Lawyers who handle workers’ compensation cases are probably familiar with Medicare set-aside (MSA) agreements. However, the use of set-asides is expanding to involve liability cases as well. In this report, elder law attorney Julian Gray of Julian Gray Associates discusses the use of set-aside agreements and how the use of set-asides is expanding. [Note: this 2015 Legal Broadcast Network report also discusses Medicare set-asides in liability cases.]
Gray explains that the use of Medicare set-asides is a response to the Medicare secondary payer act of 1980. The act was aimed at workers’ compensation claims where Medicare would at some point become a person’s primary health insurer. The idea was to shift costs from Medicare to other payment sources. Initially, at least, things were fairly clear cut. Workers’ compensation cases were the ones where set-aside agreements would be required.
Now, says Gray, Medicare is suggesting that it will look past the workers’ compensation field to other areas. Cases involving motor vehicle accidents and medical malpractice are probably the likeliest targets for Medicare, Gray says. The Centers for Medicare & Medicaid Services (CMS) are looking at liability cases, and insurance companies who will be paying for substantial verdicts or settlements “are getting a little nervous” about the possibility of monetary penalties and possible liability of people involved in a case, including counsel on both sides. The possibility that Medicare would deny coverage for future care is also in the background. The result is that parties are now beginning to think of what Medicare’s interest would be in the future. Gray says that no one presently knows what new rules from CMS might look like when they are issued, probably later in 2017. As a result, people involved in liability settlements are looking at the rules in workers’ compensation cases as a guide.
The big questions to be answered are how much money should be set aside and how to fund the account. Gray explains that there are resources available to plaintiffs’ attorneys whose expertise is in determining future medical costs. These experts can analyze the injuries in a particular case with an eye to future care that will be required, including medication costs, and suggest an amount of money that might be required given a particular plaintiff’s life expectancy. These numbers provide a basis for deciding how much set-aside funding will be needed.
Funding the Medicare set-aside requires some attention from plaintiffs’ attorneys, Gray says. In worker’s compensation cases, set-asides were typically funded by cash from the settlement or by a structured settlement annuity. However, there are presently no guidelines as to how to fund a liability MSA. Gray suggests that anyone trying to decide how to fund an MSA consider a variety of possibilities beyond the two traditional approaches. It makes sense for the lawyer for an injured party to involve an attorney knowledgeable in the MSA funding field at an early point so as to make sure that all the possible issues that might arise down the line are dealt with before the settlement plan is finalized.
Gray also suggests that people involved in liability cases should consider possible alternatives to Medicare as an insurance source for an injured party. Private insurance can be purchased, including through the Affordable Care Act or its successor, whenever such a law is enacted. Medicaid benefits might also be an option. There are ways to opt out of Medicare, and that is an option that should be kept in mind.
Julian is the founder of Julian Gray Associates in greater Pittsburgh, Pennsylvania. He is a board member of the Special Needs Alliance (SNA), a national nonprofit committed to assisting individuals with disabilities, their families and the professionals who serve them. He is one of only a few attorneys in all of western Pennsylvania to be Certified as an Elder Law Attorney by the National Elder Law Foundation. He has provided assistance to a variety of clients and their families for over twenty years in the areas of Medicaid planning, veterans' benefits, and related estate planning and tax issues. He is a lifelong resident of Pennsylvania. He received his bachelor's degree from Penn State University and his law degree from Duquesne University School of Law. The Settlement Channel is a featured network of Sequence Media Group.