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Medicare Set-Aside Arrangements
Federal law provides Medicare with expansive rights in the context of worker’s compensation (WC) settlements involving claimants who are, or soon will become eligible for Medicare benefits. When a WC claim is settled without the parties properly complying with the requirements of the federal Medicare Secondary Payer statute and regulations (42 U.S.C. §1395y; and 42 C.F.R. §§411.20-.37 and 411.40-47), the WC carrier, the claimant, and their attorneys may remain exposed to significant potential liability after the settlement; and the claimant may risk the denial of his or her future Medicare benefits. Since July, 2001, CMS has released several memoranda, through which CMS has refined its policies and procedures for the review and processing of proposals for Medicare Set-Aside Arrangements. (To view these policy memoranda, click here.)
Any payments Medicare may have made for the claimant’s work related medical or prescription drug expenses prior to any WC or liability settlement, even if the payment was made by mistake, will result in a Medicare Secondary Payer (MSP) claim which must be satisfied as part of the settlement. If not, CMS can bring suit against the claimant or plaintiff, the claimant's or plaintiff's attorney, or the insurance carrier for payment of the claim. In a suit against an insurance carrier to recover its MSP claim, CMS can seek double damages. A similar private right to sue the carrier for double damages is also granted under federal law to the WC claimant or liability plaintiff who is eligible for Medicare benefits.If a WC settlement does not close out future medical expense liability, Medicare will continue to be secondary payer with relation to the WC carrier. However, federal law also allows Medicare to retain its secondary payer status after a WC settlement that does foreclose future liability for the claimant's work related medical expenses, at least until the amount of the settlement which was allocated to future medical expenses is exhausted on medical and prescription drug expenses. Any conditional payments or overpayments Medicare may make for the claimant’s work related medical or prescription drug expenses after settlement can also result in a post-settlement MSP claim, leaving the claimant, his attorney and the carrier vulnerable to potential future liability.
Where a proper allocation to future medical and prescription drug expenses is not made as part of settlement that closes out future medical expenses, this can result in most or all of the settlement being allocated to future medical and prescription drug expenses by application of a formula found in the federal regulations. If CMS believes that a WC settlement does not reasonably consider Medicare's interests and that the settlement is an attempt to shift responsibility for the WC claimant's future medical and prescription drug expenses from the WC carrier to Medicare, CMS even has the power to disregard the settlement altogether. In such instances, CMS may then continue to treat the WC carrier as a primary payer, even after the settlement has been approved and finalized by the state WC judge or commissioner.
Even in settlements containing a reasonable allocation to future medical and prescription drug expenses, the claimant will have the responsibility to ensure that these allocated funds are spend only on future medical and prescription drug expenses. Otherwise, CMS will deny future coverage for work related medical care and medications. A Medicare Set-Aside Arrangement provides a safe vehicle for the proper administration of a WC settlement allocation for future medical and prescription drug expenses.
Currently, CMS review and approval is mandatory for WC settlements of future medical expenses in which the claimant is already eligible for Medicare and the total uncommuted value of the settlement, including indemnity, exceeds $25,000; and in cases where the claimant is reasonably expected to become eligible for Medicare within 30 months of the settlement and the total uncommuted value of the settlement, including indemnity, is greater than $250,000. Failure to submit a Medicare Set-Aside arrangement for review in cases meeting either of these criteria will likely result in a denial of future Medicare coverage for work related medical and prescription drug expenses until the entire settlement is expended on those expenses. For cases not meeting these review criteria, CMS approval is not required.
Obtaining CMS’s release of the MSP claim and its approval of the proposed settlement and a Medicare Set-Aside Arrangement in WC cases meeting the above review criteria provides the safety and finality necessary to accomplish settlement, while ensuring that Medicare will pay for future medical and prescription drug expenses once the Medicare Set-Aside Arrangement is properly exhausted. This results in lower costs and reduced exposure to future liability for the WC carrier or self-insured employer; and greater peace of mind and reduced costs for claimants because their medical benefits will not be summarily denied.In smaller cases, a formal trust is not always needed. In these cases, a Medicare Set-Aside Custodial Agreement or other arrangement acceptable to CMS can be used. Medicare Set-Aside Arrangements can even be self-administered. However a Medicare Set-Aside Trust is recommended in larger settlements; and a special Medicare Set-Aside Trust will be necessary where the WC claimant must preserve eligibility for Medicaid or SSI, as well as Medicare.
Recently, CMS has also announced its position that Medicare retains its secondary payer status after settlement of liability claims, as well as WC claims. The current secondary payer regulations do not appear to grant CMS the same powers in a liability settlement as in a WC settlement to determine the reasonableness of an allocation to future medical expenses; or to disregard a liability settlement that CMS may feel to be an attempt to shift responsibility for future medical expenses to Medicare. However, it would be simple enough for CMS to expand the regulations peculiar to WC to cover liability settlements as well.
CMS currently has no official procedure for review of Medicare Set-Aside Arrangements in liability settlements, although several of the CMS Regional Offices have begun to review Medicare Set-Aside proposals in select liability settlements on a discretionary basis. However, CMS does require that the parties "reasonably consider Medicare's interests" in liability settlements. While it does not appear necessary to have CMS review and approve Medicare Set-Aside Arrangements in liability settlements at this time, it is necessary to notify CMS of any liability settlement in which future medical expenses were a consideration or in which there is a specific provision for past or future medical expenses. Medicare will require that any funds which are allocated to future medical expenses in the settlement be spent on injury related medical expenses before any claims are submitted to Medicare.Therefore, it is advisable to create and fund some type of arrangement to ensure payment of future medical expenses as part of the terms of a liability settlement in the event the plaintiff later receives a denial of benefits from Medicare for future injury related care. The file must be properly documented so the plaintiff can demonstrate that Medicare's interests were reasonably considered. Failure to comply with CMS's current policy in this area could result in a denial of Medicare benefits for future injury-related medical expenses for the settling plaintiff.
As part of its Worker's Compensation and Liability Consulting Services, the Law Offices of John J. Campbell, P.C. conducts negotiations and secures necessary approvals of Medicare Set-Aside Arrangements from CMS as part of the settlement process to prevent these problems. Mr. Campbell has over 13 years experience in submitting successful Medicare Set-Aside proposals. He has had consistent success negotiating reasonable terms with CMS to foreclose future liability for the parties in many WC and liaibility settlements; and to ensure future Medicare eligibility for many settling claimants and plaintiffs. 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).Our firm submits and obtains approval of many "routine" Medicare Set-Aside Arrangements. However, our experience and reputation have allowed us to be very successful in obtaining CMS approval of many extremely complex settlements involving multiple WC and liability claims; and involving issues relating to preserving eligibility for multiple public benefit programs simultaneously. In every case, we pride ourselves on taking the extra steps in analysis and advocacy to ensure that your Medicare Set-Aside Arrangement takes all of the applicable legal and public benefit eligibility issues into account; and that your Medicare Set-Aside Arrangement is acceptable to CMS without being needlessly overfunded.
Please feel free to call us if you wish to discuss your settlement. If you wish to have us review your claim, please fill out and submit our Intake Questionnaire over our SSL secure site.
For the latest news on Medicare Set-Aside Arrangements, CLICK HERE. To receive our electronic newsletter, "The Medicare Set-Aside Bulletin", use the form below:
Member, National Alliance of Medicare Set-Aside Professionals
*The State of Colorado does not certify attorneys as experts in any field.
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