Medicare Set Aside trusts (“MSA”) have been a part of the worker’s compensation world for some time now.  However, the issue of whether MSAs are required in the context of 3rd party liability claims remains a bit of an open question.  The lack of clear rules on this subject has been a source of complaint for attorneys and insurance representatives alike.  The terms of the governing statutes impose a duty to “protect Medicare’s interest” upon the parties, but does so in a very general manner.  And, as one would expect, this has lead to varying interpretations of what must be done to “protect” or otherwise account for Medicare’s “interests” when the injured party is a Medicare beneficiary.

Medicare itself has not provided clear guidance on the subject.  And, unfortunately, neither have the courts.  Generally speaking, practitioners can only expect courts to make a determination as to whether an MSA is required in a liability case in a narrow range of circumstances.  Most notably, where the parties agree that it is required, but have been unable to secure Medicare’s approval for their proposed MSA arrangement, or where the parties have reached a proposed settlement, but cannot agree on whether an MSA is required.  New Jersey has issued one published opinion holding that the directives and regulations governing MSA’s in workers’ compensation claims are also applicable in the context of liability claims.  See Hinsinger v. Showboat Atlantic City, 420 N.J. Super. 15, 18 A.3d 229 (Law Div. (Ocean County) 2011).  However, as this decision was issued at the trial court level, it does not constitute binding precedent for other trial courts.

In 2012 and 2013 Medicare had issues a notice of proposed rulemaking on the subject which would have provided more clearly defined guidelines.  However, due to the sweeping scope of the proposed rule it was challenged and, at this time, the word is that the proposed rule has been withdrawn.  The withdrawal of the proposed rule, however, does not eliminate the statutory obligation to “protect Medicare’s interest”, or the penalties which may apply if one fails to do so.  So, are MSAs required in 3rd party liability claims?  The best answer which can be given at this time is “it depends”. For some time now, cautious practitioners have been fashioning MSAs, or at least utilizing 3rd party specialists conduct a review of the case to determine whether one is needed.  Given the stiff penalties which Medicare has the right to impose, the best approach, at least for now, may well be to chart the cautious course if your client is a Medicare beneficiary or is likely to become eligible for Medicare in the next 3 years and there is a reasonable expectation of future, related medical expenses which Medicare may be called upon to pay.