Medicare Set-Aside (MSA) arrangement beneficiaries have some very specific limitations when it comes to how their money is spent. When it comes to choosing a provider, the options are wide open. A beneficiary will often deal with who they know or a provider that is close to their home. As a cash payer with limited funds to cover all future Medicare allowable and injury related expenses, the wrong choice can put a beneficiary in a world of hurt. Here are some best practices when choosing a provider to treat an injury post settlement and using Medicare Set-Aside funds:
While MSA funds can be used to pay any provider that supplies covered care related to the injury, not every provider is able to bill Medicare for these medical goods or services. If a beneficiary properly exhausts their MSA funds in a given year (when the MSA is funded with a structured annuity and receives deposits periodically) or the MSA funds have permanently exhausted, Medicare will assume responsibility to pay Medicare covered expenses related to the injury and coordinate with any other applicable insurance plan. If the provider is not Medicare certified, that provider will not be paid by Medicare even if the beneficiary has maintained Medicare coverage. This can leave the beneficiary as the responsible party if no other insurance benefit is available. We recommend choosing Medicare certified providers to avoid such situations.
A beneficiary with MSA funds is considered a cash payer by medical providers. There is no “in network” policy with set payment rates for cash payers. If the provider is not accustomed to dealing with patients without a primary medical insurance plan, the provider may charge its full retail rate. A beneficiary may have a difficult time negotiating a medical bill on their own or in advance of services being completed and this can add up to a significant expenditure of MSA funds. It is best to ask about cash rates and if any discounts are available when contacting a new provider.
Billing insurance for medical services means increased access to patients because it agrees to a negotiated contract that reduces the average cost of services. Some providers opt to avoid insurance altogether. This allows these providers to charge higher rates for services because there is no set rate or maximum charge. Moreover, these providers will only take the beneficiary’s cash even if they have a group health plan or public benefit. This lack of flexibility is often costly for the beneficiary.
This may seem obvious, but as a professional administrator, Medivest sees beneficiaries choosing providers that are not familiar with treating traumatic injuries post-settlement. This can be problematic from a communication standpoint (while the beneficiary and the administrator know the injury backwards and forwards, the doctor may see very few of these cases) and it can make billing and payment more difficult or present difficulties when seeking a referral to a specialists. The most efficient approach is to choose a provider that KNOWS the beneficiary’s type of injury from direct experience.
Here are a few common red flag phrases from providers that limit the beneficiary’s options:
“We only bill Medicare.”
“We don’t deal with liability injuries.”
“We never treat workers’ compensation injuries.”
“We only treat workers’ compensation injuries.”
“We don’t bill third parties.”
“We don’t take cash.”
Providers experienced with multiple scenarios provide the beneficiary with options when it comes to treatment and payment.
A beneficiary that is not acquainted with the typical market rate or medical fee schedules is advised to run away from any agreement or contract that would lock them into a guaranteed payment rate. A rate agreement of this nature can put the beneficiary on the hook for significantly inflated cost. If they’re using a professional administrator (and they should be), it can negotiate with the provider directly on the beneficiary’s behalf. Don’t confuse this document with an authorization form to bill insurance or a notification that the beneficiary is responsible for any non-covered services. They’re not the same thing.
Over-the-counter supplements or supplies that are sold directly by a provider typically come with a markup and can usually be found cheaper elsewhere. Your providers may recommend a device or a supplement that they conveniently stocks for sale. You should be aware that the providers may be looking to increase their margin per patient. Take your doctor’s advice and do your research. If the recommended supply of supplement makes sense, shop around for a better price.
Most providers within the US Healthcare system do not understand what a Medicare Set-Aside is or what it is for. They are frequently hesitant to accept it as a form of payment. They may mistake it for a Medicare Part C plan or out of network benefit. Sometimes, they are highly suspicious and cannot believe that Medicare is not the primary payer. It can be daunting for a beneficiary to be in the position of educating a provider’s billing office. A professional administrator is a great resource for coordinating benefits and having the MSA be the primary payment source, when applicable.
A MSA beneficiary with a persistent injury deserves the best care possible, but also needs to be positioned to ensure the MSA funds last. And if they don’t last, that the beneficiary has a proper safety net in place. Part of this strategy includes finding the right providers to not only address the injury with competence but also provide affordable and flexible options to ensure continuity of care and protect the beneficiary from having to dip into other settlement or personal funds. Even when Medicare is responsible for covering injury care, the beneficiary can be billed for any deductible, copay, or coinsurance balances.
Last, we’d be remiss if we didn’t point out that a professional administrator addresses these challenges every day and not only talks to a beneficiary’s provider on their behalf, but will also coordinate benefits with other insurance, communicate with CMS about the MSA, and negotiate rates in ways a patient will struggle to match. If you or your client is a current or future beneficiary of a Medicare Set-Aside, don’t hesitate to contact Medivest. We help thousands of beneficiaries avoid these and many other MSA pitfalls.
Last month, Washington state governor Jay Inslee signed a bill into law that will allow injured workers to receive Workers’ Compensation (WC) settlements as lump-sum settlements for the first time. Included in the bill, S.B. 5046 was an emergency clause that made it take effect immediately once it was signed. Previously, injured workers in Washington state were required to receive WC settlements via structured settlement (annuitized) payments over time. The COVID-19 Pandemic may have influenced this change and only time will tell if the decision will be good for the State of Washington. Funding of WC settlements by structured settlements have always provided a sort of safety net so that if a WC claimant failed to preserve settlement funds in any one year, there would be another round of funding to help cover the medical needs of the claimant going forward.
Lump-sum settlements offer the advantage of receiving money immediately, which can be helpful when large bills are looming overhead. However, injured workers who receive lump-sum settlements are naturally prone to misuse the medical portion of their settlement funds for several reasons. Disregarding any malicious intent, its not uncommon for misuse to occur due to:
Workers’ Compensation claimants may face sanctions from the Centers for Medicare & Medicaid Services (CMS), the agency charged with administering the Medicare program, which include denial of future medical care under Medicare for the WC related injury that was compensated, and obligation of repayment to Medicare for conditional payments made by Medicare, which can potentially be up to double the amount owed or otherwise carry high interest on unpaid Medicare Secondary Payer statute (MSP) debt. However, consequences of misuse of funds are not limited to just the claimants. Their attorneys may also share responsibility.
Attorneys in Washington, and any other state that allows lump-sum payments for Workers’ Compensation settlements, must make every effort to ensure that their clients are considering Medicare’s future interest in their settlement and have a plan for future care that will protect Medicare from being prematurely billed for any injury related and Medicare allowable future medical component of the WC settlement. CMS identifies the legal support providing why an attorney could be in its cross-hairs as a target of a MSP recovery penalty for a claimant’s misuse of funds in its April 22, 2003 memorandum.
For the protection of all parties involved, CMS highly recommends Professional Administration for a Medicare Set-Aside account. It effectively eliminates or significantly reduces the likelihood of misuse of MSA funds, assuring the settling parties remain in compliance with the letter and spirit of the MSP thereby protecting both the claimant and attorney. Additionally, Medivest’s Professional Administration services can often stretch the medical portion of the settlement funds, helping to ensure that medical funds are available for a longer period of time than if self-administered.
Medivest can help you navigate through Medicare Secondary Payer compliance complexities while you work toward a desired settlement outcome. Call us to today to speak to one of our highly trained settlement consultants for a free lien and MSP futures case consultation. For more information about Medivest or to refer a case, please call 877.725.2467 | Monday – Friday 8 am to 5 pm EST.
Are you self-administering your Medicare Set-Aside (MSA) funds or do you have a client doing so? If so, you are not alone. According to the National Council on Compensation Insurance, Inc. (NCCI) recently published a research brief updating its 2014 study on Workers’ Compensation MSAs (WCMSAs) and WCMSA reviews and reported that, between 2010 and 2015, approximately ninety-eight percent (98%) of the Workers’ Compensation cases included in the over 10,000 case sample, settled with the injured worker choosing to self-administer their MSA funds. Due to the large percentage of injured workers opting to self-administer, the Centers for Medicare & Medicaid Services (CMS) published a free downloadable, 31-page “Self-Administration Toolkit”, now in Version 1.3 which was updated on October 10, 2019.
If you’re a Claimant/Applicant/Petitioner’s attorney settling a WC case and your client is considering self-administration, below are a couple of blogs you may consider reading before deciding if self-administration is the best option.
CMS simply states that a competent administrator must be chosen to administer the MSA funds. The key word is competent, and it is the responsibility of the settling parties to deem whether the injured person is sufficiently competent to self-administer an MSA account. Below are a couple of scenarios regarding options for administration of MSA funds.
Post Settlement Tips for Self-Administration
Mismanaged MSA Funds
When considering all the factors described above, doesn’t it make sense to strongly consider the use of a professional administrator? Also, The Centers for Medicare & Medicaid Services (CMS) published in the WCMSA Reference Guide, that professional administration is highly recommended.
Simply put, Professional Administration makes sense. If you are an attorney or an injured person who has questions regarding switching from self-administration to professional administration, Medivest is here to answer any questions you may have.
It is perhaps cliché to say that life is made up of the decisions you make. But, overused maxims tend to communicate common truths, hence their ubiquity. Decision-making is mainly about choosing one of two or more options to achieve the most desirable outcome. Some decisions are straightforward and obvious. Many are not. Still more are tied up in the tension between what we want to do and what we should do. Values, discernment, and even willpower all factor into the process.
Decisions about money are among the most consequential. It therefore reasons that decisions involving large sums of money are highly consequential. Injury settlements are a prime example of how poor decision-making can produce unfortunate, even disastrous outcomes for both the injured and their families. Really no different than the lottery winner whose sudden wealth turns into debt and insolvency within a brief period, so the injured person who receives a cash settlement of any size is often just as unprepared and soon makes decisions that cannot be undone. Money, once spent, cannot be unspent.
Many people have very good intentions from the outset, but good intentions are not enough. General goals without specific plans to reach those goals will usually fall short. So, what are the missing plans that can cause settlement funds mismanagement?
This type of planning helps set priorities and leads to the details needed to help the plan succeed. It is really no different than the priorities considered in good personal finance planning. Some settlement beneficiaries get this, but many do not. That’s because this is a problem common to almost all of us. Most of us do not fund our retirements as we should, do not save as we should, and often do not limit our spending as we should. Any bonuses we receive evaporate quickly. We live up to our means and, some how, when we receive a raise, we then live up to that new limit again. And for individuals with injuries who may not be able to work or whose treatment costs exceed expected costs over their lifetime, mismanagement of a fixed settlement amount will likely result in considerable hardship for the injured and their family.
Once one considers how important it is to have a detailed plan for competent management of settlement funds, the use of a professional custodian begins to make a lot of sense. Vesting a professional custodian with the responsibility for settlement funds decisions addresses the major problems created by the introduction of a large sum of money into an injured person’s finances.
We’ll look at the advantages of a professional custodian, but first, let’s consider the major factors that often negatively affect the decision-making process for a beneficiary handling their own funds:
Again, these are pitfalls relatively common to all of us. It is easy for emotion and even rationalization to play into spending decisions. This is why there is certainly wisdom in building a wall around all or at least portions of a settlement to protect the funds and beneficiary alike.
Consider how a professional custodian’s decision-making process addresses the issues we’ve discussed:
Medicare set-aside accounts, which are created as mechanisms to comply with federal law by protecting Medicare from paying when it should not, and which contain funds specifically limited to the Medicare allowable and injury-related expenses, are commonly administered by a professional custodian (or “professional administrator”). But, other settlement funds should be placed with a professional custodian as well. It’s also worth mentioning that the best way to ensure that settlement funds are used according to the dictates of a settlement is to place those funds with a third party that is bound to comply with the terms that establish their custodianship.
At Medivest, we frequently receive calls from beneficiaries who are interested in seeking some flexibility in how their professionally administered funds are spent. The most common reason for this request is that they have already spent their remaining settlement funds and the monies under our company’s charge are all that remain. It is not difficult in those circumstances to surmise what would have happened with those custodial funds had we not been “in the picture.”
As example has shown time and again, managing large sums of money is not a simple task, and requires proper planning ahead of time to prevent problems down the road. In each settlement, it makes sense to consider using a professional custodian if concerns about fund mismanagement are warranted. Medivest has been providing custodial services to injured beneficiaries for over twenty years. We’ve helped thousands of individuals spend their settlement funds in a strategic and prudent manner in order to help stretch those funds to their benefit and the benefit of their families. If you have questions about how to integrate a custodial arrangement into a settlement, please do not hesitate to contact us.
Injured Medicare beneficiaries or those with a reasonable expectation of becoming enrolled in Medicare within 30 months of settlement (claimants) have a legal responsibility under the Medicare Secondary Payer statute enacted in 1980 (MSP), to not prematurely bill Medicare for injury-related otherwise Medicare allowable, medical expenses (future medicals). Because many claimants and even their attorneys still don’t know the MSP law exists or how to comply with it, many settlements for claimants don’t properly consider and protect Medicare’s interests as a secondary payer for future medicals. Medicare Set-Aside (MSA) compliance programs consider Medicare’s MSP interests and implement actions to protect those interests. MSP compliance companies rely heavily on two valuable tools that work best in conjunction to achieve MSP compliance goals; a MSA allocation report (also known as a Set-Aside arrangement) estimating future medicals, and administration of MSA funds, with spending restricted to applicable future medicals. If administration of MSA settlement funds is handled by the injured claimant, it is referred to as self-administration and when performed by a company like Medivest Benefit Advisors, Inc., it is known as professional administration.
With a federal law on the books prohibiting premature billing of future medicals to Medicare and the potential for those not complying with the MSP being denied Medicare benefits for the claimed/released injury, is it wise to allow injured parties to manage and administer post settlement future medicals? The National Council on Compensation Insurance, Inc. (NCCI) recently published a research brief updating its 2014 study on Workers’ Compensation MSAs (WCMSAs) and WCMSA reviews and reported that between 2010 and 2015, approximately 98% of all WCMSAs from the study’s 11,000 MSA data sample were self-administered. That seems outrageous when injured parties are notorious for quickly spending money received from lump-sum settlements. Statistics in a personal injury practice guide by The Rutter Group indicate that somewhere between 25 and 30% of accident victims spend all settlement money within two months of receiving the funds and that up to 90% of accident victims use all settlement proceeds within five years. Spending sprees seem common with lottery winners, some professional athletes, and most likely other people that come into money quickly. Congress considered the poor spending habits of settlement recipients when it enacted the Periodic Payment Settlement Act of 1982 (PPSA),, and in subsequent related legislation. Because annuity payments paid under the PPSA are paid tax-free and injured parties can often be irresponsible with their spending when they receive lump-sum settlements, structured settlements are often a wise choice to help injured parties preserve settlement funds for their needs.
Irresponsible spending of settlement funds by injured parties is sad, but when settlement funds are misspent by people other than the injured parties, it can be tragic. A Wall Street Journal article recently highlighted this risk. In 1980, Nicole Herivaux lost the use of one of her arms due to alleged medical malpractice at the time of her birth in New York. In 1983, the minor’s family settled a malpractice lawsuit in exchange for a structured settlement that paid monthly annuity payments and a few hundred thousand dollars in lump sum money that could be used for Nicole’s education, among other things. The company that started making settlement payments initially deposited the annuity checks in Nicole’s mother’s name, “as guardian” of Nicole directly into a bank account. That company later transferred the responsibility for making those payments to a different insurance company in 1995, when Nicole was 15 and still a minor. Nicole Herivaux is now an adult with student loan debt and alleged in a 2018 lawsuit that the new company sent the annuity payments directly to her mother without any payment restriction or oversight and that her mother misused and inappropriately exhausted Nicole’s settlement funds. If the settlement had included professional administration of a custodial account, money intended for the minor could have paid off Nicole’s education expenses and provided her a better chance to live with peace of mind, dignity and security.
The Centers for Medicare & Medicaid Services (CMS), the regulatory body running the Medicare program and charged with the responsibility of interpreting the MSP has promulgated regulations and issued memos helpful to determining reasonable and appropriate measures to comply with the MSP. A 2011 memo from CMS’s Regional Office in Dallas from Sally Stalcup, as MSP Regional Coordinator, announced that Medicare Set-Aside is CMS’s “method of choice and the agency feels it provides the best protection for the program and the Medicare beneficiary.” From the context of the Stalcup memo, it is clear the use of the term “Set-aside” included a MSA arrangement described above, and that Set-asides (MSAs) would apply in both workers’ compensation and liability cases. The Stalcup Memo also announced that “each attorney is going to have to decide, based on the specific facts of each of their cases, whether or not there is funding for future medicals and if so, a need to protect the Trust Funds.”
However, it is one thing to set money aside for the intended purpose and quite another to properly administer the money. Even when an injured claimant hires an attorney to represent them to obtain a settlement, judgment or award (“settlement”), settlement funds reserved for future medicals can be misspent. For example, attorney misconduct was found in a South Carolina Bar disciplinary case where an attorney representing a claimant failed to properly administer funds set aside to protect Medicare’s interests (MSA funds) as a secondary payer for future medicals. In another bar disciplinary case, an Illinois licensed attorney used trust funds for improper purposes when the trust funds were to be maintained in trust until it was determined whether they belonged to the attorney’s client or Medicare.
Did the attorneys in these matters know how to report settlements to CMS’ Benefits Coordination & Recovery Center (BCRC) contractor, how to request Medicare conditional payment amounts, perform bill review and potentially dispute and finalize conditional payment lien amounts? Did they consider whether their client’s injury and/or financial condition might lend itself to a conditional payment lien compromise or waiver request? Furthermore, did the attorneys know how to properly administer the MSA funds that were set aside for their clients’ future medicals? If the attorneys had sought the advice of a competent company that performs these functions regularly, they would have been in a better position to protect their clients, protect the Medicare Trust Funds and protect their professional standing.
Allowing incompetent, injured claimants to self-administer their own MSA accounts cannot be a prudent way to protect Medicare’s interests in preserving the nation’s Medicare Trust Funds. Even competent claimants likely experience difficulties attempting to self-administer MSA funds. While CMS makes resources available to individuals intending to self-administer an MSA account including a WCMSA Reference Guide and a Self-Administration Tool Kit, but what percentage of injured claimants will read and follow the protocol of the 127-page WCMSA Reference Guide and the 31-page Self-Administration Tool Kit?
Self-administration is surely harder than filing a standard federal income tax return. Plenty of people find it helpful to use professional assistance or digital software to help them file their tax return.  A self-administering claimant needs to evaluate bills for medical items and expenses, including prescription drug expenses, to verify that they are both injury-related, Medicare allowable and otherwise reimbursable. Once bills are reviewed, a decision still needs to be made as to how much should be paid. Is the provider a Medicare-approved provider? Should the amount be the Medicare allowable rate, the provider’s bill rate or the usual and customary rate? Is there a Group Health Insurance plan involved? Does it matter if the case stems from a liability case versus a workers’ compensation claim? Does the Code of Federal Regulations say anything about these distinctions? Does CMS provide guidance in this area via its website, its Medicare Learning Network, or WCMSA Reference Guide? Have there been any cases evaluating these issues and was the claimant’s injury in a jurisdiction where case law might affect the amount of money to be set aside for those future medicals? Will a claimant be able to keep records on their own sufficient to withstand CMS scrutiny to determine whether MSA account spending is MSP compliant? Will the claimant remember to prepare and transmit required annual attestations of MSP accounting compliance? Because the answer to these questions is only part of the MSP compliance puzzle, it is little surprise that CMS announced professional administration as recommended for MSA fund administration. In addition to providing a full array of Professional Administration services, Medivest also offers a Self-Administration Kit service that provides customer service and claims support as well as discounts on durable medical equipment and prescription medication to help competent claimants take on self-administration.
 42 U.S.C. § 1395y(b).
 The Rutter Group, “California Practice Guide: Personal Injury” Chapter 4.
 Re: Section 130 Qualified Assignments, 2003 WL 22662008, at *3 (legislative history to the PPSA detailed that additions to the law helped provide certainty that periodic payments of personal injury damages are excluded from the gross income of the recipient. S. Rep. No. 97-646, 97th Cong., 2d Sess. 4 (1982)).
 Periodic Payment Settlement Act of 1982 (PL 97–473 (HR 5470), PL 97–473, January 14, 1983, 96 Stat 2605) (through tax benefits, the PPSA encourages use of structured settlements to resolve personal physical injury and physical sickness cases).
 Re: Section 130 Qualified Assignments, 2003 WL 22662008, at *18 (The public policy encouraging use of structured settlements by providing a tax subsidy was affirmed in JCX-15-99, the Joint Committee on Taxation, Tax Treatment of Structured Settlement Arrangements from March 16, 1999 (pointing out perils of lump sum settlements when “. . . the individual may, by design or poor luck, mismanage his or her funds so that future medical expenses are not met.” JCX 15-99 accompanied H.R. 263, “The Structured Settlement Protection Act,” 106th Cong., 1st Sess. Section 5891 of the Code enacted by a subsequent version of that bill, H.R. 2884, on January 23, 2002).
 Under Section 104(a) of the Internal Revenue Code (I.R.C.), personal injury settlement proceeds are tax-free, but when paid in a lump sum, any investment earnings or interest paid on those funds as they grow over time is taxable. Pursuant to Section 104(a)(2) of the I.R.C., each structured settlement payment over the entire period of payment of the annuity stream is tax-free to the victim. The details of taxable consequences associated with interest gained after receipt of each annuity should be evaluated with a licensed tax professional in conjunction with a structured settlement advisor.
 Leslie Scism, Lawsuit Alleges MetLife Mistake Helped a Woman Keep Settlement Money From Her Daughter Insurer faces lawsuit over structured-settlement annuity related to old business, WALL STREET JOURNAL., February 21, 2018.
 Sally Stalcup, MSP Regional Coordinator, Region VI (May 25, 2011, Handout).
 In the Matter of Morris, 343 S.C. 651, 653-54, 541 S.E.2d 844, 845 (2001).
 In the Matter of: Charles Augustus Boyle, Attorney-Respondent, No. 268739, 2014 WL 10505032, at *2. (Attorney voluntarily relinquished his license to practice law after an investigation revealed among other misconduct, that he failed to pay his client’s medical bills from settlement proceeds in one case, failed to deposit settlement proceeds into a guardianship account established on behalf of a minor in another case, failed to notify Medicare that four other cases settled and failed to pay the Medicare conditional payment liens for those four cases).
 Excluding those individuals who responded “none of the above” to the question of how they file their taxes, gobankingrates.com reports from an internet poll that of just over 5,000 people, 36.8% said they use either an accountant (28.5%) or a brick and mortar tax company like H&R Block (8.3%) and 34.5% responded that they use tax filing software.