Some things complement each other and together they're the perfect pair: Jordan & Pippen, peanut butter & jelly, soap & water. You get the point. In the running for the top pair in the workers' compensation / claims world are professional administration and structured settlements.
When a claim settles where there are funds set aside for medical expenses (like in the case of a Medicare Set Aside), the combination of structuring the medical fund and incorporating professional administration can provide exceptional benefits to all settling parties.
When the Oracle of Omaha speaks, people should listen. As it relates to structured settlements, Warren Buffet has been quoted as saying:
Anyone settling a personal injury claim should seriously consider a structured settlement as part of their plan for financial recovery. Structured settlements can stretch settlement funds by providing tax-free payments for lost income, medical bills or other future needs, which delivers tremendous long-term security for injured people and their families…
A structured settlement involves the purchase of an annuity to fund a settlement and/or the component of a future medical fund. Structuring a post-settlement medical account provides the injured individual with a stable source of funding to meet an injured individual's medical needs.
In the case of a Medicare Set Aside (MSA), it can “be established as a structured arrangement, where payments are made to the account on a defined schedule to cover expenses projected for future years.” See WCMSA Reference Guide, v3.1, Sec. 5.2. The first two years of the annual amount are included along with the first surgery and related costs, then followed by annual deposits. Id. at Table 9-2, “Step 6.”
Professional administration involves utilizing a third-party to manage the portion of an injured individual's settlement funds attributed to post-settlement medical expenses. In the MSA domain, professional administrators are defined as, “corporate entities administering [MSA] funds after settlement who are responsible for reporting to Medicare.” See Workers' Compensation Medicare Set Aside Portal (WCMSAP) User Guide, v6.0, Chapter 2.2. It's noted that the Centers for Medicare & Medicaid Services (CMS) “highly recommends” the use of a professional administrator for MSA funds. See WCMSA Reference Guide, v3.1, Sec. 17.1.
Benefits of Combining Professional Administration & Structured Settlements
Since a structured settlement broker and professional administrator's goals are aligned, i.e. settling a claim and ensuring the maximum capability of the funds available to care for the injured individual, they often fit perfectly together when resolving a claim. In most instances, funds earmarked for post-settlement medical expenses – whether an MSA or other types of medical cost allocations – are budgeted annually over an individual's lifetime. Therefore, professional administration and structured settlements fit together integrally and oftentimes settling parties prefer them as a “package” when resolving their claim.
Savings & Extending the Life of the Fund
Establishing an MSA via annuity can significantly lessen costs of funding the account. Studies have shown an average savings of approximately 34% (funding an MSA via annuity vs. lump-sum). Moreover, if funds for an MSA are temporarily exhausted in any given year, Medicare will pay for related expenses until the next annual payment. See Self-Administration Toolkit for Workers' Compensation Medicare Set-Aside Arrangements, v1.3, Sec. 11. Thus, funding an MSA via annuity can extend the life of the post-settlement medical fund.
These benefits are further compounded by having the structured MSA professionally administered. A professional administrator can potentially provide significant savings to an injured individual on their treatment, prescription drugs, and durable medical equipment through provider, pharmacy, and equipment networks. These savings can be dramatic and drastically extend the life of the medical fund, greatly reducing the chance that it will prematurely deplete. Especially in the instance of administering an MSA, the additional savings will also help ensure that the potential of an injured individual's out of pocket costs are lessened.
Ensuring Medicare Pays Primary if Temporary Exhaustion Occurs
As indicated above, one of the benefits of a structured future medical fund in the context of an MSA is that if in any given year the amount is temporarily exhausted, Medicare will pay for covered items or services related to the underlying injury. However, Medicare must be alerted of this occurrence via the attestation process. See Self-Administration Toolkit for Workers' Compensation Medicare Set-Aside Arrangements, v1.3, Sec. 13, “Structured account attestation and expenditure letter: Temporary exhaustion.” Professional administration ensures the appropriate reporting of attestation information relative to temporary exhaustion to make certain that Medicare will provide reimbursement for medical expenses related to the injury.
Funding a post-settlement medical account via a structured settlement and having it professionally administered are powerful tools in claims resolution. They're the perfect pair that complement each other to the benefit of all parties to a settlement.
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