Medicare Set-Asides

1. What is a Medicare Set-Aside?

A Workers’ Compensation Medicare Set-aside Arrangement (WCMSA) (a/k/a Medicare Set-aside Arrangement (MSA)) is a bank account (or trust) that is established at the time a workers’ compensation (WC) case settles. This separate account is created for the sole purpose of protecting Medicare from having to pay for expense that a reasonably related the WC-related injury.

The reason these accounts are created is that Medicare no longer will pay for medical expenses that should have been paid for by a primary insurer. In this case, the primary insurer is the employer that should be paying medical expenses related to an on-the-job injury that is covered by workers’ comp. By settling a WC claim, the parties (both the employer and the employee) are prohibited from shifting the burden of future medical expenses to Medicare.

Example:

Joe, a Medicare beneficiary, hurts his knee working for ABC Company. Joe is going to need a complete knee replacement that is going to cost $15,000. Joe and ABC settle the case for $50,000. Joe puts the money in his pocket and uses his Medicare card to pay for his surgery.

This is exactly the type of conduct that Medicare is trying to prevent because Medicare had to pay $15,000 for a surgery that should have been covered by the employer through the workers’ comp program. This used to be common practice because both the employee and the employer benefited by shifting the responsibility to Medicare. Federal law now prohibits this practice.

Instead of the parties settling the case for $50,000, the parties should have determined that Medicare would likely have to pay $15,000 for Joe’s upcoming knee surgery and set that money aside for the benefit of Medicare by establishing an MSA. Therefore, Joe should have put $35,000 in his pocket and $15,000 should have been put in a separate account for the benefit of Medicare. When Joe went for his surgery, instead of using his Medicare card, he should have written a check to his physician for $15,000 out of the MSA account.

This is a simplified version of how the MSA process is suppose to work.

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All of the content was prepared by Michael R. Merlino II, an attorney in Georgia who focuses on his practice primarily on MSAs. He prepares MSAs for many large self-insureds and insurance companies. If you have questions, he can be contacted at 770-374-3697 or mmerlino@gmail.com. He also has a website devoted to MSAs, which is updated frequently: www.wcmsainfo.com