Workers Compensation and Medicare Update

Medicare Regulation Problems

The Medicare secondary payer law precludes Medicare from paying in a primary capacity on behalf of a Medicare beneficiary where another entity has primary payer responsibility. In workers compensation terms, Medicare will not pay a workers compensation bill since the primary payer should either be the employer or the insurer that covers the employer.

In the May 2001 article, the broad problems with regard to the Medicare Regulations were outlined. Those problems included the following:

1. In regulation § 411.46 (b), Medicare indicates that a lump sum compromise settlement is deemed to be a workers compensation payment for medical purposes even if the settlement agreement indicates there is no liability under the state workers compensation law or plan.
2. In § 411.46 (b)(2), Medicare indicates that if a settlement attempts to shift to Medicare the responsibility of payment of medical expenses for treatment of work-related conditions, the settlement will not be recognized. Medicare will not pay for the treatment of that condition. However, in paragraph (d), this Section notes that the basic rule with regard to a lump sum compromise settlement is "If a lump sum compromise settlement forecloses the possibility of future payment of workers compensation benefits, medical expenses incurred after the date of the settlement are payable under Medicare." It appeared that there was a distinct conflict between paragraph (b) and paragraph (d).

Further confusion was generated from § 411.47. This Regulation attempts to explain the apportionment of a lump sum compromise settlement of a workers compensation claim. Paragraph (a)(1) indicates that if a compromise settlement allocates a portion of the payment for medical expenses and also gives reasonable recognition to the income replacement element, that apportionment may be accepted as a basis for determining Medicare payments. The next paragraph (a)(2) basically states that if no recognition is given to the medical portion of a claim, the Agency will use a mathematical formula to determine the amount of medical offset.

After those problems were outlined, through the auspices of the Pennsylvania Department of Labor, U.S. Senator Arlen Specter, and the Pennsylvania Bar Association, a meeting was held with Medicare on May 24, 2001. In that meeting, the problems concerning Medicare approval of workers compensation cases were discussed. I outlined the conflicts in the Regulations and also requested that a monetary limit be placed on cases, as well as a time limit. In other words, if a claimant was not going to qualify for a Medicare payment for 30 or 40 years, why would Medicare be interested in a workers compensation settlement now? In addition, Medicare officials agreed they did not have the manpower to review every workers compensation case.

July 2001 Guidance

After this meeting, a Guidance was issued by Medicare on July 23, 2001. The Guidance has answered some questions but raised many others. Initially, the Guidance attempted to define compromise and release settlements as opposed to commutation settlements. However, there are no definitions of either term within the Code of Federal Regulations, and the Guidance is lacking with regard to a definitive interpretation of either term.

The definitions are very important because Regulations deal differently with a commutation as opposed to a compromise and release. In a commutation, Medicare will offset against the medical benefits resolved. In a compromise and release, if the claimant gives up all further rights to medical, the Regulations indicate that Medicare will pay all future medical bills. Currently, after a second meeting with Medicare, these definitions are still in limbo.

A second item that was not addressed in the Guidance was whether or not Medicare's Regulation indicating that a payment in a case that is not a proven workers compensation case can still be used as an offset. Again, this question has been raised with Medicare officials, but no answer has yet been forthcoming.

On a more positive note, Medicare did provide sweeping pronouncements on when the Agency would be interested in approving a workers compensation settlement. In answer to question #1 of the Guidance, Medicare officials have agreed that Medicare's interest should only be considered:

When the injured individual 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 then $250,000.00.

In speaking with Medicare officials, after the Guidance was issued, the Agency has taken the position that if a person has not received a Medicare card or a Medicare payment for any reason, and the settlement is under $250,000, Medicare is not interested in approving that settlement. However, this applies only to people who have not received a Medicare benefit. Currently, if someone has received a Medicare benefit, all workers compensation resolutions must be approved by Medicare to completely eliminate future Medicare liability.

Workers Compensation and Medicare Cost Saving Tips

1. If your workers compensation settlement is under $250,000, and the claimant has not qualified for Medicare benefits, Medicare approval is not required in a workers compensation settlement.
2. If the claimant is more then 30 months away from any potential qualification for Medicare benefits, arguably, even if the resolution is over $250,000, Medicare approval may not be needed. (Stress is on the word "may" because an official position by the Agency has not been stated. This opinion relies solely on the guidelines published in July of 2001.)
3. Medicare approval can be obtained with regard to any settlement amounts over $250,000 or, in the case where Medicare has paid benefits, all cases within reason. Each self-insured and insurer must assess what risk they are willing to take with regard to Medicare approval. Obviously, in a small settlement it may be worth taking the risk of a future Medicare audit rather than going through the cost of approval. Currently, it takes between 60 and 120 days to obtain a Medicare approval for settlement, and in some regions it takes even longer.
4. In any evidentiary hearing regarding the settlement of future workers compensation benefits, establish on the record that the claimant is aware that there may be a potential Medicare lien at some time in the future and that the claimant understands the total amount of the settlement can be offset by Medicare.
5. Again, it is suggested that the work-related condition be strictly limited through precise language to define what condition was considered work related. This will aid both the claimant and the insurer to determine what conditions Medicare should pay for in the future which are not work related.
6. If the settlement is over $250,000, the participants to the resolution of the workers compensation case must establish some sort of Medicare fund set aside arrangement. This may be a specific interest-bearing bank account that the claimant could administer of (if the amount is small and the claimant is well educated) or an arrangement where a trustee would actually review all charges and pay the Medicare-related expenses out of the trust. If this type of arrangement is used, none of the trustee fees can come out of the amount set aside for Medicare benefits.

Conclusion

Although much progress has been made over the past year with regard to excluding some workers compensation settlements from Medicare review, more progress is necessary. In small settlements ($50,000 or less), Medicare approval should not be needed even if the injured worker has received Medicare benefits. In settlements regarding this amount, usually 80 to 90 percent is an indemnity payment. Thus, requiring Medicare approval in these situations may prevent a settlement.

Parameters need to be redefined for claimants who are receiving Medicare benefits. Although no official position has been announced by the Medicare Agency, it is expected that a supplemental Guidance will be issued within the next 2 months. It is hoped this Guidance will answer the question of the conflict in the Regulations and the seemingly unconstitutional stance with regard to contested claims and payments when no workers compensation claim can be proven.