Understanding Medicare Set Asides (MSA) for Personal Injury Cases

• By law, Medicare is a secondary payer when another party (such as an insurer or settlement) is responsible for covering medical costs in your personal injury settlement. 

• If the settlement includes compensation for future medical expenses, an MSA is often used to prevent Medicare from paying for those costs prematurely.
• Some attorneys and insurers may require an MSA to protect both you and Medicare.

What is a Medicare Set-Aside (MSA)?

• Part of your settlement may need to be set aside to pay for future medical expenses. This is called a Medicare Set-Aside (MSA).

For more information, check out Medicare Set-Aside FAQ

Medicare Secondary Payer (MSP) Act

If you’ve received a personal injury settlement and are a Medicare beneficiary (or will be soon), the Medicare Secondary Payer (MSP) Act is important because it affects how your medical expenses are paid. Here’s what you need to know in simple terms:

• Medicare is not the first payer if another source (like a lawsuit settlement or insurance) is responsible for your medical bills.
• This means that your settlement funds must be used first to pay for future medical treatment related to your injury before Medicare covers those costs.

Requirements for your MSA after the lawsuit 

• Requirements for MSA management
  • Funds must be held in an interest-bearing account
  • Use the fund only for treatments related to the injury
  • Use the fund only for Medicare–covered expenses
  • Prepare and submit annual accounting report to Medicare
  • Maintain line item detail for the duration of eligibility

• These records must be submitted to the Centers for Medicare and Medicaid Services (CMS) in an annual attestation.

You can manage your own MSA, but it’s tricky

• Medicare requires annual reporting of MSA spending to confirm compliance. As noted above, the protocol can be complicated and the penalties for mismanagement can be huge
• There two routes for managing an MSA:

• Self-administration. The injured person manages the MSA themselves, keeping track of expenses and reporting to Medicare.
• Professional administration. A third-party administrator (like Ametros) handles the funds, payments, and reporting to Medicare.

How does the MSA affect your money in a personal injury case?

• The MSA is only valid for Medicare-covered services related to the injuries incurred in the incident that you’re settling via the courts.

Two forms of funding for an MSA in a personal injury case:

• The MSA money is typically awarded in one of two structures:
  • A lump sum (one-time deposit). A one-time deposit of the total estimated amount into the MSA account.
  •  A structured annuity. A series of payments over time, often used for larger MSAs to stretch funds over a lifetime.

Why a Medicare Set-Aside (MSA) is necessary

• As noted above, the mechanics of MSA usage are determined by federal law
• The benefits and penalties are, at base, pretty simple:
  • If you use all the MSA money properly, Medicare will step in and cover future costs related to your injury after the MSA funds are exhausted
  • If you do not properly allocate funds for future medical expenses, Medicare can demand reimbursement for any related payments they make.

The risk of a mismanaged MSA

• If Medicare finds that you did not set aside money properly, they may deny future injury-related claims until they are reimbursed.
• If you spend it on non-medical expenses (like rent, vacations, or non-covered treatments), Medicare won’t pay for your future injury-related care until the full amount is repaid.

• If Medicare mistakenly pays for something that should have been covered by your settlement, they can demand reimbursement from you or your attorney.
• If you ignore the MSP rules, Medicare could deny paying for your injury-related medical care.

Typical process for generating MSAs in personal injury lawsuits

• Generally, the litigation process includes three main stages:
  • Calculating the MSA amount. (More on this below.) Lawyers, insurers, and third-parties may all be involved. CMS does not currently require approval of MSAs in personal injury cases, but getting CMS review (if possible) can provide assurance that Medicare’s interests are protected.
• Funding the MSA. As noted above, the settlement may include a lump sum for the MSA or set up a structured annuity that funds the MSA over time.
• Court approval and distribution. In some cases, courts review the settlement to ensure Medicare’s interests are protected.

• The legal oversight does not end with the end of the trial, however. The MSA funds must be properly administered.
  • Medicare requires regular documentation of how your MSA is being spent.

How a Medicare Set-Aside (MSA) is calculated

• The calculation of an MSA in a personal injury settlement involves an evaluation of the injured party’s future medical expenses that would otherwise be covered by Medicare.

Medical cost projection

• A medical cost projection is created, often using a life care plan if long-term care is needed.
• The projection document estimates the cost of future medical care related to the injury. For example:

• Medical treatments (e.g., surgeries, therapy, hospital stays)
• Medications (prescription drugs covered by Medicare Part D)
• Durable medical equipment (wheelchairs, prosthetics, etc.)
• Diagnostic tests (MRI, CT scans, lab work)
• Rehabilitation services (physical and occupational therapy)

Medicare coverage evaluation

• Not all future medical expenses qualify for an MSA. The MSA amount is based only on:
  • Services covered by Medicare Part A & Part B
  • Prescription drugs covered by Medicare Part D
• Expenses for non-Medicare covered treatments (such as experimental therapies or certain dental/vision services) are not included in the MSA and should be addressed separately in the settlement.

Medical and claims history

• Past medical records and billing history are examined to assess the injured party’s expected medical needs.
• If the individual has ongoing or progressive conditions, cost estimates must consider inflation and worsening conditions.

MSA allocation reports

• A Medicare Set-Aside allocation expert typically prepares an MSA allocation report.
• This report outlines:
  • The recommended MSA amount
  • The breakdown of anticipated medical costs
  • The methodology used in the calculation

CMS guideline and review

• CMS does not currently require approval for MSAs in personal injury cases, but in some cases, voluntary submission to CMS for review can provide compliance assurance.
• If the MSA is not properly funded, Medicare may later deny injury-related claims.

What you need to manage your MSA after the lawsuit

• Once the MSA is funded and active, the injured party (or their MSA administrator) must maintain and submit records showing that funds are spent correctly on Medicare-covered, injury-related care.
• Typical documentation includes:
  • Annual accounting report (if required by CMS). A breakdown of MSA expenses submitted annually to CMS (if the case was reviewed by Medicare).
  • Receipts and invoices for medical services. Proof that MSA funds were spent on Medicare-eligible treatments related to the injury.
  •  Prescription drug records. Documentation of all Medicare Part D-covered medications paid for using MSA funds.
  • Bank statements for MSA account. Financial records showing transactions from the dedicated MSA account.
  • Denial letters from Medicare (if applicable). If Medicare denies a claim, documentation should be kept for review.
  • Proof of exhaustion of MSA funds. If MSA funds are depleted, documentation must be sent to Medicare before Medicare resumes coverage of injury-related costs.

Managing your MSA with professional administration

• Receiving your settlement from a personal injury lawsuit is only the beginning of your care management.

• The government mandates are rigorous and the penalties can be stiff.
• With experts standing by to answer questions, professional administrators enable clients to direct their MSA funds without having to fret over the technicalities

Make your post-settlement process seamless 

• Ametros manages all of the documentation and billing processes. We make your healthcare after settlement simple.