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Expressions-16The issue of Medicare Set Asides (MSAs) is known to cause confusion and frustration for insurers. So, we want to provide a brief explanation to help settle some of the confusion and resolve some of the frustration that comes along with trying to keep up with changes in the Section 111 reporting and recovery regulations – including MSA rules.


Conditions required for Workers’ Compensation Medicare Set Asides (WCMSAs)

When an insurer providing state-mandated Workers’ Compensation insurance for a Medicare beneficiary settles a claim with that beneficiary, the following items play into the creation of a WCMSA:

  • If the settlement covers all existing medical expenses,
  • the claimant is already a beneficiary of Medicare, or
  • the total settlement is equal to or greater than $250,000 and the claimant can reasonably expect to qualify for Medicare within 30 months of the date of the settlement.

If those conditions are met, the Medicare Secondary Payer Act requires that the primary payer also set aside a certain portion of the settlement funds exclusively for medical expenses that are reasonably expected to be necessary in the future.

Going forward, as additional medical expenses are incurred, Medicare requires that the funds in the MSA account be used before they will cover any charges related to the injury being covered under Workers’ Compensation.

Liability Medicare Set Asides (LMSAs)

When it comes to liability and personal injury claims, however, the situation becomes much cloudier.

Current regulations do not require a primary payer to set up an MSA account in connection to a liability or personal injury claim, regardless of the circumstances. Instead, Medicare’s reporting and recovery rules regarding liability claims are limited to tracking and recovering any funds owed Medicare due to conditional payments they have already made to cover medical expenses of a beneficiary.

However, in the current manual – and this language has been unchanged for years – the following paragraph is used to define the term Set-Aside Arrangement:

Set-Aside Arrangement – An administrative mechanism used to allocate a portion of a settlement, judgment or award for future medical and/or future prescription drug expenses. A set-aside arrangement may be in the form of a Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA), No-Fault Liability Medicare Set-Aside Arrangement (NFSA), or Liability Medicare Set-Aside Arrangement (LMSA)”

So CMS will allow a primary payer to set up an MSA for no-fault liability or liability claimants, but they are not required to do so. These facts are at the core of much of the confusion and frustration surrounding this issue.

When asked for additional clarification on this topic, CMS will often fall back on the standard response: “Primary payers must protect Medicare’s interests…” But without concrete regulations in place, they are unable to detail exactly how to go about doing that.

Further confusion from professional financial consultants

An additional cause of confusion comes from professional financial consultants who have based their livelihood around setting up and administering MSAs for P&C insurers. It makes good financial sense for them to encourage insurers to create as many MSAs as possible, whether they’re actually required or not.

Since liability claims are handled differently than Workers’ Compensation claims – no state mandated coverage, requiring a judgment to be levied, no preset amount, no ongoing lifetime relationship with the insurer – estimating the proper amount for an MSA for a liability claim is much more difficult. Likewise, liability judgments are normally awarded in lump sums without necessarily being broken down to itemize medical expenses, lost wages, or general damages, making it even more difficult to determine what portion of the settlement should be set aside for future medical expenses.

But, all that being said, a financial consultant who earns his living setting up MSAs can easily convince an insurer that every Medicare-related claim requires one, when the fact is liability claims rarely benefit from an MSA and the MSA will often add to the claim’s total costs.


The optimal solution to MSA confusion

At Flagship Service Group, we’ve found that striving for 100% compliance to CMS guidelines is key to covering all legal obligations while spending as little time and money on the process as possible.

We always stay up to date on the numerous changes in the Medicare laws and best practices with an eye on keeping our clients compliant without complicating their lives. We’ve honed our expertise around the concept of achieving 100% compliance, whether that involves an MSA or not. We’re not wedded to setting up and administering MSAs to keep our business afloat because we see them as just one piece in a much larger puzzle. Of course, if the rules change tomorrow and it becomes preferable to set up an LMSA, we’re ready, willing, and able to handle that.

Our clients are P&C insurers who want to guarantee they’re not going to get hit with expensive penalties for failing to report or pay back Medicare even a dime that’s owed. But at the same time, they don’t want to pay Medicare even a penny that’s not required by law.

That’s where Flagship comes in with our guarantee of 100% Medicare compliance. If this sounds simpler and more reasonable to you than what you’re doing now, contact us to see what your options are.


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