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How Does Medicare Set Aside Administration Work? Video & Transcript

How does MSA Administration work? Professional Administration is set up to help an injured person with their medical care after a personal injury settlement. A Professional Administrator establishes a bank account for the injured party’s future medical care, receives bills, and pays them on behalf of the injured party. In the case of a Medicare Set-Aside or “MSA” a Professional Administrator handles all required annual reporting. Often Administration is used for MSAs, however, it can also be used for any type of personal injury settlement or future medical funds.

If you are settling with a Medicare Set-Aside, also known as an MSA, you are required to take Medicare's interest into consideration with how you use the funds. Medicare wants to make sure you use the money in your MSA account for your injury related treatment first, before they step in to pay for anything. If you have an MSA you are required to report annually so the federal government can make sure you are spending the money appropriately. Medicare tracks your use of the money through annual reporting.

Let's take a look at how this works in reality. For instance, if you suffer back injury at work and decide to settle your claim for all your future medical care, you receive a one-time payment of $10,000 which funds your Medicare set-aside account for the injury. Your responsibility with this money is to spend it on the treatments that are related to your injury and would be Medicare covered. For example, after you settle you go to your doctor and receive a series of injections of steroids to help your back pain and the doctor's office sends you a bill for $1,000 for the treatment. If you have money in your MSA account, the bill should be paid in full from your MSA account. Medicare will not handle or paying portion of the bill as long as you have funds remaining. Medicare guidelines require you inform them on your proper use of the funds in your annual reporting. The MSA is like a deductible that you need to spend through before Medicare will pay for a single bill.

After paying for the injections and your account is at $9,000, let's suppose you receive a series of treatments for your back that costs $15,000. You pay the bills with your MSA funds until your account is out of money. You will need to notify Medicare and send them a report so they can validate the funds were spent properly. As long as you have enrolled in a Medicare plan, once they validate your MSA funds were spent properly, Medicare will step in to begin providing coverage for your injury related treatment. Keep in mind you need to have previously enrolled in Medicare, and your coverage with Medicare for your injury or any other treatments will be subject to the usual co-pays, coinsurance, and deductibles that all Medicare beneficiaries must contribute. On average, these costs represent 20% of the total treatment cost. If Medicare has not received any record of how you spent your MSA money, they will deny any bills related to your injury.

While you can choose to navigate this process yourself, Medicare highly recommends in their MSA reference guide, that you choose a Professional Administrator to remain in compliance, and to protect your benefits. The administrator will help you navigate the whole process and complete all the required reporting on your behalf. They will set up a separate bank account for you, will give you a card that you can use for treatment anywhere in the country, and will receive bills on your behalf. They also work on your behalf to obtain discounts to reduce the cost of bills and will pay them for you from your MSA account. In addition, the administrator will manage and send your required reports to Medicare. Also, if you choose to receive your MSA with an annuity through a structured settlement, the administrator will handle all of the accounting each year. Administration protects all parties in a settlement making sure that your benefits are protected and that you're taken care of, so you can focus on living a happier and healthier life. If you have any questions about MSAs or the administration of your MSA account contact us.