Workers Comp Medicare Set Aside (WCMSA)
There are a few concerns that I have concerning my last post on Workers Comp Medicare Set Aside. The info from the CMS website is in italics.
Annuities
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. 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.
As a Chartered Financial Consultant, I often deal with annuities. My concern on the above passage is a very small annuity spread over many years can actually trigger the reporting limit. If an insurance carrier is looking at lifetime meds, one of the most efficient ways to settle claims will be affected.
If an employer/TPA/insurance carrier wants to avoid the reporting limit, the easiest method would be to shop for annuities that show a lower final payout. This could be detrimental to the injured employee over the long term.
Current Medicare Beneficiaries
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.
The concern here is that even a small settlement with a Medicare beneficiary has to contain a set aside agreement. This may likely affect a large number of lower dollar settlements. This will encourage the carriers/TPAs/employers to not settle these files.
Review Thresholds are Subject to Adjustment
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.
This paragraph is actually what made me decide to write this article. The review thresholds are subject to adjustment. If the CMS decides their interests are not being protected in the overall Workers Comp industry, then they can modify the rules as they see fit?
What happens if in 20 years, the CMS says that for the last 30 years, their interests have not been protected on ALL claims under $25,000? Are they allowed to retroactively require MSA’s to protect their interests?
If a carrier/TPA/employer has settled a file that does not require CMS approval, but then the rules now require a WCMSA, would the settlement have to be redone?
What if the settlement had already been paid and the file was closed? Would the file have to be reopened and a new settlement agreement completed?
When all the data is reported to the CMS and the FIO, will the statistics change? My main point for this article is the CMS based their rules on the statistics they had in their possession. As most carriers have not reported their data, were the conclusions drawn by CMS based on accurate data? That worries me.
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