Medicare Set-Aside in Workers’ Compensation: What Pennsylvania Injured Workers Should Know

When someone settles a workers’ compensation claim, the process may involve more than simply agreeing on a payment amount. If the injured worker is eligible for Medicare, federal rules may require part of the settlement to be reserved for future medical treatment related to the workplace injury.

This arrangement is called a Medicare Set Aside, often shortened to MSA workers’ comp. While not every claim requires one, MSAs play an important role in ensuring that medical costs are properly allocated and that federal healthcare programs are not forced to pay expenses that should be covered by a workers’ compensation settlement.

If your workers’ compensation settlement may involve Medicare Set Aside workers’ compensation requirements, the Pennsylvania workers’ comp attorneys at Munley Law can help review your case, explain how MSA workers’ comp rules may apply, and ensure your settlement is structured to comply with Medicare guidelines.

What Is a Medicare Set Aside (MSA)?

A Medicare Set Aside (MSA) is a portion of a workers’ compensation settlement set aside to pay for future medical treatment related to a work injury.

The purpose of the MSA is to ensure that Medicare does not pay medical expenses that should be covered by a workers’ compensation claim.

In other words, when a workers’ compensation settlement includes money for future medical care, the injured worker may need to reserve part of that settlement for injury-related treatment before Medicare will pay for those services.

The money in the MSA can only be used for treatment that is:

• Related to the work injury
• Covered by Medicare
• Provided after the settlement occurs

Until those funds are properly spent, Medicare generally will not cover injury-related care.

Why Is an MSA Required in Some Workers’ Comp Settlements?

The requirement for MSAs comes from federal law designed to protect the Medicare system from paying costs that should be covered by another party.

Under the Medicare Secondary Payer Act, Medicare acts as a secondary payer when another source of coverage is responsible for medical expenses. Workers’ compensation insurance is considered a primary payer for workplace injuries.

When a workers’ compensation claim settles, there may still be ongoing medical treatment related to the injury. Without safeguards in place, Medicare could end up paying for those expenses even though the settlement already included funds for that purpose.

An MSA solves this problem by reserving part of the workers’ comp settlement Medicare allocation specifically for future treatment. This ensures that settlement funds are used first before Medicare coverage begins.

When Is an MSA Required?

An MSA is typically required when the injured worker is already enrolled in Medicare or is likely to become eligible within 30 months,  for example, if they receive or are applying for SSDI, are 62½ or older, or have a qualifying medical condition. Large settlements that include funds for ongoing medical treatment are also more likely to require an MSA. These are CMS guidelines rather than strict legal mandates, but most insurers and attorneys follow them to protect Medicare coverage after settlement.

Who Reviews and Approves an MSA?

CMS, the Centers for Medicare & Medicaid Services, reviews proposed MSA amounts to confirm that Medicare’s interests are adequately protected. CMS may approve the proposed amount, request additional documentation, or recommend a higher allocation. While CMS review is not always legally required, obtaining it provides assurance that the settlement complies with federal guidelines.

What Happens If You Don’t Set Up an MSA Properly?

If an MSA is required but not created, or if the funds are misused, Medicare may refuse to cover future medical treatment related to the work injury, leaving the injured worker responsible for those costs. Medicare may also seek reimbursement if it determines it paid expenses that should have been covered by settlement funds.

How Is an MSA Funded?

An MSA can be funded in two ways. With a lump sum, the full amount is deposited into a dedicated account at settlement and drawn down as treatment costs arise. With a structured MSA, an initial deposit is made, and annual annuity payments replenish the account over time. The right approach depends on the settlement size and projected future medical costs.

Can You Spend MSA Funds on Anything?

No. MSA funds must be used only for Medicare-covered medical expenses related to the work injury.

Examples of allowable expenses may include:

• Doctor visits related to the injury
• Hospital treatment
• Physical therapy
• Prescription medications covered by Medicare
• Medical equipment such as braces or mobility aids

The funds cannot be used for unrelated medical care, everyday expenses, or non-Medicare services.

In addition, the injured worker typically must keep detailed records showing how the money was spent. This documentation may be necessary if Medicare later reviews the account.

Once the MSA funds are properly exhausted, Medicare may begin paying for additional treatment related to the injury.

Do All Workers’ Compensation Cases Require an MSA?

No. Many workers’ compensation cases settle without a Medicare Set Aside.

An MSA is usually unnecessary when:

• The worker is not eligible for Medicare
• Medicare eligibility is not expected soon
• The settlement does not include funds for future medical care
• The projected medical costs are minimal

However, even when an MSA is not formally required, parties to a settlement may still need to consider Medicare’s interests to avoid potential complications.

Because the rules can be complex, determining whether a workers’ comp settlement Medicare issue exists often requires careful analysis of the worker’s medical history and future treatment needs.

How Can a Workers’ Compensation Lawyer Help With Medicare Compliance?

Workers’ compensation settlements can involve complex legal and financial considerations, especially when federal healthcare rules are involved.

A lawyer familiar with Medicare Set Aside workers’ compensation issues may help injured workers by:

• Determining whether an MSA may be necessary
• Reviewing medical records to estimate future treatment costs
• Coordinating with specialists who prepare MSA allocations
• Ensuring settlement documents address Medicare requirements
• Helping clients understand how MSA funds must be managed

Proper planning can help avoid delays in settlement approval and reduce the risk of future Medicare coverage disputes.

For anyone facing the settlement process, understanding how MSA workers’ comp arrangements work is an important step toward protecting both their compensation and their long-term access to medical care. For more information, contact Munley Law. Our award-winning workers’ comp lawyers have decades of experience advocating for the rights of workers in Pennsylvania. Consultations are free.