Medicare Set-Aside Facts and Fiction

With speaking at SIGO’s education day, writing an article for the Cleveland Metropolitan Bar Association and getting ready for another CLE, I’ve been a little delinquent with the blog, so my apologies.   I’ve decided to use some of the material I put together for those events in the blog.  This is Part One of an article I’m writing regarding Medicare Set-Aside issues.

Workers’ Compensation Medicare Set-Aside Facts and Fiction

In 1980 Congress passed The Medicare Secondary Payer Act (“MSP”) to ensure that Medicare did not pay for services which were the responsibility of other parties, such as workers’ compensation or liability insurers. Subsequent provisions in the SCHIP Extension Act of 2007 (42 U.S.C. §1395y) extended Medicare’s oversight regarding settlements occurring after July 1, 2009 by establishing new reporting requirements.

Most workers’ compensation attorneys are now familiar with MSP issues, but even those in the practice area find the process frustrating and even confusing at times. Following are some common misconceptions regarding the Medicare Set-Aside (“MSA”) process, and some information that will hopefully make dealing with MSA issues a little easier.


FICTION: The MSP requires the creation of an MSA in certain claims.

FACT: Nothing in the MSP mandates or even discusses the need for an MSA.  However, as a result of the MSP, Medicare will not pay for medical expenses which are properly payable under a workers’ compensation claim.  Medicare also has a right of recovery against the injured worker, the employer, and the attorneys for both parties if Medicare’s interests in the settlement are not adequately protected.  42 C.F.R. §411.24(g).  One way to try to avoid a finding by Medicare that the parties have “cost-shifted” is by creating an MSA.  An MSA is a separate fund, created as part of the settlement, to pay for medical bills related to the allowed conditions in a claim.


FICTION: An MSA that covers all future medical expenses for work-injury related conditions satisfies Medicare’s interest in the settlement.

FACT: In addition to payments for future medical expenses, Medicare maintains an interest in all amounts it has already paid.  Accordingly, the first step in settling any workers’ compensation claim where the injured worker might be Medicare eligible is to confirm whether Medicare has already made any “conditional payments” for conditions allowed in the claim.

The Center for Medicare and Medicaid Services (“CMS”) is the private corporation contracted to protect Medicare’s interests in workers’ compensation and personal injury claims. You can contact the CMS Benefits Co-ordination and Recovery Center to obtain conditional payment amounts; request a waiver of recovery; or to appeal a determination.


FICTION: An MSA is only necessary for current Medicare beneficiaries or large dollar settlements.

FACT:  This misconception arises from the “review thresholds” established by CMS.  In addition to pursuing recovery, CMS also approves proposed MSAs.  CMS does not have the resources to review every MSA.  Accordingly, it imposed review thresholds based upon an injured worker’s Medicare enrollment status and the amount of the settlement.  Those guidelines are set forth in Section 8.1of CMS’ Workers’ Compensation Medicare Set-Aside Arrangement Reference Guide. Under the guidelines, CMS will only review MSA proposals that meet the following criteria:


  • The injured worker is a Medicare beneficiary and the total settlement amount is greater than $25,000.00; or
  • The injured worker has a reasonable expectation of Medicare enrollment within 30 months of the settlement date and the total settlement amount is greater than $250,000.00


  • According to CMS, an injured worker has a reasonable expectation of becoming Medicare eligible within 30 months if he or she has either: applied for Social Security Disability Benefits; been denied Social Security Disability Benefits but anticipates appealing that decision; is in the process of appealing and/or re-filing for Social Security Disability benefits; or is 62 years and 6 months old.

However, CMS has made it very clear that “(a)ny claimant who receives a WC settlement, judgment, or award that includes an amount for future medical expenses must take Medicare’s interest with respect to future medicals into account. Medicare’s interests need to be protected in any workers’ compensation settlement, including those outside the review thresholds.” See WCMSA Reference Guide, Section 3.0.  MSA Guide



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