Medicaid, Social Security, and Supplemental Security Income (SSI) are a few of the public benefits available people with limited assets and/or income.  When there is a personal physical injury or sickness claim, a settlement most often involves receipt of a cash lump sum payment—however, Medicaid and SSI are needs-based programs so a lump sum cash settlement would most likely make the claimant ineligible for these government public assistance programs.

 If you receive a structured settlement, the periodic payments will also be considered income for the purpose of qualifying for government assistance. For this reason, it is recommended that a structured settlement fund a special needs trust. Assets in a Special Needs Trust are not counted for purposes of qualifying for needs-based programs.  In the case of a Special Needs Trust, the payee of the structured settlement is the trust.  A trust is basically money or property held by one party for the benefit of another.  A Special Needs Trust is an irrevocable trust with a trustee who will use the assets for the benefit of the injured party and is the only person that can make a distribution from the trust.  A Special Needs trust must be approved by the court and can be used for most expenses other than basic support such as room and board.  

Medicare has a statutory right to be reimbursed for an injury victim’s medical expenses AND a right to recover from the victim’s future medical expenses before Medicare’s secondary coverage applies.  All parties in WC (Workers Compensation) cases have significant responsibilities under the Medicare Secondary Payer (MSP) laws to protect Medicare's interests when resolving WC cases that include future medical expenses.

The recommended method to protect Medicare's interests is a Medicare Set-Aside (MSA) in WC cases, which allocates a portion of the WC settlement for future medical expenses. An MSA is an interest-bearing account, either professionally administered or self administered, that holds the funds to pay for future medical and drug expenses related to an injury for which a WC claim has been filed.  Structured settlements have become a popular method of funding MSAs because of the reduced cost to the parties.  

The benefits of using a structured settlement for an MSA:

  • Structured Settlement consultant handles all the details and the work involved in setting up the MSA.

  • Can reduce the cost by up to 50% when annuitizing the MSA

  • Reduces claim reserves

  • Age ratings reduce premium if a traditional or NQ assignment is used.

  • Contingent liabilities may be eliminated

  • Reduces adjustment expenses by resolving claims more quickly which may include reduced attorney fees, investigation costs and medical costs which continue to rise

  • Structured settlements are a great tool as claimants are used to period payments (weekly payments from WC)

  • Multiple settlement designs available which allows structuring to meet present and future individual needs

  • Conference calls to attorneys and claimants to help educate all parties on the process

CMS/Medicare has not issued any memos or rules regarding Liability Medicare Set-Asides.  However CMS/Medicare does take the position (pursuant to statute) that CMS/Medicare’s payments for medical treatment of an injury are secondary to any policy of insurance, workers’ compensation, liability and/or no fault benefits that is primary for paying that medical treatment. Although Medicare has not come forth with any rules that outline how to protect Medicare's interests with regard to a Liability Medicare Set-Aside (as they have done with Workers’ Compensation), an argument could be made that Medicare’s interests are protected if a Liability Medicare Set-Aside is done the same way a Workers’ Compensation Medicare Set-Aside is done.

“CMS’s legal position is if a liability settlement designates that the settlement includes money for future medical care, a set-aside is appropriate. However, there is no formal process to review Liability set-aside proposals. Depending on the availability of medical staff, some Regional Offices will review a proposal. You do not have to submit a proposal to CMS. It is sufficient to have it on the record that the fund is created.”


Further Resources

Learn more about CMS

Medicare Set-Asides with Workers' Compensation Claims