An amount of money related to future medical expenses that must be reserved from an employee benefits, workers compensation, or auto insurance claim settlement that involves a Medicare-eligible claimant. The purpose of the set-aside is to protect Medicare from paying for medical benefits that should have been funded by the party responsible for causing the injury. Although applicable to general liability and automobile no-fault claims, the set-aside is most commonly a factor in workers compensation claim settlements. The Centers for Medicare and Medicaid Services (CMS) must approve the amount of the Medicare set-aside.

Under federal law, Medicare is only secondarily responsible for paying medical expenses for individuals covered by Medicare who are also covered by any type of private insurance. An example of how this concept applies is in the context of workers compensation claims. The medical expenses of a Medicare-eligible injured worker should be paid by the workers compensation insurer or self-insurer as the primary payer, with Medicare serving as the back-up or secondary payer of the medical expenses.

The party that is responsible for funding a claim payment to an individual eligible for Medicare benefits is considered the Responsible Reporting Entity (RRE) under the provisions of the Medicare, Medicaid, and SCHIP Extension Act (MMSEA) of 2007. The RRE must register with the Centers for Medicare and Medicaid Services (CMS) and report electronically all claims and claim payments related to any workers compensation, general liability, or automobile no-fault claim where the claimant is also entitled to Medicare benefits.