Skip to Content
Claims Management

Accessing Claims Cost-Savings through a Medicare Set-Aside

Most of us don’t see the grind in evaluating a workers’ compensation claim for settlement. It is a time-consuming process that requires a trained eye, and the process becomes even more involved when a Medicare set-aside (MSA) is considered.

July 3, 2023

A Medicare set-aside (MSA) is a financial agreement that allocates a portion of a workers’ compensation settlement to pay for future medical services related to the workers’ compensation injury, illness, or disease that would otherwise be covered by Medicare if not for the work injury. In short, the MSA protects Medicare from paying for the treatment related to the claim. After the workers’ compensation claim is settled with an MSA, the set-aside amount is used to pay for the covered treatment. In the event that an injured worker exhausts the funds set aside, Medicare should pick up the difference upon proof from the injured worker that they utilized the funds appropriately.

“There will be times that settlement of medical with an MSA does not appear cost-effective,” said Katie Leonard, Regional Loss Portfolio Claims Manager. “The adjuster must consider the facts of the file before they can decide if settling a claim with an MSA is worthwhile. Often, it comes down to what they do with the MSA that makes the difference.”

When should an MSA be considered?

The Centers for Medicare & Medicaid Services (CMS) requires that Medicare’s interests are protected in all workers’ compensation settlements that resolve medical costs under the Medicare Secondary Payer (MSP) laws. While the submission of an MSA to CMS for review is not defined by statutory or regulatory provisions, it is recommended that all parties involved consider submission of an MSA to CMS for review. Medicare will review significant cases that meet the following thresholds:

  1. The claimant is a Medicare beneficiary, and the total settlement amount is greater than $25,000.00; or
  2. The claimant has a reasonable expectation of Medicare enrollment within 30 months of the settlement date, and the anticipated total settlement amount for future medical expenses and disability/lost wages over the life or duration of the settlement agreement is expected to be greater than $250,000.00.

What if an MSA does not appear cost-effective?

In some cases, settlement with an MSA may not appear cost-effective due to its high cost compared to the current exposure of the file. During the settlement evaluation process, the adjuster can seek quotes to annuitize the MSA and consider offering professional administration of the funds. Reversion of the funds to the insured or carrier will also be part of this evaluation process.

How can settling with an MSA be beneficial?

Each claim is unique. Settling a claim with an MSA can be a win-win for the parties, even when it doesn’t look like it on the surface. When an offer includes settlement of medical with an MSA that is annuitized and professionally administered by a third party, it eliminates the ongoing exposure for the claim to the carrier or insured. It allows the injured worker to make decisions without including the insurance company as it relates to their care.  It protects Medicare’s interests from being burdened with treatment costs associated with the claim. In addition, professional administration keeps the injured worker from inaccurately allocating post-settlement funds to items unrelated and potentially risking Medicare’s coverage when the annual funds are exhausted. Lastly, reversion to the carrier or insured upon the injured worker’s passing potentially brings a portion of the funds back to the carrier or insured that the injured worker did not use for their medical treatment associated with the workers’ compensation claim.