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Liability Medicare Set-Asides: Proposed Regulations Now Expected in August of 2020

July 1, 2020

By Jason D. Lazarus, J.D., LL.M., MSCC, CSSC

Late in the fall of 2018, the Office of Management and Budget issued a notification from the Department of Health and Human Services which oversees CMS of a proposed rule related to the Medicare Secondary Payer Act (MSP).  The abstract of the rule says it “would ensure that beneficiaries are making the best health care choices possible by providing them and their representatives with the opportunity to select an option for meeting future medical obligations that fits their individual circumstances, while also protecting the Medicare Trust Fund.”[1]   It indicated that the rule was “economically significant” and the basis for the legal authority was 42 U.S.C. 1396y(b).  The final rule was expected sometime in 2019 but didn’t come.

More recently, in the spring of 2020, we got a new notification.  It was an update to the previous notification and indicates that the proposed rule “would clarify that an individual or Medicare beneficiary must satisfy Medicare’s interest with respect to future medical items and services related to such settlements, judgments, awards, or other payments.”  In the notice, it indicates that the proposed rules will be revealed in August of 2020.  Whether that truly means we will have something before the end of August is anyone’s guess, but it does confirm CMS’s intent to push the agenda forward with regulations.  When we do get proposed rules, that is only the first step in the process towards final rules.  In the interim, things have not changed, and the same problems still exist.

That problem is that Medicare set-asides (MSAs) are not required by a federal statute even in Workers’ Compensation cases where they are commonplace.  There are no regulations, at this time, related to MSAs either.  Instead, CMS has intricate “guidelines” and “FAQs” on their website for nearly every aspect of set-asides from submission to administration.  There are only limited guidelines for liability settlements involving Medicare beneficiaries.  Without codification of set-asides, there are no clear-cut appellate procedures from arbitrary CMS decisions and no definitive rules one can count on as it relates to MSAs.  While there is no legal requirement that an MSA be created, the failure to do so may result in Medicare refusing to pay for future medical expenses related to the injury until the entire settlement is exhausted.  There has been a slow progression towards a CMS policy of creating set-asides in liability settlements over the last seven years as a result of the Medicare Medicaid SCHIP Extension Act’s passage[2].

This creates a difficult situation for Medicare beneficiary injury victims and contingent liability for legal practitioners involved in litigation involving physical injuries to Medicare beneficiaries given the uncertainty surrounding the need to create a set-aside.

If you represent a Medicare beneficiary, you must determine if future medicals have been funded and if so, advise the client regarding the legal implications of the MSP related to futures.  The easiest way to remember the process once you have identified someone as a Medicare beneficiary or someone with the reasonable expectation of becoming Medicare eligible within 30 months is by the acronym “CAD”.  The “C” stands for consult with competent experts who can help deal with these complicated issues.  The “A” stands for advise/educate the client about the MSP implications related to future medical.  The “D” stands for document what you did in relation to the MSP.  If the client decides that they do not want an MSA or to set aside anything, a choice they may make, then document the education they received about the issue with them signing an acknowledgement.  If they elect to do an MSA analysis, hire a company to do the analysis so that they can help you document your file properly and close it compliantly.

If you represent a client who is Medicare eligible and is treating for their injuries, I recommend a Medicare Expert Case Evaluation (MECE) when you resolve the case.  As part of the MECE, a Synergy Medicare Compliance expert will consult with your client regarding Medicare future interest protection mechanisms and the risk of doing nothing.  After being advised, your client can make an informed decision about what they would like to do, and you can document your file accordingly.

For $1,000.00, the MECE service includes:

  • Unlimited client consultation
  • Template communications to your client
  • Customized acknowledgement form to document your file
  • Settlement documentation consultation for MSP compliance

If an MSA allocation report is desired after consultation with the client, the cost of the MECE is applied towards the $2,500 charge for a Medicare Set Aside allocation report.


The whole system is flawed when it comes to Medicare.  You take all the risks, you do all the work, you bear all the costs and after you win then you must address the Medicare Secondary Payer Act.  Synergy flips that paradigm on its head and fixes the broken system.  Our team will create a comprehensive plan to allow you to close your file compliantly by addressing Medicare’s “future interest”, freeing you up to take on the next battle.  You can focus on what you do best and everyone wins.

If you have a client who is Medicare eligible that is going to require future accident-related care, a Medicare Set-Aside should be considered and a MECE completed. There are numerous ways to deal with Medicare Secondary Payer compliance (without a set-aside) to ensure both your firm, as well as your clients are protected. It just requires expert analysis with Synergy’s help.

[1] https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=201810&RIN=0938-AT85

[2] The MMSEA created a mandatory insurer reporting requirement which tasks defendants/insurers with reporting settlements involving Medicare beneficiaries to Medicare.  The reporting requirement requires settlements of $2,000 or greater to be reported as of 10/1/13.  Medicare, Medicaid, and SCHIP Extension Act of 2007 (P.L. 110-173). This Act was passed by the House on December 19, 2007, and by a voice vote in the Senate on December 18, 2007.

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