by: Begley Law Group

by Thomas D. Begley, Jr., Esquire, CELA

In addition to any claim for reimbursement for the conditional payment of past medical expenses, Medicare also has a right to consideration for the Medicare beneficiary’s future medical expenses.  Unless adequate funds are set-aside in a suitable arrangement, Medicare will not pay that person’s future medical bills.  A mechanism for administering funds set-aside for future medical expenses is known as a Medicare Set-Aside Arrangement (MSA).  Funds in the MSA are used to pay future medical bills related to the incident resulting in the injury as those expenses are incurred.  The statute has been on the books for about 40 years and has been enforced in connection with Worker’s Compensation claims since 2001.  CMS has proposed regulations in Third Party Liability Cases, but they have not yet been adopted.  The statute, nevertheless, requires the MSA in appropriate liability cases.  The statute has been only sparingly enforced.  In 2019 the Medicare Secondary Payer Manual was changed to specifically include liability cases.  Personal Injury attorneys frequently seek Opinion Letters as to whether or not the MSA is appropriate.

Whether an MSA should be considered depends on the client’s Medicare status.  This is true regardless of how small the amount of the settlement.  An MSA should be considered if the Plaintiff is receiving Medicare or has a reasonable expectation of receiving Medicaid within thirty months.


Individuals who are eligible for Medicare:

  • Upon attaining age 65 or if they are eligible for Railroad Retirement benefits, or
  • Government Employees. If they are federal, state or local government employees who paid sufficient premiums, or if they buy in to the Medicare program.
  • They are also eligible for Medicare based on disability if they are receiving Social Security Disability Income (SSDI) or Railroad Retirement Disability (RRD). There is a 24-month waiting period for SSDI and RRD. There is a five-month waiting period to get benefits, so the waiting period is 29 months total.
  • End Stage Renal Disease. If the individual suffers from End Stage Renal Disease (ESRD), they are eligible for Medicare while receiving kidney dialysis or if the individual has a kidney transplant, they are eligible for up to three years after the date of the transplant.
  • Individuals are eligible for Medicare if they suffer from ALS. Eligibility for ALS patients begins on the first month after receipt of SSDI benefits.

Minor Children

An MSA may not be required for a minor child, unless that child is age 17-1/2, because at age 18 the child could then apply for Child Disability Benefits (CDB) if the child has a parent who is entitled to benefits as disabled or retired or there is a deceased parent, and be eligible for Medicare 24 months thereafter.

Reasonable Expectation of Medicare Enrollment Within 30 Months

For purposes of defining “reasonable expectation of Medicare enrollment within 30 months of settlement,” CMS includes the following criteria:

  1. Claimant is receiving SSDI benefits at the time of settlement.
  2. Claimant has applied for SSDI or has applied and been denied, but anticipates appealing the decision.
  3. Claimant is in the process of appealing and/or refiling for SSDI benefits.
  4. Claimant is age 62.5 or older at the time of settlement.
  5. Claimant has ESRD, but does not yet qualify for Medicare based on ESRD.

While not required by the CMS Memorandum, it should be noted that individuals with Lou Gehrig’s Disease (ALS) will also qualify for Medicare within that 30-month timeframe. The authors believe it is good practice to consider the establishment of an MSA if those factors apply.

Although not mentioned in the CMS Memorandum, individuals eligible for Railroad Retirement Disability (RRD) are also eligible for Medicare. Therefore, persons receiving RRD will receive Medicare within 29 months of the onset of disability, which is within the 30-month window.[1]

Other Medical Coverage

An MSA is recommended where the claimant is covered under a Group Health Policy (GHP) or a Managed Care plan or has coverage through the VA. An MSA is still appropriate, because the other health insurance and health service could, in the future, be cancelled or reduced, or the injured individual may elect not to take advantage of such services. As previously stated, WC is always primary to Medicare.[2]

Cost of an MSA

The cost of an MSA can be significantly reduced by utilizing a Structured Settlement.  The average savings by utilizing a Structured Settlement rather than a lump sum is 48%.

[1] Medicare Secondary Payer (MSP)—Workers’ Compensation (WC) Frequently Asked Questions (2).

[2] Medicare Secondary Payer (MSP)—Workers’ Compensation (WC) Additional Frequently Asked Questions, Q8, July 11, 2005.