Tips on MSAs and How to Calculate Finger Loss
Thursday, August 27, 2009 | 0
By Eugene F. Keefe
Synopsis: We asked the MSA guru of guru's about using a Medicare Set-Aside Trust with a reversionary clause after our newsletter's recent article. The idea of a reverter clause is to get the insurer's or self-insured employer's money back following the passing of the injured worker who is being protected by the trust.
In a second inquiry, we also asked about the repeated question we receive about whether claimant attorneys in Illinois or any state can take an attorney fee on an MSA value.
Editor's comment: We don't like to name names in the Update but if you ever have a wildly complex question, she is the best of the best of the best on this topic. She gave us permission to print the following thoughts for your consideration. If you want her name and contact information, send us your contact information and we will forward it along.
Her thinking on these two topics is:
A. If you want a reversionary clause, you'll need to hire a custodian because the money goes directly to the claimant in self-administered MSA's. Have fun getting it back from the estate.
Custodial fees are $500 to $2,000 a year, so a custodial account (trust) is usually reserved for large (more than $150,000) MSAs. The next problem is a large MSA is usually funded with an annuity. The most cost effective annuities pay for life only. That means that if the claimant dies, the annuity stops paying into the trust and all that's left is usually about 1-2 years worth of funds.
If you want the reversionary clause, you would want to spend the extra money and purchase an annuity with a minimum guarantee period. There are tax implications for the funder (the insurer or self-insured employer) if annual annuity payments revert to them.
Most carriers only allow reversionary clauses when you pay in a lump-sum or use a "life only" annuity.
B. As to attorney's fees on MSA values, none of the states she does business in allow the attorneys to take a fee on the MSA (we are unaware of any state that does). Medicare demands all money go to the claimant's future medical bills. They don't care about the role of the attorney in reaching the settlement.
Medicare won't even allow you to include the custodial fees in the calculation of the "total settlement". They are expense dollars, not medical payments. That's a technical issue that only matters to the payer and Medicare. The "total settlement" value determines whether the case meets the CMS review threshold.
Synopsis: If someone injures two or more fingers, do you have to treat the claim as loss of use of the hand?
Editor's comment: We get asked this question so often; we have to give you a summary approach to the concept. Right now, the weekly permanency value for complete loss of use of the hand is 205 weeks. The combined weekly permanency value for loss of use of the
- THUMB 76
- INDEX FINGER 43
- MIDDLE FINGER 38
- RING FINGER 27
- LITTLE FINGER 22
In section 8(e-9) of the Illinois Workers' Compensation Act, it states:
The loss of 2 or more digits, or one or more phalanges of 2 or more digits, of a hand may be compensated on the basis of partial loss of use of a hand, provided, further, that the loss of 4 digits, or the loss of use of 4 digits, in the same hand shall constitute the complete loss of a hand.
This provision is a constant source of confusion for adjusters and claimant attorneys alike. If you take a careful look, you will note the word "may" means the Arbitrator and the Commission thereafter, has discretion to award loss of use of the hand if an injured worker has injuries to at least two digits or fingers.
We don't feel this means you have to pay both the loss of the fingers and the loss of use of a hand unless four digits are gone.
You can pay it as loss of use of the fingers or loss of use of the hand and match the amounts being offered and paid.
They did make a mess of things when they changed the rates for amputation loss to the dramatically higher weekly minimum PPD values. You can pay a fractured finger at the normal PPD rate and a second, amputated finger at the minimum amputation rate. While there are two digits affected, you do not have to add anything in thereafter for loss of the hand.
If you are paying for loss of use of the hand in such a setting, you do not have to use the minimum amputation rate that rate only applies to the amputated digit.
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Eugene F. Keefe is a partner in the Chicago law firm of Keefe, Campbell & Associates.
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