WCMSA = Federalization of Workers Comp?
The CMS WCMSA requirements could be the first steps in federalization of Workers Comp. The last paragraph should be of concern to any carrier, employer or TPA. CMS can change the rules as they see fit as I read it. What happens if they decide to review, for instance, ALL claims over $25,000 regardless of status? That development would send shockwaves through the Workers Comp and the insurance industry overall.
I was going to rewrite these sections on Workers Comp Medicare Set Asides (WCMSA) from the Center for Medicaid/Medicare Services (CMS). I thought I would leave them intact and not link you to the webpage and then have you search for them. This info is confusing enough without having to dig for it.
CMS Review Threshold
It is not in Medicare’s best interest to review every WC settlement nationwide in order to protect Medicare’s interests per 42 CFR 411.46. (Ref: 7/23/01 Memo Q1(c)) A WCMSA is not necessary when resolution of the WC claim leaves the medical aspects of the claim open.
A WCMSA may be submitted to CMS for review in the following situations:
- The claimant is currently 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.
Computing the Total Settlement Amount
The computation of the total settlement amount includes, but is not limited to, wages, attorney fees, all future medical expenses (including prescription drugs), and repayment of any Medicare conditional payments. Payout totals for all annuities to fund the above expenses should be used rather than cost or present values of any annuities. Also, any previously settled portion of the WC claim must be included in computing the total settlement amount. (Ref: 4/25/06 Memo)
In order to determine the total settlement amount when using an annuity, please be advised that Medicare determines the value of the annuity based on how much the annuity is expected to pay over the life of the settlement, not on the Present Day Value (PDV) or cost of funding that annuity. (Ref: 4/21/03 Q17)
Example: A settlement is to pay $15,000 per year for the next 20 years to an individual who has a “reasonable expectation” of Medicare enrollment within 30 months. This settlement is to be funded with an annuity that will cost $175,000. The RO will review this settlement because the total settlement to be paid is greater than $250,000 ($15,000 per year x 20 years = $300,000). It is immaterial for Medicare’s purposes that the PDV or cost ($175,000) to fund this settlement is less than $250,000. (Ref: 4/21/03 Q17)
Current Medicare Beneficiaries
Injured individuals who are already Medicare beneficiaries must always consider Medicare’s interests prior to settling their WC claim regardless of whether or not the total settlement amount exceeds $250,000. That is, ALL WC PAYMENTS regardless of amount must be considered for current Medicare beneficiaries.
However, CMS no longer reviews new WCMSA proposals for Medicare beneficiaries where the “total settlement amount” is $25,000 or less (i.e., low dollar threshold Medicare beneficiaries). In order to increase efficiencies in our process, and based on available statistics, CMS instituted this workload review threshold. However, CMS wishes to stress that this is a CMS workload review threshold and not a substantive dollar or “safe harbor” threshold. Medicare beneficiaries must still consider Medicare’s interests in all WC cases and ensures that Medicare is secondary to WC in such cases. In other words, if the total settlement amount is $25,000 or less, the parties to the settlement are still required to consider Medicare’s interests. The recommended method to protect Medicare’s interests is to enter into a Medicare Set Aside arrangement to protect Medicare’s interests, even though CMS will not review the proposal. (Ref: 7/11/05 Memo Q1 and 2)
Settlements Greater than $250,000 where the Claimant is “Reasonably Expected to Become a Medicare Beneficiary”
(Ref: 4/21/03 Memo Q2)
An individual has a “reasonable expectation” of Medicare enrollment if any of the following situations apply:
(a) The individual has applied for Social Security Disability Benefits;
(b) The individual has been denied Social Security Disability Benefits but anticipates appealing that decision;
(c) The individual is in the process of appealing and/or re-filing for Social Security Disability Benefits;
(d) The individual is 62 years and 6 months old (i.e., may be eligible for Medicare based upon his/her age within 30 months); or
(e) The individual has an End Stage Renal Disease (ESRD) condition but does not yet qualify for Medicare based upon ESRD.
To the extent a WC settlement meets both of the criteria (i.e., the settlement is greater than $250,000 AND the claimant is reasonably expected to become a Medicare beneficiary within 30 months of the settlement date), then a CMS-approved Medicare set-aside arrangement is appropriate.
Review Thresholds are Subject to Adjustment
(Ref: 7/11/05 Memo Q2; 4/25/06 Memo)
Both the beneficiary and non-beneficiary review thresholds are subject to adjustment. The CMS reserves the right to modify or eliminate its review criteria if it determines that Medicare’s interests are not being protected. Claimants, employers, carriers, and their representatives should regularly monitor this website for changes in policies and procedures.
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