Can I Spend My Medicare Set-Aside Money?

A Medicare Set-Aside (MSA) account is established as part of a settlement to cover future medical costs related to an injury or illness. This account ensures that funds from a workers’ compensation or liability settlement are used specifically for medical care resulting from the injury. MSA funds are not personal funds and have specific rules for their use. The primary purpose of an MSA is to protect Medicare’s interests by ensuring settlement money is spent on injury-related care before Medicare becomes responsible for payments.

What is a Medicare Set-Aside Account

A Medicare Set-Aside (MSA) account is a financial arrangement that sets aside a portion of a workers’ compensation or liability settlement to pay for future medical treatment and services. These funds are specifically designated for expenses Medicare would typically cover, related to the injury for which the settlement was received. The Centers for Medicare & Medicaid Services (CMS) uses the MSA process to protect Medicare’s financial interests, ensuring settlement proceeds are used for injury-related medical care before Medicare becomes the primary payer.

MSAs are established in workers’ compensation and liability settlements where future medical expenses are anticipated. While CMS review is not federally mandated for every MSA, it is a recommended process to ensure compliance and avoid future Medicare coverage issues. CMS generally reviews Workers’ Compensation Medicare Set-Aside (WCMSA) proposals when the claimant is a Medicare beneficiary and the total settlement is greater than $25,000. CMS review is also considered when a claimant has a reasonable expectation of Medicare enrollment within 30 months of the settlement date and the anticipated total settlement amount is greater than $250,000.

The amount allocated to the MSA is determined on a case-by-case basis, often estimated by professional companies specializing in these allocations. These companies review medical records and project future Medicare-covered expenses based on the injury, life expectancy, and typical medical protocols. Funds can be deposited into the MSA account as a single lump sum or through structured payments, such as an annuity, which provides periodic deposits over time. Medicare will only begin paying for these services once the MSA funds are exhausted.

Expenses Covered by MSA Funds

Funds within a Medicare Set-Aside (MSA) account are specifically for medical expenses directly related to the injury or illness for which the settlement was awarded. These must be costs Medicare would typically cover. The primary objective is to ensure that the settlement funds are exhausted on injury-related care before Medicare assumes payment responsibility. All these expenditures must align with Medicare’s standard coverage policies and be solely for the injury addressed by the settlement.

Covered expenses include prescription medications necessary for treating the injury, encompassing ongoing prescriptions and refills linked to the settled condition. Doctor visits and consultations with specialists, such as orthopedic surgeons, neurologists, or pain management physicians, are also permissible uses of MSA funds, provided they are for the injury covered by the MSA.

Funds can also be used for hospital stays and surgical procedures necessitated by the injury, including inpatient care, operating room fees, and anesthesia. Durable Medical Equipment (DME) that is medically necessary for the injury, such as wheelchairs, crutches, walkers, or oxygen tanks, can be purchased or rented using MSA funds.

Rehabilitation services, including physical therapy, occupational therapy, and speech therapy, are generally covered if prescribed to aid recovery. Home healthcare services are also permissible if medically necessary and directly related to the injury, such as nursing care or therapy provided in the home setting. Transportation to and from medical appointments, including mileage reimbursement, is another valid use.

Expenses Not Covered by MSA Funds

Medicare Set-Aside (MSA) funds are not for general living expenses or medical care unrelated to the specific injury. Using MSA funds for non-medical expenses like rent, groceries, utility bills, or vacations is strictly prohibited. These are considered personal expenses and must be paid from other sources of income or savings.

MSA funds cannot be used for medical expenses unrelated to the injury or illness for which the MSA was established. For example, if the MSA was created for a back injury, funds cannot be used to treat a pre-existing heart condition or a new, unrelated illness. The funds are exclusively tied to the settled injury.

Medical expenses covered by other insurance, such as standard health insurance policies or Medicare Parts A, B, or D for non-injury-related care, are not permissible uses. Experimental treatments or services not approved by Medicare are typically not covered. Services must be medically accepted and align with Medicare’s established guidelines.

Over-the-counter medications, unless specifically prescribed by a physician for the injury and eligible for Medicare coverage, cannot be purchased with MSA funds. Even if a medication helps with a symptom of the injury, if it’s available without a prescription and not typically covered by Medicare, it’s not an appropriate use. Expenses incurred before the MSA was established or after the funds are completely exhausted and properly reported to CMS are also not covered. Misusing funds for any non-covered expenses can lead to serious consequences, including Medicare denying future injury-related claims.

Administering Your MSA Account

Proper administration of a Medicare Set-Aside (MSA) account is crucial to ensure compliance with CMS guidelines and to protect future Medicare benefits. Whether managed by the individual (self-administered) or by a professional administrator, meticulous record-keeping is a foundational requirement. This involves retaining all receipts, invoices, and medical documentation for every expenditure made from the MSA account. These records serve as proof that funds were used appropriately for injury-related, Medicare-covered expenses.

MSA funds must be held in a separate, interest-bearing account, such as a checking or savings account, distinct from any personal funds. This segregation prevents commingling and simplifies the accounting process. Any interest earned on the MSA funds must remain within the account and be used for injury-related medical expenses, just like the principal.

An annual attestation of expenditures must be submitted to the Centers for Medicare & Medicaid Services (CMS) each year. This report, sent to the Benefits Coordination & Recovery Center (BCRC), details how the MSA funds were spent over the past year. The attestation can be submitted electronically through the Workers’ Compensation Medicare Set-Aside Portal (WCMSAP) or mailed to the BCRC. CMS provides attestation forms, and it is imperative to complete and submit them accurately and on time to demonstrate proper fund utilization.

When MSA funds are fully depleted, notify CMS in writing. A final attestation letter must be sent to the BCRC within 60 days of the account’s depletion, stating that the account is completely exhausted. Once CMS verifies that the funds were spent appropriately, Medicare can then resume primary payment responsibility for the injury-related medical care. Due to the complexity of these rules, CMS strongly recommends considering a professional administrator to manage the MSA account, as they handle record-keeping, reporting, and ensure compliance.

Implications of Improper MSA Use

Misusing Medicare Set-Aside (MSA) funds can lead to severe financial consequences and the potential loss of Medicare benefits for injury-related care. If funds are spent on non-covered expenses or medical care unrelated to the settled injury, Medicare may refuse to pay for any future injury-related medical services. This denial of coverage will persist until the misused funds are repaid or accounted for by the beneficiary.

CMS actively monitors MSA accounts through the required annual attestations and other reporting mechanisms. If discrepancies or inappropriate expenditures are identified, beneficiaries will be required to repay any misspent funds. This repayment obligation means the beneficiary must restore the misused amount to the MSA account before Medicare will resume its role as the primary payer for injury-related medical needs.

The Centers for Medicare & Medicaid Services maintains a strict stance on the proper use of these funds. The MSA is designed to protect taxpayer dollars by ensuring that settlement money covers future medical costs before Medicare does. Failure to adhere to these rules can result in significant out-of-pocket expenses for the beneficiary, as they become personally responsible for all medical bills Medicare would have otherwise covered. Strict adherence to MSA guidelines is necessary to avoid these implications and maintain eligibility for Medicare coverage for the injury.