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No, but understand that MSAs are NEVER required, even in workers' compensation cases. The MSP Act advises that Medicare will not pay for medical expenses where payment has been made under a workers' compensation, automobile, liability insurance (including self-insurance), or a no-fault insurance plan.
Based on this broad statutory prohibition, the question to ask is whether someone is being compensated for future medicals (in part or in whole) as part of the settlement. When there is compensation being paid for future medicals, then Medicare should not be expected to pay a bill related to the settlement under that amount of compensation for future medicals paid is spent down and exhausted on future medicals related to the settlement.
An MSA or Medicare Set-aside Arrangement is a vehicle used to ensure that Medicare is not billed prematurely post-settlement for future injury-related medical care related to the settlement.
MSAs can be a simple as an interest-bearing checking account opened by the injured person or as complicated as a formal trust.
While MSAs are Medicare's preferred vehicle and the most well-known vehicle for addressing future medical obligations under the MSP Act, they are not the only option. So long as Medicare is not billed for future medical care that is someone else's responsibility, then Medicare suffers no harm.
MSAs can be funded one of two ways: 1) lump sum dollars up front; or 2) purchasing some financial product (i.e., an annuity or structure) that will pay the same amount as the lump sum amount over a period of time.
There are pros and cons to each approach. If you decide to fund the MSA with lump sum dollars up front, it is less complicated. However, one does not capture the benefits of the time value of money. Further, the potential exists for the entire amount to be mishandled and spent incorrectly. Using some financial product to pay the MSA out over time means that you can maximize the injured person's net settlement proceeds and ensure that funds will be available on a regular basis (typically paid our annually) to prevent mismanagement of the MSA proceeds over a short period of time.
There is no incorrect way to fund an MSA, except to under or over fund the obligation. Best practices dictate that you ensure the MSA being funded adheres to all legal requirements regarding future medicals under the MSP Act to avoid over or under funded MSAs.
MSAs can be administered one of two ways: 1) by the injured person themself; or 2) by a trustee or professional administrator.
There are pros and cons to each. Self-administering an MSA is the cheaper route. Hiring a professional administrator costs money. However, self-administering an MSA could be overwhelming. Responsibilities include, but are not limited to: 1) ensuring that the MSA proceeds are being spent properly; 2) negotiating rates with service providers; 3) instructing service providers to accept a check from you instead of billing Medicare; 4) handling correspondence to and from the federal government; and 5) knowing which medical expenses are Medicare covered versus non-Medicare covered. Depending on the client’s injuries as well as level of education/sophistication, asking them to self-administer the MSA would not only be ill advised, but potentially unethical.
On the other hand, there are experienced third parties who act as MSA administrators. These companies have the resources, knowledge and connections to handle this obligation compliantly for the injured person. These services do come at a cost, and some companies are better than others. Make sure you do your due diligence on the options available, and ask those who work with those companies regularly who they would recommend. While there are fees involved, they should be reasonable in nature. As an added benefit, when one couples a professionally administered MSA with a financial product based MSA funding option, a settlement planner can typically imbed the cost of MSA professional administration in the cost of the financial product. That way, there is a complete pass through and the client is not burdened with paying an annual fee.
No. Any review by Medicare of an MSA is always voluntary. Such review/approval is only made mandatory when the settling parties have made that a condition of their settlement agreement.
Even when parties make that a condition of settlement, Medicare does not review every MSA proposal it receives. Medicare has an established review process for MSAs in workers' compenastion cases. Those review thresholds are: 1) the injured worker is a current Medicare beneficiary, and the gross settlement exceeds $25,000; or 2) the injured worker is not yet Medicare enrolled but has a "reasonable expectation" of Medicare enrollment within 30 months of settlement, and the gross settlement exceeds $250,000. If a workers' compensation case fits one of those two criteria, parties have the option to ask Medicare voluntarily to review an MSA. When a case does not meet that criteria, that DOES NOT PROVIDE PARTIES A SAFE HARBOR ON THE MSA ISSUE. Medicare advises that "Claimants must still consider Medicare's interests in all WC cases and ensure that Medicare pays secondary to WC in such cases." CMS WCMSA Reference Guide v3.1 (issued May 11, 2020).
For liability MSAs, Medicare has not (yet) established a formal review process. Industry experts anticipate that any formal review process Medicare introduces will have some similarities to its WCMSA review process. As we move forward, you will want to monitor this by receiving our firm's periodic newsletter, The MSA Today. To receive the most recent edition of The MSA Today, and be added to the distribution list, please click here.
Potentially, nothing. For years, injured persons have been instructing medical providers to bill Medicare for future medical care that was related to their settlement. By and large, Medicare has paid those bills, no questions asked. However, Medicare has recovery options at its disposal today, and has begun enforcement of those options.
Under the MSP Act, Medicare has the right to seek recovery for any conditional payments made post-settlement from the responsible party. Under the terms of most settlement agreements, that responsible party would be the injured person. Thus, when that injured person has: 1) been compensated for future medical care as part of the settlement; 2) sought medical treatment related to the settlement and instructs the provider to bill Medicare; and 3) Medicare pays that bill in error, Medicare has a statutory right to seek recovery of the amount of the overpayment. The same statute also allows Medicare to recovery double damages (i.e., 2x the amount of the overpayments). Medicare can also seek interest pursuant to the statute.
Medicare also has the ability to refer such matters to the U.S. Department of Justice (USDOJ). USDOJ could then pursue recovery using the federal False Claims Act (FCA) as its mechanism. 31 U.S.C. §§ 3729, et seq. Under that statute, the USDOJ could collect treble (3x) damages plus assert penalties of between $5,000 and $10,000 per false claim. Thanks to Section 701 of the Bipartisan Budget Act of 2015, revising prior provisions of the Federal Civil Monetary Penalties Inflation Act of 1990, FCA penalties in 2018 rose to between $11,181 and $22,363 per false claim. 28 U.S.C. § 2461.
For attorneys, the potential repercussions also include legal malpractice actions filed by the former client whose Medicare benefits have been revoked (for future medicals related to the settlement) and/or being reported to the state bar for possible ethics violations (revolving around competance, diligence, client communication, and safekeeping client property).