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Consequences of Not Using a Medicare Set-Aside Account


Worker standing on beams at a building construction site.
If you think you'll need to take advantage of Medicare in the future but have a workman's compensation claim, protect what's yours with a Medicare Set-Aside Account

Those who obtain a workers’ compensation settlement for future medical expenses must create a Medicare Set-Aside (MSA) Account to preserve their eligibility for Medicare. This separate, interest-bearing account pays for medical costs related to the worker’s injury. After the funds are exhausted, Medicare provides coverage for medical fees related to the injury.



Why You Should Create an MSA Account


Failing to establish an MSA can have significant consequences for Medicare eligibility. Neglecting to create an MSA can result in losing Medicare, as well as means-tested government benefits like Medicaid. In certain cases, not using an MSA following a settlement can lead to liability.



Keep Your Medicare Coverage


Individuals who receive settlements or judgments to cover future medical care must use these funds for that purpose to preserve Medicare coverage. For these expenses, Medicare is not the primary payer. Payments for the injury kick in only after the account is depleted and the beneficiary files a report with the Medicare Secondary Payer (MSP) Recovery Contractor. (Learn more about the Medicare Secondary Payer Act.)


Receiving a settlement for future medical expenses without setting up an MSA jeopardizes Medicare eligibility. Someone who ignores the requirement to create an MSA could forfeit Medicare coverage entirely. This could mean losing coverage for all medical expenses, including those unrelated to the injury.


If Medicare acts as the primary payer – meaning that Medicare pays first – when funds should have come from workers’ compensation, Medicare has a right of action. It can take legal action against the primary payer responsible for the payment, as well as those who received Medicare’s funds.


When beneficiaries are unaware of the rules and fail to create an MSA, they could lose coverage.



Stay Eligible for Public Benefits Programs With Asset Limits


Not having an MSA, or setting one up that is ineffective, can also make individuals ineligible for means-tested benefits such as Supplemental Security Income (SSI) and Medicaid.

The Social Security Administration counts settlement funds as assets. Without a proper MSA, a person who acquires money to cover prospective medical costs following an accident could lose their public benefits.


Increases in assets can also disqualify beneficiaries of the following programs:

  • Supplemental Nutrition Assistance Program (SNAP)

  • Temporary Assistance for Needy Families (TANF)

  • Low-Income Home Energy Assistance Program (LIHEAP)

People who obtain workers’ compensation settlements can continue to receive means-based benefits, along with Medicare, when they have a well-structured MSA. According to the Special Needs Alliance, embedding a special needs trust (SNT) within an MSA can allow a person to continue accessing government benefits. This is because the funds in an SNT are not countable assets.



Avoid Liability After a Workers Compensation Settlement


The Centers for Medicaid and Medicare Services (CMS) requires that workers’ compensation settlements reasonably consider Medicare’s interests. A workers’ compensation settlement requires a person to create an MSA. If they fail to do so, they could face legal consequences for breaching their settlement agreement.


CMS can also obtain restitution from anyone involved in the settlement, including the worker, workplace, insurance companies, and attorneys.



Consult With a Special Needs Planning Attorney


Creating and maintaining an MSA can be complex. If you wish to keep your Medicare eligibility while receiving compensation for an injury, working with an attorney to help you set up and manage an MSA is critical.


Consider consulting with a special needs planning attorney like Sharek Law Office. We can help you stay eligible for Medicare after acquiring a workers’ compensation settlement. Call our office at 412-347-1731 or click here to schedule a complimentary 15-Minute Call with our staff to discuss your needs today.



Learn More About MSAs


For more information about Medicare Set-Asides, check out the following articles:

 

This article is a service of Sharek Law Office, LLC. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That's why we offer a Life and Legacy Planning Session, during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. You can begin by calling our office today to schedule a Life and Legacy Planning Session and mention this article to find out how to get this $750 session at no charge. Please note this is educational content only and is not intended to act as legal advice.

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