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Medicare, Medicaid, and LMSAs

Medicare, Medicaid, and LMSAs: What to know when future medical care is included in a personal injury settlement or verdict.

Written by Nikita Wolf, Trial Attorney with the Pendleton Law Team

Medicare and Medicaid.  Many people easily get these two Federal insurance programs confused.  Medicaid is a need-based program based on a person’s income level.  Medicare is an entitlement-based program based on a person’s age or disability status.  Not everyone will qualify for Medicaid, but many people will qualify for Medicare at some point in their life.

What are LMSAs?

LMSA stands for Liability Medicare Set Aside.  This program is tied to Medicare and dates back to around 1980 with the Federal enactment of the Medicare Secondary Payor Act.  In a nutshell, an LMSA is recommended when an award for future medical bills/treatment or a future life care plan is granted, either through a settlement or verdict.  It is an amount of money set aside from a client’s settlement or verdict award that will be used at some future date to pay back any amount of money paid by Medicare for crash-related treatment.

For example, if you are injured in a car crash and permanently injure your left shoulder, there could potentially be an award for the future cost of medical care of that left shoulder for the injury sustained in the crash.  At some point, you may qualify for Medicare and Medicare will pick up the bill for the crash-related shoulder treatment.  HOWEVER, Medicare is not the responsible party in this situation – the defendant is the person responsible for paying that bill.  If you were given an award for a life care plan or for future treatment of the permanent left shoulder injury, then Medicare can seek reimbursement for any bills they paid related to your left shoulder.

Sadly, Medicare often comes after YOU for reimbursement, not the defendant since the defendant already paid for that future treatment via the settlement or verdict awarded at some earlier point in time.  That’s where the LMSA comes in.

By setting up an LMSA, you are ensuring that when/if Medicare comes knocking on your door for their reimbursement money, you’re able to point them to the LMSA account rather than your own personal bank account.

An LMSA is not required for all clients covered by Medicare.  Remember to speak to your attorney about whether or not an LMSA is required in your case.