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Archive for category: Medicare Set-Aside Allocations

Why You Should Not Ignore Medicare’s Interests in Your Liability Settlements

Why You Should Not Ignore Medicare’s Interests in Your Liability Settlements

Protecting Medicare’s interests in a settlement is a legal requirement. In 1980 Congress enacted the Medicare Secondary Payer Statute (42 U.S.C. 1395y(b) or MSP), giving Medicare rights as a “Secondary Payer”. While the MSP does not specifically state how a party should protect Medicare’s future interests, the MSP law prohibits Medicare from making a payment where there is a primary payer involved but provides one exception for what is known as conditional payments. Medicare may make a payment under certain circumstances when a primary payer is involved such as a liability carrier or self-insured, and the primary payer has not yet demonstrated its payment obligation by settling a case or paying a judgment. These payments are called conditional payments because the Medicare payment is conditioned upon being reimbursed by the primary payer. The right to reimbursement is a direct statutory right of the U.S. for recovery of conditional payments, that carries steep interest assessments over 10% for demands not paid within 60 days and when left unpaid, can lead to recovery of double damages in litigation. The MSP also provides a right of subrogation where the U.S. is subrogated to the rights that Medicare beneficiaries have. It is important to know that along with the rights of the U.S. under traditional Medicare, which encompasses Medicare Part A and Part B, Medicare Advantage Plans also known as Medicare Advantage Organizations (Medicare Part C), and Medicare Part D Prescription Drug Plans, may assert a private cause of action under the MSP against primary payers and in some cases, those who receive payment from primary payers.

The MSP outlines what plans are deemed primary to Medicare. These plans or types of insurance are auto insurance, liability insurance including self-insured plans, workers’ compensation and no-fault insurance. Collectively, these are referred to as Non-Group Health Plans or NGHP. Medicare’s interests in a settlement applies not only to past payments (think Medicare liens) but to future medicals as well. When describing conditional payments and the right of the government to reimbursement, the MSP does not distinguish between pre-settlement conditional payments and post-settlement conditional payments. Therefore, Medicare’s rights to recovery may apply to post-settlement conditional payments anytime Medicare is prematurely billed for injury related medicals after settlement. In the Workers’ Compensation context, the policy of the Centers for Medicare & Medicaid Services (CMS), as the agency that runs Medicare, traditionally has looked to the employer or insurance carrier for the employer as the debtor for reimbursement of conditional payments arising prior to settlement. In the liability context, the Medicare beneficiary is considered the debtor for conditional payments. Because the MSP allows recovery from both the primary payer and any person or entity that receives payment from a primary payer such as the contingency fee of an attorney being paid from settlement proceeds, attorneys need to be aware of how to protect not only their clients but themselves from collection actions under the MSP.

Completing a Medicare lien investigation and reimbursing Medicare for past payments related to a claim is what most parties will do to consider Medicare’s past interests in a case. However, the most frequently overlooked piece when settling a liability claim is determining how much of the settlement money is being paid to compensate for future medicals and of that amount, how much of that would ordinarily be covered by Medicare. In other words, some trial attorneys may look at all the available damages when proceeding with a case but may not realize that they should also demonstrate a consideration of Medicare’s future interests regarding the future medicals. The repercussions of not addressing Medicare’s future interests in a case could result in Medicare denying payments for case related medical items, services, and/or expenses. This is Medicare’s primary enforcement mechanism post settlement. If done properly, actions taken during the representation of the injured plaintiff (whether enrolled in Medicare at the time of the representation or not) will help ensure that the injured Medicare beneficiary will have funds available to get the treatment they need and future Medicare entitlement for case-related body parts. Protecting Medicare, and the Medicare beneficiary, is a long-term play.

There are several options regarding how to consider Medicare in a settlement. The options will largely depend on the details of the case and there is not a single method that can be applied across the board. The Medicare Set-Aside (MSA) allocation is used frequently on workers’ compensation claims as a method to estimate Medicare’s future interests in a case. Medicare has offered guidance and put in place a voluntary submission process by which they will review MSA allocations that meet certain workload review threshold categories and will issue an approval (or counter approval) on the proposed amount. CMS, as the sub agency under DHHS that runs the Medicare program, publishes a WCMSA Reference Guide that outlines the format for MSA allocation reports and what information should be provided to have the MSA reviewed. Even though there is a well-established process for review of WCMSAs, there is no law requiring the completion of a MSA allocation on a WC case or any case.

As of July 2019, Medicare has avoided setting up a formalized process for review of liability MSAs and has not issued formal guidance or regulations regarding liability MSAs. It is this lack of guidance or a formalized process (like there is in WC) that has led many to believe they do not need to be concerned with Medicare’s future interests in a case. The general approach is to determine whether Medicare made conditional payments pre-settlement and if so, pay the pre-settlement Medicare lien (or negotiate it to satisfactory resolution), and close out the case. This approach is only the first step in adequately addressing and protecting Medicare’s interests. If you only consider Medicare’s past interests, you are placing you and your clients at risk.

Medicare will actually be aware of the case and the associated injuries. They are tracking this information via the MSP’s Mandatory Insurer Reporting (MIR) provision that comes out of Public Law Section 111 and is most commonly known as Section 111 reporting. Section 111 reporting is codified in the MSP under 42 U.S.C. §1395y(b)(8) and establishes MIR for either ongoing payment obligations or total payment obligations demonstrated by payments made by auto insurance, liability insurance including self-insureds, workers’ compensation plans or insurance, or no-fault insurance. If payment of over $750 is made regarding a claim of an individual who is a Medicare beneficiary, the primary payer (source of funds) is required to electronically report the amount of the payment, the date of the payment, the name of the Medicare beneficiary, date of the incident, and all the medical codes associated with the claimed injury (sometimes referred to as the Big 5), and a huge number of other data fields to Medicare. The information becomes integrated into what is known as the common working file for that Medicare claimant. Medicare places electronic markers for the claimant and for the medical codes (ICDs and CPTs) associated with the claimed injury. This information is ultimately used to “track the case” to ensure that Medicare is reimbursed for past payments (liens) and to help Medicare avoid making payments for future medical care related to the case for which it is not the primary payer. Medicare uses this information to monitor the file, check for unpaid liens, and notify parties of discrepancies. The MSP initially described penalties of $1000 per day per claim but was later amended in 2012 with the SMART Act and now describes financial penalties of “up to $1,000 per day per claimant” for noncompliance of any primary payer. CMS has not yet promulgated regulations regarding exactly how civil money penalties will be assessed and whether there will be safe-harbors for bona fide errors associated with the reporting process.

The Office of Management and Budget (OMB) provided indications in December of last year that CMS will be providing two Notices of Proposed Rulemakings (NPRMs) related to the enforcement of the MSP. Each are scheduled to be issued no later than September 2019. While the first could relate to any NGHP cases, because WC already has both regulations in the Code of Federal Regulations addressing Workers’ Compensation cases as well as a Reference Guide concerning WCMSAs, and no-fault claims don’t typically have future obligations, many in the industry have surmised that this first rulemaking will address protecting Medicare’s future interests in liability cases and putting back on the table the adoption of regulations or at least guidance (like a LMSA Reference Guide) on a possible review and approval process with workload review thresholds for CMS review of Liability Medicare Set-Asides (LMSAs). The second NPRM that is scheduled for the same time period will relate to the civil monetary penalties associated with non-compliance with Section 111 reporting. Once these two NPRMs are released, the best practice compliance behaviors for parties on both sides of liability cases should become even more clear.

Medicare’s primary enforcement mechanism regarding protection of Medicare’s future interests and the Medicare Trust Funds is denial of payments for medicals related to compensated third party injuries. However, what happens when Medicare’s computer system doesn’t catch a body part or claim previously compensated in a third-party settlement? Anytime and every time Medicare pays for those injury related medicals when it should not have, those conditional payments accrue as a growing collection action on behalf of Medicare. Our company has seen demands for payment that have included requests for reimbursement of post settlement medicals. We have also seen an uptick in recovery actions by the Department of Justice concerning collection of conditional payments. In March of 2019, a law firm in Maryland agreed to pay $250,000 to resolve a Medicare conditional payment demand on a case where the firm had already disbursed net settlement proceeds to its client. Last June, it was a law firm in Philadelphia that reached settlement with the Department of Justice to reimburse Medicare for conditional payments that were not paid out of trust and had already been disbursed to the client. Just because a plaintiff’s medicals might have been paid for by Medicare after a settlement in the past, does not mean that Medicare won’t deny those items or services in the future, or that it won’t demand repayment when it determines it made conditional payments. Imagine what could happen if Medicare began searching every single payment it makes and brushing that payment up against every settlement over $750 reported by insurance carriers. This is the future and could lead to some eye-popping dollar figures related to parties and legal representatives that failed to pay past Medicare liens and regularly fail to prevent future Medicare liens.

We should also not lose sight of the fact that if an injured individual does not set aside funds for injury related Medicare covered medicals and settlement funds are no longer available, that individual may not be able to get the treatment they need. Sadly, we often see that the MSA funds are the only funds remaining after about five years following a settlement. On a positive note, if MSA funds are exhausted and exhausted properly with the attestations and accounting that CMS likes to see, Medicare will typically step in and become the primary payer for those case related items going forward. Even though there is no law requiring the preparation of a MSA allocation, it is the safest and most conservative approach that can be taken. The injured party will obtain a detailed report outlining anticipated future medical care costs that are normally covered by Medicare. Along with a non-qualified report that typically comes along with a MSA allocation, you will have a better economic picture of all items, services and expenses reasonably expected in the injured plaintiff’s future. Obviously there will often be cases with such significant injuries and accommodations to living and transportation that could also benefit from an evaluation by an economist to take inflation into consideration and Life Care Plans that examines case management costs and some other costs that may not be evaluated in a MSA to help round out the best evidence to build your client’s case.

With a healthy respect for the extraordinary reach of the MSP, if the MSA funds administered are the total amount of funds projected in a LMSA and CMS is notified of the settlement and the amount of the MSA (different from asking CMS to review a LMSA), chances are less likely that there will either be a denial of the payment of post settlement injury related Medicare covered medicals after proper exhaustion or that post-settlement conditional payments would ever arise. Of course, when LMSAs are apportioned, questions abound whether Medicare may ever demand exhaustion of a full projected MSA versus an apportioned dollar amount that takes various factors into consideration of why a liability case may settle for less than full value. We could receive some indication of answers once regulations are promulgated regarding liability futures. However, in the meantime, a MSA allocation offers valuable protections regardless of whether an apportionment is calculated, because the MSA helps limit the extent of Medicare’s reach into a settlement. Without it, the default position taken by CMS for liability cases is that without a plan for future care, the entire settlement will be treated as the amount compensated for as future Medicals. Therefore, CMS would look for the entire value of the settlement to be exhausted in payment of future Medicals before Medicare would pick up coverage for that injury. Contemplating the MSA allocation in the settlement and making sure MSA funds are spent according to Medicare guidelines via professional administration is the safest and most conservative approach that can be taken to not only protect Medicare’s interests in a case, but to protect an attorney and their client from collection actions by CMS, helping to provide peace of mind for your injured clients.

The Road to Settlement Funds Mismanagement is Paved with Good Intentions
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The Road to Settlement Funds Mismanagement is Paved with Good Intentions

It is perhaps cliché to say that life is made up of the decisions you make. But, overused maxims tend to communicate common truths, hence their ubiquity. Decision-making is mainly about choosing one of two or more options to achieve the most desirable outcome. Some decisions are straightforward and obvious. Many are not. Still more are tied up in the tension between what we want to do and what we should do. Values, discernment, and even willpower all factor into the process.

Decisions about money are among the most consequential. It therefore reasons that decisions involving large sums of money are highly consequential. Injury settlements are a prime example of how poor decision-making can produce unfortunate, even disastrous outcomes for both the injured and their families. Really no different than the lottery winner whose sudden wealth turns into debt and insolvency within a brief period, so the injured person who receives a cash settlement of any size is often just as unprepared and soon makes decisions that cannot be undone. Money, once spent, cannot be unspent.


“Where There Is No Vision, the People Perish”

Many people have very good intentions from the outset, but good intentions are not enough. General goals without specific plans to reach those goals will usually fall short. So, what are the missing plans that can cause settlement funds mismanagement?

  • a plan to get the most value out of every dollar spent
  • a plan to use the money for what it was intended
  • a plan to ensure the funds are insulated from poor decision-making

This type of planning helps set priorities and leads to the details needed to help the plan succeed. It is really no different than the priorities considered in good personal finance planning. Some settlement beneficiaries get this, but many do not. That’s because this is a problem common to almost all of us. Most of us do not fund our retirements as we should, do not save as we should, and often do not limit our spending as we should. Any bonuses we receive evaporate quickly. We live up to our means and, some how, when we receive a raise, we then live up to that new limit again. And for individuals with injuries who may not be able to work or whose treatment costs exceed expected costs over their lifetime, mismanagement of a fixed settlement amount will likely result in considerable hardship for the injured and their family.


The Advantages of a Professional Custodian

Once one considers how important it is to have a detailed plan for competent management of  settlement funds, the use of a professional custodian begins to make a lot of sense. Vesting a professional custodian with the responsibility for settlement funds decisions addresses the major problems created by the introduction of a large sum of money into an injured person’s finances.

We’ll look at the advantages of a professional custodian, but first, let’s consider the major factors that often negatively affect the decision-making process for a beneficiary handling their own funds:

  • Lack of Expertise – Inability to seek or negotiate for the best price on products and services due to a lack of knowledge about fee schedules, rates, coordination of benefits, medical billing department practices and policies, and negotiation.
  • Dependence on Willpower – Decisions are at the mercy of the beneficiary’s self-control.
  • Outside Influences – Life circumstances, or the needs or even manipulation of family members or friends creates pressure to spend imprudently.

 

Again, these are pitfalls relatively common to all of us. It is easy for emotion and even rationalization to play into spending decisions. This is why there is certainly wisdom in building a wall around all or at least portions of a settlement to protect the funds and beneficiary alike.

Consider how a professional custodian’s decision-making process addresses the issues we’ve discussed:

  • Professional Expertise – Knowledge and experience in reviewing and repricing claims down to applicable fee schedules, and negotiating reductions in claims where possible.
  • Limited by Agreement – Discretion in spending decisions is limited by agreement. The custodian is not permitted to use the funds in any fashion not explicitly contemplated by the contract. Emotionality is factored out of the decision-making process.
  • Contingency Planning – In the event of specific circumstances, special exceptions can be planned for and facilitated.


Custodial Arrangements: Not just for Medicare Set-Asides

Medicare set-aside accounts, which are created as mechanisms to comply with federal law by protecting Medicare from paying when it should not, and which contain funds specifically limited to the Medicare allowable and injury-related expenses, are commonly administered by a professional custodian (or “professional administrator”). But, other settlement funds should be placed with a professional custodian as well. It’s also worth mentioning that the best way to ensure that settlement funds are used according to the dictates of a settlement is to place those funds with a third party that is bound to comply with the terms that establish their custodianship.

At Medivest, we frequently receive calls from beneficiaries who are interested in seeking some flexibility in how their professionally administered funds are spent. The most common reason for this request is that they have already spent their remaining settlement funds and the monies under our company’s charge are all that remain. It is not difficult in those circumstances to surmise what would have happened with those custodial funds had we not been “in the picture.”

As example has shown time and again, managing large sums of money is not a simple task, and requires proper planning ahead of time to prevent problems down the road. In each settlement, it makes sense to consider using a professional custodian if concerns about fund mismanagement are warranted. Medivest has been providing custodial services to injured beneficiaries for over twenty years. We’ve helped thousands of  individuals spend their settlement funds in a strategic and prudent manner in order to help stretch those funds to their benefit and the benefit of their families. If you have questions about how to integrate a custodial arrangement into a settlement, please do not hesitate to contact us.

How to Use a Medicare Set-Aside Allocation (and, how NOT to)
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How to Use a Medicare Set-Aside Allocation (and, how NOT to)

Administering Medicare Set-Aside (MSA) funds properly is a daunting task for most. Nuance in the Medicare formulary, ignorance about MSAs in the provider’s billing department, and complexity in medical coding all conspire to frustrate even the most diligent and well-meaning of beneficiaries. Truly, the successful MSA custodian has to be part educator, part negotiator, part coding wizard, and part accountant.

Conflated Ideas

In this area of compliance, it is not surprising that misunderstandings abound. One common misconception involves what can actually be paid for from a MSA account. This mistake sometimes has its origin in the failure to understand the MSA allocation report’s actual purpose. It probably does not help that the term “MSA” is sometimes used to describe both the funds in a MSA account and a MSA allocation report (“MSA allocation” or “MSA report”).

The properly prepared MSA report’s value lies in its final dollar amount. Medicare is given consideration through the establishment of an amount of money to be used to treat the injury, thereby shielding Medicare from premature payments on behalf of the beneficiary. This is necessitated by the fact that, by law[1], Medicare is secondary to workers’ compensation and liability injuries, pre and post-settlement. The amount established in the MSA allocation is intended to be spent prior to Medicare becoming primary. But also, the settlement is able to establish a limit to how much of the settlement proceeds must be isolated for the sole purpose of stepping in front of Medicare. According to the latest version of the Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA) Reference Guide, where no arrangement is made for how future medicals shall be paid, Medicare may consider the entire settlement as primary[2].

An Estimate, not a Formulary

The mistake is in a literal application, not of the MSA report’s final dollar amount, but of the itemized detail of medical services and medications. It is common for a beneficiary, those counseling them, or those settling with them, to believe that only the specific items listed in the MSA report are covered by the MSA funds. It’s imagined that the beneficiary, when paying their bills, will reference the MSA allocation to determine whether a given medical expense is listed there, and if not, arrange to have it paid by other means. But, the MSA allocation is not an injury-specific formulary of allowed items any more than it is a prescription for care.

In actuality, anyone who has written a MSA allocation or administered MSA funds for a relatively short period of time knows that, at its best, the MSA allocation report is an educated guess. Moreover, the stock MSA allocation, if written to the government’s review standards, may project treatments in frequencies that would not ordinarily be expected, ballooning its amount, or completely ignore the inflationary nature of healthcare costs over time, deflating the final amount below reality’s expectation of the future. (That back x-ray costs $65 today. Do you imagine it will cost that in 10 or 15 years?) In the end, the final number is recognized as an adequate consideration of Medicare’s interests, but a supposition unlikely to hit future costs with absolute accuracy.

Consider all of the ways that actual injury expenses could differ from those in the MSA allocation report. Take prescription drugs as an example. A drug priced into a MSA report references a single NDC (National Drug Code), but that particular drug may have dozens of codes, representing different manufacturers, doses, forms, etc. It’s very likely your corner store pharmacy is going to fill your drug under a different code, and different price. The other corner store pharmacy right across from your corner store pharmacy may use still another code and price. A drug prescribed to treat a condition may become ineffective or create side effects undesired by the beneficiary and/or the prescribing physician. It is not uncommon for a physician to drop one medication in favor of another, or add or remove medications. This all changes the spend.

Also, the Medicare formulary changes annually. Something covered by Medicare today may not be covered in the future, and just because an expense was contemplated in a MSA report, it does not mean that the MSA funds should continue to cover it if that particular expense is no longer covered by Medicare. In summary, a beneficiary’s needs may change over time and the MSA allocation report is not designed to and cannot contemplate all of those changes at the time it is prepared.

What to Pay

So, what is actually to be paid from MSA funds? The answer is any and all Medicare allowable, injury-related expenses incurred on or after the date of settlement until the MSA funds are properly exhausted. Administration is all about stepping in front of Medicare to prevent any payment by it for injury-related expenses until MSA funds are gone. This is not accomplished by checking expenses against the list in the MSA allocation report. It is about identifying injury related expenses that Medicare would otherwise pay for and paying them at rates consistent with or below the applicable fee schedule. It is inaccurate to say that Medicare is responsible for any injury-related expenses not specifically contemplated by the MSA allocation. Such an assumption (though made more frequently than you may expect), if resulting in payments by Medicare for the injury while MSA funds still exist, represents an unlawful shift of burden to Medicare that may prompt a request for reimbursement if discovered.

In the event that real life is more expensive than the MSA report expected, what then? Medicare will assume primary responsibility for the injury’s Medicare allowable expenses once the MSA funds have been spent, provided those funds are spent properly. They will do this annually, in the case of temporary exhaustions, or from the point of permanent exhaustion onward. The key is the ability to demonstrate that the funds were spent according to the Centers for Medicare & Medicaid Service’s (CMS) guidelines. And what if the MSA report seems to have expected more expense than is actually realized? CMS wants those funds to remain in the MSA account in the event one of those unforeseen complications, hospitalizations, or changes in treatment comes along.

In conclusion, a MSA allocation is a valuable resource to any administrator of MSA funds to understand at a glance the nature of the injury and any co-morbid conditions that are specifically excluded. However, it should be used for what it was intended, namely, to arrive at an amount. Understanding the proper use of the MSA funds is critical to administering the funds correctly. A beneficiary who uses their MSA allocation report as a litmus test for what the MSA account can and cannot pay for may end up draining other settlement funds unnecessarily or end up shifting the burden to Medicare prematurely. Ultimately, improper administration places the beneficiary’s Medicare benefits at risk, as Medicare has the right to suspend benefits until it has recovered payments that should have been made by other primary funds.


[1] Medicare Secondary Payer Statute, 42 U.S.C. §1395y(b) a/k/a the MSP.

[2] See Section 8.1 titled Review Thresholds, Example 2 –“Not establishing some plan for future care places settling parties at risk for recovery from care    related to the WC injury up to the full value of the settlement.”

Announced and Unannounced Changes in the New WCMSA Reference Guide Now in Version 2.9 – A Peak Behind the CMS Curtain
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Announced and Unannounced Changes in the New WCMSA Reference Guide Now in Version 2.9 – A Peak Behind the CMS Curtain

CMS published the latest version of the WCMSA Reference Guide as Version 2.9 (Reference Guide or Guide) on January 4, 2019. In addition to changes announced in Section 1.1 of the Reference Guide titled Changes in This Version of the Guide, there are several other changes made that were not announced. The announced changes were as follows:

Version 2.9 of the guide includes the following changes:

• To eliminate issues around Development Letter and Alert templates auto populating with individual Regional Office (RO) reviewer names and direct phone numbers, these will now display the generic “Workers’ Compensation Review Contractor (WCRC)” and the WCRC customer service number “(833) 295-3773” (Appendix 5).
• Per CMS’ request, certain references to memoranda on cms.gov have been removed.
• The CDC Life Table has been updated for 2015 (Section 10.3).
• Updates have been provided for spinal cord stimulators and Lyrica (Sections 9.4.5 and 9.4.6.2)

Below, in numerical order, please find some of the main changes made by CMS, many of which were not announced in Section 1.1 quoted above. Sections, titles and additions have been bolded for emphasis and ease of reading.

A change in Section 4.1.1, titled Commutation and Compromise, on page 4, was one of the announced changes, and omits the previous Reference Guide’s reference to the July 2001 WC Regional Office (RO) Memorandum known in the industry as the Patel Memo. This is consistent with the statement in Section 1.0 that the Reference Guide “. . . reflects information compiled from all WCMSA Regional Office (RO) Memoranda issued by CMS, from information provided on the CMS website, from information provided by the Workers Compensation Review Contractor (WCRC), and from the CMS WCMSA Operating Rules. The intent of this reference guide is to consolidate and supplant all historical memoranda in a single point of reference. Please discontinue the reference of prior documents.” The concept is that the Reference Guide is the policy of CMS and prior documents or Memos it has issued should not be referred to or otherwise used to support a party’s position regarding matters addressed in the Reference Guide unless it continues to be referenced in the Reference Guide.

Section 4.2, titled Indications That Medicare’s Interests are Protected, has a new unannounced on page 5 bullet stating:

• CMS’ voluntary, yet recommended, WCMSA amount review process is the only process that offers both Medicare beneficiaries and Workers’ Compensation entities finality, with respect to obligations for medical care required after a settlement, judgment, award, or other payment occurs. When CMS reviews and approves a proposed WCMSA amount, CMS stands behind that amount. Without CMS’ approval, Medicare may deny related medical claims, or pursue recovery for related medical claims that Medicare paid up to the full amount of the settlement, judgment, award, or other payment.

Medivest’s take on the subject: CMS makes it sound enticing for Workers’ Compensation entities by using the word “finality.” Many parties have used the voluntary process to obtain approvals but have felt there has been a lack of consistency in review standards, especially from one contractor to another. Blogs and websites of many other companies that prepare Medicare Set-Aside (MSA) allocations indicate that they have experienced an increase in surprise counter highers over expenses like off-label prescription drug use as well as some other medical services when submitting WCMSAs to CMS for approval. As a result of what may have been perceived as a lack of consistency or perhaps a lack of confidence that the counter highers reflect real-world evidence-based needs of injured parties, many settling parties have seemed less inclined to choose submission as a regular practice, even when WC settlements fall within the CMS workload review thresholds, opting instead to follow the Medicare Secondary Payer Act, 42 U.S.C. § 1395y(b) et. seq. (MSP), and its corresponding regulations, instead of the voluntary policies of CMS.

On pages 8-9, under Section 8.1, titled Review Thresholds, two new unannounced examples have been included as follows:

Example 1: A recent retiree aged 67 and eligible for Medicare benefits under Parts A, B, and D files a WC claim against their former employer for the back injury sustained shortly before retirement that requires future medical care. The claim is offered settlement for a total of $17,000.00. However, this retiree will require the use of an anti-inflammatory drug for the balance of their life. The settling parties must consider CMS’ future interests even though the case would not be eligible for review. Failure to do so could leave settling parties subject to future recoveries for payments related to the injury up to the total value of the settlement
($17,000.00).

 

Example 2: A 47 year old steelworker breaks their ankle in such a manner that leaves the individual permanently disabled. As a result, the worker should become eligible for Medicare benefits in the next 30 months based upon eligibility for Social Security Disability benefits. The steelworker is offered a total settlement of $225,000.00, inclusive of future care. Again, the steelworker [typo fixed] is offered a total settlement of $225,000.00, inclusive of future care. Again, there is a likely need for no less than pain management for this future beneficiary. The case would be ineligible for review under the non-CMS-beneficiary standard requiring a case total settlement to be greater than $250,000.00 for review. Not establishing some plan for future care places settling parties at risk for recovery from care related to the WC injury up to the full value of the
settlement.

Medivest’s take on the subject: These examples illustrate CMS’s position that Medicare’s future interests need to be considered even if the dollar amount of the judgment, settlement, award or other payment does not meet the CMS workload review thresholds. The examples emphasize that CMS considers the establishment of a plan for future care to be a priority and that CMS is serious about protecting Medicare’s future interests. These examples further spell out that CMS reserves the right to request an injured party to fully exhaust the amount of money equal to the entire settlement (not mentioning anything about allowing for a reduction of procurement costs such as attorney’s fees and costs expended to obtain the settlement typically allowed to be deducted under MSP regulations when parties timely request to resolve conditional payment/Medicare liens) when an injured party who is compensated for future medicals, fails to establish a plan for future care.

On page 9 under Section 9.0, titled WCMSA Submission Process Overview, CMS allows for a WCMSA proposal to be submitted either by paper or CD to the Benefits Coordination & Recovery Center or online via the WCMSA Portal (WCMSAP) and clarifies that these are the only acceptable submission delivery methods to be used.

In Section 9.4.5, titled Medical Review Guidelines, under the subsection heading Spinal Cord Stimulators on page 22, the following language was added to change the former policy of not including lead implantation in revision surgeries to the newly adopted policy whereby “Routine replacement of the neurostimulator pulse generator includes the lead implantation up to the number of leads related to the associated code. Revision surgeries should only be used where a historical pattern of a need to relocate leads exists.”

In Section 9.4.5, titled Medical Review Guidelines, under the subsection Pricing for Spinal Cord Stimulator (SCS) Surgery on page 22, the following text was inserted “SCS pricing is based on identification of: 1.) Rechargeable vs. Non-rechargeable and 2.) Single vs. Multiple Arrays (leads). If unknown, CMS will default to non-rechargeable single array.”

In Section 9.4.5, titled Medical Review Guidelines, under the subsection Pricing for Spinal Cord Stimulator (SCS) Surgery on page 22, the following language was deleted: “Preadmission Testing will be included where appropriate.”

In Section 9.4.5, titled Medical Review Guidelines, under the subsection Pricing for Spinal Cord Stimulator (SCS) Surgery, a table titled Table 9-3: Spinal Cord Stimulator Surgery CPT Codes on page 24, was expanded from three procedure (CPT) codes previously listed for Post Placement System Testing to a total of 12 including the same Post Placement System Testing as well as a series of CPT codes for Pre-Placement Psychological Testing, Anesthesia, and various other codes for the implantation procedures, etc. along with detailed descriptions of each.

In Section 9.4.6.2, titled Pharmacy Guidelines and Conditions, under the subsection Medically Accepted Indications and Off-Label Use, on page 28, there are now two detailed examples of off-label use instead of only one off-label use example in the prior version. The additional language appears in bold as follows:

Example 1: Lyrica (Pregabalin) is cited in MicroMedEx for an off-label medication use related to neuropathic pain from spinal cord injury, and a number of scientific studies indicate that Pregabalin shows statistically significant positive results for the treatment of radicular pain (a type of neuropathic pain). Spinal cord neuropathy includes injuries directly to the spinal cord or its supporting structures causing nerve impingement that results in neuropathic pain. Lyrica is considered acceptable for pricing as a treatment for WCMSAs that include diagnoses related to radiculopathy because radiculopathy is a type of neuropathy related to peripheral nerve impingement caused by injury to the supporting structures of the spinal cord.

 

Example 2: Trazodone” – which was previously described as – “Trazodone is approved by the FDA for the treatment of major depressive disorder,
but is commonly given off-label to treat insomnia. So the WCRC would include trazodone in a WCMSA if used to treat insomnia, if it is related to the workers’ compensation injury.”

Medivest’s take on the subject: This seems to be a situation where the new WCRC has been including more off-label drugs in its counter highers than the prior contractor, with the expensive drug Lyrica, gaining the most industry attention. Entities submitting WCMSAs for approval should be aware of the language referred to on page 28 of the Reference Guide that cites the Medicare IOM (Internet Only Manual) rules concerning Medicare covered off-label usage. The standard is as follows, “FDA approved drugs used for indications other than what is indicated on the official label may be covered under Medicare if the carrier determines the use to be medically accepted, taking into consideration the major drug compendia, authoritative medical literature and/or accepted standards of medical practice accepted, taking into consideration the major drug compendia, authoritative medical literature and/or accepted standards of medical practice.” Because this standard is so broad and the CMS and its WCRC seems to be taking an expansive approach to what types of off-label use is determined to be includable, parties seeking to control costs but still interested in CMS submission should consider professional consultations with treating physicians as to whether there are less costly medications and/or alternate treatment/prescription doses that can be utilized, implemented, and confirmed as equally effective, prior to submission.

Under Section 10.4 Section 20 – Life Care / Future Treatment Plan, page 43, a new statement “A Future Treatment Plan is required in the absence of a Life-Care Plan” makes it clear that there is a minimum requirement for future treatment to be listed in a submitted allocation in absence of a Life-Care Plan.

Medivest’s take on the subject: This is not really news because the term Future Treatment Plan existed in the prior Reference Guide’s title for this section. This seems to be a way to bring some consistency to the idea and to tie the term Future Treatment Plan together with the terms Future Treatment and Future Treatment Summary that also appear (and previously appeared) in the section.

In Section 10.5.2, titled Use of WC Fee Schedule vs. Actual Charges for WCMSA, on page 43, the state of Virginia was removed from the list of states that do not have a state Workers’ Compensation (WC) Fee Schedule. The states that do not have a WC fee schedule currently are Indiana, Iowa, Missouri, New Hampshire, New Jersey, and Wisconsin. The Reference Guide instructs, “Do not use a fee schedule in a state that does not have a fee schedule.”

Under Section 16, titled Re-Review, there are three subheadings describing circumstances under which a party may request a Re-Review. Under the subheadings of Mathematical Error and Missing Documentation on page 55, the following unannounced Note was inserted:

Notes:
• Disagreement surrounding the inclusion or exclusion of specific
treatments or medications does not meet the definition of a mathematical error.

• Re-Review requests based upon failure to properly review already submitted records must include only the specific documentation referenced as a basis for the request.

Under the third subheading titled Amended Review, the criteria and information remained the same, but the information was reformatted as follows with a phrase added to last note bullet in bold:

• CMS has issued a conditional approval/approved amount at least 12 but no more than 48 months prior.

• The case has not yet settled as of the date of the request for re-review.

• Projected care has changed so much that the submitter’s new proposed amount would result in a 10% or $10,000 change (whichever is greater) in CMS’ previously approved amount.

• Where a re-review request is reviewed and approved by CMS, the new approved amount will take effect on the date of settlement, regardless of whether the amount increased or decreased.

• This new submission may be delivered in both paper and portal formats. Please see the WCMSAP User Guide for more information.

In order to justify that the projected care would result in a 10% or $10,000 change (whichever is greater), the submitter must return CMS’ Recommendation Sheet that was included in CMS’ conditional approval letter and identify the following:

• Line items that were included in the approved amount, but are for care that has already been provided to the beneficiary. Please identify where references to records indicating that the care has already been provided can be found in the updated proposal.

• Line items for care that is no longer required. Please identify where references to replacement treatment can be found in the updated proposal.

• If additional care is required that was not otherwise included in CMS’ conditional approved amount, please add line items.

Notes:
• In the event that treatment has changed due to a state-specific requirement, a life-care plan showing replacement treatment for denied treatments will be required if medical records do not indicate a change.

• The approval of a new generic version of a medication by the Food and Drug Administration does not constitute a reason to request an amended review for supposed changes in projected pricing.

• CMS will deny the request for re-review if submitters fail to provide the above-referenced justifications with the request for re-review.

• Submitters will not be permitted to supplement the request for re-review, nor will they be developed.

Under Section 17.3 Use of the Account on Page 57, the bolded language replaced prior language on the subject:

“Please note: If payments from the WCMSA account are used to pay for services other than Medicare-allowable medical expenses related to medically necessary services and prescription drug expenses for the WC settled injury or illness, Medicare will deny all WC-injury-related claims until the WCMSA administrator can demonstrate appropriate use equal to the full amount of the WCMSA.”

Medivest’s take on the subject: CMS is indicating that Administrators have the burden to show appropriate use of MSA funds and therefore, must keep accurate records to prevent mistaken denial of injury related Medicare covered claims by Medicare after MSA funds are exhausted.

Under Chapter 18 titled CMS Submission, after the sentence, “Additionally, the contractor must ensure that Medicare makes no payments related to the WC injury until the WCMSA has been used up”, the following language was added on page 60:

This is accomplished by placing an electronic marker in CMS’ systems used to pay or deny claims. That marker is removed once the beneficiary can demonstrate the appropriate exhaustion of an amount equal to the WCMSA plus any accrued interest from the account. For those with structured settlements, the marker is removed in any period where the beneficiary exhausts their available funds; however, it is replaced once the anniversary fund deposit occurs until the entire value of the WCMSA is demonstrated as entirely exhausted.

Medivest’s take on the subject: This is the first indication of an “electronic marker” and gives an idea of how the CMS computer system will be flagging those injury related medicals submitted for payment by Medicare, but that Medicare may deny.

In Appendix 4, WCRC Proposal Review Reference Tools on page 69, the link to CMS Memos and written references to CMS Memos going back to 2001 were removed.

All references in Appendix 5. Sample Letters to Sherri McQueen, as Acting Director, were changed to Sherri McQueen, Director, Financial Services Group Office of Financial Management.

In the Development Letter Sample, the CMS Regional Office Contact reference and contact phone numbers were removed and replaced with “the Workers’ Compensation Review Contractor (WCRC) at (833) 295-3773” on pages 81 and 85.

Medivest’s take on the subject:  The WCRC now has the responsibility to field calls regarding submission of WCMSAs instead of the CMS Regional Offices.

Medivest will continue to follow changes in policy at CMS and in the actions of its Workers’ Compensation Review Contractor, Capitol Bridge, LLC, and will keep our readers up to date on developing trends.

Notice of Proposed Rulemaking for Protecting Medicare’s Future Interests on the Horizon (For Auto, Liability (and Self-Insurance), No Fault, and Workers’ Compensation Cases)
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Notice of Proposed Rulemaking for Protecting Medicare’s Future Interests on the Horizon (For Auto, Liability (and Self-Insurance), No Fault, and Workers’ Compensation Cases)

This week, under a “Miscellaneous Medicare Secondary Payer Clarifications and Updates” title, the Office of Management and Budget (OMB) provided information that in September of 2019 there will be a Notice of Proposed Rulemaking (NPRM) issued by the Department of Health and Human Services (HHS) and CMS, its sub agency that runs Medicare, to “ensure that beneficiaries are making the best health care choices possible by providing them and their representatives with the opportunity to select an option for meeting future medical obligations that fits their individual circumstances, while also protecting the Medicare Trust Fund.” The abstract acknowledges that “[c]urrently, Medicare does not provide its beneficiaries with guidance to help them make choices regarding their future medical care expenses when they receive automobile and liability insurance (including self-insurance) no fault insurance, and workers’ compensation settlements, judgments, awards, or payments, and need to satisfy their Medicare Secondary Payer (MSP) obligations.” Interestingly, the projected NPRM will be geared to clarifying MSP obligations to protect Medicare’s future interests regarding injury related future medicals regardless of the case type.

Stakeholders in the MSP compliance community must always look first to the Medicare Secondary Payer statute (a series of provisions beginning at 42 U.S.C. §1395y(b) commonly referred to as the MSP) to help determine how to best comply with the statute. However, while the MSP prohibits Medicare from making payment when a primary payer should pay and makes an exception for Medicare to be able to make payments conditionally provided it gets paid back, no part of the MSP or any related regulation references the term Medicare Set-Aside (MSA) or addresses what a Medicare beneficiary’s obligations are under the law as it relates to Medicare’s future interests.

Because the law does not directly address MSAs or future interests of Medicare, parties look to case law interpreting the MSP, regulations issued by CMS, a Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA) Reference Guide published by CMS, and MSP compliance companies and attorneys, to help guide MSP compliance decision making. While CMS has issued memos discussing MSAs and have clarified that there is no difference under the law between workers’ compensation and liability cases in terms of the need to consider and protect Medicare’s interests, uncertainty has remained as to the “how” and “when” as opposed to the “why”.

MSP stakeholders have been waiting for clarification from CMS regarding Liability Medicare Set-Asides (LMSAs) and No Fault MSAs for quite some time. It is generally understood that an injured party that receives payment from an injury complies with the MSP regarding Medicare’s future interests, when he or she does not prematurely bill Medicare for injury related Medicare covered medicals. In the workers’ compensation context, because CMS sets workload review thresholds at over $25,000 when an injured worker is a Medicare beneficiary and at over $250,000 when the injured worker has a reasonable expectation of becoming a Medicare beneficiary within 30 months, this has been a standard that many in the industry look to when trying to determine when to protect Medicare’s future interests in injury cases outside of the workers’ compensation field. This “when” has not yet been clarified by CMS. Confusion over the “how” to protect Medicare’s future interests has surrounded LMSAs because liability cases often settle for amounts lower than full case value due to questions over causation, comparative or contributory negligence or hybrids of those concepts, policy limits, caps on damages, along with the allowance for a variety of non-economic damages in liability cases. While the abstract describing the future Notice of Rulemaking does not use the term Medicare Set-Aside or MSA, it describes precisely what Medicare Set-Asides are designed to address.

As described, the proposed rule would address the protection of Medicare’s future interests in each of the Non Group Health Plan (NGHP) categories described in the MSP and its regulations, those being automobile and liability insurance (including self-insurance) no fault insurance, and workers’ compensation cases. The OMB notification defines the future action as a NPRM. Prior to the distribution of the Notice of Rulemaking, agencies typically publish a notice in the Federal Register called an Advance Notice of Proposed Rulemaking or ANPRM, to “test out” a proposal or to solicit ideas before drafting its actual Notice of Proposed Rulemaking.  The ANPRM is often an intermediate step for an agency to let the public know it intends to take official action in creating a regulation in the Code of Federal Regulations pertaining to a statute. The statute this NPRM would relate to is the MSP. An ANPRM had been announced in 2012 and it sought public comment but was subsequently withdrawn.

We have also written about some private MSP stakeholder meetings in 2018 during which CMS indicated that, while subject to change, denial of service would be their primary enforcement mechanism with respect to injury related Medicare covered future medicals in the liability area when specifically discussing Liability Medicare Set-Asides (LMSAs). With the addition of a Mandatory Insurance Reporting (Section 111 Reporting) section in the MSP effective in 2009, and the collection of Medicare beneficiary injury data by CMS now approaching 10 years, it seems inevitable that denials of service will increase for Medicare beneficiaries who fail to set money aside to cover their injury related Medicare covered items, services, and expenses. Due to the private stakeholder meetings CMS has had, it is not known whether CMS will provide an ANPRM prior to the NPRM.

Therefore, it remains to be seen how soon regulations clarifying the obligations of parties to protect Medicare’s future interests will be promulgated. Medivest will continue to keep you apprised as this important Medicare future interest matter progresses.

Does Self-Administration Ever Make Sense?
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Does Self-Administration Ever Make Sense?

Injured parties receiving lump sum settlements tend to spend their settlement money quickly. This quick spend risk is often described as dissipation risk. Statistics in a personal injury practice guide by The Rutter Group indicate that somewhere between 25 and 30% of accident victims spend all settlement money within two months of receiving the funds and that up to 90% of accident victims use all settlement proceeds within five years[1]. It would, therefore, seem prudent for attorneys representing injured parties to caution their clients about the quick spending tendency and to discuss ways to reduce that risk. One method to help reduce dissipation risk is the use of structured settlements with regular tax-free annuity payments, discussed in footnotes 4-6 of a prior blog article. Another option is using a professional administrator for payment of medical needs through Medical Custodial Accounts (MCAs) or via Medicare Set-Aside (MSA) accounts specifically designed to protect Medicare’s Trust Funds by preventing premature billing of Medicare for future injury related Medicare covered medical items and services (future medicals).  MSAs, which can and are often funded via structured settlement arrangements, are most often considered when the injured party is a Medicare beneficiary or has a reasonable expectation of becoming one within 30 months of judgment, settlement, award or other payment (settlement) (30-month Medicare window[2]), and the settlement compensates future medicals that would ordinarily be covered and reimbursable by Medicare.

The Centers for Medicare & Medicaid Services (CMS) suggests in section 17.0 of its Workers’ Compensation Medicare Set Aside Arrangement (WCMSA) Reference Guide, currently in Version 2.8, that WCMSAs “should be administered by a competent administrator” and provides examples such as a professional administrator, a representative payee, the claimant, etc. Other than cases with traumatic brain injuries for which a court may render a person legally incompetent, the question becomes whether there should be a minimum level of competence for a person to be deemed capable of self-administering a WCMSA or a Liability MSA (LMSA).

CMS explains the administration process in section 17.5 of the WCMSA Reference Guide. Requirements for administration are summarized by CMS as follows:

• Claimants should submit annual self-attestations, just as professional administrators would.

• WCMSA funds must be deposited into interest-bearing accounts separate from any personal savings or checking accounts.

• WCMSA funds may only be used for medical services and prescription drug expenses related to the workers’ compensation injury that would normally be paid by/otherwise reimbursable by Medicare.

• CMS provides some examples of care/items that Medicare does not pay for including acupuncture, routine dental care, eyeglasses or hearing aids, and suggests that claimants get a copy of the booklet entitled “Medicare & You” for a more detailed list of non-Medicare covered items.

• CMS cautions that “if funds from the WCMSA are used to pay for services other than Medicare-allowable medical expenses related to medically necessary services and prescription drug expenses, Medicare will not pay injury-related claims until these funds are restored to the WCMSA account and then properly used up.”

• Even if a person is not a current Medicare beneficiary, the requirements and prohibitions are the same as if the injured party were a Medicare beneficiary.

• While whether to submit a WCMSA to CMS for review is voluntary, Claimants that lose Medicare entitlement after such CMS approval, “. . . are not entitled to release of WCMSA funds if they lose their Medicare entitlement. However, the funds in the WCMSA may be used for medical expenses specified in the WCMSA until Medicare entitlement is re-established or the WCMSA is exhausted.”

Are the above bullets easy to understand and follow? Does the WCMSA Reference Guide language clearly explain what is expected? Even if a person can understand what they are reading, are injured parties likely to comply with the described procedures?

Regarding WCMSAs, The National Council on Compensation Insurance, Inc. (NCCI) published a February 2018 research brief updating its 2014 study on WCMSA reviews. According to the 2018 NCCI brief, approximately 98% of all WCMSAs (from the study’s 11,000 MSA data sample between 2010 and 2015) were self-administered.

Shouldn’t CMS want to try to plug this 98% administration compliance hole? CMS has “highly recommended that settlement recipients consider the use of a professional administrator for their funds”, does that language go far enough to protect the Medicare Trust Funds, one of which (covering Medicare Part A hospital insurance) is on track to be exhausted in 2026, three years earlier than projected just a year ago?

Are injured parties flying blind when self-administering their MSA funds? How does the dissipation risk described above affect injured parties’ decision-making process? There is an entire industry devoted to helping injured parties consider and protect Medicare’s interests in accordance with the Medicare Secondary Payer Act[3] and that keep up with CMS policies on WCMSAs, LMSAs, and administration. Regardless of whether CMS might ever mandate professional administration, insurance carriers and attorneys for injured parties should want competent and professional compliance partners to dispute and negotiate Medicare conditional payment reimbursements, estimate future injury related Medicare covered medicals, and above all else, to help injured parties competently administer their Medicare Set-Aside funds.

After all, should injured parties really be the ones making payments, coordinating benefits and/or negotiating bills? Can they really be expected to keep up with the detailed accounting and  reporting expected by CMS? CMS has shown a rekindled interest in both review of WCMSAs and LMSAs with the increased scope of work and dollar amount of its awarded WCRC Contract and in its recoveries of conditional payments. Because best in class administrators provide network discounts for Durable Medical Equipment and Prescription Drug pricing through Pharmacy Benefit Managers (PBMs), professional administration can help ease the burden of MSP compliance and save injured parties money.

Take Aways:

• Professional administration should be thoroughly discussed with injured parties by their attorneys. After all, lawyers are not only attorneys, but “Counselors at Law”.

• Insurance carriers and their attorneys should see also see value in minimizing MSP exposure.

• Even when outside the commonly referred to 30-month Medicare window, when future medicals are in play, parties to a settlement should strongly consider the use of a professional administrator, regardless of whether the primary driver is to coordinate and negotiate bills, or to reduce dissipation risk.

• The need for professional administration becomes even more apparent when the injured party is within the 30-month Medicare window, now combining the advantages of wiser spending with reduced MSP exposure.

• Allowing non-competent individuals to self-administer MSA funds turns a blind eye on our nations’ at-risk Medicare Trust Funds.

• MSP enforcement by CMS regarding past medicals will likely continue to proceed via the conditional payment recovery process. MSP enforcement by CMS regarding future medicals will likely be addressed through denial of Medicare coverage for injury related medicals when beneficiaries ignore the law or don’t keep accurate records of their Medicare covered medical spending.


[1] The Rutter Group, “California Practice Guide: Personal Injury” Chapter 4.

[2] CMS workload thresholds established for suitability of review of WCMSAs, as listed in the current WCMSA Reference Guide, have one tier for claimants who are Medicare beneficiaries and one for claimants with a reasonable expectation of becoming enrolled in Medicare within 30 months of judgment, settlement, award or other payment.

[3] 42 U.S.C. §1395y(b)(2) et. seq.

 

New WCMSA Reference Guide Version 2.8 Published by CMS
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New WCMSA Reference Guide Version 2.8 Published by CMS

The Centers for Medicare & Medicaid Services (CMS) released its latest Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA) Reference Guide as Version 2.8 on October 1, 2018. The changes announced by CMS in this latest version of the WCMSA Reference Guide are described below:

• The discontinuation of Social Security Number (SSN)-based Medicare identifiers by CMS and the distribution of a new 11-byte Medicare Beneficiary Identifier (MBI)-based card to each Medicare beneficiary by April 2019 as required by Section 501 of the Medicare Access and CHIP (Children’s Health Insurance Program) Reauthorization Act (MACRA) of 2015 was confirmed. Fields formerly labeled as “Health Insurance Claim Number” (HICN) have been relabeled as “Medicare ID” and will accept either the traditional HICN or the new MBI[1].

• Information regarding the Verifying Jurisdiction and Calculation Method for Medical Review was updated. Under Section 9.4.4 Medical Review of the WCMSA Reference Guide, CMS explains that the Workers’ Compensation Review Center/Contractor (WCRC) follows ten steps in its medical review process. The fifth step is to verify the jurisdiction and calculation method. Updates have been made to this fifth step of medical review, specifically in the tables describing the order of jurisdictional precedence (broken down between updated Table 9-1 covering “Normal Pricing) and the new table, Table 9-2 covering “Other Pricing”). The general rules for verifying jurisdiction have not changed[2].

The order of jurisdictional precedence will follow the charts listed in Table 9-1 and Table 9-2.

Table 9-1 is the same as in version 2.7 except for scenario number 6, where it now explains (by example) that if the WC carrier’s attorney does not have an address in the state in which the WC claim was filed, pricing will be based on the zip code where the injury occurred.

Table 9-2 is a new table for the WCMSA Reference Guide with highlights listed below.

  • If a case is filed with the U.S. Department of Labor Office of Workers’ Compensation Programs (OWCP); pricing is based using the OWCP Fee schedule
  •  If submitted documentation indicates that a proposed WCMSA amount is based on a Longshore Harbor Workers’ Compensation Act (Longshore Act) settlement; pricing is based on the OWCP fee schedule for the zip code of claimant’s residence, unless the submitter specifies actual charges
  • If a state WC fee schedule does not exist based on the jurisdiction evaluation referenced above (Indiana, Iowa, Missouri, New Jersey, Virginia, and Wisconsin); pricing is based on actual charges, even if the submitter proposed the use of a fee schedule
  • If a state WC fee schedule exists based on the jurisdictional evaluation described above; pricing is based on the most current version of the fee schedule posted publicly

• The link to the CDC Life Expectancy Table has been updated in Section 10.3 paragraph number 7 as follows: All rated ages shall be accompanied by a written justification on how such age was determined. For example, if a rated age obtained from life insurance companies for like injuries/illnesses is the method of evaluation, include documentation to support the life expectancy. CMS will project the cost of the claimant’s future treatment over the claimant’s life expectancy, using the Centers for Disease Control (CDC) Tables. Please see the WCMSA site for information on the latest tables to use.

While not new, it is always good to remember the following caution by CMS:

Do not include the following:

  • Actuarial charts or life expectancy charts from the CDC or elsewhere, or statements that there are no rated ages.

  • Do not include any documents on rated ages that contain redacted data. They will not be considered.

Questions you may have about these changes or any other matters covered in the WCMSA Reference Guide are welcomed by Medivest.


[1] Examples of where the new MBI is incorporated into the WCMSA Reference Guide include:

• Page 3 of the WCMSA Reference Guide refers to this update when contacting the Benefits Coordination & Recovery Center (BCRC) to confirm the injured person’s Medicare ID (HICN, MBI or SSN).
• Page 33, under Section 05 – Cover Letter (WCMSA submission letter) indicates: Claimant’s Medicare ID (HICN or MBI) as displayed on their Medicare card or their SSN, if not yet entitled to Medicare, is required in the submission.
• Page 63, Appendix 2: The Abbreviations List now includes MBI – Medicare Beneficiary Identifier.
• Page 67, an update to the definition of Social Security Number: The SSN is an identification number issued by the Social Security Administration and used instead of a Medicare ID (HICN or MBI) when the Medicare ID is not present.
• The sample letters found in Appendix 5 replace SSN or HICN with Medicare ID or Medicare ID/SSN.

[2] This section explains the general rule that jurisdiction for fee schedule selection and pricing depends upon where the WC claim is filed (the state that will control any WC hearing). It then lists some specifics.  “If the claim is filed in the same state of residence as the claimant, pricing shall be calculated based on the zip code of the claimant. If the claimant resides in a state other than the state of jurisdiction for the WC claim, pricing is calculated based on the zip code associated with the employer’s address. If the employer is not located in the state where the WC claim is filed, pricing is calculated based on the zip code of the claimant’s attorney. If the claimant is not represented by an attorney, pricing is calculated based on the zip code of the WC carrier. If the carrier is also not located in the state where the WC claim is filed, pricing is calculated based on the zip code of the carrier’s attorney.”

Liability Medicare Set-Asides (LMSAs) – A Glimpse into the Future
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Liability Medicare Set-Asides (LMSAs) – A Glimpse into the Future

Last week, the National Alliance of Medicare Set-Aside Professionals (NAMSAP) released a bulletin by Tom Stanley, co-chair of NAMSAP’s Liability MSP Advisory Committee, describing what he learned in a private meeting with the Centers for Medicare & Medicaid Services (CMS) in April 2018. In the meeting, which focused solely on liability Medicare Set-Asides (LMSAs), CMS representatives indicated that there will be an 18-month timeframe before rolling out a LMSA review program. Also, similar to the choice of whether to submit a Workers’ Compensation Medicare Set-Aside allocation report (WCMSA) for review by CMS for Workers’ Compensation claim resolutions that meet CMS established monetary and Medicare eligibility thresholds[1], the choice of whether to submit a LMSA to CMS for review under the new program would also be voluntary.

Other points brought up by CMS for LMSAs are paraphrased below:

• Denial of services for the affected body parts/injury is considered a “primary enforcement mechanism.”
• The injured party must receive something free and clear through judgment, settlement, award, or other payment (“Settlement”).
• Review of a LMSA would not occur until a Settlement has been reached.
• That a LMSA (and presumably the administration of the money set aside) is exclusively the responsibility of the plaintiff and that defendants, and their insurers, are not a “target” of CMS with respect to LMSAs.
• CMS would publish a LMSA Reference Guide.
• Individuals meeting the “eligibility” threshold for LMSAs would remain the same as the current WCMSA system – those Medicare beneficiaries or injured parties who have a reasonable expectation of Medicare enrollment within 30 months.
• There is no projected change in the law and pursuant to the Medicare Secondary Payer statute (MSP)[2], Medicare’s interest must be considered in every claim.
• A workload threshold of above $250,000 is anticipated – “NO SAFE HARBOR”. This level is analogous to the above $25,000 workload threshold for WCMSAs.
• For Settlements above $250,000 and up to $750,000, CMS review/approval would be available and encouraged by CMS. CMS would apply “a formula” to determine the LMSA amount. Starting with the total Settlement amount, CMS would subtract certain expenses and apply a discount factor to the total Settlement.
• Settlements above $750,000 would be presumed to fund all future medicals (considered full commutations) and for those cases, CMS would recommend the preparation of traditional LMSAs.

We have explained in the past that the creation of a Medicare Set-Aside (MSA) is not required by law for any type of case. However, in the Stalcup Memo[3], CMS provided its interpretation of the MSP by saying “[t]he law requires that the Medicare Trust Funds be protected from payment for future services whether it is a Workers’ Compensation or liability case. There is no distinction in the law.” Furthermore, while clarifying that a MSA allocation report is not mandated by CMS, the Stalcup memo announced that “[s]et aside is our method of choice and the agency feels it provides the best protection for the program and the Medicare beneficiary. The long-awaited LMSA review process may have been delayed (prior hints from CMS were that LMSA reviews might start as early as July 2018) due to a realization by CMS that reviewing LMSAs will be a huge undertaking with many factors to consider.

Take Aways from Meeting on LMSAs:

• When the injured party receives something (free and clear) through Settlement etc., that payment triggers the need to evaluate and protect Medicare’s interests.

• If you don’t consider and protect Medicare’s future interests at the time of Settlement and take steps to not prematurely bill Medicare, Medicare can deny payment for those body parts claimed and/or released by Settlement.

• Plaintiff counsel should take steps to educate themselves and their clients on all aspects of MSP compliance and formulate strategies to reasonably consider Medicare’s interests when Settlements fund future medicals and injured clients fall within the Medicare eligibility “window”.

• CMS should seek help from stakeholders in the MSP compliance community, the judiciary, and financial analysts to examine historical data to consider developing more than one formula to be able to reasonably address varying liability case types and differing legal and factual scenarios.

• The percentage of the net Settlement proceeds a beneficiary will receive as a ratio to the full value of the case after deducting procurement costs, attorney’s fees, and Medicare liens etc. can vary greatly and should be taken into consideration.

• There are many reasons liability cases may settle for less than full value including questions of causation, policy limits in place, and percentages of fault that can vary by state, under theories of applicable comparative negligence, contributory negligence or some hybrid thereof.

• The idea that CMS may now consider evaluating apportioned LMSA allocations and taking some of the factors leading to reduced Settlement values into consideration when reviewing LMSAs seems to be a step in the right direction.


[1] The current WCMSA threshold is for Workers’ Compensation claims with a judgment, settlement, award, or other payment (“Settlement”) above $25,000 for current Medicare beneficiaries and above $250,000 and for those with a reasonable expectation of becoming enrolled in Medicare within 30 months of the Settlement.

[2] 42 U.S.C. §1395y(b)(2) et seq.

[3] Sally Stalcup, MSP Regional Coordinator, Region VI (May 25, 2011 Handout).

How to Qualify for SSDI or Medicare (Even if a Non-US Citizen)
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How to Qualify for SSDI or Medicare (Even if a Non-US Citizen)

Some people may be surprised to learn that an individual does not always need to be a citizen of the United States to qualify for government benefits such as Social Security Income (SSI), Social Security Disability Insurance (SSDI) or Medicare.  Provided the individual receives or qualifies to receive SSI or SSDI benefits, and the person otherwise qualifies for Medicare, a non-US citizen (non-citizen) typically qualifies for Medicare Part A without having to pay a premium.  They would still need to pay a premium for Medicare Part B.  Before addressing how a non-citizen may become eligible to receive Social Security benefits and therefore, be one step closer to qualifying for Medicare, we will first look at the distinctions between SSI and SSDI and how US citizens become eligible for either.

SSDI and SSI Requirements for U.S. Citizens

For U.S. citizens to qualify for SSDI, they must be under 65, have earned enough work credits[1] by working and paying Social Security (FICA) taxes, and have a qualifying disability sufficient to meet the definition designated by the Social Security Administration (SSA).  A majority of those who apply for SSDI do not get accepted on the first try. Many injured individuals have found value in retaining attorneys to help with the application (and the commonly required appeals) process.

A major distinction between SSDI and SSI is that SSI does not require any work history or a disability, even though disability is one of the ways a person may qualify for SSI.  For example, those that are disabled but haven’t accumulated enough work credits to be eligible for SSDI, may qualify for SSI.  Furthermore, U.S. citizens who are 65 or older, or who are blind or are disabled, and have limited income and limited resources, and are not confined to an institution, are generally eligible for SSI.  Another important distinction between SSDI and SSI is that once a person receives SSDI benefits for two years[2], the SSDI recipient will be eligible for Medicare benefits.

Requirements for Non-U.S. Citizens

If a person is a non-citizen and meets the following requirements, they may be eligible for Social Security benefits:

  • Non-citizens who are legal permanent residents
  • Active members or veterans of the U.S. military
  • Foreign workers who have paid FICA taxes for the required time period[3]
  • Other non-citizens who are not permanent residents but who can prove that they are here legally (i.e. refugees, those under political asylum, temporary visitors with non-immigrant visas, abuse victims, etc.)

There are many exceptions and rules regarding non-citizens’ status and SSI and SSDI eligibility.  Additionally, non-citizens that are allowed to work in the US but not required to pay FICA taxes (and don’t), are not eligible for SSDI.

Aside from standard SSDI eligibility requirements that everyone must meet*, there are two additional requirements that non-citizens must meet in order to qualify for SSDI:

1.  If an individual was assigned a Social Security number on or after January 2, 2004, the individual’s number must have been assigned based on their authorization to work in the U.S. or they must have B-1, D-1, or D-2 worker status.

2.  Before receiving disability benefits, the individual must show proof that they are in the U.S. legally.

Non-Citizens Returning to their Countries

Once an individual receives either type of Social Security benefits as a non-citizen, if, when and how these benefits will be distributed depends on the country that they are citizens of and how much time they may spend in that country, whether that country is on a restricted list, and whether that country has a bilateral Social Security agreement with the U.S.  Some countries that the SSA is restricted from sending Social Security payments to, such as those listed below, are disqualified from accepting Social Security payments.

  • Azerbaijan
  • Belarus
  • Cuba
  • Kazakhstan
  • Kyrgyzstan
  • Moldova
  • North Korea
  • Tajikstan
  • Turkmenistan
  • Ukraine
  • Uzbekistan
  • Vietnam

Ineligible Countries

Legal residents from Cuba, North Korea, and Vietnam may not receive disability benefits, even if they meet the other necessary requirements.

If a citizen of one of the above-listed countries, other than from Cuba, North Korea or Vietnam, goes back to their home country after working and living in the U.S. and otherwise qualifies for a form of Social Security Benefits, the SSA will not send the individual payments and cannot send the payments to someone else on their behalf (unless an exception is granted).  The SSA will withhold these payments and will only send them to the individual once they are in a country to which the U.S. may send those payments.  Generally, if the SSA is not restricted from sending payments to a particular country, but the country also does not have a bilateral Social Security agreement in place with the U.S., the SSA can send payments to the individual, but will stop the individual’s payments after the person has been outside of the U.S. for six months.  If the individual returns to the U.S. and stays for at least a month, they are usually eligible to begin receiving benefits again. The SSA’s website provides information and exceptions concerning these matters including the difference between a person receiving benefits based on their own earnings or residency in the U.S. versus receiving benefits based on the earnings or residency in the U.S. of a dependent or survivor.  A pamphlet that provides additional information is available on SSA’s website.

The Medicare Secondary Payer Act (MSP), 42 U.S.C. §1395y(b)(2), enacted in 1980 and aimed at preserving Medicare Trust Funds and reigning in Medicare costs that had up to that point been much larger than projected[4], is focused on both the timing of payments and the recovery of Medicare’s conditional payments[5] for medical expenses [6] of injured Medicare beneficiaries or injured people who have a reasonable expectation of becoming Medicare beneficiaries within 30 months from settlement, when another (primary) payer is responsible for payment or prompt reimbursement of the injured individual’s injury related Medicare covered medical expenses.[7]  There are several ways people fall into the reasonable expectation of becoming a Medicare beneficiary within 30-month time frame, including reaching 62.5 years of age, applying for SSDI, being denied but considering appeal of SSDI denial, being in the process of appealing the denial, or being diagnosed with end-stage renal disease or ALS, a/k/a Lou Gehrig’s disease.


[1]  The number of work credits needed varies based on the age of the individual at the time they become disabled.  Required credits start at 6 credits or 1.5 years of work during the three-year period before the disability started for people disabled in or before the quarter they turn 24 years of age and move up to a requirement for 40 qualifying quarters at or after they turn 62 years of age, with varying requirements in between.

[2]  The two years does not include the approximate six-month wait time between the date disability is approved and benefits begin.  Eligibility begins 30 days after established onset date (EOD) so along with a mandatory five-month waiting period, it is essentially six months before payments start or 30 months from EOD to Medicare eligibility.

[3]  *According to the SSA website, the required work requirements for non-citizens seem to be different from those of US citizens as well.  The requirement for non-citizens does not appear to have a sliding scale for work credits that US citizens are required to have.  Here is an example of some non-citizen requirements for SSDI eligibility from SSA’s website: “[t]hey are a Lawfully Admitted for Permanent Residence (LAPR) with 40 qualifying quarters of earnings.  Work done in the US by a person’s spouse or parent may also count toward the 40 qualifying quarters of earnings, but only for getting SSI. Quarters of earnings earned after December 31, 1996 are not counted if the individual, spouse, or parent worked or received certain benefits from the U.S. government based on limited income and resources during that period. If a person entered the U.S. for the first time on or after August 22, 1996 they may not be eligible for SSI for the first five years as a LAPR, even if they have 40 qualifying quarters of earnings.” More information regarding this topic is available here.  Sometimes depending on the country of citizenship, there may also be other ways for a non-citizen to qualify for SSI including living in the US for required periods of time or having a spouse or parent who has lived long enough in the U.S. (See https://www.ssa.gov/pubs/EN-05-10137.pdf).  You are encouraged to consult with an attorney practicing in the SSI and SSDI field to help determine whether any particular person may qualify for Social Security benefits.

[4]  Humana Med. Plan, Inc. v. Western Heritage Ins. Co., 2018 WL 549834 (11th Cir. Jan. 25, 2018) (declining to rehear 2016 11th Cir. case en banc and citing 5 James B. Wadley, West’s Federal Administrative Practice §6305 (2017)).

[5]  Or conditional payments by Medicare Advantage Plans that a primary payer should have paid.

[6]  Medical items, services and prescription drug expenses.

[7]  42 U.S.C. § 1395y(b)(2)(A)(ii) prohibits Medicare from making payment to the extent that “payment has been made or can reasonably be expected to be made under a workmen’s compensation law or plan of the United States or a State or under an automobile or liability insurance policy or plan (including a self-insured plan) or under no-fault insurance.” Furthermore, under the Code of Federal Regulations, the Centers for Medicare and Medicaid Services (CMS) has rights to recover any conditional payments Medicare made that a primary payer should have made or reimbursed, specifically, “CMS may initiate recovery as soon as it learns that payment has been made or could be made under workers’ compensation, any liability or no-fault insurance, or an employer group health plan.” 42 C.F.R. § 411.24(b).

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The History of ICD-10 Codes

Forbes, and others, are reporting that Medicare’s October 1, 2015 rollout of the new ICD-10 medical codes is going smoothly for large insurers. Also, from everything I have heard, the Medicare Secondary Payer compliance industry, which has been preparing for this for years, is experiencing few problems switching from ICD-9 to ICD 10.

Much has been written about the much-anticipated switch to ICD-10, but very little about the origin and purpose of the ICD medical coding system. So, this piqued my curiosity and here is what I found out.

In 1763, the first attempt to classify diseases is credited to a French physician, François Boissier de Sauvages de Lacroix, who identified 2,400 individual diseases. Many physicians updated the list to add diseases as more were discovered. In 1855, the first revision of standards for classification was published in Paris, which established a model for how the coding process should work. In 1948, the United Nation’s World Health Organization (WHO) created a Sixth Revision International Classification list. By 1955, the seventh revision of this list was called, the “International Classification of Diseases (ICD)”.

ICD is the WHO’s standard diagnostic tool for classifying diseases and other health problems. It is used for many types of health records, death certificates, mortality and morbidity statistics and for reimbursement and resource allocation decision making.

ICD-9, the 9th revision, uses 3-5 digits and has been used in the United States and internationally since about 1979. ICD-9-CM Volume 3 was added in the United States for procedural codes for hospitals.

ICD-10 codes, which use a 3-7 digit alphanumeric scheme, came into use by the WHO countries in 1994. The United States is one of the last developed countries to adopt ICD-10. After several delays, the U.S. finally begin using ICD-10 codes on October 1, 2015. ICD-10 will expand the number of diagnostic codes, more than fivefold, from the previous 13,500 found in ICD-9 to about 69,000 codes IN ICD-10.

In addition, the Centers for Medicare and Medicaid Services (CMS) has developed a completely new procedural coding system for reporting hospital inpatient procedural services to Medicare called ICD-10-PCS which will expand the number of hospital inpatient procedure codes from 4,000 to 71,000, bringing the total new ICD-10 codes to about 144,000.

Work on ICD-11 is well underway and a final draft is expected in 2018.

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28 Days

What would have seemed impossible just a short time ago actually came true for us earlier this month.  On July 10th we reluctantly submitted yet another MSA to CMS for approval via the web-based portal.  We then subsequently scheduled a routine follow up for July of 2022! Much to our surprise, on August 6th, just 28 days later, we received a notification from CMS that our submitted MSA had been approved.

What had been promised to the MSA industry had actually been delivered, and we were able to relay the good news to our customer.  I have since heard similar stories from our friends in the industry with approval times coming back in as little as 7 days.  We’re not sure how long this good fortune will last, but here’s hoping for the best!

Superior Court of New Jersey Allows Attorney’s Fees to be Taken from LMSA
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Superior Court of New Jersey Allows Attorney’s Fees to be Taken from LMSA

In Hinsinger v. Showboat Atlantic City, an opinion reached in January 2011 but not published until late May 2011, the Superior Court of New Jersey held that a portion of a Medicare beneficiary’s attorney’s fees associated with procuring settlement may be deducted from a Liability Medicare Set Aside (LMSA) account in determining the amount of money to be set aside for injury-related, otherwise Medicare allowable, medical expenses.  Interestingly, Judge Rochelle Gizinski also addressed several different issues pertaining to MSAs that could have far-reaching effects on the settlement community.

First, and arguably the most significant, Judge Gizinski opined that the workers’ compensation federal regulations and the workers’ compensation CMS memos apply to liability MSAs.   This is a first, as far as we know, and could possibly have a major impact for liability settlements in the future.  The court justified this position by stating, “The statutory and policy reasons for creating both of them are the same: to protect the government, and the Medicare system in particular, from paying medical bills for which the beneficiary has already received money from another source.”

Second, the court continued on to determine that an attorney can recover a portion of their fees obtained on behalf of a client in a third-party liability case directly from the Medicare Set Aside itself.   The opinion provides an analysis of the wording found in 42 CFR § 411.37, which outlines allowable deductions from MSAs when the recovery is sought from the party that received the primary payment.  The court felt that 42 CFR § 411.37 was unclear as to whether or not the regulations apply only to recovery funds already paid by Medicare (conditional payments), or to funds obtained for future medical expenses.  However, based on the language in the regulation and the headings themselves, the court found that 42 CFR § 411.37 could apply to funds awarded for future medical expenses as it does to conditional payments.

Third, the opinion also referenced the May 7, 2004 CMS memo entitled “Medicare Secondary Payer- Workers’ Compensation (WC)-INFORMATION.”  This memo specifically prohibits administrative expenses or attorney costs associated with the establishment of the MSA from being taken out of the account.  The court found that since it already established that the rules and regulations created in workers’ compensation situations also apply to set asides created in other situations, then this memo should also apply to third-party liability settlements as well.  Interestingly, the court held that this directive applies only to attorney’s fees specifically associated with the establishment of the trust, and does not apply to attorney’s fees incurred in the procurement of funds in a civil suit.

The court held that its decision to apply 42 CFR § 411.37 to funds obtained in a civil action and placed within an MSA was also consistent with the general principles of equity.  Allowing Medicare to avoid paying its fair share of expenses incurred in the procurement of a settlement, judgment, award or other payment would unfairly force a claimant to pay for those fees (resulting in a smaller amount of net proceeds) and would discourage Medicare beneficiaries from filing claims against liable third parties when they have a legal right to do so.

CMS has traditionally remained silent when pressed for clarification on issues related to liability MSAs, and in some instances, workers’ compensation MSAs.  Courts across the country have been left to their own devices to determine a fair and equitable way to consider Medicare’s interest in their cases.  The court’s decision in this case, along with others (see Haro v. Sebelius and Bradley v. Sebelius), may not be what CMS had in mind when issuing what little guidance they have offered up.  On the other hand, the personal injury settlement community has clearly begun to police itself, which could very well have been CMS’s plan all along.  The liability settlement community is calling for additional directives from CMS, and if CMS continues to remain silent on the issues then they can expect the courts to continue making their own interpretations.

 

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SSDI, Medicare and MSAs

I recently received a question from a defense attorney who called to ask me to explain how these six programs work and interrelate: SSDI, Medicare, MSAs, SSI, Medicaid, and SNTs. After giving my answer, it occurred to me that others might have the same question. I will review the first three programs here and the rest in my next blog:

SSDI
SSDI (Social Security Disability Income) is a federal disability insurance program funded by payroll taxes. It pays a monthly benefit to people who have worked in the past and have paid Social Security taxes, and are now unable to work for a year or more because of a disability. There is a five month waiting period before benefit payouts begin.

Medicare
Medicare is a federal health insurance program that is funded by payroll taxes, self-employment taxes and premiums. It pays for hospitals (Part A), doctors, outpatient and durable medical equipment (Part B) and prescription drugs (Part D). Most people will pay a premium for parts B and D. Individuals become eligible for Medicare at age 65 or at any age if they have End Stage Renal Disease. Medicare insurance is also provided to all SSDI recipients after they complete a 24-month waiting period.

MSAs
A Medicare Set-Aside (MSA) is Medicare’s preferred method to protect Medicare from paying future medical bills that settlement money should pay. A portion of the settlement money is “set-aside” in a separate bank account and spent down on future injury-related, Medicare-allowable expenses. MSAs are used in workers’ compensation and liability cases to protect Medicare as the secondary payer.

Interrelationships
These three programs relate to each other. Five months after an injury occurs, the injured person may qualify for SSDI benefit payments. Then, after a 24-month waiting period, he/she will automatically become eligible for Medicare. However, by law, Medicare is secondary and cannot pay if there is a primary insurer. So if an insurance settlement occurs, the future medical part of the settlement money will be set-aside in an MSA account and spent on injury related, Medicare allowable expenses. Then if the MSA money runs out, Medicare will pay for those medical bills.

Medivest specializes in the area of Medicare Set Asides and we can assist you in referrals to Elder law attorneys and/or Social Security attorneys, if expert assistance in the other programs is needed.