We will begin this answer by explaining the purpose of a Medicare Set-Aside Account (MSA). Medicare functions as a health insurance carrier for individuals who are eligible for traditional Social Security or for Social Security Disability. The Social Security Act makes Medicare a secondary payer. This means if an individual who is Social Security eligible has another insurance source able to pay medical expenses, then that other source is the primary payer. All other insurance sources are obligated to pay before Medicare pays any medically related expenses. Workers’ compensation insurance pays for medical expenses. If a workers’ compensation or liability case is contested and medical treatment is needed, Medicare will pay for the medical care for an eligible person until liability is determined. These payments are conditional, and if the case is resolved and it is determined the other carrier is responsible, Medicare is entitled to be reimbursed for all conditional payments made. The workers’ compensation or liability carrier is then obligated to pay future medical bills associated with the claim as the primary payer.
An MSA becomes important if a Medicare eligible injured worker or liability claimant is contemplating settling a case. The purpose of a MSA is to set funds aside from the settlement proceeds to pay for future medical expenses, expenses that are consistent with what Medicare would pay. At all times it is important to be mindful of the fact Medicare is a secondary payer. Settlement does not eliminate that fact; it shifts the primary payer responsibility from the insurance company to the settling party.