Using a Workers Compensation Medicare Set Aside Arrangement (WCMSA) in Your Settlement Can Help Protect Medicare’s Interest and Preserve Your Right to Future Medical Care through Medicare
Medicare is a federal health insurance program available to people who:
- Are 65 years of age or older; or
- Have qualified for Social Security Disability Insurance (SSDI) benefits; or,
- Have end stage renal disease, which is permanent kidney failure so severe that it requires dialysis or a kidney transplant.
If you sustain a workplace injury or contract an occupational disease then you must consider Medicare’s interests when negotiating a California workers compensation settlement. Though you may have Medicare coverage, Medicare may not have primary payment responsibility for medical treatment that you receive if your care is the responsibility of other health care coverage, such as workers compensation, no-fault insurance, liability insurance, self-insurance, or group health plan insurance.
What is the Relationship Between Medicare and Workers Compensation?
Your employer – or its workers compensation insurance carrier – is responsible for the payment of medical treatment related to your work injury or occupational disease. This is true even if you are a Medicare beneficiary.
Medicare requires its beneficiaries to apply for all applicable workers compensation benefits as a term of coverage. And physicians, medical providers, surgeons, therapists, and suppliers of medical devices must bill the workers comp insurance carrier before they bill Medicare if there is reason to believe that the injury or disease is work-related.
Section 1862(b) of the Social Security Act states that Medicare may not pay for your medical expenses when payment “has been made or can reasonably be expected to be made under a workers compensation plan, an automobile or liability insurance policy or plan (including a self-insured plan), or under no-fault insurance.” Payment is made if you negotiate a California workers compensation settlement or the Workers Compensation Appeals Board Judge enters an award or order.
If the workers’ compensation claim is disputed and the workers’ compensation insurance carrier refuses to pay promptly, then the physician, surgeon, health care provider, or medical supplier may bill Medicare as the primary payer. This enables you – the injured worker – to obtain care while your claim is pending. But you must consider any conditional payments made by Medicare if you settle your work comp claim.
Do Medicare’s Rights Prevent Me from Settling My Workers Comp Case?
No. You can settle your workers compensation case despite Medicare’s interests. But you must structure your settlement properly.
Personal injury cases, car accidents, and workers comp litigation are expensive and unpredictable. Many insurance carriers, therefore, will try to settle your claim. The lump sum settlement agreement will allocate money toward different categories – wage loss, permanent partial disability, and future medical needs – and include language stating who is responsible for the payment of medical treatment to date.
An injured employee who receives a workers comp settlement or award that includes the payment or allocation of funds toward future medical expenses must take Medicare’s interests into account when settling the case. This is done through the use of a Workers Compensation Medicare Set Aside Arrangement in the settlement documents.
What is a Workers’ Compensation Medicare Set-Aside Arrangement?
A Workers Compensation Medicare Set-Aside Arrangement allocates a portion of your total workers compensation settlement for all future medical expenses related to your workers’ comp claim that are covered and reimbursable by Medicare. These are called Medicare covered expenses.
A proposed Medicare Set-Aside amount is submitted to CMS. CMS will review the proposed amount and then issue a decision. If you obtain approval from CMS then you must spend the CMS-approved MSA amount before Medicare will start to pay for medical treatment related to your workers’ comp claim.
Once the CMS-approved MSA amount is exhausted and accounted for to CMS, Medicare will take over primary responsibility for future Medicare-covered expenses related to your work injuries that exceed the approved set-aside amount.
How Much Money Do I Need to Put in a Medicare Set Aside?
We recommend that you ask the employer and insurance carrier to pay a third-party expert to determine the appropriate MSA amount. There are several companies that do nothing but MSA evaluations and proposals.
Who Will Fund the Workers Compensation Medicare Set Aside Arrangement?
There are two ways to fund a MSA when negotiating your settlement: through a lump sum MSA or through a structured MSA. CMS allows either method.
Regardless of what method you use, it’s important that your settlement documents state that your employer or its workers compensation insurance carrier are responsible for funding the MSA. Under no circumstances should you settle a case requiring a MSA unless the employer or its insurance carrier are funding it. Medical treatment is expensive and health care costs rise every year. Make sure the employer pays for medical care you’ll require for your industrial accident and injuries.
Funding A WCMSA With a Lump Sum
Under a lump sum funding arrangement your employer agrees to fund the entire MSA with a single payment. This lump sum amount, which is approved by CMS, is designated for all future medical expenses related to your workers comp claim. Medicare will not make any payments for treatment related to your work injury until you exhaust all the funds in your MSA.
We prefer lump sum Workers Comp Medicare Set Asides for several reasons:
- You receive all of the settlement funds at one time. If you die then your family will receive the unspent portion of the MSA. This may be a significant amount that can help your family during this difficult time.
- Lump sum MSAs are easier to monitor and keep track of. This is important since you will be responsible for keeping track of all expenditures from the MSA. Medicare requires you send in a form each year, documenting any money spent from the Medicare Set Aside.
- You don’t have to worry about what happens if the annuity company or insurer go bankrupt. A structured MSA is funded with the purchase of an annuity. With an annuity the MSA is funded with seed money plus a yearly payment. If the annuity company or the insurance carrier go bankrupt, however, it may be difficult to get the money you’re owed. A lump sum MSA eliminates this possibility.
Unfortunately many employers and insurance companies will not agree to a lump sum MSA, especially if the value of the MSA is significant. In cases involving spinal cord injuries, paralysis, and traumatic brain injuries, where the cost of future medical care is large, the employer and insurer will want to avoid a lump sum MSA to save some money.
Funding a MSA with an Annuity (Structured MSA)
CMS will allow the parties to propose a structured MSA. With a structured MSA the employer or its insurance carrier must make an initial deposit that will cover the first surgical procedure or replacement recommended, if applicable, and two years of annual payments.
The initial deposit, which is known as “seed money,” is then followed by annual payments that continue for a set period. These annual deposits, which occur on a defined schedule, must be used to cover projected future medical expenses.
If in any given coverage year you do not use the deposited funds on medical treatment related to your workers comp claim, those unused funds are carried forward to the next year and added to the next annual deposit from the insurer. If you spend all the money in your MSA in a given coverage year on medical care for your work-related injuries then Medicare will pay for workers comp claim-related medical expenses until you receive the next annual deposit. Medicare can require you to provide receipts showing what the MSA money was spent on.
Before signing settlement documents providing for a structured MSA, make sure they include a provision addressing what happens if the insurance company or the annuity company go bankrupt. The employer should remain liable for funding the MSA if the annuity company and insurer go out of business.
Who Can Submit a Workers Compensation Medicare Set Aside Proposal to CMS?
Any party involved in a workers’ compensation claim may submit a WCMSA amount to CMS for approval.
This includes the injured worker, the injured worker’s attorney, the attorney for the employer and insurer, MSA agents or consultants, or other representatives appointed by the injured worker.
Understanding the MSA Review Thresholds and When CMS Will Evaluate a Medicare Set Aside Proposal
If you meet the review thresholds, you MUST submit the proposed settlement to the Center for Medicare Services. Otherwise you are at risk of forfeiting Medicare coverage unless you pay Medicare a significant portion of your work comp settlement.
CMS will review a proposed Medicare Set Aside amount if you meet the following review thresholds:
- You are a Medicare beneficiary and the total settlement amount is more than $25,000.00 (total settlement amount includes wage loss and permanent disability paid previously by the carrier); or
- You have a reasonable expectation of enrolling in Medicare within 30 months of the settlement date and the anticipated total settlement amount for future medical expenses and disability or lost wages over the life or duration of the settlement is expected to be more than $250,000.00.
You have a reasonable expectation of Medicare enrollment within 30 months if any of the following apply:
- You have applied for Social Security Disability Insurance (SSDI) benefits
- The Social Security Administration (SSA) has denied your claim for disability benefits but you expect to appeal that decision
- You have appealed a denial of Social Security Disability benefits at the initial application, reconsideration, or hearing level
- You are at least 62 years and 6 months old
- You have End Stage Renal Disease (ESRD) but do not yet qualify for Medicare.
IF YOU MEET ANY OF THESE CRITERIA, AN MSA IS REQUIRED BY LAW.
If you are an injured worker over the age of 65 or an employee who suffered a severe spinal cord injury, brain injury, back injury, hip injury, neck injury, knee injury, or shoulder injury that will keep you out of work for at least one year, we recommend that you submit a proposed Medicare Set Aside amount to CMS if you meet the review thresholds. The risk to you is high, and the insurance carrier will attempt to shift their future risk to you.
What Happens if I Do Not Consider Medicare’s Interests When Settling a Workers Compensation Claim?
Medicare has the right to refuse to pay for future medical expenses until the entire amount of the settlement is exhausted on medical treatment if you fail to take its interests into account. Medicare has a right of recovery against any person or entity that received any portion of a third-party payment either directly or indirectly. Medicare also has a subrogation right with respect to any third-party payment.
This is why insurance carriers are usually proactive in obtaining Medicare’s approval of a settlement. Medicare can go after them for funds expended – and will because it knows insurance carriers have deeper pockets than individuals.
A Workers Compensation Attorney Fees to Navigate Medicare Issues
Worker’s compensation attorneys are paid 15% of the total settlement. Attorney fees must be paid in addition to the MSA amount by the worker’s compensation insurance carrier. For every $10,000 in settlement, the attorney is paid $1,500. As there is no out of pocket cost, and considering the future risk of being denied Medicare in the future, (such as when you are in a nursing home) the only reason not to use an attorney is that the person’s greed overcomes their common sense. After all, if you wouldn’t do your own dental work, why would you do your own legal work?