A colleague recently asked me what happens to the funds placed in an established Medicare Set-Aside when the injured employee/beneficiary dies before the funds are completely exhausted. Since my legal responsibility usually ends once an MSA is established I did not readily know the answer to this question and I had to dig through old policy memorandums issued by the Centers for Medicare and Medicaid Services (CMS) to find the answer.  According to the policy memorandum issued on April 22, 2003, funds remaining in an MSA after the death of the beneficiary may be distributed to her heirs or beneficiaries in accordance with state law.

However, the distribution can only occur once Medicare’s regional office and the contractor responsible for monitoring the beneficiary’s case ensures that all of the beneficiary’s claims have been paid and Medicare’s interests have been protected.  Protecting Medicare’s interest may involve holding the Medicare set-aside arrangement open for some period after the date of death, as providers, physicians, and other suppliers are permitted to submit their initial bill to Medicare for a period ranging from 15-27 months after the date of service.