How to Protect Your Rights to Medicare Following a Settlement

A Medicare Set Aside trust/account is a tool to preserve Medicare benefits by setting aside a portion of the settlement money in a segregated account to pay for future Medicare covered items. The account is funded using a portion of the settlement proceeds.  A Medicare Set Aside account is not mandatory, but is recommended by the government. 

The government recommends that you set up a Medicare Set Aside account if you are a Medicare recipient settling a personal injury claim for more than $25,000 or if you settle for more than $250,000 and can be expected to receive Medicare within 30 months of settlement (this happens if you receive Social Security Disability, which has a 24-month waiting period before you can receive Medicare benefits).

How a Medicare Set Aside Trust Works

A Medicare Set Aside trust or account is a trust or trust-like agreement that is set up to hold settlement proceeds for future medical expenses.  A Medicare Set Aside trust only protects future Medicare eligibility.  The funds must be held in an interest-bearing account. 

Medicare is a “secondary” payer that is only supposed to pay for medical services that are not provided by another party.  Section 1862(b)(2)(A)(ii) of the Social Security Act precludes Medicare payments for services to the extent that payment has been made or can reasonably be expected to be made promptly under liability insurance. This also governs workers’ compensation payments. 42 C.F.R. section 411.50 defines liability insurance.

The funds in the Medicare Set Aside account can only be used for Medicare covered expenses for injury related expenses. Once the set aside account is exhausted, the injury victim receives full Medicare coverage without Medicare ever looking to the remaining settlement funds to provide for Medicare covered injury related health care.

How to Set Up a Medicare Set Aside Trust

A structured settlement company, such as Forge Consulting, examines the medical records and makes a recommendation based on the amount of care that is covered by Medicare.  The structured settlement company evaluates the injury victim’s medical needs, evaluates an amount that should be set aside for future medical care, and the government may approve the amount.

The following four factors determine the appropriate amount for a Medicare Set Aside account: 

1. The personal injury settlement amount.
2. The full value of the case if it went to trial.
3. The amount allocated to future medical care, and
4. How much future Medicare-allowable medical treatment will be needed over the course of the injury victim’s lifetime.

The funds are either placed in the Medicare Set Aside account in one lump sum or the account is funded with a structured settlement annuity that will refill the account over time.

Record-Keeping and Annual Reporting Required for MSAs

You can administer your own Medicare Set Aside account, but these accounts require detailed record-keeping and annual reporting to the Centers for Medicare and Medicaid Services (CMS).  Failing to follow these guidelines can jeopardize your current or future Medicare eligibility.

If an injury victim receives Medicaid in addition to Medicare, a supplemental needs trust might be needed to preserve Medicaid eligibility.  If the injury victim has a named beneficiary on the MSA account, and passes away before the proceeds are exhausted, the remaining money will to that person.