Medicare
Medicare – A Brief Description
Medicare is health insurance provided by the Federal government. Medicare acts as a defined secondary payer in the context of workers compensation. The intent of Congress is to reduce federal spending and to protect Medicare’s financial integrity by expanding its recovery rights. Requiring Medicare Set-Aside accounts as a part of settlements is one method used to protect Medicare financially.
Medicare Benefit Eligibility Requirements
An individual is eligible to receive Medicare benefits for certain medical and hospital expenses if they meet one of the following criteria:
- Are 65 years of age or older;
- Have been receiving Social Security Disability benefits for at least twenty-four (24) months; or
- Are suffering from end-stage renal disease.
Medicare’s “Reasonable Expectation” Provision
A person can reasonably expect to become a Medicare beneficiary within thirty (30) months if at the time of the settlement of their workers compensation case, they:
- Are between the ages of 62 1/2 and 65;
- Have applied for or have been approved for Social Security Disability benefits;
- Have been denied Social Security Disability benefits but anticipate appealing the decision; or
- Have an end-stage renal disease but do not yet qualify for Medicare.
The Medicare Set – Aside (MSA)
A Medicare Set-Aside (MSA) is an account that is created in the settlement of an individual’s workers compensation or liability claim that is used to pay for future medical expenses that are:
- Attributed to an individual’s work-related or personal injury; and
- Would otherwise be payable by Medicare.
When an MSA Is Required
When settling a workers’ compensation claim, a MSA is necessary if the future medical aspect of the claim is being settled and one (1) of the following exists:
- The claimant is currently a Medicare beneficiary and the total settlement amount is greater than $25,000; or
- The settlement amount exceeds $250,000 and the injured worker can reasonably expect to become a Medicare beneficiary within thirty (30) months of the settlement.
Determining the Amount of an MSA
The MSA amount is formulated by consideration and analysis of the following:
- Date of injury and nature of injury
- Rated age of the Claimant and life expectancy
- Review of medical payment history
- Medical diagnosis and prognosis
- Medicare coverage limitations
- Workers’ compensation fee schedules
- Future medical needs for treatment of the work injury
Funding an MSA Account
Several methods can be utilized to fund an Medicare Set Aside. Specifically, an MSA can be funded via a lump sum payment, a structured settlement annuity, or a combination of both. Structured settlements are a great tool to fund an MSA because the cost of an annuity provides an additional savings to either the insurer or employer. If the Medicare Set Aside is exhausted between annuity payments, Medicare will step in and pay for qualified medical expenses until the release of the next annuity payment.
Administration and Terms of an MSA Account
An MSA can be self-administered by the injured worker, a custodian or a guardian. An MSA can also be administered by a third-party administrator. The account must be an interest-bearing account and the administrator of the account should only allow distribution for those medical expenses related to the work injury that would otherwise be covered by Medicare, thereby preventing a financial burden shift to Medicare after settlement. The administrator will also have to provide CMS with an annual accounting of the expenditures from the account. If there is a questionable expense, the administrator of the account should obtain approval from CMS before paying for the questionable expense.