Medicare set-asides: Attorney outlines changes, reviews challenges

Complying with the requirements of the Medicare Secondary Payer Act continues to be a challenge for many in the workers' comp system.

That was one of the overarching themes of a recent ask the expert session at the National Workers' Compensation and Disability Conference® & Expo, produced by LRP Publications.

While outlining the top errors identified by the Centers for Medicare and Medicaid Services in submitting Medicare set-asides, many attendees related continued confusion over their rights and responsibilities.

Determine whether a set-aside is needed (12/05/11)

Bionic hand becoming more acceptable in workers' comp system (08/22/11)
Partial hand amputees benefit from i-LIMB technology (08/22/11)
Study: Medical best practices equal fewer lost work days, lower costs (12/22/11)
Psychosocial issues are key to insurer's new modeling tool (09/29/11)

"People still don't believe you don't need a set-aside when the injured worker is not a Medicare beneficiary and is settling for less than $250,000," said Jim Pocius, a shareholder with Marshall, Dennehey, Warner, Coleman & Goggin in Philadelphia. Despite the stiff penalties for failing to consider Medicare's interests in a workers' comp settlements, CMS has certain thresholds to determine if a set-aside is required.

Top errors. "We talked about common errors with regard to the submission of Medicare set-asides," Pocius said, "areas where people who are submitting Medicare set-asides generally make a mistake."

Topping the list is failure to send the proper pharmacy and medical records to the agency.

For example, "assume there is a case where the insurance carrier stopped paying the medicals in 2008 for whatever reason," Pocius said. "We need to obtain the patient's records -- not only through 2008, but up to the present, whether the records are related to the workplace injury or not, or Medicare won't process the application."

Similarly, the agency won't process the application if the pharmacy records for the most recent years are not included.

"The agency found that over time in difficult workers' comp cases, sometimes a beneficiary, rather than struggle with medical coverage through the workers' comp carrier, would begin billing Medicare for treatment," Pocius said. "The carrier would not have knowledge of that treatment, but would have a record indicating that no payments had been made."

With prescription drugs, the agency found that the same things would happen, Pocius explained, and the patient would get drugs through his Medicare plan rather than through the workers' comp carrier. The bills would be paid by Medicare.

"As a result of those cases, the agency began requiring treatment records right up to the date of application -- even if the workers' comp carrier's records indicated that no workers' comp payment had been made for a significant amount of time."

Additional errors identified by CMS included:

Failing to respond to a development request from the agency. "The agency sends a letter requiring additional information," Pocius said. "If you don't respond, the agency closes the file."
Not including the proper rated age statement.
Failing to include the proper payment amount in structured settlement situations.
Incorrectly calculating the drug set-aside amount.

New developments. Several recent memos issued by CMS for liability cases may portend upcoming changes for the workers' comp system. Three have been released since September.

First, if the treating physician has issued a report stating that no future medical treatment is needed as a result of the accident, the parties in the liability case could rely on that note and no Medicare set-aside would be needed.

A second memo pertained to conditional payments. Medicare implemented a $300 threshold for certain liability cases, saying it would not pursue a conditional payment amount in such cases if all Medicare's criteria are met. What's not entirely clear is whether litigants would need to send final settlement documents indicating the amount is $300 or less. "My advice to anyone dealing with this provision would be to send the final settlement documents to the Medicare Secondary Payer Recovery Contractor with a cover letter indicating the settlement is for $300 or less and no conditional payment should be assessed," Pocius said.

In a third notification, Medicare announced a percentage in liability cases settling for $5,000 or less. Beneficiaries electing this option will be able to resolve Medicare's recovery claim by paying the agency 25 percent of the total liability settlement.

"The parties can now send a percentage of the settlement to Medicare in lieu of a conditional payment search being conducted," Pocius explained. "However, I think you would have to look at the facts of the case very carefully since a liability case settling for $5,000 usually doesn't have significant medical billing or significant injuries. Therefore, by selecting this 25 percent option, you may be actually overpaying Medicare."

Right now, the options apply only to liability cases. But Pocius thinks they could lead to policy changes for workers' comp cases.

"An argument can be made that the same waivers should be applied to workers' comp, since the rights and responsibilities are the same in workers' comp and liability cases," he said. "These new directives seem to have created different rights for litigants in workers' comp as opposed to liability litigants."

Read more at the WorkersComp Forum homepage.

December 5, 2011

Newsletter Sign-up