A Workers’ Compensation Medicare Set-Aside (WCMSA or MSA) is money set aside from a workers’ compensation settlement to pay future medical benefits. The money goes toward any treatment for the work-related injury that would have been paid by Medicare.
A WCMSA is used when an injured worker:
- is eligible for Medicare
- settles his or her future medical care with a lump sum payment
A lump-sum settlement of future medical care in workers’ compensation cases is done through a form called a Compromise and Release.
A WCMSA is calculated by:
- determining an injured worker’s life expectancy
- calculating the future medical services for life as related to the work injury
Money for a WCMSA is put into a special account. The account is used to pay for medical treatment whenever the injured worker gets treatment for the work injury through Medicare.
There is nothing to stop an injured worker from using the set-aside funds on something else. But he or she will then have to find another way to pay for the treatment for the work injury or not go for treatment.
In this article, our California personal injury lawyers will answer the following faqs:
- 1. What is an MSA?
- 2. When is an MSA used?
- 3. How is a WCMSA calculated?
- 4. What happens to the WCMSA report?
- 5. What does it mean if Medicare approves the set-aside?
- 6. How does an MSA work after a settlement?
- 7. What is the effect of an MSA in workers’ compensation settlement?
A Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA) is a financial agreement that sets aside a portion of a workers’ compensation injury settlement to pay for future medical needs related to the workers’ compensation injury.
The money must be used before Medicare will pay for treatment related to the workers’ compensation injury.1
Medicare is a federal program that pays for healthcare if a person is on Social Security Disability or reaches retirement age.2
The WCMSA was created under federal law because Medicare does not want to pay for medical care that should have been the responsibility of a workers’ compensation insurance company.3
When an insurer settles an injured worker’s future medical care, it does not have to pay for that care in the future. But the injured worker may still need the care.
An injured worker might try to get the treatment through Medicare. Medicare argues that this treatment should be paid for by money from the workers’ compensation insurance company even if there is a settlement agreement of the claim.
Federal rules were created to require any workers’ compensation settlement to consider Medicare’s interests.4
There is a WCMSA reference guide for workers’ compensation settlements with Medicare set-asides.
Example: Ben is 65 years old and has a heart injury at work. He files for workers’ comp and agrees to a total settlement of $50,000. This settles any responsibility the insurance company has to pay for Ben’s future medical care for his injury.
The insurance company estimates that of the $50,000, it paid Ben $25,000 to settle the future medical bills.
After the settlement, Ben tries to get treatment for his heart through Medicare.
Medicare says it’s not going to pay for Ben’s heart treatment because it should be paid by the workers’ compensation insurance company.
Since the heart treatment is not Medicare covered, Ben now has to pay for the medical care himself out his settlement funds.
A WCMSA will be necessary any time an injured worker:
- is on Medicare or may be in the near future
- settles his or her future medical care with a lump sum payment from the insurance company
When an injured worker settles his or her future medical care with the insurance company, the settlement is called a Compromise and Release. In this situation, an injured worker will need to find a way to pay for his or her future medical care.
When an injured worker does not settle his or her future medical care, the settlement is called a Stipulated Award. In this case, the injured worker will continue to get medical treatment for his or her injury paid for by the insurance company.
Therefore, a WCMSA is only necessary where there is a Compromise and Release settlement.
An MSA applies to both specific injuries and cumulative trauma injuries.
Any injured worker that will receive Medicare benefits must consider an MSA. This includes police officers and firefighters injured on the job.
An MSA does not affect temporary disability or permanent disability benefits.
Undocumented workers are entitled to workers’ compensation benefits but do not receive Social Security and Medicare. Since they will not receive Medicare benefits, there is no Medicare set-aside account.
When an injured worker is considering settling his or her case, the possibility of an MSA is an important factor to consider.
Any time an injured worker is on Medicare, the insurance company must report the worker’s injury to Medicare. Medicare will then send the injured worker a notice that the workers’ compensation insurance company is primarily responsible for payments for medical treatment for the work injury.
When an injured worker’s condition has stabilized at the permanent and stationary date, the treating doctor can determine the future medical care an injured worker may require.
Medicare wants to make sure that the insurance company pays enough money in the settlement to cover medical care for the injured worker’s work injury for the rest of his or her life.
Generally, the insurance company will hire an outside company that will:
- review all the medical records and treatment
- determine the injured worker’s life expectancy
- list all the reasonable future treatment
- determine the cost of each type of treatment over the injured worker’s life expectancy
Example: Johnathan has a work injury to his knee. He is on Medicare.
His doctor says he may need arthroscopic surgery, physical therapy, and medication for his knee.
The insurance company has an MSA company prepare a report of Johnathan’s future medical care and related medical expenses.
The MSA allocation is for $17,300. The report says that Johnathan has a life expectancy of 19 years, so the cost of medical care will be:
$7,500 for one knee surgery
$3,800 for physical therapy at $200 a year (an annuity) for 19 years
$6,000 for monthly medication at $315 a year for 19 years
Medicare will review the WCMSA if the:
- amount of the settlement money is over $25,000; and
- injured worker is a Medicare beneficiary
Medicare will also review the report if the:
- settlement is over $250,000; and
- injured worker has a reasonable expectation of Medicare enrollment for 30 months
If the settlement meets either of these review levels, the insurance company will send this report to Medicare. Medicare will approve or deny the WCMSA.
If the settlement does not meet these standards, Medicare will not review it.
However, just because Medicare does not review it, it does not mean the WCMSA is approved.
The parties have to guess what Medicare would find acceptable and hope it isn’t a problem in the future.
Example: Harrison is on Medicare and has a knee injury. The insurance company gets an MSA that says the lifetime future medical care for his knee is $5,000.
Harrison agrees to settle his claim for $24,999. This is under the $25,000 review threshold, so Medicare will not review it. The parties move ahead and settle the claim.
If Medicare later says the workers’ compensation insurance company should pay more than $5,000 for Harrison’s medical care, the WCMSA is proof that the parties tried to consider Medicare payments.
The timeline for review of an MSA report by Medicare can vary significantly from weeks to many months.
The delays can be frustrating to the injured worker who wants to settle his or her workers’ compensation claim.
Example: Laura has a severe cardiovascular injury at work. After more than two years of treatment, her condition has stabilized. Laura and the insurance company would like to settle the claim for $150,000 with a Compromise and Release.
However, Laura applied for and received social security disability and is now on Medicare.
Because the settlement is over $25,000 and Laura is on Medicare, the insurance company gets a Medicare Set-Aside. The WCMSA says that Laura’s future medical care for her work injury for life is $67,000.
The MSA is submitted to Medicare for approval. After five months there has not been a response from Medicare.
Laura must continue to wait for Medicare’s response before settling her claim.
If Medicare agrees to the set-aside amount, it will pay benefits once the money in the set-aside is used up.
Depending on the type of occupational injury, future medical care, and life expectancy, an MSA may be only a few thousand dollars up to several hundred thousand.
An MSA will often be worked out at the mandatory settlement conference.
Example: Manny is 64 and has a back injury at work. When his condition stabilizes, he will be on Medicare.
He settles his claim for a total of $35,000, which includes a WCMSA of $7,500. Several weeks later, Manny has an unexpected significant problem with his back and needs back surgery that costs $20,000.
Manny must first use up the MSA amount of $7,500 to pay for a portion of the back surgery. After that, because Medicare approved the MSA, it will pay the remaining $13,500 of Manny’s back surgery cost and all of Manny’s back treatment for the rest of his life.
When there is a Compromise and Release settlement, the amount going to the MSA can be put in a special bank account.
The special account should only be used for:
- medical treatment for the work injury
- treatment that is with a Medicare provider
The money is for treatment that would have been paid by the workers’ compensation insurance company if not for the settlement.
In an MSA, the workers’ compensation insurance company is estimating and paying for the medical care upfront. The money is then paid from the MSA account to Medicare as the injured worker receives treatment through Medicare.
Example: Jackson is on Medicare and settles his claim for $60,000. Of that, $28,000 is the MSA.
The $28,000 is put in a special bank account. There is also a company that will manage the payments to Medicare when Jackson goes to the doctor. The insurance company agrees to pay the fees for this.
Having someone else handle the payments to Medicare is easier than Jackson doing it himself.
There is nothing to prevent an injured worker from spending the MSA money on something else.
However, if the injured worker then needs treatment for the work injury, Medicare may refuse to provide it. The injured worker would have to find some other way to get or pay for the treatment.
If the injured worker never gets treatment through Medicare for his or her work injury, it does not matter if the money is spent somewhere else.
Example: Hector settles his claim for his hip, and $15,000 goes into his MSA account for a hip replacement. Instead of saving the money, Hector uses the money to buy a car.
Later that year, Hector goes to the doctor for a hip replacement. Medicare will not pay because he used the MSA funds.
Hector will have to pay for the care himself or find another way get care.
An MSA can protect an injured worker from having to pay for medical costs on his or her own.
Because an MSA is a detailed analysis of future medical care over an injured worker’s lifetime, it usually increases the value of a settlement.
The downside is that the increased value is directed to future medical expenses. The money is not available to the injured worker for other things.
An injured worker should carefully consider the effect an MSA will have on his or her claim.
Call us for help…
For help with filing a workers compensation claim in California, completing workers comp forms or appealing a denial of benefits, contact us to discuss your eligibility. Our firm helps police officers, firefighters and other workers to get compensation for their job-related injuries in California.
- https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Workers-Compensation-Medicare-Set-Aside-Arrangements/WCMSA-Overview (Centers for Medicare and Medicaid Services).
- https://www.medicare.gov; see also Medicare Primary Payer laws, Medicare Secondary Payer (MSP) laws, and Conditional Payment Information.
- 42 U.S.C 1395y(b)(2)
- 42 U.S.C 1395y(b)