Medicare, and the Centers for Medicare and Medicaid Services (CMS), have made clear that the interests of Medicare must be considered in every workers compensation settlement. How and when to consider Medicare’s interests is not the subject of universal understanding.
In its most basic distillation, there are three aspects to considering and protecting the interests of Medicare:
(1) Section 111 reporting; (2) Conditional Payments; and (3) Otherwise protecting and considering the future interests of Medicare.
A Medicare Set Aside (MSA) is the compliance mechanism for considering Medicare’sfuture interests.
This Alert focuses on the future interests of Medicare when a workers’ compensation case is being settled and evaluated for settlement. Generally, since a workers’ compensation settlement closes out the right to future medical care, CMS has made clear that the parties must consider and protect the future interests of Medicare. Specifically, the parties are not permitted to unfairly shift to Medicare future (post‑settlement) medical liability when the medical care is related to the effects of the work accident.
The extent to which Medicare’s interests are to be considered is the issue. Of course, each case is unique, and the Medicare analysis must address that uniqueness.
The Centers for Medicare and Medicaid Services have published certain Review Thresholds for the circumstances when the future interests of Medicare need to be defined and set by CMS (July 2001). While these work level thresholds have been modified since 2001, once met, an MSA arrangement must be determined/approved by CMS in order for the parties to be assured that the future interests of Medicare are adequately considered. The current Review Thresholds are as follows:
Medicare Beneficiary=Category A The total settlement is greater than $25,000.00 and the person is a Medicare Beneficiary .CMS‑Approved MSA Required.
Not a Medicare Beneficiary=Category B The total settlement is greater than $250,000.00 and there is a reasonable expectation of Medicare enrollment within 30 months of the settlement. .CMS-Approved MSA Required.
However, the interests of Medicare may not be disregarded because a case does not meet the Review Threshold. In an upcoming Alert we discuss ways to consider Medicare’s interests in “non‑threshold” cases. First, though, knowing what CMS means by “total settlement” is important.
*Compromise and commutation aspects of settlements are defined by CMS but are beyond the scope of these general observations.
Total Settlement Defined
CMS defines the total settlement amount as including, but not limited to, wages, attorneys’ fees, all future medical expenses (including prescription drugs), and repayment of any Medicare Conditional Payments. Note that any previously settled portion of the workers’ compensation claim – e.g., PPD advances, as well as disputed medical expenses and disputed TTD in a settlement – must be included in computing the total settlement amount.
Payout totals for all annuities purchased to fund medical expenses shall be used rather than the cost or present values of any annuities. Thus, the total payout on all annuities shall be included when determining the total settlement amount for CMS purposes.
Conditional Payments only come about if an individual is already a Medicare beneficiary. At the time of settlement, Conditional Payments need to be addressed and repaid. Conditional Payments, and the repayment obligations, are in the category of things that have already happened but which need to be concluded with the settlement. This is distinct from the future interests of Medicare incident to an MSA.
By way of example, if CMS were to approve a “zero” Medicare Set‑Aside (meaning no funds need to be set aside for future medical), the primary payer (workers’ compensation) retains the obligation to repay Medicare for Conditional Payments Medicare made for work‑related care.
CMS has not provided particular guidelines on the repayment methodology for Conditional Payments. However, after settlement, the approved Final Settlement forms are exchanged with CMS and determinations made on the amount of the repayment. Accordingly, a workers’ compensation settlement seemingly below the $25,000.00 Review Threshold might well exceed the Review Threshold when Final Conditional Payments are taken into account. For this reason, parties are well served to be out ahead of the Conditional Payment issue, and to request the Conditional Payment worksheet from the appropriate CMS contractor. FOCUS ON SERVICE AND WHAT WE DO
Attorneys Robert Smith, Dan Simones and Tim McNally hold Medicare Set‑Aside Consultant Certified (MSCC) credentials. In addition to lawyers working on Medicare issues, we have a full staff trained in all aspects of Medicare Secondary Payer Law compliance.
Innovative Allocations From allocations in settlements that do not meet CMS Review Thresholds to formal WCMSA submissions, we utilize a legal analysis to scrutinize CMS policy and to formulate a WCMSA that not only adequately considers Medicare’s interests but also mitigates our client’s liability for future medical expenses. We have a proven track record of allocations that protect our clients from future inquiry by Medicare, and save them thousands of dollars in unnecessary and/or unrelated future medical costs.
Legal Review of Set‑Aside Estimates Prior to Submission Conditional Payment Resolution Legal Issues Related to Section 111 Civil Litigation/Case Resolution and Medicare
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