Part 7 - Debunking the MSA Mystery: Clues to Solving Medicare Secondary Payer Compliance in Liability Settlements

Posted date in Medicare Set Asides


So what do trial lawyers do given all of the my previous posts?  In my opinion, you must put into place a method of screening your files to determine those that involve Medicare beneficiaries or those with a reasonable expectation of becoming a Medicare beneficiary within 30 months.  Once you identify a client as falling in one of those two categories, you must determine if future medicals have been funded and advise the client regarding the legal implications of the MSP.  The easiest way to remember the process once you have identified someone as a Medicare beneficiary or someone with the reasonable expectation is by the acronym “CAD”.  The “C” stands for consult with competent experts who can help deal with these complicated issues.  The “A” stands for advise the client about the MSP implications related to future medical.  The “D” stands for document what you did in relation to the MSP.  If the client decides that they don’t want an MSA or to set aside anything, a choice they can make, then document the education they received about the issue with them signing an acknowledgement.  If they elect to do an MSA analysis, hire a company to do the analysis so that they can help you document your file properly to close it compliantly. 

In addition, release language is critical when it comes to the question of documentation of considering Medicare’s future interests.  Release language I have seen prepared by defendant/insurers is typically inappropriate or overbearing.  Frequently the language cites regulations that are related to workers’ compensation settlements and typically will specifically identify a figure to be set aside.  The latter can potentially cause a loss of itemized deductions for the client.  Not only is release language an important consideration, so is the method of calculation of the set aside, potential reduction methodologies and funding alternatives (lump sum vs. annuity funding).  These issues do impact how the release is crafted as well as considerations of whether to submit to CMS for review and approval.  Submission of a liability set aside isn’t required and a settlement should never be made contingent upon CMS review and approval in my opinion.  Some regional offices will not review a liability set aside whiles others will.  Since review/approval is voluntary, I typically don’t recommend submission given the lack of appeal process should CMS come back with an unfavorable decision.  Furthermore, making a settlement contingent upon CMS review/approval could create an impossible contingency if the settlement is in a jurisdiction where the regional office will not review such as my home state of Florida. 


I believe the easiest way to think about MSAs in liability settlements is by analogy to special needs trusts.  If a client is a Medicaid recipient, it would be malpractice not to educate them on the potential of establishing an SNT to keep them eligible for future Medicaid benefits.  Failure to advise a client regarding establishing an SNT is clearly legal malpractice.  That doesn’t mean a client must set up an SNT; it just means they must be advised about the option to create the trust and the impact of foregoing it in terms of future Medicaid benefits.  Similarly, Medicare beneficiaries must understand the risk of losing their Medicare coverage should they decide to set aside nothing from their personal injury settlement for future Medicare covered expenses related to the injury.  So it is about educating the client to make sure they can make an informed decision relative to whether they desire to protect their future Medicare eligibility by setting aside funds to be used for future medical. 

Beyond education of the client, the most critical issue becomes how to properly document your file about what was done and why.  This part is where the experts come into play.  For most practitioners, it is nearly impossible to know all of the nuances and issues that arise with a set aside.  From the creation of the allocation to the release language and the funding/administration of a set aside, there are issues that can be daunting for even the most well informed personal injury practitioner.  Without proper consultation and guidance, mistakes can lead to unhappy clients or worse yet a legal malpractice claim. 

The lesson to take away from this article and the cases described herein, is not to wind up in federal court over these issues.  Instead, deal with these issues pre-settlement strategically.  If a client is a Medicare beneficiary, then make sure you know which ICD codes will be reported under the Mandatory Insurer Reporting law and evaluate with the client the possibility of a set aside.  Discuss with competent experts the proper steps for MSP compliance.  Potentially use the set aside as an element of damages to help improve settlement value.  Properly word the release if a set aside is being used to make sure the client doesn’t get saddled with inappropriate language or lose itemized deductions.  Appropriate planning will avoid this kind of outcome or unnecessary trips to federal court.