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If you’re a Medicare beneficiary and are about to receive a personal injury settlement, you may risk losing your benefits without proper settlement planning. A solution for some is to establish a Medicare set aside (MSA). Below, we break down what you need to know.

Why Medicare could drop your benefits after settlement

Medicare is known as a “secondary payer” by law, which means that when an injured person has certain types of insurance coverage, those insurance companies are first responsible for paying for related medical expenses. If those companies do not cover the full cost of services, Medicare may then become responsible for the balance of payment. When you receive a settlement as a Medicare beneficiary, you’ll likely need to show that you recognize Medicare is still a secondary payer. 

An MSA is a financial agreement that some beneficiaries use if they are about to receive a personal injury settlement or a payout from a worker’s compensation claim. The fund allocates a portion of the settlement to pay for future medical services related to an injury or illness, that would otherwise be payable by Medicare. That way, Medicare doesn’t have to pay first. 

How to tell if you need an MSA to preserve benefits

When considering either kind of MSA, we recommend a four-step process:

  1. Determine if a MSA is necessary. In making this decision, consider your (or your client’s) Medicare eligibility, anticipated settlement amount, and the potential cost of future related medical care. For example, an MSA is often not recommended if the plaintiff is Medicare-eligible but none of the settlement money is meant to cover future medical care, or only past damages and wages are being recovered in the settlement.
  2. If this is the best option to comply with Medicare, the next step is to determine the appropriate allocation. An expert allocator will gather information about the beneficiary’s covered and non-covered medical needs.
  3. Plaintiffs may choose to self-administer their MSAs. However, self-administration could mean making critical accounting errors and improperly using funds.
  4. Implement the most cost-effective funding solution. There are different options, including funding with a lump sum or utilizing a structured arrangement. An expert can weigh these options for the best tax-saving benefits, flexibility, and cost.

An expert settlement planner can help you set up an MSA to ensure your settlement is as beneficial as possible without losing Medicare eligibility.

If you are interested in learning more about MSAs or complying with government benefits after settlement in general, we welcome you to contact us.