When a workers’ compensation settlement claim includes provision for “future medical care,” the Federal government does not want to be held responsible for paying bills for medical expenses that arise because the person was hurt at work.
In fact, 42 U.S.C. §1395y(b)(2) and §1862(b)(2)(A)(ii), also known as the Medicare Secondary Payer Act, specifically state that Medicare is precluded from paying for a beneficiary’s medical expenses when payment “has been made or can reasonably be expected to be made under a workers’ compensation plan, an automobile or liability insurance policy or plan (including a self-insured plan), or under no-fault insurance.”
What this means is that if self-insured employers or insurance companies are going to buy-out potential medical expenses that arise in the future, they need to make sure that the amount being paid to the injured worker for future medical is adequate to ensure Uncle Sam won’t come back for more. When cases meet specific criteria of age, dollar value of the settlement, or if the person has applied for— or is reasonably expected to apply for—SSDI, a settlement including a future medical buyout needs to include a provision that the injured worker self-administer a Workers’ Compensation Medicare Set-Aside (“WCMSA”) from which to pay for future treatment.
Further, while insurance companies administering future medical may be careful to pay only for legitimate industrial conditions, Medicare will pay for industrial and/or non-industrial conditions…so Medicare could potentially require reimbursement of expenses that Medicare argues are somehow related to the covered claim. Failure to adequately fund a WCMSA may subject a carrier to significant penalties.
In order to protect from these situations, insurance companies typically have a Medicare Set-Aside analysis performed to confirm the amount allotted for future medical is adequate to “protect Medicare’s interests.” These analyses include a detailed review of medical treatment reports, medical-legal reports, bills paid, and projected costs based on life expectancy.
As added protection, prior to buying out future medical care, employers can voluntarily submit this analysis to the Centers for Medicare and Medicaid Services (“CMS”) for approval. CMS may review cases where the person is currently a Medicare recipient and the total settlement value is over $25,000, or where the injured worker has a reasonable expectation of Medicare enrollment within 30 months of the settlement date and the anticipated cost of future medical benefits, lost wages, is expected to be over $250,000.
However, even if these thresholds are not met, CMS requires all parties to “consider and protect” Medicare’s interests when settling any workers’ compensation claim of any amount.
Because the MSA analysis may include costs of treatment provided, not just the reasonable future medical expected by an AME or QME, the frequency of treatment for years prior to settlement/P&S/MMI can be taken into consideration and so will denied body parts that were later settled. Thus, the cost of funding a MSA can quickly skyrocket. And if Medicare at any time later concludes the set-aside was not adequate to address subsequent treatment, Medicare can still assert its interests.
It often takes six months or more to receive approval from CMS, during which time the case is in limbo and cannot settle completely. This leaves the case open for additional expenses, withdrawal from negotiations, and other complications. CMS has no set policy in place for reviewing the adequacy of future medical benefit set-asides. There are stories of CMS simply requesting “more money” in the MSA without providing an accounting for the projected difference. There are no guidelines in place for what CMS will or will not approve and third-party MSA vendors are likely to be overly generous in order to increase the chance that CMS will issue an approval.
Some third party administrators, carriers, and employers are discovering that CMS’ right to recovery can be limited when a claim is settled or judgment is entered by a workers’ compensation judge. According to 42 CFR 411.37, Medicare must reduce its recovery to take into account the fact that a claim is disputed and the costs are borne by the party against which CMS seeks to recover. In other words, they are arguing that Medicare’s ability to recover more than the value of the settlement is severely limited.
Some are moving away from submitting documents for CMS approval and, instead, are addressing MSA amounts in-house. Given the headaches and delays we have suffered through our many years of dealing with CMS, this trend should come as no surprise. However, dangers lurk at every turn and potential pitfalls abound. Careful, detailed documentation and adequate Medicare Set-Aside funding is, therefore, essential to buttress arguments at some point down the road that the parties made a “good faith effort” to comply with the detailed provisions of the Medicare Secondary Payer Act.
Michael D. Peabody is a Partner out of B&B’s Woodland Hills office. He can be reached at email@example.com.
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