The Settlement Alliance

Why is it Advantageous to Fund an MSA with a Structured Settlement?

Why is it Advantageous to Fund an MSA with a Structured Settlement?

Aug 3, 2017

When a Medicare beneficiary anticipates receiving a settlement including funds for future medical costs, their first question is typically: how will the settlement affect my Medicare eligibility? Because Medicare is an entitlement benefit (i.e. it does not have an income nor an asset test), the acceptance of a settlement will not affect eligibility.

However, per Medicare Secondary Payer laws, a claimant who is a Medicare beneficiary (or who expects to receive Medicare in the near future) must take Medicare’s best interests into consideration. In some cases, that means establishing a Medicare Set-Aside (MSA) with a portion of the settlement to pay for future medical costs that would otherwise be payable by Medicare. If Medicare pays for any medical costs that should have been paid for out of the settlement, the claimant may jeopardize future Medicare benefits.

The two big funding options

To fund a Medicare Set-Aside, a claimant has two main options: fund it using cash or fund it using a structured settlement. The structured settlement option provides advantages over the cash option and in the long run, it can save the claimant money.

Here’s how the structured settlement option works:

  • An initial deposit of “seed money” is placed into the MSA. The amount of the deposit is equal to the first surgical procedure or replacement, plus two years of annual payments.
  • A structured settlement is then used to fund the MSA with annual deposits. If any funds remain in the MSA at the end of the annual period, they are carried forward to the next period and added to the next annual deposit.

It’s a relatively simple concept, but with a big differentiator that sets funding with a structured settlement apart from funding with a lump sum:

If the funds are exhausted within an annual period,

Medicare will serve as the primary payer for the remainder of that period.

Once that period ends, the structured settlement makes the next scheduled deposit, and the MSA resumes paying for medical costs. On the other hand, if the claimant chooses to fund the MSA with a lump sum, the entire MSA must be used up before Medicare will resume as the primary payer. A structured settlement could provide significant cost savings over time.

Work with a settlement planning expert

It is important to bring in a settlement planner for the claimant, rather than relying solely on the defense broker. A settlement planner provides many services that the defense broker likely would not, such as: pulling rated ages to get the best pricing on the structured settlement annuity, making recommendations on MSA administration options, determining the appropriate allocation, and setting up funding. A settlement planner can also walk the claimant through all of their other settlement options to ensure that the settlement proceeds will meet their financial and medical needs.

Contact The Settlement Alliance to learn more about structured settlements

The decision to fund a Medicare Set-Aside with a structured settlement must be made before finalizing the settlement. For more information, contact our experienced settlement planning team today at 800-464-2500 or

We are proud to partner with the highest rated structured settlement providers in the industry:

  • American general Life Companies
  • Berkshire Hathaway Structured Settlements
  • MetLife
  • Mutual of Omaha
  • New York Life
  • Pacific Life
  • Prudential