During a recent presentation to a knowledgeable group of claimant attorneys, there was discussion about the importance of protecting Medicare’s interests if an injured worker settling a case is Medicare eligible or if eligibility is on the horizon. The conversation around it prompted an observation and question from the audience. A young lawyer raised his hand and suggested: Medicare coverage is not an issue if the Medicare beneficiary became eligible because of a chronic disease. In fact, the comment was amplified with the explanation the disease was an ill-defined debilitating neurological disorder. He then seemed unsure his unequivocal statement was accurate and asked: Isn't that true?
A question should never be answered with a question. In response, the speaker asked: Where did you get that impression? The predictable response was, ‘from a friend who is very knowledgeable about Medicare.’
That interaction prompted the idea it might be a good time to write about common Medicare Set Aside (MSA) misconceptions and their realities.
Many in the workers’ compensation legal community became familiar with Medicare Set Aside accounts after reading about them in legal journals in 2001 after Parashar Patel wrote his famous memo: Workers Compensation: Commutation of Future Benefits. After Patel caught the attention of the bar, there was an evolution in our understanding of MSAs. This evolution is best evidenced in the CMS memoranda published on the topic in subsequent years. Recently, we have all been afforded the opportunity to learn more by reading on the topic and attending presentations. The keen observer is aware there are several misconceptions about MSAs. This article addresses five that arise with some regularity.
- Everything medically related to my claim that has been paid by the workers’ compensation carrier will be covered by my MSA/ Medicare Set Aside funds cover anything medically related to an injury.
This belief seems logical and consistent with what you would think happens once a case settles. However, it is inaccurate because it is over-inclusive. An MSA can only be used to pay for medically related expenses, including pharmaceuticals Medicare would typically cover. Most Medicare beneficiaries do not realize there are limitations on what medical expenses Medicare allows. If a procedure, a service, or a pharmaceutical is disallowed by Medicare, an MSA cannot be used to cover the expense. This limitation begs the question, how can an expense not covered by Medicare be paid after settlement? The simple answer is, if the medical expense is incurred and is necessary for the treatment of the work injury, then separate funds not in an MSA but administered similarly, can be placed in an account, and be used for items not covered by Medicare. How is a beneficiary supposed to know what Medicare will and will not cover? This question helps frame the argument for professional administration. A professional administrator is charged with knowing and pays consistently with that knowledge. The self-administrator can determine what is and is not covered by reviewing the CMS publication Medicare and You or by visiting CMS’ website.
- All bills paid with an MSA are paid at Medicare rates.
The impression some Medicare beneficiaries have is that medical bills are not paid in an amount reflective of the actual bill. That impression is correct. Medical bills incurred post-settlement and paid with MSA funds should be paid consistent with any applicable state fee schedule. Those bills can, however, be negotiated for payment in a lesser amount.
Paying at fee schedule rates or an amount less than fee scheduled is very difficult for the self-administrator. When dealing with an individual who has little to no bargaining power, medical providers usually expect to be paid the full amount on an invoice. In contrast, a professional administrator typically has the size and technical wherewithal to negotiate payment consistent with CMS’ expectations. Paying the full charge will cause the MSA to exhaust prematurely and create problems when Medicare becomes the expected payer.
- An MSA covers all my co-pays and Medicare pays the balance on every bill.
This misunderstanding arises with some regularity. Under the Medicare Secondary Payer Act of 1980, Medicare is a secondary payer. If there is a primary payer, it pays first. When a workers’ compensation case settles the primary payment responsibility shifts from the carrier or self-insured employer to the settlement proceeds. The Medicare beneficiary or the professional administrator managing the funds is then responsible for paying medical expenses post-settlement. Medicare payment responsibilities do not begin until the funds in an MSA have been appropriately exhausted.
- MSA funds are received by CMS post settlement. They pay all the medical bills with those funds until they are exhausted. Once exhausted, Medicare then pays for the injury related medical expenses.
This misunderstanding is best addressed by looking at each sentence individually. MSA funds are not paid to CMS post-settlement. They are directed to either the injured worker if self- administering, or to an MSA professional administration company. It is helpful to know there has been legislation proposed in Congress that would have MSA funds managed by CMS. This legislation, although proposed several times, has never received much traction. Because CMS does not receive the MSA funds, they do not pay bills with those funds.
The final sentence in this misconception however is partially correct, once MSA funds are properly exhausted, Medicare will then pay any ongoing medical expenses associated with a workers’ compensation injury that are medical expenses Medicare would normally pay.
Once an individual exhausts, they typically must cover copays and deductibles moving forward, around 20% on average.
- If MSA funds are not used in five years, those funds may be used for any purpose/The funds become the settling party’s money to use as they might choose.
There are different versions of this misconception. The basic idea is usually presented with different time frames, ranging from 5 to 10 years. If you think about an injured worker’s proposed future medical treatment, specifically if they've had implanted durable medical equipment, a total knee, a total hip, or some other device that has a life expectancy, it can be anticipated there might be years with no treatment. Just because there is a treatment hiatus, that does not change the character of the funds from those intended to pay for medical treatment to those available for any use. This misconception is attractive, but inaccurate.
It's hoped these thoughts on common MSA misconceptions help to better understand how funds in an MSA should be properly administered. Acting on misunderstandings could negatively impact a Medicare beneficiary’s medical entitlement. If there are doubts about how to administer an MSA, seek the advice of experts who regularly work with them. Or, better yet, retain the services of a professional MSA administrator and rest easy the account will be managed without any issues related to misconceptions.
This article began with report on a comment about whether the basis for how a beneficiary qualified for Medicare plays a role in his MSA obligations. The observation is a misconception and is incorrect. It matters not how a beneficiary qualifies either by age or medical status. Post-settlement MSA obligations are the same for all Medicare beneficiaries.