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Child Support Obligation Seeking Medicare Set Aside Funds?

Matt Murphy Jan 31, 2018

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Montana workers' compensation practicioners have worried about this eventuality for years. Unfortunately, some authority suggests that your medicare set aside ("MSA") funds are an "asset" and child support can enforce a lien against them. In fact, it is a fixed asset that cannot be used for any purpose other than to pay for future qualifying medical care so the money stays put and becomes a sitting duck for execution. Further, MSAs do not have a trust document or separate federal identification number so these funds probably cannot be qualified as a "trust" to avoid execution. Finally, according to the Center for Medicare ("Medicare") rules, an MSA must be kept in the name of the claimant, but Medicare has few other requirements. The Medicare rules only require record keeping, interest retention, and reporting.

Another interesting issue which arises is where would such a fight be litigated? Would this issue be contestable in the Workers’ Compensation Court or would it go to the District Court that issued the child support order? All practicioners should be rightfully concerned about trying to educate a District Court Judge on the purpose and mechanics of an MSA, particularly if the District Court Judge is the one who issued the child support order.

One argument against execution is that the MSA is an entity that has accepted responsibility for future medical expenses. Bolstered by the terms in your workers’ compensation settlement documents, claimant's can argue that the MSA portion of the settlement was paid for future medical expenses. With that proof, you can argue that the money must be preserved to pay future medical expenses as required by federal law, and Montana protects such funds from execution.  

Another option is to avoid this fight entirely and place the MSA funds into an irrevocable trust. Just as a special needs trust protects a plaintiff's Medicaid coverage, an MSA Trust should provide similar protection from a lien. Another alternative would be to have the MSA professionally administered, because the MSA funds would be carried in the name of the MSA administrator.

A final argument based on Montana law would be that the MSA account should be protected under Mont. Code Ann. § 25–13–608(1)(f), which states:  

          (1) A judgment debtor is entitled to exemption from execution of the following:

                    … (f) benefits paid or payable for medical, surgical, or hospital care to the extent they are used or will be used to pay for the care.

This statute was reviewed last year by the Montana Supreme Court, In re Giacometto, 2017 MT 162, ¶ 1, 388 Mont. 82, 82, 397 P.3d 1264. In Giacometto, the Court favorably reviewed a certified question from the Bankruptcy Court, on whether, under Montana's liberal construction of exemptions, a debtor may claim an exemption for a health savings account (HSA) pursuant to § 25-13-608(1)(d) or (f), MCA. The Montana Supreme Court answered, “yes,” the debtor may claim an exemption for a health savings account under Montana law within the constraints imposed by the statute. Therefore, it appears claimants should argue for an exemption under Mont. Code Ann. § 25–13–608(1)(f), because the MSA funds are “payable for medical, surgical, or hospital care” and “will be used to pay for the care” in the future.

Finally, Medicare may also have a “constructive trust” in the MSA funds, since protection of Medicare “interests” is what caused the creation of the MSA in the first place. It may be a good idea to notify Medicare of any action/levy/garnishment against MSA funds to give them an opportunity to intervene. At least, if execution occurs, you gave Medicare the opportunity to get involved and protect its own interest.

Contact Our Personal Injury Attorneys

If you are dealing with Medicare involvement your workers' compensation claim, or other issues related to your workplace injury, and you need help understanding your legal rights, our injury attorneys will work on your behalf to ensure your rights are protected. To learn more about your legal options, you are encouraged to schedule a consultation with our legal team today. Call Murphy Law Firm at 1 (406) 452-2345 of visit us on the web at

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