Medicare Set-Asides

4. How do I know if I need an MSA?

This is probably the most common question asked. It is also the one that requires the most explanation. First, the Medicare Secondary Payer Act does not give The Centers for Medicare and Medicare Services (CMS) a right of recovery until a workers’ compensation (WC) case settles and medical is going to close as well. Therefore, there is no reason to analyze the need for a Medicare Set-aside until the parties are contemplating a complete settlement of the underlying WC claim. In some states, like Texas, the parties are prohibited from closing the medical portion of a WC claim and, therefore, there is no reason to establish an MSAs in that situation.

Once it has been established that the WC case is going to settle and the burden of medical expenses is no longer going to be the responsibility of the employer, the parties must make sure not to shift the burden of future medical expenses to Medicare. Therefore, if the claimant is a Medicare beneficiary at the time of settlement then an MSA is absolutely necessary to protect Medicare from paying for any expense that are reasonably foreseeable to Medicare in the future.

This is true even the employee is entitled to lifetime medical benefits from the employer. CMS does not view lifetime medical benefits as a factor in determining if an MSA is needed because these benefits can be terminated by the employer in the future for any number of reasons (e.g. bankruptcy, change in benefits, change in a collective bargaining agreement, etc.)

So there is a “bright line rule” when the parties are settling a WC case and the claimant is on Medicare: The parties need an MSA.

There is a grey area, however, when it comes to employees who are not on Medicare. The law states that the parties cannot shift reasonably foreseeable medical expenses to Medicare, but the law does not define what is reasonable foreseeable. Therefore, the parties are left to make that determination. Some cases are easier to evaluate than others.

For example, the claimant is 64 years-old and will be on Medicare within a few months. The parties should probably secure an MSA because it is reasonably foreseeable that some of the employee’s future medical expenses will be shifted to Medicare.

If the claimant is five (5) years away from being on Medicare, however, it makes the issue a little more difficult to evaluate. The nature of the injury then becomes a factor. For example, if the employee was absolutely going to need a knee replacement in another 5 to 10 years, then it seems that an MSA would be necessary to protect Medicare from having to pay for that knee replacement after the employee became Medicare eligible.

Please keep in mind that there is a distinct difference between when an MSA is needed and when CMS will review and approve a proposed MSA. Many people confuse these two issues. Here is how the CMS explains it:

The CMS wishes to stress that this is a CMS workload review threshold and not a substantive dollar or “safe harbor” threshold. Medicare beneficiaries must still consider Medicare’s interests in all WC cases and ensure that Medicare is secondary to WC in such cases. April 24, 2006 Memorandum.

CMS Review Threshold

It is not in Medicare's best interest to review every WC settlement nationwide in order to protect Medicare's interests per 42 CFR 411.46. (Ref: 7/23/01 Memo Q1(c)) A WCMSA is not necessary when resolution of the WC claim leaves the medical aspects of the claim open.

A WCMSA may be submitted to CMS for review in the following situations:

The claimant is currently a Medicare beneficiary and the total settlement amount is greater than $25,000; 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 over the life or duration of the settlement agreement is expected to be greater than $250,000.

Therefore, many people are under the impression that if the case settles for less than $25,000 (when the claimant is a Medicare beneficiary) or under $250,000 (when the claimant is not a Medicare beneficiary) that an MSA is not needed. This is not the case. An MSA maybe still be needed; CMS, however, will not review and approve the MSA. This is a subtle but significant difference that should not be overlooked.

BACK

All of the content was prepared by Michael R. Merlino II, an attorney in Georgia who focuses on his practice primarily on MSAs. He prepares MSAs for many large self-insureds and insurance companies. If you have questions, he can be contacted at 770-374-3697 or mmerlino@gmail.com. He also has a website devoted to MSAs, which is updated frequently: www.wcmsainfo.com