by Andrea Mills, Chief Client Officer, Ametros

Settling a workers’ compensation or liability claim can and should be a win-win for the injured individual and the payer. But, various obstacles may impede what would otherwise be a seamless process, especially when Medicare comes into play.

Fortunately, some experts devote their careers to understanding and alleviating the concerns of injured individuals and helping move claims to settlement.

This three-part series examines the medical settlement process and the ways professional administrators achieve claim closures with optimal outcomes for injured individuals and payers.

Understanding the basic rules and regulations of Medicare, especially Medicare Set-Asides, and knowing how and where to get professional help offers the best chance of optimal outcomes.

The Medicare Factor

Many injured parties are, or soon will be, eligible for Medicare benefits. The government has strict mandates to ensure these benefits are not commingled with monies paid to injured individuals for injuries expected to be covered by another third party, i.e., the employer or insurer.

In short, Medicare is always a secondary payer. If an injured individual is covered by Medicare or is Medicare-eligible, the government ensures that Medicare does not pay the medical expenses associated with the claim or medical settlement.

What Are An Injured Individual’s Obligations to Medicare?

Obligations Before Settlement

Before settling, the parties must demonstrate that Medicare’s interests will be reasonably considered when paying for future medical expenses related to the specific injury. Plainly stated, parties must prove that Medicare will not pay for future medical expenses that have already been allocated to be paid by a settlement amount. Medicare wants to make sure individuals aren’t buying a boat with their settlement money when they should be paying for hip surgery.

The recommended method to consider Medicare’s interest is a Medicare Set Aside (MSA). This is an allocation of funds to pay for all future work-related medical expenses that are otherwise covered by Medicare. While not mandatory, many settlement participants opt to create an allocation report outlining injury-related items covered by Medicare.

MSAs include several elements, such as:

• Medical Allocation. This line-item listing of Medicare-covered treatment and prescription drugs contains frequency, duration, dosage, costs, etc., for the individual’s life.
• MSA Funding. The MSA can be funded as a lump-sum payment or through a structured annuity.
• Administration. Beneficiaries may act as their own administrators or opt to have another entity, such as a professional administrator, oversee the MSA funds.

The MSA may, but is not required, be submitted to Medicare for review and approval. Getting approval means Medicare has validated that the amount set aside is accurate.

Important: The Center for Medicare & Medicaid Services’ (CMS) expansion of the Total Payment Obligation to Claimant (TPOC) reporting process for Workers’ Compensation claims involving Medicare beneficiaries will be effective April 4^th, 2025. All Responsible Reporting Entities (RREs) will be required to submit certain WCMSA data fields regardless of whether the settlement was formally submitted or not to CMS. Notably, CMS now requires submission of the amount of future medical care set aside to protect Medicare’s interest. The data collected will assist Medicare in making informed determinations regarding the coordination of benefits, ensuring that Medicare does not become the primary payer for future medical services related to workers’ compensation injuries. This requirement now makes professional administration for MSAs not submitted for CMS approval critical to ensure an individual is properly managing and reporting on their funds, as Medicare will have greater insights into all medical settlements.

What are an individual’s obligation to Medicare After Settlement?

Obligations After Settlement

After the case settles, the injured individual must properly pay their medical bills using funds intended for future medical until the funds are exhausted.

There are several rules and regulations an injured individual must follow. According to CMS guidelines, injured individuals:

• Are only allowed to spend their MSA funds on Medicare-covered treatments related to their injury, and only those which would be covered by Medicare.
• Must place MSA funds in a separate, interest-bearing bank account.
• Must keep copies of bills & receipts.
• Must report all expenses they used their MSA funds on to CMS each year and in the case their funds run out.

What Are the Risks and Consequences of Mismanaging MSAs?

Failure to adhere to Medicare’s requirements can have significant consequences for the injured individual. Mismanagement of the MSA account could result in Medicare refusing to cover future work-related medical expenses. This may occur if funds are depleted and could also entail repaying the MSA account for expenses not covered by Medicare.

In other words, failing to manage MSA funds properly could lead to Medicare denying paying for treatment until the reporting is corrected. That typically means the injured individual would have to refund any money used on an improper expense unrelated to the injury to the MSA account.

Is Help Available, or Are Injured Parties On Their Own to Manage Their MSA?

Self-management of MSAs is quite complex. In fact, Medicare advises against this. The Centers for Medicare and Medicaid Services (CMS), which oversees Medicare, issued the following statement in a reference guide in 2017:

“It is highly recommended that settlement recipients consider using a professional administrator for their funds.”

The many rules and regulations involved in administering an MSA account can too easily lead to mismanaged Medicare benefits, which can put the injured party at risk of losing these benefits in the future.

Professional administrators have vast expertise in managing MSAs. The most highly-rated firms offer various products to ensure the funds are used and appropriately reported. This takes tremendous pressure off the injured individual to oversee the MSA.

Conclusion

The goal of settling a workers’ compensation or liability claim is to allow the injured individual to move on with their life without fear of running out of money to care for themselves and their injuries; for the payer, it is the opportunity to get the claim off its books knowing the injured individual is well taken care of.

Following CMS’ advice and turning to a professional administrator to handle the complex aspects of protecting Medicare’s interests allows all parties involved to accomplish their goals.

Part three of this article series on medical settlements and Professional Administration will delve into optimizing the use of Professional Administration. It will focus on when and how to engage a professional administrator, leveraging best practices to optimize settlement agreements, and extending settlement funds.

Stay tuned to learn more about:

• When and how to engage a professional administrator
• Leveraging best practices to optimize settlement agreements
• Transitioning care with professional administration
• Extending settlement funds

Missed part 1? Catch up on understanding the basics of professional administration for medical settlements and important questions both professionals and injured individuals settling a medical case should know.

Andrea Mills, Chief Client Officier, Ametros. Andrea focuses on growing business and partnering with clients to find solutions that best fit their needs or solve problems. She has been in the workers’ compensation space for over ten years, starting her career as a marketer for a case management company, and transitioning to a sales role for a large provider of ancillary services in the WC space.