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MEDICARE SET-ASIDE ARRANGEMENTS

The Center for Medicare and Medicaid Services (CMS) is a federal agency within the U.S. Department of Health and Human Services. CMS runs the Medicare and the Medicaid programs - two national health care programs that benefit about 75 million Americans. CMS has announced an effort to collect monies owed to Medicare under the Medicare Secondary Payment statute provided for by 42 U.S.C. §1395y. Under the secondary payment system rules, CMS can make conditional payments for medical services for which another payer, such as a products liability or worker's compensation insurer, is responsible. The conditional payments are considered secondary. Medicare only pays when the primary payer will not pay or payment is expected to take a long time. Nonetheless, CMS intends to be refunded upon settlement of the litigation or worker's compensation claim. In the event that CMS is not reimbursed as required, CMS makes referrals to the Department of Justice for prosecution. The Department of Justice has a right to pursue recovery against every party involved including the injured worker, all attorneys, the insurance carrier and all medical providers.

In addition, CMS has issued new guidelines that outline the requirements for considering Medicare's interest in the commutation of a worker's compensation claim. A commutation of a worker's compensation claim occurs when a worker compensation insurance carrier makes a lump sum payment to an injured worker to compensate the worker for future medical expenses. The purpose of the new guidelines is to enforce the rules that require a worker's compensation carrier to pay for all future medical expenses, as well as past medical expenses, for the injured party. Therefore, Medicare will resist attempts by the worker's compensation carrier to shift liability for medical bills to Medicare without reasonably considering Medicare's interest in the settlement. To provide a means for the worker's compensation insurance carrier to reasonably consider Medicare's interest and not shift payment of future medical bills of the claimant to Medicare, the settlement must make a reasonable allocation of a portion of the lump sum settlement to future medical expenses. If the settlement does not set aside a reasonable allocation of future medical expenses, Medicare will not pay for any future medical expenses of the claimant until the claimant can prove that the entire settlement has been spent on his or her medical care.

The solution to this problem lies in the utilization of a Medicare Set-Aside Arrangement. CMS accepts a Medicare Set-Aside Arrangement as a means to allow an insurance carrier to reasonably consider Medicare's interest in the settlement upon the payment of a lump sum settlement of a worker's compensation claim. A properly prepared Set-Aside Arrangement takes into consideration many factors, including past medical expenses, life expectancy and the nature of the injuries. The Set-Aside Arrangement must be approved by the appropriate Medicare Regional Office prior to the time of settlement. By securing Medicare's approval of the set aside amount, the claimant is assured that Medicare will pay for future medical expenses once the set-aside monies are spent and the insurance carrier will be released from future liability.

A proper Medicare Set-Aside Arrangement must be customized to fit the individual needs and can be structured in the form of a Medicare Set Aside Trust, in the form of a custodial account or can be paid with a structured annuity. For more information on how a worker's compensation settlement can be structured to avoid losing future Medicare coverage, please contact the Law Offices of Bradley J. Frigon.