A life care plan projects the full cost of injury-related future care for damages. A Medicare set-aside allocation reserves the portion of a settlement that Medicare would otherwise pay for that care. They start from the same record but differ in purpose, audience, scope, pricing, and horizon, and many catastrophic settlements need both.
A life care plan answers the question: what will this person's injury-related care cost over the rest of their life? It is prepared for a trier of fact, a mediator, or an adjuster, and it supports a damages figure. A Medicare set-aside allocation answers a different question: of the money changing hands in a settlement that closes future medical care, how much should be reserved so that Medicare is not asked to pay for care the settlement was meant to cover? It is prepared for the settling parties and, when submitted, for Medicare's reviewer.
Because the questions differ, the documents differ, even when the same planner prepares both from the same record. Treating one as a substitute for the other is the most common error counsel make with them.
The plan is written to be understood by a jury and tested by an opposing expert. It explains the injury, describes the person's current function, sets out each need in plain terms, and shows the foundation for it. The allocation is written for a settlement file and a government review process. It is organized around Medicare coverage categories, cites the version of Medicare's guidance relied on, and is accompanied by the medical and payment records that support each line. The reader of an allocation is checking compliance; the reader of a plan is weighing evidence.
The plan includes every injury-related need the treating team supports, medical and non-medical: physician follow-up, therapies, medications, supplies, equipment, home and vehicle modification, attendant care, case management, and where appropriate residential placement. It excludes care the person would have needed regardless of the injury.
The allocation includes only injury-related care that Medicare would cover. Most home modifications, vehicle modifications, non-skilled attendant care, case management, and many supplies fall outside it. Within covered categories, it includes only what the treating providers recommend. Prescription drugs are addressed as a separate component. An allocation is therefore always a subset of the plan, usually a substantially smaller one.
The plan prices each item at the cost of the care in the person's own market, using provider quotes, usual-and-customary data, and published schedules as appropriate, with the source recorded for each figure (see cost research methodology). The allocation prices covered items on the basis Medicare's guidance expects, which in workers' compensation matters is generally the applicable state fee schedule or, where none applies, usual-and-customary charges for the jurisdiction. The same physician visit can carry two different prices in the two documents, and that is correct.
The plan carries items across the person's life expectancy, starting from the published population tables and departing from them only on a physician's opinion. The allocation may instead use a rated age obtained from a life insurance underwriter, which can shorten the allocation period when the person's health profile supports it. A rated age is a pricing device for annuities and set-asides; it is not a medical opinion, and a plan prepared for litigation does not rely on it.
Both documents are needed when a catastrophic workers' compensation or liability matter is settling, the injured person is a Medicare beneficiary or reasonably expects to become one, and the settlement releases future medical care. The plan establishes the full scope of need so the settlement is adequate; the allocation establishes the Medicare-protected portion so the settlement is compliant. Preparing both from one record review keeps them consistent, and a reconciliation showing which plan items fed the allocation and which fell outside it answers the questions a reviewer or an opposing party will ask. The allocation methodology page describes the steps, and the comparison page summarizes the differences in a table.
An allocation is prepared by a planner or allocator with training in Medicare's review guidance, often the same certified life care planner who prepared the plan. Coordination with counsel happens at three points. Before the work begins, counsel confirms the injured person's Medicare status, the settlement structure, and whether submission for review is intended, because each changes what the allocation must contain. During preparation, the planner flags items whose coverage status is unclear so counsel can decide how to treat them rather than discovering the question at review. At delivery, the planner supplies the allocation, the supporting records, and a reconciliation to the life care plan, and remains available to respond to reviewer questions or to revise the allocation if the settlement terms change.
Three errors recur. The first is using the plan total as the set-aside, which overstates the reserve and ignores Medicare's pricing basis. The second is preparing only an allocation in a case that will be tried, which leaves the non-covered categories, often the largest, unquantified. The third is building the two documents from different records or different providers, so that the allocation lists care the plan does not, or the plan omits care the allocation reserves for. Each is avoided by treating the allocation as a carve-out from the plan rather than as an independent exercise.
Submission for review is voluntary and available only when the settlement meets published thresholds. Parties may settle without review, but the allocation should still be reasonable and documented so Medicare's interests are demonstrably considered.
Yes, when Medicare's interests are not implicated, for example where the person is not a beneficiary and has no reasonable expectation of enrollment, or where future medical care is not being released.
The funds may be self-administered by the injured person or placed with a professional administrator. Professional administration is often recommended for larger allocations because it documents that the funds were spent on covered, injury-related care.
Generally no. The plan's horizon rests on population life tables and physician opinion. The rated age belongs to the allocation and to structured settlement pricing.