Workers’ Compensation Medicare Set-Aside Allocations (WCMSAs)

Under 42 U.S.C. 1395y(b)(2) of the Medicare Secondary Payer Statute (MSP), Medicare payment may not be made for any item or service if payment has been made or can be reasonably expected to be made under a workers’ compensation law or plan. The Centers for Medicare Services (CMS) has the right to disregard a settlement and seek reimbursement of medical expenses paid by Medicare, when the expenses should have been paid by the Workers’ Compensation Carrier. CMS may also pursue a private cause of action for double damages against the Insurance Carrier for failure to provide primary payment or reimbursement. CMS may additionally seek reimbursement from the Claimant, Claimant’s Attorney, and Defense Attorney.

In order to settle medical benefits in a workers’ compensation case, Medicare’s interests must be protected. In order to protect Medicare’s interest you must:

1. Create a Workers’ Compensation Medicare Set-Aside (WCMSA)
2. Obtain Medicare approval of the MSA if CMS review thresholds are met
3. Perform Medicare lien verification
4. Include allocation language in the settlement agreement to show Medicare’s interests
   have been considered

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What is a MSA?

A MSA is a projection of the Claimant’s future medical costs, including but not limited to doctor’s visits, hospital stays, surgical procedures, diagnostic tests, laboratory studies, physical therapy, and prescriptions. A MSA is based solely on anticipated medical treatment for the work related injury. In addition, only services, supplies, and prescriptions that would be covered by Medicare are included.

The MSA amount is then deposited into a MSA account. Once the MSA account is created, the Claimant or his/her administrator pays bills for the work injury that would otherwise be paid by Medicare from the Account. If the account is properly depleted and medical treatment is still needed, Medicare will begin paying bills for the work injury.

A MSA is comprised of three elements:

1. Allocation of Future Projected Treatment. Only treatment for the work injury that would otherwise be covered by Medicare is included. The allocation is based on the medical records (especially the most recent two years), medical payment history, physician recommendations, IME reports, rated age/life expectancy, and life care plan (if applicable).
2. Method of Funding. The MSA Account may be funded by a structured settlement. In general, an initial deposit covering two years of expenses and the first surgical procedure and/or equipment replacement must be deposited into the MSA Account. Then on the anniversary date, not more than a year from the settlement date, the remainder of the MSA divided by the length of the MSA is deposited into the account.
   * Note: In cases with high MSA allocations, funding by annuity may provide substantial savings in the overall cost of the MSA.
3. Method of Administration:
   1. Professional Administration: is the preferred method of Administration according to CMS. The rules and requirements for administrating a MSA Account are too complex for most claimant to properly manage on their own.
   2. Self Administration: Claimant may self administer the MSA Account if:
      1. Claimant is not mentally or physically incapable of managing payments or complying with CMS administration requirements, and;
      2. Claimant has not been declared legally incompetent by a court or assigned a guardian or conservator, and;
      3. Claimant has not been assigned a representative payee by the Social Security Administration.

However, if the Claimant does not follow all of the pricing, coverage, reporting and record keeping rules required by CMS, he/she runs the risk of losing Medicare entitlement for injury related care!

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CMS Review Thresholds for WCMSAs

If a case meets the CMS Review Threshold, the MSA may be submitted to CMS for approval. CMS will either approve the allocation as submitted or counter with a different allocation amount.

CMS Review Threshold:

A: The claimant is currently a Medicare beneficiary and the total settlement is more than $25,000

OR

B: The settlement amount exceeds $250,000 and the claimant has a reasonable expectation of becoming a Medicare beneficiary within thirty (30) months of the settlement date.

A “reasonable expectation” exists if:

• Claimant has applied for Social Security Disability Benefits, or;
• Claimant has been denied Social Security Disability Benefits but anticipates filing an appeal, or;
• Claimant is in the process of appealing and/or refiling for Social Security Disability Benefits, or;
• Claimant is (or will be) at least 62 years and 6 months old, 120 days from today, or;
• Claimant has End Stage Renal Disease (ESRD) but does not qualify for Medicare based on ESRD.

For cases where the CMS review threshold is not met, CMS’s interests must still be considered. This may be accomplished by a Medical Record Review Report outlining the Claimant’s projected future medical treatment as it relates to Medicare Covered Expenses.