The Misconceptions (Still) Muddying the MSA Waters

In our last post, we explained why Medicare set-asides (MSAs) lie within a gray area of the law, and how forthcoming guidance from the Centers for Medicare and Medicaid Services (CMS) may change that. Until that happens, however, the law surrounding MSAs will remain muddied by a few age-old misconceptions, which we’ll try to clear up here.

The first misconception about MSAs is also the best starting point for this post. And that is: there is no law or regulation that expressly requires the creation of an MSA in any case. We repeat: “the law does not require a ‘set-aside’ in any situation.”

You may be wondering, if this is true, then why all the fuss?

There’s fuss because, while MSAs aren’t mandated by law, they’re CMS’s “method of choice” to protect Medicare’s future interests, which is mandated by law.

To put it another way, consider this situation: a judge requires an attorney to submit a proposed order, “preferably in 14-point font.” If you’re the attorney, would you submit the proposed order – one that you’d really like the judge to enter – in anything but 14-point font? No. The answer is no.

The second misconception is that MSAs need only be used in workers’ compensation (WC) cases. This one probably persists for a couple reasons. First, there’s (still) only one formal MSA review process in existence, and it applies only to WC cases. Second, MSAs (still) just function better within WC cases because future medical expenses are calculated by using rigid formulas; a similar process for earmarking future medical expenses just doesn’t exist in liability cases.

But don’t let these things fool you. When it comes to protecting Medicare’s future interests, “there is no distinction in the law” between WC cases and liability cases.

The third misconception is that, in the absence of a formal review process for liability MSAs, beneficiaries involved in liability cases, as well as their attorneys, can fly under CMS’s radar. This shouldn’t happen in light of Section 111 reporting. Every time a Medicare beneficiary settles a liability case with the opposing party, that party’s insurer is required by law to report the settlement to CMS.

What’s funny is that Section 111 reporting wasn’t implemented with MSAs in mind. Rather, it’s geared toward conditional payments – or, more specifically, Medicare’s recovery thereof (which we’ve covered in previous posts ). Indeed, once the insurer reports the settlement to CMS, Medicare must be reimbursed for any conditional payments within 60 days of the report.

Of course, the cases where Medicare may be entitled to reimbursement for conditional payments are generally the same cases where Medicare’s futures interests must be protected (preferably by using MSAs). So, intentionally or not, Section 111 lets CMS kill two birds with one stone.

To be sure, under Section 111, the insurer must also report the injuries claimed by the beneficiary in the case being settled. CMS then “flags” these injuries in its system. The effect is that, when the beneficiary seeks treatment for these injuries after the settlement, but fails to use funds set aside for such treatment, CMS denies coverage. Indeed, denial of coverage is CMS’s “method of choice” for enforcing the protection of its future interests.

Finally, don’t bank on the possibility that the insurer won’t report the settlement or injuries; failure to comply with Section 111 reporting requirements could subject the insurer to a civil monetary penalty of $1,000 per day.

Just as these misconceptions still persist, so does the ultimate conclusion about MSAs: they’re the best tool for meeting the obligation of protecting Medicare’s future interests, and thus it’s in your and your client’s best interests to use one when appropriate. To that end, if you’re wondering whether your client needs an MSA, or how much money should be set aside in your client’s MSA, contact us today!

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Disclaimer: The information provided through these blog posts does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available through these blog posts are for general informational purposes only.

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