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Sandy Simpson
10/Mar/2026
Professional Administrationworkers compensation

Understanding the “Workers’ Compensation Holiday” and Why Professional Administration Matters

When an injured worker resolves a third-party liability claim arising out of the same injury covered by workers’ compensation, the law prevents double recovery by granting the workers’ compensation carrier a credit against future benefits, commonly referred to as a “holiday.” During this period, the injured worker must use the portion of the third-party liability settlement allocated to future medical expenses before the work comp carrier resumes payment responsibility.

While the concept is legally straightforward, the practical implications can be complex, particularly when future medical exposure, allocation issues, and Medicare Secondary Payer (MSP) compliance are involved. Professional Administration can play a critical role in navigating this process by ensuring funds are properly managed and documented, protecting ongoing benefit eligibility, and reducing compliance risk for all parties.

What Is a Workers’ Compensation Holiday?

A workers’ compensation holiday typically occurs when an injured worker settles a third-party liability claim related to the same injury covered by workers’ compensation benefits. Common examples include motor vehicle accidents, property liability incidents, or other third-party negligence claims arising during employment.

Because a workers’ compensation carrier has a statutory right of reimbursement, part of any third-party settlement is used to satisfy its lien for benefits already paid. However, lien repayment does not end the carrier’s financial exposure. In many jurisdictions, the carrier is also entitled to a future credit against ongoing medical benefits.

During a workers’ compensation holiday, the carrier temporarily suspends payment of injury-related expenses, and the injured worker must use the allocated portion of the third-party liability settlement to cover those costs. Once the credited amount is properly exhausted, the carrier resumes responsibility and becomes the primary payer for covered benefits.

Why Worker’s Compensation Holiday Exists

As mentioned above, in a third-party recovery, the workers’ compensation holiday exists to prevent double recovery. When an injured worker obtains a liability settlement for the same injury covered by a workers’ compensation claim, the law does not permit simultaneous recovery of both settlement funds and ongoing work comp benefits for the same medical expenses.

Instead, the carrier receives a credit against future medical exposure, and the injured worker must first exhaust the settled future liability medical funds before workers’ compensation resumes primary payer. While the concept is simple in theory, it can be complex, particularly when allocation disputes, lien issues, future medical projections, and Medicare compliance are involved. For plaintiff attorneys, understanding of how the holiday functions is critical to structuring settlements that protect the client’s recovery while avoiding unintended post-settlement complications.

How Professional Administration Supports Compliance

Professional administration involves specialized third-party management of settlement funds allocated for future medical care during the workers’ compensation holiday and beyond. Rather than placing complex compliance responsibilities on the injured worker, a professional administrator provides oversight by:

Managing Medical Payments

Medical bills are reviewed and paid directly from settlement funds in accordance with Medicare guidelines.

Verifying Medicare-Covered Treatment

Only qualified injury-related expenses are approved, helping prevent improper spending.

Maintaining Accurate Accounting

Every payment is documented, creating a clear audit trail that demonstrates the proper use of settlement funds.

Handling Reporting and Recordkeeping

Required documentation is maintained to support MSP compliance in the event of Medicare review.

Monitoring Fund Exhaustion

When credited funds are properly depleted, documentation supports reinstatement of workers’ compensation benefits or Medicare coverage when appropriate.

Benefits of Professional Administration for Plaintiff Attorneys

In today’s increasingly compliance-driven environment, professional administration is not simply an added service; it is a proactive strategy that helps safeguard settlement outcomes long after litigation concludes. Understanding how the workers’ compensation holiday functions and planning for it properly can significantly impact both your client’s financial security and your firm’s risk exposure.

  • Professional MSA Administration helps ensure that settlement funds are properly allocated and documented
  • minimizing the risk of Errors & Omissions (E&O) claims
  • reducing potential malpractice exposure
  • preserving eligibility for needs-based benefits
  • providing peace of mind for both injured workers and plaintiff attorneys

And when the third-party liability funds are fully exhausted, Medivest can seamlessly transition to provide professional administration for the ongoing workers’ compensation claim as well, supporting compliance, simplifying claim management, and helping facilitate resolution if and when the carrier decides to move toward settlement.

About Medivest

Founded in 1996, Medivest is a national MSP compliance company and provider of settlement solutions. Our focus is assisting anyone settling a workers’ compensation or personal injury claim to understand their obligation to consider Medicare’s interests under federal law. Medivest provides pre- and post-settlement solutions that help mitigate exposure from that obligation. Contact us today at 877-725-2467 or contact us here.

 

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Sandy Simpson
13/Jan/2026
Medicare Set-AsidemsaTax Preparationwcmsa

1099-INT Forms for Medicare Set-Aside Accounts

It is that time of year again when mailboxes begin to receive W-2 statements and 1099-INT statements. If an injured individual has either a Self-Administered Medicare Set-Aside (MSA) account or a Professionally-Administered MSA account, the individual will be sent a 1099-INT by January 31st, and a copy will be filed with the IRS. The 1099-INT shows interest earned in the account during the previous tax year.

Liability and Workers Compensations cases should follow the Workers Compensation Medicare Set-Aside (WCMSA) Reference Guide until CMS publishes a Liability Medicare Set-Aside (LMSA) Reference Guide. Until that time arrives, the WCMSA Reference Guide should be considered a single point of reference for both Liability and Workers Compensation cases. To download the WCMSA Reference Guide Version 4.4, dated July 14, 2025, click here.

 

What the WCMSA Reference Guide states:

  • MSA funds must be placed in an interest-bearing account that is separate from the individual’s personal savings and checking accounts.
  • The interest must be deposited into the MSA account to be used for MSA-covered expenses.
  • You can use the MSA account to pay for the income tax on the interest income.

For further clarification regarding how individuals can pay their taxes from the interest incomed earned in their account, refer to the CMS Memo Dated July 11, 2005, Subject:  Medicare Secondary Payer (MPS) – Workers’ Compensation (WC) Additional Frequency Asked Questions.

“Q6. Treatment of Taxable Interest Income Earned on a WCMSA – If I receive a Form 1099-INT for the interest income earned on my WCMSA account, may I charge the income tax on that amount against the WCMSA?

A6. Assuming that there is adequate documentation for the amount of incremental tax that the claimant must pay for the interest earned on this set-aside account, the claimant or his/her administrator may withdraw an amount equal to the additional tax as a “cost that is directly related to the account” to cover the additional tax liability. Such documentation should be submitted along with the annual accounting.”

MSA Tax Planning

 

How Medivest Handles the 1099-INT:

Medivest will advise the Member to prepare their tax return two ways to determine the increased income tax burden, if any:

  1. Include the MSA interest income in the income tax return
  2. Exclude the MSA interest income in the income tax return

 

In other words, if the Member must pay the IRS an increased income tax amount as a result of the interest earned from their MSA account, the additional income tax burden can be paid from the MSA account. This is considered a cost associated with having the MSA account and CMS allows this expense to be paid from the MSA account. Once a year, Medivest will send CMS an attestation for every applicable professionally-administered MSA account. Any MSA reimbursement of the additional income tax burden will be included in this attestation.

 

Answers to Common Questions

Question 1.  If I am taxed on the earned interest, why can’t I have it?

Answer 1.  CMS’ guidelines state that Medicare Set-Aside funds place must be placed into an interest-bearing account and are to be used for covered medical expenses.

Question 2.  Why do I have to report the earned interest to the IRS?

Answer 2.  Per IRS guidelines, all interest income is taxable, unless specifically excluded.

Question 3.  Isn’t my injury settlement tax-exempt?

Answer 3.  Any compensation you receive from a settlement because of physical injuries or sickness is not taxable. However, the interest earned after the settlement occurs is taxable.

 

Best Practices

Medivest’s highly trained representatives can help you figure out if Medicare may have an interest in your settlement. We assist all settling parties to navigate the MSP complexities and provide you with cost-saving strategies for your settlement. For questions about your account or setting up a new professional administration account please contact us here.

 

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Medivest
26/Aug/2024
April 4thcms

CMS’s Rapid-Fire Guidelines Take Aim at Post-Settlement Activity

It’s been a busy 2024 for CMS. Since February 2024, over half a dozen updates have been made to Section 111 Mandatory Insurance Reporting and CMS’s policies.  

Ultimately, these new changes increase awareness and focus on post-settlement MSA spending, emphasizing the importance of utilizing a competent professional administrator.  

What this means is you need Medivest more than ever to navigate these changes and keep all settlement parties from getting penalized for non-compliance!  

Medivest’s Professional Administration Helps Protect All Parties 

 

Pro-Admin:
Professional Administration for MSA Accounts by the professionals 

  • Medivest claimant accounts saved over 70% of what they were billed by providers over the last 12 months
  • An average of 23.3% of the original MSA is disbursed to the surviving beneficiary or reversionary interest party upon the claimant’s death
  • During our 27 years of business, we have only had a 2% member cancellation rate due to unforeseen reasons other than death. This remarkable retention rate underscores the value and satisfaction our members experience with our services
  • Medivest members and clients can be confident that a Claims specialist will review every line item on every bill submitted, ensuring proper coordination of benefits

 

Self-Administration
The DIY solution with Medivest’s expert support

  • Don’t go it alone! Use a Self-Administration Kit to navigate the CMS government maze 
  • The Self-Administration Kit, an innovative tool first created by Medivest, is good for injured parties with a small MSA that is designed to exhaust in a short length of time. It provides guidance to individuals who opt to manage their own MSA, and pairs it with phone support and medical bill review from Medivest’s experienced Member Services team.  
  • However, a Self-Administration Kit still has limitations, particularly if multiple bills come in at once. So the settlement parties need to carefully consider Medivest for professional administration per CMS’s recommendation. 

 

Easy approach to navigate settlement compliance for Insurer, Self-insured, and TPA without adding ANY work to the adjuster’s already full plate. The streamline process of:

  • Medicare Status check/lien investigation to determine if MSA is recommended
  • Structured Settlement consultant for rated age and MSA funding 
  • MSA Allocation Report (if needed) 
  • Professional Administration of MSA 

CONTACT MEDIVEST TODAY – WE ARE HERE TO HELP!

877-725-2467 (Monday – Friday 8am to 5pm EST)

 

Summary/Takeaways 

MMSEA Section 111 Mandatory Insurer Reporting (NGHP)

Medicare is ramping up its data collection. New fields have been added to the Section 111 Claim Input File to capture WCMSA information on all Workers’ Compensation (WC) claims involving Medicare beneficiaries.  

These data collections will have a significant impact on reporting and WCMSA compliance for the use of non-submit and Evidence Based Medicare Set-Aside arrangements. By capturing this new data, Medicare will know when funds have exhausted, make more appropriate determinations regarding the coordination of benefits, and more thoroughly investigate which injury related medical payments they should be denying. The new fields will become effective 4/4/25. 

Self-Administration Toolkit, Version 1.6 

Under the WCMSA Guidelines, CMS has the right to recovery. Over 1/3 of Medicare recipients have a Medicare Advantage Plan (MAP). These plan providers have asked for the same recovery rights that CMS has. The last sentence in Section 4.1.3 of the new Self-Administration Toolkit takes the first steps to clearly spell out that CMS is extending their rights of recovery to MAP partners: 

If you are enrolled in a Medicare Advantage or prescription drug plan, please contact your plan to discuss your WCMSA, if you have not already done so.  

WCMSA Reference Guide, Version 4.3 

In the latest update of the WCMSA reference guide, Medicare Advantage Plans continue to be spotlighted. In Section 4.1.3, CMS states: 

CMS notifies Part C and D plan sponsors that a WCMSA has been approved and instructs plan sponsors to conduct Medicare Secondary Payer (MSP) investigations. However, CMS does not relay WCMSA details to plan sponsors… The administrator must provide details concerning treatments and medications used exclusively to treat a related illness or injury to the plan sponsor so the sponsor may avoid making primary payment in the future.

CMS instructs the MAP sponsors that a WCMSA exists but doesn’t share any specific details of the MSA. It seems inevitable that this will create a communication breakdown at some point. The onus of communication is put entirely on the administrator. For a professional administrator, this will be a common (and new) task, but for someone attempting to self-administer their WCMSA, a whole new world of responsibility and questions are about to be spotlighted.

For the full information on these alerts from CMS, please visit the “What’s New” page of their website. 

For Additional Information

Medivest will continue to monitor changes occurring at CMS and will keep its readers up to date when such changes are announced. For questions, feel free to reach out to the Medivest representative in your area by clicking here or call us direct at 877.725.2467 (Monday – Friday 8am to 5pm EST).

 

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Sandy Simpson
06/Feb/2023
msaSelf-Administration

Is Self-Administering Your MSA the Right Choice?

When an individual has a Medicare Set-Aside (MSA) account, they have the option to either self-administer the funds or have them professionally administered.  If self-administration is chosen, it can be a difficult and trying task to comply with the CMS’ rules; opening a MSA checking account, learning what type of expenses can be paid and cannot be paid out, coordinating health insurance benefits, keeping accurate records, and when to send reporting to CMS.  This blog will discuss what you need to know if you choose Self-Administration, and if self-administering your MSA is the right choice for you.

What is Self-Administration?

Self-administration is the process of managing the medical portion of your settlement, compromise and release, judgment, award or other payment/arrangement (“Settlement”) arising from an incident on the job and/or due to the negligence of another party. After a settlement, the individual is responsible for paying the medical claims following the process and guidelines set forth by the Centers for Medicare & Medicaid Services until the funds have been permanently depleted.

What is Professional Administration? 

Professional administration is the practice of using a qualified third party to oversee and manage funds for future medical expenses following a liability or Workers’ Compensation settlement. Though not required, Medicare strongly suggests the professional administration of a MSA. However, for those who choose self-administration, the individual is still responsible for using their MSA account to pay for injury-related and Medicare covered expenses in accordance with the Medicare Secondary Payer (MSP) Statute. The MSP provisions protect Medicare Trust Funds by ensuring that Medicare does not pay for items and services that certain health insurance or coverage, such as a MSA account, is primarily responsible for paying.

Two Ways to Fund Your MSA Account

Before the settlement has occurred, the settling parties will discuss the ways a MSA account can be funded. Typically, there are two options:
  1. Lump-Sum – a single lump sum payment to fund your MSA account.
  2. Structured Settlement Annuity Funding – an initial deposit to fund your account and smaller annual deposits in the following years. The initial deposit covers the first two years of annual funding for treatments plus any cost for proposed first surgeries. If the MSA funds are not spent down in a given year, the funds must remain in the account and carry forward into the next year.

Establishing a Self-Administration Bank Account

Below is a list of CMS’ requirements regarding opening up a separate bank account for the MSA funds.
  • Deposit MSA funds into its own account, separate from any other accounts you may have
  • The account must earn interest and the interest must stay in the account
  • The account should be insured by Federal Deposit Insurance Corporation (FDIC)
  • Choose a bank or an account that does not charge fees if you have a low balance
  • Select an account that allows you to write checks

 

Know What Is Covered

It is important to recognize that not every medical bill or service can be paid out of the MSA account. For individuals self-administering their account, it is highly important to be aware of qualified expenses. Below is a partial list of the expenses that can and cannot be paid out of the account:

Expenses That Can Be Paid

  • Funds can only be used to pay for future care that is Medicare covered and related to your injury.
  • Cost of copying documents
  • Mailing fees/postage
  • Any banking fees related to the account
  • Paying income tax on the interest income earned in the account*
*Note – The MSA funds are not considered taxable income, but the interest earned is taxable. Each year your bank will issue an IRS 1099-INT form for the interest earned in the account.

Expenses That Cannot Be Paid

  • Fees for trustees, custodians, or other professionals hired to help administer the account
  • Expenses for administration of the MSA other than those listed above
  • Attorney costs for establishing the MSA
  • Cannot use to purchase a Medicare supplemental insurance policy or a Medigap policy
  • Medicare premiums, co-payments, and deductibles
  • Acupuncture
  • Routine dental care
  • Eyeglasses
  • Hearing aides
For a more extensive list of what Medicare will pay, click here to obtain a copy of the free handbook “Medicare & You”.

Keep Accurate Records of All Transactions

Bank statements, receipts, and tax records should all be kept and recorded.  Self-administering parties will not need to submit these records annually, but Medicare may request them as proof that the account is being used correctly. It is also recommended that settlement documents showing the date the case was settled, diagnosed injury, and date of injury are also kept. Consider keeping accurate records for each transaction such as:
  • Transaction date
  • Check number
  • “Payable to” or provider’s name
  • Date of service
  • Description – procedure, service or item received, deposit, interest, other allowable expenses
  • Amount paid
  • Deposit amount
  • Account balance
  • Interest earned

What is Coordination of Benefits for a MSA?

The MSP program is in place to ensure that Medicare is aware of situations where it should not be the primary payer of claims.  Sometimes a Medicare beneficiary with a MSA account, public benefits, and other health insurance; the Coordination of Benefits (COB) rule decides which entity should pay first on a claim. In certain situations, if Medicare has paid a claim by mistake, CMS will take action to receive the mistaken Medicare payment.

What is the MSA Attestation?

If the MSA proposal was approved, CMS requires the attestation form to be signed, attesting that the injured party has used the account correctly and to report the amounts spent. If Medicare is satisfied that the right amount of money has been spent appropriately, Medicare will pay for future treatments for this work injury. Below is the information found on the attestation form.
  • Total spent for medical services
  • Total spent for prescription drugs
  • Grand total of expenditures
  • Total of interest income the account earned if any
  • Balance of MSA account at the end of the calendar year

Annual Attestation or Expenditure Letters Reporting

CMS’ Benefit Coordination & Records Center (BCRC) is responsible for monitoring and receiving the submitted attestations forms. The attestation informs Medicare that they are now primary payer when your funds have exhausted.  Note, once the account funds are exhausted you must continue to pay your Medicare monthly premiums, co-pays, and deductibles in order for Medicare to pay your claims. CMS has the right to demand and receive a complete accounting of payments made from the account at its discretion. The following only applies if the MSA proposal has been approved by CMS.
  • Annual Attestations must be submitted every year, no later than 30 days after the end of each reporting period (beginning one year from the date of establishment of the MSA account). Annual attestations should continue through final exhaustion of the account.
  • Temporary Exhaustion occurs when the MSA account funds have exhausted before the next annuity has been deposited into the account.
  • Final Depletion or Permanent Exhaustion is where the MSA account has no money left and no future deposits of funds are expected.
  • Death Occurs / Inheritance before the MSA account is permanently exhausted you will need to notify the BCRC of death. This may require the MSA account to stay open for some time to pay outstanding claims.
  • Completely Exhausted within 60 days of the date the MSA account is depleted, send the BCRC a final attestation that the account is ‘Completely Exhausted”.
  • Loses Medicare Entitlement
  • Re-Establishes Medicare Entitlement

How to Submit Your Attestation to CMS’ BCRC

  1. Electronical Attestation is a Medicare web portal that allows submission of either yearly or final attestations electronically. For more information about how to submit an attestation electronically, please see the MSAP User Guide.
  2. Mail-in Submission / Paper Copy

MSA Proposal/Final Settlement
PO Box 138899
Oklahoma City, OK 73113-8899

  1. Call BCRC

855-798-2627 or TTY/TDD
855-787-2627 for the hearing and speech impaired
Opened: Monday – Friday, from 8am – 8pm | Eastern Time

Medivest’s Solutions

If handling a Self-Administrated account becomes too difficult of a task, Medivest can help. We provide the following options that may reduce the burden of keeping track of the details:
1. Switch to Medivest’s Professional Administration Service
For over 25 years, Medivest has been helping clients navigate the complexities of the MSP and protecting their Medicare benefits. Our services guarantee the most comprehensive and cost-effective professional administration program available and provides:
  • Streamlined reporting and compliance
  • Savings on treatment, equipment, and pharmaceuticals
  • Expert support and service
2. Purchase Medivest’s Self-Administration Kit
Medivest offers a Self-Administration Kit that equips individuals who opt to manage their own Worker’ Compensation or Liability settlement with many of the tools and services available to Professionally Administers settlements. The Medivest Self-Administration Kit has been designed to give the individual the flexibility in determining just how “hands-on” they wish to be in managing their medical funds, while providing to the settling parties the piece of mind that comes from knowing due diligence has been considered.   Below are the services that are included Medivest’s Self-Administration Kit Services:
  • Detailed Booklet
  • Unlimited Phone
  • Medical Bill Review
  • Pharmacy and Durable Medical & Equipment (DME) Discounts

 

For additional information regarding Medivest’s Professional Administration Services or Self-Administration Kits or to get started with one of these options today call us at 877.725.2467 or contact us here.

 

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Rob Hlozek
28/Oct/2022

The Ohio Association for Justice Winter Convention

Medivest will be joining the Ohio Association for Justice from November 2 - 4 for its annual Winter Convention. This year's Winter Convention kicks off the OAJ Advocate's Academy, a four-event sequence specifically designed as a training ground to accelerate the performance of newer plaintiffs' attorneys. 

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Aaron Winnell
07/Sep/2022
BeneficiariesMedicare Set-Aside

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.
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Aaron Winnell
19/Apr/2022
Medicare Set-AsideProfessional Administration

Inflation: The Medical Settlement’s “Silent Killer”

Economic inflation is a major topic of discussion these days. Just about everything, from gas to food, carries a higher price tag than it did a year ago. Some say this is a temporary side effect of economic recovery. Others argue that much of this may be here to stay. Regardless, most are mindful of the impact inflation is having on the average American’s buying power.
No one should be surprised to hear that the cost of medical care has an inflationary rate as well. Well before the present economic factors and policy decisions precipitated general inflation, medical costs have increased year over year by a rate that outstrips the general economic rate of inflation. According to the U.S. Bureau of Labor Statistics, medical care costs have increased 100.86% since 2000. That’s a doubling of medical costs in two decades! Bottom line: medical care will be more expensive in the future.
This brings us to a serious problem most medical settlements face. Often, the final portion of the settlement award designated for medical care is determined by looking at present day costs and the life expectancy of the beneficiary. Basically, it’s an annual expense multiplied by years of expected need. This, for instance, is generally how Medicare set-aside allocations are calculated, but the calculation is frequently applied to the entire medical portion of the settlement. Rarely is the inflationary rate of those medical costs considered.
This is why I’m calling inflation the medical settlement’s “silent killer”. In the year or two following settlement, it may seem like the funding is adequate. But as time marches on, each dollar reserved for medical expenses buys a little less care, fewer drugs, and fewer supplies. Soon, a beneficiary must find other money, cheaper alternatives, or simply treat less frequently. Factor in that many settlements aren’t funded at full value and that the beneficiary is buying services in an insurance-driven ecosystem as a cash payer, and you quickly see the long-term problem.
Factoring inflation into the settlement would be one way to mitigate much of the problem. But, if we’re going to be realistic, we must acknowledge that there are many factors that create a significant headwind to the “more money” solution. There are also other considerations: What rates are reasonable? How does the beneficiary avoid being gouged? What about coordinating with another policy that may be able to pay instead? Then there’s the need to keep settlement funds intended to consider Medicare’s interest separate and properly accounted for to protect the beneficiary’s Medicare benefit. If healthcare cost inflation is a silent killer, these other considerations are death by a thousand cuts.
Anyone who’s lived by a budget understands that when more money is not an option, keeping spending under control is essential to not running out at the end of the month. One must stretch their settlement proceeds if they are going to last, or at least last longer. This is where a professional administrator can make all the difference. Professional administrators are typically thought of as the go-to option for making sure a Medicare set-aside (MSA) arrangement is used properly. As a matter of fact, CMS highly recommends professional administration of MSAs (MSA Reference Guide v3.6, 17.1). The professional administrator uses the MSA according to CMS’ expectations and meets the beneficiary’s obligation to attest annually to the MSA’s proper use, thereby protecting the beneficiary’s Medicare benefit (as CMS can suspend benefits if it determines that improper use of the MSA represents a burden shift to Medicare). The professional administrator can also stretch MSA dollars to help them last.
So, we know that professional administrators are a great option for handling the compliance obligations placed on MSA money. But what about the “silent killer” problem? What can professional administrators do to address the concern of healthcare cost inflation? It comes down to our budget reference above and all the ways a professional administrator is well-positioned to reduce the spend and keep the funds solvent.  Yes, professional administrators protect MSAs, but they also step between the beneficiary and the healthcare system in any settlement where future medicals are contemplated.
Consider the similarities between the experience of a beneficiary responsible for MSA funds and a beneficiary responsible for general future medical funds: The beneficiary is going to be a cash payer and likely pay top dollar. They are likely to receive bill after bill from their medical providers, expecting them to cut the check in a timely fashion to prevent interruption of care. They might have other insurance plans that could pay if benefits were properly coordinated. They’re probably not experienced at handling a lump sum of cash all at once and may struggle to use the medical settlement proceeds as intended. Fortunately, a professional administrator can provide better outcomes in all these situations.
A professional administrator steps between the beneficiary and the healthcare world where payment is concerned. Rates are negotiated. Incorrect bill coding, duplicate charges, and other types of billing mistakes are identified and addressed. All payment concerns, bills, coordination with other payers, etc. is taken care of on behalf of the beneficiary. And the money is used for what it is intended: medical care. The result is the preservation of settlement funds as a hedge against the fatal climb of healthcare cost inflation. In many cases, the medical proceeds will remain solvent for the life of the beneficiary, depending on the nature of their injury expenses and the cost controls available.
It’s fairly simple and affordable to set up professional administration of future medical settlement proceeds, and Medivest can help you integrate professional administration into your cases. From the simple straightforward claims to the most complex, Medivest has developed resolutions that address an array of post-settlement concerns, especially healthcare cost inflation. Contact us today for a free case consultation.

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