What Is An MSA?


Medicare guidelines and statutes indicate that they are not required to pay for medical expenses relating to Workers’ Compensation cases, where the injured worker has received a lump sum settlement that includes funds for their future medical benefits.

Medicare requires that the portion of future medical payments that would be paid by Medicare be outlined in the settlement and submitted to the Center for Medicare and Medicaid Services (CMS) for approval.

Once approved, Medicare agrees to be the secondary payer for medical costs, after the monies from the settlement are exhausted.

These requirements are solely related to medical treatment related to the industrial injury and do not effect Medicare payments for your non-industrial conditions.


If you are currently receiving Medicare benefits or are reasonably expected to receive these benefits within the next 30 months (currently on Social Security or have applied for Social Security) AND your settlement is over $250,000, you are required to address Medicare’s interests as a secondary payer in your Compromise and Release.

If you do not do this Medicare can assume that the entire amount of your settlement is for Medicare payable services.


The Workers’ Compensation carrier will have an outside vendor review the history of your medical payments and medical reports for the past 2 years and make a recommendation as to the amount of money that needs to be set-aside.

Note: Medicare only covers certain medical expenses. The most common are doctor visits, physical therapy, surgery, hospitalizations, injections, some Durable Medical Equipment, and diagnostic tests and some prescription medications. Any co-payments or co-insurance must be paid outside the MSA. This is not an exhaustive list.

Once your case is settled, you must open a separate interest bearing checking or savings account. Other funds must not be co-mingled with Medicare set-aside funds. Interest earned in this account is also to be used for your Medicare expenses.


There are 3 options from which you must choose:

You can administer the account yourself.
If this is your option you must sign the Terms and Conditions (see Exhibit 1) and abide by these guidelines. You must keep detailed records of your expenses. These will need to be submitted annually to CMS. Your records must show all expenses and deposits and include the following:

  • Date of service
  • Diagnosis
  • Service Received
  • Amount of Payment
  • Who Received Payment
  • Date of Payment
Click here to download the "Self Administration Toolkit" from the Centers for Medicare & Medicaid Services.


You can opt for a vendor to administer your account for an annual fee, usually between $500.00 and $2,000.00 depending on the amount of the set-aside. There is also an initial set up fee to establish your account with a vendor.


There is a self administration start up service provided by several vendors that helps you negotiate with your physicians and medical providers for payment charges and assists you for one year on how to administer the account. The cost is usually $750-$1,000.00 for this service. Following this transitional period, you will be responsible for the future administration of the funds.


You can settle your case with the purchase of an annuity to fund the MSA. There will be annual deposits made to your set-aside account.

A structured settlement can also pay the vendor for the administration of your MSA, if this is your administration choice.

If, in any given year, your MSA account becomes depleted, CMS will make payments until the next annual deposit by the annuity company. There will be co-pays or co-insurance during this period. An annuity can issue you these payments on a monthly or annual basis.

A Structured Settlement can also provide you with a monthly payment that can be used for medical expenses other than what is provided by Medicare such as non-covered medications, interpreting services, attendant care, or specialized vehicles or transportation.


This is not intended to be a complete explanation of all the factors involved between Medicare and your Workers’ Compensation settlement. CMS may change or modify its requirements and rules at any time. You can find out the most current information at:

Centers for Medicare & Medicaid Services (CMS)

Region IX
90- 7th Street
San Francisco, CA 94103
Attn: Medicare Secondary Payer
Phone: 415.744.3654
Or 1-800-Medicare