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Common Medicare Set-Aside (MSA) myths or mistakes persistently come up despite the best efforts of attorneys, consultants, financial professionals, and a Medicare compliance service provider, like Flagship Services Group, to squash them.

P&C insurance companies that routinely process worker’s compensation and liability claims, and even the individual claims examiners and claims managers who are responsible for overseeing the claim and settlement process, are losing money, time, and becoming increasingly frustrated with a process that should be fairly straightforward.Below we’ll cover five common myths about MSAs and discuss what you can do to overcome the expensive mistakes these myths cause to start getting the most value from the Medicare Set-Asides Arrangement process.

Myth 1: A MSA Fund Should Not Be Considered

A Medicare Set Asides (MSA) fund should not be considered when determining the attorney’s calculations for services on settlement. All fees to administer the MSA can be paid out of the MSA funds.

Fact: The MSA allocation amount is part of the future medical portion of the complete settlement; meaning it will need to be incorporated in the fee calculation for total settlement amount. But attorney fees cannot be paid out of the MSA allocation, including the cost of professional administration of the MSA funds. 

Administrative fees/expenses for administration of a Medicare Set-Aside arrangement and/or attorney costs specifically associated with establishing a Medicare Set-Aside arrangement cannot be charged to the set-aside arrangement. The Centers for Medicare & Medicaid Services (CMS) will no longer be evaluating the reasonableness of any of these costs because the payment of these costs must come from some other payment source that is completely separate from the MSA arrangement funds.

For example, if the settling parties submit a Medicare set-aside proposal to CMS that claims the injured individual will need $50,000 worth of work-related medical expenses that would otherwise be reimbursable under Medicare, and the settling parties claim that it will cost $10,000 in administrative and attorney fees in order to both administer and establish the Medicare Set-Aside arrangement proposal of $50,000, then CMS will only evaluate/judge the reasonableness of the $50,000 figure.

CMS will not evaluate whether or not the $10,000 in administrative and attorney fees are reasonable, nor will CMS permit the settling parties to add that $10,000 amount to the $50,000 Medicare Set-Aside arrangement amount. Therefore, if CMS approves the proposal for a $50,000 Medicare Set-Aside arrangement, the settling parties’ $10,000 in administrative and attorney fees cannot be charged to/against the Medicare Set-Aside arrangement of $50,000 because CMS considers those costs to be a separate issue for the parties to negotiate.

Myth 2: Claimants Under 65 Are Not Eligible

If the claimant is under 65, they are not eligible for Medicare. Therefore, they do not need to take Medicare’s interest into consideration.

Fact: A claimant will be Medicare eligible if they are any of the following:

  • 65 years of age or older
  • Applied/Been Denied/Appealing Social Security Disability benefits for a period of 24 months or longer
  • Have End Stage Renal Disease (ESRD) (permanent kidney failure that requires dialysis treatment or a kidney transplant)
  • Have Lou Gehrig’s disease (Amyotrophic Lateral Sclerosis, or ALS) 

Medicare Set Asides, Flagship Services Group

Myth 3: MSAs Prevent Workers’ Comp Settlement

Medicare Set Asides prevent settlement of workers’ compensation claims.

Fact: MSAs are recognized as a tool in taking Medicare’s interest into consideration. The MSA provides protection to all parties involved by projecting the future medical cost estimates. This allows Medicare to stay secondary, and not primary.

By incorporating this practice, Medicare’s interests have been considered, thus allowing the claim to be settled. For example: workers compensation insurers are obligated to pay for all related medical and pharmaceutical expenses related to the workers compensation injury; by doing so, this will release the financial burden from Medicare.

Myth 4: MSAs Aren’t Needed for Workers’ Comp

I do not need a Medicare Set-Aside (MSA) in workers’ compensation cases –even if the claimant is Medicare eligible, as long as the total settlement amount is less than $25,000.

Fact: The CMS approval thresholds are only in place to reduce workload. They are not to be used as a determining factor in deciding if an MSA needs to be completed.

Related to this, the CMS states:

“CMS wishes to stress that this is a CMS workload review threshold and not a substantive dollar or ‘safe harbor’ threshold. Medicare beneficiaries must still consider Medicare’s interests in all workers’ compensation (WC) cases and ensure that Medicare is secondary to WC in such cases. In other words, if the total settlement amount is $25,000 or less, the parties to the settlement are still required to consider Medicare’s interests. The recommended method to protect Medicare’s interest is to enter into a Medicare Set-Aside arrangement…”

Myth 5: Settlement Language will Prevent Penalties

I can use settlement language in the release stating that I protected Medicare’s interests, which releases me in case Medicare’s interests are not protected. That way, I have done my due diligence, and Medicare will not come after me for any payment or penalties.

Fact: Medicare clearly states that it is not bound by the parties’ settlement language.

You will need to add proper settlement language stating how Medicare’s interests were protected; this is what should be contained in the release.

Medicare has the right to come after any party involved who did not protect their interests; regardless of what the release states.


What’s the best way to avoid the myths and stay protected when it comes to MSAs?

The investigation and approval process for Medicare Set-aside Arrangements can be complicated and nuanced. There are a lot of moving pieces and a lot of areas that are as much art as science.

The best way to make sure all involved parties are well-protected and Medicare’s interests have been considered is to work with a professional MSA service provider like Flagship Services Group. Our professionals have the experience and know-how to walk you through the entire process from start to finish and publish the best final product. But Flagship doesn’t stop there. Unlike other companies, we provide interpretation of the report when it is complete and identify gaps or additional cost-savings opportunities.

Contact us today if you’d like to discuss your current Medicare compliance process, or if you know there are gaps you’d like to fill in your MSA process.



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