Temporary or permanent loss of Medicare benefits for injured workers and potential financial exposure for payers are the consequences of failing to comply with Medicare requirements after a workers’ compensation claim is settled.
Closing a claim can be beneficial for payers, injured workers, and all other stakeholders involved – as long as Medicare’s interests are taken into account before the settlement and, especially, as long as all mandates are followed afterward. Using a professional administrator can be key to protecting all parties.
The Centers for Medicare and Medicaid Services (CMS) has taken significant steps in the last 15 years to ensure Medicare is not paying for medical services that should instead be paid through other avenues – including workers’ compensation. Any injured worker who is or will in the future be on Medicare must look first to the workers’ compensation system, and any settlement proceeds to pay for any workers compensation injury-related medical expenses. The idea is to prevent Medicare from paying when there is already a primary payer – such as workers’ compensation or any medical settlement funds.
Many workers’ compensation settlements include a Medicare Set-aside (MSA) – essentially, an allocated amount of money provided by the workers’ compensation payer to fund all future medical expenses related to the injury that Medicare would otherwise fund.
Determining the appropriate amount of the MSA is typically done by a specialized vendor pre-settlement. Once the MSA is submitted to Medicare for approval, Medicare will not pay for Medicare-covered expenses unless and until the MSA is exhausted and accurately accounted for to CMS. That is where the danger lies – failing to properly provide the required information consistently to CMS of how the money was spent.
While reporting the correct information to CMS may seem simple, it is anything but.
“When an injured individual settles a claim with an MSA, there exists a whole host of obligations, outlined by CMS, with respect to administering the funds,” writes Shawn Deane, General Counsel for Ametros. In his blog series, ‘Perspectives on the Benefits of Professional Administration,’ he outlined several obligations:
- Establishing a separate interest-bearing account at an FDIC-insured institution
- Expending funds only on Medicare-covered items casually connected to treatment related to the underlying workers’ compensation or bodily injury claim
- Coordinating with providers to transmit invoices to be properly billed against the MSA funds
- Maintaining proper records and accounting of the MSA
- For every transaction with the account, the following needs to be tracked:
- Transaction date
- Check number
- Payable to or health care provider name;
- Date of service;
- Description (procedure, service, or item received; deposit; interest; other allowable expense);
- Amount paid;
- Any deposit amount;
- Account balance.
- Submitting annual reporting and attestation with proper documentation and receipts; and/or when the funds are exhausted (either permanently or temporarily).
MSAs that have been approved by CMS protect the injured party if and when additional medical costs are incurred. “Once the CMS-approved set-aside amount is exhausted and accurately accounted for to CMS, Medicare will pay primary for future Medicare-covered expenses related to the injury that exceed the approved set-aside amount,” Deane explains. “For Medicare to be informed of the accounting and exhaustion associated with the MSA, they must be notified via the attestation process.”
Medicare must be apprised of information such as:
- Total spent for medical services, and prescription drugs
- Total of interest income the account earned, if any
- Balance of the MSA account at the end of the calendar year
“Any temporary depletion or permanent exhaustion of the funds must also be reported,” Deane writes. “If attestation reporting does not occur and there was depletion or exhaustion of the MSA, it is possible that Medicare may deny coverage.”
Denial of Coverage
While CMS maintains it can deny paying for treatment if there is still money in an MSA OR if the injured worker has failed to properly report those funds’ full exhaustion, many stakeholders are unconvinced. But CMS has increasingly denied payments.
“Your claim has been denied by Medicare because you may have funds set aside from your settlement to pay for your future medical expenses and prescription drug treatment related to your injuries,” reads an actual letter from CMS. It was sent to an injured worker in 2018 when he sought treatment. He had settled his claim in 2014 but did not spend and/or report his MSA funds as required by CMS guidelines. In fact, he received several such letters before he reached out for help.
“This document shows that CMS is becoming savvier and denying treatments that should be paid for with settlement funds,” Deane writes. “Injured parties that do not expend their settlement funds appropriately are at risk of jeopardizing their future Medicare benefits.”
The risk to the injured worker may also extend to the payer. The denial of medical care from Medicare could result not only in treatment interruptions but could also lead the injured worker to turn to the workers’ compensation payer if there have been issues with administering their account.
Professional administrators are experts in controlling how post-settlement medical funds are spent and properly reported to CMS. Medicare guidelines do allow for an injured person to administer an MSA on his own. However, without an extensive understanding of the complexities involved, doing so puts both the injured worker and the workers’ compensation payer at risk. In addition, CMS highly recommends the injured worker seek the help of a professional administrator.
“A settlement event often provides sums of money to an injured individual at levels they’re not accustomed to and may create a situation which poses financial issues. When funds are earmarked specifically for post-settlement medical expenses, there is a risk these funds may be mismanaged or misspent,” Deane explains. “The adage in the MSA industry is the concern that an injured individual may ‘buy a boat’ with their funds specifically designated for injury-related medical expenses. Even if that’s not the case, and they are trying to do the right thing, it can be extremely challenging to get it right.”
Using professional administration ensures money set aside for future medical care is used for that, and that only. It also gives peace of mind to both the injured worker and payer to know the correct information is being reported to CMS.
If you’re looking to brush up on Medicare Set Aside requirements or want to provide an individual with a resource that simply breaks down the components of Medicare Set Aside administration, get our free video resource, MSA Self-Administration: 5 Critical Things Individuals Should Know About Managing Future Medical Funds.