Medicare is a federal health insurance program available to people who:
If you suffer an injury at work or develop an occupational disease, and are eligible for Medicare currently or plan on applying for SSDI within the next 30 months, you must consider Medicare’s interests when negotiating or accepting a workers compensation settlement. If you do not, then you put the amount of your settlement and the payment of future medical treatment by Medicare at risk.
This is because of Medicare’s Secondary Payer (MSP) laws. Even though you may have Medicare coverage or will become eligible for Medicare soon, Medicare does not have the primary payment responsibility for medical treatment you receive if that treatment is the responsibility of other health care coverage, such as workers compensation, no-fault insurance, bodily injury liability coverage, or group health plan insurance.
The purpose of this article is to explain how you can protect Medicare’s interests when settling your workers compensation claim and, therefore, protect yourself. This article discusses:
Have a question about a Medicare Set Aside (MSA) in your workers comp case?
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Your employer – or its workers compensation insurance carrier – is responsible for the payment of medical treatment related to your work injury or occupational disease. This is true even if you are a Medicare beneficiary or expect to become eligible for Medicare in the next 30 months.
Section 1862(b) of the Social Security Act states that Medicare may not pay for your 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.” Payment is made if you negotiate a Virginia workers compensation settlement or the Workers Compensation Commission enters an award order.
If the workers’ compensation claim is disputed and the workers’ compensation insurance carrier refuses to pay promptly, then the physician, surgeon, health care provider, or medical supplier may bill Medicare as the primary payer. This enables you – the injured worker – to obtain care while your claim is pending. But you must consider any conditional payments made by Medicare if you settle your work comp claim.
Medicare requires its beneficiaries to apply for all applicable workers compensation benefits as a term of coverage. And physicians, medical providers, surgeons, therapists, and suppliers of medical devices must bill the workers comp insurance carrier before they bill Medicare if there is reason to believe that the injury or disease is work-related.
No. You can settle your workers compensation case despite Medicare’s interests. But you must structure your settlement properly.
Personal injury, car accident, and workers comp litigation are expensive and unpredictable. Many insurance carriers, therefore, will try to settle your claim. The lump sum settlement agreement will allocate money toward different categories – wage loss, permanent partial disability, and future medical needs – and include language stating who is responsible for the payment of medical treatment to date.
An injured employee who receives a workers comp settlement or award that includes the payment or allocation of funds toward future medical expenses must take Medicare’s interests into account when settling the case. This is done through the use of a Workers Compensation Medicare Set Aside Arrangement in the settlement documents.
A Workers Compensation Medicare Set-Aside Arrangement allocates a portion of your total workers compensation settlement for all future medical expenses related to your workers’ comp claim that are covered and reimbursable by Medicare. These are called Medicare covered expenses.
A proposed Medicare Set-Aside amount is submitted to CMS. CMS will review the proposed amount and then issue a decision. If you obtain approval from CMS then you must spend the CMS-approved MSA amount before Medicare will start to pay for medical treatment related to your workers’ comp claim.
Once the CMS-approved MSA amount is exhausted and accounted for to CMS, Medicare will take over primary responsibility for future Medicare-covered expenses related to your work injuries that exceed the approved set-aside amount.
We recommend that you ask the employer and insurance carrier to pay a third-party expert to determine the appropriate MSA amount. There are several companies that do nothing but MSA evaluations and proposals.
At least one federal court has indicated that the MSA does not need to be established for the full value of your expected future Medicare costs.
There are two ways to fund a MSA when negotiating your settlement: through a lump sum MSA or through a structured MSA. CMS allows either method.
Regardless of what method you use, it’s important that your settlement documents state that your employer or its workers compensation insurance carrier are responsible for funding the MSA. Under no circumstances should you settle a case requiring a MSA unless the employer or its insurance carrier are funding it. Medical treatment is expensive and health care costs rise every year. Make sure the employer pays for medical care you’ll require for your industrial accident and injuries.
Funding A WCMSA With a Lump Sum
Under a lump sum funding arrangement your employer agrees to fund the entire MSA with a single payment. This lump sum amount, which is approved by CMS, is designated for all future medical expenses related to your workers comp claim. Medicare will not make any payments for treatment related to your work injury until you exhaust all the funds in your MSA.
We prefer lump sum Workers Comp Medicare Set Asides for several reasons:
Unfortunately many employers and insurance companies will not agree to a lump sum MSA, especially if the value of the MSA is significant. In cases involving spinal cord injuries, paralysis, spinal fusion, and traumatic brain injuries, where the cost of future medical care is large, the employer and insurer will want to avoid a lump sum MSA to save some money. You can use this as a bargaining chip in settlement talks.
Funding a MSA with an Annuity (Structured MSA)
CMS will allow the parties to propose a structured MSA. With a structured MSA the employer or its insurance carrier must make an initial deposit that will cover the first surgical procedure or replacement recommended, if applicable, and two years of annual payments.
The initial deposit, which is known as “seed money,” is then followed by annual payments that continue for a set period. These annual deposits, which occur on a defined schedule, must be used to cover projected future medical expenses.
If in any given coverage year you do not use the deposited funds on medical treatment related to your workers comp claim, those unused funds are carried forward to the next year and added to the next annual deposit from the insurer. If you spend all the money in your MSA in a given coverage year on medical care for your work-related injuries then Medicare will pay for workers comp claim-related medical expenses until you receive the next annual deposit.
Before signing settlement documents providing for a structured MSA, make sure they include a provision addressing what happens if the insurance company or the annuity company go bankrupt. The employer should remain liable for funding the MSA if the annuity company and insurer go out of business.
Any party involved in a workers’ compensation claim may submit a WCMSA amount to CMS for approval.
This includes the injured worker, the injured worker’s attorney, the attorney for the employer and insurer, MSA agents or consultants, or other representatives appointed by the injured worker.
There is no requirement or statute requiring you to submit a Medicare Set Aside proposal to CMS for its review. But we recommend doing so if you meet the review thresholds. Otherwise you are at risk of forfeiting Medicare coverage unless you pay Medicare a significant portion of your work comp settlement.
CMS will review a proposed Medicare Set Aside amount if you meet the following review thresholds:
You have a reasonable expectation of Medicare enrollment within 30 months if any of the following apply:
If you are an injured worker over the age of 65 or an employee who suffered a severe spinal cord injury, brain injury, back injury, hip injury, neck injury, knee injury, or shoulder injury that will keep you out of work for at least one year, we recommend that you submit a proposed Medicare Set Aside amount to CMS if you meet the review thresholds.
Medicare has the right to refuse to pay for future medical expenses until the entire amount of the settlement is exhausted on medical treatment if you fail to take its interests into account. Medicare has a right of recovery against any person or entity that received any portion of a third-party payment either directly or indirectly. Medicare also has a subrogation right with respect to any third-party payment.
This is why insurance carriers are usually proactive in obtaining Medicare’s approval of a settlement. Medicare can go after them for funds expended – and will because it knows insurance carriers have deeper pockets than individuals.
We have had success obtaining $0 MSAs from CMS.
If the compensability of your claim is disputed then it may make sense to try to obtain approval of a $0 Medicare Set Aside Arrangement. Otherwise the case may not settle and you will have to go to hearing. If you lose at hearing then you will receive nothing.
Medicare laws are complicated. And failing to understand the affect Medicare laws have on your workers’ compensation case can lead to costly mistakes.
Corey Pollard is here to help you understand the process used by CMS when determining whether to approve a proposed Workers’ Compensation Medicare Set-Aside Arrangement. If you have any questions, contact us for more information: 804-251-1620 or 757-810-5614. We help injured employees across the state, including those in Richmond, Chesterfield, Newport News, James City County, Hampton, Norfolk, Fredericksburg, Virginia Beach, Charlottesville, Roanoke, Fairfax, and Prince William County.