You must always consider Medicare’s interests when settling future medical in any workers’ compensation case.
By memorandum dated July 23, 2001, the Centers for Medicare and Medicaid Services (“CMS”) set up the system in which CMS would review certain workers’ compensation settlement agreements to determine whether Medicare’s interest was considered. This memorandum defined the threshold requirements for CMS review and indicated that if the settlement did not meet the threshold requirements, then Medicare’s interest did not need to be considered. In its recently issued memorandum dated July 11, 2005, CMS now declares that its review thresholds are not safe-harbor thresholds and that Medicare’s interests must always be considered even if its review thresholds are not met, i.e. in essentially every case in which the claimant’s right to future medical care is settled.
In the memorandum of July 23, 2001, CMS indicated that 42 CFR 411.46 requires that all workers’ compensation settlements must adequately consider Medicare’s interests. CMS specified that if the claimant was presently a Medicare beneficiary, then Medicare’s interests would always need to be considered, regardless of the settlement amount. However, the July 23, 2001 memorandum specifically addressed the question of when must Medicare’s interests be considered for cases in which the claimant is not yet a Medicare beneficiary. CMS noted that it was not in Medicare’s best interest to review every workers’ compensation settlement nationwide. Therefore, CMS specified that
[i]njured individuals (who are not yet Medicare beneficiaries) should only consider Medicare’s interests when the injured individual has a “reasonable expectation” of Medicare enrollment within 30 months of the settlement date, and the anticipated total settlement amount for future medical expenses and disability/lost wages over the life or duration of the settlement agreement is expected to be greater than $250,000.00.
CMS memorandum dated July 23, 2001, answer to question 1(c) (underline added).
Consistent with CMS’s guideline that Medicare’s interests only needed to be considered if the settlement met the threshold requirements for review, in its memorandum of May 23, 2003, CMS specified that if the workers’ compensation settlement did not meet the threshold requirements, then Medicare would make payment for workers’ compensation related services that were otherwise reimbursable under Medicare once the individual enrolled in Medicare. (CMS memorandum dated May 23, 2003, answer to question 3, replaced by memorandum of July 11, 2005).
The July 11, 2005 memorandum introduces a new term of “CMS workload review” and indicates that CMS’s review thresholds are not safe-harbor thresholds. “Accordingly, all beneficiaries and claimants must consider and protect Medicare’s interests when settling any workers’ compensation case; even if review thresholds are not met, Medicare’s interests must always be considered.”
As of July 11, 2005, CMS will only review settlements for presently Medicare-eligible claimants if the settlement is for $10,000.00 or more. CMS indicates though that in calculating the total settlement amount, any previously settled portion of the workers’ compensation claim must be included in the computation. For individuals who are not yet Medicare eligible, CMS will continue to only review settlements for which the injured worker has a reasonable expectation of becoming Medicare eligible within 30 months and the settlement amount is for $250,000.00 or more.
While the parties must consider Medicare’s interests for any settlement which includes the settlement of the claimant’s right to future medical care, CMS does not specify how the parties are to adequately consider Medicare’s interest if the settlement does not meet the new “CMS workload review” thresholds. The parties should at least make a reasonable assessment of the cost of the claimant’s future medical care needs and allocate a portion of the lump sum settlement to the release of claimant’s future medical care. If possible, the parties should allocate funds to each type of anticipated future medical treatment, such as medications, therapy, and doctor’s visits. The parties’ allocation should be included under the terms of settlement.
However, with the requirement to consider Medicare’s interest in all cases, claimants may be reluctant to enter into any settlement which includes settlement of the right to future medical care given the potentially onerous record keeping requirement. Until the July 11, 2005 memorandum, only Medicare beneficiaries or those who were very close to being Medicare beneficiaries had to maintain a set-aside account including complying with CMS’ record keeping requirements. Under the new guidelines, funds allocated for future medical treatment in settlements that do not meet the new “CMS workload review” thresholds still must be maintained to be able to determine the balance at the time that the claimant becomes Medicare eligible. The memorandum states that “[e]ven if there is no CMS-approved [set-aside account], any funds from a WC settlement attributable to future medicals that are remaining at the time a claimant becomes a Medicare beneficiary must be used for Medicare-covered services related to the workers’ compensation claim or settlement until such funds are exhausted.” A claimant who becomes Medicare eligible many years after the settlement may be expected to provide CMS an accounting of how the allocated funds were used over the years prior to CMS’ paying for any expenses related to the workers’ compensation injury. It is highly doubtful that many claimant’s would be able provide such an accounting.