Beneficiary Designation: Decide Where Your Medicare Set-Aside Goes

We’ve all heard how important it is to establish a plan for how our affairs are to be handled after we die. It also comes as no surprise that this plan is best established before we die. Though I have not died yet, all evidence seems to indicate that I will have an exceedingly difficult time addressing these details once I’m dead. Despite this evidence, it is estimated that around half of all Americans have no estate planning whatsoever. So, it should not come as a surprise that those with a Medicare Set-Aside account likewise have no clear plan established for what happens to any funds that may remain once they die. Not having a clear plan can create confusion and aggravation for those responsible to sort out or benefit from the settling of an estate. Addressing these questions at the outset can avoid a lot of trouble. So, what are the main considerations?

Reversionary Interest

Sometimes a settlement will establish a reversionary interest for any remaining Medicare-Set Aside funds. For instance, it may have been agreed that a percentage or all unused funds at the time of the claimant/applicant’s death are to be returned to the funding party. If true, this is a detail that the executor of the estate will want to know. Reversionary Interest arrangements are becoming more popular as a tool in settlements, as more and more Medicare Set-Asides are professionally administered with better cost controls and preservation.

Medicare Set-Asides held within Trusts may be Subject to Specific Rules

If the Medicare Set-Aside was placed in a Special Needs Trust (SNT) to protect access to means tested benefits like Medicaid, or was placed in some other type of trust, there may be a special arrangement already in place that governs what happens to the Medicare Set-Aside funds once the trust beneficiary passes away. If unsure, consult the trust officer as to whether they require any specific guidance, or if the final destiny of the MSA funds have been already decided by agreement or statute.

Tell the Professional Administrator Your Intentions

One advantage of professional administration is that it is more likely that some funds will survive the claimant/applicant due to the strategies a professional administrator leverages. Another advantage is that a professional administrator will disburse all funds it administers directly to the beneficiary designated by the claimant/applicant. Most professional administrators will request that the claimant/applicant designate their beneficiary in writing at the time the account is established. Still, it is not rare for a professional administrator to never receive the claimant/applicant’s written intent. This sometimes causes issues when the final MSA balance is disbursed to the claimant/applicant’s estate.

Also, sometimes life situations will change the intended beneficiary of the Medicare Set-Aside funds. If this changes, it is vitally important to record that change in writing with the professional administrator, to ensure that the claimant/applicant’s wishes are followed. Remember, the professional administrator can only follow the most recent guidance provided by the claimant/applicant.

Medicare’s Interest Must Be Considered

Family members and/or the executor of a claimant/applicant’s estate are typically motivated to settle arrangements as quickly as possible. However, it is important to remember that the Medicare Set-Aside was established to pay for Medicare allowable and injury-related expenses post settlement. Medical providers have a filing window in which to bill for medical services rendered or medications and supplies dispensed or sold. Often, allowable medical claims are received within the first 12 months following a claimant’s death, and the Centers for Medicare & Medicaid Services (CMS) expects the Medicare Set-Aside to pay as primary to Medicare for those claims, even if those claims are received after the claimant/applicant’s death. A best practice is to reserve the MSA funds for a period of twelve months (or until it is confirmed that final billing has taken place) to pay for allowable expenses before disbursing the MSA funds to the designated beneficiary(ies).

Conclusion

Medicare Set-Aside funds are a special type of asset that must be treated differently. They’re intended to protect a claimant/applicant’s access to Medicare benefits, as well as protect the Medicare Trust Funds from unlawfully paying when other funds are primary. But, like other assets, it’s important to declare and/or confirm where these funds are to go once the claimant/applicant passes away to avoid confusion and/or dispute over where those funds eventually go.

You can count on Medivest to help guide you through the complexities of Medicare Set-Aside arrangements. If you have questions about preparing or administering a MSA or you need consultation on any of our settlement services, call us at 877.725.2467 or reach out to us online here.