Does Receiving Workers' Compensation Trigger a Medicare Set-Aside?
Yes, it is true that a Medicare Set-Aside (MSA) arrangement may be required when a workers' compensation settlement or award addresses future medical treatment related to a work injury. The MSA sets aside a portion of the settlement funds specifically for those future medical expenses so that Medicare does not pay for them first. The obligation arises from the Medicare Secondary Payer Act, which makes Medicare the payer of last resort for injury-related care that workers' compensation should cover.
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Not every workers' compensation case requires an MSA. The obligation typically applies when the settlement includes payment for future medical care, when the claimant is enrolled in Medicare or will become enrolled within 30 months, or when the settlement is a lump sum that could be spent on medical costs Medicare might otherwise cover. If the settlement pays only for past wages or non-medical losses and future medical treatment is handled directly through ongoing workers' compensation payments, an MSA may not be necessary.
How a Medicare Set-Aside Works
An MSA is not a separate government account you apply for. It is a commitment written into the settlement agreement that a specific dollar amount be reserved for future medical treatment related to the work injury. The funds are typically placed into a dedicated savings account, and the claimant is responsible for spending them only on approved, work-injury-related medical expenses until the account is depleted.
Key obligations of the claimant
- Report the MSA arrangement to Medicare, usually via a CMS MSA submission, before disbursing settlement funds.
- Use MSA funds only for medical expenses tied to the compensable injury.
- Preserve receipts and records showing how the set-aside money was spent.
- Notify Medicare if the MSA funds are exhausted and future treatment needs continue.
What Happens Without an MSA
If a settlement affects Medicare's interests and no MSA is established, Medicare may deny claims for work-related treatment and seek reimbursement from the settlement proceeds later. This can leave the claimant financially responsible for medical bills they expected Medicare to cover, and it can trigger audits or repayment demands years after the original settlement.
When to Seek Professional Guidance
Because MSA calculations require projecting future medical costs, the process can be complex. Working with a qualified workers' compensation attorney or an MSA analyst helps ensure the set-aside amount is reasonable, the submission to CMS is complete, and the claimant remains compliant with Medicare rules. Legal advice is especially important when the settlement includes both medical and wage-loss components.