There are few new wrinkles with regard to new guidances issued by the Centers for Medicare and Medicaid Services. While the essential standards remain the same, Medicare will now allow an offset of costs and fees expended to acquire Medicare approval, within certain specified parameters.
As previously noted (see "Workers Compensation and Medicare"), there is currently a conflict between the Medicare system and the workers compensation system in all 50 states. Medicare officials have indicated they wish to approve workers compensation settlements. The agency has also indicated that money should be set-aside for possible future medical bills.
2001 CMS Guidance
The agency issued a guidance on July 23, 2001, indicating Medicare approval of the settlement is necessary:
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 over the life of duration of the settlement agreement is expected to be greater than $250,000.00.
Thus, if the Claimant has applied for Social Security Disability Benefits, but has not yet received them, no Medicare approval is required unless the settlement is over $250,000. Similarly, if the Claimant is too young to qualify for Medicare based on age and has not applied for Social Security Disability, there is no reason to seek approval from Medicare because the Claimant would not have a reasonable expectation of receiving Medicare benefits within the 30-month target.
Problems still arise when a Claimant is actually receiving Medicare benefits either based on age or through Social Security Disability. Currently, the Centers for Medicare and Medicaid Services (CMS) wishes to approve every workers compensation settlement that involves a Claimant receiving Medicare benefits for any reason. There is no monetary limit in these types of cases. Even if the case proposes a settlement for $5,000 or $10,000, Medicare approval must be obtained. Often, this provides an obstruction to settlement, especially if the settlement involves only medical expenses.
April 2003 CMS Guidance
Recently, in April and May of 2003, the CMS issued further guidance. The guidance clarified a reasonable expectation of Medicare enrollment. Thus, in a situation where your settlement is over $250,000, a reasonable expectation now includes:
An individual who has applied for Social Security Disability Benefits;
An individual who has been denied Social Security Benefits, but anticipates appealing the Decision;
An individual who is in the process of appealing and/or refiling for Social Security Disability Benefits;
An individual who is 62 years and 6 months old (will be eligible for Medicare based on age 65 within 30 months);
The individual is in end-stage renal disease, but does not yet qualify for Medicare based on end-stage renal disease.
Further, the agency has expressed the opinion that if the workers compensation settlement does not allocate between indemnity and medical expenses, and no approval is sought, Medicare will consider the entire amount paid as compensation for future medical expenses. Thus, if a settlement is made for $50,000 for a person who has a Medicare card, and there is no allocation in the settlement for Medicare and no approval is requested, the entire $50,000 amount would have to be used for Medicare-related expenses before Medicare would make any further payment.
Commutation versus Compromise. With regard to the ongoing issue between commutation and compromise cases, the agency still refuses to give these terms their English definitions. The agency has taken the stance that a compromise case only includes compensation for medical expenses incurred prior to the settlement. They referred to "commutation" as a case which includes compensation for future medical expenses. There are no definitions of either term specifically contained in the regulations.
Set-Asides. The agency also has indicated that they would review proposals for set-asides within 45-60 days. However, that is not the case in many of the regions throughout the country where the wait is up to 6 months.
In an interesting development, the agency has also agreed that fees and costs to obtain the Medicare set-aside can be charged to the set-aside arrangement. Thus, if you can prove that fees and costs were incurred to obtain the Medicare set-aside, this amount can be offset. However, these fees and costs must be included in the proposed Medicare set-aside arrangements submitted to CMS. It is also interesting to note that wage loss or disability wages paid while waiting for the Medicare decision are not considered to be an offset by the agency. Thus, there is no penalty for their interminable delay.
Other Highlights. Other highlights of the guidance include the fact that the beneficiary can still administer his or her own Medicare set-aside arrangement and that a structured settlement can still be used. It is also interesting to note that there is no appeal process if the agency rejects the proposal for set-aside. Thus, as previously noted, some of these regulations and positions by the agency are probably an unconstitutional denial of due process.
The agency also finally recognized that a Claimant might not need future medical care. The agency has agreed that there is no set-aside necessary if the following facts can be established:
The facts of the case demonstrate that the injured individual is only being compensated for past medical expenses:
There is no evidence that the individual is attempting to maximize the other aspects of the settlement;
The individual's treating physicians conclude in writing that to a reasonable degree of medical certainty, the individual will no longer require any Medicare covered treatments related to the injury.
As a practical matter, it is extremely difficult to get a physician to report on treatment, let alone obtain a tailored report, which would include the language required by Medicare.
Within the guidance, the agency also essentially requests that if a set-aside is needed, there is an ethical duty on behalf of all parties to notify Medicare.
May 2003 CMS Guidance
A second guidance was issued on May 23, 2003. In this guidance, the agency reiterates its position with regard to the $250,000 and 30-month thresholds and explains that if Medicare does not require settlement approval, they will not send a letter that the settlement does not have to be approved by Medicare.
In summary, there are few new wrinkles with regard to the new guidances. The essential standards remain the same. Additionally, Medicare will now allow an offset of costs and fees expended to acquire Medicare approval.
Opinions expressed in Expert Commentary articles are those of the author and are not necessarily held by the author's employer or IRMI.
Expert Commentary articles and other IRMI Online content do not purport to provide legal, accounting, or other professional advice or opinion.
If such advice is needed, consult with your attorney, accountant, or other qualified adviser.