What does Medicare have to do with my workers compensation case? (What is an MSA?)
Medicare is what is called a “secondary payer.” That means that if any other insurance is supposed to cover a medical bill, then Medicare does not have to cover it. Since workers’ compensation covers work injuries, they are the “primary payer” for medical care for the injuries that occur at work. Most workers are not covered by Medicare, although some are. If you are covered by Medicare and injured at work your doctors should be billing the workers’ compensation insurance and not Medicare.
If Medicare does pay some bills for treatment that is found to be “industrial” (a work injury), then Medicare will be entitled to be reimbursed by the workers’ compensation insurance company. You need to keep your attorney informed about any doctors you see who are billing Medicare.
Workers’ compensation insurance is required to pay for medical care for your industrial injuries as long as you need that care, sometimes for life. So, even if you are not on Medicare when you are injured, you may become eligible for Medicare sometime later, when the workers’ compensation insurance is still responsible for medical care to some part or parts of your body. If you settle your case by Stipulation and Award, which keeps your right to medical care open, then the workers’ compensation insurance will always be responsible for medical care to your work injured body parts. In that case, you would use your Medicare for all medical treatment except that treatment for which workers’ compensation was responsible.
A different problem comes up if you want to settle your future medical care by Compromise and Release. If you settle your workers’ compensation case and accept a lump sum dollar amount to release the workers’ compensation insurance from any future responsibility for your medical care, then you cannot look to Medicare to cover that treatment. Their position will be that you already have money which is designated to pay for that treatment so you are the “primary payer.” Medicare won’t pay the future bills that have already been “paid” (in advance) by the workers’ compensation insurance. In fact, they won’t even try to figure out how much money from your settlement was for medical care and how much was for permanent disability and other things that they shouldn’t get credit for. If your settlement is for $100,000.00, Medicare will claim credit for that whole amount, even if half of it was intended to be for permanent disability benefits and not medical care.
There is a way around this problem, but it is not easy. We suspect that it is not easy because Medicare would prefer that you do not close your right to future medical care, but keep it open so that Medicare has less bills to pay. Here is how it works. Medicare requires that its interest is protected in any settlement that might involve them. The method that has been developed to protect their interest begins with an analysis of the potential future medical costs of your work injury. This is a projection based on your last two years of medical care and on the predictions of your treating doctor(s) as to what care you are likely to need. There are companies that specialize in analyzing your likely future medical costs. The workers’ compensation insurance will pay one of these companies to create a Medicare Set Aside (MSA) Analysis. It will consist of two parts, the future medical costs and the future pharmaceutical costs.
Once that analysis has been done it is submitted to the Center for Medicare Services (CMS) which will review it and decide if they think it is reasonable. Actually, they contract with some other company to do the initial review and make a recommendation. Then CMS will either accept the proposal or make a different recommendation, usually higher. When Medicare accepts an amount as reasonable, they will agree that if you keep that amount separate and spend it only for medical care, necessary to treat the agreed upon body parts, then, if you spend it all down, then Medicare will resume covering the medical care for your industrial injuries.
Here is an example. You have a back injury. Your doctor thinks that you may need surgery sometime in the future due to that injury. You are taking 1 or 2 Vicodin per day and the doctor expects that you will require visits to an orthopedic doctor about 6 times per year and 10 or 12 physical therapy sessions per year for flare-ups. The amount of your future care is computed, using today’s costs. For sake of example, let’s say the Vicodin costs $30 per month or $360 per year; the orthopedic visits $50 each or $300 per year and the therapy sessions are $70 each or $840 per year. Medicare will always use the larger amount, so 2 Vicodin per day and 12 therapy sessions per year. The surgery may cost $30,000 at Medicare rates. So in this fantasy example your total estimated cost is $1,500 per year plus the one-time surgery cost of $30,000 If you are young enough to have a life expectancy of 40 years, then the total amount is $60,000.00 plus the $30,000 surgery for a grand total of $90,000.00. That would be the Medicare Set Aside (MSA) amount. That is the amount from your settlement that would have to be “set aside.” You will have to put it into a Federally insured, interest bearing account and keep it separate. You will use that account only to pay medical bills that Medicare (or workers’ compensation) would otherwise have paid for your industrially injured back. If you spend all the money appropriately, and you are still alive and needing treatment, Medicare will begin to cover your treatment to your back.
If you do not spend all the money before you die, then the money goes to your heirs. That is an advantage over keeping your medical care open by Stipulation and Award. If the workers’ compensation insurance is responsible for your life-time medical care, that responsibility ends when your “life-time” ends. Any unspent money is the property of the insurance company.
You might ask, “How would I have a forty-year life expectancy if I am on Medicare? Doesn’t Medicare start when you are 65 years old?” The answer is that if you are on Social Security Disability, then you will be eligible for Medicare at a younger age. You become entitled to Medicare 30 months after you become eligible for Social Security Disability. So, if you have applied for Social Security Disability you may be “within 30 months of being eligible for Medicare. If your claim for Social Security Disability is finally accepted or determined to be valid, then it will usually relate back to the date you applied and the 30 months will start then. So, if it takes two years (24 months) from the date you apply, until you are awarded SSD, you will become eligible for Medicare in just another 6 months from the time of the award.
The reason this is important is that, while Medicare wants every C&R to protect their interest, they will only review those settlements that meet their minimum review requirements. If your settlement is over $250,000.00 (in total, including all benefits already paid) and if you are within 30 months of being eligible for Medicare, then Medicare will review your MSA. If you are 62.5 years old, or if you have applied for SSD, then you meet that part of the requirement.
If you are already on Medicare and your settlement is $25,000.00 or more, then you meet the review requirements. So settlements which close future medical care are more difficult if you are older. The difficulty is that Medicare is very slow to review these proposals. While a vendor may take only a few weeks to put together the analysis, it might take CMS (and their reviewing entity) 6 months or more to approve or reject a proposal. Depending on how thorough the initial submission is, CMS might make several requests for more information and then they might say they demand that a lot more money be included in the MSA. This can end up being a deal breaker. If Medicare wants a lot of money to be included for care which you will probably never get, the workers’ compensation insurance might just decide they don’t want to pay that much and there will be no C&R. The workers’ compensation insurance might decide they are better off to leave your medical care open. There is no way to force them to buy out your future medical care.
You might wonder, “Why is the workers’ compensation carrier so concerned about Medicare? Why don’t they just give me my money and let me deal with Medicare? The answer is that Medicare threatens to hold the insurance companies liable if they have not done what they can to protect Medicare’s interest. That is why some insurance companies require that an inquiry is made to Medicare on every case settled by C&R, to see if the applicant, no matter how young, is on Medicare or has applied for SSD.
Attorneys on both sides are also expected to protect Medicare’s interest and are under threat of being held responsible for not protecting Medicare’s interest. That threat forces us into the system that can delay a Compromise and Release for 6 months to a year or more. The threat to you is that you could end up in the position of desperately needing medical care and not being able to obtain it because Medicare will not pay.
Because of this problem, your attorney may recommend that you do not try to settle your future medical care by Compromise and Release, but settle by Stipulation with Request for Award, leaving your medical care to be provided by the insurance carrier. Every situation is unique and you and your attorney will need to discuss this before entering into a settlement.
© Robert S. Havens 2017
This article is for general information, and not meant as specific legal advice. You should always see an attorney for specific legal questions.