The confusion caused by gaps in CMS regulations regarding Medicare Set-Asides (MSAs) continues to grow. An aging population ensures that more people will become potential Medicare claimants if they are injured for any reason. While CMS has provided clear guidelines around the development of MSAs when injuries occur on the job, it has not been so forthcoming when those injuries occur in a third-party liability setting. Without such guidelines, both applicants/claimants and their legal representatives face potentially devastating consequences if they fail to 'guess correctly' about the appropriate use or non-use of an MSA in a third-party liability case.
Fundamentally, an MSA holds the funding necessary to cover the current and future medical costs of injuries sustained by Medicare beneficiaries (or soon-to-be beneficiaries). The theory behind the account is to protect Medicare (and Medicaid) from making medical payments for injuries that are the legal responsibility of another entity (the primary payor).
Federal law requires that the primary payor is deemed liable (responsible) for paying the costs of those injuries and must provide 100% of the current and future medical coverage for their treatment.
The distinction between a workers’ compensation MSA (WCMSA) and a liability MSA (LMSA) is the location of the incident that caused the injury.
In both cases, when the injuries will take time to heal fully and require ongoing medical coverage, the primary payor is also responsible for covering those future costs that accrue after the legal case has closed. The MSA is the account used to sequester the funds needed for this purpose.
The present challenge arises because the Centers for Medicare and Medicaid Services (CMS) has issued guidance for handling MSAs based in WC cases, but not for MSAs based in third-party liability cases.
From a legal perspective, not having official governmental guidance for setting the parameters of legally binding agreements (like an MSA) can open liability and other vulnerabilities for everyone involved in the liability case:
While all MSAs are voluntary, including WCMSAs, not all cases should have one, not even LMSAs, even when the guidelines for its establishment are clear.
The main determiners for creating an MSA are:
As in a WC injury, injuries sustained in a liability case don't always require long-term medical care. Broken bones, for example, that don't also have co-occurring nerve or muscle damage will often heal back to their pre-break state and require no additional medical coverage after that process is complete. When those injuries also include ongoing or irreparable nerve damage, muscle damage or other long-term health concerns, an MSA might be the best option to ensure that the appropriate funding is available to cover the costs of that care.
The type and duration of the injury are relevant factors regardless of whether it happened on the job site or in a liability scenario.
Medicare coverage is only available for people who are already eligible to receive it (currently age 65 years), or who will become eligible within a reasonable period (during which ongoing treatment for the injury is expected). Ergo, if the injured person is only 45 years old and the injury is expected to heal completely within two years, then the MSA is unnecessary.
On the other hand, if the injured person is 64 years old at the time of the incident, and the injury is expected to take two years to heal, then setting up an MSA to cover the costs of care after Medicare kicks in might be a wise choice.
Whether an injury occurs because of a workplace incident or through the fault of another party, having access to appropriate medical care is critical for the injured person to recover fully and regain their previous lifestyle. Despite having no direct guidance as yet from CMS about the necessity or appropriateness of an MSA in a third-party liability case, every person should perform a careful evaluation of both the cause of their injury, its short- or long-term prognosis, and the costs of its medical care before deciding an MSA is not for them. While there's no drawback to setting up the account as a prudent act of self-care, there may be significant drawbacks if it turns out that CMS will indeed have an interest in payouts for that injury and that interest wasn't considered when the financial resolution of the liability case occurred.