By: The Workers' Compensation Practice Group
When negotiating settlements and planning for future exposure in a claim, one issue to remain constantly aware of is the potential role that a Medicare Set-Aside (MSA) may play in your claim. We must take Medicare’s interest into account in every workers’ compensation settlement. Therefore, it is important to understand what a Medicare Set-Aside is, when you might need one, and what effect it can have on the handling of a claim.
What is a Medicare Set-Aside (MSA)?
A Medicare Set-Aside is an allocation of all or part of a settlement towards future medical expenses. Once these funds have been paid to and exhausted by the claimant, Medicare is responsible for covering any additional Medicare-covered expenses related to the underlying work accident. Therefore, Medicare has an interest in determining whether an appropriate amount of funds has been set aside for the MSA, given that Medicare will be responsible for any costs incurred once those expenses have been exhausted.
When do you need a Medicare Set-Aside?
The Center for Medicare and Medicaid Services (CMS) is charged with reviewing MSAs to determine whether sufficient funds have been allocated for future medical treatment by the parties to a claim. CMS will not review all MSAs, however, and has developed “review thresholds” to determine which claims will merit their review. It is important to note that these thresholds can change at any time. At this time, the current thresholds for review by CMS are as follows:
- The claimant is a current Medicare beneficiary and the total settlement value is over $25,000.00;
- The claimant has a reasonable expectation of becoming a Medicare beneficiary within 30 months of settlement approval and the total settlement value is over $250,000.00.
Therefore, claims meeting one of these above classifications should be submitted to CMS for review and approval. To the extent that CMS disagrees with the proposed allocation, CMS may return a counter-proposal that may be higher or lower than what was originally submitted.
How can this affect your claim?
The Virginia Workers’ Compensation Commission generally will not approve a settlement that meets the thresholds for review by CMS but that has not had the MSA submitted to CMS for review. Therefore, to the extent that your claim meets one of the review thresholds, it will usually be important to secure a Medicare Set-Aside to include as a part of a full and final settlement.
Securing the MSA will also help you understand your future exposure on the medical side of the claim, as it is meant to predict the future Medicare-covered expenses for the remainder of the claimant’s life. This information may be useful to know in negotiating settlement with the claimant and/or the claimant’s attorney.
Adjuster Tips for Dealing with a Medicare Set-Aside
- The MSA will only cover future Medicare-covered expenses. Therefore, it is possible that there will be additional medical costs over the life of the claim not included in the MSA calculation. You may see claimant’s counsel factoring in additional medical exposure outside of the MSA when negotiating settlement.
- If the MSA is extraordinarily high, such that it would be cost-prohibitive to settle the medical portion of the claim, you can elect to try to negotiate an indemnity-only settlement, which would leave open the medical portion of the claim while closing out the indemnity portion of the claim.
- If the MSA is more than a couple of months old, there is the risk it could be considered “stale.” If so, you might need to secure a new MSA for use in ongoing settlement negotiations.
Statutory Update
Several new laws went into effect on July 1, 2015 that affect workers’ compensation in Virginia. These include:
- Changes to the definition of “employee” and “executive officer” in Va. Code §65.2-101;
- An addition to the exclusivity provision of Va. Code §65.2-307, which appears intended to prevent inconsistent findings between the VWCC and civil courts in Virginia;
- A mandate that the Commission shall establish a schedule by 1/1/16 for the development of an infrastructure for electronic medical billing, payment, and records; and
- A mandate that the Commission shall determine the number and geographic area of communities across Virginia for use in determining the prevailing community rate for medical services.
