Ask Jen: Concerns about MSA Annuities
Dear Jen –
Some injured clients have been very relieved that they could count on the security of structured settlement payments but, since medical expenses can start or stutter in any given year, some clients and myself fear running out of the allocated payment money part way through the year even though the overall estimate of yearly medical expenses doesn’t really change.
I understand that there is a delay in Medicare coverage picking back up or kicking back in once a beneficiary may have exhausted the yearly allowed payments under the annuity or structure.
Can you please address those concerns or that event of incurring uneven medical expense situation more than the yearly annuity payment under the structure?
-Brad, WC Attorney
Dear Brad –
Clearly CMS contemplated the possibility of structured annual MSA deposits running out since it addressed the issue in one of its memos and provide beneficiaries with the form to easily notify them of the same with every approval letter. We’ve been able to tell people that once the money runs out, immediately send a notification that your funds are depleted and have your providers start billing Medicare and things will work themselves out on CMS’s end. We have never had an issue with the beneficiary of one of our custodial accounts not receiving treatment once their MSA account ran out of funds (and it happens every year with some accounts). Granted, there may be a delay in payment as the paperwork reaches the system; however, the same fine Medicare accounting system that permits payments when there is a primary payer pre-settlement will likely allow the payments to go through without a second thought.
Fact of the matter is that CMS has actually set itself up for an almost guaranteed account depletion in future years by actively telling us all not to account for inflation. In it’s approval letter, it provides a year by year annual deposit amount that is flat and equals the exact total amount approved. Given that medical inflation ranges between 6 and 10 percent from year to year, those annual deposits are almost guaranteed to be insufficient in future years. What is particularly troubling is that the industry actually had no objection to funding life annuities with a cost of living increase prior to that memo being released, as that appropriately protected Medicare’s interest in the settlement. After the memo we all shifted to temporary life annuities that pay out only the total amount approved at a significant savings (despite the fact the that same memo also prohibits funding MSAs at present value). So not only did CMS basically guarantee that Medicare would be making payment on an annual basis in the later years of the MSA, it also absolutely guaranteed that Medicare would be paying 100% should the beneficiary live beyond his rated age life expectancy.
So although your concerns are valid, they should be for us the taxpayers rather than the Medicare beneficiaries – public policy always prevails and medical treatment will be denied none, especially in light of CMS creating the problem.
Questions? Ask Jen.
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