Medicare Set Aside Approval Proposed Changes

6-01-09

Reform legislation has been introduced to streamline the Medicare Set Aside review process. Representative John Tanner (Tennessee) re-introduced legislation H.R. 2641 ( May 21, 2009) to amend section 1862 of the Social Security Act. The bill proposes to establish an exemption for low dollar workers compensation settlements and an exemption where there is no expectation of future medical care related to the work injury.

The bill establishes (1) a safe harbor for low value settlements of $25,000 or less, (2) an exemption where there is no expectation of future medical care and (3) an exemption where the injured worker is unlikely to become eligible for Medicare within 30 months after the date of the settlement.

Importantly, the proposed bill provides a definition of "compromise settlements" which are now already exempt from the need for Medicare set aside arrangements under the federal regulations but currently the word "compromise" is not adequately defined to provide a real exemption. Under the new bill, "compromise settlements" would mean a settlement where the workers' compensation claim is denied or contested, in whole or in part and the settlement does not provide for full payment of benefits.

Where a set aside agreement is required, the bill mandates set-aside account dollars shall be based on the particular state workers' compensation fee schedule in effect as of the date of the settlement.

Importantly, under the proposed bill, Medicare would allow for a reduction of the Set Aside Account by the costs and expenses incurred in establishing, administering, or securing approval for the Medicare set-aside. That includes attorneys fees, third-party vendors, and any appointed trust account administrators. The current system does not allow for reduction of Medicare set aside accounts by costs incurred for attorneys fees or costs for approval and administration.

In an effort to achieve an equitable assessment for future medical expense accounts, the bill also proposes a proportional % adjustment for "compromise" settlement agreements. In general, the proposal allows the parties to reduce the set aside account amount in direct proportion to the full value of the claim if there were no disputes involved. The percentage reduction for the set aside account would be equal to the % of benefits denied or contested out of the settlement as compared to full value.

This section will cover all those settlement agreements that are currently partially disputed and represent a real reducuction in workers compensation settlement value based on the disputes in the case. This proposal actually attempts to correct the current process whereby parties are forced to fund full future medical amounts even though the benefits in the claim are disputed and even though the injured worker is only receiving half or less of full value because of the disputed issues in the case.

Time wise, the bill proposes a 60 day period for the government to approve or disapprove the set aside proposal. Under the current system, we have had MSA approval take from 6 months to as long as a year and a half after reaching a settlement agreement in the workers compensation claim. Meanwhile, the injured worker continues to incur medical bills for medical care and prescription expenses but they do not have access to the Medicare set aside funds. While the insurance carrier is waiting for CMS approval on the MSA, most carriers will not pay the medical bills waiting to see if Medicare approves the settlement.

The proposal is also designed to set out standards for the review process by CMS contractors and attempts to set review standards for amounts to be reserved in Medicare set aside accounts.

The current status of the bill as of this writing, HR 2641 has been referred to the House Committee on Ways and Means and to the Committee on Energy and Commerce.

chicago workers compensation attorney -- 6-01-09