Settlement of Future Medical in Workers’ Compensation (Part I)
Before the year 2000, many injured workers settled their cases for a lump sum of money and then (later) paid for the treatment of their old work injury through Medicare. Medicare paid for this treatment–at times expensive treatment involving multiple surgeries–even though the injured worker had “sold” his right to future medical care when he settled his Workers’ Compensation case. To put it simply, the injured worker took money from the employer’s Workers’ Compensation claims administrator or insurance company but did not use it to pay for his future medical treatment. This happened with some frequency–even though there had been a federal law which required anyone settling their injury case to take into consideration the interests of Medicare which had been on the books for several years.
Note: There is a concept in law which precludes an injury victim from “double-dipping”(i.e., getting paid twice for the same injury claim). There are usually two (2) main parts to the settlement of an injury or disability claim: (1) money to compensate for mental and physical losses (in Workers’ Compensation this usually referred to simply as Permanent Disability); and, (2) (in Workers’ Compensation claims) money to cover likely future medical needs. If the injured worker is paid money by the Workers’ Compensation claims administrator or carrier for the stated purpose of covering the injured worker’s future medical needs but later gets Medicare to cover the future medical costs attributable to injuries covered in the previous settlement, he or she is getting “paid” twice for his future medical costs–this is “double-dipping”.
Before 2000, an injured worker with a low back problem that his doctors were telling him required surgery might settle his Workers’ Compensation case and receive, for example, $30,000 in addition to the value of his Permanent Partial Disability. The additional $30,000 would be characterized as being for “future medical” treatment The same worker who settled his future medical for $30,000 then might wait a few years, until he is entitled to Medicare benefits, and then begin treatment with a doctor who accepted Medicare. Later, that doctor would request authorization from Medicare to proceed with low-back surgery. If the clinical findings supported the surgery, Medicare would ordinarily give the doctor authorization to proceed with the surgery. The worker may have spent the money from the settlement of his future medical or he may simply be saving it. In either case it violated a federal law which has been in place for several years, but was not enforced until 2000.
This pattern of “double-dipping” had gone on for many years. The Federal Government was aware of the practice of injured workers using the money from the settlement of their future medical for things other than their future medical care. But nothing was done about it until 2000 when the Bush Administration urged Medicare to start enforcing the law.
The Two Sides
Some injured workers have objected: “I paid into those benefits. That is my money. I am entitled to get my medical taken care of through Medicare because I am on Social Security Disability and it is a benefit I have earned with my years of work.” While one might agree with these sentiments, it’s inconsistent with the interpretation of federal law. Federal law says that Medicare is a “Secondary Payor”–which means if there is someone primarily responsible for the payment of the medical costs incurred, then that party must pay for the current and future medical costs—instead of Medicare. Medicare only pays when there is no primary party responsible for the medical costs (or when the funds available from the primary party have been exhausted for medical care). So, in the example referenced above, the federal law interpreting the right of Medicare to insist that its “interests be taken into consideration” when a Workers’ Compensation claim is settled requires that the settling worker spend the $30,000 he realized from his settlement towards the treatment of his back before he asks Medicare to pay any of the medical bills associated with his back.
MSATo further complicate matters, the warning that was issued by Medicare in 2000 to the attorneys in California representing injured workers evoked panic in the insurance industry. Almost immediately, Workers’ Compensation insurance companies and third-party administrators began insisting that any global settlement involving significant money for future medical must include a “Medicare Set Aside” account (MSA). If the total settlement exceeded $25,000 some carriers insisted–and still insist–that the MSA also be approved by the Center for Medicare/Medicaid Services (CMS).
So, what does this mean? After the injured worker is essentially released or declared Permanent and Stationary (P&S) or at Maximum Medical Improvement (MMI), the medical billings for the previous two (2) years on the Workers’ Compensation claim involved are submitted to a private vendor selected by the insurer or administrator. Based upon apparent future medical needs of the injured worker, as defined by the evaluating and treating doctors and his life expectancy, the future costs of medical treatment that would otherwise be covered by Medicare is projected–based upon Medicare rates. That projected number is then reduced to present value.
After the essential calculations have been made, an amount of money is determined to be needed to fund–either completely at one time or with periodic payments–an MSA that will cover future medical needs that are ordinarily covered by Medicare, at Medicare rates. Once this number has been calculated–assuming the parties still wish to proceed with a global settlement*–the proposed MSA is submitted to CMS for its approval.
Here’s the real problem: CMS can take several months to review and either accept or reject with suggested modification the proposed MSA. While the speed of approvals seems to be gradually increasing, any problems with the Federal budget may impact the efficiency of CMS’ approval process.
Some cases can be settled for a lump sum for the Permanent Partial Disability alone–leaving the future medical still “open” as a right in the Workers’ Compensation system. In the right case this can work…but usually not.
Settle the case with a calculated MSA included as part of the terms of the settlement document and simply not submit the MSA to CMS for approval. Some carriers are becoming more open to his approach. It depends on the size of the settlement, the nature of the injury (and likely future needs), and who the carrier is.
If the carrier balks at settlement because the MSA number is “too high” in their estimate, sometimes you can legitimately work with the carrier and the evaluating doctors to obtain a lower MSA number. If CMS approves the MSA, the injured worker is usually protected for the future. (Caveat: If CMS is given bogus information about prospective cost of future medical this protection could be lost. It is important to review what information is being provided to CMS.)
Finally, it is usually advisable for the injured worker to endure the delay that occurs with the MSA and CMS procedures. If CMS approves the MSA and the worker follows the rules with how he spends the money in the MSA account, CMS is in effect saying: We have your back. If the vendor and we at CMS got it wrong…if you follow the rules and have to spend all your MSA money for medicals relating to your settled case, CMS will step in and pick up the slack…Medicare will pay your future medical after you spend all the MSA money for medical treatment covered by Medicare at Medicare rates. This is a good thing. It provides ultimate security for the injured worker and his future.
The Bottom Line
The disappointment, of course, is that you do not get to spend that “extra” money that you get from settling your rights to future medical. However, you are out of the sometimes horrible delays and frustrations of trying to get medical treatment in the Comp system, you have the security of money for future medical and, in the event that you do not spend the money in the MSA account, it will usually revert to your heirs. Not the most positive point possibly but one assumes you’d rather that your family got the money than the insurance company.
* Unfortunately, some settlement “deals” simply fall apart when the MSA number is unusually high. Essentially, the insurance company or administrator says to itself–maybe to the injured worker as well–we are never paying that. We will fight the medical costs in the Workers’ Compensation system and never pay what CMS expects for an MSA. This whole conundrum will be the subject of an upcoming blog, “Settlement of Future Medical in Workers’ Compensation (Part II): Do I Stay Or Do I Go?”
NOTICE: Making a false or fraudulent Workers Compensation claim is a felony subject to up to 5 years in prison or a fine of up to $50,000 or double the value of the fraud, whichever is greater, or by both imprisonment and fine.