A Medicare set aside trust is created when a Medicare or expected Medicare recipient assigns a portion of their structured settlement to cover future Medicare expenses. This money is only spent on future medical costs related to the injury that Medicare would typically cover if the settlement did not exist. Medicare later steps in to pay for these costs if and when the trust is exhausted.
Similarly, a Medicaid set aside trust occurs when a portion of a structured settlement is allocated to pay for future Medicaid expenses. Once this amount runs out, Medicaid agrees to pay for future Medicaid covered expenses associated with the injury as a condition of the settlement.