Workers’ Compensation Settlements and Medicare Set Asides

A seriously injured worker may sometimes require continued medical treatment for months or even years. As we reported in a recent entry in this blog, thanks to a 2017 change in Arizona law in many such cases the compensation insurance carrier can now offer a lump sum “full and final” monetary settlement. If it is accepted and approved, such a settlement will relieve the insurer of responsibility for the cost of any future medical treatment.

WHEN A WORKERS’ COMP CLAIMANT

– agrees to settle a workers’ comp claim in which it appears likely that future medical treatment may be required; and

– is eligible for Medicare (or will be in the near future)

federal law usually requires as part of the settlement process that a Medicare Set Aside, or “MSA” (technically, a “Workers Compensation MSA” or “WCMSA”) be established. This is because Medicare is considered a “secondary payer” for injuries covered by workers’ compensation.

AN MSA:

• Is a formal legal agreement that requires a “reasonable” portion of a workers’ compensation settlement to be “set aside” to pay for future medical services. Only if and when funds in the MSA are exhausted will Medicare pay for treatment.
• Is typically funded with cash, but may also be funded with an annuity
• May be administered by the claimant him or herself or a professional manager

THE CENTER FOR MEDICARE AND MEDICAID SERVICES (“CMS”)

CMS  is the group within the federal Department of Health and Human Services with principal responsibility for establishing minimum standards for MSAs. However, in many cases, the burden of determining whether an MSA complies is on the carrier and claimant. CMS itself generally will evaluate an MSA in only when:

– The claimant currently receives Medicare beneficiary and the settlement amount is greater than $25,000; or

– The claimant is likely to become Medicare eligible in the next thirty months and the settlement exceeds $250,000

There is no requirement for a claimant to obtain CMS approval of an MSA, even if it meets the above conditions. If a submitted MSA is submitted and CMS does not reject it, Medicare will pay for medical care if the MSA funds turn out to be insufficient. Given the uncertainty surrounding both the future course of many injuries and the costs of current and future treatments and medications, qualifying for such “safe harbor” is nearly always be in an eligible client’s best interests.

WCMSA TRENDS

The National Council on Compensation Insurance  periodically studies CMS data in order to identify trends and issues in MSAs.

AMONG THE NCCI’S MOST RECENT FINDINGS:

• The time it takes CMS to process a reviewable MSA has declined steadily since at least 2012. It currently averages around 70 days.
• The belief that that prescription drug costs will continue to rise is the main driver of increases in MSA amounts.
• The share of an MSA allocated to drug costs increases with the size of the MSA. This explained by the fact that large MSAs are naturally associated with more serious injuries or illnesses.

Most claimants with MSAs were already Medicare-eligible when they settled their workers’ comp claims. In many instances, however, they are younger than 65 but Medicare eligible because they receive Social Security Disability benefits.