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Danvers, MA 01923

(866) 630-CPSC Toll-free
(978) 774-0540 Facsimile

www.CPSCmsa.com

There are two types of workers’ compensation schemes that are relative to compliance with the Medicare Secondary Payer statute: those that allow settlements to ‘close out’ future medicals, and those that do not close out future medicals. To demonstrate the concepts, the following looks at the compensation schemes implemented in Texas, Massachusetts and New Jersey that do not close out future medicals on compensable injuries This article illustrates that MSP-compliance issues exist and require attention regardless of what state workers’ compensation scheme is available.

Complying with the MSP statute is a complicated, multifaceted endeavor that can take many different forms. There are two ways to ensure compliance with the MSP: (i) conditional payments and (ii) future Medicare-covered expenses. A significant challenge exists when considering what extent these issues need to be addressed under a particular state’s workers’ compensation scheme. This issue is one that cannot be answered without a sufficient understanding of the implications of conditional payments and future Medicare-covered expenses.

Issue One – Medicare’s Past Payments

In any workers’ compensation case in which a settlement is on the horizon, the first question should concern whether the claimant is eligible for Medicare. If the claimant is or has been receiving Medicare benefits, this issue commands a great deal of attention, and for very significant reasons.

First, if it turns out that Medicare paid for treatment that the carrier was primarily responsible for, then Medicare can enforce its right, under the MSP, to recover those payments. This enforcement right permits the Centers for Medicare and Medicaid Services (CMS) to recover from any entity responsible for making primary payments, or from any entity that received such a payment, including beneficiaries, providers, attorneys, insurers and even state agencies. Moreover, if CMS initiates legal action to recover moneys due to Medicare, CMS could potentially recover double the amount owed.

Issue Two – Future Medicare-covered Expenses

An additional challenge for MSP compliance arises from future Medicare-covered expenses.

This compliance issue involves determining whether and to what extent the claimant may need additional treatment for his or her compensable injuries in the future. CMS Memoranda requires projecting into the future based on what treatment the party has received in the past.

The most common approach to this compliance issue involves setting up a Medicare Set-Aside (MSA) account. These accounts should reserve a ‘reasonable’ amount of money to cover the costs of future Medicare-covered treatment related to the claimant’s compensable injury. The ‘reasonable’ amount set aside must be used to pay for the claimant’s future injury-related Medicare-covered treatment until completely exhausted. Then, and only then, will CMS agree to act as the primary-payer for injury-related covered services.

There is one additional way to “take Medicare’s interests into account,” and this method does not actually require funding an MSA. Known as “zero allocations,” this compliance method is appropriate when, for any number of medical or legal reasons, Medicare either should be the primary payer or the claimant will not require injury-related treatment in the future. Frequently, the review threshold factors are often present in these cases, allowing for potential CMS approval that can offer all parties additional peace of mind. These complex medical-legal arguments can potentially save all parties involved a substantial amount of money, and should therefore always be considered in such special situations.

It is still important, however, to determine what compliance methods are available, or required, in your jurisdiction, as not all state compensation schemes are created equal.

Issue Three – MSP Compliance in states that do not close out future medical treatment

In Texas, if a worker is injured at work or suffers a work-related illness, his or her medical bills and lost wages will at least partially be taken care of by the employer’s workers’ compensation carrier. Ideally, as soon as the worker reports the injury to his or her employer and the state compensation board, the carrier will commence paying the claimant’s lost wages and injury-related medical treatment. There are, of course, several possible scenarios in which Medicare might be paying for all or part of such treatment, which would implicate the need for complying with “Issue One.” Thus, regardless of the jurisdiction you are in, conditional payments will be an issue that will always require attention.

In Texas, settlements may not limit or terminate the claimant’s right to medical benefits for treatment that is the responsibility of the carrier. In other words, in Texas, workers’ compensation carriers are responsible for compensable injuries indefinitely. It is still necessary, however to comply with “Issue Two” because Medicare still is worried about being the primary payer on the claimant’s compensable injuries.

For example, parties do not always agree on whether an injury is compensable, or whether there is an injury at all. Still, however, the parties may nevertheless want to settle, or want to settle by agreeing that some injuries are compensable, while others are not.

In such cases, in a sense, the parties are agreeing to ‘close out’ future medicals by not taking responsibility for some or all of the injuries. Unfortunately, once a payment has been made by a carrier in a worker’s compensation case, Medicare presumes that the carrier has “bought the injury,” so to speak. In such cases, Medicare will expect its interests to be taken into account at the time of settlement, and may refuse to make payments on behalf of the worker in the future until the entire amount of the settlement is exhausted. In these types of situations, it is almost imperative that the parties reflect the process of taking Medicare’s interests into account by creating an un-funded MSA, also known as a “zero allocation.” This way, the carrier can rest assure that it will not be liable for non-compensable injuries in the future and the claimant can rest assure that should he or she require assistance with future treatment, Medicare will step in to help.

In Massachusetts, with the exception of cases involving dates of injury prior to November 1986, Massachusetts does not allow parties to close out medical expenses on accepted cases. For the most part, MSP compliance in Massachusetts should involve a Social Security/Medicare determination on all cases, and conditional payment investigation in all cases involving Medicare beneficiaries. However, in cases settling without liability, the parties should evaluate the need for a Medicare Set Aside – including the possibility of obtaining a zero allocation – before reaching a final settlement agreement. Depending on the claimant’s Medicare status and the facts of the case, it may be appropriate to set money aside, or explain why no money is being set aside. On cases that meet review thresholds, CPSC recommends that all Massachusetts cases settling without liability be submitted to CMS for review and approval.

In New Jersey, two types of settlements call attention to the MSP. The first is an Order-Approving settlement. When parties reach an OAS, the carrier agrees to keep future medicals open; however, it is imperative that a conditional payment analysis is done to determine if CMS has paid for treatment that should have been covered by the workers’ compensation carrier.

The second type of settlement in New Jersey is a Section 20 settlement. In this instance, a genuine dispute exists between the parties surrounding compensability. In order to resolve this, the parties reach a full and final settlement of workers’ compensation claim on a pure compromise basis with no future medicals included. When parties reach a Section 20 agreement, not only is it necessary to conduct a conditional payment analysis, but they also need to submit a zero allocation to CMS based on the disputed claim if review thresholds are met.

By Ashley C. Hague, Esq., Legal Counsel for Crowe Paradis Services Corporation

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