When an insurance settlement involves Medicare beneficiaries, all involved parties are responsible for protecting Medicare’s financial interests. The Medicare Secondary Payer (MSP) act mandates that Medicare’s best interests are met; if they are not, the government will take action to recover its losses.
Medicare protects its interests by ensuring your client spends their settlement funds before it begins paying any bills. This is done through a Medicare Set-Aside Allocation (MSA).
Myth #1- It’s Your Client’s Job to Pay Back Medicare
Everyone involved in the settlement process is responsible for resolving conditional payments and making sure Medicare’s interests are protected.
Your client does need to pay back Medicare; however, as their attorney, you are responsible and can consequently be held liable if this payment is not made in full. Ensure that you have the final demand letter from the Medicare Secondary Payer Recovery Contractor (MSPRC) before dispersing the settlement funds to your client.
Myth #2- Medicare’s Future Interest is a Defense Issue
It can be easy to let the other side convince you that they are a part of this equation; after all, the topic is complex and there are myriad other things on your plate.
However, Medicare set-aside allocation is not a defense issue but a plaintiff issue and should be treated as such. Take control of the MSP process early in the negotiations.
Myth #3- Medicare Set-Asides Can Be Avoided
Technically, this is not a myth.
MSAs are not required by law, however, they are Medicare’s preferred method of protecting its future interests. MSAs are complex; they have numerous restrictions regarding how the money can be spent and require detailed record keeping and reporting to the Centers for Medicare and Medicaid Services (CMS). Mistakes are costly and can compromise your client’s future entitlement to Medicare. MSAs are not typically a trial attorney’s area of expertise, so there are still many attorneys in the workers compensation and liability industries who try to avoid the need for an MSA when settling their clients’ claims. However, not using Medicare’s preferred method can put both client and attorney at risk.
There is also a choice regarding whether the MSA will be self-administered or professionally administered and whether it will be funded in the form of a lump sum or with an annuity. Professional administration of the MSA protects your client and is highly encouraged by Medicare. Because annuity funding provides your client with a 20 to 30 percent discount, this is also the best option.
This article is continued in Part 2.
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Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.