Posted by Douglas M. Brand, CSSC
CEO & President, Medivest Benefit Advisors, Inc.
Many times, one of the last of many difficult decisions to be made in the settlement process is how to administer the Medicare Set-Aside (MSA) monies. Unfortunately, this decision is perhaps the least understood of all the MSA issues. How does each choice protect the interests of Medicare, the claimant, the insurance company, and the lawyers? What are the risks and exposures involved? How do I decide what path to take or how to advise my client?
First of all, you have three basic choices to consider: (1) professional administration, (2) give assistance to the claimant via a self-administration kit, purchased from a professional MSA company or (3) let the claimant administer the funds without assistance.
A professional administration company, like Medivest, will ensure that all the complex rules established by the Centers for Medicare and Medicaid Services (CMS) for administering MSA’s are complied with. For example, they will establish an interest bearing bank account, pay only Medicare allowable and injury related medical bills, communicate with medical providers, complete all the required accounting to CMS, make sure that all bills are paid according to the required fee schedules. They will also provide phone support and comprehensive transparent accounting to the claimant. Professional administration companies preserve and protect the settlement money and prevent “dissipation risk” (a fancy term that essentially means the risk of money being spent on things other than what its intended for).
Why does all this CMS compliance matter, post-settlement, to anyone except the claimant, you might ask? Well, as it turns out it matters a lot to all parties to the settlement. Medicare can suspend the claimant’s Medicare benefits if the monies are not spent according to the strict CMS guidelines. That could be devastating to the injured person who needs medical care. Not taking Medicare’s interest into consideration, as required by the Medicare Secondary Payer (MSP) Statute, could be a basis for a claimant’s potential claim against the attorney for negligent representation. Also CMS has the right to audit the injured person’s settlement and the Medicare Secondary Payer (MSP) Statute gives strong recovery rights against the defendant (double damages incurred by Medicare plus interest) if it finds it’s interest was not properly considered.
So, in what situations should professional administration be considered? Essentially, CMS requires professional administration if the injured person is mentally or physically incapable of managing the account or complying with the CMS administration requirements, has been declared legally incompetent, or has been assigned a representative payee by the Social Security Administration and the representative payee elects not to serve as administrator of the MSA. Professional administration is recommended for most large settlements and when the injured person has very serious medical conditions, lower education level, or any personal issues that put the funds at-risk. Sometimes professional administration is the “right thing to do” because it provides the claimant peace of mind from the stress of self-administration and dissipation risk.
There are fees associated with professional administration and, unfortunately, CMS does not allow them to be paid from the settlement funds. Therefore, they have to be negotiated at settlement. However, in many cases the cost savings from professional bill review practices will more than offset the fees. Also, funding the fees with a structured settlement annuity can offset the cost of the fees.
Self-Administration With a Kit
A Self-Administration Kit may be appropriate in those cases where the claimant is competent to administer their own MSA account but needs some support from a professional administration company. This kit provides valuable tools to assist the claimant including: a detailed do-it-yourself manual, unlimited phone support and some even provide bill review services and a lifetime pharmacy/DME discount program. The average cost of these kits is about $750-$1,000 per year.
Self-Administration Without a Kit
MSA self-administration is not a simple undertaking. It involves complex compliance with government rules and regulations, accounting expertise and discipline. Additionally, it puts many injured parties in the untenable position of not being capable of complying with Medicare’s requirements while being threatened with the loss of Medicare benefits if they don’t. It should be used sparingly and only in those cases with low dollar settlements or with competent claimants who don’t need any assistance from a professional.
It is important to understand and plan for the MSA administration issues early on in the settlement process because it is a key component to the entire settlement.