Whether you're dealing with a workers' compensation case or a third-party personal injury matter, understanding MSAs is key to securing your financial future and maintaining your healthcare coverage. Let's get into it!
A Medicare Set Aside (MSA) account is basically there to make sure Medicare doesn’t end up paying for medical costs that should be covered by your workers' comp or personal injury settlement. It does this in two key ways:
First, it lets Medicare double-check that it hasn’t already paid for any medical bills that your workers' comp should have covered. If it turns out Medicare did pay for something it shouldn’t have, they can go after the insurance company for reimbursement.
Second, it makes sure Medicare isn’t stuck covering future medical expenses related to your injury or disability after your case is settled. In short, Medicare just wants to be sure your insurance company is paying what it’s supposed to—both now and down the road.
Figuring out if you need a Medicare Set Aside (MSA) can be a little confusing, but it really comes down to two main situations.
First, if you’re already on Medicare and your settlement is more than $25,000, you’ll need an MSA to make sure Medicare’s interests are covered.
Second, even if you’re not on Medicare yet, but you expect to be within the next 30 months and your settlement is over $250,000, you’ll also need an MSA. This is basically a way to plan ahead so Medicare isn’t stuck paying for future medical costs.
But there are some exceptions. For example, if your settlement only covers lost wages or other non-medical costs (what’s called an “indemnity-only” settlement), and your insurance company is still paying for medical expenses, then you don’t need an MSA. Since the insurer is keeping those medical costs covered, there’s no need to set aside money for future care.
When it comes to Medicare Set Aside (MSA) accounts, there are two main types: formal and informal.
Formal MSAs are required by law in certain situations—like when your settlement is above a certain amount and you’re either already on Medicare or will be soon. These accounts have to be approved by the Centers for Medicare & Medicaid Services (CMS), and once they’re approved, you have to follow CMS rules to make sure the money is used properly for future medical expenses related to your injury.
Informal MSAs, on the other hand, aren’t legally required but can still be a smart idea. Even if you don’t have to set one up, putting money aside for future medical costs can help protect you financially. It ensures you’ll have funds available for ongoing care and keeps Medicare from getting stuck with bills that should be covered by your settlement.
Setting up a Medicare Set Aside (MSA) account might seem a bit overwhelming, but it’s an important step to make sure you’re following Medicare’s rules and protecting your future medical funds.
First, you’ll need to figure out how much money should go into the MSA. This means estimating your future medical costs based on today’s dollars. Things like your injury type, age, and past treatments all factor into this calculation to predict what your future care will cost.
If a formal MSA is required, the next step is getting it approved by the Centers for Medicare & Medicaid Services (CMS). They review the proposed amount to make sure it’s enough to cover your future medical needs. You can’t move forward with the settlement until CMS gives the green light.
Once approved, the funds usually go into a separate, interest-bearing checking account that’s only used for medical expenses related to your injury. It’s super important to keep clear records of all medical payments from this account—Medicare may require proof that the money was spent correctly.
Managing a Medicare Set Aside (MSA) account takes some careful planning to make sure everything is handled correctly. Here’s what you need to know to stay on track.
Use a Separate, Interest-Bearing Checking Account
Once your MSA is funded, the money should go into its own interest-bearing checking account. This account is just for covering medical expenses related to your injury—nothing else. Keeping it separate makes it easier to track spending and ensures the funds are used the right way.
Keep Good Records
Documentation is key. Every time you use MSA funds, you need to keep track of what you spent and why. That means saving medical bills, receipts, and any paperwork related to those payments. Medicare might check these records to make sure the money was only used for approved medical costs.
Stay on Top of Reporting
In some cases, you might need to send reports to CMS (Centers for Medicare & Medicaid Services) showing how the money was used. This is usually required for formal MSAs, but even if it’s not, keeping a record is a smart move. Regular reporting helps you stay compliant and avoid any issues down the road.
Managing a Medicare Set Aside (MSA) account might feel overwhelming, but there are ways to make it easier—like using annuities or hiring an outside administrator. Here’s how these options can help:
Annuities: Spreading Out Payments Over Time
An annuity is a financial setup that spreads out payments instead of giving you the full amount upfront. This can be really helpful if your future medical costs are high. Here’s how it works:
The perks? Annuities can make settlements more affordable for insurance companies, ensure a steady flow of funds for your care, and even help your attorney negotiate better terms.
Outside Administration: Let Someone Else Handle the Hassle
Instead of managing your MSA yourself, you can hire a company to do it for you. Here’s what they take care of:
The biggest benefit? Convenience. You don’t have to stress over paperwork, bookkeeping, or Medicare compliance. The tradeoff is that you won’t have direct control over those settlement funds.
Managing a Medicare Set Aside (MSA) account means knowing what you can and can’t spend the money on.
What You Can Use It For
MSA funds are strictly for medical expenses related to your injury—doctor visits, surgeries, prescriptions, and treatments tied to your workers’ comp or personal injury case.
What You Can’t Use It For
You can’t use MSA funds for unrelated medical care (like the flu or a new injury) or non-medical expenses (vacations, car payments, etc.). Misusing the funds could result in Medicare denying future coverage for your injury-related care.
Follow the Rules or Risk Losing Coverage
If you don’t follow Medicare’s strict guidelines, they may refuse to cover future medical costs once your MSA runs out, leaving you financially vulnerable.
Keep Good Records
Save receipts, invoices, and medical reports to prove proper use of funds. If Medicare audits your account, documentation will protect you from penalties.
1. Stay in Touch with Your Attorney
Your attorney is a key player in setting up and managing your MSA. They’ll make sure everything is legally sound and properly allocated in your settlement. Check in with them regularly to stay updated on best practices and any rule changes.
2. Consider Annuities or an Outside Administrator
Annuities can provide steady payments over time, which can be helpful for managing large MSAs. An outside administrator can also take the burden off your shoulders by handling payments, bookkeeping, and compliance. Talk to your attorney about whether these options make sense for you.
3. Keep Good Records
Hold onto invoices, receipts, and medical reports for every expense paid from your MSA. If Medicare ever checks your account, having everything documented will save you from potential issues.
4. Follow Medicare’s Rules
MSA funds must be used only for medical expenses related to your injury or disability. If you spend the money on something else, you could face serious penalties—including losing Medicare coverage for your injury-related care.
5. Plan for Future Medical Costs
Work with your doctor and attorney to estimate future medical needs. Making sure your MSA funds last for necessary treatments will help prevent gaps in your healthcare coverage.
6. Stay Up to Date
Medicare rules can change, so keep yourself informed. Check in with your attorney and reliable sources to make sure you’re always following the latest requirements.
If you have any questions or need assistance with your workers' compensation case, don’t hesitate to reach out. Give me, Rex Zachofsky, a call at 212-406-8989, and let's discuss how we can assist you. There's no pressure—just sound advice and support when you need it.
