WORKERS' COMPENSATION MEDICARE SET-ASIDES


Prepared By:

Craig A. Larsen, Esq. and Jennifer M. Gibson, Esq.

COUSINEAU McGUIRE CHARTERED
Attorneys at Law


Minneapolis Office
1550 Utica Avenue South
Suite 600
Minneapolis, Minnesota 55416
(952) 546-8400
(952) 546-0628 (fax)
 N. Wisconsin/Michigan Office
225 East Aurora Street
Ironwood, Michigan 49938
(906) 932-0726
(800) 877-866
(906) 932-1688 (fax)
www.cousineaulaw.com



TABLE OF CONTENTS

  1. Introduction


  2. Definitions


  3. When is a Medicare Set-Aside Necessary


  4. How to Obtain Approval for a Medicare Set-Aside Trust


  5. CMS Policy Memorandums


    1. CMS July 23, 2001 Policy Memorandum
    2. April 22, 2003 Policy Memorandum
    3. May 23, 2003 Policy Memorandum
    4. May 7, 2004 Policy Memorandum
    5. October 15, 2004 Policy Memorandum
    6. July 11, 2005 Policy Memorandum
    7. December 30, 2005 Policy Memorandum
    8. April 25, 2006 Policy Memorandum
    9. July 24, 2006 Policy Memorandum


  6. Alternatives to Obtaining a Medicare Set-Aside


  7. H.R. 2549 (Proposed Legislation)


  8. Addresses



I. INTRODUCTION

The ever increasing cost of health care and limits on the availability of private employer-sponsored healthcare insurance have resulted in the federal government assuming an ever increasing financial burden and paying for medical services to aging and disabled individuals. Beginning in the early 1980's the United States Congress passed a series of laws that have since become known as the Medicare Secondary Payer Act (MSPA). The MSPA is an attempt by the federal government to minimize the impact of the financial burdens it was assuming through the Medicare program. As a result of the act, parties who do not reasonably consider Medicare's interest when settling a claim may be subject to the MSPA's enforcement provisions and corresponding legal action initiated on behalf of the Medicare program.

II. DEFINITIONS

CMS - Center for Medicare and Medicaid Service: The federal agency that administers Medicare set-aside arrangements and to whom the arrangements are submitted for approval.

Chickasawa National Industries: The contractor hired by CMS to handle recoveries when Medicare is an intervenor i.e., has made conditional payments on the employee's behalf.

Medicare Conditional Payments: Payments made by Medicare for past medical expenses which are claimed to be for treatment related to a work injury. When conditional payments are made by Medicare, Medicare is an intervenor and needs to be dealt with as any other intervenor would be.

Compromised Case: Settlement of an injured worker's current or past medical expenses incurred due to a claimed work-related injury.

Commutation Case: Settlement of an injured worker's future medical expenses due to a claimed work injury i.e., arrangements intended to compensate an injured worker for any medical expenses after the date of settlement.

III. WHEN IS A MEDICARE SET-ASIDE NECESSARY?

Beginning July 23, 2001, CMS began issuing policy memorandums regarding the Medicare Secondary Payor Act and how Medicare will handle issues related thereto.

  1. A Medicare Set-Aside will be necessary only in commutation cases, i.e., where there is a closure of future medical expenses. If the case is compromised settlement only or future medical claims remain open, no Medicare Set-Aside is necessary, regardless of the amount of settlement.


  2. A Medicare Set-Aside may be necessary in commutation cases if:


    1. The injured worker is a Medicare, beneficiary at the time of settlement and the total settlement is greater than $25,0001; or


    2. The individual is not a Medicare beneficiary at the time of settlement, the total settlement is over $250,0002 AND there is a reasonable expectation of Medicare entitlement within 30 months of the settlement date.


              Reasonable expectation of Medicare enrollment includes the following:

      1. Individual has applied for Social Security Disability insurance benefits;


      2. Individual has been denied Social Security Disability insurance benefits but anticipates appealing the adverse decision;


      3. Individual is in the process of appealing/refiling for Social Security Disability insurance benefits;


      4. Individual is age 62 years and 6 months (may be eligible for Medicare based on age within 30 months); or


      5. Individual has end-stage renal disease, but is not yet qualified for Medicare.


IV. HOW TO OBTAIN APPROVAL FOR A MEDICARE SET-ASIDE TRUST

  1. Determine the settlement amount. In doing so, consider the following:


    1. Employee's treatment history;
    2. Employee's treatment post maximum medical improvement;
    3. Payment history by insurer (specifically focus on past two to three years);
    4. Physician recommendations for employee's future medical treatment;
    5. Whether lifetime treatment may or may not be necessary;
    6. Primary liability whether accepted or denied; and
    7. Pre-existing condition/treatment.


    1. Companies exist to help defense attorneys and insurance companies determine whether a Medicare Set-Aside trust will be necessary. These companies can be contracted with to prepare a Medicare Set-Aside Summary and a recommended set-aside amount, if any.
  1. Submit Medicare Set-Aside Trust Proposal or request for waiver to:


    1. Send proposal to the following address:
      2. CMS
      c/o Coordination of Benefits Contractor
      Attn: WCMSA Proposal
      P.O. Box 660
      New York, NY 10274-0660

    2. When submitting a Medicare Set-Aside proposal please include the following documents in said submission:


      3. a) Copy of Claimant's Social Security card, if applicable;
      b) Copy of Claimant's Medicare card, if applicable;
      c) Employer's First Report of Injury;
      d) All medical records in the past five years, if available;
      e) Claims payment history;
      f) The name, address and telephone number of the structured settlement broker you prefer to use, if any
      g) A list of prescription medications for the claimant or the name of the medication management company;
      h) State settlement documents;
      I) If the claimant is represented by an attorney, please provide that attorney's name, telephone number and address;
      j) Claim number;
      k) The insurance carrier, name, telephone number, address and the name of the adjuster handling the claim;
      l) The defense attorney's name, address and telephone number.

    3. Ultimately it is in the best interests of the submitting party to provide information that supports the proposed set-aside amount. It is recommended that a cover letter setting forth the history of the case as well as any defenses be submitted along with any Medicare Set-Aside proposal.


  1. CMS POLICY MEMORANDUMS


    1. CMS July 23, 2001 Policy Memorandum
      2. CMS insured its first policy memorandum on July 23, 2001. This memorandum laid the foundation for Medicare to set aside trusts and put people on notice of CMS's intention to vigorously enforce the MSPA.

      According to this memorandum, it is in Medicare's best interest to learn the existence of workers' compensation situations as soon as possible in order to avoid making a mistake in payment. The use of administrative mechanisms referred to by attorneys as Medicare satisfied trusts in workers' compensation commutation cases enables Medicare to identify workers' compensation situations that would otherwise go unnoticed, which in turn prevents Medicare from making a mistake in payment.

      This memorandum also outlined the scope of CMS's review of Medicare Set-Aside Trusts and further defined what cases must be submitted for review. It also outlined the Medicare satisfied trust submission process and laid the ground work for the required documentation which must be submitted with the Medicare Set-Aside Trust allocation.

    2. CMS April 22, 2003 Policy Memorandum


      3. CMS published its second policy memorandum on April 22, 2003. In this memorandum CMS gave practitioners further guidance as to when a claimant has a "reasonable expectation" of Medicare benefits within 30 months of settlement. Clarification was also provided in a number of areas, including the administration of a Medicare Set-Aside Trust, judicial recognition of decisions in the state courts and the recovery of funds in properly administered set-aside trust accounts. CMS also reassured practitioners that once CMS agrees to a Medicare satisfied amount, the individual can be certain Medicare's interests have been appropriately considered.

    3. CMS May 23, 2003 Policy Memorandum


      4. On May 23, 2003, CMS issued yet another memorandum on Medicare setaside trusts. This memorandum gave further clarification on the CMS review thresholds and noted that settlements less than $250,000 OR where the claimant did not have a "reasonable expectation" of Medicare benefits within 30 months from the date of settlement, did not acquire review by CMS. It is also noted that CMS would not issue verification letters to parties wanting a determination of when a Medicare Set-Aside Trust was required in their settlement.

    4. CMS May 7, 2004 Policy Memorandum


      5. On May 7, 2004, CMS issued a memorandum defining what payments were to be included in CMS's review thresholds. It was specifically noted that administrative fees associated with the administration of a Medicare Set-Aside Trust and attorneys fees associated with the establishment of the same could not be charged against the Medicare Set-Aside Trust account. CMS noted that the costs of Medicare Set-Aside Trust administration and preparation are a separate and distinct issue.

    5. CMS October 15, 2004 Policy Memorandum


      6. In this memorandum additional clarification on the administration of a Medicare Set-Aside Trust administration was provided. CMS noted that when future medical treatment expenses are being left open in a workers' compensation settlement, a Medicare Set-Aside Trust is NOT necessary. However, given the unique nature of the Minnesota Workers' Compensation Act, and the fact that CMS was addressing workers' compensation claims in all fifty states, practitioners were not given guidance on the issue of close-out of so-called "soft medical" expenses. Suggestions regarding this issue are addressed in Section VI.

    6. CMS July 11, 2005 Policy Memorandum


      7. This memorandum is most notable for the inclusion of an additional review threshold for "low dollar" settlements. According to this policy memorandum, "low dollar settlements" are settlements where the settling insurance carrier or third-party administrator has paid a total settlement amount of less than $10,000 in benefits to or on behalf of the injured worker. It was also noted that this review threshold is not a substantive dollar or "safe harbor" threshold, and the parties must always consider Medicare's interest in all workers' compensation cases and ensure that Medicare is secondary to workers' compensation in such cases. Please note, workers' compensation practitioners should never assume that just because a settlement does not trigger CMS review based on an established threshold, a Medicare Set-Aside Trust is not required.

      This memorandum also addressed other issues relative to Medicare Set-Aside Trusts and their administration. CMS cautioned Medicare Set-Aside Trust beneficiaries not to use the trust monies prior to CMS approval. It was also noted that interest income from said trust can be paid to the Medicare Set-Aside Trust funds as a "direct cost that is directly related to the account." CMS also provided a process for the removal of funds from the Medicare Set-Aside Trust provided that adequate medical documentation is present and a five year period has gone by since establishment of the funds.

    7. CMS December 30, 2005 Policy Memorandum


      8. This memorandum dealt with the Medicare Prescription Drug Improvement and Modernization Act, which established prescription drug benefits under Medicare Part D. According to this memorandum, all Medicare Set-Aside Trust proposals on or after January 1, 2006 need to take into account the claimant's future use of prescription medications. If the Medicare Set-Aside Trust allocation does not consider this, CMS will take the position that the proposal does not reasonably consider Medicare's interests. However, the memorandum did not provide guidance in calculating the price for future medications under the Medicare Set-Aside Trust allocation by using the average wholesale price, a workers' compensation reimbursement rate (when applicable) or the actual amount billed. The memorandum also did not advise workers' compensation practitioners as to when they could use pricing for generic medication vs. brand name. It is important to note that when preparing a Medicare allocation for a Medicare Set-Aside Trust one should calculate only medications that are covered under the Medicare Part D Program. For example, drugs from the following categories typically should not be considered part of a Medicare Set-Aside Trust allocation and submission:

      • drugs used for anorexia, weight loss, or weight gain;
      • drugs used to promote fertility;
      • drugs used for cosmetic purposes or hair growth;
      • drugs used for symptomatic relief of coughs and colds;
      • prescription vitamins and mineral products, except prenatal vitamins and flouride
      • prescriptions;
      • non-prescription drugs;
      • inpatient drugs;
      • barbiturates; and
      • benzodiazepines


      Please note, this memorandum was superceded by the July 24, 2006 memorandum discussed later in this chapter.

    8. CMS April 25, 2006 Policy Memorandum


      9. In this memorandum CMS increased its prior "low dollar" review threshold from $10,000 to $25,000. It also noted that future review thresholds were subject to future adjustment. Lastly, CMS noted that the computation of the total settlement amount includes, but is not limited to, wages, attorney's fees, all future medical expenses (including prescription drugs) and repayment of any Medicare conditional payments.

    9. CMS July 24, 2006 Policy Memorandum


      10. This policy memorandum supercedes the Part D in workers' compensation Medicare set-aside arrangements previously published on December 30, 2005. This memorandum dealt primarily with the implementation of the Medicare Part D Program, and specifically superceded the memorandum of December 30, 2005. Notwithstanding this notice by CMS, the memorandum as a whole did little to change existing policy. For example, CMS maintained its existing policy that all settlements on or after January 1, 2006 must consider and protect Medicare's interest when future treatment includes prescription drugs along with the future medical services that would otherwise be reimbursable by Medicare.

      This memorandum also clarified the medical and prescription drug allocation requirements by noting that Medicare Set-Aside Trust funds are to be used for all medical services and prescription medications which are covered by Medicare. However, CMS went onto state that they will not require funds properly paid from a Medicare Set-Aside Trust to be spent in the identical corresponding percentages. For example, if $10,000 is placed in a Medicare Set-Aside Trust with $4,000 designated for medical services and $6,000 for prescription medications, CMS will not discontinue payments if $7,000 is paid for medical services and only $3,000 is paid for prescription medications. As long as the full $10,000 in the Medicare Set-Aside Trust is used up, Medicare will resume payment for the additional medical expenses and prescription drugs, even though the anticipated allocation was based on different percentages. Lastly, CMS stated that the claimant and all other parties to the workers' compensation settlement can rely on CMS's written opinion regarding whether the workers' compensation settlement adequately protects Medicare's interests.

VI. ALTERNATIVES TO OBTAINING A MEDICARE SET-ASIDE

  1. Leave future medical expenses open in the Stipulation for Settlement. As discussed previously, closure of "soft medicals," i.e., chiropractic care, psychiatric/psychological care, chronic pain programs etc. is a closure of medicals and potentially subject to Medicare sanctions if Medicare's interests are not taken into account.


  2. Agree that the injury was a temporary injury. All parties to the Stipulation for Settlement can stipulate that the employee is no longer in need of medical care and treatment, the injury was only a temporary aggravation or temporary injury, and no future medical treatment will be required. It is beneficial if support from a physician can be provided to substantiate these stipulations.


  3. Medicare Set-Aside savings clauses can be included in the Stipulation for Settlement. The following are examples:


    1. Regarding the close-outs of medical as set forth in the Stipulation, if those close-outs are ever deemed to infringe on the right to future Medicare benefits or deemed to have required a Medicare Set-Aside Trust, then those close-outs are null and void herein. It is the understanding of the parties hereto based upon the employee's current status that a Medicare Set-Aside would not be needed at the present time.


    2. Therefore, this settlement shall settle and fully close-out any potential future claims for medical treatment for health club services or membership, chiropractic care, home health care and nursing services by a family member, etc., . . . with the exception of any such medical treatment expenses paid or payable by Medicare.


VII. H.R. 2549 (PROPOSED LEGISLATION)

Recently, the Medicare Secondary Payer in Workers' Compensation Settlement Agreements Act of 2007 was introduced on May 24, 2007 as H.R. 2549 by Representative John Tanner (D-TN), Representative Phil English (R-PA). H.R. 2549 proposes to amend the Social Security Act by adding a new subsection (l) to the Medicare Secondary Payer Act, Section 1862(b) of the Social Security Act. The bill was introduced to provide clear and consistent standards lacking in the Centers for Medicare and Medicaid Services process, in an effort to resolve serious delays and confusion in the review of workers' compensation Medicare set-asides. A copy of the proposed bill is contained in the Appendix under Tab J.

VIII. ADDRESSES

  1. If Medicare has paid, or it is possible that they have paid, they should be put on notice of the right to intervene in the matter, like any other health insurer or provider.


    2. Notices should be sent to the following address:

    CMS
    Medicare-Coordination of Benefits
    P.O. Box 5041
    New York, NY 10274-5041
    Phone No.: (800) 999-1118


    It is recommended that a copy also be sent to: Chickasawa, Medicare's contractor for recoveries, at the following address:

    Chickasaw
    MSPRC-WC
    P.O. Box 33831
    Dearborn, MI 48232-3831
    Phone No. (866) 677-7220


    Ideally, Chickasaw will eventually make contact regarding Medicare's intervention interest. However, it is recommended that you follow up regularly with Chickasawa regarding Medicare's intervention interest as oftentimes they are slow to make contact. Medicare should not be dealt with as other intervenors sometimes are. All efforts should be made to obtain something in writing from CMS/Chickasawa regarding any intervention interest and settlement.

  2. Questions are constantly arising, and CMS, through policy memorandums, attempts to clarify the regulations with respect to Medicare Set-Aside arrangements. The CMS website that posts updated information is:


    3. www.cms.hhs.gov\medicare\cob\attorneys\att_wc.asp



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Footnotes:
1 If the total settlement amount is $25,000 or less, CMS will not review Medicare Set-Aside proposals.BACK
2 The following should be considered in calculating the MSA required threshold: 1) money paid as part of a previous settlement of any portion of a claim, such as a prior indemnity settlement; 2) amounts paid at the current time to settle benefits, such as future medicals, indemnity or vocational benefits; 3) attorneys fees paid in the settlement; 4) costs/expenses paid in the settlement; 5) payment of any Medicare conditional payment/lien claims; and 6) if any annuity is being used in the settlement, the amount of the expected payout must be included instead of the cost to purchase the annuity.BACK 		 
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