Structured Settlement for Medicare Set-Asides
MSA Meds understands the complexities of MSA funding and will help you choose the best option for your client. No case is the same and each injured individual’s unique circumstances should be evaluated to maximize their recovery, while at the same time ensuring that they receive the medical treatment they need. If you have questions regarding which funding option is best for your client, contact MSA Meds today.
How Are MSA Accounts Funded
Medicare Set-Aside Accounts may be funded by a lump sum, whereby the entire amount of the MSA is deposited into an interest-bearing checking account. If all of the funds are properly depleted, then Medicare will begin paying bills for injury-related care.
MSA Accounts may also be funded by a structured settlement, which is a financial product that pays out the money from a Personal Injury or Workers’ Compensation settlement in a series of periodic payments. Most MSAs from workers’ comp settlements are funded with annuity payments. The payments continue for the life of the beneficiary. If a MSA is funded by an annuity or structured settlement, Medicare requires that the first two years of medical expenses, as well as the first surgery or procedure, be deposited into the MSA Account as “seed money.” From here, the remainder of the MSA is deposited into the MSA Account through yearly annuity payments on the anniversary date of the MSA Account’s creation. If funds run out between annuity payments, the beneficiary or Professional Administrator must file a temporary exhaustion accounting with CMS. If Medicare finds all funds from the MSA were properly spent, then Medicare will start paying bills for injury-related care until the next annuity deposit is received. Regardless of which funding option is selected, proper spending and reporting of all MSA funds are crucial to maintaining future Medicare eligibility for injury-related care.
The Pros and Cons of Funding a MSA with Structured Settlement
One of the benefits of funding a MSA with an annuity is the cost savings associated with applying the present-day value to the MSA. A MSA funded with an annuity should cost less than one funded with a lump sum. For Liability cases this ensures more of the settlement dollars go into the plaintiff’s pockets. Additionally, an annuity also provides a steady income stream for paying medical expenses. Once an annuity is established, the payments are guaranteed by the annuity company and will not fluctuate.
Advantages of funding a Medicare set-aside with structured settlement funding include:
- Claim resolutions are faster, which reduces adjustment expenses and potentially lower additional legal fees.
- Benefits are prevented from being disqualified, and penalties and fines are avoided for all parties.
- Having one structured settlement consultant streamlines everything for setting up the MSA.
- MSA structured settlements are also capable of funding professional administration fees, reducing the upfront costs to all parties.
- Interest earned on the structure settlement is tax-free.
- Because funding an MSA with a structured settlement is less expensive than using a lump sum, additional unrestricted funds may be available.
One of the drawbacks of funding a MSA with an annuity is the possibility of temporary exhaustion. If the MSA’s funds are spent before the next annuity payment is due, Medicare will pay bills for injury-related care. However, a temporary exhaustion accounting must be submitted to Medicare and Medicare must agree that all funds were properly spent before Medicare will pay any bills for injury-related care. This process may delay treatment. Hiring a Professional Administer will expedite this process and ensure that medical treatment is uninterrupted. Another area of concern regarding structured settlements is reversionary interests. If a MSA is funded with a lump sum, any funds remaining in the MSA Account at the time of the beneficiary’s death pass to the beneficiary’s estate. Some Insurance Carriers try to add reversionary clauses into the structured settlement contract, requiring any unused funds to be paid back to the Insurance Carrier. Many attorneys feel that this action is inherently unjust to the injured individual, who assumes the risk if the MSA funds are insufficient to pay for all future treatment. It is only fair then that if funds remain at the time of death, the beneficiary’s estate receives them.
Contact MSA Meds
Determining how to fund a MSA should be made on a case-by-case basis according to the injured individual’s circumstances. MSA Meds has the experience and understanding needed to help you resolve any confusion regarding funding options and MSA administration. Please contact MSA Meds today to learn more about maximizing your clients’ settlement dollars to ensure they receive the future medical treatment they need.