June 16, 2008

Medicare
Set-Aside
Update

By Kevin L. Connors and Patricia S. Duffy

Charged with broad power to review workers’ compensation settlements, Medicare’s long reach continues to challenge practitioners seeking the final resolution of all compensation liability, inclusive of indemnity and medical benefits, for work-related injuries.

Medicare’s regulatory authority flows from the Social Security Act, requiring that Medicare payments for medical treatment or services be excluded, to the extent that the treatment or services could reasonably have been expected to have been made due to an obligation under a workers’ compensation statute or plan. Section 18.62(b)(2n). Medicare is required to exclude payments to individuals who have received a workers’ compensation settlement award, when the award is intended to compensate the individual for future medical expenses required for treatment of a work-related injury or disease.

Medicare’s authority is both retrospective and prospective. Depending upon the individual’s Medicare entitlement, Medicare has the authority to assert a lien for past injury-related treatment or services.

Prospectively, Medicare is aggressively reviewing workers’ compensation settlements to verify that they are not shifting responsibility for the payment of future medical treatments and services from the workers’ compensation insurance carrier to Medicare.

Medicare’s long shadow of oversight and pre-approval of the workers’ compensation claim settlement is triggered when the settlement involves one or more of the following four types of claimants:

Services commonly covered by Medicare include doctor visits, diagnostic tests, steroid injections, hospitalizations, surgeries, morphine pumps, TENS stimulators, and prescription medications. Services not covered by Medicare include dentures, glasses, hearing aids, and physical rehabilitation, after maximum medical improvement has been achieved.

Other factors that must be considered in the process of seeking approval of a Medicare Set-Aside include the Set-Aside funds only being used to pay for injury-related treatment and services that would otherwise be covered by Medicare, and that the Set-Aside funds be sufficient to last for treatment and services over the Claimant’s estimated life expectancy, with prescription medications being covered as well.

As most practitioners are painfully aware, Medicare approval of proposed Set-Aside trusts is typically taking anywhere from 90 to 180 days, with the proposed Set-Asides being submitted for review to the Centers for Medicare and Medicaid Services (CMS).

Typically, with rare exception, CMS’ Medicare Set-Aside approvals are sought by Claimants’ counsel, with the insurer/administrator having little involvement in, or oversight of, the timing over the request for approval, follow-up contacts with CMS as to the receipt and review of the MSA approval request, or without being provided with copies of the approval applications being submitted by Claimants’ counsel. For these reasons, insurers/administrators might want to consider taking control of the process and utilizing an outside vendor to seek approval.

Given the delay in the approval process, more and more workers’ compensation claims settlements are “bifurcated,” with the claim for indemnity compensation benefits being settled with an indemnity-only Compromise and Release Agreement, so that indemnity compensation benefits need not be paid during the pendency of the MSA approval.

Given the regulatory oversight being enforced by Medicare, it is incumbent upon all practitioners to maintain familiarity with Set-Aside requirements for settlement of workers’ compensation claims.

Problems that arise while the MSA approval is “pending” can include the necessity of the insurer/administrator continuing to pay for reasonable, necessary and related medical treatment, a not inexpensive necessity, considerations as to whether to seek utilization review of treatment during the “pendency” period and, the more difficult issue of a significant gap in the projected MSA expenses, versus CMS’ determination as to future Medicare expenses for medical treatments and services, absent an agreement by the insurer/administrator that it will fully fund the CMS-approved MSA. Insurers and administrators might want to consider negotiating with Claimants either the extent of the medical treatment that will be paid during the approval period such as one office visit per month and physical therapy limited to one day per week or providing for a sum certain to Claimant such as $2,000.00 to pay for medical bills during the approval period.

Another complication occurs in situations where the indemnity compensation benefits are already settled under a prior Compromise and Release Agreement. In that case the parties are seeking a medical-only settlement requiring MSA approval, with Claimants’ counsel requesting separate consideration, over and above the MSA-approved funds for medical expenses, to compensate counsel for attorneys’ fees, with there being no specific provision, either under the Workers’ Compensation Act, or under the Social Security Act, providing for or prohibiting against Claimants’ counsel receiving an attorney fee, so long as the attorney fee is not depleting the funds set aside for future medical expenses, as Medicare strictly prohibits utilization of the Set-Aside funds for anything other than Medicare-covered medical expenses.

The link to Medicare’s website is http://www.cms.hhs.gov.

Questions concerning the practical implications of Medicare Set-Asides on the day-to-day administration of workers’ compensation claims should be directed to our Workers’ Compensation Department.

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