If you are a Medicare beneficiary and suffer a work-related injury or illness, both Medicare and workers’ compensation (WC) may be involved in paying for your care. The rules governing which payer goes first and how settlements are handled are set by the Medicare Secondary Payer (MSP) Act.
Who Pays First: Medicare or Workers’ Comp?
Workers’ compensation is the primary payer for medical expenses related to a work injury. Medicare is secondary, meaning it only pays after workers’ comp has paid its share. If workers’ comp denies a claim or delays payment, Medicare may make a conditional payment to cover your care, but it will seek reimbursement once the WC claim is resolved.
| Situation | Primary Payer | Secondary Payer |
|---|---|---|
Active workers’ comp claim for work-related injury | Workers’ compensation | Medicare (conditional) |
Workers’ comp denies or delays payment | Medicare (conditional payment) | Workers’ comp (must reimburse Medicare) |
Non-work-related medical expenses | Medicare | Other supplemental coverage |
Conditional Payments and Reimbursement
If Medicare pays for treatment related to your work injury while your WC claim is pending, those are called conditional payments. Medicare has the right to recover these payments from any WC settlement or award you receive. You or your attorney must notify the Benefits Coordination and Recovery Center (BCRC) when a WC claim is filed and when a settlement is reached.
Notify Medicare Before Settling
Before finalizing a workers’ compensation settlement, you must address any Medicare conditional payments and, if applicable, set up a Medicare Set-Aside arrangement. Failing to do so can result in Medicare refusing to pay for future related care until the set-aside funds are exhausted.
What Is a Medicare Set-Aside (MSA)?
A Medicare Set-Aside (MSA) is a portion of a workers’ compensation settlement that is allocated to pay for future medical expenses related to the work injury that Medicare would otherwise cover. The Centers for Medicare and Medicaid Services (CMS) reviews proposed MSA amounts for settlements that meet certain thresholds. Once the MSA funds are exhausted, Medicare will begin paying for covered future care.
Periodic Payments vs. Lump-Sum Settlements
Workers’ comp benefits can be paid as ongoing periodic payments or as a lump-sum settlement. With periodic payments, Medicare typically pays for medical expenses not covered by WC. With a lump-sum settlement, Medicare may not pay for related medical expenses until the settlement amount allocated for medical care has been spent down, even if the settlement did not specifically designate funds for medical costs.
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