Issue #20        September 5, 2005



By John J. Campbell, CELA, MSCC


          Under federal law, a worker’s compensation (WC) plan is a primary payer with respect to services also covered under Medicare.   Medicare is not likely to pay for any work injury related medical expenses until all WC benefits and remedies, including a lump-sum compromise settlement, have been exhausted by the beneficiary.  (42 C.F.R. §411.43(b); 42 C.F.R. §411.46(b)(1).)  If Medicare does make any such payments prior to settlement of the WC claim, those payments are conditional.  That is, Medicare has the right to be reimbursed from settlement proceeds.  (42 C.F.R. 411.24.)


Federal regulations also specifically provide that Medicare will not pay for any future medical expenses after a lump sum settlement is received until the total future medical expenses related to the employee’s injury equals the amount of the lump sum settlement which was allocated to future medical expenses.  (42 C.F.R. §411.46(d)(2).)  If a WC settlement of future medical expenses represents an attempt by the WC carrier to shift liability for the claimant’s future medicals to Medicare, the regulations permit Medicare to disregard the settlement altogether.  (42 C.F.R. §411.46(b)(2). 


Because of Medicare’s requirement that no attempt be made to shift liability without reasonably considering Medicare’s interests, the first Medicare Set-Aside Trust was submitted to and approved by the Dallas Regional Office of HCFA (now CMS) in 1995.  Since that time, Medicare Set-Aside Trusts and other professionally administered and self-administered Medicare Set-Aside arrangements have come to be recognized as the preferred vehicles for reasonably considering Medicare’s interests in WC settlements.


          Currently, CMS requires that every WC settlement and a proposed Medicare Set-Aside arrangement must be submitted to CMS for approval whenever the settling claimant meets the following criteria:   1) The claimant is already a Medicare beneficiary and the total value of the settlement, including indemnity, exceeds $10,000; or 2) the claimant is reasonably expected to become eligible for Medicare within 30 months of the settlement and the total value of the settlement, including indemnity, is more than $250,000.  In these cases, some part of the WC settlement will need to be set aside to pay for future medicals until the requirements of 42 C.F.R. §411.46(d)(2) are satisfied and Medicare will again pay the claimant’s medical expenses. 


          In either a commutation or a compromise, the settlement must allocate an amount roughly equal to the amount of projected future medicals that would otherwise be covered by Medicare over the worker’s remaining life expectancy.  (42 C.F.R. §411.46(d)(2).)  When a Medicare Set-Aside Trust or other arrangement has not yet been created and the WC settlement itself does not allocate a specific amount of the lump sum settlement to future medical expenses, the actual amount to be allocated can often be negotiated with CMS.   The negotiated amount must at least be sufficient to demonstrate that Medicare’s interest has been reasonably considered.  CMS will require the beneficiary to place the negotiated amount into a Medicare Set-Aside arrangement to insure that Medicare will pay future benefits once the set aside amount is gone. 


          To safely complete any WC settlement where the claimant meets CMS’s review criteria, it is necessary to secure CMS’s approval of the Medicare Set-Aside Trust or other arrangement and the amount to fund the arrangement before the settlement is finalized.  To accomplish this, practitioners should involve CMS in the settlement process as early on as possible.  The earlier CMS can be involved in the settlement process, the better the prospects are for a reasonable set-aside amount. 


          It is important to note here that every WC case is different.  Each claimant will have different needs.  A proper Medicare Set-Aside arrangement must be customized to fit the individual needs of each WC claimant.  A so-called “form” trust or custodial agreement will not be appropriate in all cases.  It is vital that the Medicare Set-Aside arrangement be modified where needed to consider potential  consequences under federal and state tax laws, and under federal and state laws governing eligibility for means tested public benefit programs, depending on the circumstances of each individual case.  (For example, where Medicaid or Supplemental Security Income (SSI) eligibility is also an important settlement issue, a formal trust that also complies with federal and state Medicaid and SSI law must be used rather than a custodial agreement.)


          More and more, life care planners and other medical professionals are going about the business of submitting WC settlements to CMS for approval.  Often, their submissions are based solely upon what they project to be the claimant’s expected future medical expenses.  For smaller settlements in situations that do not have complex legal or benefit eligibility issues, this is often adequate.  However, these entities are not in the position to be able to draft custom trust or custodial documents; nor are they always able to recognize and advocate complex legal and public benefit issues that may justify a smaller set aside amount or may require compliance with laws other than those governing Medicare.   In larger and more complex settlements, a proper arrangement really requires the involvement of experienced counsel to prevent overfunding of the Medicare Set-Aside arrangement and to prevent potentially disastrous consequences outside of Medicare.


          The following is a general description of the step-by-step procedure recommended for Medicare Set-Aside attorneys seeking to obtain CMS approval of a WC settlement and Medicare Set-Aside arrangement:


1.         Begin by sending a comprehensive intake questionnaire with a HIPAA release, a Social Security Release, a “Consent to Release Medicare Information” form and a “Proof of Representation” form (See Appendix H) to the client in order to obtain complete information on the worker, the claim history and the settlement.  Also request a copy of any life care plan, IME or comprehensive medical assessment.

2.         Upon receiving the requested information, review this information and schedule a conference with the client to identify issues and recommend needed actions.

3.         If the client wishes to engage to perform specific services in connection with settlement, send the client an engagement letter, quoting fees and outlining the services to be performed.

4.         As soon as you are engaged, send a written request for a benefit statement along with the Social Security Release to the local Social Security office nearest to the claimant or plaintiff’s residence.

            Also contact the Medicare Coordination of Benefits (COB) Contractor by telephone and send a copy of the Consent to Release Medicare Information form to the COB Contractor at the following address with a follow up request in writing to determine whether a Medicare secondary payer (MSP) claim exists: 

Medicare—Coordination of Benefits
MSP Claims Investigation Project
P.O. Box 33847
Detroit, MI 48232

            (800) 999-1118


Provide the COB Contractor with the information it will require to initiate a search for a potential MSP claim and to identify the settlement and the claimant in Medicare’s Common Working File to prevent future overpayments.  The COB Contractor will refer the matter to the Medicare Secondary Payer Recovery Contractor (MSPRC), who will develop the information on any conditional payments and pursue recovery of any MSP claim.


Follow up with the MSPRC:


Address liability or no-fault MSP recovery inquiries to:

                                                MSPRC Auto/Liability
                                                PO Box 33828
                                                Detroit, MI 48232-3828

            Address Workers' Compensation MSP recovery inquiries to:

                                                MSPRC WC
                                                PO Box 33831
                                                Detroit, MI  48232-3831\ 

If a Medicare secondary payer claim does exist, have experienced counsel negotiate with CMS to obtain appropriate reductions or compromises to the claim amount; and make arrangements to obtain a release from CMS upon satisfaction of the final claim amount out of settlement proceeds.

5.         Perform a preliminary analysis of the case and, where the complexities of the case justify it, draft a preliminary analysis letter to the client. The preliminary analysis pinpoints special issues in the case that require attention; identifies the type of arrangement (i.e., a trust or custodial agreement) that is recommended in the particular situation; and identify documentation that client will need to provide.  That additional documentation will include copies of the Compromise & Release or settlement proposal; medical expense history for the claim and complete medical records for the past 2 years or from the date of injury if less than 2 years before; a statement regarding the client’s life expectancy or age rating. and any other information pertinent to the services you are being retained to provide. 

6.         Recommend preparation of a Medicare Set-Aside allocation report or cost projection to provide acceptable documentation to support the proposed Medicare Set-Aside arrangement and amount.  This work should be referred to a life care planner or other medical professional with knowledge and experience in preparing medical care and cost projections under CMS’ policy guidelines.  

7.         Review the Compromise & Release agreement that describes the terms of settlement.  If the C&R does not contain proper allocations between indemnity and future medical expenses, have an experienced MSAT or special needs attorney advise WC counsel and recommend changes to the C&R.

8.         Once settlement terms have been agreed to, although not necessarily finalized by the state workers’ compensation judge, have an experienced MSAT or special needs attorney draft the Medicare Set-Aside Trust or Custodial Agreement based upon the information supplied in the initial intake questionnaire and in subsequent communications and documents. 

9.         Prepare a detailed history and analysis of the worker’s injuries, how they were incurred, what permanent disabilities have resulted, what medical services (and expenses) have been necessary in the past and, finally, what medical services (and expenses) related to the injury are likely to be in the future, based upon the remaining life expectancy of the worker.  This history and analysis is usually based upon the Medicare Set-Aside cost projection or allocation report.

10.       Have an experienced MSAT or special needs attorney prepare a detailed “pleading” letter to CMS, outlining your analysis and the medical history of the claimant’s work related injury and treatments; exploring the legal issues in the case that may impact the reasonableness of the proposed Medicare Set-Aside amount; and requesting approval to fund the Medicare Set-Aside Trust or other arrangement with a proposed amount that the MSAT team determines to be reasonable.

11.       Send a draft version of a packet to the client for review and approval.  The packet contains the history, analysis and proposal to CMS in written form; copies of necessary supporting documentation, e.g. a life care plan or Medicare Set-Aside Allocation report, medical expense history for the WC claim, etc.; a copy of the Medicare Set-Aside Trust or Custodial Agreement itself; and a copy of the proposed settlement agreement.

12.       Once the packet of documents is approved by the client, prepare a final version and forward it to the COB Contractor at the following address:

c/o Coordination of Benefits Contractor
P.O. Box 33849
Detroit, MI 48232-5849
Attention: WCMSA Proposal

The COB Contractor then will forward the packet to the Worker's Compensation Review Center Joint Venture.  The WCRCJV will review the submission and forward it to the appropriate CMS Regional Office with a recommendation for or against final approval.                                                   

13.       If the parties have already obtained settlement approval from the appropriate state worker’s compensation agency, there may be a partial distribution of proceeds, but a prudent amount should be held back or set aside by the carrier or the claimant’s attorney to fund the Medicare Set-Aside Trust or Custodial Agreement upon approval by CMS.  It is usually advisable to hold back funds in addition to the amount proposed to CMS in this situation in the event CMS requires a greater set-aside amount than originally proposed.

14.       Follow up with the COB Contractor and WCRCJV to provide any further information or documentation that may be required and remain in touch periodically through the approval process.

                                                Worker’s Compensation Review Center

                                                Telephone: (301) 575-0160

15.       In cases where CMS does not agree to the initial set-aside amount, have an experienced MSAT or special needs attorney continue to communicate and negotiate with CMS to arrive at an amount that is reasonable.  Obtaining CMS’ approval of the proposed settlement and Medicare Set-Aside Trust or other arrangement provides the safety and finality necessary to accomplish settlement and prevent future liability exposure for claims from CMS for future secondary payments by Medicare, while insuring that Medicare will pay for future medical expense once the set aside amount is spent.

16.       Once CMS approval is obtained, forward the original Medicare Set-Aside Trust or Custodial Agreement to the funding party (usually the employer or carrier) along with a copy of CMS’ letter approving the set-aside proposal, and instructions to sign the Medicare Set-Aside Trust or Custodial Agreement (as “Settlor”) and return the signed originals with a check made out to the Trustee or Custodian in the amount to fund the trust or custodial agreement.

17.       Forward the original Medicare Set-Aside Trust or Custodial Agreement and funding check to the Trustee or Custodian along with instructions to: 1) sign the Medicare Set-Aside Trust or Custodial Agreement; 2) fund the Medicare Set-Aside Trust or Custodial Agreement; and 3) return a copy of the signed Medicare Set-Aside Trust or Custodial Agreement.

18.       Counsel should send a letter to the trustee or custodian outlining the basics of the trustee’s or custodian’s duties and setting forth the criteria by which the trustee will need to administer the trust funds.  For self-administered custodial agreements, counsel should provide a copy of CMS' guidelines for self-administration and an annual self-attestation form.

19.       Send the Beneficiary a letter recommending consideration of the purchase of Medigap insurance, although the premiums for Medigap insurance may not be paid from the assets in the Medicare Set-Aside Trust or Custodial Agreement.

20.       Once the final Settlement Agreement has been signed and approved by the state WC judge, obtain copies and forward them to the COB Contractor.  At this point, the involvement of all but the MSA fiduciary ends.

21.       A trustee or custodian will provide annual accountings to the appropriate CMS Medicare Lead Contractor; a claimant who is administering his or her own MSA submits an annual self-attestation letter.  The trustee, custodian or self-administering claimant also provides a final accounting to that entity once the assets in the Medicare Set-Aside Trust or Custodial Agreement have been exhausted on the Beneficiary’s medical expenses.

22.       Once the final accounting is provided to the appropriate CMS regional office and that accounting has been accepted by CMS, the claimant/Beneficiary can begin receiving Medicare benefits for treatment of work-related conditions.



         John J. Campbell, the founder and principal attorney of the Law Offices of John J. Campbell, P.C., has practiced law for 19 years and has practiced in the area of Medicare Set-Asides since 1996.  Mr. Campbell is certified as an Elder Law Attorney by the National Elder Law Foundation;* and is a Medicare Set-Aside Consultant Certified (national certification through the Commission on Health Care Certification).*  Mr. Campbell is licensed to practice law in Colorado and is also licensed and on inactive status in Missouri.  He is a member of the Colorado Bar Association (Trust & Estate Section and Elder Law Section), the Arapahoe County Bar Association, the Missouri Bar Association, the National Academy of Elder Law Attorneys, The National Structured Settlements Trade Association and the National Alliance of Medicare Set-Aside Professionals.  His areas of concentration include elder law; estate, disability and long term care planning; probate; guardianship and conservatorship; Medicare, Medicaid, Medicare Set-Aside Arrangements, and the preservation of public benefits in catastrophic third party liability and worker’s compensation settlements.  Mr. Campbell has published numerous articles and has presented numerous seminars on issues relating to Medicare Set-Aside Arrangements across the country.


*The State of Colorado does not certify attorneys as experts in any field.





The Law Offices of John J. Campbell, P.C. is pleased to introduce THE COMPLETE MSA TRAINING COURSE!  This comprehensive study course provides thorough core training on Medicare Set-Asides and related issues.  "The Complete MSA Training Course Book" is also available separately in hard copy or on CD Rom.  For more information, CLICK HERE.



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