QUESTION: Why would I do a Medicare Set-Aside when an individual has an alternative form of health insurance, whether that be through group health insurance after the age of 65 while working for the respondent-employer or through a spouse?
It is important to look at the big picture. Medicare is an entitlement program that nearly all Americans pay into. Most individuals enroll in Medicare at the age of 65, at least taking the premium-free Part A hospital benefits, even while they maintain health insurance through other sources. In fact, opting out of or refusing Medicare Part A coverage can jeopardize Social Security retirement and/or Railroad Retirement Board benefits. Accordingly, very few people opt out of Medicare Part A. Many people are not even aware they have Part A coverage since enrollment for some is automatic.
If an individual decides to delay both Social Security and Medicare benefits and maintains other non-Medicare group health coverage – such as group health benefits through an employer or a spouse – it is important to keep in mind that this coverage could end at any time and for a variety or reasons. Once the other coverage ends, the entitled individual could enroll in Medicare. Accordingly, the Medicare Secondary Payer Act will apply to all individuals who will eventually become Medicare entitled, and therefore consideration of how a settlement impacts an individual’s future medical needs in the future should always be addressed.
Submission of a Medicare Set-aside Arrangement to CMS for review and approval is voluntary; it is not a legal requirement and submission is not an option when the CMS workload thresholds are not met. Although most insurance carriers and many large self-insurers adopted the CMS submission program as “best practice” when CMS workload thresholds are met because CMS approval provides an enforceable safe harbor for all parties, the only legal requirement is that the parties reasonably consider Medicare’s future interests at the time of settlement to ensure there is no shift of responsibility to Medicare of future medical bills related to the work injury. Non-submit MSA options, including evidence based MSAs, MSA waivers based on medical or legal reasons and traditional MSA allocations, can be legally sufficient under the Medicare Secondary Payer Act where the settlement reasonably accounts for Medicare’s future interests.
At Nyhan, Bambrick, Kinzie & Lowry, we are well-versed and experienced in assessing proposed settlements to ensure Medicare’s interests are reasonably considered. We understand a formal, CMS-submitted MSA is not always the best way for parties considering Medicare’s future interests. We are available to provide guidance on how to effectuate settlements in compliance with the law, whether that be through submission of Medicare Set-aside Arrangements or non-submission of alternative future medical allocation options.