When an annuity is included in a settlement how does Medicare determine whether the value of the annuity meets the monetary threshold?
A40. Medicare determines the value of an annuity based on how much the annuity is expected to pay over the life of the settlement, not on the present cash value or cost of funding that annuity. Example: A settlement is to pay $15,000 per year for the next 20 years to an injured party who has a “reasonable expectation” of Medicare enrollment within 30 months (Q41). This settlement is to be funded with an annuity that will cost $175,000. This meets CMS threshold review criteria because the total settlement to be paid is greater than $250,000 ($15,000 per year x 20 years = $300,000). In CMS= view it is immaterial for Medicare’s purposes that the present cash value or cost ($175,000) to fund this settlement is less than $250,000.
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