More Clarity re: Medicare Set Asides

We have written in the past about the uncertainty surrounding whether, and under what circumstances, a plaintiff who settles a personal injury lawsuit must set aside a sum of money to cover future medical expenses that would otherwise be covered by Medicare. This has long been required in workers’ compensation settlements, but there is no regulation that explicitly requires a Medicare Set Aside (“MSA”) in a PI settlement. There is only a vague requirement that Medicare’s interests be protected. In 2012, the Center for Medicare and Medicaid Services (“CMS”) proposed a rule that would require MSA’s in PI cases, but then withdrew it.

Recently, a federal trial judge for the District of Arizona ruled:

No federal law or CMS regulation requires the creation of a MSA in personal injury settlements to cover potential future medical expenses. . . . There may be a day when CMS requires the creation of MSA’s in personal injury cases, but that day has not yet arrived.

Aranki v. Burwell, 2015 WL 9311661, Case No. CV-15-0668-PHX-SMM, order dated 10/19/15.

While this does not resolve this issue for good, it certainly gives plaintiff’s lawyers (and others) a solid basis for refusing to prepare MSA’s (and thereby avoiding the delays and complications that come along with them). Typically, it is defense counsel who insists on the creation of an MSA, out of concern that CMS could later seek to assess penalties against any or all of the parties (or lawyers) for having failed to adequately protect CMS’ interests.

However, in light of the fact that CMS, having been well aware for years about the ongoing confusion surrounding MSA’s, has failed to implement a rule requiring them in PI settlements (after having explicitly considered it) and with a federal judge now having ruled that MSA’s are not required, it is difficult to imagine CMS having any basis for seeking such penalties.

Further reading: An Explanation of Medi-Cal and Medicare Liens and Settlements