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The Centers for Medicare & Medicaid Services (CMS) has stepped up their efforts to enforce compliance with the Medicare Secondary Payor (MSP) statute. The MSP statute states CMS can recover damages from any entity [insurer, employer, employee, medical provider, plaintiff attorney or defense attorney] that attempts to shift the burden for workers' compensation medical cost to Medicare.
The MSP statute states that Medicare does not pay for any medical expense that can reasonably be expected to be paid promptly under workers' compensation law (or other types of insurance). Workers' compensation is considered the primary insurer and CMS is considered the secondary insurer. (WCxKit)
The MSP statute provides that CMS will not pursue recover from a work comp insurer who has their settlement of future medical benefits approved by CMS. In order to obtain CMS approval, the work comp insurer must provide a Medicare Set-Aside Arrangement (MSA) for CMS to approve before the claim is settled. The MSA states how many dollars of the total settlement is allocated to cover the cost of future medical care. The specified amount has to be “set-aside” in a trust arrangement to cover future medical bills. The MSA can be professionally managed (and should be if the amount is significant) or the employee/claimant can be both the trust manager and beneficiary.
If CMS makes a payment and it is then determined that work comp should have paid, CMS will seek to recover the amount they have paid. The MSP statute gives CMS the right to recover the amount from the employee/claimant, but it also gives CMS the right to recover the amount they paid from the workers' compensation insurer. If they have to bring suit to recover the amount they have paid, they can recover double damages from the work comp insurer for not making prompt reimbursement to them.
If the work comp insurer settled the claim without an approved MSA, the work comp insurer is still liable to CMS for CMS paid benefits for the work related injury even though the insurer has already paid the employee/claimant for those future medical benefits. If CMS pays medical benefits for the work related injury and the MSA was not approved, they can still recover the amount paid for medical benefits from the work comp insurer. [Yes, they should recover from the employee/claimant, but more than likely the employee/claimant has already spent the medical settlement on a new car, a new house, or whatever, and the insurer has assets that are much easier for CMS to recover from].
There is no time limit on when CMS can pursue recovery. If in 2010 they are making payments to a Medicare beneficiary and learn that in 1998 the employee/claimant had a work comp claim (that met the criteria for reporting to CMS) which is the original cause of the medical problems, CMS can demand immediate payment from the work comp insurer. If the work comp insurer put their paper file in storage ten years ago, they will need to retrieve it promptly, review it immediately and issue payment to CMS if justified, or face paying double damages after CMS has filed suit for recovery.
The question then becomes which work comp claims do the insurer (or the employer!) have to worry about? If you are leaving the medical benefits open when the indemnity benefits are closed, then you do not need to be concerned about CMS compliance. If you are buying out the future medical benefits at the time of the work comp settlement, then the answer is you need an approved MSA on any claims where:
- The employee/claimant is already Medicare eligible which includes
1. Anybody already 65 years of age or older
2 Anybody already collecting social security disability benefits for 24 months or longer
3. Anyone already eligible for Medicare or Medicaid and the total settlement is greater than $25,000
4. Anybody with End Stage Renal Disorder,
OR
- The employee/claimant has a “reasonable expectation” of becoming a Medicare beneficiary within 30 months of the date of the settlement and the settlement is greater than $250,000 including the indemnity portion of the settlement
“Reasonable expectation” is defined as:
- Anyone age sixty-two years and six months, or older, at the time of settlement
- Anyone under age 65 with permanent disabilities
- The claimant has applied for Social Security Disability Benefits
- The claimant has been denied Social Security Disability Benefits but anticipates appealing the denial decision
- The claimant has already file an appeal of Social Security Disability Benefits denial
- Anyone with end stage renal failure that has not yet qualified for Medicare benefits
The difficult part of “reasonable expectations” is it covers any employee/claimant who receives a disability rating. If the medical provider gives the employee a ten percent (10%) rating to the body as a whole, with a total settlement of $260,000 with $250,000 for the indemnity benefit, does the insurance company need to go through the process and cost of obtaining CMS approval of a MSA? The decision whether to obtain CMS approval or not has to be made on a claim-by-claim basis. If the decision is the cost of the MSA and time for getting it approve is not worth the effort, keep in mind all responsible entities – the insurer/employer/employee/medical providers, plaintiff attorney and defense attorney – remain responsible for any future cost paid by Medicare on the work related injury. In essence, you are leaving the future medical expense open, regardless of what your settlement agreement states.
The only sure way to avoid having exposure for future medical care on a claim where the employee/claimant meets the Medicare eligible definition or there is a “ reasonable expectation of the employee becoming a Medicare beneficiary, is to obtain the CMS approval of the MSA. Please note: Having a MSA as a part of the settlement but never obtaining CMS approval of the MSA is the same as never having a MSA.
For a MSA to be approved by CMS, it has to contain all the information the reviewer at CMS will need to make a decision. Unfortunately, there is no formula which will tell you if the MSA will be approved by CMS. This information that has to be supplied to CMS includes:
- All medical records
- The nature and severity of the injury
- Whether the employee/claimant has had a full recovery or partial recovery
- If the employee/claimant not had a full or partial recovery, what time frame is there before there will be a recovery
- The date the employee/claimant is entitled to Medicare or will become entitled to Medicare
- Whether the employee/claimant's condition is stable or is there a possibility the employee/claimant's condition will worsen
- Whether the employee is classified as permanent partial disabled (and what percentage disability rating) or is the employee/claimant permanent total disabled (100% disability rating)
- Whether or not the employee/claimant is a paraplegic or quadriplegic or amputee as the result of the accident
- Where the employee/claimant is living – at home, in an assisted living facility or nursing home
- The amount of medical cost already paid by the work comp insurer
- The dollar amount of a structured settlement or lump sum settlement
- The age of the employee/claimant
- The anticipated future cost of medical care for the employee/claimant(WCxKit)
As it currently stands, all insurers must be able to electronically report all their workers' comp claims to CMS by January 1, 2011. The CMS computers will be able to match any Medicare beneficiary to the work comp claim by their social security number. For the insurer (or self-insured employer) to protect themselves from future claims from CMS, they must make sure they abide by the MSP requirements, including having CMS approval of a MSA.
Author Rebecca Shafer, JD, President of Amaxx Risks Solutions, Inc. is a national expert in the field of workers compensation. She is a writer, speaker and website publisher. Her expertise is working with employers to reduce workers compensation costs, and her clients include airlines, healthcare, printing/publishing, pharmaceuticals, retail, hospitality and manufacturing. Contact: RShafer@ReduceYourWorkersComp.com.
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Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker or agent about workers comp issues.
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Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker or agent about workers comp issues.
©2010 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law. If you would like permission to reprint this material, contact Info@WorkersCompKit.com.
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