In every case where a Longshore worker or Defense Base Act contractor agrees to close or limit their right to future medical benefits, the parties must consider whether a Medicare Set Aside is needed. What is a Medicare Set Aside and why is it needed? Essentially, the Centers for Medicare and Medicaid Services (“CMS”) does not want to pay for workers’ compensation injuries. The Medicare Secondary Payer laws protect CMS from workers’ compensation litigants who may want to shift the liability for payment of future medical benefits to CMS.
Consequently, in certain situations, the parties to a workers’ compensation settlement must prepare “a financial agreement that allocates a portion of a workers’ compensation settlement to pay for future medical services related to the workers’ compensation injury, illness or disease. These funds must be depleted before Medicare will pay for treatment related to the [injury].” Moreover, CMS will want proof (in the future) that the injured worker actually spent the settlement proceeds devoted to future medical expenses on those expenses.
So, when is a Medicare Set Aside needed? Although CMS’s and Medicare’s interest must be considered in every settlement, a Medicare Set Aside is only needed when certain criteria are met. The following questions may help you determine if you need an MSA for your Longshore or Defense Base Act settlement.
Does the settlement close or limit future medical benefits?
If so, CMS’s or Medicare’s interests must be considered.
Is the claimant 65 years old or older, or has the claimant been on SSDI for 24 months or longer?
Is the total value of the settlement (including indemnity, liens, future medical benefits and attorney’s fees) more than $25,000?
If so, a Medicare Set Aside is likely needed, and CMS review of the MSA is recommended by CMS.
Is the claimant on SSDI but not yet Medicare eligible?
Has the claimant applied for SSDI benefits?
Has the claimant been denied for SSDI but is appealing the denial?
Is the claimant 62 1/2 years old?
If the answer to all of the preceding questions was, “No,” then CMS review of the Medicare Set Aside is not necessary.
However, if any of the preceding questions can be answered in the affirmative, then a Medicare Set Aside may be necessary. There is one more question to ask:
Is the total value of the settlement (including indemnity, fees, future medical benefits and attorney’s fees) over $250,000?
If not, then CMS review of the MSA is not necessary.
If so, then CMS review of the MSA is recommended by CMS.
In conclusion, the government is very clear that it does not want to pay medical benefits for an on-the-job injury. Stiff penalties exist for parties who fail to secure a Medicare Set Aside. In the event an MSA is needed, hire an expert to prepare the document and take care of the submission process.