You may have heard about Medicare Set Aside agreements when it comes to Workers Compensation lump sum settlements. They are complex and confusing too many. Let me try and help explain a little about this complex area of law.
First, when is a Medicare Set Aside agreement required as part of a structured workers compensation settlement? Generally, with a worker’s compensation settlement, federal law prohibits Medicare from paying for injury-related medical expenses or medications that an employer is responsible to pay. In essence, other insurance coverage exists for those medical expenses. To achieve that purpose, Federal government regulations require that a portion of settlement funds be “set-aside” in an account to pay for future medical expenses related to the work injury. So what specifically triggers this process? Here are the general criteria when a settlement should be submitted for CMS review.
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 over the life or duration of the settlement agreement is expected to be greater than $250,000.00
So, what is the important words in here — “is” and reasonable expectation”. Essentially, if the injured worker is currently on Medicare, then any workers compensation settlement over $25,000 must be reviewed by CMS with a potential Medicare Set Aside agreement completed. Most insurance carrier like to settle these type of cases under the $25,000 threshold. If they can’t, and the case is worth more, then it will be submitted for review, or the insurance carrier could propose just settling the wage loss portion of the claim, but keeping medical expenses open. If an injured worker is just settling the wage loss portion, then Medicare in not effected.
The second important works here are “reasonable expectation” within 30 months. In other words, does the injured worker have a reasonable expectation to be receiving Medicate within 30 months of the settlement. For instance, is the injured worker 64 1/2 years old and will be Medicare eligible in six months? If so, that is a pretty reasonable expectation? Or, was the injured worker awarded social security disability? Under SSD rules, a person awarded SSD benefits is entitled to Medicare 1 1/2 years after the eligibility date. So if a person is on SSD and was awarded benefits back to early 2016, then they would have a reasonable expectation of receiving Medicare within 30 months.
With that long explanation complete, let’s assume that we settle a workers compensation case here in Pennsylvania and it calls for a $20,000 Medicare Set Aside agreement. As part of the settlement, the employer agrees to pay $20,000 into that Medicare Set Aside account to fund your future work-related medical expenses. I frequently get asked, if a Medicare Set Aside account is established for my claim, what happens to the funds if I die before they are exhausted. In other words, if $20,000 was set aside for future medical expenses, but I die with $10,000 remaining, what happens to that $10,000? Are these both options?
The answer to both of these questions is yes, if addressed and agreed upon by the parties at the time of settlement.
If the claimant has passed away before the MSA proceeds are exhausted, AND they’ve named a beneficiary on the account, the money will go to that person. If there is no named beneficiary, then these funds would pass in accordance with state intestacy statutes. Obviously the operative word here is the AND. It is imperative that your Attorney agree to terms of the MSA in which there is a beneficiary, most likely your spouse or children, as the beneficiary of the funds. It is also important to note that it only counts for the money CURRENTLY in the MSA account. CMS requires a lump sum payment to fund the MSA or a structured annuity to make annual payments to the account. That is negotiable! Many times, if not negotiated properly, the death of the Claimant creates a windfall to the insurance carrier, as all unused funds revert back to the insurance carrier.
The vast majority of MSA’s are annuitized by the insurance carrier, and unfortunately, most are set up with life only annuities with no remainder interest to any beneficiaries. It is important to note that established CMS guidelines do NOT mandate the use of annuities. That is essentially why it is critical to have a workers compensation attorney that understands the impact of MSA’s and understands your expectations. You should not enter into any workers compensation settlement unless you fully understand it’s impact on YOU.
Workers compensation is complex enough. You should always have an attorney watching over your case and protecting your rights under the Pennsylvania Workers Compensation Act. They are too valuable to risk otherwise. It gets even more complicated when implications of Medicare pop up. That’s why you should call Mooney & Associates for a FREE consultation. We represent injured workers from Fulton County in Central Pennsylvania east to Lancaster County. We have 14 offices scattered throughout he mid-state to bring Mooney & Associates closer to YOU. Call us today for a FREE consultation at 717-200-HELP or 1-877-632-4656.