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Medicare is a federal health insurance program. Medicare entitlement comes 2 years after the date of disability under Social Security's definition. Medicare coverage is available again without regard to the client's finances.
If a client is covered by Medicare, you have to worry about the Medicare Secondary Payer (MSP) statute. The MSP is a series of statutory provisions enacted during the 1980s as part of the Omnibus Reconciliation Act with the goal of reducing federal health care costs. The MSP provides that if a primary payer exists, Medicare only pays for medical treatment relating to an injury to the extent that the primary payer does not pay. CFR Title 42, Part 411, Subpart B, Section 411.20 (2) provides "[s]ection 1862(b)(2)(A)(ii) of the Act precludes Medicare payments for services to the extent that payment has been made or can reasonably be expected to be made promptly under any of the following" (i) Workers' compensation; (ii) Liability insurance; (iii) No-fault insurance. There are two issues that the MSP deals with: (1) Medicare payments made prior to the date of settlement and (2) future Medicare payments for covered services. Enforcement of the MSP as it pertains to future Medicare covered services began back in 2001 when the Centers for Medicare and Medicaid announced in a memorandum the requirement to set aside a portion of Workers' Compensation settlements allocated to future Medicare covered expenses. This memo was the genesis of a whole new industry - Medicare Set Aside professionals who do allocation and administration of Medicare Set Asides. Recently, there have been some developments that indicate that the MSP may be enforced to a greater extent in liability settlements as well for future Medicare covered expenses.
At present, if a client has a workers' compensation claim that is settled either on its own or in conjunction with a third party claim, there may be a need for a Medicare Set Aside to preserve their future eligibility for Medicare benefits. Although referred to as a trust herein, there is technically no requirement that a Medicare Set Aside be a trust. A MSA must be considered if the claimant is Medicare eligible or there is a reasonable expectation to be Medicare eligible within 30 months of the settlement. A Medicare set aside allows a claimant to preserve Medicare benefits by negotiating an allocation of the settlement to Medicare covered expenses and requires those funds to be placed in a segregated account. Once the set aside account is exhausted, the claimant gets full Medicare coverage without Medicare ever looking to the claimant's remaining settlement dollars to provide for his or her care. As a starting point, any workers' compensation settlement must be examined by the Centers for Medicare & Medicaid Services (CMS) if the claimant currently receives Medicare and the settlement amount is greater than $10,000. CMS must also review any workers compensation settlement if there is a "reasonable expectation" of Medicare enrollment within 30 months of settlement and the anticipated total settlement amount over the life or duration of agreement is greater than $250,000.
There are no guidelines or review process for liability settlements at this time. However, according to CMS (Barbara Wright, 3/16/2010 MMSEA Townhall):
"CMS has [a] formalized process to review proposals for workers’ compensation, Medicare set aside amounts. It does not have the same formalized process for liability Medicare set aside arrangements. The process for worker’s compensation is voluntary. We have a process for an informal process on the liability side that if a plaintiff’s attorney or insurer, et cetera, wishes to approach the appropriate CMS regional office and the regional office has the ability to do so workload or otherwise, that they can choose to review a proposed set aside amount if they believe there is significant dollars at issue.
Again, it’s not the same extensive process that we have for worker’s compensation. But regardless of whether CMS has a formalized process, or regardless of whether or not you’re participating in the formalized process for worker’s compensation Medicare set aside, the statute has the same language in either situation. It’s not parallel language. It’s not similar language. It’s literally the same physical sentence that we’re not to make payment where payment has already been made.
So where future medicals are a consideration in arriving at the settlement, et cetera, then appropriate arrangements should be made for appropriate exhaustion of the settlement before Medicare is billed for related services."
The passage of the Medicare, Medicaid & SCHIP Extension Act (MMSEA) at the end of 2007 has had a profound impact on enforcement of the MSP and also has implications for Medicare Set Asides for liability cases. To learn more about MMSEA click here.
If you have a settlement that is non-workers' compensation but involves a Medicare beneficiary you should consider protecting Medicare's interest. To learn more about liability Medicare Set Asides click here.