Every trial lawyer knows that securing a settlement or an award is only the beginning of the end of representation. The “litigation” part may be over, but the work is not done. Experts must be notified, releases and/or stipulations finalized, liens negotiated, expenses calculated, and so on. And, if the client is a Medicare beneficiary, Medicare’s future interest must be “considered.”
What does it mean to consider Medicare’s future interest? In short, no one really knows.
The Medicare Secondary Payer Act, which is codified at 42 U.S.C. § 1395y, generally prohibits Medicare from paying for medical care if “payment has been made or can reasonably be expected to be made under a workmen’s compensation law or plan of the United States or a State or under an automobile or liability insurance policy or plan (including a self-insured plan) or under no fault insurance.” § 1395y(b)(2)(A) (emphasis added). The Centers for Medicare and Medicaid Services (“CMS”) takes the position, therefore, that Medicare beneficiaries who have received compensation from another entity as compensation for expected future medical care are required to pay for future “related” Medicare-covered services out of that compensation.
Unfortunately, however, there is no clear statutory language or regulatory guidance, setting forth a formula to calculate the portion of a recovery that should be reserved to pay for future healthcare. Similarly, there is no statutory language or regulatory guidance regarding how Medicare beneficiaries should “set aside” funds for future “related” healthcare or how Medicare beneficiaries should set about using those funds to pay for their future healthcare. Given the lack of clear guidance on this topic, lawyers and their Medicare-beneficiary clients must think carefully about whether proceeds from a settlement or award are intended to compensate the client for future healthcare that would otherwise be covered by Medicare and, if so, how to go about ensuring that Medicare’s future interests are “considered.”
One mechanism to ensure that Medicare’s future interests are considered is the Medicare Set Aside (“MSA”). MSAs are voluntary agreements that allocate a specific portion of an award or settlement to pay for future “related” medical care. Under current law, MSAs are never technically required. Nevertheless, MSAs provide a degree of assurance that lawyers and their clients have complied with their obligations under Federal law.
MAJ members have access to industry experts who assist trial lawyers and their clients navigate the hyper-technical requirements of the Medicare Secondary Payer Act. Many of those leading experts provided practice tips that are incorporated herein. The MAJ sponsors quoted in this article are excellent resources for further information on this topic. As Megan Eissler, the Director of Strategic Partnerships at Compass, LLC explains:
The law on Liability Medicare Set-Asides [and Workers’ Compensation Medicare Set-Asides] can be confusing. While the applicable authority is the Medicare Secondary Payer Act, CMS has not provided a lot of guidance on how to best protect Medicare’s future interest. The best advice is to make sure you put yourself in a defensible position to demonstrate that you considered Medicare’s interest and appropriately document your file.
Understanding the basic framework for MSAs in the context of workers’ compensation claims is important for every trial lawyer, regardless of whether that lawyer practices workers’ compensation law, because CMS has provided significantly more guidance in the workers’ compensation context than in cases involving other types of claims. Indeed, in certain workers’ compensation cases, CMS will review and approve voluntary MSA agreements allocating a portion of the award to pay for future care. Once that portion of the award is exhausted, Medicare resumes normal payment for the beneficiary’s care. This arrangement is known as a Workers’ Compensation Medicare Set Aside (“WCMSA”). CMS’s WCMSA Reference Guide explains:
CMS’ voluntary, yet recommended, WCMSA amount review process is the only process that offers both Medicare beneficiaries and Workers’ Compensation entities finality, with respect to obligations for medical care required after a settlement, judgment, award, or other payment occurs. When CMS reviews and approves a proposed WCMSA amount, CMS stands behind that amount. Without CMS’ approval, Medicare may deny related medical claims, or pursue recovery for related medical claims that Medicare paid up to the full amount of the settlement, judgment, award, or other payment.
Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA) Reference Guide, Centers for Medicare & Medicaid Services (updated January 17, 2025), available at https://www.cms.gov/files/document/wcmsa-reference-guide-version-42.pdf.
Nevertheless, CMS will not review all WCMSA agreements in workers’ compensation cases. Beneficiaries who wish to apply for WCMSA approval must meet threshold requirements. CMS will only review WCMSA agreements where the claimant is a current Medicare beneficiary, and the total settlement is greater than $25,000; or where a claimant has a reasonable expectation of becoming a Medicare beneficiary within 30 months and the anticipated future economic losses are greater than $250,000. Id. at p. 16. Moreover, WCMSA submissions seeking CMS approval must meet various complicated procedural requirements.
Mark Long, the Senior Vice President of Ametros explains:
The complexity of administering a WCMSA and the potential consequences is, in part, why CMS highly recommends the use of a professional administrator (WCMSA Reference Guide, V 4.2, page 64, Section 17.1) for the WCMSA. A professional administrator goes beyond simply meeting the established CMS guidelines. They are able to provide injured individuals with valuable benefits, including cost savings, security, full transparency and expert guidance-- ensuring their medical funds are managed efficiently and with peace of mind.
In contrast to the detailed and complex procedure associated with obtaining approval for WCMSAs, there is no corresponding program to seek CMS approval of MSAs in liability cases. CMS has the option to review MSAs in the liability context, but there is no formal guidance or uniformity across regional CMS offices. Despite the lack of formal guidance, however, trial lawyers and their Medicare-beneficiary clients should not ignore the requirements of the Medicare Secondary Payer Act.
Rodd Santomauro, Esq., the Vice President of Strategic Partnership at Synergy. explains that whenever there “is a likelihood that the client will have future related medical care paid for by Medicare/Medicare Advantage post settlement,” lawyers should make sure that their clients consult a “licensed/certified set aside expert” regarding Medicare’s potential future interests. Mr. Santomauro points to a 2011 “handout” that was issued by a CMS Regional Coordinator from Texas named Sally Stalcup that was “intended to provide consolidated guidance” in “liability, no-fault and general third party liability cases for any Medicare beneficiary residing in Oklahoma, Texas, New Mexico, Louisiana and Arkansas.” See Handout Issued by Sally Stalcup, May 25, 2011.
The Stalcup Handout stated: “Anytime a settlement, judgement or award provides funds for future medical services, it can reasonably be expected that those monies are available to pay for future services related to what was claimed and/or released in the settlement, judgment, or award.” Id. (emphasis in original). The Handout further claimed: “The fact that a settlement/judgement/award does not specify payment for future medical services does not mean that they are not funded.” According to Ms. Stalcup, “it is Medicare’s position that counsel should know whether or not their recovery provides for future medicals, simply recovers policy limits, etc.”
Ms. Stalcup intended to provide clarity and guidance. Unfortunately, the Stalcup Handout failed to address the complexity of analyzing compensation for future medical care in liability cases. Unlike workers’ compensation cases that generally involve specific awards for future care, it may be difficult or impossible to determine the extent to which an award or settlement in a liability case was intended to compensate for future medical care vs other types of economic damage and pain and suffering. For example, what if a plaintiff’s medical experts provided insufficient causation testimony regarding future medical care at deposition, but the case thereafter settled? Or, what if the client had preexisting conditions and no expert parsed out what future medical care was caused by negligence as opposed to the preexisting conditions? Moreover, what if a client was catastrophically injured, but the applicable policy limits are only $100,000 – does Medicare get everything and the client receives no compensation for pain and suffering?
The Stalcup Handout additionally claimed that lawyers “must decide whether or not there is funding for future medicals. If the answer for plaintiff’s counsel is yes, they should to [sic] see to it that those funds are used to pay for otherwise Medicare covered services related to what is claimed/released in the settlement judgment award.” Once again, the Stalcup Handout failed to take into account the complexity of the Medicare system and human health in general. How can Medicare beneficiaries be expected to parse out which future care is “related” to the liability claim? How will healthcare providers know which portions of care should be billed to Medicare and which portions of care should be billed to the beneficiary directly?
Mr. Santomauro points out that “many draft proposals and comments have been submitted to CMS since the Stalcup Handout was issued, but none formally adopted yet. At some point, that must change.”
To that point, in 2022, CMS issued a “Notice of Proposed Rulemaking” memorandum. The proposed regulation would have implemented an MSA approval process in liability cases. See Office of Information and Regulatory Affairs, Regulation Identifier Number: 0938-AT85. While some advocates believed that an MSA approval process in liability cases would provide clarity, others were dubious that CMS could effectively manage such a program. In particular, the Medicare Advocacy Recovery Coalition (“MARC”) opposed the 2022 proposed rule change. See “MARC Letter” available at https://www.reginfo.gov/public/do/eoDownloadDocument?pubId=&eodoc=true&documentID=134542.
The MARC Letter contained scathing criticism of CMS’s administration of the voluntary WCMSA program and expressed disbelief that CMS would be able to manage a Set Aside program in liability cases as follows:
Respectfully, the Agency understandably lacks the expertise in the workers’ compensation arena, as reflected in the January 2022 statement, the February webinar, and the March changes. This will be all the more true if the Agency tries to expand a MSP future medicals policy to liability and no fault cases, which are far more numerous and complex, involve apportionment of fault and liability limit considerations not present in workers’ compensation, and will touch every settlement, judgment and award in every cases across the country. The Agency’s overreach risks damaging the ability of millions of Medicare beneficiaries to resolve claims, just as its voluntary policy has already done in the workers’ compensation program. Given that CMS is unable to appropriately implement its WCMSA “future medicals” policy in a significantly narrower and far less complex environment, OIRA should closely examine the significant unintended consequences of the proposed CMS future medicals policy before allowing CMS to propose a new (and, in our view, ultra vires) rulemaking that will negatively impact a far broader universe of claims and beneficiaries.
Id. (emphasis added).
Ultimately, CMS withdrew the proposed rule change. To date, the regulations and requirements surrounding consideration of “Medicare’s future interest” in liability cases remain vague. What is clear, however, is that trial lawyers who represent Medicare beneficiaries should carefully consider whether their clients need to obtain an MSA analysis.
Joanna Wynes, Esq. of Joanna Wynes Settlements recommends consulting experts to help determine whether an MSA is necessary. She says:
The first time I heard about Medicare Set Asides, I was practicing law in Philadelphia approximately 15 years ago. Since that time, I’ve worked as a Medicare Set Aside analyst and as a settlement consultant, providing advice and lecturing on Medicare compliance and other settlement related issues in the country. Throughout this time, we’ve awaited more specific guidance from CMS as to liability set asides, but it still remains a grey area. We know that MSAs are not mandatory in liability cases at this time; however, settlements closing out future injury related treatment should avoid cost shifting the post-settlement injury-related care onto Medicare. An MSA is a preferred method for avoiding this cost shift. With that said, if you have a client who is a Medicare beneficiary or Medicare eligible, and requires future injury related care, I do recommend a consultation with someone in this space to provide an analysis of the risks and benefits of an MSA in a given situation.
(Emphasis added).
Medicare Set Aside analysis is a service designed to provide clarity to trial lawyers and their Medicare-beneficiary clients. Analysts review the injured party’s medical records, case documents, and the settlement information to determine whether the injured person will require future medical care as a result of the negligence that would otherwise be covered by Medicare (i.e. “related care”). The analyst then uses CMS reimbursement rates to estimate the cost of future related care. Companies that offer these services provide “Medicare Set Aside Allocation Reports” that explain the anticipated future care and the anticipated cost of that care.
Still, there is no clear law or guidance on the appropriate way to “set aside” funds for purposes of considering Medicare’s future interests in liability cases. There are companies that will assist clients in opening a “set aside account” for purposes of using those funds to pay for medical services until the account is exhausted. Alternatively, clients may opt to open their own “set aside” account and to administer their own funds. In either case, trial lawyers and their clients should be able to demonstrate that they have considered Medicare’s potential future interests.
The lack of clarity and guidance on MSAs in the context of liability cases does not obviate a trial lawyer’s obligation to consider Medicare’s potential future interests when concluding representation of a Medicare beneficiary. To the contrary, “CMS has a right of action to recover its payments from any entity, including a beneficiary, provider, supplier, physician, attorney, State agency or private insurer that has received a primary payment.” 42 C.F.R. § 411.24 (emphasis added). Ensuring that Medicare’s interests are adequately considered is, therefore, a crucial step in concluding representation of a Medicare beneficiary who receives compensation for an injury.
William Rothrock of Rothrock Settlement Consulting explains that failure to consider Medicare’s potential future interests presents risks to lawyers and clients alike as follows:
This topic deserves more attention in the personal injury arena. Attorneys often fail to recognize the significant liability that arises when they neglect to factor Medicare into cases involving future medical expenses. What’s intriguing is that the cost of a Medicare Set-Aside (MSA) can be remarkably affordable, especially when structured settlements are used, making it difficult to justify overlooking this important step. Fortunately, Medicare has yet to take a strong stance on compliance, but this shouldn't lull us into complacency. The MSP Statute of 1980 protects Medicare's past and future interests in a case. Failing to fulfill either component can result in the loss of future Medicare benefits, so seeking professional assistance is advisable.
(Emphasis added.)
Mr. Santomauro confirms that Medicare will deny payment for future medical care if CMS believes that funds should have been set aside to cover the care. He provided a sample (redacted) explanation of benefits form reflecting a denial of Medicare coverage accompanied by the following note:
Your claim has been denied by Medicare because you may have funds set aside from your settlement to pay for your future medical expenses and prescription drug treatment related to your injury.
In short, despite the lack of clarity from CMS, trial lawyers should carefully consider whether or not any particular client should obtain an MSA analysis.
The statutes, regulations, and agency guidelines regarding Medicare Set Asides are vague and complex. Medicare Set Asides are never “required.” However, Medicare-beneficiaries and their attorneys who receive compensation for future medical care must consider Medicare’s potential future interests. Medicare Set Aside analyses and Medicare Set Aside accounts can be important tools to help ensure Medicare’s future interests are considered.
Patrice Meredith Clarke is a trial attorney who focuses her practice on representing victims of medical negligence. She has served as lead counsel in numerous medical malpractice cases throughout Maryland and has recovered tens of millions of dollars on behalf of her clients. Ms. Clarke sits on the Board of Governors of the Maryland Association for Justice and currently serves as MAJ’s Secretary-Treasurer and the Co-Editor-in-Chief of MAJ’s Trial Reporter. Ms. Clarke also serves on MAJ’s Judicial Review Committee and the Legislative Committee. She was a 2024 recipient of “The Robert J. Zarbin Legislative Advocacy Award.”
Additionally, Ms. Clarke is an active member of the Maryland State Bar Association (“MSBA”) and serves as a member of the MSBA’s Appellate Practice Committee and as Co-Chair of the MSBA Special Committee on Voir Dire. Ms. Clarke is also an active member of the Maryland Bar Foundation, the Anne Arundel County Bar Association, the American Association for Justice, and the American Bar Association. In her spare time, she enjoys traveling, swimming, and spending time with her husband and three sons.
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