The money stays in your account until you use it or it runs out
A Medicare Set Aside (MSA) is a separate account created from a workers' compensation or liability settlement. The money in it is reserved specifically to pay for your medical care that relates to your injury or illness. If you don't spend the funds, they don't disappear — they remain in the account for you to draw from later when you need medical services.
The account itself doesn't expire, but the money in it is finite. Once you've spent what's there, you'll need to pay for related medical care out of pocket or through other insurance. Medicare won't cover those costs if the MSA was supposed to fund them first.
How long the money lasts depends entirely on how much was set aside and how much medical care you actually need. Some people use their MSA within a few years; others have funds remaining decades later.
Key Takeaways
- An unused Medicare Set Aside account does not expire — the money stays available until you spend it or it runs out.
- You can only use MSA funds for medical services related to the injury or condition covered by your settlement.
- Once the MSA is exhausted, Medicare becomes responsible for related medical costs, but you may owe out-of-pocket expenses depending on your coverage.
- If you don't use the MSA and later need care, you must prove the expense is related to your settlement before Medicare will pay.
- Failing to use the MSA properly can result in Medicare denying claims or demanding repayment if the agency discovers misuse.
How the account works after settlement
When your workers' compensation or personal injury case settles, the court or insurance company calculates how much money should be set aside to cover your future medical treatment. This amount is based on your age, the severity of your injury, and projected lifetime care costs. The money goes into a dedicated account — not your personal bank account, but a structured arrangement managed by a custodian or trustee.
You access the MSA by submitting requests to the custodian, who then pays your medical providers directly. You don't get to withdraw cash and spend it however you want. The custodian verifies that the expense is related to your covered injury before releasing funds.
This structure exists because Medicare has a legal right to be reimbursed from settlement money that was meant to cover medical costs. If you spent the settlement on unrelated things, Medicare could demand repayment from you personally.
What happens when you stop using the account
If you have an MSA and you straightforward don't access it for months or years, nothing automatic happens. The money sits there. You're not required to spend it on any schedule. However, you remain responsible for knowing what's in the account and what it covers.
The custodian will send you statements showing the balance and any transactions. It's your job to keep track of this information. If you lose the custodian's contact details or forget about the account entirely, you could miss the chance to use funds when you need them — especially if the custodian goes out of business or loses your file.
Some people deliberately don't use their MSA because they've recovered well and don't need ongoing medical care. That's a valid choice. But you should still monitor the account and understand its rules, because medical needs can arise unexpectedly.
Medicare's role once your MSA is depleted
Once you've spent all the money in your MSA on covered medical services, Medicare takes over responsibility for related costs. At that point, you'll use your Medicare card like any other beneficiary — Medicare pays its share, and you pay your deductibles and copayments.
The transition is automatic. You don't need to notify Medicare or file paperwork. When a provider submits a claim for a service related to your injury, Medicare will process it normally if the MSA is empty.
However, if Medicare suspects that you didn't actually spend the MSA money on medical care — or that you spent it on unrelated services — the agency can investigate. If they find that you misused the funds, they may refuse to cover related costs and demand repayment from you or the settlement.
Common mistakes that create problems later
One frequent error is losing track of the MSA entirely. People move, change phone numbers, or straightforward forget about an account created years earlier. Then when they need medical care, they don't think to check whether an MSA exists. They pay out of pocket or use regular insurance, and the MSA money sits unused.
Another mistake is using MSA funds for services that aren't actually related to the covered injury. The custodian may not catch this when ready, but Medicare will. When Medicare reviews your claims, they cross-reference your settlement documents to see what conditions the MSA was supposed to cover. If you've been paying for unrelated care from the MSA, Medicare can demand repayment.
A third problem is not keeping receipts or documentation of what you spent. If Medicare questions whether you actually used the MSA money for legitimate medical care, you need proof. Without it, you may have to repay Medicare out of pocket.
What to do if you're unsure whether you have an MSA
If you received a workers' compensation or liability settlement years ago and can't remember whether an MSA was created, start by reviewing your settlement documents. The agreement should clearly state whether an MSA was established and name the custodian managing it.
You can also contact the insurance company or attorney who handled your case. They have records of the settlement and can tell you whether an MSA exists and how to access it.
If you find that an MSA does exist but you haven't used it in years, contact the custodian to request a current balance and account statement. Ask them to explain what medical services the account covers. Then decide whether you want to use it for upcoming care or let it remain available for future needs.
Planning ahead if you have an MSA
The smartest approach is to treat your MSA as a dedicated medical fund and use it strategically. If you have ongoing care related to your injury — physical therapy, specialist visits, medications — direct those bills to the MSA custodian for payment. This preserves your personal money and ensures the settlement funds are used as intended.
Keep a list of what your MSA covers. Your settlement documents should specify which conditions and treatments are included. Refer to this list before seeking care, so you know whether the MSA will pay.
Save all receipts and explanation of benefits statements from medical providers. If Medicare ever questions your MSA spending, you'll need documentation showing that the money went to legitimate, related medical care.
Frequently Asked Questions
Can I withdraw MSA money as cash instead of having it pay providers?
No. The custodian pays medical providers directly. You cannot withdraw the money as cash or use it for non-medical expenses. If you try to do so, the custodian should refuse, and if they don't, Medicare can demand repayment from you personally.
What happens to unused MSA money when I turn 65 and go on Medicare?
The MSA continues to exist and function the same way. You'll use it to pay for related medical care before Medicare pays. Once it's depleted, Medicare covers the rest. Your age doesn't change how the account works.
If I don't use my MSA, can I give the money to family members?
No. The MSA is tied to your medical care for your specific injury. You cannot transfer the funds to anyone else or use them for their care. The money must be spent on your covered medical services or it remains in the account unused.
Does the MSA earn interest, and what happens to that interest?
Some MSAs are held in interest-bearing accounts. Interest earned typically stays in the account and can be used for the same medical purposes as the original funds. Check your custodian's statements to see whether your account is earning interest.
What if my medical needs change and I need more care than the MSA covers?
Once the MSA is empty, Medicare and your regular insurance take over. You'll pay your normal deductibles and copayments. The MSA was calculated based on your condition at the time of settlement, so it may not cover every future need — that's why you have Medicare.