In most cases, the entire amount paid out in a personal physical injury settlement is non-taxable. So, your MSA funds, as part of that settlement are also not taxed upon receipt.
The injured party is responsible for taxes on interest earned on their MSA funds. If the interest earned is accrued over $10, typically the bank will provide the injured party a 1099-INT to use in their tax filings. Interest income taxes can be paid for out of the MSA account per Medicare's guidelines.