In the last blog, I spoke about the health insurance companies’ right to recover money paid for accident related medical expenses from an injured person’s lawsuit. Medicare (I will assume everyone knows what Medicare is) may also recover money it pays for an accident victim’s medical expenses just like the insurance companies. However, as a result of 2007 amendments to the Medicare law, it may now be necessary to set aside money out of a lawsuit settlement or award for future medical expenses also. This “Set-Aside” fund becomes the money the injured person must use for future care. Failure to properly reimburse Medicare or set aside funds for future expenses may result in significant costs and penalties to both the accident victims and their attorneys.
So what does this mean for you and your lawsuit? First, your attorney must keep track of the Medicare lien for past expenses and receive Medicare’s approval for your settlement as it has always been done. Second, to avoid a set-aside requirement, your attorney must obtain a report from a physician or other private consultant giving an opinion that you will not need further care for accident related injuries or the expense will not be significant enough to require a set-aside under the Medicare law. If you may need significant future care, your attorney will have to pay a consultant to estimate the amount required for the set-aside. While a set-aside does not need Medicare approval, the defendant’s attorney may seek court approval if the parties cannot agree on the set-aside amount because the Medicare law imposes certain requirements on them, too. In short, if you are eligible for Medicare, expect your case to take much longer to resolve.
When your case settles, the set-aside money goes to you, but it must go into its own account. It is considered a “self-administered trust.” This simply means you are responsible for using it only for accident related medical expenses. You cannot submit any bills for treatment of accident related injuries to Medicare unless and until the set-aside fund has been exhausted. You must maintain accurate records for the set-aside fund. If you use up all the money and submit a bill to Medicare, expect an audit. If Medicare finds you spent money from the fund for things other than medical needs related to the accident, you may be subject to stiff civil and criminal penalties. In plain English, don’t mess with your set-aside fund. Pretend it is not there unless you have a legitimate medical expense.
The availability of the set-aside fund does not prevent you from submitting bills to Medicare for non-accident related treatment. If the set-aside fund comes from an auto accident settlement, you can still expect Medicare to pay bills for treatment of a heart condition (unless the heart condition was caused by the accident).
Fortunately, there is no law at the moment that requires an accident victim to create a set-aside fund so private health insurance companies don’t have to pay for the future medical expenses. But don’t think the insurance companies aren’t pushing for one.