(2) Medicare secondary payer(A) In general Payment under this subchapter may not be made, except as provided in subparagraph (B), with respect to any item or service to the extent that-(i) payment has been made, or can reasonably be expected to be made, with respect to the item or service as required under paragraph (1), or(ii) payment has been made, or can reasonably be expected to be made promptly (as determined in accordance with regulations) under a workmen's compensation law or plan of the United States or a State or under an automobile or liability insurance policy or plan (including a self-insured plan) or under no fault insurance....(B) Conditional payment (i) Repayment required: Any payment under this subchapter...shall be conditioned on reimbursement to the appropriate Trust Fund....(ii) Action by United States. In order to recover payment under this subchapter for such an item or service, the United States may bring an action against any entity which is required or responsible (directly, as a third-party administrator, or otherwise) to make payment with respect to such item or service (or any portion thereof) under a primary plan (and may, in accordance with paragraph (3)(A) collect double damages against that entity), or against any other entity (including any physician or provider) that has received payment from that entity with respect to the item or service, and may join or intervene in any action related to the events that gave rise to the need for the item or service. The United States may not recover from a third-party administrator under this clause in cases where the third-party administrator would not be able to recover the amount at issue from the employer or group health plan and is not employed by or under contract with the employer or group health plan at the time the action for recovery is initiated by the United States or for whom it provides administrative services due to the insolvency or bankruptcy of the employer or plan.(iii) Subrogation rights The United States shall be subrogated (to the extent of payment made under this subchapter for such an item or service) to any right under this subsection of an individual or any other entity to payment with respect to such item or service under a primary plan.
If a lump-sum compensation award stipulates that the amount paid is intended to compensate the individual for all future medical expenses required because of the work-related injury or disease, Medicare payments for such services are excluded until medical expenses related to the injury or disease equal the amount of the lump-sum payment.
(1) A lump-sum compromise settlement is deemed to be a workers' compensation payment for Medicare purposes, even if the settlement agreement stipulates that there is no liability under the workers' compensation law or plan.
The parties stipulate and the arbitrator finds that no portion of this settlement represents payment of past, present or future medical expenses. Accordingly, the amount to be set aside for Medicare future injury related medical expenses is $0.00.
(1) the date of Medicare entitlement,(2) the basis for Medicare entitlement,(3) the type and severity of injury,(4) the age and projected life span of the beneficiary,(5) the worker's compensation classification of disability type,(6) the prior Medicare and worker's compensation payments in the previous 1 or 2 years,(7) the amount and allocation of settlement proceeds,(8) the commutation of time periods over which settlement allocations are spread,(9) the residence (nursing home or otherwise) of the beneficiary, and(10) the reasonableness of the allocation given Medicare's projected payments.
(10) the reasonableness of the allocation given Medicare's projected payments.
B. Documentation Required
Those seeking advance approval must provide Medicare with sufficient medical documentation to ascertain 1) what the injuries are and 2) whether the injuries or medical care are being contested as unrelated to the accident. Required documentation also includes treating medical records and recent IME reports. Counsel or adjusters may need the help of medical life care planners to establish projected future medical care expenses. The last two or three years of workers' compensation medical payments record can also be provided.
At a minimum, those seeking approval must submit the proposed settlement agreement and the documentation (e.g., doctors' reports) upon which projected future medical expenses, both Medicare or non-Medicare, are based.
C. Minimum Threshold
Our regional center for Medicare & Medicaid Services recently stated a threshold level below which their review approval is not required (pursuant to the guidelines of the Internal Memorandum).
An injured individual who is not yet a Medicare beneficiary should only consider Medicare's interests when the injured individual has a "reasonable expectation" of Medicare enrollment within 30 months of the settlement date, and the anticipated total settlement amount for future medical expenses and disability/lost wages over the life or duration of the settlement agreement is expected to be greater than $250,000.
A memorandum was issued on May 23, 2003, from the Department of Health and Human Services in an attempt to clarify the review threshold for claimants who are not yet Medicare beneficiaries. The memorandum from Thomas L. Grissom, Director, Center for Medicare Management, states in pertinent part:
[T]o the extent a WC settlement meets both of the criteria (i.e., the settlement is greater than $250,000 AND the claimant is reasonably expected to become a Medicare beneficiary within 30 months of the settlement date), then CMS approved Medicare set-aside arrangement is appropriate. However, if a WC settlement is $250,000 or less OR where the claimant of that settlement is not reasonably expected to become a Medicare beneficiary within 30 months of the settlement date, then a CMS approved Medicare set-aside arrangement is unnecessary. ...[W]hen an individual's settlement does not meet both thresholds Medicare will make payment for WC related services that are otherwise reimbursable under Medicare once the individual enrolls in Medicare.
Thus, most workers' compensation settlements do not now qualify for Medicare prior approval. However, where the claimant is a Medicare recipient, or is expected to be one within 30 months, consideration of Medicare's allocation amount is required even if the dollar amount of the settlement is less than $250,000. Note that the current review thresholds (i.e., 30 months and $250,000) will be subject to adjustment once CMS has experience reviewing these matters under the instructions of the internal guidelines.
Where the claimant is a Social Security Disability recipient or, more likely, a Medicare recipient or someone expected to be a recipient, Medicare requires adequate protection of his or her future interests. Specifically, Medicare requires an allocation of that portion of the settlement that represents future medical expense.
Allocation of appropriate monetary amounts for future medical expense can be difficult, particularly if there are conflicting medical opinions or disputes about whether expenses are "reasonable and necessary" or "related."
Note that the allocation requirement applies when the claimant is a Medicare recipient or can reasonably be expected to be one within 30 months of the settlement.
Failure to allocate might be considered a failure to adequately protect Medicare's interests, which could lead to reimbursement proceedings.
Keep the following Medicare-lien pointers in mind:
(1) Parties to a settlement should inquire about the claimant's Medicare status and whether he or she has applied for Social Security benefits.
(2) Include a future-related-medical-expense allocation in the settlement contract that i) assures that Medicare liens for conditional payments will be satisfied and ii) accounts for Medicare's future liability for injury-related medical expense.
(3) When settlement proceeds come in, put Medicare's portion in a separate interest-bearing account or other arrangement acceptable to Medicare.
(4) The standard settlement contract language should be modified to reflect i) whether future medical care is disputed, ii) if so, the basis for the dispute, and iii) what portion of the funds if any represents settlement of expected future medical expense.
(5) If you seek Medicare's prior approval of the allotted amounts and adequacy of the set aside arrangements, you must apply to the regional CMS office.
Efforts are underway to refine requirements and create expedited procedures to obtain prior Medicare approval from the regional CMS office. How these settlement proposal packages will be handled and whether more definitive guidelines for Medicare's prior approval will be developed remains to be seen.
Disclaimer: This article is not intended as a substitute for professional legal advice nor intended to be taken as legal advice. Only a review by a legal professional of the specific facts and the related medical information for each claim can be relied upon for an accurate assessment of application.
It is highly recommended that readers consult a Medicare Set Aside or MSP compliance expert. Contact our office for further assistance, review or representation.
Author's Note: The Centers for Medicare and Medicaid Services (CMS) continues to update and change their procedural requirements and the minimum review threshold is currently set at $25,000.
Only a current review of the most recent Federal Regulations, CMS guidelines and CMS directives can be relied upon. CMS directive memos should be read in their entirety from earliest to current for a running history of changes as they are cumulative. Some of the early directives are subsequently modified or changed by updated memos. See the CMS Reference Guide link below.
Please also note, the new address for prior approval submission has now changed to the CMS Detroit office:
Coordination of Benefits Contractor,
P.O. Box 33849,
Detroit, Michigan 48232.
Medicare Secondary Payer Recovery Contractor (MSPRC) tele 1-866-677-7220
READ the online Guide: Updated Medicare Set-aside Reference Guide (12-14-2015)
SEE the CMS Medicare Recovery Portal
NOTE: This article was only a starting point for early adoption of MSP regulations and procedures which have dramatically grown in scope. We strongly recommend consulting an MSP expert at MEDVAL for compliance, guidance and instruction.
ORDER: The Complete Guide to Medicare Secondary Payer Compliance, by Jennifer C. Jordan (LexisNexis®)
Order by phone, call 1-800-223-1940 Order online, click here For MSP Compliance Contact MedVal or other MSP specialists.
For assistance in a Illinois workers compensation claim contact an Illinois workers compensation attorney.
(c) 2007 Work Comp Chicago Illinois Workers Compensation Attorneys (312) 541-0049