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MSP Compliance Case Study: Limited Recovery with Significant Damages

By B. Josh Pettingill, MBA, MS, MSCC

Below is a real world scenario involving MSP compliance issues which Synergy handled on behalf of one of our clients. The case involved a limited recovery for a plaintiff who was receiving SSDI benefits and needed future medical care related to his accident. At the time of the settlement, he had not yet received his Medicare card but was a month away from becoming eligible. The plaintiff attorney called Synergy looking to obtain an opinion letter stating a Medicare set aside was not necessary. The salient facts of the case are as follows:

  1. $300,000.00 Gross Settlement (policy limits)
  2. 57 Year Old Male
  3. Social Security Disability income (SSDI) recipient
  4. Injuries: Mild TBI (normal CT scan); Chinlaceration (healed); T1 to T2 transverse process fractures (no pain); Bilateral clavicular head fracture; Sternal fracture (wired); Multiple rib fractures, displaced, (now healed); Small pneumothorax on the right (healed); T11 non displaced fracture of the vertebral body (needs to be active to not be in pain); Achilles tendon injury (surgery; healed; no new surgery recommended); Left kidney injury (went into kidney failure but now healed); Cervical and Thoracic soft tissue injuries
  5. Date of settlement: 12/1/2013
  6. Date of Medicare eligibility: 2/1/2014
  7. $150k in private hospital liens
  8. $3,000,000 in damages/full value of case per economist report


  1. Do nothing. The attorney could obtain an opinion letter stating there were no monies to account for future medical care and/or get an opinion letter stating the client was not a current Medicare beneficiary at the time of the settlement. Accordingly, there would be no need to do a Medicare set aside. Sterrett et al. v. Klebart et al. (a CT state court case) would support the position regarding non-funding of future medical care.  In Sterrett, the court found that the settlement agreement did not reflect compensation for future medical costs, including future Medicare covered expenses related to the accident and ruled no MSA was required.
  2. Do a Medicare set aside (MSA) evaluation. The attorney/client could have Synergy do an MSA evaluation to make sure Medicare’s future interests and the client’s Medicare benefits were fully protected.


First, because this plaintiff was going to be eligible for Medicare within a month of the settlement, an argument could not be justified that this settlement would not be shifting the burden to Medicare to pay for his future care. Secondly, a sufficient basis didn’t exist to argue there was no recovery for any future medical care.  While an argument could have been made, it would have been questionable at best. There are lawyers who would be willing to write such a letter but Synergy didn’t recommend it and didn’t believe it was in anyone’s best interests to make the argument in this particular case. Synergy explained the options and potential implications of each course of action to the attorney.

After careful consideration, the attorney and plaintiff chose to do a Medicare set aside (MSA) with a reduction formula applied. When a Medicare set aside is prepared, the methodology assumes a recovery of the full value of the case. The fundamental problem with this methodology as it relates to liability cases and MSAs is that a full recovery is rarely if ever made. This was particularly true on this case. There was a plaintiff with significant damages and a limited monetary recovery based on the injuries sustained. The full value of the MSA was $150,000, which was equal to the client’s net recovery after attorney’s fees, costs and liens. That would leave the plaintiff with zero dollars if the full amount was set aside. In addition, it would allow Medicare to recover future care dollars from non-medical portions of the recovery.  Based on the economist report, the full value of this claim was $3,000,000 or 5% of what the plaintiff recovered. The plaintiff ultimately set aside a reduced amount of $7,500 based on an equitable distribution type formula similar to what was used in the Ahlborn case which compares the net recovery relative to the full value of the claim.  For this particular case, it looks like:

Full Value of Case                                                         $3,000,000

Total Settlement                                                           $300,000

Full Value of Medicare Set Aside                                     $150,000

Net Recovery to Client                                                  $150,000

Percentage of Recovery to Client                                    5%

Reduced Set Aside Amount                                          $7,500 ($150,000*.05 or 5%)


Take Away

Benoit vs. Neustrom was the first case to directly support reducing MSAs based on a limited recovery. For years, Synergy has been recommending a reduction approach on liability cases when applicable. The best practice is to set aside the full MSA amount if sufficient funds are available from the recovery. However, when there is a tough liability case or a limited coverage situation, the reduced MSA approach is better than the “do nothing” approach. If Medicare ever audited this file in the future, a strong argument could be made that Medicare’s future interests were “adequately” addressed and protected.

Knowing what to do when it comes to Medicare Secondary Payer compliance isn’t easy. Medicare doesn’t have any answers but Synergy does. Let Synergy customize Medicare compliance solutions so you can focus on what you do best. From conditional payment resolution to Medicare Set Aside (MSA) allocations to funding mechanisms and administration, Synergy has the solution to fit no matter the size.  

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