By Michael Craig, Wyoming Division of Workers' Safety & Compensation, and Thomas Struyk, Pinnacol Assurance
There are two major Medicare issues that presently affect workers' compensation funds. The first issue is past Medicare payments that Medicare believes should have been paid by workers' compensation and the second issue is called Medicare Set-Asides (MSAs) which prevents workers' compensation insurers from shifting medical liability to Medicare in the future.
Workers' compensation funds are legally responsible for considering and protecting Medicare's interests. This means that Medicare is not liable for the related medical expenses of an injured worker because workers' compensation is primarily liable for those medical expenses. The first issue has caused Medicare payments made to (Medicare eligible) injured workers to come under close scrutiny in the past two or three years. Unfortunately, Medicare seems to hold workers' compensation funds liable for any or all medical expenses of an injured worker. Therefore workers' compensation funds are required to review past cases and provide documentation which proves that Medicare was responsible for payment.
Medicare has been demanding repayment from some workers' compensation funds when the injured worker is also Medicare eligible. It appears that monopolistic funds may have received more repayment demand letters than other workers' compensation funds, probably because all medical payments are made from a single source. However, it is reasonable to expect that Medicare will eventually try to recover medical expenses from all workers' compensation insurance carriers if collection efforts are proven to be cost effective.
Medicare resolved the second issue by requiring Medicare Set-Asides. A Medicare Set-Aside allocation is an arrangement that takes place at claim settlement. It prevents shifting the burden for future injury-related medical expenses from workers' compensation to Medicare. If it is determined that workers' compensation attempted to shift the burden of an injured worker's medical expenses to Medicare, Medicare can collect twice the amount of the original payment from workers' compensation.
A Medicare Set-Aside allocation and approval from the Center for Medicare and Medicaid Services is required for any structured settlement in which:
- The claimant is a Medicare recipient at the time of settlement regardless of the amount of the settlement.
- The claimant is not yet receiving Medicare benefits but the following two-prong test is met:
a) The total amount of the settlement (indemnity plus medical less attorney fees) is over $250,000.00, and
b) It is reasonably expected that the claimant will become a Medicare recipient within 30 months of the settlement.
Structured settlements periodically payout settlement amounts over a period of years anticipated to meet the present and future medical needs of the injured party (claimant) on an income tax-free basis. This type of funding effectively meets the injured party's needs for security, providing benefits paid out according to the workers' compensation fee schedule over time rather than a single, lump sum settlement.
Generally, the steps for establishing a Medicare Set-Aside trust or custodial account are:
• Determine Social Security Disability and Medicare status
• Evaluate need for set-aside and Center for Medicare and Medicaid Services approval
• Determine Medicare allocation over life expectancy, considering rated age when obtained
• Determine Medicare lien status and lien negotiation
• Submit allocation to the Center for Medicare and Medicaid Services for approval, when requested
Few injured workers fully understand Medicare and what is actually covered. Medicare Set-a-Sides often involve extensive procedures and therefore it may be better to have the Medicare Set-a-Side account administered by a third party. If Medicare approved settlements prove to be insufficient, Medicare will begin to pay for the necessary treatment. You can get more information on the Medicare web site at www.cms.gov or there are several other specialized Medicare Set-a-Side companies on the web.
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