Medicare Set Asides in Workers’ Compensation—The Basics

In workers’ compensation settlements, depending upon the status of the injured worker, interests of Medicare must be protected. If an injured employee has a reasonable expectation of becoming or is a Medicare beneficiary at the time of settlement of the medical portion of a claim, Medicare is considered to be a “secondary payer.” In the event of the settlement of the medical portion of a claim, some settlement funds must be allocated to bills Medicare has paid on behalf of an injured worker. As well, because Medicare is a “secondary payer,” the parties must allocate enough funds to cover future medical expenses related to a work injury before Medicare pays for any bills related to a work injury.

A Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA) is an agreement that allocates a portion of a workers’ compensation settlement to pay for future medical services related to the workers’ compensation injury. Funds placed in a WCMSA must be depleted before Medicare will pay for treatment related to the workers’ compensation injury, illness, or disease.

Funds are either placed in the WCMSA account in one lump-sum or the account is funded with a “structured settlement annuity.” Either way, the administrator of the WCMSA may only use the funds to pay for medical care related to a work injury, leaving Medicare free to cover medical expenses unrelated to the work injury.

There is no provision requiring that a WCMSA proposal be submitted to the Center for Medicare & Medicaid Services (CMS) for review. However, submission of a WCMSA is recommended. Doing so ensures that Medicare will pay for future covered expenses down the road in excess of the approved MSA amount. That being said, CMS will not review every proposal. CMS will only review new WCMSA proposals that meet the following criteria:

• The claimant is a Medicare beneficiary and the total settlement amount is greater than $25,000.00; or
• The claimant 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/lost wages is expected to be greater than $250,000.00 

Once the MSA is implemented, Medicare will not pay for medical expenses related to the injury until after all set-aside money has been used properly. Thereafter, Medicare can start paying for items and services related to the work injury. 

Please note that CMS recently created an MSA re-review process. Effective July 31, 2017, submitters can submit a re-review request where CMS has provided an approved amount, but settlement has not occurred and the medical care that supported the approved amount has changed substantially. This process is not available in all situations. For starters, (1) the MSA must have been originally submitted between 1 – 4 years from the date of the re-review request; (2) the re-review must result in at least a 10% or $10,000 change (whichever is greater) from the previously approved amount.