MSA's and structured settlements

Structured settlement annuities allow the future expenses to be discounted to the cost of buying a structured settlement that will pay the projected future injury-related costs. This often yields a very substantial funding discount.

Medicare’s interest need to be considered any time that future medical benefits from Worker’s Compensation are being settled. The same now holds true for settlement of third-party liability claims. If Medicare’s interest is not considered, stiff penalties can follow to the liability insurer, plaintiff attorney and the client could jeopardize future access to Medicare.

The Centers for Medicare and Medicaid Services (CMS), the federal agency that administers Medicare, has the responsibility to recover monies from past overpayments and to ensure that future medical benefits are paid by the primary payer (liability insurers, Worker’s Comp, self-insureds, judgments, settlements, compromises, etc,) and not shifted to Medicare.

If Medicare erroneously pays a claim that should have been paid by the primary payer in a liability or WC case and finds that their interest was not properly considered, the penalty can be double the damages incurred by Medicare, and the injured party could lose their future Medicare benefits (42 C.F.R. 411.24(c)(2)).  CMS is also authorized to recover not only from the claimant, but from the claimant’s attorney, the fees paid, as well as payments made to medical providers, private insurers, or any other party receiving a payment from the case, including experts who may have paid (42 C.F.R. 411.24(g)).

Therefore, if the primary payer is settling claims that involve future medical benefits for a “qualified” injured party, an allocation to a Medicare Set Aside (MSA) account is worth serious consideration by all involved parties. For Worker’s Compensation cases, an injured party is considered “qualified” if he/she is currently on Medicare (through Social Security Disability or retirement), or if there is reasonable expectation that the injured party is going to be on Medicare within 30 months of settlement and the amount of settlement is $250,000 or more. While as of the date of this article, At present, there has been little guidance with regard to the specific circumstances that require an MSA with regard to third-party liability claims and some regional offices of CMS are not yet requiring an MSA allocation in third party liability cases, the statute referenced above gives CMS the authority to do so. Therefore, we suggest that attorneys retain qualified experts that are up to date on the latest developments on this issue. The plaintiff attorney and the claimant each have duties to protect Medicare’s interest with regard to settlements involving future injury-related medical payments and MSAs are often used when meeting that duty.

The components and requirements for creating and funding an MSA are, unsurprisingly, very detailed, and require expertise and medical proficiencies that attorneys rarely possess, and generally don’t have the time to develop. If an MSA is to be established as part of a settlement, the parties should all be aware that it is highly unlikely that any funds used to fund that MSA will not directly benefit the injured party since they only pay for future care that Medicare would have otherwise paid. Therefore, it is in all parties best interest that the amount of funding be the lowest amount that would reasonably meet the legal obligation.

One way to reduce the funds that are placed into an MSA is by using a qualified structured settlement. Structured settlement annuities allow the future expenses to be discounted to the cost of buying a structured settlement that will pay the projected future injury-related costs. This often yields a very substantial discount from the amount that must be allocated to the MSA.  Make certain that their MSA professionals are taking advantage of this opportunity.