Although no statutory or regulatory authority requires Medicare set-aside arrangements (MSAs) in third party liability settlements, confusion continues as to whether and when MSAs are necessary and/or appropriate for such cases.
S2KM has addressed this topic in two prior blog posts:
- MSAs and Liability Cases 1: summarizing recommendations for MSAs in liability cases issued by the National Academy of Elder Law Attorneys (NAELA) for special needs attorneys (case specific) and the American Bar Association (ABA) for the United States Congress (legislative).
- MSAs and Liability Cases 2: reviewing an article by Peter Wayne that offers advice to plaintiff attorneys about Medicare compliance generally in liability cases.
An article by Aaron D. Frishman published in the Fall 2012 issue of the NAELA Journal titled "Medicare Set-asides in Personal Injury Cases: Is There a Standard Method of Practice?" expands and updates analysis of this challenging settlement planning issue.
- Provides historical background about the Medicare Secondary Payer (MSP) Act and the evolution of MSAs in workers compensation cases.
- Details the three primary arguments for and against MSAs in liability cases:
- Statutory basis for MSAs
- Actions taken by CMS and its regional offices
- Risks of attorney liability.
- NAELA's 2010 liability MSA Task Force Report.
- The ABA's 2011 Resolution 108A urging Congress to enact new MSA legislation.
- The 2011 Hinsinger v. Showboat Atlantic City case "that found MSAs in third party liability cases to be synonymous with those in workers’ compensation matters." while addressing the issue of whether a liability set aside should be reduced for procurement costs.
- Proposed MSA rule changes CMS released June 15, 2012 in the form of an "advanced notice of proposed rule-making" (ANPRM).
Frishman's conclusions for MSA's in non-workers compensation personal injury cases:
- No clearly identifiable best practice currently exists.
- MSAs are not currently a mandatory method for satisfying Medicare's interests.
- There is currently no published history of any suit by Medicare against any party in a personal injury suit for the failure to establish an MSA.
- Whether to use an MSA is case specific and ultimately the client's choice.
- Attorneys should fully informed their clients of the issues related to future medical expenses and Medicare’s interest.
- At a minimum, attorneys should discuss the potential use of MSAs in personal injury contexts with their clients and all parties involved.
- An attorney should always consider the size of the settlement, as well as the plaintiff’s Medicare eligibility status, when evaluating whether to use MSAs in personal injury settlements.
- An attorney’s examination of the issues should include an in-depth cost-benefit analysis of the plaintiff’s circumstances.
an attorney is determining whether to advise his or her client to use
an MSA in a personal injury settlement, it is reasonable to assume that
the following CMS rules for workers compensation cases would apply:
- The total settlement amount is greater than $25,000; or
- The plaintiff has a reasonable expectation of enrolling in Medicare within 30 months from the settlement date and the anticipated total settlement amount is expected to be greater than $250,000.
- Until CMS or Congress provides firm authority regarding the application and enforcement of the MSP Act in personal injury settlements, uncertainty will continue regarding MSA use in these contexts.