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Medicare Set Aside FAQMEDICARE SET-ASIDES MEDICARE SECONDARY PAYER FREQUENTLY ASKED QUESTIONS By Angelo Paul Sevarino, Esq. Windsor, Connecticut (Revised 12/09) This series of 79 questions and answers has been derived from various Regional Administrative Letters or "memorandums" issued since 2001 and information found on CMS' web site. The original memorandums may be viewed by logging onto CMS' web site: http://www.cms.hhs.gov clicking the Medicare tab and following Coordination of Benefits>Workers' Compensation Agency Services>Downloads. These Q & As focus primarily on workers' compensation settlements as currently CMS has not established review thresholds for liability settlements. It is anticipated that liability settlement thresholds will be released in the Spring of 2010, however, there is no published policy released by CMS to date. The questions and answers have been grouped into categories: Contracting CMS Q&A 1 Statutory/Regulation References: Q&A 2-3 Medicare's Right of Recovery/Liens: Q&A 4-17 CMS Policy & Procedures: Q&A 18-38 CMS Review Criteria and Referral Process: Q&A 39-49 Payments from the Medicare Set-aside: Q&A 50-53 Duration/Exhaustion/Termination of the Medicare Set-aside; Q&A 54-57 Valuation of the Medicare Set-aside: Q&A 58-65 Prescription Drug Therapy/Coverage D Q&A 66-75 Conflicts between State/Federal Laws: Q&A 76-77 Ethical Considerations: Q&A 78-79 Caveat: The answers provided are those suggested by CMS and may not reflect the opinion of the Angelo Paul Sevarino, Esq. Where deemed appropriate, "Comment" will reflect the opinion of Angelo Paul Sevarino, Esq. This material is offered for general information only. While every effort is made to keep this material current there is no guarantee that the answers reflect current CMS opinion. The reader should reference www.cms.hhs.gov for the most up to date guidance provided by CMS. Additionally this material is not intended as legal advice. Consultation with an attorney experienced in Medicare Set-aside mechanisms and Social Security Disability offset provisions is required to address individual issues. Contacting CMS Q1. How do I contact CMS? A1. For MSA referrals and inquiries: If the practitioner is in need of general information regarding the MSA referral process or if the practitioner has made a MSA referral but has not yet received an acknowledgement letter regarding the submission contact 1-800-999-1118. If the practitioner has received an acknowledgment letter regarding the MSA referral contact 301-575-0160. If the practitioner has received a decision regarding the MSA referral and has a question about the case contact with the CMS Regional Office is required. A list of contract names by Region is annexed as Addendum 1 and the end of this material •· The following is a listing of CMS contacts by region and state. Effective September 1, 2008 the ten former Regional Districts were consolidated into six (New York, Atlanta, Kansas City and Denver being consolidated): Boston Region (Contact 617-565-1318)
Philadelphia Region (Contact Sean Emberson, Richard Meehl 215-861-4178)
Dallas Region (214-767-6402)
San Francisco Region (Tom Bosserman: 415-744-4907, Ian Fraser: 415-744-3665, Tina Lim: 415-744-3673, Irene Cheng: 415-744-3582)
Seattle Region (Jonella Windell: 206-615-2385, Bert Vance: 206-615-2329)
Statutory/Regulation References Comment: On May 4, 2006 HR 5309 entitled "The Medicare Secondary Payer and Workers' Compensation Settlement Agreements Act of 2006" was introduced to address the dysfunctional procedures for workers' compensation Medicare Set-aside proposals. This bill, while not passed, aimed to establish a clear legal basis for workers' compensation Medicare Set-asides, as well as, fast and efficient procedures for the review of Medicare Set-aside proposals by CMS. It is hoped and expected that in the near future new bills addressing these same issues will be offered. Q2. Has CMS issued any guidelines for Medicare Set-asides? A2. Yes. Since 2001 a number of Regional Administrative Letters or Amemorandums@ have been released explaining The Centers for Medicare & Medicaid Services (CMS) (formerly known as the Health Care Financing Administration or "HCFA") policy and practice as it relates to the establishment, valuation and approval process for Medicare Set-asides (MSA) (sometimes referred to as a Medicare Set-aside "mechanism", "trust", "account" or "arrangement"). The primary memorandums are listed below. The primary memorandums may be found at: http:/www.cms.hhs.gov/WorkersCompAgencyServices/gov. CMS also maintains an excellent general website at http://www.cms.hhs.gov 1. Patel Memorandum dated July 23, 2001 entitled "Workers' Compensation: Commutation of Future Benefits" (Parashar B. Patel, Deputy Director Purchasing Policy Group Center for Medicare Management). 2. Olenick Memorandum dated October 15, 2001 entitled "Mr. Michael G. Dileo's September 27, 2001 letter concerning Workers' Compensation Cases" (Paul J. Olenick, Director, Division of Integrated Delivery Systems). 3. Grissom Memorandum dated April 21, 2003 entitled "Medicare Secondary Payer Workers' Compensation (WC) Frequently Asked Questions" (Thomas L. Grissom, Director Center for Medicare Management). . 4. Grissom Memorandum dated May 23, 2003 entitled "Medicare Secondary Payer Workers' Compensation (WC) Additional Frequently Asked Questions" (Thomas L. Grissom, Director Center for Medicare Management). 5. Herb Huhn Memorandum dated May 7, 2004 entitled "Medicare Secondary Payer: Workers' Compensation" (WC) INFORMATION. 6. Walters Memorandum dated October 15, 2004 entitled "Medicare Secondary Payer (MSP) Workers' Compensation (WC) Additional Frequently Asked Questions." (Gerald Walters, Director Financial Services Group, Office of Financial Management). 7. Walters Memorandum dated July 11, 2005 entitled "Medicare Secondary Payer (MSP)-Workers' Compensation (WC) Additional Frequently Asked Questions" (Gerald Walters, Director Financial Services Group, Office of Financial Management). 8. Walters Memorandum dated December 30, 2005 entitled "Part D and Workers' Compensation Medicare Set-aside Arrangements (WCMSAs) Questions and Answers" (Gerald Walters, Director Financial Services Group, Office of Financial Management). 9. Walters Memorandum dated April 25, 2006 entitled "Workers Compensation Medicare Set-Aside Arrangements (WCMSAs) and Revision of the Low Dollar Threshold for Medicare Beneficiaries" (Gerald Walters, Director Financial Services Group, Office of Financial Management). 10. Walters Memorandum dated July 24, 2006 entitled "Questions and Answers for Part D and Workers' Compensation Medicare Set-aside Arrangements" (Gerald Walters, Director Financial Services Group, Office of Financial Management). 11. Walters Memorandum dated May 20, 2008 entitled "Medicare Secondary Payer - Workers' Compensation - INFORMATION" (Gerald Walters, Director Financial Services Group, Office of Financial Management). 12. Walters Memorandum dated August 25, 2008 entitled "Medicare Secondary Payer - Workers' Compensation - INFORMATION" (Gerald Walters, Director Financial Services Group, Office of Financial Management). 13. Walters Memorandum dated April 3, 2009 entitled "Medicare Secondary Payer - Workers' Compensation - INFORMATION" (Gerald Walters, Director Financial Services Group, Office of Financial Management). In addition to the memorandums CMS has hosted open forum conference calls allowing practitioners to participate along with CMS management and staff in an informal "Q & A" format aimed at providing the practitioner with a better understanding of CMS' requirements for the need to set up Medicare Set-asides and the process by which that is accomplished. Additional information may also be obtained by referencing the author's text: "Practitioner's Guide To Settlements, Offsets & Set-asides" published by Atlantic Law Book Company, West Hartford, Connecticut 06110. Information regarding this text may be found on the "Publications" page. Q3. What authority gives CMS the right to seek a Medicare Set-aside? Comment: These statutes and regulations do not constitute "legal authority" to mandate use of a Medicare Set-aside or the prior approval of a Medicare Set-aside. What they do reinforce is that Medicare is secondary to any available primary payer policy, whether that policy is a workers' compensation, liability or group health policy and that if Medicare does make a conditional payment(s) Medicare has an absolute right to seek recovery. It is also true that the regulations, as currently written, only apply to workers' compensation and not liability. That being said the existence of regulations and statues since 1980 clearly provide that Medicare is a secondary payer to workers' compensation, liability and group health policies and clearly provides Medicare the authority to deny payment when there is other valid and collectable coverage. A3. Section 1862(b)(2) of the Social Security Act and '42 USC 1395y(b)(2 )requires that Medicare payments may not be made for any item or service to the extent that payment has been made under a workers' compensation law or plan. Moreover, '42 CFR 411.46 requires Medicare to exclude its payments when an individual receives a workers' compensation settlement award that is intended to compensate the injured party for future medical expenses required because of a work-related injury or disease. That is, Medicare must not pay for an individual's medical, services when that individual received a workers' compensation settlement, judgment or award that includes funds for future medical expenses, until all such funds are properly expended. Section 1862(b)(2) and '42 CFR 411.46 do not explicitly require individuals who are not yet Medicare beneficiaries to consult with CMS prior to settling their workers' compensation cases. However, Section 1862(b)(2) and '42 CFR.411.46 do require Medicare to exclude its payments once that injured individual actually becomes a Medicare beneficiary. Accordingly, it is in the injured party's interest to consider Medicare's interest at the time of settlement (even though the injured party is not actually a Medicare beneficiary at the time of settlement). CMS further believes that once CMS agrees to a Medicare Set-aside the injured party can be certain that Medicare's interests have been appropriately considered. Medicare regulations at '42 CFR 411.46 states that: "If a lump-sum compensation award stipulates that the amount paid is intended to compensate the individual for all future medical expenses required because of the work-related injury or disease, Medicare payments for such services are excluded until medical expenses related to the injury or disease equal the amount of the lump-sum payment." In addition the Medicare manuals ('3407.8 of the MIM, '2370.8 of the MCM) state: "When a beneficiary accepts a lump-sum payment that represents a commutation of all future medical expenses and disability benefits, and the lump-sum amount is reasonable considering the future medical services that can be anticipated for the condition, Medicare does not pay for any items or services directly related to the injury or illness for which the commutation lump-sum is made, until the beneficiary presents medical bills related to the injury equal to the total amount of the lump-sum settlement allocated to medical treatment." Medicare's Right of Recovery/Liens Q4. What is the Medicare Secondary Payer Act? A4. The Medicare Secondary Payer Act gives rise to Medicare conditional payments. The Medicare Secondary Payer Act (MSP) is found at Section 1862(b) of the Social Security Act 42 USC 1395y(b)(2). Applicable regulations are found at 42 CFR Part 411(1990). The MSP provides that Medicare may not make payment for medical services or prescription drug therapy charges where payment has been made or can reasonably be expected to be made under a workers' compensation law or plan of the United States or a Sate or under a liability, no-fault or group health policy. Under this authority Medicare has a priority right of recovery from the primary payer, as well as, from parties in receipt of third-party payments such as a beneficiary provider, supplier, physician, attorney, state agency or private insurer pursuant to 42 CFR 411.25(g). Q5. How does the practitioner investigate whether there are Medicare Conditional Payments? A5. Contacting the Coordination of Benefits Contractor (COBC) is always the first step in the process. For the initial Medicare conditional medical payment inquiry the practitioner should first call CMS/COBC at 1-800-999-1118 (Fax: 1-646-488-6762 or http://www.cms.hhs.gov/COBGeneralInformation/03_ContactingtheCOBContractor.asp) and request that they initiate a "lien search". The practitioner may also initiate the process by letter with proper Proof of Representation and Consent to Release forms included. These documents are required whether the inquiry is by telephone or in writing. The COBC mailing address is: Medicare-Coordination of Benefits, P.O. Box 33847, Detroit, MI 48232-5847. Note: MSPRC will provide conditional payment information to a workers' compensation entity/carrier or no-fault insurer without a Consent to Release document. However, MSPRC will not provide conditional payment information to a liability insurer, including a self-insurance entity, without a proper Consent to Release document. Any inquiry to the COBC requires the following information be provided: Claimant's name and address; Claimant's Social Security (SSN) or Medicare Health Insurance Claim Number (HICN); Claimant's attorney's name, address, telephone number; Employer's name and address; Insurer's name and address; Insurer's claim number; Insurer's attorney's name, address, telephone number; Claimant's Medicare Entitlement Date; Date of injury or onset of illness; Claimant's date of birth; body part(s)/system(s) involved; ISD codes, if available; total settlement amount, if known; description of how injury occurred or illness contracted; and Proof of Representation with Consent to Release authorizations. Upon receipt of this information, the COBC will apply it to the Claimant's Medicare record and assign the case to a Medicare contractor (MSPRC) and release the Rights and Responsibility Letter. Q6. What is the Medicare Secondary Payer Rights and Responsibilities Letter? A6. Effective for cases established on or after October 1, 2009, the "Right to Recovery Letter" issued when a claim for liability insurance (including self-insurance), no-fault insurance, or workers' compensation is reported to CMS' Coordination of Benefits Contractor (COBC) will no longer be issued by the COBC. The letter has been revised, renamed (it is now the "Medicare Secondary Payer Rights and Responsibilities" letter) and will be issued by the MSPRC. Q7. What is the Conditional Payment Letter (CPL)? A7. Effective October 1, 2009, the MSPRC will issue information concerning interim conditional payment amounts automatically (that is, without receiving a request for such information) as soon as an interim conditional payment amount is available. This is by way of the Conditional Payment Letter (CPL). If you have an outstanding request for a conditional payment letter (CPL) for a case established prior to October 1, 2009, the request will be processed in the order received. For all new cases, the Medicare beneficiary and any authorized individuals will receive the CPL within 65 days of the issuance of the "Rights and Responsibilities Letter." Once all claims have been retrieved from Medicare systems and determined to be related to the reported claim the MSPRC will issue a conditional payment letter to all authorized parties on record. The practitioner must understand that a careful review of this letter is required as not all items listed in the conditional payment letter properly belong to the claim and must be challenged. The most effective way to do this is by way of a review of the listed ISD codes as reported by Medicare to insure only those body parts/systems which are the same as are applicable to the work or accident related injury or illness are included. Q8. How are conditional payment information updated? A8. Once MSPRC has issued its original conditional payment information updated information may be viewed on MyMSP tab on www.mymedicare.gov website. Q9. What is "Proof of Representation?" A9. This is the form wherein the Claimant has authorized the individual or entity (including an attorney) to act on the Claimant's behalf. The representative has no independent standing, but may receive or submit information/requests on behalf of the Claimant, including responding to requests from the MSPRC, receiving a copy of the recovery demand letter if Medicare has a recovery claim, and filing an appeal (if appropriate) when that Claimant is involved in a liability, workers' compensation, or auto/no-fault situation. Under these circumstances, the exchange of information is a two way street. The representative may provide necessary information to or interact with the MSPRC, on behalf of the Claimant, in order to resolve Medicare's Recovery Claim. If the party requesting MSPRC information is not the attorney of record on the underlying claim the following information is required to be included in the Proof of Representation form. The Claimant's name as shown on his/her Medicare card, his/her Medicare Health Insurance Claim Number (HICN)(the number on the Medicare card), specify the following information for the representative including the name, type of representative, firm/company name (if applicable), address, telephone number, and signature with date the appointment. The representative must sign and date the document to show that he/she has agreed to represent the beneficiary. Q10. What is the Consent To Release Form?" A10. This is the form wherein the Claimant has authorized an individual or entity to receive certain information from the MSPRC for a limited period of time. The release does not give the individual or entity the authority to act on behalf of the beneficiary. Under these circumstances, the exchange of information is a one-way street. The Claimant has authorized the MSPRC to provide privacy protected data to the specified individual/entity, BUT this does not authorize the individual/entity requesting information to act on behalf of/make decisions on behalf of the Claimant. Q11. What is the Final Settlement Detail Statement and Final Demand Letter? A11. Once a settlement is reached the Final Settlement Detail Statement must be sent to MSPRC. This document includes the total settlement amount, itemization of procurement costs including attorney fees and costs, and date of settlement. Upon receipt MSPRC will send the practitioner a Final Demand Letter indicating the amount of recoupment MSPRC is seeking from the settlement. Interest begins to accrue on this amount 60 days after issuance of the Final Demand Letter regardless of whether the practitioner is disputing or appeal the amount claimed. MSPRC may be contacted by telephone at Tele: 1-866-677-7220, Fax: 734-957-0998 Workers' compensation settlements are sent to: MSPRC Liability settlements are sent to: MSPRC Group health plan reconciliations to: MSPRC Q12. Does Medicare have "lien" rights against a workers' compensation or liability settlement? A12. No! But it does have a "right of recovery". Because most workers' compensation carriers and all liability carriers typically dispute liability it is very common that Medicare later finds that it has already made "conditional payments". A conditional payment means a Medicare payment was made for which another payer e.g., the workers' compensation carrier, liability carrier or group health carrier is potentially responsible but had not made due to a pending dispute. If Medicare's conditional payments are more than $100,000 and the injured party, known in Medicare terminology as the "beneficiary", (beneficiary means a person who is entitled to Medicare benefits ' 42 CFR 400.202) also wishes Medicare to compromise its recovery under the Federal Claims Collection Act provisions of '31 U.S.C.3711, the case must be referred to CMS' Central Office and then is forwarded to the Department of Justice. Medicare is a "secondary" payer to workers' compensation, liability or group health policies; therefore, it is, according to CMS in Medicare's best interest to learn of the existence of a workers' compensation, liability or group health open case, as well as, settlements as soon as possible in order to avoid Medicare making "mistaken" conditional payments. According to CMS, the use of a Medicare Set-aside in workers' compensation cases enables Medicare to identify workers' compensation situations that would otherwise go unnoticed, which in turn prevents Medicare from making "mistaken" payments. Comment: While not yet common use of Medicare Set-aside provisions are recommended in liability settlements. Q13. Does the Medicare program have a claim against a lump sum workers' compensation payment before an injured party's Medicare entitlement? A13. No. Medicare cannot make a formal determination until the injured party actually becomes entitled to Medicare. However, once the injured party becomes entitled, Medicare payment may not be made to the extent of Medicare's interests in the lump sum payment pursuant to ' 42 CFR 411.46 or according to a Medicare Set-aside that adequately considers Medicare's interests. Comment: If a Medicare Set-aside of some sort is not utilized in settlement of workers' compensation claims then the client's only recourse is to take an appeal to each Medicare payment denial. Q14. Is it permissible for Medicare to accept an up-front cash settlement instead of establishing a Medicare Set-aside? A14. No. An up-front cash settlement is only appropriate in certain instances when Medicare agrees to a compromise in order to recover conditional payments made when the workers' compensation carrier or liability carrier did not pay promptly (promptly generally means payment will be made within 120 days of receipt of the claim). Thus, when future medical or prescription drug benefits are included in a workers' compensation or liability settlement agreement, Medicare cannot pay until the medical or prescription drug expenses related to the injury or illness equal the amount of the settlement allocated to future medical or prescription drug expenses or until the amount included for medical or prescription drug expenses in the Medicare Set-aside has been properly exhausted. Q15. How does Medicare determine its interests in workers' compensation cases when the parties to the settlement do not explicitly state how much of the settlement is for past medical expenses and how much is for future medical expenses? A15. A settlement that does not specifically account for past versus future medical or prescription drug expenses will be considered to be entirely for future medical or prescription drug expenses once Medicare has recovered any conditional payments it may have made. This means that Medicare will not pay for medical or prescription drug expenses that are otherwise reimbursable under Medicare and are related to the workers' compensation injury or illness, until the entire settlement is exhausted. Example: An injured party is paid $50,000 by a workers' compensation carrier, and the parties to the settlement do not specify what the $50,000 is intended to pay for. Medicare has made $5,000 in conditional payments. If there is no CMS approved Medicare Set-aside Medicare will consider $45,000 as compensation for future medical expenses. Additionally, it is the position of CMS that any allocation made for lost wages, pre-settlement medical expenses, future medical expenses, or any other settlement designations that do not consider Medicare's interests, will not be recognized by Medicare. Q16. From whom can CMS recover funds if Medicare's interests are ignored in a workers' compensation or liability case? A16. CMS has a direct priority right of recovery against any entity including an injured party, provider, supplier, physician, attorney, state agency, or private insurer that has paid or received any portion of the settlement proceeds whether directly or indirectly. CMS also has a subrogation right with respect to any such third party payment. See, for example, '42 CFR 411.24(b), (e), and (g) and '42 CFR 411.26. Comment: This right of recovery clearly applies to any conditional Medicare payments made prior to the settlement, however there is no clarity as to whether CMS has a direct right of recovery against any entity for payments Medicare may make for services provided "after" the settlement. Q17. If a current Medicare beneficiary has outstanding workers' compensation or liability related medical services or prescription drug claims that were not paid prior to the settlement will Medicare or the Medicare Set-aside pay those claims? A17. No, Medicare cannot pay because it is secondary to the workers' compensation or liability settlement and the Medicare Set-aside cannot pay because it is created solely for future medical and prescription drug expenses related to the workers' compensation case. Medical expenses incurred prior to the settlement need to be accounted for in the compromise portion of the settlement. These medical services should be known to the parties. The provider/supplier will typically have billed Medicare and/or the workers' compensation carrier for these medical services or prescription drug charges and the injured worker's representative should have made inquiries about outstanding related claims. In addition, to the extent Medicare has made any conditional payments, Medicare will recover those payments pursuant to '42 CFR 411.47. CMS Policy & Procedures Q18. How does CMS define a "settlement"? A18. A "settlement" is an executed settlement agreement that is approved by the court or agency of competent jurisdiction for the applicable state and will be recognized by Medicare. Medicare is not required to recognize a settlement that has not be approved by court or agency. Q19. What is the difference between a "commutated" and "compromise" settlement? A19. Medicare's regulations '42 CFR 411.46 and manuals MIM'' 3407.7& 3407.8 and MCM ''2370.7 & 2370.8 make a distinction between settlements that are commutations of future benefits and those that are due to a compromise between the insurance carrier and the injured party. Commutation cases are settlement awards intended to compensate individuals for future medical or prescription drug expenses (expenses after the settlement date) required because of a work or accident related injury or disease. In contrast, compromise cases are settlement awards for an injured party's current or past but not future medical or prescription drug expenses (expenses incurred prior to the settlement date) that were incurred because of a work or accident injury or illness. Therefore, settlement awards or agreements that intend to compensate an injured party for any medical or prescription drug expenses after the date of settlement are considered commutation cases. It is important to note that a settlement agreement can possess both compromise and commutation aspects. That is, some settlement agreements can designate part of a settlement for an injured party's future medical or prescription drug expenses and simultaneously designate another part of the settlement for all of the injured party's medical or prescription drug expenses up to the date of settlement. Additionally, a settlement possesses a commutation aspect if it does not provide for future medical expenses when the facts of the case indicate the need for continued medical care due to the work or accident injury or illness. It is important to note that Medicare Set-asides are only used in cases that possess a commutation aspect; they are not used in cases that are strictly or solely compromise cases and do not provide for any work or accident related future medical or prescription drug expenses. One of the distinctions that Medicare's regulations and manuals make between workers' compensation compromise and commutation cases is the absence of controversy over whether a workers' compensation carrier is liable to make payments. An admission of liability by the workers= compensation carrier is not the sole determining factor of whether or not a case is considered a compromise or commutation. A significant number of workers' compensation cases are commutations of future workers' compensation benefits where typically there is no controversy between the injured party and the workers' compensation carrier over whether the workers' compensation carrier is actually liable to make payments. However, an absence of controversy over whether a workers' compensation carrier is liable to make payments is not the only distinction that Medicare's manuals and regulations make between compromise and commutation cases. Thus, settlements should not automatically be considered as compromise cases simply because a workers' compensation carrier does not admit to being liable in the settlement agreement. Conversely, settlements should not automatically be considered as commutation cases simply because a workers' compensation carrier admits to being liable in a settlement agreement. Q20. Does Medicare give written advisory opinions on the sufficiency of a Medicare Set-aside even if the injured party is not as yet entitled to Medicare? A20. CMS established case review thresholds (currently only with workers' compensation settlements) and will review a proposed settlement including a Medicare Set-aside and give a written opinion on which the injured party and the attorney can rely, regarding whether the settlement has adequately considered Medicare's interests pursuant to '42 CFR 411.46. These proposed settlements are handled on a case-by-case basis, as each situation is different. Once CMS has given its written opinion that the Medicare Set-aside is sufficient to satisfy the requirements at '42 CFR 411.46, when the Medicare Set-aside established CMS, will monitor its National Medicare Enrollment database confirming the Medicare Set-aside has been established according to the authorization provided. Q21. If the workers' compensation settlement does not meet current review thresholds will CMS provide the settling parties a "verification" letter confirming that approval of a Medicare Set-aside is unnecessary? A21. No. however CMS will honor threshold levels that are in effect as of the date of a workers' compensation settlement even if subsequent threshold levels change. Q22. Once the Medicare Set-aside has been approved by CMS what is CMS' subsequent role? A22. When CMS approves a Medicare Set-aside CMS will check the National Medicare Enrollment database on a monthly basis in order to determine when an injured party actually becomes enrolled in Medicare. Once CMS verifies that the injured party has actually been enrolled in Medicare, CMS will assign a contractor, based on the injured party's State of residence, to be responsible for monitoring the injured party's case. When the injured party has actually been enrolled in Medicare, CMS will provide the Coordination of Benefits Contractor (COBC) with identifying information to add a workers' compensation or liability record to their file known as a "Common Working File." Typical information provided includes (1) injured party's name, (2) injured party's HICN, (3) date of incident, (4) ICD code(s) or a description of the illness/injury , (5) whether the Medicare Set-aside is self-administered or third party administered, and (6) injured party's attorney information. The administrator of the Medicare Set-aside , whether it is self-administered or administered by a third party, must forward annual accounting summaries concerning the expenditures from the Medicare Set-aside to the contractor responsible for monitoring the injured party's case. The contractor responsible for monitoring the injured party's case is then responsible for insuring/verifying that the funds allocated to the Medicare Set-aside were expended on medical services or prescription drug charges for Medicare covered services or drugs only. Additionally, the contractor responsible for monitoring the injured party's case will be responsible for ensuring that Medicare makes no payments related to the work or accident related injury or illness until the Medicare Set-aside has been properly exhausted. Q23. Does a "system of records" exist for the documentation that CMS receives and or collects concerning the proposed Medicare Set-aside? A23. Yes. CMS' Division of Benefit Coordination is in the process of establishing a "system of records" via the Federal Register process, which will provide legal authority to maintain records on injured parties that are not enrolled in Medicare. The CMS Regional Office will be responsible for maintaining or "housing" the records for every Medicare Set-aside in which CMS provides a written opinion. Please note that these records are not subject to Freedom of Information Act requests and may not be disseminated to the public. Q24. What types of measures should CMS and the contractors take to ensure that Medicare makes no payments for work or accident related injury or illness medical services and prescription drug charges until the Medicare Set-aside has been properly exhausted? A24. If the contractor monitoring the injured party's case discovers that payments from the Medicare Set-aside have been used to pay for medical services or prescription drug charges that are not covered by Medicare or for third party administrative expenses arising out of the administration of the Medicare Set-aside then the contractor will not pay the Medicare claims. The contractor must provide the evidence of the unauthorized expenditures to CMS for investigation. If CMS determines that the expenditures were contrary to the CMS written opinion on the sufficiency of the Medicare Set-aside, then CMS will notify the self or third party administrator of the Medicare Set-aside that the CMS approval of the Medicare Set-aside is withdrawn until such time as the funds used for non-Medicare expenses and/or administrative expenses are restored to the Medicare Set-aside. Q25. What impact will Medicare Set-aside have on Medicare payment systems and procedures? A25. According to CMS, because a Medicare Set-aside's purpose is to pay for all medical services and prescription drug therapy charges related to the injured party's work or accident related injury or illness, Medicare will not make any payments (as a primary, secondary or tertiary payer) for any medical or prescription drug charges due to the work or accident related injury or illness until nothing remains in the Medicare Set-aside mechanism. Medicare Set-asides are established in order to pay for all medical and prescription drug expenses and are not designed to simply pay portions of medical or prescription drug expenses. This is the case where the settlement is by way of lump sum or structured. Q26. May a beneficiary self-administer his or her own Medicare Set-aside? A26. Yes. CMS requires a self-administered Medicare Set-aside to follow the same rules and guidelines as those required of a third-party administrated Medicare Set-aside. Third party administration of the Medicare Set-aside may be warranted, however, if the injured party is incompetent, mentally incapable of managing benefit payments, a minor , has had a conservator(trix) appointed or there is a need for a Special Needs Trust due to Title 19/Medicaid issues. Q27. Who may be an "administrator" to a Medicare Set-aside? A27. Medicare Set-asides must be administered by a competent administrator. This can be the beneficiary, a representative payee for Social Security purposes pursuant to 20 C.F.R. '' 404.2010 and 404.2015 (e.g., because the individual is legally incompetent, mentally incapable of managing benefit payments, etc.), an appointed guardian or conservator or a professional administrator. Moreover, when an individual has a designated representative payee, appointed guardian/conservator, or has otherwise been declared incompetent by a court then the party submitting the Medicare Set-aside proposal to CMS must include that information as part of their proposal to CMS. Q28. Is there a means by which an injured party can permanently waive his or her right to certain specific medical services or prescription drug coverage arising from a work or accident related injury or illness and thereby eliminate the need for or reduces the amount of a Medicare Set-aside? A28. No, CMS cannot approve settlements that promise not to bill Medicare for certain medical services or prescription drug charges in lieu of including those medical services or prescription drug charges in a Medicare Set-aside. This is true even if the injured party offers to execute an affidavit or other legal document promising that Medicare will not be billed for certain medical or prescription drug charges if those medical or prescription drug charges are not included in the Medicare Set-aside. Q29. Does CMS require that a Medicare Set-aside in liability claims? A29. CMS' position is that Section 111 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (PL 110-173) amends the Medicare Secondary Payer (MSP) provisions of the Social Security Act (Section 1862(b) of the Social Security Act; 42 U.S.C. 1395y(b)) to provide for mandatory reporting for group health plan arrangements, liability insurance (including self-insurance), no-fault insurance, and workers' compensation. The provisions will begin to be implemented January 1, 2009, for information about group health plan arrangements, and July 1, 2009, for information about liability insurance, no-fault insurance, and workers' compensation. If you would like more information about the new Section 111 requirements, please visit www.cms.hhs.gov/MandatoryInsRep. Comment: In the case of a settlement of a liability case it is likely CMS will interpret this as a commutation case requiring the establishment of a Medicare Set-aside. In the case of a civil judgment where no future economic damages are awarded for future medical treatment it would suggest no Medicare Set-aside would be warranted. Careful drafting of the settlement documents is warranted and in the case of court side verdicts the transcript should reflect no future medical costs have been awarded and in the case of jury verdicts special interrogatories to the jury should be submitted to confirm no award for future medical costs. As with workers= compensation settlements there is no statutory authority for CMS' position other than the Regional Director Memorandums interpreting the statutes and regulations to mandate the Medicare-Set-aside process. While there is no such authority the practical reality is that it will be the client who suffers when a Medicare Set-aside is not utilized since Medicare may well deny coverage and payment for accident or injury related medical and prescription drug bills leaving the client with the long arduous process of appealing a Medicare payment denial to the ALJ. Q30. Does CMS require that a Medicare Set-aside be established in situations that involve both a workers' compensation and a liability claim? A30. Yes. To the extent that a liability settlement relieves a workers' compensation carrier from any future medical or prescription drug expenses, a CMS approved Medicare Set-aside is appropriate. "Relief" could come in the form of a full and final settlement of the workers' compensation claim or a moratorium on future workers' compensation until the liability proceeds are exhausted. This Medicare Set-aside would need sufficient funds to cover future medical and prescription drug related expenses incurred once the total liability settlement (less procurement costs of the judgment e.g., attorney fees and costs is exhausted. There may be exceptions to this rule. Establishing a Medicare Set-aside would not be necessary if it can be medically documented that the injured party does not require any further medical services or prescription drug therapy. However, a Medicare Set-aside would still be appropriate even where the resolution of the workers' compensation claim permanently closes the medical aspects of the claim but where the medical records document that the injured party will require future medical services or prescription drug therapy related to the workers' compensation claim that Medicare would otherwise reimburse. A Medicare Set-aside would also be unnecessary if the medical portion of the workers' compensation claim remained open and the workers' compensation carrier continued to be responsible for work-related medical or prescription drug services once the liability settlement was exhausted. Q31. Can you settle just the indemnity portion of a workers' compensation claim while awaiting a CMS determination on a proposed Medicare Set-aside? A31. Yes, however, this will normally require two appearances before the workers' compensation administrative body approving the settlement with the first resolving the indemnity portion and the second upon receipt of the CMS approval. Q32. Can the parties proceed with the settlement of the medical portion of a workers' compensation claim before CMS actually reviews the proposed Medicare Set-aside? A32. Yes, but not recommended. The parties may proceed with the settlement but any statement in the settlement of the amount needed to fund the Medicare Set-aside mechanism is not binding upon CMS until the parties refer the Medicare Set-aside to CMS and then provide CMS with documentation that the Medicare Set-aside has actually been funded for the full amount as specified by CMS that adequately considers Medicare's interests as a result of its review. If CMS does not subsequently provide approval of the funded Medicare Set-aside amount as specified in the settlement and proof is not provided to CMS that the CMS approved Medicare Set-aside amount has been fully funded, CMS will deny payment for medical services and prescription drug charges related to the workers' compensation claim up to the full amount of the settlement. Only the approval of the Medicare Set-aside by CMS and the submission of proof that the Medicare Set-aside mechanism was funded with the approved amount, would limit the denial of related medical and prescription drug claims to the amount in the Medicare Set-aside. This is demonstrated by submitting a copy of the final, signed settlement documents indicating the Medicare Set-aside is the same amount as that recommended by CMS. Comment: The following options have not been developed by CMS and are those developed by Attorney Angelo Paul Sevarino. These options (with associated risk to the client) can be considered if the parties do not wish to wait for CMS approval: Option 1: Advance. With the consent of all proposed signatories to the settlement the parties enter into a Stipulation to Date for 10-20% of the gross settlement plus attorney fees and costs and refer the settlement with proposed Medicare Set-aside to CMS. Upon approval of the submission by CMS the parties enter into a final settlement agreement and the workers' compensation insurance carrier or self-insured employer would pay the difference of what was advanced under the Stipulation to Date and the original gross settlement figure. Under this option the workers' compensation insurance carrier or self-insured employer remains primarily liable for all work related medical and prescription drug expenses up to the date of CMS approval and subsequent approval of the final Stipulation. Under this option the injured party bears the entire cost of any excess funding of the Medicare Set-aside in excess of that contemplated in the original settlement. Option 2: Post-settlement approval from CMS. With the consent of all proposed signatories to the settlement the parties proceed to obtain settlement approval by the workers' compensation adjudicatory body and injured party's counsel disburses the settlement funds before receipt of CMS approval so long as the injured party's counsel holds two times the proposed Medicare Set-aside figure in a client fund account until CMS approval is obtained. Should CMS then require a higher Medicare Set-aside amount than that funds held in the client fund account the injured party's counsel must then require the injured worker to promptly fund the difference. This option requires that the injured party provide the insurance carrier a hold harmless for any liability should the injured party fail to properly fund the Medicare Set-aside. Option 3: Reversionary Set-aside. This option is the same as Option 2, except the full proposed Medicare Set-aside amount as indicated in the settlement document is held in the client fund account and the parties agree that should CMS comes back with a requirement that the Medicare Set-aside figure be greater than that proposed in the settlement documents the injured party agrees to fund an agreed to additional amount from the settlement proceeds which additional sum has been held in the injured party's attorney's client fund account. However, if the Medicare Set-aside amount required by CMS exceeds the original proposed Medicare Set-aside amount plus this additional sum held in the client's fund account then the workers' compensation insurance carrier or self-insured employer agrees to fund the excess (amount of Medicare Set-aside required by CMS less the amount of the original proposed Set-aside amount plus additional sum committed to by injured party). Should this excess not be fully exhausted at the death of the injured party the remainder of the excess reverts to the payer insurance carrier or self-insured employer and not the injured party or his/her estate. Q33. If the injured party receives a Form I099-INT for the interest income earned on the Medicare Set-aside may the injured party charge the income tax on that amount against the Medicare Set-aside? A33. Yes. Assuming there is adequate documentation for the amount of incremental tax that the injured party must pay for the interest earned on the Medicare Set-aside funds, the injured party or his/her administrator may withdraw an amount equal to the additional tax as a cost that is directly related to the Medicare Set-aside account to cover the additional tax liability. Such documentation should be submitted along with the annual accounting. Q34. Does CMS provide an example of an acceptable format for a Medicare Set-aside or CMS referral? A34. Yes. A sample Medicare Set-aside mechanism and proposal may be found at http://www.cms.hhs.gov/WorkersCompAgencyServices/Downloads/samplesubmission.pdf Q35. In a workers' compensation settlement, is a Medicare Set-aside recommended where the injured party is covered under a group health plan, managed care plan, or has coverage through the Veterans Administration? A35. Yes, a Medicare Set-aside is still appropriate because such other health insurance or health service could in the future be canceled or reduced, or the injured party may elect not to take advantage of such medical services or prescription drug coverage. It is important to remember that workers' compensation, liability or group health coverage is always primary to Medicare for expenses related to the workers' compensation or liability settlement. If the injured party belongs to a HMO that may not be coordinating benefits based on workers' compensation entitlement, the settlement should still set-aside funds for Medicare covered services in case the injured party converts to a fee for service plan. Q36. Does a Medicare Set-aside have an effect on Medicaid resources for purposes of eligibility for Medicaid? A36. Medicare Set-asides are not subject to any special treatment under Medicaid resource rules. These funds should be evaluated to determine if they meet the legal definition of a resource for Supplemental Security Income (SSI), and therefore Medicaid, purposes, i.e., "cash or other assets that an individual owns and could convert to cash to be used for his or her support and maintenance." There may be cases in which funds in a Medicare Set-aside are placed into trusts, possibly trusts that would satisfy the definition of "special needs trusts" under Section 1917 of the Social Security Act. In those cases, the funds might not be a countable resource, but that result would be solely on the basis of Medicaid, not Medicare, rules. Consultation with an Elder Law specialist should be sought. Q37. Is a Medicare Set-aside appropriate when resolution of the injured party's workers' compensation claim leaves the medical aspects of the claim open? A37. No, since the workers' compensation carrier remains primary on work related medical or prescription drug expenses a Medicare Set-aside would not be necessary. Q38. If the settling parties of a workers' compensation case contend that a workers' compensation settlement is not intended to compensate an injured party for future medical or proscription drug expenses, does CMS still require that a Medicare Set-aside be established? A38. It depends. It is unnecessary for the injured party to establish a Medicare Set-aside if all of the following are true: a) The facts of the case demonstrate that the injured party is only being compensated for past medical expenses (i.e., for medical services or prescription drug charges furnished prior to the settlement); b) There is no evidence that the injured party is attempting to maximize the other aspects of the settlement (e.g., the lost wages and disability portions of the settlement) to Medicare's detriment; and c) The injured party's treating physician(s) conclude (in writing) that to a reasonable degree of medical probability the injured party will no longer require any Medicare covered serves due to the work or accident related injury or illness. However, if Medicare made any conditional payments for work or accident related medical services or prescription drug charges prior to settlement, then Medicare would require recovery of those conditional payments. In addition, Medicare will not pay for any medical services or prescription drug charges furnished prior to the date of the settlement for which it has not already paid. CMS Review Criteria and Procedures Q39. What are the review thresholds set by CMS? A39. All workers' compensation regardless of amount must be considered for current Medicare beneficiaries. For civil liability settlements refer to Q21. Comment: CMS is fond of using the term Aprotect@ in discussing the Medicare Set-aside process, e.g. Medicare's interests must be protected. There is no requirement for attorneys to "protect" the interests of Medicare. Rather, the obligation is to give Medicare's interests due consideration. The attorney's sole obligation is to protect the interests of his or her client. Currently there are no established thresholds for liability settlements. The thresholds for review of a workers' compensation Medicare Set-aside proposal are only CMS workload review thresholds, not substantive dollar or "safe harbor" thresholds for complying with the Medicare Secondary Payer law. Under the Medicare Secondary Payer provisions, Medicare is always secondary to workers' compensation and other insurance such as no fault and liability insurance. Accordingly, all injured parties, whether resolving a workers' compensation or liability claim must consider Medicare's interest when settling the claim. The current review thresholds are subject to adjustment and CMS reserves the right to modify these guidelines. Workers' compensation settlement at or below $25,000. Effective April 26, 2006 CMS no longer reviews new Medicare Set-aside proposals for current Medicare beneficiaries where the total settlement amount is $25,000.00 or less. Previously, as of July 11, 2005 this threshold was $10,000.00. Workers' compensation settlement above $25,000. To the extent a workers' compensation settlement meets both of the following criteria: - the total settlement amount for future medical and prescription drug expenses and impairment/wage loss over the life or duration of the settlement agreement is greater than $250,000 (not discounted to present cash value); and - the injured party is reasonably expected to become a Medicare beneficiary within 30 months of the settlement date. See Q41. then a CMS approved Medicare Set-aside is appropriate. For example, if the injured party is designated by workers' compensation carrier as a Permanent Total disabled individual, has applied for Social Security disability benefits, and the settlement apportions $25,000 per year (combined for both future medical and prescription drug expenses and disability/lost wages) for the next 20 years, then the CMS Regional Office should review that workers' compensation settlement because the total settlement amount over the life of the settlement agreement is greater than $250,000 ($25,000 x 20 years = $500,000) and the injured party has a "reasonable expectation" of Medicare enrollment within 30 months of the settlement date. If the injured worker in this example fails to consider Medicare's interests, then Medicare may preclude its payments pursuant to '42 CFR 411.46 once the injured worker actually becomes entitled to Medicare. Note that the computation of the "total settlement amount" includes, but is not limited to, wages, attorney fees, all future medical and prescription drug expenses, due to the work or accident related injury or illness, repayment of any Medicare conditional payments and the value of any previously settled portion of the workers' compensation claim. Comment: Note that "previously settled portion of the workers' compensation claim" will be difficult to calculate since many aspects of a workers' compensation claim may be "settled" or compromised during the life of a claim. To include the value of any previously settled portion of a workers' compensation claim is unworkable. What does this mean? It would be appropriate to include a previously settled portion of the workers' compensation claim if it was contemporaneous to the full and final settlement, otherwise only those amounts which constitute the actual settled claim as of the date of settlement should properly be included. Also note that payout totals for any annuity utilized to fund the Medicare Set-aside and not the cost or present values of the annuity is considered in the total settlement amount calculation. See Q40. Q40. When an annuity is included in a settlement for an injured party (who is not yet a Medicare beneficiary), how does Medicare determine whether the value of the annuity meets the $250,000 monetary threshold? A40. Medicare determines the value of an annuity based on how much the annuity is expected to pay over the life of the settlement, not on the present cash value or cost of funding that annuity. Example: A settlement is to pay $15,000 per year for the next 20 years to an injured party who has a "reasonable expectation" of Medicare enrollment within 30 months (see Q33). This settlement is to be funded with an annuity that will cost $175,000. This meets CMS threshold review criteria because the total settlement to be paid is greater than $250,000 ($15,000 per year x 20 years = $300,000). In CMS' view it is immaterial for Medicare's purposes that the present cash value or cost ($175,000) to fund this settlement is less than $250,000. Q41. What is "reasonable expectation" of Medicare entitlement? A41. A "reasonable expectation" of Medicare enrollment is not an extreme, immoderate, or excessive chance that the injured party will become enrolled in Medicare. A "reasonable expectation" of Medicare enrollment may be where: a) The individual has applied for Social Security Disability Benefits; b) The individual has been denied Social Security Disability Benefits and has a present intent of appealing that decision; c) The individual is in the process of appealing and/or re-filing for Social Security Disability Benefits; d) The individual is 62 years and 6 months old (i.e., may be eligible for Medicare based upon his/her age within 30 months); or e) The individual has an End Stage Renal Disease (ESRD) condition but does not yet qualify for Medicare based upon ESRD. Q42. Assuming an injured party is not a Medicare beneficiary at the time of settlement; if in the future the injured party requests Medicare benefits will Medicare provide benefits? A42. Yes. When an injured party's settlement does not meet both thresholds Medicare will make payment for work related medical or prescription drug charges that are otherwise reimbursable under Medicare once the injured party enrolls in Medicare. This is so, according to CMS, since CMS assumes that when a non-Medicare eligible injured party's workers' compensation settlement does not meet the 30-month and $250,000 thresholds, typically that injured party will completely exhaust the settlement by the time Medicare e1igibility is reached. Q43. What is the referral process for submission of a proposed Medicare Set-aside to CMS? A43. When CMS first started the Medicare Set-aside review process the submission process went something like this: The settlement proposal with the proposed Medicare Set-aside was sent to the CMS Coordination of Benefits Contractor (COBC). The inquiry would be directed to the attention of the Regional Office Medicare Secondary Payer Coordinator, who then would forward the inquiry to the appropriate CMS Regional Office. Workers' compensation Medicare Set-aside responsibilities were generally, but not always, assigned based upon CMS Regional Office responsibility for contractor oversight over the lead fiscal intermediary for workers' compensation recoveries for a particular state. This could or could not have been the same CMS Regional Office as the one with general responsibilities for a particular state. Starting in 2004, instead of direct submission to the CMS Regional Office, Medicare Set-asides are submitted to the Coordination of Benefits Contractor (COBC). Prior to August 27, 2007 this was sent to New York. As of August 27, 2007 the referral is sent to Detroit. Now, if a Medicare Set-aside is sent directly to the CMS Regional Office, the instructions are to send it on to the COBC contractor in Detroit. The address in Detroit is: CMS The COBC contractor will catalog the submissions and forward them to the Workers' Compensation Joint Venture Contractor (see Q41). The purpose of this procedure is to help CMS establish a "centralized case control" system. Purportedly, one of the purposes of the centralized data collection initiative was to establish the average lifespan of the Medicare Set-aside, the experience with medical fee schedules versus actual charges, and similar questions. The data will eventually be made public but there is no timeframe for such a step. Once the contractor has completed its review it will forward a recommendation to the CMS Regional Office having jurisdiction over the claim. Q44. Are there documentation requirements that must be satisfied before the CMS Regional Office can provide a written opinion on the sufficiency of a Medicare Set-aside? A44. Yes. CMS has provided a checklist of requirements that are necessary to conduct a review of the proposed Medicare Set-aside which can be found at: http://www.cms.hhs.gov/WorkersCompAgencyServices/Downloads/wcchecklist.pdf At a minimum, the following documentation must be submitted to CMS prior to the approval of any Medicare Set-aside. 1. Injured party's name 2. Injured party's date of birth 3. HICN (Medicare health insurance claim number) or SSN (Social Security number) if the injured party is not yet entitled to Medicare 4. Injured party's address or telephone number 5. Injured party's CMS Consent to Release authorization 6. Name of injured party's attorney's name, address and telephone number 7. Name of workers' compensation carrier's attorney's name, address and telephone number 8. Entitlement information. Indicate if the injured party is currently enrolled in Parts A, B or D. Attach a copy of the injured party's Medicare card. If the injured party is not currently enrolled in Medicare Parts A B or D indicate if any of the following situations apply to the injured party or if another situation will result in the injured party being enrolled in Medicare within 30 months of the date of settlement. -injured party: - has applied for SSDI benefits - has been denied SSDI but has present intent to appeal - is in the process of appealing and/or re-filing for SSDI - is 62 years old - has end stage renal disease or Lou Gehrig's disease but does not yet qualify for Medicare based on either of these conditions 9. Employer's name, address and telephone number 10. Workers' compensation insurer's name, address, telephone number and claim number 11. State of venue (name of state where workers' compensation hearing is being held) 12. Injury/disease date of injury or onset of disease 13.Type of injury/disease: a brief description of the work or accident related injuries sustained including the ICD-9 diagnosis codes, if available 14.Total workers' compensation settlement amount including the Medicare Set-aside amount plus the amount provided for all other aspects of the settlement. 15. Proposed Medicare Set-aside amount 16. Life expectancy stated in actual age or rated age (obtained from a life insurance underwriter for like injuries/illnesses) and based upon CDC Life Expectancy TablesB Table 1. Note: A rated age is different from the actual age of the injured party and reflects a shorter life span due to underlying medical injury or illness whether occupational or non-occupational. 17. A copy of the Medicare Set-aside analysis. Unless the entity referring the MSA to CMS furnishes acceptable proof of a rated age for the injured party, CMS will estimate the injured party's remaining life expectancy using actual age. Acceptable proof of rated ages includes independent rated ages on the letterhead of an insurance carrier or settlement broker and a statement from the party referring the MSA to CMS that all rated ages obtained on the injured party have been included. With the May 20, 2008 Memorandum the use of rated and actual ages are both still acceptable. However, to determine life expectancy, in relation to the Medicare Set-aside amount, CMS will only accept use of CDC Life Expectancy Tables Table 1. 18. A copy of the proposed settlement agreement 19. Current treatment: Provide the treatment/services that the injured party regularly receives. The current treatment should give an indication that the work-related condition is stable. The summary of current treatment should be supported by a minimum of two years of medical documentation and a comprehensive payment history from the workers' compensation carrier (including indemnity payments). If the work-related injury occurred less than two years from the date of submission of the workers' compensation Medicare Set-aside supporting medical documentation should date back to the date of the work-related injury. Also note any relevant past treatment, such as surgery, that the injured worker may have undergone. In addition, the summary of current treatment should be supported by a minimum of two years of prescription drug information that is related to the workers' compensation injury and/or illness/disease. Include the name of the drug, dosage, and intake regimen (i.e. 3 times a day, once a month etc.) for each drug listed. Also, provide a comprehensive prescription drug payment history from the workers' compensation carrier as follow: - if the injury occurred less than 2 years from the date of the submission, the prescription drug payment history should include those payments that were paid from the injury date through the date of submission. - if the injury occurred more than 2 years from the date of the submission, the prescription drug payment history should include the last 2 years of payments for prescription drugs. 20. Future treatment. Identify specific types of medical services or prescription drug therapy, the frequency/duration of the medical services/items, prescription drug dosage and intake regimen, and the projected costs of the medical services and prescription drug therapy charges related to the work injury/disease that are expected in the future in light of the injured party's condition. Include ICD-9 diagnosis codes if available. Future treatment must be based on the evaluation and recommendation of a physician(s), e.g. the primary care physician, orthopedic surgeon or other specialist (if applicable). An independent medical examination may be sufficient under certain circumstances, e.g. the injured party has not received treatment in several years and there is no primary care physician. Living arrangements that impact the medical benefits of the settlement should be noted. 21. Patient medical recovery prognosis. Describe the expected recovery, e.g., full or partial. Describe the projected recovery period. Identify the date at which the patient achieved maximum medical improvement (when relevant). 22. Total settlement amount. Provide the total workers' compensation settlement amount and not the settlement amount minus attorney fees, expenses, etc. Identify all categories of the settlement. 23. Amount of Future Medical treatment. Identify the total amount of the workers' compensation settlement that is designated for future medical benefits separate from wage/indemnity benefits). If the settlement does not specify a total amount for future medical treatment, explain why it does not. Identify separately the appropriate future expenses that might otherwise by paid by Medicare. 24. Identify the calculation method used to determine the amount for future medical treatment, workers' compensation fee schedule or full actual charges. Identify if the amount is for the injured party's lifetime or for a specified time period. 25. Medicare Set-aside amount. State the amount of the medical benefits and prescription drug therapy that you propose to be placed in the Medicare Set-aside for future items/services that would otherwise be covered by Medicare. Include a payout schedule for each year if a structured settlement is applicable. 26. Administrator. Designate the administrator responsible for control and documentation of proper expenditures from the Medicare Set-aside. Include the address of the administrator if it is not the injured party. 27. Medicare Set-aside funding. The account may be funded with a lump-sum amount or a structured amount or a combination of both. Funds must be placed in an interest-bearing account. If an account is structured and funded by an annuity, identify the source of the annuity and include the annual payment amount, annual funding date, and the amount of the initial lump sum deposit. 28. Final workers' compensation settlement agreement. Approval of the workers' compensation Medicare Set-aside is not final until CMS receives an executed copy of the final settlement agreement that has been approved and signed by all parties. Forward a copy of the final settlement agreement to CMS. 29. Consent to Release form signed by the injured party According to CMS the most efficient method for submission of a Medicare Set-aside proposal is on a CD-ROM in PDF format, The file extension must be .pdf. Upon receipt, the documentation is electronically transmitted into the CMS system and, provided all required information is included, it is then sent to a centralized database for review. The information should categorize the files based on the following codes and use the associated code as the prefix in the naming convention: 05 - Submitter Letter or Other Summary Documentation; 10 - Consent Form; 15 - Rated Age Information or Life Expectancy; 20 - Medicare Set-aside analysis; 25 - Settlement Agreement or Proposed Court Order; 30 - Set-aside Administrator or Copy of Agreement ; 35 - Medical Records; 40 - Payment History; 45 - Future Treatment Plan; 50 - Supplemental or Additional Information Q45. What criteria does Medicare use to determine whether the amount of a lump sum or structured settlement has sufficiently "considered" Medicare's interests? A45. The following criteria is used by CMS in evaluating the amount of a proposed Medicare Set-aside to determine whether there has been an attempt to shift liability for the cost of a work or accident related injury or illness to Medicare. Specifically, is the amount allocated for future medical expenses and prescription drug therapy charges reasonable? If Medicare has already made conditional payments their repayment also has to be taken into account. a) Date of entitlement to Medicare. b) Basis for Medicare entitlement (disability, ESRD or age). If the injured party has entitlement based on disability and would also be eligible on the basis of ESRD, this should be noted since the medical and prescription expenses would be higher. This would also be true for an injured party who is over 65 but had been entitled prior to attaining that age. c) Type and severity of injury or illness. Obtain diagnosis codes (ISD) so injury or illness related expenses can be identified. Is full or partial recovery expected? What is the projected time frame if partial or full recovery is anticipated? As a result of the injury or illness is the injured party an amputee, paraplegic or quadriplegic? Is the injured party's condition stable or is there a possibility of medical deterioration? d) Age of the injured party. Acquire an evaluation of whether his/her condition would shorten the life span e.g., "rated age". e) Workers' compensation carrier's classification of the injured party (e.g., temporary total disability, temporary partial disability, permanent partial impairment, permanent total disability). f) Prior medical and prescription expenses paid by the workers' compensation carrier due to the injury or illness in the 2 year period after the condition has stabilized. If Medicare has paid any amounts e.g., conditional payments, they must be recovered. Also, this would indicate that the case may not purely be a commutation, but may also entail some compromise aspects, e.g., the workers' compensation carrier may have taken the position that the medical services or prescription drug therapy charges were not covered by workers' compensation. g) Amount of lump sum or amount of structured settlement. Obtain as much information as possible regarding the allocation between income replacement, loss of limb or function, and medical or prescription drug benefits. h) Is the commutation for the injured party's lifetime or for a specific time period? If not for lifetime, what is the basis? Medicare will insist that there is a reasonable relationship between the respective allocation for medical services and prescription drug therapy charges covered by Medicare and medical services and prescription drug therapy charges not covered by Medicare. For example, is it reasonable for the settlement agreement's allocation for medical services or prescription drug therapy charges not covered by Medicare to be based on the injured party's life time while the agreement's allocation for medical services or prescription drug therapy charges covered by Medicare is based on a lesser time period? Here, the practitioner may wish to educate CMS on the State law regarding how long workers' compensation is obligated to cover the items, medical services or prescription drug therapy charges related to the accident or illness. i) Is the injured party living at home, in a nursing home, or receiving assisted living care, etc.? If the injured party is living in a nursing home, or receiving assisted living care, it should be determined who is expected to pay for such care, e.g., (for life time or a specified period) from the medical benefits allocation within the lump sum settlement, e.g., Medicaid, etc. j) Are the expected medical or prescription drug expenses for Medicare covered items and services appropriate in light of the injured party's medical condition? Although each case must be evaluated on its own merits, it may be helpful to ascertain for comparison purposes the average annual amounts of Part A, B and D spending for a disabled person in the appropriate State of residence. Keep in mind that these fee-for-service amounts are for all Medicare covered services, while CMS' focus here only deals with medical services or prescription drug charges related to the workers' compensation injury or illness. Therefore, CMS will use appropriate judgment and seek input from a medical consultant, of their own choosing, when determining whether the amount of the lump sum or structured settlement has sufficiently taken Medicare's interests into account. NOTE: Before evaluating whether the Medicare Set-aside reasonably considers Medicare's interests, CMS must know whether the Medicare Set-aside is based upon the workers' compensation fee schedule in a particular state or full actual charge amounts. The amount of the lump sum is typically established by using a Medicare Set-aside analysis and actuarial methods to determine the injured party's life expectancy. If a Medicare Set-aside analysis is not used to project the injured party's future medical expenses, then the injured party or his/her representative must present other alternative competent medical evidence that sufficiently justifies the amounts Medicare Set-aside. Q46. What is the expected time frame for CMS to review and make their decision regarding a proposed Medicare Set-aside? A46. CMS seeks to review and make a decision regarding proposed Medicare Set-asides within 60 days, from the time that all necessary/required documentation has been submitted to CMS. Comment: Assuming the submission is complete when sent to CMS it is more likely that from the time the submission leaves your desk a decision will not be received for a period of 90-120 days. Q47. If the injured party or his/her representative disagrees with the amount that CMS has determined for the Medicare Set-aside is there any appeal process? A47. No. CMS has no formal appeals process for rejection of a proposed Medicare Set-aside amount. However, the injured party or their representative and submitters have several other options available to them. a) An submitting party may always contact the CMS Regional Office that issued the CMS determination for a clarification. b) If there is a belief that a CMS determination contains obvious mistakes, such as mathematical errors, fails to recognize that medical records already submitted, or prices a surgery that has already occurred, then the submitting party may "challenge" the original CMS and request a correction of the errors. c) If there is additional evidence not previously considered by CMS that would warrant a change in the CMS determination, the submitting party "challenge" the original decision and resubmit the case with the additional evidence and request a re-evaluation? It will then be considered a new submission and shall be processed in order of receipt. Although an injured party has no formal appeal rights with respect to the Medicare Set-aside process, an injured party does have appeal rights with respect to specific denied Medicare claims. If CMS denies a submitted claim for a service or prescription drug on the basis that CMS determined the Medicare Set-aside amount has not been exhausted, the injured party may appeal that specific claim denial through the regular administrative appeal process. Q48. Will CMS treat workers' compensation cases that were settled prior to the issuance of the July 23, 2001 Patel memorandum in the same manner as those settled after the review threshold guidelines were established? A48. Yes. For workers' compensation settlements that do not meet the thresholds, Medicare will make payments for workers' compensation related medical services and prescription drug therapy charges that are otherwise reimbursable under Medicare, once the injured party becomes enrolled in Medicare. This will be done regardless of when the sett1ement actually occurred. However, a reopening of claims (see 42 C.F.R. ''405.750 and 405.841) that Medicare previously denied for these injured party's will not be granted, nor will CMS change any decisions already made with respect to settlements which pre-date July 23, 2001. According to CMS, when the Patel Ju1y 23, 2001 memorandum was released, it established review thresholds for workers' compensation cases settled by an injured party who is not yet a Medicare beneficiary. This was done in order to organize and prioritize workloads for CMS and to convey to its Regional Offices that it is not in Medicare's best interests to review workers' compensation settlements that do not meet the review thresholds. Q49. Who is the "Workers' Compensation Joint Venture Contractor?" A49. CMS has contracted with a "joint venture" contractor reviewing pre-October 1, 2003, cases (which CMS refers to as "the backlog") starting on November 10, 2003. The cases were sent to the CMS Regional Offices with a recommendation or additional information requested. Once this joint venture contractor has provided a recommendation to the CMS Regional Office, acknowledgement of the receipt of the Medicare Set-aside proposal is sent to the submitter, usually within a 2 - 3 day period, or additional information will be requested from the submitter. The joint venture contractor's address is: 10830 Guilford Road, Ste. 307, Annapolis Junction, MD 20701. Tele: 301-575-0160 Fax: 646-458-6745 According to CMS this joint venture contractor is not actually making determinations as to the acceptability of the Medicare Set-aside amount. Rather, according to CMS this joint venture contractor is merely giving the CMS Regional Office recommendations (including suggestions for "more adequate" allocations). CMS suggests that the CMS Regional Office continues to be responsible for making any formal determinations. Comment: Many practitioners believe this to be "a nice legal distinction", since the CMS Regional Office seldom act contrary to the Joint Venture Contractor's recommendation. Payments from the Medicare Set-aside Q50. May workers' compensation settlement funds attributable to future medical services and prescription drug therapy charges be used prior to Medicare entitlement? A50. Yes. As of July 11, 2005, for an injured party who is not yet a Medicare beneficiary and for whom CMS has approved a Medicare Set-aside, the Medicare Set-aside may be used prior to becoming a beneficiary. However, use of the Medicare Set-aside is limited to medical services (and as of January 1, 2006 prescription drug therapy) that are related to the workers' compensation claim or settlement and that would be covered by Medicare if the injured party was a Medicare beneficiary. The same requirements that Medicare beneficiaries follow for reporting and administration are to be used in the above cases. Even if there is no CMS approved Medicare Set-aside, any funds from a workers' compensation settlement attributable to future medical services and prescription drug therapy that are remaining at the time an injured party becomes a Medicare beneficiary must be used for Medicare covered medical services and prescription drug therapy related to the workers' compensation claim or settlement until such funds are exhausted. Only then will Medicare pay for Medicare covered services and drug charges related to the workers' compensation claim or settlement. Prior to July 11, 2005 CMS' policy was until the injured party actually became entitled to Medicare, the Medicare Set-aside fund could not be used to pay the injured party's medical expenses. Once the injured party actually became entitled to Medicare the injured party (if a self-administered Medicare Set-aside or in the case of a third-party Medicare Set-aside the administrator) was permitted to make payments for the injured party's medical care (for Medicare-covered services only) from the Medicare Set-aside. Q51. How do providers and suppliers obtain payment for the services covered by the Medicare Set-aside and at what rate may they charge? A51. There are two distinct methods for providers, physicians and other suppliers to obtain payment for workers' compensation covered medical services and prescription drug therapy charges when funds are held in a Medicare Set-aside. Determining which distinct payment method applies depends on whether the Medicare Set-aside was priced by contemplating full actual charges or a workers' compensation State fee schedule. In no case is the payment based on Medicare approved rates. If the Medicare Set-aside is based upon a State fee schedule physicians and other suppliers will be paid based on what would normally be payable under the State's workers' compensation fee schedule. Accordingly, providers, physicians and other suppliers would not be permitted to bill the Medicare Set-aside more than the State's workers' compensation fee schedule rate. For example, if a provider's full charge for a particular service is $100 and the workers' compensation carrier normally pays $65 for that particular service, then the Medicare Set-aside should only pay $65. However, when the Medicare Set-aside does not contain specific provisions ensuring that the Medicare Set-aside cannot be charged more than what would normally be payable under the State's workers' compensation fee schedule, then providers, physicians and other suppliers are permitted to bill the Medicare Set-aside their full actual charges. Comment: Realistically, use of the State's workers' compensation fee schedule is improbable with a self-administered Medicare Set-aside since the injured party does not have ready access to these schedules and if they did would probably not properly interpret them. Accordingly use of the State's medical practitioner fee schedule would mandate use of a professional administrator knowledgeable in Medicare coverage and coding, as well as, the State's workers' compensation medical practitioner fee schedules. Additionally, since the case has now been settled the State's workers' compensation adjudicatory body or the civil court no longer has jurisdiction over the matter, fee disputes would seem not to be readily resolvable short of an appeal to the ALJ. Q52. In a structured Medicare Set-aside where payments are made at regular intervals to cover medical services and prescription drug therapy expenses incurred during those periods, how should an administrator account for unspent funds during a given period? A52. Generally, Medicare Set-asides that are designed as lump sums (i.e., the Medicare Set-aside is funded by the workers' compensation settlement all at once) present less of a problem to monitor than structured arrangements. Medicare would then not make any payments until all of the funds within the Medicare Set-aside have been depleted. For example, if a Medicare Set-aside were established for $90,000, Medicare would not make any payments until the entire $90,000 (plus interest) were exhausted for the injured worker's medical care and prescription drug therapy (for Medicare covered services and formulary only). On the other hand, structured Medicare Set-asides apportion settlement monies over a defined period of time. For example, a structured Medicare Set-aside may be designed to disburse $20,000 per year over the next ten years for an injured party's medical care and prescription drug therapy (for Medicare-covered services and formulary only). If the $20,000 allocated on January 1 for year one were fully exhausted on August 31, Medicare may make payments for the medical services performed or prescription drug charges after August 31 once the contractor responsible for monitoring the injured party's case verifies that the entire $20,000 (plus interest) is exhausted. However, when the structured arrangement allocates money for the start of year two (i.e., on January 1) Medicare would not make any payments for medical services or prescription drug therapy charges performed until year two's allocation was completely exhausted etc... If funds are not exhausted during a given period then the excess funds must be carried forward to the next period. The threshold after which Medicare would begin to pay claims related to the injury or illness would then be increased in any subsequent period by the amount of the carry-forward. Example: A structured Medicare Set-aside established in 2009 is designed to pay $20,000 per year over the next 10 years for an injured party's Medicare covered services and charges. Medicare would begin paying covered expenses in any given year after this $20,000 is exhausted. In 2008 the injured party needs only $15,000 to cover all related expenses. The administrator would need to carry-forward the excess, $5,000 into 2010. Therefore, in 2010 a total of $25,000 of Medicare covered expenses would need to be spent for services otherwise reimbursable by Medicare before Medicare would begin to cover workers' compensation related expenses, but only for the balance of 2010. This carry-forward process continues until the accumulated carry-forward plus the payment for a given year is exhausted. Q53. What if there is a dispute as to whether the Medicare Set-aside pays? A53. When providers, physicians and other suppliers submit claims to Medicare associated with the injured party's work or accident related injury or illness, claims processing contractors may deny those claims and instruct the submitting party to seek payment from the Medicare Set-aside. Since the injured party will be a Medicare beneficiary at the time when the provider, physician, or other supplier submits the claim to Medicare, the contractor responsible for monitoring the injured party's case will have already updated its file to indicate that the injured party's claims should be denied. However, when a provider, physician or other supplier submits any claims that are for injuries or illnesses that are not work or accident related, then contractors should process those claims like they would any other claim for Medicare payment. On the other side of the isle, when the Medicare Set-aside administrator refuses to make payment on a provider's, physician's or other supplier's claim because the Medicare Set-aside administrator asserts the medical services or prescription drug charges are for injuries or illnesses that are not work or accident related (or for any other reason), and the provider, physician or other supplier, subsequent to the administrator's denial, submits the claim to Medicare, then the contractor should consult CMS in order to determine whether Medicare should pay the claim. If a determination to deny the claim is made, then Medicare's regular administrative appeals process for claim denials would apply to the claim. Duration/Exhaustion/Termination of the Medicare Set-aside Q54. May the Medicare Set-aside contemplate only a finite period of time for estimated Medicare covered items or services? A54. No. To consider Medicare's interest, a Medicare Set-aside should be funded based on the expected life expectancy of the injured party unless the State law specifically limits the length of time that the workers' compensation carrier covers work-related medical conditions or prescription drug charges or if there is specific medical evidence that limits Medicare's exposure other than over the life expectancy of the Claimant. Q55. May the Medicare Set-aside amount be reduced due to changed circumstances? A55. No. Effective August 25, 2008, once the Medicare Set-aside has been established the only method of termination is due to the (1) proper exhaustion of the Medicare Set-aside res or (2) the death of the injured party. Prior to August 25, 2008 CMS did allow for modification if the treating physician concluded that the injured party's medical condition has substantially improved, then the injured party or his/her representative could submit a new Medicare Set-aside proposal covering future expected medical and prescription expenses. Such proposals had to justify at least a 25% reduction in the outstanding Medicare Set-aside funds. In addition, such a request for a reduction or termination could not be made until at least five years after the initial approval of the Medical Set-aside and was accompanied by all supporting documentation not previously submitted with the original Medicare Set-aside proposal. If CMS determined that a 25% or greater reduction was justified, CMS would issue a new approval letter. After CMS issued a new approval letter, any funds in the current Medicare Set-aside in excess of the newly calculated amount could be released to the injured party. As with the original decision, CMS' decision on the new proposal was final and not subject to administrative appeal. Comment: If a substantial change in circumstances exists there should be no reason for this rule given the purpose of the Medicare Set-aside is to "reasonably" consider Medicare's interest. Q56. Should an injured party die before the Medicare Set-aside is completely exhausted, what happens to the remaining money? A56. Once CMS and the contractor responsible for monitoring the injured party's case ensure that all of the injured party's claims have been paid, then any amount left over in the Medicare Set-aside may be disbursed pursuant the terms the Medicare Set-aside funding mechanism itself e.g. bank account, or in the case of a structured Medicare Set-aside settlement annuity agreement and if none then according to state law, once Medicare's interests have been considered. This may involve holding the Medicare Set-aside open for some period after the date of death, as providers, physicians, and other suppliers are permitted to submit their initial bill to Medicare for a period ranging from 15-27 months after the date of service. Q57. Is the injured party entitled to a release of the Medicare Set-aside funds if the injured party loses Medicare entitlement? A57. No. However, the funds in the Medicare Set-aside may be expended for medical expenses or prescription drug charges specified in the Medicare Set-aside until Medicare entitlement is re-established or the Medicare Set-aside is properly exhausted. Use of the Medicare Set-aside is limited to medical services and prescription drug charges that are due to the work or accident that would otherwise be covered by Medicare if the injured worker were a Medicare beneficiary. CMS will not pay for any expenses related to the workers' compensation claim or settlement until a self-attestation document or a full accounting of all monies expended from the Medicare Set-aside are sent to the lead contractor upon the re-establishment of Medicare entitlement. At that time, the lead contractor will adjust the Medicare Set-aside record to reflect the expenses paid prior to entitlement. Comment: If, in fact, the injured party's Medicare entitlement is lost, and there is no reasonable likelihood that it will be re-established then this should constitute a substantial change in circumstances justifying petitioning CMS to dissolve the Medicare Set-aside allowing release of the Medicare Set-aside funds.. Valuation of the Medicare Set-aside Q58. What types of "investment" vehicles may be used to fund the Medicare Set-aside? A58. The only guidance CMS provides here is that the account used to fund the Medicare Set-aside must be "interest bearing". Comment: CMS will not approve any Medicare Set-aside that is funded with other than "liquid" funds e.g., bank accounts of any FDIC insured bank, CDs, money market funds of any bank and U.S. Treasury bills or notes. Q59. Is the Medicare Set-aside indexed to account for inflation or reduced to present cash value? A59. No. While this was initially a consideration and there was a requirement that the Medicare Set-aside be indexed consistent with how Medicare calculates its growth in spending, as of October 15, 2004 the Medicare Set-aside does not need to be indexed for inflation and may not be discounted to present cash value. Q60. Should the settlement agreement provide for items and services that are not covered by Medicare but later become covered? A60. No. CMS had at one time contemplated and ultimately rejected a suggestion that an additional allocation within the Medicare Set-aside be provided so that medical services and prescription drug charges that were not covered by Medicare at the time the Medicare Set-aside was submitted, but later become covered, be transferred from the amount specified for non-Medicare covered items and services to the Medicare Set-aside. Comment: It is, however, a prudent course of action to have a separate medical allocation (not a Medicare Set-aside) for non-Medicare covered items that the injured party may incur in the future and which are related to the injury or illness. This certainly can assist in the calculation of any Social Security Disability offset since this separate medical allocation would still be deemed an excludable medical expense. These funds do not have to be transferred to the Medicare Set-aside or be included in the annual Medicare Set-aside accounting. Q61. May administrative fees/expenses for administration of the Medicare Set-aside and/or attorney costs specifically associated with establishing the Medicare Set-aside be charged to and paid from the Medicare Set-aside? A61. Initially, CMS answered this question in the affirmative if the following were found to be true a) the expenses were related to the Medicare Set-aside itself; b) they were reasonable in amount; and c) they were included in the proposed Medicare Set-aside submitted to CMS and incorporated into the Medicare Set-aside approved by CMS. However, as of May 7, 2004 administrative fees/expenses for administration of the Medicare Set-aside and/or attorney costs specifically associated with establishing the Medicare Set-aside cannot be charged to or paid from the Medicare Set-aside mechanism. CMS no longer evaluates the reasonableness of any of these costs because the payment of these costs must come from some other payment source that is completely separate from the Medicare Set-aside funds. Q62. Is a Medicare Set-aside analysis prepared by a commercial vendor absolutely necessary for submission of a Medicare Set-aside to CMS? A62. No. However, the referral must include an analysis of the future medical services and prescription drug therapy charges exposure and how it was calculated. Utilization of a certified Medicare Set-aside consultant in the preparation of a Medicare Set-aside analysis is probably the most accurate manner to prepare this data for presentation to CMS. A Medicare Set-aside analysis is a document based upon published standards of practice, comprehensive assessment, data analysis and research, which provides an organized, concise analysis of current and future medical service needs and prescription drug therapy charges for the injured party. There are numerous commercial vendors, in-house insurance industry individuals and attorneys who prepare Medicare Set-aside analysis. The quality and costs of these entities varies greatly. Note, that CMS does not necessarily consider the Medicare Set-aside as conclusive. CMS may not credit the analysis if there is information that calls the analysis into question for some reason, such as contrary evidence, internal conflicts, or if the analysis is not credible on its face. Q63. Does CMS compromise or reduce future medical or prescription drug expenses included in the Medicare Set-aside which are related to a workers' compensation or liability claim? A63. No. Some submitters have argued that '42 C.F.R. '411.47 justifies such are deduction to the amount of a Medicare Set-aside as it relates to workers' compensation. The compromise language in this regulation, however, only addresses conditional (past) Medicare payments. Q64. Can a Medicare Set-aside be established as a structured arrangement, where payments are made to the Medicare Set-aside on a defined schedule to cover expenses projected for future years? A64. Yes. However, CMS will approve a payout amount for medical services and prescription drug therapy that would otherwise be reimbursable by Medicare from the Medicare Set-aside in the following manner: 1. The "seed money" or initial funding for the Medicare Set-aside must equal an amount calculated to cover the first surgical procedure(s), costs of replacement of durable medical equipment and costs for the first two years of annual medical services and prescription drug therapy. 2. The "annual feeds" then are calculated by dividing the remaining Medicare Set-aside funding over the injured party's life expectancy (or a shorter defined period of time e.g., over the "rated age" if CMS has agreed to a shorter time period) which are then designated as "annual deposits". These annual deposits into the Medicare Set-aside are to be based upon a set "anniversary date" which cannot be more than one year after the settlement date. Q65. Are there special rules for pricing implantable devices? A65. Yes. Effective October 1, 2008 if the Medicare Set-aside proposal includes the pricing for any implantable device(s) and does not include enough information or if it is determined upon review that the Medicare Set-aside proposal that an implantable device is recommended for the injured worker but has not been included in the Medicare Set-aside proposal, CMS will utilize its own pricing methodology. If an implantable device is being used or recommended you should consult with the appropriate physician and include the following information in the Medicare Set-aside pricing: a. Device, electrodes, receiver manufacturer name b. Device, electrodes, receiver model # or type c. Device, electrodes, receiver cost including tax, freight and handling d. Facility fee, whether inpatient or outpatient, procedure code and cost e. Surgeon procedure code and cost f. Anesthesiologist procedure code and cost h. Programming services procedure code, frequency and cost i. Other associated costs Prescription Drug Therapy: Coverage D Note: Medicare's reference to prescription drugs is limited to those prescription drugs that are for the treatment of the workers' compensation or liability related injury(s) or illness(s), and those where Medicare provides coverage under any one of its formulary plan. Q66. What is CMS' policy regarding the inclusion of prescription drugs in a Medicare Set-aside with the implementation of the Medicare Modernization Act of 2003 (MMA)? A66. All Medicare Set-asides involving workers' compensation settlements that occur on or after January 1, 2006 must include separate pricing for prescription drugs and medical services. If the workers' compensation claim was settled prior to January 1, 2006, the Medicare Set-aside proposal did not need to specify a separate amount for future prescription drug treatment but rather allowed for prescription drug and medical services to be lumped together. CMS's policy regarding the pricing of prescription drugs did not change with the passage of this Act. However, as of June 1, 2009 CMS now requires that prescription drugs be priced using the average wholesale price as listed in Redbook. The Medicare Set-aside must now include separate amounts for (a) future medical treatment, and (b) future prescription drug treatment. In addition, the Medicare Set-aside must include an a payment history of the prescription drugs paid by the workers' compensation carrier, as follows: 1. If the injury occurred less than 2 years from the date of the submission, a payment history should include those prescription drugs paid from the injury date through the date of the submission. 2. If the injury occurred more than 2 years from the date of the submission, a payment history should include the last 2 years of payments for prescription drugs. 3. CMS will review the Medicare Set-aside proposal based on the (a) required payment history, (c) anticipated future prescription drug treatment information, and (c) Medicare Part D data. 4. If the cover letter fails to provide a payment history or the payment history reflects that the workers' compensation carrier did not previously pay for prescription drugs indicated for the injured worker's future treatment, CMS will price the Medicare-covered prescription drugs using CMS information available from current Medicare Part D data. Comment: Medicare Parts A and B do not provide coverage for prescription drugs not administered by a physician or administered in the hospital. Enrollment in Part D is required in order to secure prescription drug coverage when purchased in a pharmacy. The fact that enrollment in the drug benefit is optional complicates the future pricing of prescription drugs in the Medicare Set-aside because at the time of the settlement the injured party may not have made a decision regarding enrollment. In addition there are numerous Part D plans each of which cover different drugs and have different co-pays, deductibles and gaps or donut hole factors. Q67. What is the injured party's reporting requirements as to prescription drug expenses? A67. The injured party (in a self-administered Account) or the administrator (in a third party mechanism) must forward an annual accounting, separately identifying the expenditures for the medical treatment and prescription drug treatment to the Medicare contractor responsible for monitoring the injured worker's case. For example, if the total Medicare Set-aside amount in CMS' written opinion is $10,000 ($7,000 identified for future prescription drug treatment and $3,000 identified for future medical expenses) then the injured worker/administrator must forward an annual accounting that separately identifies how much of the $10,000 was spent for medical expenses and prescription drugs. However, exhaustion of the total Medicare Set-aside amount is not limited to the separate amounts set-aside for future medical expenses and future prescription drug treatment. As long as the annual accounting shows bona fide payments were made from the total Medicare Set-aside amount, CMS will consider the account properly exhausted e.g. final actual expenditures may be $6000 for future prescription drug treatment and $4000 for the future medical expenses that may properly exhaust the $10,000 set aside Q68. What do you do if the injured party has not been prescribed drugs for the work or accident related injury or illness or if the drugs prescribed are excludable under Medicare? A68. The Medicare Set-aside will have to include documentation from the attending physician as to why no prescription drugs usage is anticipated in the future. A medical payment recap history from the workers' compensation carrier covering the last two years of treatment or in the case of a liability claim from the injured party's pharmacy supporting the proposition that no prescription drugs have been prescribed for the work or accident related injury or illness should be included as part of the Medicare Set-aside proposal. Additionally, CMS may require an affidavit from the workers' compensation carrier, if applicable, that no payments have been made for prescription drugs for the last two years of treatment. Q69. Where a workers' compensation claim settled prior to January 1, 2006, can the injured party use the Medicare Set-aside funds to pay for prescription drug expenses related to the workers' compensation injury? A69. No. If the workers' compensation settlement included an allocation for non-Medicare covered medical and/or prescription drug expenses, the injured party must exhaust those funds prior to billing Medicare for prescription drugs (assuming the injured party has opted for Part D coverage. However, the injured party does not have to transfer those funds to an existing Medicare Set-aside account or include them in the annual Medicare Set-aside accounting. After exhausting these funds, if the injured party enrolls in a Part D plan, Medicare may be billed for prescription drug expenses related to the workers' compensation injury, assuming that the injured party does not have any other coverage primary to Medicare. Q70. What are CMS' submission requirements if the workers' compensation claim did not "settle" prior to January 1, 2006? A70. If the workers' compensation case did not "settle" prior to January 1, 2006 and the Medicare Set-aside proposal is received by CMS on or after January 1, 2006, then the submitter must include separate amounts for future medical treatment and future prescription drug treatment in the Medicare Set-aside proposal. For structured Medicare Set-aside proposals, the submitter must also indicate whether any portion of the future prescription drug treatment amount has been included in the initial deposit (i.e., seed money). See Q56. Q71. What happens if the Medicare Set-aside proposal received after January 1, 2006 does not include an amount for future prescription drug treatment? A71. If the Medicare Set-aside proposal does not include an amount for future prescription drug treatment, and the current treatment records indicate that the injured party has been prescribed drugs and/or may need prescription drugs due to the work or accident related injury or illness in the future, CMS will deem the submission as not adequately considering Medicare's interests. If the cover letter does not include an amount for future prescription drug treatment, and there is no indication in the current treatment records that the injured worker will need future treatment with prescription drugs related to the workers' compensation injury, then CMS will accept that Medicare's interests have been adequately considered. Medicare will then pay primary for future prescription drugs if the injured worker has enrolled in a Medicare prescription drug plan and does not have any other coverage that is primary to Medicare. Q72. What happens if CMS closes its case because the Medicare Set-aside submitter failed to provide requested information in a timely manner? A72. If the workers' compensation case did not "settle" prior to January 1, 2006, and the submitter provides additional documentation with regard to the closed case on or after January 1, 2006, the case is considered a new Medicare Set-aside submission and the requirements related to: (1) future medical treatment; and, (2) future prescription drug treatment will be applied to the new Medicare Set-aside submission. If, however, the workers' compensation claim settled prior to January 1, 2006 and the submitter provides additional documentation with regard to a closed case, the case is considered a new Medicare Set-aside submission; however, the Medicare Set-aside proposal does not need to include an amount for future prescription drug treatment. Q73. Should Medicare Set-aside submitters include an amount for future prescription drug expenses if the injured party has not enrolled in a Part D plan? A73. Yes. Injured parties who have not enrolled in a Part D plan need to include future prescription drug expenses in their Medicare Set-aside proposals if the current treatment records indicate that the injured party has been prescribed drugs and/or may need future prescription drug treatment related to the work or accident related injury or illness. Q74. Should funds for future prescription drug treatment be included in the calculation of the total settlement amount to determine if the Medicare Set-aside proposal should be reviewed by CMS. A74. Yes, the total settlement amount calculation should include an amount for prescription drugs if the future treatment indicates that the injured party has been prescribed drugs and/or may need drugs in the future. Q75. Does the injured party have to resubmit the Medicare Set-aside proposal after January 1, 2006 if CMS has already issued a written opinion as to the total Medicare Set-aside amount? A75. No. A previously submitted Medicare Set-aside proposal does not have to be resubmitted (a) if CMS has already issued a written opinion as to the total Medicare Set-aside amount for settlements occurring prior to January 1, 2006, or (b) where the Medicare Set-aside proposal was reviewed prior to January 1, 2006. Note, if the workers' compensation settlement occurred prior to January 1, 2006, and the workers' compensation settlement included an allocation for future prescription drug treatment, then the injured party must exhaust those funds before Medicare can be billed for those future prescription drugs. However, the injured party does not have to transfer these funds to the existing Medicare Set-aside account or include them in the annual Medicare Set-aside accounting. Conflicts between State/Federal Laws Q76. When a state workers' compensation Commissioner, Judge or Administrator approves a settlement will Medicare accept the terms of that settlement? A76. Medicare will generally honor judicial decisions issued after a hearing on the merits of a case by a court of competent jurisdiction. If a court or other adjudicator of the merits specifically designates funds to a portion of a settlement that is not related to medical services or prescription drug therapy charges (e.g., lost wages), then Medicare will accept that designation. However, a distinction must be made where a court or other adjudicator is only approving a settlement that incorporates the parties' settlement agreements. Medicare will not accept the terms of the settlement as to an allocation of funds of any type if the settlement does not adequately consider Medicare's interests. If Medicare's interests are not reasonably considered, Medicare will refuse to pay for medical services or prescription drug charges due to the work or accident related and otherwise reimbursable by Medicare until such expenses have exhausted the amount of the entire settlement. Medicare will also assert a recovery claim, if appropriate. Q77. Does CMS recognize or honor any State-specific statutes that conflict with CMS policy? A77. If a copy of the applicable statute is made part of the submission CMS will consider any non-compensable medical services or denied body parts/systems and evaluate any special situations. cases. Ethical Considerations Q78. What are an attorney's ethical and legal obligations when his or her client effectively ignores Medicare's interests in a settlement? A78. Attorneys should consult their national, state, and local bar associations for information regarding their ethical and legal obligations. Additionally, attorneys should review applicable statutes and regulations, including, but not limited to, '42 CFR 411.24(e) and '42 CFR 411.26. At the very least the attorney must advise his or her client of the consequences of the client's obligations under a self-administered Medicare Set-aside; obtain an informed consent as to the clients understanding of how future medical services and prescription drug therapy charges will be covered, as well as, any accounting obligations the client is assuming in the administration of the Medicare Set-aside account; and what the client's obligations under the Medicare Secondary Payer Act regarding repayment of any conditional Medicare payments. CMS is fond of using the term "protect" Medicare's interests. An attorney's obligation is to the client to insure the client understands Medicare rules and regulations. It is not the attorney's obligation to "protect" Medicare, rather the attorney's obligation is to consider Medicare's interest and protect the client's interests. Q79. What information should the attorney review with the client to insure the client understands his or her obligations under the settlement? A.79. There are a number of areas the attorney needs to discuss with the client and these include: a. Settlement documents. These are not boilerplate documents and each is tailored to the individual situation to include provisions dealing with social security offset, Medicare Set- aside (self-administered or professional administration) coverage, Medicare or other repayment obligations and accounting responsibilities b. Informed Consent. The client must make an informed consent as to the implications the settlement will have on future entitlement to Medicare, Medicaid, group health insurance or other available health coverage, short/long term disability coverage or pension plans, etcY c. Notice of Consequences of the Settlement. The client must understand the entire settlement as to past, current or future indemnity, as well as, medical benefits and any repayment obligations which must be paid from the settlement. d. Other documents provided by CMS. Normally, CMS will provide a sample accounting form to be used by the injured party in a self-administered Medicare Set-aside as well as an instruction sheet for either a self-administered or professionally administered Set- aside. |
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