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Due to the “Medicare hysteria” these days some insurers are insisting upon Medicare Set Asides in liability settlements.  In advance of mediation, some are getting Medicare Set Aside allocations done.  These allocations are typically prepared by defense oriented companies which invariably underestimate the set aside.  One colleague told me recently of a $4M settlement involving a severe brain injury to a child where the MSA allocation was estimated to be $70k.  I really can’t imagine how in the world the company that prepared the allocation could possibly have come up with such a small number.  I guess it is possible that most of the future medical care was not covered by Medicare, but it seems to me that is unlikely given the breadth of what Medicare does cover.  The largest service that Medicare does not cover is attendant care, but I would imagine a child with a lifetime of medical care ahead would generate more than $70k in future Medicare covered services.

This brings me to my point, insurers may have figured out the trick from workers’ compensation cases.  It is commonplace for carriers to get MSA allocations which lowball the future care covered by Medicare to drive down settlements.  In liability settlements, this tactic is easily thwarted by having a life care plan (if it is a catastrophic case) priced out with all of the services covered by Medicare incorporated into the allocation.  Having a plaintiff friendly allocation prepared in advance of mediation may help boost the value of the case.  In addition, a non-Medicare expense report can quantify all of the things Medicare will not cover.  The downside is that making the MSA allocation high means that those dollars will be set aside and only used for Medicare covered services in the future. 

The trade off is an important one to think about though.  Having a settlement held artificially low because of a low ball MSA isn’t really in the best interest of the injury victim.  It also impacts the trial attorney’s contingent legal fees.  Since the allocation reports are fairly inexpensive, it makes a lot of sense to consider getting an allocation prepared in advance of mediation if the client is a current Medicare beneficiary or has a reasonable expectation of becoming a Medicare beneficiary within 30 months (i.e., has applied for SSDI or has been accepted for SSDI).