If you’ve been seriously injured in New York City and are settling a personal injury case—especially one involving future medical care—you might hear your lawyer or insurance carrier mention something called a “Medicare Set-Aside,” or MSA. But what happens if you don’t use one?
At The Law Office of Michael J. Redenburg, P.C., we represent clients throughout NYC who are navigating complex injury settlements. One of the biggest risks our clients face, particularly those on Medicare or approaching Medicare eligibility, is failing to protect those benefits after a settlement. That’s where Medicare Set-Asides come into play.
Let’s explore what MSAs are, when they matter, and what can go wrong if they’re ignored.
What Is a Medicare Set-Aside (MSA)?
A Medicare Set-Aside (MSA) is a portion of your personal injury settlement that is specifically earmarked to cover future medical expenses related to your injury—expenses that Medicare would otherwise be expected to pay.
In other words, if you’re a Medicare beneficiary—or expected to become one soon—and you receive compensation for an injury in New York City, federal law requires that Medicare doesn’t pay for those future treatment costs. Instead, your settlement must account for them. That’s what the MSA does: it protects Medicare’s interests and keeps your future benefits safe.
While MSAs are commonly used in workers’ compensation cases, they are increasingly considered in liability cases, especially those involving serious injuries and future medical needs. If you live in NYC and settle a case without addressing this, Medicare may deny payment for related treatments down the road.
What Happens If You Don’t Use an MSA?
If you skip a Medicare Set-Aside—or fail to use the funds properly after your settlement—Medicare can refuse to pay for your future medical care related to the injury. This is a serious issue, especially in New York City, where medical costs are already among the highest in the country.
Here’s what can happen:
- Claim Denials: Medicare may outright deny coverage for any treatment it believes should have been paid from your settlement.
- Out-of-Pocket Expenses: You may be forced to pay for those treatments yourself—despite having Medicare coverage—until your MSA funds would have reasonably been exhausted.
- Future Settlement Complications: If Medicare pays by mistake and later realizes an MSA should have been established, it can demand repayment. In some cases, this could jeopardize your eligibility for benefits or lead to liens being placed against your settlement funds.
- Provider Confusion and Delays: Healthcare providers in NYC are increasingly familiar with MSAs and may pause treatment or demand payment upfront if there’s uncertainty about coverage.
The bottom line? Failing to use an MSA can put your health and your settlement at risk.
Who Enforces the Use of MSAs?
While there’s no federal law that requires a Medicare Set-Aside in every personal injury case, the Centers for Medicare & Medicaid Services (CMS) does have the authority to enforce its interests under the Medicare Secondary Payer (MSP) Act.
That means Medicare doesn’t have to pay for medical bills that should be covered by your settlement—and it can take action if those responsibilities are ignored.
In New York City, we’ve seen situations where:
- Medical claims are flagged because they relate to an injury that was part of a settlement.
- Medicare refuses to pay, citing the settlement as the primary source of coverage.
- Healthcare providers delay care, asking for proof that an MSA has been established or exhausted.
CMS may not review every personal injury settlement, but they absolutely can step in when future medical treatment is involved—especially for larger settlements. And once they do, it can take months to resolve coverage issues.
That’s why working with an attorney familiar with these federal guidelines and how they play out here in NYC is critical.
Can You Be Penalized for Skipping an MSA?
Technically, there’s no formal legal penalty for failing to establish a Medicare Set-Aside in a personal injury case—but that doesn’t mean you’re off the hook.
If you’re a Medicare beneficiary in New York City and you settle your case without accounting for future medical expenses, Medicare can—and often will—deny coverage for treatment related to your injury. That means you could end up paying thousands out of pocket for care that could have been covered if an MSA had been in place.
Worse yet, if Medicare mistakenly pays for services it shouldn’t have, they can seek reimbursement from your settlement funds or even from the law firm that handled your case. That’s a big risk—for both you and your legal team.
Also, if your case later triggers a CMS audit or review (especially in high-dollar settlements), failure to show that an MSA was considered or documented can lead to delays in care and complications with benefit eligibility.
At our NYC firm, we help clients avoid these pitfalls by working with experienced MSA consultants, ensuring that settlements are structured to protect both your current and future benefits.
How to Protect Your Benefits After Settlement
If you’re resolving a personal injury claim and you’re currently on Medicare—or expect to be soon—setting up and properly managing a Medicare Set-Aside is one of the smartest ways to protect your future benefits.
Here’s how you can safeguard yourself:
- Fund the MSA Properly: The amount should reflect the anticipated future medical costs related to your injury. In NYC, where medical care is expensive, accurate projections are critical.
- Use the Funds Correctly: You must spend the MSA only on Medicare-eligible services related to your injury. Otherwise, Medicare can refuse to cover care down the line.
- Consider Professional Administration: While you can self-administer your MSA, many NYC clients choose to work with a professional administrator who handles compliance, reporting, and record-keeping.
- Keep Detailed Records: You’ll need receipts and documentation showing how every dollar from the MSA is spent. Without this, future Medicare claims might be denied.
Our firm routinely guides clients through this process, helping ensure that every legal and financial box is checked. In a city like New York, where one trip to the ER can cost thousands, it pays to be prepared.
Do All Injury Cases Require an MSA?
Not every personal injury settlement in New York City requires a Medicare Set-Aside—but that decision isn’t something you want to guess on.
Generally, an MSA is considered when:
- The injured party is already on Medicare; or
- The injured party is expected to become Medicare-eligible within 30 months (due to age or disability); and
- The settlement includes compensation for future medical care.
If none of those apply, an MSA might not be necessary. But here’s the catch: CMS doesn’t issue formal guidelines for liability cases the way it does for workers’ compensation cases. That creates a legal gray area—and it’s where many NYC claimants run into problems.
Some clients think they can bypass the MSA process by keeping settlement amounts low or labeling compensation a certain way, but this approach can backfire. If Medicare determines that future care was part of the settlement, they may still deny coverage later.
That’s why working with a law firm experienced in Medicare coordination is so important. At our firm, we assess each case individually, bring in MSA experts when needed, and ensure that your financial and medical future are both protected.