Settling workers’ compensation, personal injury, or auto/no-fault claims involving Medicare beneficiaries carries a unique layer of complexity due to obligations under the Medicare Secondary Payer (MSP) Act. The MSP Act, enacted to protect Medicare’s financial interests, requires that Medicare not pay for medical treatment when another payer—such as a liability insurer, workers’ compensation carrier, or no-fault insurer—is responsible.
While compliance with the MSP Act may seem daunting, particularly as Medicare continues to push on additional obligations to further enforce the MSP Act, settlements involving Medicare beneficiaries do not have to be slow, contentious, or unpredictable. When all parties—including the injured individual, their attorney, and the insurance payer—collaborate early and proactively, MSP compliance can be addressed efficiently, allowing settlements to move forward with confidence and ease.
Understanding the MSP Challenge
At the heart of MSP compliance is Medicare’s right to reimbursement for “conditional payments” it made related to the injury. Before settlement funds are disbursed, Medicare must be repaid, and its future interests should be reasonably considered. Failure to do so can result in delays, post-settlement demands, or even penalties. Historically, MSP obligations at times have been treated as a backend problem, addressed only after settlement terms were finalized. This reactive approach often leads to frustration, extended timelines, and unnecessary risk for all involved. However, as the MSP Act further matures and the Centers for Medicare & Medicaid Services (CMS) continues to push further MSP obligations, such as Workers’ Compensation Medicare Set-Aside (WCMSA) reporting, we are seeing settling parties with Medicare beneficiaries becoming more proactive in addressing MSP requirements to help further facilitate settlement.
Strategy One: Early Identification and Communication
One of the most effective strategies is identifying Medicare beneficiary status as early as possible. Confirming whether the injured party is enrolled in Medicare and/or Medicare Advantage/ Part D Prescription Drug Plans, or if the individual is likely to become eligible for Medicare soon allows the parties to plan accordingly.
When insurers, plaintiff attorneys, and claimants align early on MSP issues and how Medicare and Medicare Advantage Plans will be reimbursed, expectations are set from the outset. This transparency builds trust and eliminates the adversarial posture that can arise when Medicare issues are raised late in negotiations. Further, it eliminates the possibility of Medicare/Medicare Advantage Plans lodging a private cause of action claim for double damages due to failure of repayment.
Strategy Two: Thoughtful Consideration of Future Medicals
Medicare’s future interests must be reasonably considered if a workers’ compensation settlement exceeds $750, and the injured worker is reasonably expected to be on Medicare or is currently on Medicare.
There are a variety of options available to properly consider Medicare’s interests as part of a settlement. The two most effective are the use of either a Submitted MSA or a non-Submit MSA.
The traditional approach has been to submit the MSA to CMS for review and approval. The allocation is projected based upon CMS guidelines and the parties are subject to the determination made by CMS. There are instances where the parties are unable to obtain records or information CMS requests, there may be disputed and/or denied body parts and there may be treatment modalities commented upon by a physician that are not reasonable to cure or relieve the effects of the injury. These may lead to a Development Letter from CMS, causing delays in finalizing settlement or preventing it from happening altogether.
The use of non-Submit MSAs has become far more mainstream in recent years and can be highly effective in properly considering Medicare’s interests. A non-Submit MSA is precisely as it sounds: an allocation is developed and not submitted to CMS for review and approval. Providing the MSA uses a reasonable, fact-based approach to the consideration of future medical care, the consideration of Medicare’s interests is addressed as part of the settlement.
While there are benefits and drawbacks to each, ultimately, the decision to pursue CMS approval via a submitted MSA versus the use of non-submit MSAs lies in the risk tolerance of the parties.
When insurers and plaintiff attorneys work together to evaluate future medical exposure early, they can select a compliance strategy proportionate to the risk and value of the case. This avoids both over-funding which can stall settlements and under consideration, which can invite future scrutiny.
Strategy Three: Clear Settlement Language and Coordinated Reporting
Well-crafted settlement agreements play a critical role in MSP compliance. Clear language allocating responsibility for Medicare reimbursement, addressing future medical care, and confirming cooperation with Section 111 reporting requirements protects all parties. When insurers and attorneys coordinate on reporting obligations and timelines, the risk of inconsistent data or delayed acceptance by Medicare is minimized.
Additionally, including proper language and relevant Addendums or Exhibits as part of the settlement documents provides a clear, concise outline of how the parties reached the terms of the agreement. Thoughtful settlement documents should also articulate the funding method of the future medical care (lump sum versus annuity) and communicate the party responsible for the management and reporting of MSA expenditures to Medicare in the future.
The Power of Early Collaboration
Ultimately, the most unique and effective strategy in settling Medicare beneficiary claims is early, intentional collaboration. When the injured party understands the MSP process, their attorney proactively manages Medicare issues, and the insurer engages as a partner rather than an observer, settlements become smoother and faster. Medicare compliance shifts from being a barrier to being a manageable, predictable part of the resolution process.
Using this approach aids in getting one of the main aspects of a settlement properly addressed. Cooperation between the parties in the MSP compliance process can lead to dialogue and progress in addressing the other aspects of a settlement including the indemnity and potential non-Medicare-covered expenses.
By addressing MSP obligations early, sharing information openly, and selecting compliance strategies tailored to the specific claim, parties can reduce risk, protect Medicare’s interests, and— most importantly—deliver timely and fair settlements to injured beneficiaries. In an area often associated with delay and uncertainty, collaboration is the key to ease.
About the Authors:
Heather Sanderson is CEO of Sanderson Firm. heather@sandersoncomp.com
Greg Gitter is president of Legacy Claim Solutions. ggitter@legacyclaims.com