Keeping Benefits with a Medicare Set-aside

Posted on November 9, 2020

Settling a lawsuit can be a great relief to an individual and his or her family. While the money that can come as a result of settlement is usually welcome, the next step of the process is to make sure one educates themselves on the implications of these new funds, and how to best manage the money to set oneself up for success moving forward.

What is Medicare?

Medicare is a government-provided health insurance program de-signed to assist certain people with hospital care, medical costs, and other expenses. Qualifying beneficiaries are people who are 65 or older, those younger than age 65 with certain disabilities, and people of all ages with permanent kidney failure.

Complying with Medicare using a Medicare set-aside

A Medicare set-aside (MSA) is an account created from a settlement of a workers’ compensation case or a liability case such as a medical malpractice or auto accident lawsuit. The account is funded by using a portion of the settlement proceeds that were awarded to the claimant or plaintiff in order to pay for future medical expenses related to the injury or illness. Those expenses would otherwise be paid for by Medicare, but because Medicare is a “secondary payer,” adequately complying with Medicare means a beneficiary’s settlement must help cover those expenses.

There is a very specific set of steps beneficiaries must take to properly set up an MSA and comply with Medicare. Funds must be established in insured bank accounts, health care providers must be notified, and claims must be properly paid and recorded. The claimant must decide whether to manage the account alone or set up the MSA in a custodial account. A custodial account is a financial account set up for the benefit of a beneficiary, and administered by a responsible person, known as a custodian.

Taking a streamlined, systematic approach to the MSA process will ensure beneficiaries set up their program properly and keep their Medicare eligibility. It can sound overwhelming, but it’s very manageable, especially with the help of a seasoned professional.

Funding a Medicare set-aside

Many people ask us how to figure out how much money they need to put in their Medicare set-aside. Every case is different, but in short, the following four factors determine the appropriate amount for an MSA:

  • The settlement recovery amount,
  • The full value of your case if you went to trial or arbitration,
  • The amount allocated to future medical care, and
  • How much future Medicare-allowable medical treatment will be needed over your lifetime.

An experienced settlement planner can assist claimants in determining how much money to set aside in their account. It’s important to mention here that MSAs are not mandatory. Some companies will aggressively market MSAs to unsuspecting people even when they’re not necessary for those individuals.

At Milestone Consulting, our philosophy is to make sure each client is informed about their options. Our experts provide assistance with MSAs when they are the best step to take to ensure government compliance.