Would you buy a house if you didn’t know its price or the ongoing cost of your mortgage? It seems like a ridiculous question, but many claimants are asked to make decisions of the same magnitude on the non- Medicare covered portion of their settlements with little to no reliable information.
Most of the time, claimants don't know the current cost of their medical treatment nor the future expected increases. While a Medicare Set Aside may provide a vote of confidence to the claimant for the MSA portion of their settlement, given Medicare approves the amount, the costs that would not be covered by Medicare (also known as “non-qualified costs”) can be particularly daunting.
Many adjusters try to avoid addressing the issue of non-Medicare covered items altogether in a settlement, but often times it is a necessary component of the offer and a very contentious one. Estimating the pricing on big-ticket items, such as facility costs, custodial care service and home health care can be extremely difficult and often result in many cases never reaching settlement. Working with a hands-on professional administration company, like CareGuard, you can gain transparency into real- world pricing for these items and reach a definitive number for the costs.
What are some of the most significant non-Medicare covered expenses?
- Long Term Skilled Nursing Facilities
- Home health aides and custodial care services
- Home modifications
- Certain creams, gels & compounds (Lidocaine, Voltaren, )
- Medical supplies sold over the counter
- DME bathroom supplies
- Services like acupuncture, gym memberships, home IV therapy
There is no exact science for how to appropriately cost out these expenses for a settlement. Many adjusters are trained to look at the past two years’ cost and then project out the future costs based on the claimant's life expectancy. The issue with this method, as many applicant attorneys will be quick to point out, is that the carrier has sophisticated cost containment systems in place to reduce what it pays on its bills. The true expense can be dramatically higher after settlement when the claimant is no longer covered by the payer’s systems and instead faces these costs alone, paying retail prices with cash.
Other adjusters rely on MSA vendors to put together a “non-qualified” projection for these costs. It is worthwhile to examine the basis of these projections, given that, unlike MSA’s, there is no specific guideline across the industry that the vendor must follow so the figures can vary significantly.
In contrast to methods above, with a professional administration provider you can often discover the exact cost that the claimant will incur after settlement for these expenses. Professional administration companies can go out and secure pricing for some of the largest cost-drivers, and often minimize or at least lock-in inflation risks. For example, at Careguard, we have locked-in rates for claimants at specific facilities for long periods of time: 10 to 15 years, or for the rest of their life. In other instances, we have been able to secure rates for home health treatment, depending on the type of care and requirements of the claimant. In addition, many professional administration companies have pharmacy networks that drive discounts on the creams, gels, and medications that are non-qualified.
CareGuard Case Study: California Facility Costs
An attorney introduced a case to CareGuard which was not going to settle due to disagreements over non-Medicare covered costs. The claimant was in a long term skilled nursing facility in California. He and his family were interested in settling, but hesitant about the ongoing expense of the care and medical cost inflation. CareGuard took the following steps to help move the case forward:
In this case, CareGuard was able to negotiate a rate with the facility that was about a day below what the carrier had been paying. This reduced rate over 17 years generated a significant savings that allowed the carrier and claimant to find a middle ground and to settle the case.
Non-Medicare covered expenses will continue to become more significant components of settlements. Reports indicate that home health attendant costs have risen between 1-2% over the past 5 years, nursing facility costs have risen approximately 4% per year, and that in last year alone, rates for adult day care rose almost 6% nationwide.* There is also enormous price inflation and variance in the cost of the prescriptions. These challenges are not going away anytime soon. As the parties to a settlement try to come to a resolution, knowing and using real-world pricing through a platform such as CareGuard can help bridge the gap.
Don’t let the discrepancy in estimates of non-Medicare costs become a huge sticking point in your negotiations. Instead, introduce visibility into the cost and let a professional administrator like CareGuard help get everyone on the same page so the claimant can feel confident that they’ve made an informed choice when they settle their case.
Genworth 2015 Cost of Care Survey https://www.genworth.com/dam/Americas/US/PDFs/Consumer/corporate/130568_040115_gnw.pdf