You may be able to avoid a Medicare set-aside. However, they can ensure compliance with Medicare secondary payer (MSP) laws and help you and Medicare save money on medical costs.

A Medicare set-aside is money from a workers’ compensation settlement (WCS). It is for future medical costs associated with a work-related injury.

Typically, the primary insurer will be a workplace or professional insurance, but an employer may offer a Medicare set-aside as part of its compensation settlement.

Medicare set-asides can save you and Medicare from paying for medical costs for which another insurer is responsible.

While some situations do not need Medicare set-asides, some do, and it is important to consider how they may help your long-term medical costs.

Medicare set-asides are not always mandatory.

Medicare set-asides are also known as workers’ compensation Medicare set-aside arrangements (WCMSAs). They have no statutory or regulatory provisions, but can be important to Medicare secondary payer (MSP) provisions.

If you sustain an injury at work, you will likely have some legal and medical processes to follow. Your workplace will often have insurance in place to cover workplace injuries, and this will become your primary health insurance for injury-related care.

However, workplace insurance may have gaps or specific benefit limits, and Medicare may not cover some of these items, even as a secondary insurer. This may leave you liable for outstanding medical costs.

An employer may offer a settlement for healthcare costs in the form of a Medicare set-aside or WCMSA. They “set aside” money from the compensation settlement so that you can use it for future medical expenses related to the work injury, expenses which Medicare may otherwise cover.

Medicare typically covers eligible expenses for medical care unrelated to workplace injury.

You can contact a lawyer or financial adviser for help and advice on setting up a Medicare set-aside or WCMSA.

Alternatively, you can set up and manage a Medicare set-aside or WCMSA account yourself.

Some elements of a Medicare set-aside that you should be aware of include:

Medical allowance

Your Medicare set-aside must include a detailed list of the Medicare-eligible treatments and prescription medications you will need. This list must specify:

  • how often you need the treatment
  • how long you will need the treatment for
  • any specific medication dosage
  • the total costs for all care over your lifetime

Payment type

You can receive a Medicare set-aside either as a lump-sum payment or through structured payments.

If you accept a lump sum payment, this will be a single payment intended for all future medical expenses and disability benefits related to your work injury or illness.

You can also receive structured payment for a Medicare set-aside, where you receive payments into a specified bank account on a defined schedule. A structured Medicare set-aside pays an initial deposit to cover the first procedure for each body part, and the first 2 years’ worth of annual payments. You will then receive annual payments.

You can carry over any money you don’t use, and you must use all of the funds before Medicare will pay for any medical expenses for your work-related injury. If you use all of the funds appropriately before the next payment is due, Medicare may cover any outstanding medical costs.

Managing funds

You can manage your own Medicare set-aside account or use a professional administrator. may be beneficial. A professional can help ensure that the funds are correctly allocated and are compliant with Medicare set-aside rules.

The Centers for Medicare and Medicaid Services (CMS) recommends submitting a WCMSA proposal for them to review when:

  • You are a Medicare beneficiary, and your total settlement amount is over $25,000.
  • You will become eligible for Medicare enrollment within 30 months of your settlement date, and your future medical expenses, disability, and lost wages over the life or duration of your settlement agreement are expected to be higher than $250,000.

If you have a work-related injury and need to set up a WCMSA and submit the proposal to the CMS for approval, a lawyer, financial adviser, or tax adviser can help. They can also help you decide whether you need someone else to administer your WCMSA.

Professional advice is important because there are various elements to consider when setting up a Medicare set-aside.

While it is possible to avoid a Medicare set-aside, you should consider all options before deciding. If you sustain an injury at work, workplace insurance will typically become the primary insurer for the medical care you need for the work-related injury.

Medicare may cover some treatment if there are gaps in the workplace insurance coverage, but it will only pay for Medicare-eligible treatment, procedures, items, or services.

However, an employer may apportion a Medicare set-aside or WCMSA to cover your future healthcare needs, saving you and Medicare money.

You can also choose to manage a Medicare set-aside yourself. However, you can also discuss available options with a financial adviser or lawyer, who can help you make an informed decision.