When settling a workers’ compensation case, the individuals involved must decide how the injured worker will manage their settlement funds, particularly if they include a Medicare Set-Aside (MSA). The two primary options are professional administration (where a professional company handles everything on behalf of the injured person) and self-administration (where the injured person basically goes it alone). Each approach has benefits and drawbacks but making the right choice can mean the difference between financial security and unnecessary risk. In recent years, the workers compensation industry has rallied around providing professional support for the injured worker for a number of valid reasons we will explore.
So, let’s clarify the key differences, advantages, and potential challenges of self-administration versus professional administration, helping injured workers, attorneys, and insurers navigate this critical decision.
Understanding the Basics
The Centers for Medicare & Medicaid Services (CMS) requires that the MSA administrator (either professionally or self-administered) send annual reports to CMS detailing the use of the MSA funds. In addition, more reports and coordination are mandated if the funds ever run out. Any mistake in this process leads to CMS denying payments for injury-related care and the injured worker potentially being left without funds or insurance coverage for their injury. (See CMS’ WCMSA Reference Guide Section 17 for more detail: https://www.cms.gov/medicare/coordination-benefits-recovery/workers-comp-set-aside-arrangements.)
CMS “highly recommends” in its Reference Guide that injured workers use a professional administrator to manage their funds. CMS recognizes the complexity of the task at hand and the harsh consequences if funds are handled improperly – essentially, a professional is better equipped to protect the injured worker’s Medicare benefits and the Medicare trust fund.
On the line is about $1 billion a year that CMS approves in MSAs that it wants administered properly (” target=”_blank”>See CMS Statistics (PDF). This figure is even larger when including additional MSAs that are settled, but did not go through the formal approval process.
Today, the majority of high dollar MSA’s are professionally administered. The industry has heeded CMS’ guidance and offered much needed support to injured workers that are obliged to manage significant ongoing care and expenses.
What is Professional Administration?
A professional administrator manages the settlement funds on behalf of the injured worker and takes on the responsibility that everything will be done correctly. This service includes fully ensuring compliance with Medicare guidelines by filling all required reports, negotiating medical costs to save money, providing transparency, and offering dedicated support to help injured workers maximize their settlement funds.
What is Self-Administration?
Self-administration means that the injured party takes full responsibility for managing their settlement funds. The use of the account and all reporting is done by themselves. This includes tracking expenses, ensuring compliance with Medicare’s strict reporting guidelines, and making payments for medical care directly. CMS allows injured workers to self-administer their MSA funds, provided they follow all regulatory requirements. Keep in mind, CMS guidelines change frequently and Medicare Advantage plans are becoming the norm and they have their own procedures related to MSAs. The expectation is that the injured worker will file accurate and timely reports from settlement date onward for the rest of their lives.
Key Considerations: Self-Administration vs. Professional Administration
Compliance and Oversight
A simple analogy to understand the difference in the two is that professional administration like entrusting a CPA to file your annual taxes. The CPA takes on responsibility for doing the job right and is an expert in the subject matter. Self-administration is like filing your taxes on your own. You fill out the various forms trying to abide by all the latest rules and requirements from the Federal government.
One of the most significant challenges of self-administration is compliance with Medicare’s evolving reporting and expenditure requirements. CMS requires meticulous record-keeping, including proper documentation of all medical expenses paid from the settlement. If the individual fails to follow CMS guidelines, they risk losing Medicare coverage for injury-related care.
Professional administrators provide structured compliance oversight, ensuring that funds are spent appropriately, and that reporting is accurate. Selecting a professional administration partner that securely and transparently holds the funds and abides by strong regulatory oversight is crucial. Firms that adhere to stringent banking standards, such as compliance with the Sarbanes-Oxley Act (SOX) and Gramm-Leach-Bliley Act (GLBA), offer greater security and accountability.
Cost Savings and Negotiation Power
Self-administration often means paying full retail price for medical services and prescriptions. Without the buying volume of a professional administrator, the injured worker may struggle to negotiate medical costs and could deplete their funds more quickly.
Professional administrators have established networks with providers and pharmacies, enabling them to secure significant discounts on medical expenses. This cost-saving benefit can extend the longevity of a claimant’s settlement, ultimately providing better financial security over time.
Risk of Mismanagement and Fraud
Mismanagement is a major risk for self-administrators. Without financial expertise, claimants may inadvertently mix their MSA funds with other accounts and misallocate funds, leading to early depletion of their settlement. In some cases, individuals might even use the funds for non-medical expenses, jeopardizing their future care needs.
Professional administration reduces this risk by ensuring funds are managed separately, securely, and with independent oversight. A top-notch professional administrator also has bank-level security and fraud prevention measures in place.
Transparency and Accessibility
Self-administration requires the claimant to maintain accurate records and manage their accounts manually. If they lose track of their spending or fail to keep proper documentation, they could face challenges from Medicare down the line.
High-quality professional administrators offer transparent, real-time access to account balances and expenditures. With FDIC-insured accounts and secure online portals, the injured worker can easily track their funds without the burden of manual record-keeping.
Customer Support and Peace of Mind
Self-administration requires claimants to handle all financial and medical coordination independently, which can be overwhelming—especially for individuals dealing with serious injuries.
A professional administrator provides ongoing support, answering questions, helping with complex billing issues, and ensuring injured workers receive necessary medical treatments without administrative burdens. This level of service provides peace of mind, ensuring that claimants can focus on their health rather than the stress of managing finances.
We handle close to a million calls a year related to coordinating care for MSAs. These accounts are complex, and most provider offices have never heard of how they work. It helps to have a support team explaining everything and make sure bills are paid properly.
Making the Right Choice
While self-administration may appeal to those who prefer direct control over their finances, the risks, especially regarding compliance, financial security, and cost efficiency—can be substantial. Many claimants underestimate the complexity of Medicare reporting requirements and medical expense management, leading to avoidable financial difficulties.
Professional administration, on the other hand, offers security, compliance assurance, and cost-saving benefits that can extend the life of a settlement. Given the stakes, it’s a solution that ensures long-term financial stability. And it’s CMS’ “highly recommended” solution. For MSAs of significant size, in recent years it has become the standard to guide the injured worker toward professional help.
In terms of cost, professional administration is almost always paid for by the insurance carrier or employer which means there is no direct cost to the injured worker. This puts it on par with self-administration, which has also no cost to the injured worker.
For those weighing their options, it’s best to do research on the requirements and there is also no harm in consulting with a professional or CMS. As CMS will guide you, working with a trusted professional administrator can provide clarity and protection, ensuring that settlement funds are used effectively and in full compliance with all regulations.
About Porter Leslie
Porter directs the growth of Ametros and works with its many partners and clients. He built his career leading customer-focused businesses in the healthcare and financial services industries. Porter earned a B.A. in Economics from Columbia University, as well as an MBA from the Wharton School and an M.A. from the Lauder Institute at the University of Pennsylvania. Porter speaks Spanish and Portuguese and resides in Boston with his wife and three children.
