Medicare Set-Asides

2.   What are the laws that govern an MSA?

This is how the Centers for Medicare and Medicaid Services (CMS) summarizes the laws and regulations associated with MSAs (We have added links to the various statutes and regulations for easy reference):

Pursuant to 42 U.S.C. §1395y(b)(2) and § 1862(b)(2)(A)(ii) of the Social Security Act, Medicare is precluded from paying for a beneficiary's medical expenses when payment "has been made or can reasonably be expected to be made under a workers' compensation plan, an automobile or liability insurance policy or plan (including a self-insured plan), or under no-fault insurance."

Overpayments and Recovery

Federal law (42 U.S.C. § 1395y(b)) not only establishes that Medicare is a secondary payer to WC, but also that Medicare has a priority right of recovery over any other entity to the proceeds of any settlement.  To the extent that Medicare has made any "conditional payments", Medicare will recover those payments pursuant to 42 C.F.R. § 411.47.

Pursuant to 42 C.F.R. § 411.21, "conditional payments" are Medicare payments for services for which another payer is responsible, made either on the bases set forth in 42 C.F.R. § 411 subparts C through H, or because the intermediary or carrier did not know that the other coverage existed.

Future Medical Services

The burden of future medical expenses in WC cases may not be shifted to Medicare.42 C.F.R. § 411.46 and § 411.47 provide that Medicare's interest must be considered in WC settlements, when future medical expenses are a component of the settlement.

Because Medicare does not pay for an individual WC related medical services when the individual receives a WC settlement that includes funds for future medical expenses, it is in the best interest of the individual to consider Medicare at the time of settlement. For this reason, CMS recommends that parties to a WC settlement set aside funds, otherwise known as Workers' Compensation Medicare Set-aside Arrangements (WCMSAs) for all future medical services related to the WC injury or illness/disease that would otherwise be reimbursable by Medicare.

. . .

If Medicare's interests are not considered, CMS has a priority right of recovery against any entity that received a portion of a third party payment either directly or indirectly.  Medicare may also refuse to pay for medical expenses related to the WC injury until the entire settlement is exhausted.  To avoid future overpayment negotiations and to protect the injured worker's future Medicare benefits, it is in the best interests of all parties to work together, including Medicare, the WC agencies, attorneys, WC carriers, and claimants.

This provides a fairly accurate summary of the relevant laws and regulations. For a more information about the law, please read 42 C.F.R. § 411 et. seq. 

Policy Memos

There is one more source of information that anyone studying this area of law should be aware of. CMS has issued a series of confusing and at times contradictory memorandums concerning the implementation of the Medicare Secondary Payer Act.  There are nine memos in all.  All of the memos are listed below. It is easier if the most recent are read first.  All of the memos are in PDF format and require Adobe Reader to view.  Click here to obtain Adobe Reader.

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All of the content was prepared by Michael R. Merlino II, an attorney in Georgia who focuses on his practice primarily on MSAs.  He prepares MSAs for many large self-insureds and insurance companies. If you have questions, he can be contacted at 770-374-3697 or mmerlino@gmail.com.  He also has a website devoted to MSAs, which is updated frequently:  www.wcmsainfo.com  

© 2007 Wisconsin Association of Worker’s Compensation Attorneys, Inc, and Michael R. Merlino II. All rights reserved.

This page was last updated on October 08, 2007.

This page was last updated on October 08, 2007.