When settling a workers’ compensation claim in any state, carriers and self-insured employers often make one of two crucial errors based on two commonly accepted compliance myths. Most focus solely on $25,000 and $250,000, the two threshold markers for determining if the Centers for Medicare and Medicaid Services (CMS) approval is required (the former if the claimant is Medicare enrolled, the latter if the claimant is expected to be enrolled within 30 months of settlement). However, the real issue that both parties in a workers’ compensation claim should be focused on is whether Medicare’s interests are protected in the settlement.
The first myth is that a CMS-approved Medicare Set Asides (MSA) is necessary where the settlement meets or exceeds one of the two thresholds noted above. This is not true. In fact, the WCMSA reference guide, published on the CMS website, states explicitly that “submitting a WCMSA proposed amount for review is never required.” The only requirement is that the parties protect Medicare’s interests. Keeping this in mind can save a carrier tens of thousands of dollars in a settlement, and even permit settlement where the circumstances otherwise preclude it.
Consider the following scenario: The parties hope to settle a claim for $200,000, inclusive of $50,000 for future medical costs, where the claimant is Medicare enrolled. However, six months ago, the claimant’s doctor recommended a spinal cord stimulator. The claimant refused, however, and is afraid to undergo any surgical procedure whatsoever. The doctor still thinks it may be a viable treatment option in the future. If the parties seek CMS approval, the medical value will skyrocket to $150,000. CMS doesn’t care what the claimant wants; it only looks to what has been recommended by the doctor. The carrier isn’t going to pay the claimant an extra $100,000 for medical treatment that the claimant will never have, and the claimant isn’t going to settle for $200,000 where the majority is put in an account for future medical. But so long as the parties are aware that CMS approval is not mandatory, they can still settle. The claimant simply takes on the risk that if she does want a spinal cord stimulator in the future, she will be paying for it out of the remainder of the settlement funds.
For the second myth, consider this scenario: The claimant is 45 years old with mild, but chronic, back pain. He takes medication costing $60.00 per month, and follows up with his physician twice per year. He continues to work. The parties agree to settle for $20,000, with $3,000 set aside for medical. Ordinarily, the parties wouldn’t think twice about this. In fact, though, the parties are failing to adequately protect Medicare’s interests. The medical allocation will be depleted in less than four years, and the entire settlement will run out after about 25 years. The parties are failing to comply with federal law, and should either increase the amount of the settlement or find a way to decrease the projected future value.
Ultimately, the lesson is that simply submitting an MSA to CMS is not required, and does not alone guarantee compliance. In all cases, the parties must take into account Medicare’s interests, and in no cases is CMS approval mandatory. Understanding these facts can lead to both better compliance and more favorable settlements for all parties involved.