Introduction
When is a Medicare Set Aside Required is one of the most common and important questions attorneys face when settling cases that involve injured clients. The answer is not always simple. It depends on the type of case, the client’s Medicare status, and the expected future medical care tied to the injury.
If Medicare’s interests are not handled correctly, your client could lose coverage for future treatment—and that risk often comes back to the attorney. In this guide, we break down when a Medicare Set Aside (MSA) is required, how it works, and what steps you should take to protect both your client and your firm.
What Is a Medicare Set Aside (MSA)?
A Medicare Set Aside (MSA) is a portion of a settlement that is set aside to pay for future medical care related to an injury that would otherwise be covered by Medicare. This requirement comes from the Medicare Secondary Payer (MSP) law, which says Medicare should not pay when another source—like a settlement—is responsible first.
MSA funds must be placed into a separate, dedicated account, often called a Medicare set aside account or Medicare set aside bank account, and used only for approved expenses.
What Can and Cannot Be Paid From an MSA
| Covered by MSA Funds | Not Covered by MSA Funds |
| Medicare-covered treatments related to the injury | Non-injury-related medical care |
| Injury-related doctor visits and procedures | Dental, vision, or hearing (unless Medicare-covered and injury-related) |
| Prescription medications tied to the injury | Over-the-counter medications |
| Hospital services for the injury | General living expenses |
Understanding this structure is key when evaluating Medicare set aside requirements in any case.
When is a Medicare Set Aside Required by Law?
This is where confusion often starts.
There is no federal law that explicitly requires an MSA in every case. However, the MSP law does require that Medicare’s future interests be considered in any settlement.
So, when is a Medicare Set Aside required?
- In workers’ compensation cases, MSAs are commonly expected and often submitted to Centers for Medicare & Medicaid Services (CMS) for review
- In liability or personal injury cases, MSAs are not legally mandated—but may still be necessary to protect Medicare eligibility
In short:
An MSA is not always required, but protecting Medicare’s future interest is always required.
Medicare Set Aside Rules for Workers' Compensation Cases
In Medicare set aside workers compensation cases, MSAs are much more structured.
CMS has clear review thresholds:
- The claimant is already on Medicare and the settlement is over $25,000
- The claimant is expected to be on Medicare within 30 months and the settlement is over $250,000
When these thresholds are met, a workers compensation Medicare set aside (WCMSA) is typically submitted for CMS approval.
Even when thresholds are not met, attorneys should still evaluate whether a workers compensation Medicare set aside is appropriate.
Failing to do so can result in Medicare denying future care.
Self-Administered vs. Professional Administration
Once an MSA is established, the funds must be managed properly.
There are two main options:
Self-Administration
- The client manages their own Medicare set aside account
- Must track spending and report to Medicare
- Higher risk of mistakes
Professional Administration
- A third-party administrator manages the funds
- Ensures compliance with Medicare set aside requirements
- Reduces risk of improper spending
For complex or high-value cases, professional administration is often the safer choice.
Medicare Set Aside Rules in Liability and Personal Injury Cases
For Medicare set aside personal injury and liability cases, the rules are less formal—but the risk is still real.
CMS does not currently require submission or approval of MSAs in these cases. However:
- Medicare still expects its future interests to be protected
- Large settlements with significant future care should be evaluated carefully
- Ignoring the issue can result in denied claims later
This is why many attorneys still consider a Medicare set aside personal injury strategy, even when it is not strictly required.
What to Tell Your Client About Medicare Set Aside Obligations
Start with this: Every attorney should clearly explain Medicare obligations before settlement funds are disbursed.
Here’s what you should do in every case involving a Medicare beneficiary:
- Identify Medicare status early
Confirm whether your client is on Medicare or likely to qualify soon - Evaluate future medical exposure
Determine if the settlement includes compensation for future care - Explain Medicare’s expectations
Make sure the client understands they may need to use settlement funds first - Document the conversation
Keep written proof that you informed the client about their obligations
The worst-case scenario is simple:
Your client seeks treatment later, but Medicare refuses to pay because settlement funds should have been used first.
When that happens, clients often return to their attorney asking why they were not warned.
In more complex cases—especially those involving large settlements or ongoing care—it is wise to consult an MSA professional.
Need Help Navigating a Complex Case?
If you’re unsure when a Medicare Set Aside is required or how to structure one correctly, this is where expert guidance matters.
Amicus Settlement Planners helps attorneys:
- Evaluate Medicare exposure
- Design compliant Medicare set aside accounts
- Protect client eligibility and reduce firm risk
Booking a consultation can help you avoid costly mistakes and ensure your case is handled the right way.
What Happens If You Do Not Use a Medicare Set Aside?
If Medicare believes settlement funds should have been used for future care, it may:
- Deny coverage for injury-related treatment
- Require proof that funds were properly spent
- Delay or reject claims
This applies even if no formal MSA was created.
Is It Illegal to Spend Medicare Set Aside Money?
It is not illegal to spend the funds—but it is illegal to misuse them.
MSA funds must only be used for:
- Medicare-covered services
- Injury-related care
Using the funds incorrectly can result in:
- Loss of Medicare coverage
- Financial penalties
- Required repayment
How to Set Up a Medicare Set Aside Account
Setting up a Medicare set aside account involves:
- Allocating the correct amount for future care
- Opening a separate Medicare set aside bank account
- Funding the account (lump sum or structured payments)
- Establishing a plan for administration and reporting
This process must follow strict Medicare set aside requirements to ensure compliance.
Frequently Asked Questions (FAQs)
What Is the Role of CMS in Reviewing a Medicare Set Aside?
CMS reviews certain MSAs in workers’ compensation cases to confirm that the allocation properly protects Medicare’s interests.
How Is a Medicare Set Aside Calculated?
An MSA is calculated based on:
- Medical history
- Future treatment needs
- Prescription costs
- Life expectancy
Accurate projections are critical to avoid underfunding or overfunding.
What Is the Difference Between a Medicare Lien and a Medicare Set Aside?
- A Medicare lien covers past medical expenses
- A Medicare Set Aside covers future medical expenses
Both must be addressed in settlement planning.
What Is the Difference Between a Liability MSA and a Workers' Comp MSA?
- Workers’ Comp MSA: Structured, often reviewed by CMS
- Liability MSA: Not formally required, but still important to consider
How Long Does a Medicare Set Aside Take To Establish?
It can take anywhere from a few weeks to several months, depending on:
- Case complexity
- Whether CMS review is required
- Documentation readiness
Conclusion
So, when is a Medicare Set Aside required?
While it is not always legally mandated, it is often practically necessary to protect your client’s access to future care and to shield your firm from liability.
Whether you are dealing with a workers compensation Medicare set aside or evaluating a personal injury settlement, the key is simple:
Always account for Medicare’s future interest.
Take the Next Step with Confidence
If you want clarity on how to avoid a Medicare set-aside mistake—or determine whether one is needed at all—working with the right partner makes all the difference.
Amicus Settlement Planners can help you:
- Analyze your case
- Structure compliant solutions
- Protect both your client and your practice
Schedule a consultation today and make sure your next settlement is handled the right way.
