If you have sustained an injury because of someone else’s negligence, you may choose to pursue a personal injury lawsuit. This way, you can obtain payment for the medical care you will need in the future and compensation for your pain and suffering.
If your injury falls under the workers' compensation system, or if you are receiving Medicare or can be expected to receive Medicare, you may need to create a special kind of trust. This trust, a Medicare Set-Aside, reimburses the government for future medical expenses related to your injury. (Many people younger than age 65 with a disability receive Medicare through Social Security Disability Insurance (SSDI) benefits.)
Medicare set-aside law is complicated and constantly changing. However, here are some basic points to help you frame your conversation with your special needs planner.
Personal Injury Claims
Because personal injury litigation is expensive, in most cases, insurance companies and other responsible parties will try to settle your lawsuit without having to go through the time and expense of a trial. The settlement agreement, a document that can take months to draft, lays out the parties' understanding of the issues. It typically allocates the settlement money into different categories, including past medical expenses, future medical expenses, and damages for pain and suffering.
If you were already receiving Medicare at the time of the settlement, you may have to use some of the settlement funds to reimburse the federal government for injury-related “conditional” medical expenses that Medicare paid for prior to your settlement.
This is because Medicare, as a secondary payer, is only supposed to pay for medical services not provided by another party. In the case of your personal injury settlement, the person who injured you includes funds in your settlement to pay for your past medical expenses. Therefore, they are the primary payer, and some of those settlement funds must be applied toward any bills that Medicare has already paid on your behalf.
However, personal injuries don’t just go away once the parties settle. Your future medical expenses could be much higher than your previous bills, especially if your injury is severe and you are expected to live a long time. Since the government is still only a secondary payer, it wants to make sure that you use the funds in your settlement that are allocated toward future medical expenses before Medicare picks up the tab for the rest. This is where a Medicare set-aside can prove to be crucial.
Medicare Set-Aside Trusts
A Medicare set-aside is a trust or similar arrangement created to hold settlement proceeds for future medical expenses. A specialized company evaluates your future medical needs and recommends an amount that should be set aside for your future care. The government approves the amount. The funds are then either placed in the Medicare set-aside account in one lump sum or the account is funded with a structured settlement annuity that will refill the account over time.
In either case, the administrator of the Medicare set-aside trust may use the funds only to pay for medical care related to your personal injury. This leaves Medicare or your private insurance free to provide coverage for medical expenses not related to your injury.
When You Must Have a Medicare Set-Aside
Medicare set-asides have been used for years in workers' compensation cases. The federal government has an extensive set of reporting and monitoring rules in place for those cases.
But several years ago, the government instituted a set of reporting requirements for anyone who is responsible for compensating a personal injury victim. Many practitioners believe the government will soon require Medicare set-asides for all personal injury cases. (Right now, you are responsible for protecting Medicare's interest in your future medical care in case of a settlement. However, there are few hard-and-fast rules defining this requirement, especially for small claims.)
Currently, the government is interested in setting up a Medicare set-aside if:
- you are a Medicare recipient settling a personal injury claim for more than $25,000; or
- if you settle for more than $250,000 and can be expected to receive Medicare within 30 months of settlement. (This happens a lot if you receive SSDI, which has a 24-month waiting period before you can receive Medicare benefits.)
However, these rules are in a constant state of flux, and no one can predict how extensive the Medicare set-aside requirements will become. Therefore, it is essential to speak with a local special needs planner immediately if you believe you are entitled to a personal injury settlement or if you are beginning a workers' compensation claim.