WORKERS' COMPENSATION
Welcome to our workers’ compensation blog page! Our Synergy experts have extensive experience in assisting with workers’ compensation cases and navigating the complex world of workers’ compensation. Our blogs cover a wide range of topics related to workers’ compensation, including the basics of workers’ compensation, our special advice column “Since You Asked”, and more. We understand the challenges that injured workers face and the importance protecting their compensation for injuries sustained on the job. Our goal is to provide you with the information and resources you need to navigate the issues at settlement with confidence and achieve the best possible outcomes. Check back often for new blog posts and updates!
By: Joanna Wynes, J.D., Partner Planner
The primary goal of a plaintiff’s attorney in a personal injury or workers’ compensation action is to achieve the greatest possible financial recovery given the facts and circumstances of the case. Once there is an agreement on the amount to settle the case for the injury victim or workers’ compensation claimant, there is a one-time opportunity for the plaintiff to invest a portion of the recovery in a structured settlement annuity. The decision to purchase a structured settlement with a portion or all of a victim’s settlement must be made before receipt of the proceeds.
What is a Structured Settlement and Why is it Used?
A structured settlement is an investment vehicle where the settlement proceeds are paid as a periodic stream of payments instead of a lump sum payment or in addition to a lump sum.
Since their inception in 1982, structured settlement annuities have been considered one of the safest financial options at settlement for personal injury and workers’ compensation victims. Prior to the creation of structured settlements, plaintiffs could only receive their settlements in the form of a one-time lump sum cash payment. As a result of limited financial expertise and the fact that many plaintiffs receive more funds from a settlement than they have ever had in their lifetime, there is a significant risk of quick dissipation of settlement funds. In fact, there is anecdotal evidence that ninety percent of claimants quickly dissipate lump sums received for personal injuries within five years of receipt of the lump sum. A structured settlement provides financial management for settlement funds and can be designed in various ways to meet a plaintiff’s needs. Depending on the type of structured settlement plan selected, it can ensure that the settlement proceeds will last for the rest of an injury victim’s life.
A structured settlement has many advantages over taking an entire settlement as a lump sum, as discussed in more detail below:
- A structured settlement offers valuable tax incentives: Although personal injury and workers’ compensation settlement proceeds are tax-free, any interest earned on traditional investments is fully taxable. To promote the use of structured settlements, Congress amended the federal tax code to make 100% of every structured settlement payment received on account of personal physical injury or sickness exempt from income taxes.
- A structured settlement helps provide financial security: Traditional investments typically do not offer a guaranteed return. A structured settlement, on the other hand, creates a fixed stream of guaranteed income with a guaranteed rate of return, which allows a personal injury victim the ability to recover without spending time and resources determining investment strategies. Additionally, a structured settlement can help protect funds from creditors, relatives, friends and others seeking money when they learn of a large settlement.
- A structured settlement is flexible in design: A personal injury or workers’ compensation victim can design a structured settlement to provide a monthly check to help pay for basic needs such as food, clothing, transportation and/or housing. Alternatively, it can be used to provide for the future cost of college, retirement funds and/or a down-payment on a home.
- A structured settlement is backed by the highest-rated insurance companies: A structured settlement is contractually guaranteed by a highly rated, well-capitalized life insurance company.
Cases in Which a Structured Settlement Should Be Considered:
Structured settlements are ideally suited for many types of cases including: 1) cases that involve minors or persons found to be incompetent; 2) people with temporary or permanent disabilities; 3) severe injuries necessitating extensive future medical care and income replacement; 4) wrongful death cases where the surviving spouse and/or children need monthly or annual income, or assistance with education expenses; and 5) workers’ compensation cases.
Case Studies:
20-Year-Old Female: Anna Parker (name changed for privacy and confidentiality)
Ms. Parker was significantly injured in an automobile accident. Although she was not completely disabled, her injuries significantly diminished her future employment capacity. Ms. Parker’s case settled for policy limits, and after the payment of attorneys’ fees and costs, she was going to net $350,000.00. Ms. Parker elected to take $40,000.00 of her net settlement proceeds in a lump sum at the time of settlement to buy a used car and rent a new apartment. She also elected to invest $310,000.00 in a structured settlement, which would provide her with guaranteed monthly payments of $1,169.27 for thirty years to help her with monthly bills as her earnings capacity was diminished. The contractually guaranteed payments under the plan selected totaled $420,937.20. Accordingly, her structured settlement was guaranteed to earn $110,937.00 of tax-free interest on her investment.
9-Year-Old Female: Lisa McDonald (name changed for privacy and confidentiality)
Lisa McDonald sustained a severe arm fracture as a result of medical negligence as a young child. Her case settled when she was 9 years old for $750,000.00. After attorney’s fees and costs, she was going to net $400,000.00. Because she was a minor at the time of settlement, and not disabled, her parents had two choices for her settlement funds under Maryland law. One option was to place her funds in a statutory “Title 13 Trust.” With this option, her funds would be in a restricted bank account, earning little to no interest until she reached the age of 18. The funds would not be available for use without Court Order prior to the age of 18, and upon age 18, Lisa would be able to withdraw all of her money at any time. The other option was a structured settlement, which could start paying her at or after the age of 18 on a schedule selected by her parents and was guaranteed to earn significant interest. After speaking with her parents, we designed a structured settlement so that Lisa would receive semi-annual payments of $20,000.00 for four years starting in the summer following her 18th birthday, with the intention that those payments would assist with college tuition. Her parents also elected for her to get a guaranteed lump sum of $45,000.00 on her 23rd birthday, $30,000.00 on her 25th birthday and $322,918.47 on her 27th birthday. The contractually guaranteed payments under the plan selected totaled $557,918.00. Accordingly, her structured settlement was guaranteed to earn $157,918 of tax-free interest on her investment.
Conclusion
If you or a family member are anticipating a settlement for personal injury or sickness, speak with your attorney about getting a structured settlement consultant involved to discuss options for your settlement proceeds, and to ensure that a plan is putting in place prior to signing settlement documents and receiving funds. Alternately, reach out to a settlement planner, such as myself, directly, to learn whether a structured settlement might be right for you or your family.
October 14, 2021
Rasa Fumagalli JD, MSCC, CMSP-F
As we reflect on the 20th anniversary of the devastating September 11, 2001, terrorist attacks on US soil and all the lives lost, we cannot forget the heroic efforts of all the first responders and workers involved in the clean-up of the devastation sites. Since then, many have developed a whole host of health conditions due to the exposure to toxic chemicals and the gruesome nature of the work. This month’s “Since You Asked” column will address the interplay between workers’ compensation claims, the World Trade Center (WTC) Health Program, and the Medicare Secondary Payer Act.
Question:
My client sustained a workers’ compensation injury during the clean-up of the World Trade Center Ground Zero site. Should I have a Medicare Set-Aside proposal submitted to CMS for review or is there a different process for this?
Answer:
The clean-up of the September 11, 2001 devastation sites exposed many workers to dust and toxic chemicals for a prolonged period. This resulted in the development of respiratory illnesses as well as different cancer types and other conditions. No cost medical monitoring and treatment for certain medical conditions may be available through the federal World Trade Center (WTC) Health Program for qualified workers that provided rescue, recovery, debris clean up or related services after the 9/11/2001 attacks during the period between 9/11/2001 and 7/31/2002. By way of background, the WTC Health Program was developed in connection with the passage of the James Zadroga 9/11 Health and Compensation Reauthorization Act. The Act is named after a New York City police officer who developed a respiratory disease after his prolonged exposure to dust at the WTC Ground Zero Site. The WTC Health Program is administered by the National Institute for Occupational Safety and Health (NIOSH) and is funded through 2090. Details regarding eligibility and enrollment into the WTC Health Program may be found here.
Workers that are enrolled in the WTC Health Program may also have a companion workers’ compensation case. The coordination of benefits between the WTC Health Program and the workers’ compensation plan is addressed in the WTC Health Program’s “Policy and Procedures for Recoupment Lump-Sum Workers’ Compensation Settlements” (Policy) guide that was last revised on July 7, 2016. When a settlement releases an employer/insurer from responsibility for future medical expenses, the WTC Health Program will seek to recover its cost of providing health care and pharmacy benefits “either from the member or from the individual/entity designated to administer any set-aside established to pay for future medical expenses.” The WTC Health program “will follow best practices for WC recoupment as outlined by the Centers for Medicare & Medicaid Services (CMS) in its “Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA) Reference Guide.”
The Policy guide also provides information on how to estimate the amount of money to be set aside to protect the WTC Health Program. If CMS reviewed and approved a WCMSA for expenses related to the same conditions that were certified for treatment under the WTC Health Program, the CMS determination will be given deference. The funds in the CMS reviewed WCMSA however must be used to reimburse the WTC Health Program annually for the cost of the treatment that was provided in the case. The Policy Guide also provides for the submission of proposed set-asides to the WTC Health program for review.
In your case, I would recommend that you determine whether your client qualifies for the WTC Health Program. This would then guide you in deciding how to address future injury related medical expenses in a settlement that closes out future medical care.
September 9, 2021
Structured settlements may be used to fund a Workers’ Compensation Medicare Set-Aside (WCMSA). Samantha Webster, Synergy’s Director of Case Management, addresses two common questions that come up about funding of a WCMSA with a structured settlement annuity.
Question #1:
“Are there different structured settlement options to fund a Medicare Set-Aside and what is the difference?”
Yes, there are different types of structured settlement payment plans that can fund a Medicare Set-Aside. After an initial cash deposit is made to start the Medicare Set-Aside account (seed), a structured settlement will make annual payments to replenish/ add to the account. The most common structured settlement option offered by the carrier is a temporary life payment stream. With a temporary life payment stream, the annual payments to the MSA account are payable only as long as the injury victim is alive and for a maximum number of years (the life expectancy used for the MSA allocation). If the injury victim dies before reaching the maximum number of years, the payments stop. There are no structured settlement payments payable to their beneficiaries. A great alternative, but higher cost, is a period certain payment stream. With a period certain payment stream, the annual payments to the MSA account are paid for a certain number of years (generally the life expectancy used for the MSA allocation). Every payment is “guaranteed,” which means that in the event of the injury victim’s death before all payments are made, the remaining payments would go to designated death beneficiaries or the injury victim’s estate. While there are other options, these are the two most common.
Question #2:
“My client’s CMS-approved MSA is being funded with a structured settlement, but the payments do not add up to the total on the CMS approval, is that acceptable?”
CMS will provide parameters for the funding of an approved MSA using a structured settlement. In providing the initial seed amount and the annual payments, CMS rounds the numbers down. In doing so, the initial seed/deposit and the sum of all annual payments may be less than the total amount approved. If an MSA is funded with a structured settlement and the proposal follows the recommendation of CMS with regard to the initial seed/deposit and the annual payment amount, CMS will consider the MSA as being fully funded. If you or your client are concerned about the discrepancy, you can add the difference to the seed or ask your settlement planning professional to include the difference in the annual structured settlement payment stream. Both options will allow your client to match the total CMS-approved MSA amount.
Example:
CMS Approved MSA $345,687.00
Initial seed/deposit $48,549.00
Annual Payments $14,149.00
Duration per CMS 21 years
In this case, the seed/deposit plus the annual payments equals $345,679 which is $9 less than the CMS-approved MSA. To relieve any concerns, $9 can be added to the seed/deposit or the annual payments can be increased to $14,149.43.
April 8, 2021
Rasa Fumagalli JD, MSCC, CMSP-F
The nature of the Workers’ Compensation Medicare Set-Aside (WCMSA) has evolved over the years since the 2001 Patel Memo. That evolution has seen us move from every WCMSA that met the Center for Medicare and Medicaid Services (CMS) internal workload review threshold being submitted to CMS for review, to now a practitioner may be offered an evidence-based medicine WCMSA, a “certified” WCMSA or a compromise WCMSA. An understanding of the differences between these various types of proposed WCMSAs and their projection methodology is important when it comes to settlement discussions.
The WCMSA that most practitioners are familiar with is the “traditional” WCMSA. This type of WCMSA is submitted to CMS for review when CMS’ internal workload review threshold is met. Although CMS recommends that parties seek Agency (CMS) review of the WCMSA, the WCMSA Reference Guide (Guide) specifically states: “There are no statutory or regulatory provisions requiring that you submit a WCMSA amount proposal to CMS for review.” The Guide further states that “if you choose to use CMS’ WCMSA review process, the Agency requests that you comply with CMS’ established policies and procedures.”
The Guide includes the general frequency schedules for various diagnostic studies, implants, and drugs used by the Workers Compensation Review Contractor (WCRC) in determining future treatment costs. Given the “cookie-cutter” projection methodology that is used by the WCRC, the CMS-determined WCMSA may, at times, overfund the future treatment. The benefit to CMS review, however, is the assurance that CMS will become the primary payer upon review/approval of the allocation and proper exhaustion of the WCMSA funds.
A second type of WCMSA is the evidence-based medicine WCMSA. This may or may not be submitted to CMS for review. Rather than projecting future treatment based on the Guide’s frequency schedules, the projections instead focus on evidence-based medicine guidelines, such as those that may be found in the Official Disability Guidelines (ODG) or American College of Occupational and Environmental Medicine (ACOEM) guidelines. It is generally lower than a “traditional” WCMSA and will also limit projections based on state law arguments. If the evidence-based medicine WCMSA is submitted to CMS for review and approved by CMS, the WCMSA may more accurately allocate funds for the future treatment.
A practitioner may also be presented with a “certified” WCMSA that is not submitted to CMS for review. The “certified” WCMSA projection methodology looks to evidence-based medicine guidelines. It also comes with an assurance that the reasonableness of the certified WCMSA projections will be defended against any challenges by CMS. The WCMSA funds, however, must be either professionally administered or “self-administered with support” in order to extend the life of the funds. Since this type of WCMSA is not submitted to CMS for review, CMS is not bound by it.
The compromise WCMSA is used in disputed settlements and is never submitted to CMS for review. It is based on the calculation methodology that is outlined in 42 C.F.R. § 411.47. Although this provision discusses conditional payments, it should equally apply to the apportionment of future medical damages in a compromise settlement.
Conclusion
Although the majority of WCMSAs are prepared by the defense, it is important that the practitioner scrutinize the methodology used in the WCMSA projections. If the WCMSA is not going to be submitted to CMS for review, an evidence-based medicine projection methodology is more appropriate than the “cookie cutter” projections used in the traditional WCMSA. This difference is particularly significant when the WCMSA is to be carved out from the settlement rather than added to the settlement. When in doubt as to the best approach, Synergy’s team is available to guide you through your Medicare Secondary Payer compliance options.
March 25, 2020
B. Josh Pettingill
We are oftentimes asked about injured workers who have a Medicare Advantage Plan (MAP) and if they still need to use their Workers’ Compensation Medicare Set-Aside (WCMSA) funds if the MAP will cover all their medical care. This brief post will explain Medicare’s position on this issue and then provide real-world analysis. There has been a surge of case law over the last several years regarding MAPs and their ability to assert the same rights as Medicare under the MSP statute. However, there is no case law in existence regarding MSAs or where a MAP has denied paying for accident-related care. Over the years, whenever the injured worker has an MAP, the plan covers everything the MSA normally would (and then some).
Medicare Advantage Plan – Part C
Medicare Advantage Plans also referred to as “Part C” Plans, were established under the Social Security Act as an alternative to traditional Medicare. Medicare Advantage Plans are a type of Medicare health plan offered by a private company that contracts with Medicare to provide all Part A and Part B benefits.
Part C Coverage
Medicare Advantage Plans include Health Maintenance Organizations, Preferred Provider Organizations, Private Fee-for-Service Plans, Special Needs Plans and Medicare Medical Savings Account Plans. If your client is enrolled in a Medicare Advantage Plan, Medicare services are covered through the plan and are not paid for under original Medicare. Most Medicare Advantage Plans include prescription drug coverage (Part D) as well. In order to be eligible for an MAP, you must be eligible for Medicare Part A and Part B.[1] Part C plans can also cover things that traditional Medicare does not pay for such as gym memberships or dental benefits.
Part C Statistics
As of 2018, more than one-third of all Medicare beneficiaries were enrolled in some type of Medicare Advantage Plan. One in every five (20%) of these enrollees were in group plans offered by employers and unions.[2] What this means for Workers’ Compensation cases is that we are seeing a lot of injured workers who have these types of plans.
Medicare’s Position
From Medicare’s standpoint and per the WCMSA reference guide, section 4.1.3:
“A WCMSA is still recommended when you have coverage through other private health insurance, the Veterans Administration, or Medicare Advantage (Part C). Other coverage could be canceled, or you could elect not to use such a plan. A WCMSA is primary to Medicare Advantage and must be exhausted before using Part C benefits to cover your WC claim-related expenses.”[3]
In other words, they don’t care if there are other forms of private health insurance because the claimant’s circumstances may change and there could be a shift in burden for Medicare to pay. However, by including MAPs in the category of “other coverage”, one could interpret that CMS is also admitting that these plans will likely pay if presented with a bill. That is exactly what we have been seeing.
Real-World Implications
As it stands today, these plans are not rejecting claims on the basis they should be paid for out of a Medicare Set-Aside. There have been rumblings from Medicare that they are sharing Section 111 reporting data with the MAPs which could give them the ammunition to reject claims if they were related to the work-related injury. [4] However, they simply do not have the resources or the wherewithal to do this. It is not to say that it won’t happen in the future. That day is not yet upon us.
Conclusion
You cannot proactively advise your clients to go out and purchase a Medicare Advantage Plan in an effort to circumvent the MSA obligation. Medicare’s position is that the WCMSA exists to protect the Medicare Trust Fund which would mean the injured worker proactively spends money from the MSA account as they treat. Along with that, you cannot control how the providers bill and who they bill.
The practical takeaway is that if your client has a Medicare Advantage Plan, there is a very high likelihood they may never spend a dime of their WCMSA funds. That is the way it stands today. Is it possible that CMS could start to share pertinent data with their MAP partners which would give them the chance to potentially deny paying for accident-related care on the basis they have the same rights under the MSP statute? Yes, but not highly likely.
WCMSAs come from Medicare’s interpretation of the MSP and not from any regulation or case law. Accordingly, it would be a significant stretch to say that a Part C plan could insist upon a set-aside when Medicare itself does not even have a specific regulation or statute requiring them. But, do not be surprised if you see Humana, Cigna or any other MAP provider, at least try to do it someday.
[1] Source: www.Medicare.gov
[2] Source: Kaiser Family Foundation analysis of CMS’s Landscape Files and March Enrollment files for 2010-2018
[3] https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Workers-Compensation-Medicare-Set-Aside-Arrangements/Downloads/WCMSA-Reference-Guide-Version-3_0.pdf
[4] Unsubstantiated rumors. The passage of the PAID Act would validate this happening.
February 13, 2020
An inquiry that Synergy receives on a regular basis involves a Medicare-eligible claimant who has both a workers’ compensation and a third-party liability companion case. The third-party liability claim has resolved and now the workers’ comp carrier has a lien against the liability claim for the amount that has been paid out for past medical/indemnity benefits. The question becomes: Is an MSA necessary and does that get handled through workers’ comp, liability or both?
The short answer is it depends. It depends on how the cases are settled. In some states, the workers’ comp carrier may be granted what is known as a “holiday” from paying any future medical expenses.[1] Specifically, the holiday can oftentimes be a barrier to washing out the workers’ comp medical claim since the carrier will not have to pay for medicals again until the total amount the claimant received from the third-party case has been spent.
In some states, the lien is negotiated as a percentage based on what the full value of the case is compared to what the client is going to net in their pocket. Once the lien is negotiated, comp is then entitled to an offset for future medical benefits paid on behalf of the claimant. For example, let’s say that the liability case settled for 25% of the estimated full value, and the comp carrier agreed to a waiver of their lien in exchange for a compromised sum. In this example, going forward, the claimant would then be responsible for paying 25% out of pocket towards the cost of their medical care until the comp claim has resolved. It should be noted, if the workers’ comp lien is fully waived at the time of the third-party settlement, then the carrier will not be entitled to an offset on future benefits.
Implications for the Claimant
In both scenarios, if the claimant were to attempt to bill Medicare for accident-related care post-settlement, they would get denied because workers’ comp still has an ongoing responsibility for medicals (ORM).[2] There is the possibility that the claimant could seek medical benefits through either a Medicare Advantage Plan or through private insurance, but these policies typically exclude coverage if there is a workers’ compensation case. So, neither of these solutions would be appropriate. A set-aside must be a consideration but what are the practical implications going forward?
MSA Issue on Holiday States
If the medical claim is not closed out, then the claimant will be forced to pay out of pocket for any accident-related care until the holiday amount has been exhausted from the third-party settlement. Those out of pocket expenses could be much greater than any MSA obligation. Whereas if the workers’ comp claim was resolved, the claimant would then be able to use Medicare, Medicare Advantage, or private insurance coverage. In those states that are entitled to the holiday, the claimant should strongly consider closing out their medical claim with workers’ comp in order to be able to use private health insurance and/or establish a Medicare Set-Aside with the intent to use Medicare for accident-related care once the MSA has been spent appropriately.[3]
MSA Issue on Non-Holiday States
If the workers’ comp claim remains open in those states that are entitled to an offset on future benefits, the claimant would be responsible for paying 25% out of pocket indefinitely for future medical care related to the workers’ comp claim. One way to address this issue is using the settlement proceeds from the third-party cases, the claimant could buy a structured settlement annuity to cover the out of pocket differential.[4] That way, there are guaranteed monies available to take care of the claimant’s out of pocket expenses. If the workers’ comp piece ultimately settles, then the carrier will fund the MSA as part of the terms of any settlement. If that event were to occur, the claimant could use the structured settlement payments for anything instead of medical expenses.[5]
Conclusion
Finally, if there is a global resolution of both the workers’ comp and the third-party liability case simultaneously, then the MSA should be established through the workers’ comp side since there are formal guidelines in place for workers’ comp cases. That way, there are no unwanted delays in getting the case to the finish line. If the workers’ comp case meets the Centers for Medicare and Medicaid’s review thresholds for workers’ compensation MSAs, then attorneys must decide whether to submit for CMS approval. All parties to a workers’ comp or liability settlement must take into Medicare’s interests when resolving a claim.
[1] This is a credit for future benefits.
[2] Medicare will have the ORM information in their system and the claimant’s common working file which will flag/deny anything related to the accident related care.
[3] The exception to this would be if the claimant was receiving attendant care benefits or significant amount of care that is not covered by Medicare or private health insurance.
[4] That structured settlement would function as an informal “MSA” since workers comp pays 75% and the claimant pays the 25% balance. It is almost like a forced MSA on the third-party case.
[5] This assumes a WCMSA is set up and there are funds available to use for medical expenses.
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