Compromise & Release Settlements in Workers’ Compensation

There are many Injured Workers who seek to settle their Workers’ Compensation cases via a Compromise & Release (C & R.)

A C & R settlement is commonly referred to as a “buy-out” of the case.  It is referred as a “buy out” because many times C & R settlements include a “buy out” of the Injured Worker’s entitlement to lifetime medical care.  Lifetime medical care, for worker’s compensation purposes, means “lifetime care” for the body parts that are considered work-related.  Lifetime care does not include non-industrial body parts.   Medical Treatment Awards in workers’ compensation do not provide all encompassing healthcare services that a regular insurance policy would provide.

There are many Injured Workers who are also Medicare Recipients or are considered as Medicare Eligible.  As a result, Medicare may require such an individual to include a Medicare Set Aside to be part of their Compromise & Release.

This article will discuss what a Medicare Set Aside is, the goal of Medicare Set Asides, how Medicare Set Asides operate, how Medicare Set Asides can be structured, and why certain Injured Workers need to have Medicare Set Asides.    Note: This article will not discuss MSA threshold amounts for submission for CMS approval.

What Is Medicare? Who is a Medicare Recipient?

Medicare is the federal health insurance program for ”[P]eople who are 65 or older Certain younger people with disabilities People with End-Stage Renal Disease (permanent kidney failure requiring dialysis or a transplant, sometimes called ESRD)” Medicare.

In sum, Injured Workers over 65, Injured Workers who have filed and awarded Social Security Disability, and Injured Workers who have permanent kidney failure requiring dialysis or transplant all may have received a Medicare Card.   For Social Security Disability Insurance (SSDI) Recipients, there is a delay period of 24 months from the date of eligibility to receive Medicare Insurance.

What is a Medicare Set Aside (MSA)?

 A Workers’ Compensation Medicare Set Aside Arrangement is frequently abbreviated as either WCMSA or MSA.

A WCMSA allocates a portion of the WC[Workers’ Compensation] settlement for all future work-injury-related medical expenses that are covered and otherwise reimbursable by Medicare (“Medicare covered”). When a proposed WCMSA amount is submitted to CMS for review and the claimant (who may or may not be a beneficiary) obtains CMS’ approval, the CMS-approved WCMSA amount must be appropriately exhausted before Medicare will begin to pay for care related to the beneficiary’s settlement, judgment, award, or other payment.” Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA) Reference Guide Version 3.1 May 11, 2020 COBR-Q2-2020-v3.1 [emphasis added]

In sum, monies that have been placed in the Medicare Set Aside must be used before Medicare will pay for the work-related body parts that were subject to the settlement.

Example: Injured Worker settles his Back Injury by Compromise & Release for $50,000.00, with $5,000.00, for a self-administered Medicare Set-Aside.   Applicant went in to have back surgery for which the facility charged $10,000.00.   The Injured Worker would have to pay his $5,000.00 from his MSA prior to Medicare paying (or adjusting) the balance.

It is noted “[o]nce the CMS-approved set-aside amount is exhausted and accurately accounted for to CMS, Medicare will pay primary for future Medicare-covered expenses related to the WC injury that exceed the approved set-aside amount.” Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA) Reference Guide Version 3.1 May 11, 2020 COBR-Q2-2020-v3.1 [emphasis added]

 Why is the Goal of the Medicare-Set Asides?

“The goal of establishing a WCMSA is to estimate, as accurately as possible, the total cost that will be incurred for all medical expenses otherwise reimbursable by Medicare for work-injury related conditions during the course of the claimant’s life, and to set aside sufficient funds from the settlement, judgment, or award to cover that cost.” Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA) Reference Guide Version 3.1 May 11, 2020 COBR-Q2-2020-v3.1 [emphasis added]

Note: In doing so, Medicare can avoid being forced to pay all of an Injured Worker’s treatment which the Workers’ Compensation Insurance was responsible for paying.  In the past, Injured Workers would get their settlements and immediately turn to Medicare to pay for every expense.

How Can Medicare Set Asides Be Structured?

Medicare Set Asides can be structured in two ways: lump sum and structured.  “WCMSAs may be funded by a lump sum or may be structured, with a fixed amount of funds paid each year for a fixed number of years, often using an annuity.” Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA) Reference Guide Version 3.1 May 11, 2020 COBR-Q2-2020-v3.1 [emphasis added]

Structured MSAs are usually done through the employment of an annuity company which will issue the payments.   Some of the Structured MSAs will guarantee the payments regardless of whether the Injured Worker is alive. Other Structured MSAs pay out over time only if the Injured Worker remains alive. This is something that can be negotiated.

Who Generates the Medicare Set Aside Amount?

In most circumstances, there are companies that specialize in preparing MSAs.

The goal of the amount of the MSA is that it must “must take Medicare’s interest with respect to future medicals into account.” Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA) Reference Guide Version 3.1 May 11, 2020 COBR-Q2-2020-v3.1 [emphasis added]

What is the Basis for Medical Set Asides?

“Medicare as Secondary Payer “Medicare Secondary Payer” (MSP) is the term used when the Medicare program does not have primary payment responsibility on behalf of its beneficiaries—that is, when another entity has the responsibility for paying for medical care before Medicare.” Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA) Reference Guide Version 3.1 May 11, 2020 COBR-Q2-2020-v3.1 [emphasis added]

How is Medicare a Secondary Provider and Not Primary? 

“Medicare is secondary payer to group health plan insurance in specific circumstances, but is also secondary to liability insurance (including self-insurance), no-fault insurance, and WC[Workers’ Compensation.] An insurer or WC[Workers’ Compensation] plan cannot, by contract or otherwise, supersede federal law, for instance by alleging its coverage is “supplemental” to Medicare. WC[Workers’ Compensation] is a primary payer to the Medicare program for Medicare beneficiaries’ work-related illnesses or injuries.” Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA) Reference Guide Version 3.1 May 11, 2020 COBR-Q2-2020-v3.1 [emphasis added]

When an Injured Worker has Medicare and a Workers’ Compensation Case, Who are They Supposed to Treat With?

“Medicare beneficiaries are required to apply for all applicable WC benefits. If a Medicare beneficiary has WC coverage, providers, physicians, and other suppliers must bill WC[Workers’ Compensation] first. In order to comply with 42 U.S.C. § 1395y(b)(2) and § 1862(b)(2)(A)(ii) of the Social Security Act, Medicare may not pay for a beneficiary’s 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.” Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA) Reference Guide Version 3.1 May 11, 2020 COBR-Q2-2020-v3.1 [emphasis added]

If the Workers’ Compensation Claim Is Denied or the Body Part Denied, Who Pays for the Treatment?

If responsibility for the WC [Workers’ Compensation] claim is in dispute and WC[Workers’ Compensation] will not pay promptly, the provider, physician, or other supplier may bill Medicare as primary payer. If the item or service is reimbursable under Medicare rules, Medicare may pay conditionally, subject to later recovery if there is a subsequent settlement, judgment, award, or other payment. (See 42 C.F.R. § 411.21 for the definition of “promptly” with regard to WC[Workers’ Compensation].) Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA) Reference Guide Version 3.1 May 11, 2020 COBR-Q2-2020-v3.1 [emphasis added]

What If I Need Legal Advice?

If you would like a free consultation concerning any workers’ compensation case, please contact the Law Offices of Edward J. Singer, a Professional Law Corporation. They have been helping people in Central and Southern California deal with their worker’s compensation cases for 28 years. Contact us today for more information. Click Here.

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