"Perfect & Protect" Medicare Set Asides with Structured Settlements and Professional Administration
After having the honor of participating in the California Applicants’ Attorney Association panel presentation on MSAs at their Winter Convention in San Diego on January 26th, I have had some engaging follow-up calls on MSAs, structured settlements, and professional administration. With that in mind - - and at the suggestion of one of the callers -- I thought I would offer a brief summary of all of the benefits.
Why Should The Claimant / Applicant Seek To Structure an MSA?
Funding an MSA with a structured settlement annuity does not cost your client anything and delivers the following value to the claimant / applicant and his or her family:
- Protect Future Medicare Benefits: Medicare has published its policy that spending MSA dollars on anything other than the treatments detailed in the MSA can potentially cause a forfeiture of your client's future Medicare benefits. The structured funding keep payments coming over the term of the MSA and eliminate the risk of spending the money prematurely.
- Protect Any Current Needs-Based Public Assistance. If the claimant / applicant is receiving any such benefits (i.e. Medicaid, SSI, AFDC), a lump sum payment is considered an “asset” that may also cause forfeiture of current or future needs-based eligibility. A structure is a “policy” that should never impact any needs-based eligibility or assistance.
- Keep the Money Coming. By setting up a lifetime of structure payments, the claimant / applicant: 1) eliminates the risk of immediately spending through a lump sum for other purposes; 2) eliminates the risk of inflation undermining the purchasing power of MSA dollars in a bank account; and, 3) eliminates the loss of funds through investment fees and/or investment risk.
- Overcome Any MSA Funding Shortfalls. CMS favors the structured financing of MSAs to such a degree that they will fund any shortfall in any given year for any documented, medical need related to the MSA. If the claimant / applicant tracks and reports appropriate expenses to CMS, a structure provides the only opportunity for a “replenishing” for the term of the MSA.
- Secure the Freedom to Direct Your Own Care. If the claimant’s / applicant’s MSA never runs out because its paid through a structure, he or she is free to pick doctors, facilities, and other facets of treatment. In fact, with the right professional administration provider, like Ametros (www.ametroscards.com), the claimant / applicant can safeguard that freedom with automated reporting to CMS and significant, network savings on all kinds of medical expenses.
- Avoid Out-Of-Pocket Expenses. If the claimant / applicant exhausts the MSA paid in a lump sum, he or she will have to pay for medical expenses from traditional health care, Medicare, or Medicare Advantage plans depending on eligibility. There may be co-pays or deductibles. MSAs do not require either co-pays or deductibles.
- Avoid State and Federal Taxes. Under the US Tax Code, the claimant’s / applicant’s ongoing benefit from a structured MSA are tax exempt and entirely tax free. Any growth in the value of a lump sum will likely subject the claimant / applicant to state and federal tax.
Why Should Claimant / Applicant Counsel Seek To Structure Their Client’s MSA?
- Protect and Assist Your Client: See all of the above!
- Mitigate Liability For Free: While the authority and appetite for CMS to recover misspent MSAs is subject to debate, structured settlement annuities with professional administration can mitigate this risk for free. Ensuring that your client’s MSA is spent on the right treatment, at the right price, in the right interval, and under CMS guidelines ensures that there are never any misspent MSA dollars. Structured settlements do not cost anything. Professional administration is usually paid for by the carrier or self-insured.
Remember: Mandatory Insurer Reporting requires the carrier / self-insured / TPA to report the amount of the MSA (and your name and bar license #) to Medicare. That MSA amount is registered on the “Common Working File” that controls all benefits for your client. While enforcement has been lax, as of 2011 Medicare knows who has an MSA and how much was allocated even if it was never submitted for approval. ("Just spend the money how ever you want" might become very costly, ill-considered advice.)
- Provide Guidance for Your Client with a Health Care Advocate: With the right professional administration and structured settlement plan, your claimant / applicant has an expert to talk to about the specifics of the MSA for their post-settlement treatment. Instead of calling you, they have access to an expert that will secure network pricing, pay all medical bills out of a separate MSA account, and generally serve their best interests for the lifespan of the MSA.
If you have any questions about any point in this summary or want to discuss any other challenge arising from MSAs, structured settlements, and professional administration, please do not hesitate to reach out to me to set up a call at [email protected].
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