The Funding of Medicare SetAside Accounts

1
The Funding of Medicare Set-Aside Accounts

• Presented by Joseph H. Bornstein
• Sr. Vice President

2
Medicare Set-Aside Arrangement
Consists of Three Primary Components

• Allocation Amount
• Funding Alternatives for the MSA Account
• Administration Alternatives for the MSA Account

3
Funding Alternatives for the MSA Account

• Immediate Lump Sum Cash Payment
• One Time Cash Payment
• Periodic Annuity Payments over Time
• Initial deposit to seed the account
• Balance paid over time via Annuity

4
Structured Annuity Payments

• Initial Deposit (MSA Seed ) must include an
  amount that is equal to two years of anticipated
  MSA Benefits plus enough funds to cover all
  one-time future expenses like surgeries,
  equipment, etc.
• Remainder of the approved MSA amount is then
  divided by the rated age life expectancy
• Balance is then paid in Annual deposits over
  rated age LE on the anniversaries of the
  settlement

5
Why Use an Annuity?

• CMS approves a MSA Allocation of 6,000 for 20
  years
• 120,000 CASH
• 70,966 premium to payout 6,000 annually for 20
  years if living
• Commutation of benefits available if Claimant
  dies prematurely

6
Impact of Age Rating on Annuity Cost

• Male Age 40 77,164
• Male Rated Age 55 70,966
• 6,000 annually for 20 years if living

7
Life Insurance Company Ratings

• Allstate A
• Amer. General A
• Aviva A
• First Colony A
• Genworth A
• Hartford A

• John Hancock A
• Mass Mutual A
• Metropolitan A
• New York Life A
• Pacific Life A
• Prudential A

8
Administration of MSA Account

• Self Administration
• Allocation amount and consideration of claimant
• Professional Administration
• Medical Bill Processing Payment
• Pharmacy Medical Equipment/Supply Programs
• Annual Reporting to Medicare

9
Real Life Example 1

• Bob Brokenback Male Age 45 Rated Age 54
• MSA Allocation 246,661.42 Rated Age
  LE 23
• COSTS
• MSA Seed Amount 88,932.92
• MSA Account Set-UP Fee 1,950.00
• Annuity Cost to fund 6,857.77
• annually for 23 yrs guaranteed 88,115.00
• 1,950 Annual Administrative fee 28,587.00
• TOTAL 207,584.92
• Savings 39,076.50 (246,661.42 less
  207,854.92)

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Real Life Example 2

• Henry Headcase Male Age 46 Rated Age 54
• MSA Allocation 116.781.50 Rated
  Age LE 25
• COSTS
• MSA Seed Amount 9,342.92
• MSA Account Set-UP Fee
  1,950.00
• Annuity Cost to fund 4,671.26
• annually for 23 yrs guaranteed
  60,021.00
• 938 Annual Administrative fee 13,624.00
• TOTAL 84,937.52
• Savings 31,843.98 (116,781.5 less
  84,937.52)

11

• Joseph H. Bornstein
• Sr. Vice President

[phone], ext. 115