Medicare is a federally sponsored health care plan that is available to individuals who are; a) 65 or over, b) to individuals who have received Social Security Disability Insurance (SSDI) benefits for more than two years, and c) to individuals with end stage renal disease. It is common for workers’ compensation claimants to be Medicare recipients.
The Medicare As Secondary Payer Act (Link) has made it clear that if medical expenses could be covered under either workers’ compensation or Medicare, workers’ compensation, and not Medicare, should pay. Workers’ compensation is primary and Medicare is secondary. Medicare is administered by the Centers for Medicare and Medicaid Services (CMS).
When the claimant has an open workers’ compensation claim, with regard to ongoing medical care a worker is currently entitled to workers’ compensation, the situation is fairly straightforward: Workers’ compensation should pay and Medicare should not.
The situation becomes much more complicated with regard to settlements. When the parties agree to a settlement and an employer/insurance carrier is relieved of its liability for future benefits, in most cases, some of the settlement proceeds is for the payment of future medical benefits. Until that amount is exhausted Medicare should not be expected to pay for medical expenses for the covered condition. When that amount is gone, Medicare should begin paying. The problems concern how to determine how much of a settlement should be allocated for future medical expenses and how to know when that amount has been exhausted. These allocations are typically referred to as “Medicare Set-Aside” (MSA) agreements.
There are no statutory or regulatory provisions requiring that you submit a “Medicare Set-Aside” proposal to CMS for review. However, the interests of Medicare must always be protected. The best way to ensure Medicare’s interests are properly protected is to obtain CMS approval of your proposed “set-aside.” Of course, if the employer/insurance carrier remains responsible for future medical treatment, there is no need to take Medicare’s future interests into account at the time of the “indemnity only” settlement as the employer/insurance carrier will continue to pay for the medical treatment for the work injury/condition.
In July 2001 CMS issued a memo [Link] to its regional offices. It suggests that under certain circumstances parties to workers’ compensation claims should not settle those cases until after CMS has had an opportunity to review the settlement and approve the allocation to future medical expenses. The memo discussed the circumstances under which the regional offices will “pre-approve” such an allocation/MSA. It discusses pre-approval in two categories of cases:
- Cases in which the workers’ compensation claimant is currently entitled to Medicare benefits.
- Cases in which the injured individual has a “reasonable expectation” of Medicare entitlement within 30 months of the settlement date and the settlement is over $250,000.
Medicare announced that the ‘threshold’ for reviewing cases was to be set at $25,000. Medicare refuses to provide a pre-approval of set-aside unless the lump-sum payment to the claimant exceeds $25,000.
Therefore, if you are settling a workers’ compensation claim and the employer/insurance carrier will not be responsible for future medical treatment after the settlement is approved, you should not seek CMS approval of the Medicare Set-Aside arrangement if the claimant is a Medicare recipient but your settlement is less than $25,000. CMS will not review the “set-aside” arrangement and will not provide a verification letter confirming the proposed “set aside” agreement properly takes Medicare’s interests into account. If the settlement exceeds $25,000 and the claimant is a Medicare recipient, you should obtain CMS approval of your Medicare Set-Aside arrangement prior to settling the claim.
If there is a “reasonable expectation” of Medicare entitlement within 30 months of the settlement date and the settlement is over $250,000, the employer/insurance carrier should obtain CMS approval of the Medicare Set-Aside arrangement. A claimant has a reasonable expectation of Medicare enrollment within 30 months if any of the following apply:
- The claimant has applied for Social Security Disability Benefits;
- The claimant has been denied Social Security Disability Benefits but anticipates appealing that decision;
- The claimant is in the process of appealing and/or re-filing for Social Security Disability benefits;
- The claimant is 62 years and 6 months old; or
- The claimant has an End Stage Renal Disease (ESRD) condition but does not yet qualify for Medicare based upon ESRD.
It is important to note, if the claimant is receiving Medicare and your settlement is below $25,000 or the claimant has a “reasonable expectation” of Medicare entitlement within 30 months of the settlement date and the settlement is less than $250,000, you need not submit the “set-aside” proposal to CMS for approval of the Medicare Set-Aside arrangement, CMS will not review the proposal, but you are required to take Medicare’s interests into account. Therefore, the employer/insurance carrier should still ensure the settlement includes a Medicare Set-Aside arrangement.
After a case is settled, CMS encourages the parties to create some form of “set-aside” arrangement in which the funds for future medical expenses that would be covered under Medicare are placed in a trust or deposited in a separate account. Medicare will begin paying medical bills for the work-related condition only when the “set-aside” is depleted and the funds are accounted for.
If you have a Medicare Set-Aside question, or question about New York Workers’ Compensation in general, you can contact Declan Gourley here. To subscribe to my monthly newsletter, enter your e-mail address on the right side of the page and click the “subscribe” button.
