So, what happens to the unused funds in the Medicare Set-Aside (MSA) account? That depends. Read on and contact our team to learn more.
Just as a recap, an MSA is a projection of what future treatment for the work injury will likely cost. The amount of the projected treatment must be placed in your MSA account and must be used to pay for the medical treatment related to the underlying workers’ compensation claim that would otherwise be covered by Medicare. Then the funds in the MSA account must be properly exhausted before Medicare will begin to pay for medical treatment related to the claim.
However, what happens in situations where the injured worker does not need as much treatment as previously expected and yearly annuity funds continue to grow or where the injured worker dies before exhausting funds in the MSA? Let’s discuss both scenarios in detail below.
What happens to unused funds and MSA annuity deposits that are not exhausted in the yearly period they were projected to cover?
While some MSA accounts are funded with a one-time lump sum payment, very often MSA accounts are funded by structured settlements that provide for periodic payments into the MSA account, usually on a yearly basis.
If the funds for a structured MSA account are not exhausted during the applicable period of time (usually on a yearly basis), the excess funds must be carried forward to the next period. The monetary threshold where Medicare would begin to cover medical treatment for the work-related injury would be increased in the subsequent period by the amount that was carried forward.
CMS provides the following example in its March 2022 reference guide:
A structured set-aside is designed to pay $20,000 per year over the next 10 years for an individual’s Medicare-covered services. Medicare would begin paying covered expenses in any given year after this $20,000 is exhausted. However, in 2012 the injured individual needed only $15,000 to cover all related expenses. The administrator would need to carry forward the excess $5,000 into 2013. Therefore, in 2013 a total of $25,000 of Medicare-covered expenses would need to be spent for services otherwise reimbursable by Medicare before Medicare would begin to cover WC-related expenses, but only for the balance of 2013. This carry-over process continues until the accumulated carry-forward plus the payment for a given year is exhausted.
As with the settlements that involve a lump-sum payment into the MSA account it is important to fully understand the terms of the structured settlement and what happens to the funds when the injured worker passes away. While unlikely, the structured settlement may provide for the continued payment of the settlement to the injured worker’s family and/or beneficiaries. However, more than likely there is language in the settlement agreement and structured settlement that only provides for the payment of funds during the injured worker’s lifetime. Of course, any remaining funds left over in the MSA account would be disposed of in the same manner as the lump sum discussed below.
What happens to unused funds remaining in an MSA Account when an injured worker dies?
According to The Centers for Medicare and Medicaid Services (CMS), should the injured worker pass away before the MSA account is completely exhausted, the Benefits Coordination & Recovery Center (BCRC) will make sure that all outstanding claims associated with the workers’ compensation case have been paid. This may require that the MSA Account remain open for 12 months after the injured worker’s death to permit claims to be submitted for payment.
Then any amount left over in the MSA account is disbursed to the injured workers beneficiaries pursuant to state law. This means remaining funds will pass to the injured workers estate and be distributed according to the terms of his/her will or if there is no will, then funds will be distributed according to state intestate laws.
Contact MSA Meds
MSA Meds stands ready to assist you in professionally administering your MSA account to protect you and your family. Contact MSA Meds today.