A Primer On Medicare Set Asides
It is important to start from the beginning when addressing the Medicare Secondary Payer Act and Medicare Set Aside issues that may impact attorneys as well as injury victim clients. Some lawyers have a good deal of knowledge when it comes to Medicare Set Asides and Medicare Secondary Payer compliance. Other lawyers have never heard of a Medicare set aside. In this post, we will give a basic overview of Medicare Set Asides in the form of frequently asked questions.
When To Submit A Wcmsa For Cms Review
While there are no statutory or regulatory provisions requiring that a WCMSA proposal be submitted to CMS for review, submission of a WCMSA proposal is a recommended process. More information on this process can be found on the WCMSA Submissions page.
If you choose to submit a WCMSA for review, CMS requires that you comply with its established policies and procedures. CMS will only review 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
For more information on Review Thresholds, please see Section 8.1 of the WCMSA Reference Guide available in the Downloads section found at the bottom of this page.
If you decide to submit a WCMSA for review, it can be submitted electronically through the WCMSA Portal or by paper/CD through the mail. The portal submission is the recommended approach for submitting a WCMSA as it is significantly more efficient than sending this information via the mail. For more information about this application, please see the WCMSAP page.
Note: For general information on CMSs Coordination of Benefits & Recovery activities, please see the COB& R page.
How Does An Msa Work After A Settlement
When there is a Compromise and Release settlement, the amount going to the MSA can be put in a special bank account.
The special account should only be used for:
- medical treatment for the work injury
- treatment that is with a Medicare provider
The money is for treatment that would have been paid by the workers compensation insurance company if not for the settlement.
In an MSA, the workers compensation insurance company is estimating and paying for the medical care upfront. The money is then paid from the MSA account to Medicare as the injured worker receives treatment through Medicare.
Example: Jackson is on Medicare and settles his claim for $60,000. Of that, $28,000 is the MSA.
The $28,000 is put in a special bank account. There is also a company that will manage the payments to Medicare when Jackson goes to the doctor. The insurance company agrees to pay the fees for this.
Having someone else handle the payments to Medicare is easier than Jackson doing it himself.
The Cost Factor Of Medicare Set
Medicare Set-Asides are not free to set up nor are they easy. You generally will need to have a qualified medical professional review all of the medical records, approximate the future needs, estimate the costs of those needs and come up with a rational basis for the amount you ultimately set aside. There are companies that can be hired to do this. In the typical case, they will charge $3,000.00-5,000.00. In more complex cases, this may be much higher. This additional cost must be factored into the determination of whether it will be profitable to handle the case.
Use A Professional Administrator
The rules for administering an MSA are so complex that I recommend getting professional assistance. Heres whats required:
- Funds must be placed in a separate interest-bearing account and earnings reported at tax time.
- Funds may only be used for Medicare-allowable expenses resulting from the settlement-related injury. An annual report must be filed with CMS, asserting that funds have been used properly.
- Medical provider fees must be negotiated to comply with CMSs fee schedule.
- Upon exhaustion of MSA funds, a report must be filed with the appropriate Medicare Secondary Payer Recovery Contractor before Medicare will assume responsibility for injury-related expenses.
Failure to comply with these requirements can jeopardize future Medicare coverage, even for expenses that are unrelated to the injury in question.
In addition to ensuring compliance with all CMS requirements, a professional MSA administrator can:
- Coordinate payments by the MSA, Medicare and other insurers.
- Obtain discounts on medications, medical equipment and medical care.
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What Happens If An Injured Worker Spends The Money In An Msa
There is nothing to prevent an injured worker from spending the MSA money on something else.
However, if the injured worker then needs treatment for the work injury, Medicare may refuse to provide it. The injured worker would have to find some other way to get or pay for the treatment.
If the injured worker never gets treatment through Medicare for his or her work injury, it does not matter if the money is spent somewhere else.
Example: Hector settles his claim for his hip, and $15,000 goes into his MSA account for a hip replacement. Instead of saving the money, Hector uses the money to buy a car.
Later that year, Hector goes to the doctor for a hip replacement. Medicare will not pay because he used the MSA funds.
Hector will have to pay for the care himself or find another way to get care.
How Does It Work
Under Medicare Secondary Payer legislation, in some instances, Medicare does not have the primary responsibility to cover medical costs, and other available insurance is responsible for the coverage before Medicare.
If a person has a WCMSA, the money put away for future healthcare covers medical costs before Medicare, ensuring that the person uses their settlement funds before using Medicares federal funds.
The amount allocated to the set-aside account varies, depending on the persons estimated medical needs. In some cases, the workers compensation insurance company asks Medicare to approve a certain amount for the set-aside account.
Medicare then reviews medical documentation and estimates future medical expenses related to the injury or illness in the compensation claim.
Medical costs covered may include:
- visits to the doctor
Yes. Any money allocated for a WCMSA must go into a separate interest-earning account.
The interest must also stay in the account for future medical expenses.
Medicare has guidelines for WCMSAs. To keep Medicare from denying claims, it is important to follow these rules.
Guidelines for Medicare set-aside agreements include:
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When Is A Medicare Set Aside Necessary
The short answer is that there are no statutory or regulatory requirements to prepare or submit a Medicare Set Aside to the Centers for Medicare & Medicaid Services for review or approval. However, CMS does mandate that Medicares interests are considered and protected in all workers compensation settlements which resolve medicals. The only sanctioned vehicle to accomplish this is an MSA.
All parties in a workers compensation case have significant responsibilities under the Medicare Secondary Payer laws to protect Medicares interests when resolving cases that include future medical expenses. The recommended method to protect Medicares interests is a WCMSA . See Medicares Medicare Set Aside official webpage. The MSP is federal law, including statutory, regulatory and policy provisions designed to prevent a cost-shift to the Medicare program.
A allocates a portion of the settlement for all future work-injury-related medical expenses that are covered and otherwise reimbursable by Medicare. See Workers Compensation Medicare Set-Aside Reference Guide, v3.1, sec. 19.2.
CMS will voluntarily review proposed WCMSAs in order to determine if the proposed amount is sufficient to cover future Medicare-covered medical expenses related to the settlement. See WCMSA Reference Guide, v.3.1, Sec. 8, and 8.1. CMS will voluntarily review a WCMSA proposal in the following circumstances:
A Medicare Set Aside can either be funded in two ways:
How Do I Manage My Account
Youll need to manage your Medicare set-aside arrangement once its been approved and set up. There are rules youll need to follow, including:
- All the money in your Medicare set-aside arrangement must be spent on treatments and services related to your settlement. You cant spend the money on anything else, for any reason.
- Your account must earn interest.
- You must keep receipts and bills for all treatments related to your settlement.
- You must only pay the usual and customary amount for any treatments you receive.
- Youll need to report your Medicare set-aside arrangement spending to Medicare each year.
- You must notify Medicare when your Medicare set-aside arrangement runs out.
These rules are in place to make sure your settlement money is going toward treatments.
Since Medicare wont pay for your treatments until your Medicare set-aside arrangement runs out, its important to have proof that the money went toward certain treatments. If your Medicare set-aside arrangement isnt handled properly, Medicare might deny your claims when it runs out.
Finding the right professional can help you manage your account and take some of the stress off of you. If you used a lawyer during your settlement case, they might be able to connect you with a professional to help manage your Medicare set-aside arrangement.
You might also be able to get recommendations from your bank, or any financial professionals you already use, like your retirement account manager.
How Do I Qualify For A Msa
CMS guidelines state that it will review new claims proposals for the following:
- The claimant is a Medicare beneficiary and the total settlement amount is greater than $25,000 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
What If My Situation Changes
There are certain situations that might change the way your Medicare set-aside arrangement is handled, including the following examples:
- What if the Medicare set-aside arrangement holder dies before all the money in the account is spent? You can name a beneficiary to your account. If you pass away before the money is spent, and all your outstanding claims have been paid, the remaining money will go to your beneficiary.
- What if I overfund my Medicare set-aside arrangement account? The amount of money in your Medicare set-aside arrangement is set by your estimated medical costs. If you still have funds when all of your treatments are done, you can close the account and keep the remaining money. A professional can help you with this.
- What if I overfund my Medicare set-aside arrangement account structured payments? If your payment is too high in a certain period, the money will roll over and reduce the amount of your next months payment.
- What if I underfund my Medicare set-aside arrangement? It depends. If your Medicare set-aside arrangement was approved by Medicare and you run out of funds, Medicare will pick up your treatment costs. If you set up an unofficial Medicare set-aside arrangement that has not been approved by Medicare, your claims might be denied.
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What Happens When I Exhaust My Medicare Set Aside Money Will Medicare Pay
Simple answer: When MSA funds are exhausted, Medicare will begin to pay for all covered items related to your injury, only if you have properly managed your MSA funds and reported your spending to Medicare, and if you are enrolled as a beneficiary on Medicare. If Medicare steps in to begin covering you for treatments related to your injury, you will be covered just like any other Medicare beneficiary and subject to corresponding co-pays, coinsurance and deductibles.
If your MSA funds run out and 1) the funds were exhausted properly according to Medicares guidelines, and 2) you reported your use of the funds properly, then Medicare would step in as the primary payor for your future medical expenses related to the specific injury.
If Medicare steps in to begin covering you for treatments related to your injury, you will be covered just like any other Medicare beneficiary and subject to corresponding co-pays, coinsurance and deductibles.
Medicare will only pay if the injured party has previously enrolled in Medicare during an enrollment period, or have managed their MSA correctly . If someone is not properly spending their MSA funds or not reporting properly, they are jeopardizing their future Medicare benefits for injury-related care. Medicare states it will deny paying for treatments if it cannot track the proper use and exhaustion of the MSA funds.
Medicare And Medicaid Reimbursement Rates
Medicare and Medicaid have enormous bargaining power with medical professionals due to their volume of patients covered. As a result, they are able to negotiate huge discounts for the services their clients receive. It is basically a mass volume discount. So, whereas an individual might get charged 10,000.00 for a particular procedure, the Medicare and/or Medicaid reimbursement rate may be $500.00 for the same procedure. The other $9,500 gets written off.
This is important because under Texas law, not only can you not seek recovery for the part written off against the tortfeasor, but a jury may not be told the sticker price of a medical bill that was paid at a discount. The amount of medical bills often influences how much a jury awards for pain and suffering. So when a jury hears that a patient only received $500.00 in medical damages, they are much more likely to give an award commensurate with $500.00 than they are $10,000.00 in damages. A personal injury attorney evaluating whether it is cost-effective to spend the money to bring a personal injury claim must take this into consideration. Unfortunately, this makes some legitimate personal injury claims cost-prohibitive since you can easily spend $5000.00 to bring to trial even the simplest of auto collision cases.
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How Can I Find Help To Set Up A Medicare Set
You can contact the Medicare Benefits Coordination & Recovery Center by calling 855-798-2627 for answers to many questions you may have about setting up a Medicare set-aside arrangement.
There are also many different professionals who can provide assistance in setting up your Medicare set-aside arrangement, including:
- private attorneys
- financial planners
- account administrators
It may be a good idea to get professional guidance, especially if your case is complex or your settlement amount is large.
An experienced professional can help you estimate the amount of your settlement that needs to go into your Medicare set-aside arrangement and get the account set up once it has been approved by Medicare.
If youd prefer to do it on your own, Medicare has a self-administration toolkit to guide you.
However, Medicare recommends that you use a professional if youre able. Properly managing your account helps make sure that Medicare will pay your figure claim after your Medicare set-aside arrangement runs out.
No matter how you manage your account, its a good idea to sign up for updates from Medicare.
Updates can provide you with important information and changes that affect Medicare and Medicare set-aside arrangement plans. You can use this link to enter your email and start receiving updates.
Are My Medicare Set Aside Funds Taxed
In most cases, the entire amount paid out in a personal physical injury settlement is non-taxable. So, your MSA funds, as part of that settlement are also not taxed upon receipt.
The injured party is responsible for taxes on interest earned on their MSA funds. If the interest earned is accrued over $10, typically the bank will provide the injured party a 1099-INT to use in their tax filings. Interest income taxes can be paid for out of the MSA account per Medicares guidelines.
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How Is A Wcmsa Calculated
When an injured workers condition has stabilized at the permanent and stationary date, the treating doctor can determine the future medical care an injured worker may require.
Medicare wants to make sure that the insurance company pays enough money in the settlement to cover medical care for the injured workers work injury for the rest of his or her life.
Generally, the insurance company will hire an outside company that will:
- review all the medical records and treatment
- determine the injured workers life expectancy
- list all the reasonable future treatment
- determine the cost of each type of treatment over the injured workers life expectancy
Example: Johnathan has a work injury to his knee. He is on Medicare.
His doctor says he may need arthroscopic surgery, physical therapy, and prescription drug medication for his knee.
The insurance company has an MSA company prepare a report of Johnathans future medical care and related medical expenses.
The MSA allocation is for $17,300. The report says that Johnathan has a life expectancy of 19 years, so the future medical costs and expenditures will be:
$7,500 for one knee surgery
$3,800 for physical therapy at $200 a year for 19 years
$6,000 for monthly medication at $315 a year for 19 years
What Is A Medicare Set Aside Account
A Medicare Set Aside Account is a settlement resulting from a workers compensation or personal injury claim. Settlement funds are set aside in a special account to pay claimants future medical treatment and service costs. Once the funds are exhausted, Medicare will begin paying for the injured persons qualified medical expenses. But thats only if the person followed all the rules and regulations for expenditures and reporting.
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