In the previous article, I covered the history of Medicare and the birth of Medicare Set-Asides (MSA). Now, we will discuss the actual components of the MSA itself. There are three primary components to a Medicare Set-Aside arrangement.
First is Medicare Set-Aside Allocation itself.
This is documentation used to identify medical diagnoses and the need for future medical treatment and prescription medication related to the covered illness or injury over a person’s lifetime. For example, let’s use the same example in Part 1 of the treating physician stating that a person will need a future knee replacement. Over their lifetime, they would incur costs for the surgery itself, but also such items as doctor’s visits, MRIs and X-rays, therapy and pain medication.
Second is the method of funding the MSA account.
The arrangement can be funded via lump sum or structured settlement, usually with an annuity.
And third, the method of administering the MSA account is either done professionally or is self-administered by the claimant.
For workers’ compensation, Medicare has set up a review and approval process for cases meeting certain thresholds.
- If a settlement involves a Medicare beneficiary and the total settlement amount is more than $25,000, then Medicare will review and approve the MSA.
- If the claimant has a reasonable expectation of Medicare eligibility and the total settlement amount is more than $250,000, then Medicare will review and approve the MSA.
Let’s define some of the terms mentioned in the thresholds. The term total settlement includes but is not limited to wages, attorney fees, all future medical expenses, repayment of any Medicare conditional payments, and any previously settled portion of the workers’ compensation claim. The total payout should be used instead of the cost or present value if an annuity is used. For example, you may have a settlement of $24,000 for indemnity, but if future medical is $10,000 that would increase the total settlement to $34,000. As such, that case would meet the threshold for submission to Medicare for review.
What does reasonable expectation mean. It means the claimant:
- Is receiving Social Security Disability (SSD) benefits at the time of settlement.
- Has applied for SSD benefits or has applied and been denied but anticipates appealing the decision.
- Is in the process of appealing and/or re- filing for SSD benefits.
- Is 62 years and six months old or older at the time of settlement.
- Has end-stage renal disease or Lou Gehrig’s disease but does not yet qualify for Medicare based on these conditions.
Then finally, approval. Having an approved MSA assures the claimant of future medical covered by Medicare because when that MSA runs out Medicare will start picking up medical costs and protects the primary plan and insurer against Medicare making any future claims.
It is very important to remember that these thresholds are workload review thresholds. On July 11, 2005, the Centers for Medicare and Medicaid Services (CMS) issued a memorandum stating that “all beneficiaries and claimants must consider and protect Medicare’s interests when settling any workers’ compensation case – even if review thresholds are not met, Medicare’s interests must always be considered.”
CMS published another memorandum April 25, 2006, stating that “The CMS wishes to stress that (the WC-MSA {workers’ compensation MSA} review threshold regarding Medicare beneficiaries) is a CMS workload review threshold and not a substantive dollar or ‘safe harbor’ threshold. Medicare beneficiaries must still consider Medicare’s interests in all workers’ compensation cases and ensure that Medicare is secondary to workers’ compensation in such cases.”
According to the memorandums issued above, Medicare’s interest should be considered even when the review threshold is not met. Therefore, an MSA may still be appropriate in certain cases such as (1) cases involving a Medicare beneficiary but the settlement is $25,000 or less or (2) cases involving someone with a reasonable expectation of Medicare eligibility within 30 months but the settlement is $250,000 or less. It comes down to a case by case determination and establishing internal protocols for cases that do not meet the review thresholds would be appropriate to ensure compliance with CMS guidelines. An MSA can be done even if not approved. This allows you to demonstrate to Medicare that you made a good faith effort to reasonably consider their interests were they to question a settlement in the future.
Keep in mind that submission for review is optional, although protecting Medicare’s interests is not. In other word, although it is expected that Medicare’s interest will be protected, it is not mandatory that the MSA be submitted for review. An MSA can be completed and kept in the file to show that Medicare’s interests were considered. There is a risk in doing this because Medicare can come back and disagree with the Medicare Set-Asides, so submission is based on risk tolerance. Janet Bailey Parker
