Settling with an MSA can be hugely beneficial for an injured worker, including protecting future Medicare benefits, managing medical expenses, preserving settlement funds, and simplifying the claims process. It can also eliminate the ongoing exposure for the claim to the carrier or insured when an offer includes settlement of medical with an MSA that is annuitized and professionally administered by a third party.
“MSAs require the last two years of medical records, prescription records, and medical care paid off the claims file,” said Kim Andrews, Senior Claims Manager at Safety National. “Employers and adjusters should reach out to their carrier through a conference call to discuss MSA resolution strategy. Involving defense counsel, nurses, and/or other vendors can help future medical finalization.”
There are many effective ways to handle this portion of the settlement evaluation process, but the following steps can be a great path for TPAs.
1. Confirm if a Medicare set-aside is needed.
An MSA is typically required when a person is a Medicare beneficiary, expected to soon become a Medicare beneficiary or someone who is receiving, or soon to receive, Social Security Disability (SSD) benefits. When it is established that an MSA is necessary, TPAs can begin the steps to collect and allocate funds for the MSA.
2. Send medical records related to the claim and collect the MSA from a third-party vendor.
The adjuster then evaluates the MSA against the facts of the claim to confirm the MSA allocation is appropriate. Assuming the MSA allocation is appropriate, the adjuster moves to step 3.
3. Decide how the MSA is going to be funded.
The Centers for Medicare & Medicaid Services (CMS) require the MSA allocation to be funded one of two ways at the time of settlement:
- Lump sum payment of the entire MSA amount to the injured worker. If this option is chosen, the injured worker typically administers their own MSA funds post-settlement.
- Cash and periodic payments to be funded by an annuity to cover the MSA amount.
- An annuity provides periodic payments to an account over an agreed period of time.
- Due to the periodic payments of the annuity, the adjuster only has to pay a discounted amount on the total set aside instead of paying the full amount of the MSA.
4. Decide if professional administration will be required as part of the settlement offer, if being annuitized.
Professional administration involves vendors that specialize in managing the MSA funds for injured workers post-settlement. Medicare requires a strict accounting of the MSA funds and will require this documentation should the MSA money be exhausted and Medicare needs to pick up the payments. Therefore, it is in the best interest of the injured workers to allow a vendor to manage the MSA funds post-settlement. This will help the injured worker keep track of the Medicare reporting so that they do not exhaust the funds on things unrelated to the associated medical treatment and provide proof to Medicare that the money was spent appropriately.
5. Consider reversion of the MSA funds, if being annuitized.
In the event that the MSA is annuitized, an account is established for the annuity, and a predetermined amount of funds is deposited into the account annually. Reversion to the carrier or insured means that if the injured worker passes away and leaves unused funds in their account, that amount is returned to the carrier or insured. Reversion can be a negotiation tool. At times, the adjuster may decide to waive the reversion completely, while in other cases, demanding full or partial recovery.
Once the adjuster has completed these steps they can evaluate the cost of the MSA against the facts of the claim and decide if presenting a settlement offer with the MSA is appropriate.