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Medicare, Settlement, Set-Asides & Guidance

Saturday, October 25, 2003 | 883 | 0 | min read

Medicare and workers' compensation have conflicts in all 50 states. Medicare officials have indicated that money should be set-aside for possible future medical bills, and memorandum issued by Medicare officials provide clear guidance (albeit, perhaps unconstitutional though untested) on what Medicare's position is in workers' compensation cases.

On July 23, 2001 the agency issued a "guidance"(1.96mb) requiring Medicare approval settlements in workers' compensation cases where the injured worker had received, or was reasonably certain to receive, Medicare benefits:

"When the injured individual has a reasonable expectation of Medicare enrollment within 30 months of the settlement date and the anticipated total settlement amount for future medical expenses and disability over the life of duration of the settlement agreement is expected to be greater than $250,000.00."

Consequently, if the injured worker has applied for Social Security Disability Benefits, but has not yet received them, Medicare approval is not required unless the settlement is over $250,000. Likewise, if the injured worker is too young to qualify for Medicare and has not applied for Social Security Disability, no Medicare approval would be required because there would be no reasonable expectation of receiving Medicare benefits within the 30-month target.

But, the majority of cases where the inured worker is actually receiving Medicare based either on age or through Social Security Disability will require agency approval, regardless of the size of the settlement. This can create an obstacle to settlement, particularly if the settlement involves only medical expense.

In response to criticism(1.56mb), the Centers for Medicare and Medicaid Services (CMS) issued further guidance in April and May of 2003, clarifying what a "reasonable expectation of Medicare enrollment" would include:

A. An individual who has applied for Social Security Disability Benefits;
B. An individual who has been denied Social Security Benefits, but anticipates appealing the Decision;
C. An individual who is in the process of appealing and/or re-filing for Social Security Disability Benefits;
D. An individual who is 62 years and 6 months old (will be eligible for Medicare based on age 65 within 30 months);
E. The individual is in end-stage renal disease, but does not yet qualify for Medicare based on end-stage renal disease.

Further, the agency's opinion is that if the workers compensation settlement does not allocate between indemnity and medical expenses, and no approval is sought, Medicare will consider the entire amount paid as compensation for future medical expenses:

"Example: A beneficiary is paid $50,000 by a WC carrier, and the parties to the settlement do not specify what the $50,000 is intended to pay for. If there is no CMS approved Medicare set-aside arrangement, Medicare will consider any amount remaining after recovery of its conditional payments as compensation for future medical expenses. Additionally, please note that any allocations made for lost wages, pre-settlement medical expenses, future medical expenses, or any other settlement designations that do not consider Medicare's interests, will not be approved by Medicare."

Additionally, CMS has unique definitions of "commutation" and "compromise", taking the position that these terms refer only to medical expenses:

"When a settlement includes compensation for future medical expenses, it is referred to as a "WC commutation case." When a settlement includes compensation for medical expenses incurred prior to the settlement date, it is referred to as a "WC compromise case." A WC settlement can have both a compromise aspect as well as a commutation aspect.
"Additionally, a settlement possesses a commutation aspect if it does not provide for future medical expenses when the facts of the case indicate the need for continued medical care related to the WC illness or injury.
"Example: The parties to a settlement may attempt to maximize the amount of disability/lost wages paid under WC by releasing the WC carrier from liability for medical expenses. If the facts show that this particular condition is work-related and requires continued treatment, Medicare will not pay for medical services related to the WC injury/illness until the entire settlement has been used to pay for those services."

The recognized strategy for dealing with Medicare is to get approval on a Medicare ‘set-aside' agreement where a portion of the settlement is allocated as Medicare reimbursement. Interestingly, the agency has agreed that fees and costs to obtain the Medicare set-aside can be charged to the set-aside arrangement. Thus, if you can prove that fees and costs were incurred to obtain the Medicare set-aside, this amount can be offset. However, these fees and costs must be included in the proposed Medicare set-aside arrangements submitted to CMS.

CMS has stated that in cases where the injured worker may not need future medical care there may be an exemption from Medicare reimbursement. The worker must show all of the following:

a) The facts of the case demonstrate that the injured individual is only being compensated for past medical expenses (i.e., for services furnished prior to the settlement);
b) There is no evidence that the individual is attempting to maximize the other aspects of the settlement (e.g., the lost wages and disability portions of the settlement) to Medicare's detriment; and
c) The individual's treating physicians conclude (in writing) that to a reasonable degree of medical certainty the individual will no longer require any Medicare-covered treatments related to the WC injury.

However, if Medicare made any conditional payments for work-related services furnished prior to settlement, then Medicare would require recovery of those payments. In addition, Medicare will not pay for any services furnished prior to the date of the settlement for which it has not already paid.

These are but a few issues related to dealing with Medicare in workers' compensation cases. Practitioners are advised to be familiar with CMS' question and answer publication, available at http://www.cms.hhs.gov/medicare/cob/pdf/wc_faqs.pdf.


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