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.
