What is to prevent a self-administrating beneficiary of a Medicare Set-Aside fund from using the money for non-medical related expenses? Is there an accounting protocol and/or what are the sanctions for misuse?
Unfortunately, the only penalty for the misuse of MSA funds is the threat of denied Medicare benefits until the beneficiary demonstrates that he properly exhausted the set-aside funds on Medicare-covered medical expenses related to his insurance claim. Given that CMS has the statutory right to provide conditional payments even when the Medicare Secondary Payer (MSP) statute prohibits the payment in order to insure that treatment is received, I don’t think that’s realistic from a public policy standpoint. But as the Medicare trust fund continues to shrink, perhaps it will (as it should) to preserve the longevity of the program.
From an attorney or insurer standpoint, I would be extremely cautious knowingly entering into a settlement where Medicare will not be adequately protected given the claimant’s intent to misappropriate the funds. Perhaps you should give serious consideration to custodial administration of the funds. There is an associated cost but the insurer may be willing to consider it rather than give CMS any opportunity to claim that the burden of future medical care was intentionally shifted, quite possibly disregard the entire settlement pursuant to 42 CFR 411.46, and continue to seek payment from it as the primary payer even after the state has approved the settlement.
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