Workers’ Compensation Medicare Set Aside Arrangements

A Workers’ Compensation Medicare Set-Aside (WCMSA) allocates a portion of the Workers’ Compensation (WC) settlement for all future work-injury-related medical expenses that are covered and otherwise reimbursable by Medicare.

The goal of establishing a WCMSA is to estimate, as accurately as possible, the total cost that will be incurred for all medical expenses otherwise reimbursable by Medicare for work-related conditions during the course of the beneficiary’s life, and to set aside sufficient funds from the settlement, judgment, or award to cover that cost. WCMSAs may be funded by a lump sum or may be structured, with a fixed amount of funds paid each year for a fixed number of years, often using an annuity.

Information for Employees regarding WCMSAs

You must deposit the total WCMSA amount (future medical treatment and future prescription drug treatment) in an interest-bearing account insured by the Federal Deposit Insurance Corporation.  The account should be separate from any other account such as personal savings or checking.  If you have a structured settlement, your first check should cover the first two years of funds for treatment of the WC injury.  Deposit that payment into your separate, interest-bearing WCMSA account.  The rest of the money will be distributed in equal sums annually until the limit of the lump sum is reached.  You will also deposit that money, as received, into your WCMSA account. In addition, some issues are unique to structured WCMSA accounts so be sure to understand what happens if you do not use all the funds in a year or if you run out of funds before the next deposit.

Employees with WCMSAs should advise their health care providers about their WCMSA prior to getting treatment for their WC injury.  WCMSA funds may ONLY be used to pay for medical services and prescription drug expenses related to your work injury that would normally be paid by Medicare. You must review any bill from a health care provider to determine which items and services can be paid from your WCMSA account. If an item or service is not related to your WC claim or covered by Medicare, you will have to pay for it yourself or with other insurance. 

WCMSA funds may not be used for items or services not related to your WC claim or that Medicare does not cover.  Examples of some items or services that Medicare does not pay for are: acupuncture, routine dental care, eyeglasses or hearing aids; therefore, these items cannot be paid from the WCMSA account. For a more extensive list of services not covered by Medicare, get a copy of the booklet “Medicare & You” from your Social Security office or from http://www.medicare.gov/medicare-and-you/medicare-and-you.html.  If you still have a question regarding Medicare’s coverage of a specific item, service, or prescription drug, to determine if you may pay for it from the WCMSA account, please call 1 800-MEDICARE (1-800-633-4227) or visit CMS’ website: https://www.medicare.gov/.

The WCMSA can be administered either by the employee (i.e., self-administered) or by a third-party trustee, such as a guardian or trust company.  Employees who administer their own WCMSAs are responsible to pay health care providers based on the methodology used to determine the amount of the WCMSA and submit annual self-attestation forms, just as a professional administrator would. This arrangement is subject to the same rules and reporting requirements as any other WCMSA.

Information about the methodology used to determine the amount of the WCMSA is included with your settlement documents.  The administrator of the account is responsible for keeping accurate records of payments made from the account.  If your WCMSA was based on the workers’ compensation fee schedule for the state of Maine, you must pay providers based on the fee schedule.  Keep an itemized receipt or other proof of each payment made.  Also, keep bank statements and tax records.  Medicare has the right to demand and receive a complete accounting of payments made from the account at its discretion to determine if the account funds were spent properly. 

Every year, beginning no later than 30 days after the 1-year anniversary of settlement, the administrator must sign and send a statement that payments from the WCMSA account were made for Medicare-covered medical expenses and Medicare-covered prescription drug expenses related to the work-related injury, illness, or disease. This annual accounting must be submitted no later than thirty days after the end of each year, beginning one year from the establishment of the WCMSA account.

When your WCMSA account has no money left in it and you do not expect a future deposit of funds, it is said to be permanently “exhausted” or “depleted”.  Within 60 days of the date your account is depleted, send Medicare a final attestation letter. 

If payments from the WCMSA account are used to pay for items and services other than those related to your work injury, for items and services not covered by Medicare, or if you set up your WCMSA based on the workers’ compensation fee schedule for the state of Maine and you pay actual charges, you will exhaust your WCMSA prematurely and Medicare may refuse to pay for medical expenses related to the WC injury until these funds are restored to the WCMSA account and then properly used up.

If Medicare is satisfied that the entire settlement is appropriately exhausted (“properly spent”), Medicare will pay primary for future Medicare-covered expenses related to the WC injury that exceed the approved set-aside amount.