Medicare Set Aside in Workers Compensation – Everything You Need to Know

In a workers compensation claim, normally the insurance company for your employer is responsible for your medical treatment for the rest of your life.

The issue of whether medicare was going to pay for expenses related to workers compensation cases or third party liability cases has been out there since 1981. The answer to this question was quickly answered in the workers compensation arena by medicare with the requirements that medicare must be considered by all parties in a workers compensation case before a case is settled and the medicals are closed.

All parties include the claimant, the insurance carrier, the claimants attorney and the Maryland workers compensation commission. Failure to do so can result in a denial of medicare benefits to their medicare recipient. In addition failure to do so can result in medicare holding all parties responsible for repayment to medicare for past benefits medicare has paid that are related to the workers compensation case.

All parties include the workers compensation insurance carrier, the claimant’s lawyer as well as the claimant. In theory it could also include the Workers Compensation Commission. To the insurance carrier the fallout would result in additional costs after a case has been settled. For the claimant, medicare could demand a refund and reimbursement for medicals previously paid by medicare or denial of future benefits. For the claimants lawyer medicare may demand reimbursements for medicals previously paid that were not reimbursed as well as malpractice suits from clients who are sued by medicare or denied benefits by medicare.

In response to these issues the Maryland Workers Compensation board has taken the lead by requiring that all full and final settlement agreements that close the medicals take medicare into consideration by way of a medicare set aside and failure to do so will result in denial of the settlement approval.The Maryland Workers Compensation Commission Requires that all settlements have the following language in the body of the settlement. “Employer and Insurer also agree to reimburse Medicare for any provisional or conditional payments made by Medicare that are ultimately determined to be the responsibility of the employer and insurer, up to the date of approval by the Commission of this agreement.”

Therefore because of this language even if medicare has not been reimbursed for medicals paid by medicare which are related to the work related accident prior to the accident the responsibility remains with the workers compensation insurance carrier to reimburse medicare even after the settlement is approved. While a prudent workers compensation insurance carrier and claimant and claimant attorney would make sure medicare is not billed for these expenses and if they pay them make sure they are reimbursed, the workers compensation commission has made it clear that the workers compensation insurance carrier is the party that will ultimately be responsible for medicals paid by medicare prior to the date the settlement is approved.

With regard to future medical expenses the workers compensation commission has been requiring a medical set aside or a letter from a physician certifying that the claimant will not need not need medical treatment in the future that would be causally related to the work related accident. Medical set asides are typically prepared by a company that specializes in evaluating the need for future medical care based upon regulation and guidance provided by medicare. While medicare will only review medical set asides that reach a certain threshold because of the inability to review every workers compensation claim, they still expect the parties to follow the same guidelines that would be followed as if the case was going to be reviewed by medicare.

There are a series of pronouncements that have been issued by either congress or medicare in order to guide parties on how to deal with past, present and future medical expenses in a worker’s compensation case including using medicare set aside.

No Medicare Payments for a Claimant’s Work-Related Injury or Disease until the WCMSA has been Exhausted (Ref: 7/23/01 Memo)
The purpose of a Workers’ Compensation Medicare Set-aside Arrangement (WCMSA) is to pay for all services related to the claimant’s work related injury or disease, therefore, Medicare will not make any payments (as a primary, secondary or tertiary payer) for any services related to the work-related injury or disease until nothing remains in the WCMSA. These arrangements are established in order to pay for all medical expenses resulting from work-related injuries or diseases; they are not designated to simply pay portions of medical expenses for work-related injuries or diseases. When WCMSAs are designated as lump sum commutations (i.e., the WCMSA is designated in a manner that the WC settlement is paid into the arrangement all at once), Medicare would not make any payments for the claimant’s medical expenses (for work-related injuries or diseases) until all the funds (including interest) within the WCMSA have been completely exhausted. These same basic principles also apply to structured settlements.
Generally, WCMSAs that are lump sums (i.e., the WCMSA is funded by the WC settlement all at once) present less of a problem to monitor than structured arrangements. Medicare would not make any payments for claimants that possess lump sum arrangements until all of the funds within the arrangement have been depleted. For example, if a set-aside arrangement were established for $90,000, Medicare would not make any payments until the entire $90,000 (plus interest, if applicable) were exhausted on the claimant’s medical care (for Medicare covered services only).

No Compromise of Future Medical Expenses (Ref: 7/11/05 Memo Q11)
The CMS does not compromise or reduce future medical expenses related to a WC injury. Some submitters have argued that 42 C.F.R. §411.47 justifies reduction to the amount of a WCMSA. The compromise language in this regulation only addresses conditional (past) Medicare payments. The CMS does not allow the compromise of future medical expenses related to a WC injury. In addition, CMS has no process to accept up-front cash payments in lieu of a CMS reviewed WCMSA.

Treatment of Taxable Interest Income Earned on a WCMSA (Ref: 7/11/05 Memo Q6)
If a claimant receives a Form 1099-INT for the interest income earned on his or her WCMSA account, the claimant or his/her administrator may withdraw an amount equal to the additional tax as a “cost that is directly related to the account” to cover the additional tax liability. This assumes that there is adequate documentation for the amount of incremental tax that the claimant must pay for the interest earned on this WCMSA. Moreover, such documentation should be submitted along with the annual accounting.

Group Health Plan (GHP) Insurance, Managed Care Plan, and Veterans’ Administration (VA) Coverage(Ref: 7/11/05 Memo Q8)
In a WC settlement, a WCMSA is recommended where the claimant is covered under a GHP or a managed care plan or has coverage through the VA. A WCMSA is still appropriate because such other health insurance or health service could in the future be canceled or reduced, or the injured individual may elect not to take advantage of such services. It is important to remember that workers’ compensation is always primary to Medicare and many other types of health insurance coverage for expenses related to the WC claim or settlement.

Inflation Adjustment/Discount for Present Value/Change in Policy (Ref: 10/15/04 Memo Q4)
WCMSAs do not need to be indexed for inflation and may not be discounted to present-day value. For additional information with regard to the WCMSA submission and review process, please click on our other WCMSA web pages.

No Waivers of Specific Services Related to a WC Case (Ref: 4/21/03 Memo Q18)
There is no means by which a claimant can permanently waive his or her right to certain specific services related to a WC case and, thereby, reduce the amount of a WCMSA. CMS cannot approve settlements that promise not to bill Medicare for certain services in lieu of including those services in a Medicare set-aside arrangement. This is true even if the claimant/beneficiary offers to execute an affidavit or other legal document promising that Medicare will not be billed for certain services if those services are not included in the Medicare set-aside arrangement.

WC Claims Not Covered in the Settlement (Ref: 4/21/03 Memo Q16)
If a current Medicare beneficiary has outstanding WC related claims that were not paid prior to the settlement and are not covered in the settlement or the WCMSA, Medicare will not pay those claims. Medicare cannot pay because it is secondary to the WC settlement and the Medicare set-aside arrangement cannot pay because it is created solely for future medical expenses related to the WC case. Medical expenses incurred prior to the settlement need to be accounted for in the compromise portion of the settlement. These services should be known to the parties. The provider/supplier will typically have billed Medicare and/or the WC carrier for these services and the beneficiary’s representative will 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.

Loss of Medicare Entitlement after CMS Approval of a WCMSA (Ref. 7/11/05 Memo Q9)
Claimants are not entitled to release of Workers’ Compensation Medicare Set-aside Arrangement (WCMSA) funds if they lose their Medicare entitlement. However, the funds in the WCMSA may be expended for medical expenses specified in the WCMSA until Medicare entitlement is re-established or the WCMSA is exhausted.
Use of the WCMSA is limited to services that are related to the workers’ compensation (WC) claim or settlement and that would be covered by Medicare if the individual were a Medicare beneficiary. The same requirements that Medicare beneficiaries follow for reporting and administration are to be used in the above cases. The CMS will not pay for any expenses related to the WC claim or settlement until a self-attestation document or a full accounting of all monies expended from the WCMSA are sent to the lead contractor upon the re-establishment of Medicare entitlement. At that time, the lead contractor will adjust the WCMSA record to reflect the expenses paid prior to entitlement.

Effect of WCMSA on Medicaid Eligibility(Ref: 7/11/05 Memo Q13)
Workers’ Compensation Medicare Set-aside Arrangements (WCMSAs) are not subject to any special treatment under Medicaid resource rules. WCMSA 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.” The funds must be in interest-bearing accounts. These funds may meet the SSI/Medicaid resource definition. There may be cases in which funds in a WCMSA are placed into trusts, possibly trusts that could 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, however, that result would be based solely on Medicaid, not Medicare rules.

Use of WC Settlement Funds Prior to Medicare Entitlement (Ref: 7/11/05 Memo Q3)
For claimants who are not yet Medicare beneficiaries and for whom CMS has reviewed a Workers’ Compensation Medicare Set-aside Arrangement (WCMSA), the WCMSA may be used prior to becoming a beneficiary because the amount was priced based on the date of the expected settlement. Use of the WCMSA is limited to services that are related to the workers’ compensation (WC) claim or settlement and that would be covered by Medicare if the claimant were a Medicare beneficiary.
The same three requirements that Medicare beneficiaries follow for reporting and administration are to be used in the above cases. The CMS will not pay for any expenses related to the WC injury, illness/disease until a self-attestation document or a full accounting of all monies expended from the WCMSA are sent to the lead contractor upon Medicare entitlement. At that time, the lead contractor will adjust the WCMSA record to reflect the expenses paid prior to entitlement.
Even if there is no CMS-approved WCMSA, any funds from a WC settlement attributable to future medicals that are remaining at the time a claimant becomes a Medicare beneficiary must be used for Medicare-covered services related to the WC claim or settlement until such funds are exhausted. Only then will CMS pay for Medicare-covered services related to the WC claim or settlement.

WCMSAs in Cases Where There are Both a WC Claim and a Third Party Liability Claim(Ref: 4/21/03 Memo Q19)
Third party liability insurance proceeds are also primary to Medicare. To the extent that a liability settlement is made that relieves a Workers’ Compensation (WC) carrier from any future medical expenses, a CMS approved Workers’ Compensation Medicare Set-aside Arrangement (WCMSA) is appropriate. The WCMSA would need sufficient funds to cover future medical expenses incurred once the total third party liability settlement is exhausted. The only exception to establishing a WCMSA would be if it can be documented that the claimant does not require any further WC claim related medical services. A WCMSA is also not recommended if the medical portion of the WC claim remains open, and WC continues to be responsible for related services once the liability settlement is exhausted.

Workers’ Compensation Medicare Set-aside Arrangements Ethical and Legal Considerations(Ref: 4/21/03 Memo Q12)
When an attorney’s client effectively ignores Medicare’s interests in a WC case, the attorney 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 411.26.

Settlements Entered Into Prior to the July 23, 2001 ARA Letter Concerning WC Commutation of Future Benefits
The CMS will treat WC cases that were settled prior to the issuance of the July 23, 2001 ARA letter concerning WC Commutation of Future Benefits in the same manner as those settled after the review threshold guidelines were established. This will be done regardless of when the settlement actually occurred. However, a reopening of claims (see 42 C.F.R. 405.750 and 405.841) that Medicare previously denied for these individuals will not be granted, nor will the CMS change any decisions already made with respect to settlements which pre-date July 23, 2001.

JUL 23 2001
To: All Associate Regional Administrators
Attention: Division of Medicare
From: Deputy Director Purchasing Policy Group Center for Medicare Management
SUBJECT: Workers’ Compensation: Commutation of Future Benefits

It is not in Medicare’s best interests to review every WC settlement nationwide in order to protect Medicare’s interests per 42 CFR 411.46. Injured individuals (who are not yet Medicare beneficiaries) should only consider Medicare’s interests when the injured individual has a “reasonable expectation” of Medicare enrollment within 30 months of the settlement date, and the anticipated total settlement amount for future medical expenses and disability/lost wages over the life or duration of the settlement agreement is expected to be greater than $250,000.3
For example, if the injured individual is designated by WC as a Permanent Total disabled individual, has filed for Social Security disability, and the settlement apportions $25,000 per year (combined for both future medical expenses and disability/lost wages) for the next 20 years, then the RO should review that WC 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 individual has a “reasonable expectation” of Medicare enrollment within 30 months of the settlement date. If the injured individual in this example fails to consider Medicare’s interests, then Medicare may preclude its payments pursuant to 42 CFR 411.46 once the injured individual actually becomes entitled to Medicare.
Please note that the review thresholds (i.e., 30 months and $250,000) will be subject to adjustment once CMS has
experience reviewing these matters under these instructions.
NOTE: Injured individuals who are already Medicare beneficiaries must always consider
Medicare’s interests prior to settling their WC claim regardless of whether or not the total settlement amount exceeds $250,000. That is, ALL WC PAYMENTS regardless of amount must be considered for current Medicare beneficiaries.

Once the set-aside arrangement has been approved by the RO (with consultation from the Regional OGC, if necessary), what is the subsequent role of the ROs and contractors?
Answer:
When the RO approves a set-aside arrangement (with consultation from the regional OGC, if necessary), the RO will check on a monthly basis the National Medicare Enrollment database in order to determine when an injured individual actually becomes enrolled in Medicare. Once the RO verifies that the injured individual has actually been enrolled in Medicare, the RO will assign a contractor responsible for monitoring the individual s case. The RO will assign the contractor based on the injured individual’s State of residence.
When the injured individual has actually been enrolled in Medicare, the RO must provide the Coordination of Benefits Contractor (COBC) with identifying information to add a WC record to Common Working File. The RO must exercise one of the following options: 1) Fax the information to the COBC; or 2) Submit through an Electronic Correspondence Referral System (ECRS) inquiry. At a minimum, the RO must indicate that this is a WC set-aside arrangement case, and include the following information: Beneficiary Name Beneficiary HIC Date of Incident DX code(s): If you do not have dx codes readily available, you must include a description of the illness/injury. Note: Do not forward to COB without a dx or description.

Administrator of Trust Claimant Attorney Information
The administrator of the set-aside arrangement must forward annual accounting summaries concerning the expenditures of the arrangement to the contractor responsible for monitoring the individual’s case. The contractor responsible for monitoring the individual’s case is then responsible for insuring/verifying that the funds allocated to the set-aside arrangement were expended on medical services for Medicare covered services only. Additionally, the contractor responsible for monitoring the individual’s case will be responsible for ensuring that Medicare makes no payments related to the illness or accident until the set-aside arrangement has been exhausted.

What types of measures should the RO and the contractors take to ensure that Medicare makes no payments related to the illness or accident until the set-aside arrangement has been depleted?
Answer:
Generally, set-aside arrangements that are designed as lump sums (i.e., the arrangement is funded by the WC settlement all at once) present less of a problem to monitor than structured arrangements. Medicare would not make any payments for individuals that possess lump sum arrangements until all of the funds within the arrangement have been depleted. For example, if a set-aside arrangement were established for $90,000, Medicare would not make any payments until the entire $90,000 (plus interest, if applicable) were exhausted on the individual s medical care (for Medicare covered services only).
Structured set-aside arrangements generally apportion settlement monies over fixed or defined periods of time. For example, a structured arrangement may be designed to disburse $20,000 per year over the next ten years for an individual’s medical care (for Medicare-covered services only). If the $20,000 allocated on January 1 for Year One were fully exhausted on August 31, Medicare may make payments for the services performed after August 31 once the contractor responsible for monitoring the individual’s case can verify that the entire $20,000 (plus interest, if applicable) is exhausted. However, when the structured arrangement allocates money for the start of Page 8 – All Associate Regional Administrators
Year Two (i.e., on January 1) Medicare would not make any payments for services performed until Year Two s allocation was completely exhausted.
In every set-aside arrangement case the contractor responsible for monitoring the individual’s case (with assistance from the RO, if necessary) should ensure that Medicare does not make any payments until the contractor responsible for monitoring the individual’s case can verify that the funds apportioned to the arrangement have truly been exhausted.
If the contractor monitoring the individual’s case discovers that payments from the set-aside arrangement have been used to pay for services that are not covered by Medicare or for administrative expenses that exceed those approved by the RO (see Question 11), then the contractor will not pay the Medicare claims. The contractor must provide the evidence of the unauthorized expenditures to the RO for investigation. If the RO determines that the expenditures were contrary to the RO’s written opinion on the sufficiency of the arrangement, then the RO will notify the administrator of the arrangement that the RO’s informal approval of the arrangement is withdrawn until such time as the funds used for non-Medicare expenses and/or unapproved administrative expenses are restored to the set-aside arrangement.

Question 5:
What are the criteria that Medicare uses to determine whether the amount of a lump sum or structured settlement has sufficiently taken its interests into account?
Answer:
The following criteria should be used in evaluating the amount of a proposed settlement to determine whether there has been an attempt to shift liability for the cost of a work-related injury or illness to Medicare. Specifically, is the amount allocated for future medical expenses reasonable? If Medicare has already made conditional payments their repayment also has to be taken into account.
1. Date of entitlement to Medicare.
2. Basis for Medicare entitlement (disability, ESRD or age)– If the beneficiary has entitlement based on disability and would also be eligible on the basis of ESRD, this should be noted since the medical expenses would be higher. This would also be true for beneficiaries who are over 65 but had been entitled prior to attaining that age.
3. Type and severity of injury or illness– Obtain diagnosis codes 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 accident is the individual an amputee, paraplegic or quadriplegic? Is the beneficiary s condition stable or is there a possibility of medical deterioration?
4. Age of beneficiary– Acquire an evaluation of whether his/her condition would shorten the life span.
5. WC classification of beneficiary (e.g., permanent partial, permanent total disability, or a combination of both).
6. Prior medical expenses paid by WC due to the injury or illness in the 1 or 2 year period after the condition has stabilized– If Medicare has paid any amounts, they must be recovered. Also, this would indicate that the case may not purely be a commutation case, but may also entail some compromise aspects, e.g., the WC carrier or agency may have taken the position that the services were not covered by WC.
7. 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 benefits.
8. Is the commutation for the beneficiary s lifetime or for a specific time period? If not for lifetime, what is the basis?– Medicare must insist that there is a reasonable relationship between the respective allocation for services covered by Medicare and services not covered by Medicare. For example, is it reasonable for the settlement agreement s allocation for services not covered by Medicare to be based on the beneficiary s life time while the agreement s allocation for services covered by Medicare is based on a lesser time period? What is the State law regarding how long WC is obligated to cover the items or services related to the accident or illness?
9. Is the beneficiary living at home, in a nursing home, or receiving assisted living care, etc.?– If the beneficiary 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., WC (for life time or a specified period) from the medical benefits allocation of lump sum settlement, Medicaid, etc.
10. Are the expected expenses for Medicare covered items and services appropriate in light of the beneficiary s condition?– Estimated medical expenses should include an amount for hospital and/or SNF care during the time period for the commutation of the WC benefit. (Just one hospital stay that is related to the accident could cost $20,000.) For example, a quadriplegic may develop decubitus ulcers requiring possible surgery, urinary tract infections, kidney stones, pneumonia and/or thrombophlebitis.
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 and Part B 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 our focus here only deals with services related to the WC accident or illness. Therefore, the RO should use appropriate judgment and seek input from a medical consultant when determining whether the amount of the lump sum or structured settlement has sufficiently taken Medicare’s interests into account.
The attorney for the individual for whom the arrangement is set-up should be advised that Medicare applies a set of criteria to any WC settlement on a case-by-case basis in order to determine whether Medicare has an obligation for services provided after the settlement that originally were the
responsibility of WC.
NOTE:
Before evaluating whether an arrangement reasonably covers/considers Medicare s interests, the RO must know whether the arrangement is based upon WC fee schedule amounts or full actual charge amounts.

Question 8:
Is it permissible for Medicare to accept an up-front cash settlement instead of a set-aside arrangement?

Answer:
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 WC did not pay promptly. Thus, when future benefits are included in a WC settlement agreement, Medicare cannot pay until the medical expenses related to the injury or disease equal the amount of the settlement allocated to future medical expenses or the amount included for medical expenses in the set-aside arrangement has been exhausted.

Question 10:
Are there documentation requirements that must be satisfied before the RO can provide a written opinion on the sufficiency of a set-aside arrangement?

Answer:
Yes. At a minimum, the following documentation must be obtained by the RO prior to the approval of any arrangement:
A copy of the settlement agreement, or proposed settlement agreement, a copy of the life care plan (if there is one), and, if the life care plan does not contain an estimate of the injured individual s estimated life span, then a rated age may be obtainable from life insurance companies for injuries/illnesses sustained by other similarly situated individuals. Also, documentation which gives the basis for the amounts of projected expenses for Medicare covered services and services not covered by Medicare (this could be a copy of letters from doctors/providers documenting the necessity of continued care).

Criteria for Determining Whether a Lump Sum or Structured Settlement Sufficiently Takes into Account Medicare’s Interests (Ref: 7/23/01 Memo Q5)

The CMS considers whether the amount allocated for future medical expenses is reasonable. In addition, the repayment of conditional payments made by Medicare should be taken into account. Consequently, CMS considers the following criteria when reviewing Workers’ Compensation Medicare Set-aside Arrangement (WCMSA):

1. Date of entitlement to Medicare.

2. Basis for Medicare entitlement [disability, End-stage Renal Disease (ESRD) or age] — If the claimant has entitlement based on disability and would also be eligible on the basis of ESRD, this should be noted since the medical expenses would be higher. This would also be true for claimants who are over 65, but had been entitled prior to attaining that age.

3. Type and severity of the injury or illness– Obtain diagnosis codes 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 accident is the claimant an amputee, paraplegic or quadriplegic? Is the claimant’s condition stable or is there a possibility of medical deterioration?

4. Age of the claimant– Acquire an evaluation of whether his/her condition would shorten the life span.

5. Workers’ Compensation (WC) classification of the claimant (e.g., permanent partial, permanent total disability, or a combination of both).

6. Prior medical expenses paid by WC due to the injury or illness in the one or two year period after the condition has stabilized—Any conditional payments made by Medicare must be recovered. Also, this would indicate that the case may not purely be a commutation case, but may also entail some compromise aspects, e.g., the WC carrier or agency may have taken the position that the services were not covered by WC.

7. Amount of the lump sum or structured settlement– Obtain as much information as possible regarding the allocation between income replacement, loss of limb or function, and medical benefits.
8. Whether the commutation is for the claimant’s lifetime or for a specific time period? If not for lifetime, please provide basis.
9. Whether the claimant is living at home, in a nursing home, or receiving assisted living care, etc. If the claimant 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., WC (for life time or a specified period) from the medical benefits allocation of lump sum settlement, Medicaid, etc.
10. Whether the expected expenses for Medicare covered items and services are appropriate in light of the claimant’s condition?– Estimated medical expenses should include an amount for hospital and/or SNF care during the time period for the commutation of the WC benefit. (Just one hospital stay that is related to the accident could cost $20,000). For example, a quadriplegic may develop decubitus ulcers requiring possible surgery, urinary tract infections, kidney stones, pneumonia and/or thrombophlebitis. 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 and Part B 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 our focus here only deals with services related to the WC accident or illness. Therefore, the RO should use appropriate judgment and seek input from a medical consultant when determining whether the amount of the lump sum or structured settlement has sufficiently taken Medicare’s interests into account.

CENTERS for MED/CARE & MEDICAID SERVICES
DEPARTMENT OF HEALTH & HUMAN SERVICES
Centers for Medicare & Medicaid Services
7500 Security Boulevard, Mail Stop C2-21-15
Baltimore, Maryland 21244-1850
Center for Medicare Management
DATE: APRIL 22, 2003
TO: All Regional Administrators
FROM: Director
Center for Medicare Management

1) What statutory law, regulations, or Federal case law supports/allows CMS to review proposed settlements of injured workers who are not Medicare beneficiaries?
Answer: Section 1862(b)(2) of the Social Security Act (the Act) (42 USC 1395y(b)(2)) requires that Medicare payment may not be made for any item or service to the extent that payment has been made under a workers’ compensation (WC) law or plan. Medicare does not pay for an individual’s WC related medical services when that individual received a WC settlement, judgment, or award that includes funds for future medical expenses, until all such funds are properly expended.
Because Medicare does not pay for an individual’s WC related medical services when the individual receives a WC settlement that includes funds for future medical expenses, it is in that individual’s interests to consider Medicare at the time of settlement. Once CMS agrees to a Medicare set-aside amount, the individual can be certain that Medicare’s interests have been appropriately considered.

2) When dealing with a WC case, what is “a reasonable expectation” of Medicare enrollment within 30 months?
Answer: Situations where an individual has a “reasonable expectation” of Medicare enrollment for any reason include but are not limited to:
a) The individual has applied for Social Security Disability Benefits;
b) The individual has been denied Social Security Disability Benefits but anticipates 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.
f) How does Medicare determine its interests in WC 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?
Answer: A settlement that does not specifically account for past versus future medical expenses will be considered to be entirely for future medical expenses once Medicare has recovered any conditional payments it made. This means that Medicare will not pay for medical expenses that are otherwise reimbursable under Medicare and are related to the WC case, until the entire settlement is exhausted.
Example: A beneficiary is paid $50,000 by a WC carrier, and the parties to the settlement do not specify what the $50,000 is intended to pay for. If there is no CMS approved Medicare set-aside arrangement, Medicare will consider any amount remaining after recovery of its conditional payments as compensation for future medical expenses.

3) Additionally, please note that any allocations 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 approved by Medicare. What’s the difference between commutation and compromise cases? And can a single WC case possess both?
Answer: When a settlement includes compensation for future medical expenses, it is referred to as a “WC commutation case.” When a settlement includes compensation for medical expenses incurred prior to the settlement date, it is referred to as a “WC compromise case.” A WC settlement can have both a compromise aspect as well as a commutation aspect.
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 related to the WC illness or injury.
Example: The parties to a settlement may attempt to maximize the amount of disability/lost wages paid under WC by releasing the WC carrier from liability for medical expenses. If the facts show that this particular condition is work-related and requires continued treatment, Medicare will not pay for medical services related to the WC injury/illness until the entire settlement has been used to pay for those services.

5) When a state WC judge approves a WC settlement, will Medicare accept the terms of that settlement?
Answer: Medicare will generally honor judicial decisions issued after a hearing on the merits of a WC 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 (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 cannot accept the terms of the settlement as to an allocation of funds of any type if the settlement does not adequately address Medicare’s interests. If Medicare’s interests are not reasonably considered, Medicare will refuse to pay for services related to the WC injury (and otherwise reimbursable by Medicare) until such expenses have exhausted the amount of the entire WC settlement. Medicare will also assert a recovery claim, if appropriate.

6) What is the expected time frame for the regional offices (ROs) to review and make their decisions regarding proposed WC settlements?
Answer: ROs seek to review and make a decision regarding proposed WC settlements within 45 to 60 days, from the time that all necessary/required documentation has been submitted.

8) May a beneficiary self-administer his or her own Medicare set-aside arrangement?
Answer: Yes, if this is permitted under state law. It should be noted though, that a self-administered arrangement is subject to the same rules/requirements as any other set-aside arrangement.

9) In WC cases that use structured Medicare set-aside arrangements (i.e., settlement monies are apportioned over fixed or defined periods of time), will Medicare agree to cover the beneficiary when it has not been verified whether the funds as apportioned in the arrangement have been exhausted?
Answer: No, Medicare does not make any payments until the contractor responsible for monitoring the individual’s case can verify that the funds apportioned to the period, including any carry-forward amount, have been completely exhausted as set forth in the Medicare set-aside arrangement.
Additionally, please note that any structured set-aside arrangement agreed to by the parties will
not be approved by Medicare if the settlement has not adequately considered Medicare’s interests.

CMS
..” ..–
CENTERS for MED/CARE & MEDICAID SERVICES
DEPARTMENT OF HEALTH & HUMAN SERVICES
Centers for Medicare & Medicaid Services
7500 Security Boulevard, Mail Stop C2-21-15
Baltimore, Maryland 21244-1850
Center for Medicare Management DATE: APRIL 22, 2003
TO: All Regional Administrators
FROM: Director
Center for Medicare Management

3) What statutory law, regulations, or Federal case law supports/allows CMS to review proposed settlements of injured workers who are not Medicare beneficiaries?
Answer: Section 1862(b)(2) of the Social Security Act (the Act) (42 USC 1395y(b)(2)) requires that Medicare payment may not be made for any item or service to the extent that payment has been made under a workers’ compensation (WC) law or plan. Medicare does not pay for an individual’s WC related medical services when that individual received a WC settlement, judgment, or award that includes funds for future medical expenses, until all such funds are properly expended.
Because Medicare does not pay for an individual’s WC related medical services when the individual receives a WC settlement that includes funds for future medical expenses, it is in that individual’s interests to consider Medicare at the time of settlement. Once CMS agrees to a Medicare set-aside amount, the individual can be certain that Medicare’s interests have been appropriately considered.

4) When dealing with a WC case, what is “a reasonable expectation” of Medicare enrollment within 30 months?
Answer: Situations where an individual has a “reasonable expectation” of Medicare enrollment for any reason include but are not limited to:
g) The individual has applied for Social Security Disability Benefits;
h) The individual has been denied Social Security Disability Benefits but anticipates appealing that decision;
i) The individual is in the process of appealing and/or re-filing for Social Security Disability Benefits;
j) 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
k) The individual has an End Stage Renal Disease (ESRD) condition but does not yet qualify for Medicare based upon ESRD.
l) How does Medicare determine its interests in WC 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?
Answer: A settlement that does not specifically account for past versus future medical expenses will be considered to be entirely for future medical expenses once Medicare has recovered any conditional payments it made. This means that Medicare will not pay for medical expenses that are otherwise reimbursable under Medicare and are related to the WC case, until the entire settlement is exhausted.
Example: A beneficiary is paid $50,000 by a WC carrier, and the parties to the settlement do not specify what the $50,000 is intended to pay for. If there is no CMS approved Medicare set-aside arrangement, Medicare will consider any amount remaining after recovery of its conditional payments as compensation for future medical expenses.

4) Additionally, please note that any allocations 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 approved by Medicare. What’s the difference between commutation and compromise cases? And can a single WC case possess both?
Answer: When a settlement includes compensation for future medical expenses, it is referred to as a “WC commutation case.” When a settlement includes compensation for medical expenses incurred prior to the settlement date, it is referred to as a “WC compromise case.” A WC settlement can have both a compromise aspect as well as a commutation aspect.
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 related to the WC illness or injury.
Example: The parties to a settlement may attempt to maximize the amount of disability/lost wages paid under WC by releasing the WC carrier from liability for medical expenses. If the facts show that this particular condition is work-related and requires continued treatment, Medicare will not pay for medical services related to the WC injury/illness until the entire settlement has been used to pay for those services.

7) When a state WC judge approves a WC settlement, will Medicare accept the terms of that settlement?
Answer: Medicare will generally honor judicial decisions issued after a hearing on the merits of a WC 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 (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 cannot accept the terms of the settlement as to an allocation of funds of any type if the settlement does not adequately address Medicare’s interests. If Medicare’s interests are not reasonably considered, Medicare will refuse to pay for services related to the WC injury (and otherwise reimbursable by Medicare) until such expenses have exhausted the amount of the entire WC settlement.
Medicare will also assert a recovery claim, if appropriate.

8) What is the expected time frame for the regional offices (ROs) to review and make their decisions regarding proposed WC settlements?
Answer: ROs seek to review and make a decision regarding proposed WC settlements within
45 to 60 days, from the time that all necessary/required documentation has been submitted.

10) May a beneficiary self-administer his or her own Medicare set-aside arrangement?
Answer: Yes, if this is permitted under state law. It should be noted though, that a self-administered arrangement is subject to the same rules/requirements as any other set-aside arrangement.

11) In WC cases that use structured Medicare set-aside arrangements (i.e., settlement monies are apportioned over fixed or defined periods of time), will Medicare agree to cover the beneficiary when it has not been verified whether the funds as apportioned in the arrangement have been exhausted?
Answer: No, Medicare does not make any payments until the contractor responsible for monitoring the individual’s case can verify that the funds apportioned to the period, including any carry-forward amount, have been completely exhausted as set forth in the Medicare set-aside arrangement.
Additionally, please note that any structured set-aside arrangement agreed to by the parties will not be approved by Medicare if the settlement has not adequately considered Medicare’s interests.

DATE: MAY 23, 2003
TO: All Regional Administrators
FROM: Director
Center for Medicare Management
SUBJECT: Medicare Secondary Payer — Workers’ Compensation (WC) Additional Frequently Asked Questions
1. When an injured individual’s WC settlement does not meet the current review thresholds, will the Regional Offices (RO) provide the settling parties with “verification” letters confirming that approval of a Medicare set-aside arrangement is unnecessary?
Answer: No, the ROs will not provide “verification” letters. However, the CMS will honor threshold levels that are in effect as of the date of a WC settlement. (See the July 23, 2001 ARA letter concerning WC Commutation of Future Benefits.)
Additional Information: The CMS assumes that when a non-Medicare eligible claimant’s WC settlement does not meet the 30-month and $250,000 thresholds, typically that individual will completely exhaust his/her settlement by the time Medicare eligibility is reached. Also, according to various members of the WC community, most settlements for these individuals are in the range of $10,000 to $50,000. Therefore, the amount of money in the settlement that is actually being provided for an individual’s medical care normally will be appropriately exhausted before the individual becomes a Medicare beneficiary.
Please note that the current review thresholds (see the July 23, 2001 ARA letter concerning WC Commutation of Future Benefits) are subject to adjustment. The CMS reserves the right to modify or eliminate its review criteria if it determines that Medicare’s interests are not being protected.
4.) Will CMS treat WC cases that were settled prior to the issuance of the July 23, 2001 ARA letter concerning WC Commutation of Future Benefits in the same manner as those settled after the review threshold guidelines were established?
Answer: Yes. For WC settlements that do not meet the review thresholds, Medicare will make payment for WC related services that are otherwise reimbursable under Medicare, once the individual becomes enrolled in Medicare. This will be done regardless of when the settlement actually occurred. However, a reopening of claims (see 42 C.F.R. 405.750 and 405.841) that Medicare previously denied for these individuals will not be granted, nor will the CMS change any decisions already made with respect to settlements which pre-date July 23, 2001.
Additional Information: When the CMS issued the July 23, 2001 ARA letter, it established review thresholds for WC cases settled by injured individuals who are not yet Medicare beneficiaries. This was done in order to organize and prioritize workloads for its ROs and to convey to its ROs that it is not in Medicare’s best interests to review WC settlements that do not meet the review thresholds.

DATE: May 7, 2004
TO: All Regional Administrators
FROM: Director
Center for Medicare Management
SUBJECT: Medicare Secondary Payer — Workers’ Compensation (WC)– INFORMATION
Administrative fees/expenses for administration of the Medicare set-aside arrangement and/or attorney costs specifically associated with establishing the Medicare set-aside arrangement cannot be charged to the set-aside arrangement. The CMS will no longer be evaluating 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 arrangement funds.
For example, if the settling parties submit a Medicare set-aside proposal to CMS that claims that the injured individual will need $50,000 worth of work-related medical expenses that would otherwise be reimbursable under Medicare and the settling parties claim that it will cost $10,000 in administrative and attorney fees in order to both administer and establish the Medicare set-aside arrangement proposal of $50,000, then CMS will only evaluate/judge the reasonableness of the $50,000 figure.
The CMS will not evaluate whether or not the $10,000 in administrative and attorney fees are reasonable nor will CMS permit the settling parties to add that $10,000 amount to the $50,000 Medicare set-aside arrangement amount. Therefore, if CMS approves that proposal for a $50,000 Medicare set-aside arrangement, the settling parties $10,000 in administrative and attorney fees cannot be charged to/against the Medicare set-aside arrangement of $50,000 because CMS considers those costs to be a separate issue for the settling parties to negotiate.
NOTE: This policy will be implemented on a prospective basis.

CMS
CENTERS for MEDICARE & MEDIC4ID SERWCES
DEPARTMENT OF HEALTH & HUMAN SERVICES Centers for Medicare & Medicaid Services 7500 Security Boulevard, Mail Stop Baltimore, Maryland 21244-1850
DATE: October 15, 2004
TO: All Regional Administrators
FROM: Director
Financial Services Group Office of Financial Management
SUBJECT:

Q1. Use of WC Fee Schedule vs. Actual Charges for WC Medicare Set-aside Arrangement – What is CMS’s policy with respect to reviewing WC Medicare Set-aside Arrangement proposals using either WC fee schedule amounts or full actual charges as the basis for the proposal?

A1. Effective with the issuance of this memorandum, CMS will use either the WC fee schedule (for states that have such schedules) or full actual charges for its review of a proposed WC Medicare Set-aside Arrangement based upon whichever methodology was used by the individual/entity submitting the proposal. The administrator of the WC Medicare Set-aside Arrangement (both professional administrators and self-administrators) should make payments from the WC Medicare Set-aside Arrangement on the same basis. That is, if the proposal was submitted and approved based upon full actual charges, the administrator should make payment from the WC Medicare Set-aside Arrangement based upon full actual charges; if the proposal was submitted and approved Page 2 – Medicare Secondary – Workers’ Compensation Additional Frequently Asked Questions
based upon WC fee schedule amounts, the administrator should make payment from the WC Medicare Set-aside Arrangement based upon WC fee schedule amounts.
Q2. Self-administration of a WC Medicare Set-aside Arrangement — If an individual has a designated 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.), has an appointed guardian/conservator, or has otherwise been declared incompetent by a court, may that individual self-administer his/her Medicare set-aside arrangement?
A2. WC Medicare Set-aside Arrangements must be administered by a competent administrator (the representative payee, a professional administrator, etc.). Moreover, when an individual does (in fact) have a designated representative payee, appointed guardian/conservator, or has otherwise been declared incompetent by a court; the settling parties must include that information in their Medicare set-aside arrangement proposal to CMS.
Q3. Up-front Settlement of Future Medicals vs. WC Medicare Set-aside Arrangement –May Medicare accept an up-front cash settlement for future medicals directly from the settling parties instead of a WC Medicare Set-aside Arrangement?
A3. CMS currently has no process to accept up-front cash payments in lieu of a CMS-approved WC Medicare Set-aside Arrangement.
Q4. Inflation Adjustment/Discount for Present Value/Change in Policy – Must the WC Medicare Set-aside Arrangement include an upward adjustment for inflation? May the WC Medicare Set-aside Arrangement include a downward adjustment as a discount for the present-day value of the total WC Medicare Set-aside Arrangement?
A4. Effective with the issuance of this memorandum, CMS’s position is that the WC Medicare Set-aside Arrangement does not need to be indexed for inflation and may not be discounted to present-day value.
Q5. Can a WC Medicare Set-aside Arrangement be established as a structured arrangement, where payments are made to the arrangement on a defined schedule to cover expenses projected for future years?
Page 3 – Medicare Secondary – Workers’ Compensation Additional Frequently Asked
Questions
A5 Yes. However, CMS will approve a payout amount for services that would otherwise be reimbursable by Medicare from the WC Medicare Set-aside Arrangement in the following manner:
The seed money for the WC Medicare Set-aside Arrangement must include an amount equal to the amount of monies calculated to cover the first surgery procedure and/or replacement and two years of annual payments.
The remainder of the approved amount should be divided by the remainder of the claimant’s life expectancy (or a shorter defined period of time if CMS has agreed to a shorter time period).
Subsequent annual deposits into the WC Medicare Set-aside Arrangement are to be based upon a set “anniversary date” which cannot be more than one year after the settlement date.
Q6. WC Claim Resolution Where Medicals Remain Open – Is a WC Medicare Set-aside Arrangement appropriate when resolution of the WC claim leaves the medical aspects of the claim open?
A6 No. However, a WC Medicare Set-aside Arrangement is appropriate where the resolution of the WC claim permanently closes the medical aspects of the claim, and the claimant will require future medical services related to the WC claim that Medicare would otherwise reimburse.
DATE: July 11, 2005
FROM: Director
Financial Services Group
Office of Financial Management
SUBJECT: Medicare Secondary Payer (MSP) – Workers’ Compensation (WC) Additional Frequently Asked Questions
TO: All Regional Administrators
Q1. Clarification of WCMSA Review Thresholds – Should I establish a Workers’
Compensation Medicare Set-aside Arrangement (WCMSA) even if I am not yet a Medicare beneficiary and/or even if I do not meet the CMS thresholds for review of a WCMSA proposal?
A1. The thresholds for review of a WCMSA 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 beneficiaries and claimants must consider and protect Medicare’s interest when settling any workers’ compensation case; even if review thresholds are not met, Medicare’s interest must always be considered.
Q3. Use of WC Settlement Funds Prior to Medicare Entitlement – May workers’
compensation settlement funds attributable to future medicals be used prior to Medicare entitlement?
A3. For claimants who are not yet Medicare beneficiaries and for whom CMS has approved a WCMSA, the WCMSA may be used prior to becoming a beneficiary because the amount was priced based on the date of the expected settlement. Use of the WCMSA is limited to services that are related to the workers’ compensation claim or settlement and that would be covered by Medicare if the individual were a Medicare beneficiary. The same requirements that Medicare beneficiaries follow for reporting and administration are to be used in the above cases. The CMS will not pay for any expenses related to the workers’ compensation illness or injury until a self-attestation document or a full accounting of all monies expended from the WCMSA are sent to the lead contractor upon Medicare entitlement. At that time, the lead contractor will adjust the WCMSA record to reflect the expenses paid prior to entitlement.
Even if there is no CMS-approved WCMSA, any funds from a WC settlement attributable to future medicals that are remaining at the time a claimant becomes a Medicare beneficiary must be used for Medicare-covered services related to the workers’ compensation claim or settlement until such funds are exhausted. Only then will CMS pay for Medicare-covered services related to the workers’ compensation claim or settlement.
Q4. Avoiding the Continuation of Indemnity Payments While Waiting for CMS to Review a WCMSA – Is there a way to avoid the continuation of indemnity payments while awaiting a CMS determination on a proposed WCMSA?
A4. Yes. To avoid this situation, CMS recommends that the claimant (or the claimant’s representative) close out the indemnity portion of the settlement and leave the settlement of medical expenses open pending a determination by CMS on the proposed WCMSA. In determining the review thresholds, the total settlement amount, including indemnity and medicals, shall be used.
Note that the computation of the total settlement amount includes, but is not limited to, wages, attorney fees, all future medical expenses, and repayment of any Medicare conditional payments, and that payout totals for all annuities to fund the above expenses should be used rather than cost or present values of any annuities. Also note that any previously settled portion of the WC claim must be included in computing the total settlement amount.
Q5. Settlement of WC Medical Expenses Prior to Submission to CMS – Can the parties proceed with the settlement of the medical expenses portion of a WC claim before CMS actually reviews the proposed WCMSA and determines an amount that adequately protects Medicare’s interests?
A5. The parties may proceed with the settlement, but any statement in the settlement of the amount needed to fund the WCMSA is not binding upon CMS unless/until the parties provide CMS with documentation that the WCMSA has actually been funded for the full amount as specified by CMS that adequately protects Medicare’s interests as a result of its review.
If CMS does not subsequently provide approval of the funded WCMSA amount as specified in the settlement and proof is not provided to CMS that the CMS-approved amount has been fully funded, CMS may deny payment for services related to the WC claim up to the full amount of the settlement. Only the approval of the WCMSA by CMS and the submission of proof that the WCMSA was funded with the approved amount, would limit the denial of related claims to the amount in the WCMSA. This shall be demonstrated by submitting a copy of the final, signed settlement documents indicating the WCMSA is the same amount as that recommended by CMS.
As a reminder, the claimant may be at risk if the WCMSA is funded for less than the amount that CMS determines to be adequate to protect Medicare’s interests.
Q6. Treatment of Taxable Interest Income Earned on a WCMSA – If I receive a Form 1099-INT for the interest income earned on my WCMSA account, may I charge the income tax on that amount against the WCMSA?
A6. Assuming that there is adequate documentation for the amount of incremental tax that the claimant must pay for the interest earned on this set-aside account, the claimant or his/her administrator may withdraw an amount equal to the additional tax as a “cost that is directly related to the account” to cover the additional tax liability. Such documentation should be submitted along with the annual accounting.
Q7. Sample Submission of a WCMSA – Does CMS provide an example of what a proper WCMSA looks like?
A7. Yes, at http://www.cms.hhs.gov/medicare/cob/pdf/attwc_sample.pdf, CMS has posted a sample WCMSA proposal. Any comments or questions regarding this sample submission should be directed to mspcentral@cms.hhs.gov Q8. Group Health Plan (GHP) Insurance, Managed Care Plan, and Veterans’
Administration (VA) Coverage – In a WC settlement, is a WCMSA recommended where the claimant is covered under a GHP or a managed care plan, or has coverage through the VA?
A8. Yes, a WCMSA is still appropriate because such other health insurance or health service could in the future be canceled or reduced, or the injured individual may elect not to take advantage of such services. It is important to remember that workers’ compensation is always primary to Medicare and many other types of health insurance coverage for expenses related to the WC claim or settlement.
Q9. Loss of Medicare Entitlement after CMS Approval of a WCMSA – Am I entitled to a release of my WCMSA funds if I lose my Medicare entitlement?
A9. No. However, the funds in the WCMSA may be expended for medical expenses specified in the WCMSA until Medicare entitlement is re-established or the WCMSA is exhausted. Use of the WCMSA is limited to services that are related to the workers’ compensation claim or settlement and that would be covered by Medicare if the individual were a Medicare beneficiary. The same requirements that Medicare beneficiaries follow for reporting and administration are to be used in the above cases. The 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 WCMSA are sent to the lead contractor upon the re-establishment of Medicare entitlement. At that time, the lead contractor will adjust the WCMSA record to reflect the expenses paid prior to entitlement.
Q10. Beneficiaries that Request Termination of a WCMSA Account – May a claimant have any or all of a WCMSA released for personal purposes under any circumstances?
A10. The administrator of the CMS-approved WCMSA should not release set-aside funds for any purpose other than the purpose for which the WCMSA was established without approval from CMS. However, if the treating physician concludes that the beneficiary’s medical condition has substantially improved, then the beneficiary (or the beneficiary’s representative) may submit a new WCMSA proposal covering future expected medical expenses. Such proposals must justify at least a 25% reduction in the outstanding WCMSA funds. In addition, such proposal may not be submitted until at least five years after a previous CMS approval letter and should be accompanied by all supporting documentation not previously submitted with the original WCMSA proposal. The CMS decision on the new proposal is final and not subject to administrative appeal.
The above proposals shall be submitted to CMS c/o COBC. If CMS determines that a 25% or greater reduction is justified, CMS will issue a new approval letter. After CMS issues a new approval letter, any funds in the current WCMSA in excess of the newly calculated amount may be released to the claimant.
Q12. Additional Information Submission after WCMSA Case Is Closed – If I disagree with the amount that CMS has determined for my WCMSA, do I have any recourse?
A12. There are no appeal rights stemming from a CMS determination of the appropriate amount of a WCMSA; however, claimants and submitters have several other options available to them. First, a claimant or submitter may always contact the Regional Office that issued the CMS determination for a clarification. Also, if the claimant or submitter believes that a CMS determination contains obvious mistakes, such as mathematical errors or failure to recognize that medical records already submitted show that a surgery that CMS priced has already occurred, then the claimant or submitter should contact the CMS Regional Office that issued the CMS determination for a correction of the errors.
Where the claimant or submitter believes that CMS has misinterpreted the evidence or disagrees with the CMS determination for some other reason, there are two choices available. If the claimant or submitter believes that there is additional evidence not previously considered by CMS that would warrant a change in the CMS determination, the claimant or submitter may resubmit the case with the additional evidence and request a re-evaluation. The re-evaluation request should be clearly marked as such, submitted to the Coordination of Benefits Contractor (COBC), P.O. Box 660, New York, New York 10274-660, and must be accompanied by additional evidence not available at the time of the original submission. It will then be considered a new submission and shall be processed in order of receipt. Although a claimant has no formal appeal rights with respect to the WCMSA process, beneficiaries do have appeal rights with respect to specific denied claims. If CMS denies a submitted claim for a service on the basis that CMS determined the WCMSA amount has not been exhausted, the beneficiary may appeal that specific claim denial through the administrative appeal process.
Q13. Effect of WCMSA on Medicaid Eligibility – Does a WCMSA have an effect on Medicaid resources for purposes of eligibility to Medicaid?
A13. Medicare set-aside arrangements 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.” The funds must be in interest-bearing accounts. These funds may meet the SSI/Medicaid resource definition.
There may be cases in which funds in a Medicare set-aside arrangement 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.
Q15. Transfer Mechanism for Items and Services Not Covered by Medicare –Is a mechanism for items and services not covered by Medicare that may later become covered necessary?
A15. Should the settlement agreement provide for items and services that are not covered by Medicare but later become covered, those funds should then be considered part of the set-aside and treated accordingly, i.e., used to pay for any services as they were designated in the non-Medicare portion of the set-aside included in the WC settlement. These funds do not have to be transferred to a separate WCMSA bank account or be included in the annual WCMSA accounting.
DEPARTMENT OF HEALTH & HUMAN SERVICES
Centers for Medicare & Medicaid Services
7500 Security Boulevard
Baltimore, Maryland 21211 1850 CMS/mer as gm msacagi. ekRIZYLA.0 M M-E .
MEMORANDUM
DATE: December 30, 2005
FROM: Director
Financial Services Group
Office of Financial Management
SUBJECT: Part D and Workers’ Compensation Medicare Set-aside Arrangements (WCMSAs) Questions and Answers
TO: All Regional Administrators
Beginning January 1, 2006, Medicare will begin its Part D prescription drug coverage as a result of the implementation of the Medicare Modernization Act of 2003 (MMA). This memorandum includes policy regarding the inclusion of prescription drugs that Medicare will cover as of January 1, 2006, in Workers’ Compensation Medicare Set-aside Arrangements (WCMSAs).
NOTE: References to prescription drugs in this document are limited to those prescription drugs that are for the treatment of the Workers’ Compensation (WC) related injury(ies) and/or illness(es)/disease(s), (hereinafter referred to as “WC injury”) and those where Medicare provides coverage.
Question 1: What is the Centers for Medicare & Medicaid Services’ (CMS) policy regarding the inclusion of prescription drugs in WCMSAs with the implementation of the MMA?
Answer 1: All WC settlements that occur on or after January 1, 2006, must consider and protect Medicare’s interests when future treatment includes prescription drugs along with the future medical services that would otherwise be reimbursable by Medicare. The recommended method to protect Medicare’s interests is to include a WCMSA as part of the WC settlement.
Question 2: Will the submission of WCMSA proposals change with the implementation of the MMA on January 1, 2006?
Answer 2: Yes, the submission of WCMSA proposals will change with the implementation of the MMA on January 1, 2006. For WCMSA proposals received by CMS’ Coordination of Benefits Contractor (COBC) on or after January 1, 2006, the cover letter must include separate amounts for: (1) future medical treatment, and (2) future prescription drug treatment. In addition, the cover letter must include an explanation as to how the submitter calculated the future prescription drug treatment amount (i.e., actual costs, average wholesale price, etc.).
Question 3: What happens if a WCMSA proposal received on or after January 1, 2006, does not include an amount for future prescription drug treatment?
Answer 3: If the cover letter does not include an amount for future prescription drug treatment, and the current treatment records indicate that the claimant has been prescribed drugs and/or may need prescription drugs related to the WC injury in the future, the submitter did not adequately consider Medicare’s interests. In such a case, CMS will advise the submitter in its written opinion that the parties to the WC settlement may not have protected 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 claimant will need future treatment with prescription drugs related to the WC injury, then CMS will accept that Medicare’s interests have been adequately protected. Medicare will then pay primary for future prescription drugs if the beneficiary has enrolled in a Medicare prescription drug plan and does not have any other coverage that is primary to Medicare.
Answer 5: When CMS begins to review and independently price for future prescription drug treatment on January 1, 2007, the submitter must include in the cover letter separate amounts for: (1) future medical treatment, and (2) future prescription drug treatment. In addition, the cover letter must include an explanation as to how the submitter calculated the future prescription drug treatment amount (i.e., actual costs, average wholesale price, etc.). Moreover, the submitter must include with the submission a payment history of the prescription drugs paid by the WC carrier, as follows:
• 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 submission.
• 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.
The CMS will review WCMSAs that include an allocation for future treatment with prescription drugs based on the required payment history, anticipated future prescription drug treatment information, and Medicare Part D data. If the submitter fails to provide a payment history or the payment history reflects that the WC carrier did not previously pay for prescription drugs indicated for the claimant’s future treatment, CMS will independently price the Medicare-covered prescription drugs using CMS information available from current Medicare Part D data.
Question 7: Do claimants have to resubmit their WCMSA proposals if CMS already issued a written opinion as to the total WCMSA amount?
Answer 7: No, claimants do not have to resubmit their WCMSA proposals, if CMS has already issued a written opinion as to the total WCMSA amount for settlements occurring prior to January 1, 2006, or where the WCMSA review occurred prior to January 1, 2006, the MMA implementation date.
Note: If the WC settlement occurred prior to January 1, 2006, and the WC settlement included an allocation for future prescription drug treatment, then the claimant must exhaust those funds prior to billing Medicare for those future prescription drugs. For example, if the WC settlement allocates $5,000 for prescription drugs related to the WC injury, then the claimant must exhaust that amount from the settlement funds before billing Medicare for prescription drug costs incurred on or after January 1, 2006. However, the claimant does not have to transfer these funds to the existing WCMSA account or include them in the annual WCMSA accounting.
For a WCMSA proposal received by COBC on or after January 1, 2006, CMS will provide in its written opinion the total WCMSA amount that adequately protects Medicare’s interests with regard to the claimant’s future medical treatment. In addition, CMS’ written opinion will note the submitted prescription drug amount. The CMS’ written opinion will provide the total WCMSA amount, which is a combination of the future medical treatment reviewed by CMS and the future prescription drug costs noted in the submitter’s cover letter. The parties to the WC settlement must note the total WCMSA amount in the final settlement agreement. Once the final settlement agreement is submitted to CMS’ COBC, the claimant and all other parties to the WC settlement can rely on CMS’ written opinion regarding whether the WC settlement adequately protects Medicare’s interests. The total WCMSA amount (future medical treatment and future prescription drug treatment) must be deposited in an interest bearing account. The administrator of the WCMSA 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 claimant’s case. For example, if the total WCMSA 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 administrator must forward an annual accounting that separately identifies how much of the $10,000 was spent for medical expenses and prescription drugs. Exhaustion of the total WCMSA 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 WCMSA account, CMS will consider the account appropriately exhausted. For example, final actual expenditures may be $6,000 for future prescription drug treatment and $4,000 for the future medical expenses that may appropriately exhaust the $10,000 WCMSA.
DEPARTMENT OF HEALTH & HUMAN SERVICES
Centers for Medicare & Medicaid Services
7500 Security Boulevard
Baltimore, Maryland 212,11 1850
DATE: July 24, 2006
FROM: Director
Financial Services Group
Office of Financial Management
SUBJECT: Questions and Answers for Part D and Workers’ Compensation Medicare Set-aside Arrangements
TO: All Regional Administrators
NOTE: References to prescription drugs in this document are limited to those prescription drugs that are for the treatment of the Workers’ Compensation (WC) related injury(ies) and/or illness(es)/disease(s), (hereinafter referred to as “WC injury”) and those where Medicare provides coverage.
Question 1: What is the Centers for Medicare & Medicaid Services’ (CMS) policy regarding the inclusion of prescription drugs in WCMSAs with the implementation of the MMA?
Answer 1: All WC settlements that occur on or after January 1, 2006 must consider and protect Medicare’s interests when future treatment includes prescription drugs along with the future medical services that would otherwise be reimbursable by Medicare. The recommended method to protect Medicare’s interests is to include a WCMSA as part of the WC settlement. However, if the WC claim settled prior to January 1, 2006, the WCMSA proposal does not need to include an amount for future prescription drug treatment.
Question 5: Should submitters provide an explanation in the cover letter when the claimant has not been prescribed drugs for the work-related injury, illness/disease or if the drugs prescribed are excludable under the MMA?
Answer 5: Yes. Submitters should provide such an explanation in the cover letter when submitting their WCMSA proposals to CMS.
Question 6: Where a WC claim settled prior to January 1, 2006, can the claimant use the WCMSA funds to pay for prescription drug expenses related to the WC injury?
Answer 6: No, the claimant cannot use the WCMSA funds to pay for prescription drug expenses related to the WC injury. If the WC settlement included an allocation for non-Medicare covered medical and/or prescription drug expenses, the claimant must exhaust those funds prior to billing Medicare for prescription drugs. However, the claimant does not have to transfer these funds to the existing WCMSA account or include them in the annual WCMSA accounting. After exhausting these funds, if the claimant enrolls in a Part D plan, Medicare may be billed for prescription drug expenses related to the WC injury, assuming that the claimant does not have any other coverage primary to Medicare.
NOTE: The above questions clarify Question and Answer Number 5 of the July 11, 2005 memorandum.
Question 7: Should submitters include an amount for future prescription drug expenses if the claimant has not enrolled in a Part D plan?
Answer 7: Yes. Claimants who have not enrolled in a Part D plan need to include future prescription drug expenses in their WCMSA proposals if the current treatment records indicate that the claimant has been prescribed drugs and/or may need future prescription drug treatment related to the WC injury.
Question 8: Has CMS’ review of WCMSA proposals changed with the implementation of the MMA on January 1, 2006?
Answer 8: The CMS’ review of WCMSA proposals has not changed with the implementation of the MMA. The CMS continues to review and independently price for future Medicare-covered medical expenses in WCMSAs in accordance with CMS’ published policy memoranda dated: July 23, 2001; April 21, 2003; May 23, 2003; May 7, 2004; October 15, 2004; July 11, 2005; and April 25, 2006.
For a WCMSA proposal received by COBC on or after January 1, 2006, CMS will provide in its written opinion the total WCMSA amount that adequately protects Medicare’s interests with regard to the claimant’s future medical treatment. However, CMS’ written opinion will also note the submitted prescription drug amount. The CMS’ written opinion will provide the total WCMSA amount, which is a combination of the future medical treatment reviewed by CMS and the future prescription drug costs noted in the submitter’s cover letter. The parties to the WC settlement must note the total WCMSA amount in the final settlement agreement. Once the final settlement agreement is submitted to CMS’ COBC, the claimant and all other parties to the WC settlement can rely on CMS’ written opinion regarding whether the WC settlement adequately protects Medicare’s interests.The total WCMSA amount (future medical treatment and future prescription drug treatment) must be deposited in an interest-bearing account. The administrator of the WCMSA 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 claimant’s case. For example, if the total WCMSA 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 administrator must forward an annual accounting that separately identifies how much of the $10,000 was spent for medical expenses and prescription drugs. Exhaustion of the total WCMSA 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 WCMSA account, CMS will consider the account appropriately exhausted. For example, final actual expenditures may be $6,000 for future prescription drug treatment and $4,000 for the future medical expenses that may appropriately exhaust the $10,000 WCMSA.
Question 9: What happens if a WCMSA proposal received by the COBC on or after January 1, 2006, does not include an amount for future prescription drug treatment?
Answer 9: If the cover letter does not include an amount for future prescription drug treatment, and the current treatment records indicate that the claimant has been prescribed drugs and/or may need prescription drugs related to the WC injury in the future, the submitter did not adequately consider Medicare’s interests. In such a case, CMS, in its written opinion, will advise the submitter that the parties to the WC settlement have not protected 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 claimant will need future treatment with prescription drugs related to the WC injury, then CMS will accept that Medicare’s interests have been adequately protected. Medicare will then pay primary for future prescription drugs if the beneficiary has enrolled in a Medicare prescription drug plan and does not have any other coverage that is primary to Medicare.
Question 10: Has CMS published any guidelines about how to price for future prescription drug expenses in WCMSAs?Answer 10: No. The CMS has not published any guidelines regarding the pricing for future prescription drug expenses in WCMSAs.
Question 11: Should funds for future prescription drug treatment be included in the calculation of the total settlement amount to determine if the WCMSA proposal should be reviewed by CMS? Answer 11: Yes, the total settlement amount calculation should include an amount for prescription drugs if the future treatment indicates that the claimant has been prescribed drugs and/or may need drugs in the future. As stated in the July 11, 2005 memorandum, the computation of the total settlement amount includes, but is not limited to, wages, attorney fees, all future medical expenses, and repayment of any Medicare conditional payments. Payout totals for all annuities to fund the above expenses should be used rather than cost or present values of any annuities. Also note that any previously settled portion of the WC claim must be included in computing the total settlement amount.
Question 12: Do claimants have to resubmit their WCMSA proposals if CMS already issued a written opinion as to the total WCMSA amount?Answer 12: No, claimants do not have to resubmit their WCMSA proposals if CMS has already issued a written opinion as to the total WCMSA amount.NOTE: If the WC settlement occurred prior to January 1, 2006, and the WC settlement included an allocation for future prescription drug treatment, then the claimant must exhaust those funds before Medicare can be billed for those future prescription drugs. For example, if the WC settlement allocates $5,000 for prescription drugs related to the WC injury, then the claimant must exhaust that amount from the settlement funds before Medicare can be billed for prescription drug costs incurred on or after January 1, 2006. However, the claimant does not have to transfer these funds to the existing WCMSA account or include them in the annual WCMSA accounting. DEPARTMENT OF HEALTH & HUMAN SERVICESCMS/ Centers for Medicare & Medicaid Services
7500 Security Boulevard, Mail Stop C3-14-00
Baltimore, Maryland 21244-1850CENTERSforMEDICARE&MEDICAIDSERVICES
DATE: May 20, 2008
FROM: Director
Financial Services Group
Office of Financial Management
SUBJECT: Medicare Secondary Payer — Workers’ Compensation — INFORMATION
TO: Consortium Administrators for Financial Management and Fee-for-Service Operations
The Centers for Medicare & Medicaid Services (CMS) will only accept life expectancies obtained from the CDC Table 1, “Life table for the total population.”
Effective with WCMSA submissions received by CMS’ Coordination of Benefits Contract on or after July 1, 2008, CMS will only accept life expectancies obtained from the CDC Table 1, “Life table for the total population.” The CMS will only use the CDC Table 1 in its WCMSA review process.DEPARTMENT OF HEALTH & HUMAN SERVICESCMS/ Centers for Medicare & Medicaid Services
7500 Security Boulevard, Mail Stop C3-14-00
Baltimore, Maryland 21244-1850CENTERSforMEDICARE&MEDICAIDSERVICES
DATE: April 3, 2009
FROM: Director
Financial Services Group
Office of Financial Management
SUBJECT: Medicare Secondary Payer–Workers’ Compensation–INFORMATION
TO: Consortium Administrator for Financial Management and Fee-for-Service Operations
The purpose of this memorandum is to set forth the Centers for Medicare & Medicaid Services’ (CMS’) procedures regarding the methodology of pricing future prescription drug treatment costs/expenses in Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA) proposals.
NOTE: References to “prescription drugs” in this document are limited to those prescription drugs covered by Medicare for the treatment of the Workers’ Compensation (WC) related injury(ies) and/or illness(es)/disease(s) (hereinafter referred to as “WC injury”) at issue.
The CMS will begin independently pricing future prescription drug treatment costs/expenses in WCMSA proposals beginning June 1, 2009. Effective with complete WCMSA submissions received by CMS’ Coordination of Benefits (COB) Contractor on or after June 1, 2009, where the WC related injury warrant(s) the need of prescription drugs for the ongoing treatment of the WC related injury, CMS’ independent pricing of the prescription drug amount will be calculated and priced using average wholesale price (AWP). The CMS will not use or recognize any other pricing, discounting, or calculation methods when determining the adequacy of the prescription drug amounts in WCMSA proposals.
The CMS will apply the following procedures to all WCMSA proposals received on or after June 1, 2009. This procedure will also apply to all closed WCMSA cases that reopen on or after June 1, 2009, as noted below. If an entity submits a WCMSA proposal to CMS’ COB contractor that does not contain an amount for prescription drugs for the treatment of a WC related injury and if, upon further review, CMS deems that the WCMSA warranted the need for prescription drugs for the treatment of the WC related injury, CMS will default to pricing using a pricing strategy of AWP for brand name drugs in determining the adequacy of the prescription drug amount.
If an entity submits a WCMSA proposal to CMS’ COB Contractor and the submitter priced the future prescription drug treatment costs/expenses as being “Generic” and there is no “Generic” available, CMS will default to the AWP pricing for brand name drugs in determining the adequacy of the prescription drug amount.
CMS Prescription Drug Set-Aside Guidance for Submitters
Effective: June 1, 2009
Since the publication of the April 3, 2009 CMS policy memorandum announcing prescription drug reviews, which becomes effective June 1, 2009, submitters of Workers’ Compensation Medicare Set-aside Arrangements (“WCMSAs”) have raised several questions concerning how certain situations will be treated by CMS and the Workers’ Compensation Review Contractor (“WCRC”).
1. Source for Evaluation of Sufficiency of WCMSA Prescription Drug Component: The WCRC is using RED BOOK® Drug References 1 to evaluate the sufficiency of the prescription drug component of WCMSAs.
2. Documentation: It is imperative that submitters furnish accurate, complete, legible, and current medical and prescription drug records for the last two years that the claimant has been receiving treatment in connection with a workers’ compensation illness, injury, or disease.
It is CMS’ preference that WCMSA proposals are not submitted until the beneficiary or claimant has reached maximum medical improvement or “MMI,” as discussed in CMS’ July 23, 2001 memorandum, which reads in part “…These set-aside arrangements are typically not created until the individual s condition has stabilized so that it can be determined, based on past experience, what the future medical expenses may be….” In addition to the qualification of having realized a state of MMI, it is always CMS intention that the beneficiary or claimant receives the appropriate medical treatment as determined by his or her treating physician.
If WCMSA proposals are submitted once the beneficiary or claimant has reached a state of “MMI,” the prescription drugs used by the beneficiary or claimant should be known. However, if the prescription drugs are not obvious from the medical records, it is incumbent upon submitters to ascertain that information to the best of their ability, either through close coordination with the beneficiary or claimant, or his or her representative, treating physician(s), and/or pharmacy(ies) where he or she regularly has prescriptions filled. The CMS will determine the sufficiency of the WCMSA proposal as supported by the medical and other records provided.
Note: Submitters need to account for future prescription drug needs that are reasonably probable and predictable even if recent medical records or claims payment histories do
1 RED BOOK® Drug References is updated continuously. The CMS WCRC thus makes it a standard practice to utilize the most current version of this resource when evaluating the sufficiency of the prescription drug component of a given WCSMA proposal. not demonstrate their current use. For example, short courses of antibiotics are usually required for recurrent urinary tract infections, commonly seen with neurogenic bladders. Also, a course of narcotic pain medication is usually necessary for probable future surgery. If not, a conservative pricing method for these and other future probable prescription drug needs will be considered in evaluating the sufficiency of the prescription drug component of WCMSAs, in addition to reviewing current and past treatment patterns specific to the beneficiary or claimant and/or the injury after-effects while being treated.
3. Tapering of Use: Where the treating physician believes tapering is possible and is in the best interests of the beneficiary or claimant, CMS will consider all evidence in making a WCMSA determination, including medical evidence of current actual tapering.
4. Expiration of patent: Patents for brand name medications do expire and less expensive generic equivalents do usually become available thereafter. On the other hand, new more expensive brand name drugs often replace drugs whose patents are expiring. Finally, beneficiaries and claimants may insist on brand-name drugs even where generics are available. All of these concepts, along with the evidence submitted in a particular case, will be considered by CMS and the WCRC in determining the sufficiency of a proposed WCMSA amount.
5. Off-label use: Off-label use of medications in the United States is both legal and common. Once a drug has been approved for sale by the Food and Drug Administration (“FDA”) for one purpose, physicians are free to prescribe it for any other purpose that in their professional judgment is both safe and effective. Physicians are not limited to prescribing a drug only for official, FDA-approved indications.
6. Utilization review: Where submitters furnish utilization review reports indicating that a beneficiary or claimant should be taking none, fewer, different, or less frequent drugs, this evidence will be considered. Reports of actual drug use from treating physicians will be given more weight than utilization review reports.
7. Brand or generic: As stated in the April 3, 2009 CMS memorandum, where drugs are indicated and the submitter has not priced drugs, or where a submitter prices for a generic drug where there is none, CMS will compare the WCMSA proposal to average wholesale price for brand name drugs. If drugs are indicated, but the medical and other records are silent or unclear about whether a beneficiary or claimant is taking a brand or generic drug and both versions exist, then CMS will compare the WCMSA proposal to the generic drug where the submitter has proposed a generic drug, and CMS will compare the WCMSA proposal to the brand name drug where the submitter has proposed a brand name drug or has not proposed a drug at all. 8. Multiple manufacturers: Brand-name drugs are only available from one manufacturer, whereas generic drugs are available from multiple manufacturers. In the absence of supporting documentation concerning prices from generic drug manufacturers within the WCMSA submission, CMS will compare generic drugs in the WCMSA proposal and use the lowest priced generic drug as listed in the RED BOOK® Drug References in accordance with the April 3, 2009 procedure memorandum.
The CMS wishes to emphasize that CMS and the WCRC will review and consider all documents submitted with a WCMSA proposal. Submitters are encouraged to present any evidence they believe is helpful towards a set-aside determination. Nothing said in this guidance should be considered a discouragement of that principle. Also, CMS wishes to stress that while there may be some general guidelines that can be stated, most determinations rest on the individual facts and evidence pertinent to the particular claimant whose WCMSA proposal is being considered. Moreover, CMS may revisit this guidance periodically and is always seeking and researching new information on these and other subjects that affect the WCMSA review process.
DEPARTMENT OF HEALTH & HUMAN SERVICESCMS/
Centers for Medicare & Medicaid Services
7500 Security Boulevard, Mail Stop C3-14-00
Baltimore, Maryland 21244-1850CENTERSforMEDICARE&MEDICAIDSERVICES
DATE: June 8, 2010
FROM: Director
Financial Services Group
Office of Financial Management
SUBJECT: Medicare Secondary Payer–Workers’ Compensation–INFORMATION
TO: Consortium Administrator for Financial Management and Fee-for-Service Operations
This memorandum clarifies the guidance provided in the Centers for Medicare & Medicaid Services (CMS) May 14, 2010 procedure memorandum regarding the Rated Age (RA) language to be included on WCMSA proposals.
Effective immediately the Rated Age (RA) certification required by the May 14th memorandum is revised to:
“Our organization certifies that all rated ages we have obtained and/or have knowledge of regarding this claimant, and generated at any time on or after the Date of Incident for the alleged accident/illness/injury/incident at issue, have been included as part of this submission of a proposed amount for a Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA) to the Centers for Medicare & Medicaid Services.”
The CMS will not accept any variation or substitute wording. If a submitter is including RA information in its WCMSA proposal, the revised certification language must be included as written, with no exceptions. If this specific language is not included as part of the WCMSA proposal, CMS will not accept the RA provided. Instead, CMS will estimate the claimant’s remaining life expectancy using Actual Age. For the convenience of those already in the process of submitting a proposal, CMS will continue to accept the certification language required by the May 14, 2010 memorandum for proposals received up through and inclusive of June 30, 2010.
Note:
All other requirements of acceptable proof of a Rated Age for a claimant are unchanged. Acceptable proof of Rated Age is demonstrated through inclusion of independent rated ages on the letterhead of an insurance carrier or settlement broker.

CENTERS FOR MEDICARE Si MEDICAID SERVICES
Workers’ Compensation Medicare mSet-Aside Arrangement (WCMSA)Reference GuideVersion 2.5 Rev. 2016/4 AprilCOBR-Q1Q2-2016-v2.5
This guide was written to help you understand the process used by the Centers for Medicare & Medicaid Services (CMS) for approving proposed Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA) amounts and to serve as a reference for those choosing to submit such amounts to CMS for approval. Submitters may include injured workers themselves (claimants), their attorneys, Workers’ Compensation (WC) Medicare Set-Aside Arrangement (MSA) agents or consultants, or claimants’ other appointed representatives.
In order to comply with Section 1862(b)(2) of the Social Security Act, Medicare may not pay for a beneficiary’s medical expenses when payment “has been made or can reasonably be expected to be made under a workers’ compensation plan, an automobile or liability insurance policy or plan (including a self-insured plan), or under no-fault insurance.” If responsibility for the WC claim is in dispute and WC will not pay promptly, the provider, physician, or other supplier may bill Medicare as primary payer. If the item or service is reimbursable under Medicare rules, Medicare may pay conditionally, subject to later recovery if there is a subsequent settlement, judgment, award, or other payment. (See 42 C.F.R. § 411.21 for the definition of “promptly” with regard to WC.)
2.2 Reporting a WC Case
All WC occurrences that involve a Medicare beneficiary should be reported to the Benefits Coordination & Recovery Center (BCRC). If you are a Responsible Reporting Entity (RRE), use the Section 111 COB Secure Website for reporting. Otherwise, contact the BCRC by phone or mail. Customer Service Representatives are available Monday through Friday, from 8:00 a.m. to 8:00 p.m., Eastern Time, except holidays. The BCRC’s toll free number is 1-855-798-2627 or TTY/TDD: 1-855-797-2627 for the hearing and speech impaired.
Written reports of WC occurrences should be addressed to:
Medicare—Medicare Secondary Payer
MSP Claims Investigation Project
P.O. Box 138899
Oklahoma City, OK 73113-8897
NOTE: This mailing address is for reporting a WC occurrence, not for the submission of proposed WCMSA amounts. See What Are Workers’ Compensation Medicare Set-Aside Arrangements? for an explanation of WCMSAs, or Part 11.2 for the WCMSA submission address.
When contacting the BCRC to report a new WC occurrence by phone or by mail, please be sure to have the following information available:
• Injured person’s name
• Injured person’s Medicare Health Insurance Claim Number (HICN) or Social Security Number (SSN)
• Date of incident
• Nature of illness/injury
• Name and address of the WC insurance carrier
• Name and address of the injured person’s legal representatives
• Name of insured
• Policy/claim number
Once this information is received, the BCRC will apply it to the beneficiary’s Medicare record and send it to the Commercial Repayment Center (CRC) for processing. The CRC will issue a Conditional Payment Letter (CPL) or Conditional Payment Notice (CPN) to the insurer, copied to the beneficiary, explaining Medicare’s recovery rights with respect to conditional payments and outlining next steps in the process. Please note that Medicare’s interests cannot be determined until the specifics of the WC occurrence are noted on the beneficiary’s record. For inquiries after submission of the WC occurrence, beneficiaries and their representatives should contact the BCRC using the contact information above or in Appendix 1, and non-beneficiaries should contact the CRC at 1-855-798-2627 (TTY/TDD: 1-855-797-2627 for the hearing and speech impaired).
Note: If Medicare is pursuing recovery directly from the WC insurer, the beneficiary, attorney, or other representative will receive a copy of recovery correspondence sent to the WC insurer. For more information on insurer recovery, see the Non-Group Health Plan Recovery page: http://go.cms.gov/NGHPR.
2.3 Past and Future Medical Services
Generally, the term “past medical services” refers to Medicare-covered and otherwise-reimbursable items and services that the claimant receives before he or she obtains a WC settlement, judgment, award, or other payment. The term “future medical services” refers to Medicare-covered and otherwise-reimbursable items and services that the claimant receives after he or she obtains a settlement, judgment, award, or other payment.
In situations in which Medicare has paid for WC-claim-related care before the beneficiary has obtained a settlement, judgment, award, or other payment, those Medicare payments are referred to as “conditional payments.” They are considered conditional payments because Medicare pays under the condition that it is reimbursed when the beneficiary gets a WC settlement, judgment, award, or other payment.
Medicare is required by statute (42 U.S.C. § 1395y(b)) to seek reimbursement for conditional payments related to the claim. Further, Medicare is prohibited from making payment where payment has been made (that is, where the beneficiary obtains a settlement, judgment, award, or other payment). Medicare remains the secondary payer until the settlement proceeds are appropriately exhausted (“properly spent”). In many situations, the parties to a WC settlement choose to pursue a CMS-approved WCMSA amount in order to establish certainty with respect to the amount that must be properly spent before Medicare begins to pay for claim-related care.
3.0 What Are Workers’ Compensation Medicare Set-Aside Arrangements?
A WCMSA allocates a portion of the WC settlement for all future claim-related medical expenses that are covered and otherwise reimbursable by Medicare (“Medicare covered”). When a proposed WCMSA amount is submitted to CMS for review and the claimant (who may or may not be a beneficiary) obtains CMS’ approval, the CMS-approved WCMSA amount must be properly spent before Medicare will begin to pay for care related to the WC claim.
The goal of establishing a WCMSA is to estimate, as accurately as possible, the total cost that will be incurred for all medical expenses otherwise reimbursable by Medicare for claim-related conditions during the course of the claimant’s life, and to set aside sufficient funds from the settlement, judgment, or award to cover that cost. WCMSAs may be funded by a lump-sum single payment, or may be structured, with a fixed amount of funds paid each year for a fixed number of years, often using an annuity.
Any claimant who receives a WC settlement, judgment, or award that includes an amount for future medical expenses must take Medicare’s interest with respect to future medicals into account. If Medicare’s interests are not considered, CMS has a priority right of recovery against any entity that received any portion of a third-party payment either directly or indirectly—a right to recover, or take back, that payment. CMS also has a subrogation right with respect to any such third-party payment. “Subrogation” literally means the substitution of one person or entity for another. If Medicare exercises its subrogation rights, Medicare is a claimant against the responsible party and the liability insurer to the extent that Medicare has made payments to or on behalf of the claimant for services related to claims against the responsible party (and the responsible party’s liability insurance); that is, Medicare is substituting for the claimant in this situation. Medicare can be a party to any claim by a beneficiary or other entity against a responsible party or his or her liability insurance, and can participate in negotiations concerning the total liability insurance payment and the amount to be repaid to Medicare.
Medicare may also refuse to pay for future medical expenses related to the WC claim until the entire settlement is exhausted. These arrangements are typically not created until the individual’s condition has stabilized, so that it can be determined based on past experience what the future medical expenses may be. CMS prefers this, so that future medical and prescription drug costs can be planned with a reasonable degree of certainty.
Once the CMS-approved set-aside amount is exhausted and accurately accounted for to CMS, Medicare will pay primary for future Medicare-covered expenses related to the WC claim that exceed the approved set-aside amount.
4.0 Should I Consider Submitting a WCMSA
Proposal?
4.1 Considerations and Guidelines
A claimant may consider seeking CMS approval of a proposed WCMSA amount for a variety of reasons. The primary benefit is the certainty associated with CMS reviewing and approving the proposed amount with respect to the amount that must be properly spent. It is important to note, however, that CMS approval of a proposed WCMSA amount is not required.
4.1.1 Commutation and Compromise
WC cases may involve past medical expenses, future medical expenses, or both. When a settlement includes compensation for medical expenses incurred prior to the settlement date, it is referred to as a “WC compromise case.” When a settlement includes compensation for future medical expenses, it is referred to as a “WC commutation case.” A settlement also has 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 related to the WC claim. A WC settlement can have both compromise and commutation aspects. Please refer to the July 2001 WC RO Memorandum for more information.
4.1.2 Outstanding WC Claims
If a Medicare beneficiary has outstanding WC-related claims that were not paid by either Medicare or the WC carrier prior to the settlement, the beneficiary is required to pay for related unpaid medicals bills out of his or her WC settlement. Medicare cannot pay because it is secondary to the WC settlement.
4.1.3 Other Health Coverage
A WCMSA is still recommended when you have coverage through other private health insurance, the Veterans Administration, or Medicare Advantage (Part C). Other coverage could be cancelled or you could elect not to use such a plan. A WCMSA is primary to Medicare Advantage and must be exhausted before using Part C benefits to cover your WC claim-related expenses.
4.1.4 Hearing on the Merits of a Case
When a state WC judge approves a WC settlement after a hearing on the merits, Medicare generally will accept the terms of the settlement, unless the settlement does not adequately address Medicare’s interests. If Medicare’s interests were not reasonably considered, Medicare will refuse to pay for Medicare-covered services related to the WC claim until after the entire dollar amount of the WC settlement has been spent on such services. Medicare will also seek reimbursement if appropriate.
• If a court or other adjudicator of the merits (e.g., a state WC board or commission) specifically designates funds to a portion of a settlement that is not related to medical services (e.g., lost wages), then Medicare will accept that designation.
4.2 Indications That Medicare’s Interests Are Protected
Submitting a WCMSA proposed amount for review is never required. But WC claimants must always protect Medicare’s interests. A WCMSA is not necessary under the following conditions because when all three are true, they indicate that Medicare’s interests are already protected:
a) The facts of the case demonstrate that the injured individual is only being compensated for past medical expenses (i.e., for services furnished prior to the settlement);
b) There is no evidence that the individual 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 individual’s treating physicians conclude (in writing) that to a reasonable degree of medical certainty the individual will no longer require any Medicare-covered treatments related to the WC claim.
In addition, if a settlement leaves WC carriers with responsibility for ongoing medical and prescription coverage once the settlement funds are fully spent, then a WCMSA is not necessary.
Notes:
• If Medicare made any conditional payments for WC claim-related services furnished prior to settlement, then Medicare will recover those payments. In addition, Medicare will not pay for any WC claim-related services furnished prior to the date of the settlement for which it has not already paid.
• CMS will not issue “verification letters” stating that a WCMSA is not necessary.
5.0 WCMSA Funding Structures
There are two kinds of WCMSAs. A claimant may obtain a settlement that provides for a lump-sum WCMSA or a structured WCMSA.
5.1 Lump-Sum WCMSAs
A WCMSA can be established as a lump-sum arrangement where the claimant accepts a single payment intended to pay for all future medical expenses and disability benefits related to the WC claim. When a WCMSA is designated as a lump-sum commutation settlement, Medicare will not make any payments for claim-related medical expenses until all the funds within the WCMSA (including any interest earned on the funds in the account) have been completely exhausted. These same basic principles also apply to structured settlements. Generally, WCMSAs that are lump sums are easier to monitor than structured arrangements.
5.2 Structured WCMSAs
A WCMSA can also be established as a structured arrangement, where payments are made to the account on a defined schedule to cover expenses projected for future years. In a structured WCMSA, an initial deposit is required to cover the first surgical procedure or replacement and two years of annual payments. The initial deposit (“seed money”) is followed by subsequent annual deposits (or a shorter time period if CMS agrees to such), based on the anniversary of the first deposit. If in any given coverage year the deposited funds are not exhausted (i.e., used up, spent), they are carried forward to the next period and added to the next annual deposit. The whole fund, including carry-forwards, must be exhausted before Medicare will pay primary for any WC claim-related medical expenses. If the fund is properly spent in a given annual period, Medicare will pay primary for further WC claim-related medical expenses during that period. In the next annual period, the replenished WCMSA funds again must be used, until the WCMSA amount is properly spent.
6.0 Who Can Help with the WCMSA Process?
Setting up a WCMSA arrangement, submitting the proposal to CMS for approval, and selecting the best way to administer the arrangement can be complicated. If you are an injured worker who will need future medical treatment, an attorney may be able to explain this process and provide legal help. An attorney can also help you consider whether you should have a separate administrator for your WCMSA. You may also find it useful to seek advice from financial and tax professionals in the planning phases and once the WCMSA is established.
Once a WCMSA is established and funded, it must be administered. This can be done by the claimant, by the claimant’s representative payee, appointed guardian, or conservator, or by a professional administrator. The administrator must establish the WCMSA account, pay Medicare-covered services from the WCMSA account, and provide CMS with a reporting of the expenditures from the WCMSA.
7.0 How is CMS Approval of a WCMSA Amount Obtained?
Generally there are four steps involved in creating a CMS-approved WCMSA. These steps are explained in more detail in the sections that follow:
1. Analysis of the claim and medical information in order to determine the amount of money required for the fund
2. Negotiation of a tentative settlement and preparation of draft settlement documents to settle the WC case, incorporating terms for creation and administration of the WCMSA (CMS is not a party to the settlement)
3. Obtaining approval from CMS for the amount of the proposed WCMSA
4. Finalizing the settlement and funding the WCMSA
8.0 Should CMS Review a WCMSA?
If a proposed WCMSA amount meets the workload review thresholds outlined below, the proposal can be submitted to CMS for approval. If the parties to a WC settlement stipulate a WCMSA amount but do not receive CMS approval, then CMS is not bound by the amount stipulated by the parties, and it may refuse to pay for future claim-related medical expenses, even if they would ordinarily have been covered by Medicare. However, if CMS approves the WCMSA amount and that amount is later properly spent, Medicare will pay Medicare-covered, claim-related medical bills regardless of the amount of care the claimant continues to require.
There are no statutory or regulatory provisions requiring that you submit a WCMSA amount proposal to CMS for review. If you choose to use CMS’ WCMSA review process, the Agency requires that you comply with CMS’ established policies and procedures in order to obtain approval.
CMS reviews proposed WCMSA amounts in order to determine if the proposed amount is sufficient to cover future claim-related medical expenses. Note: A WCMSA amount should not be submitted to CMS when the resolution of the WC claim results in the medical portion of the claim being left open—that is, the resolution does not include medical expenses and the WC plan or carrier maintains ongoing responsibility for medicals (ORM), i.e., the WC plan or carrier will continue to pay for claim-related medical expenses after settlement.
8.1 Review Thresholds
CMS will review a proposed WCMSA amount when the following workload review thresholds are met:
• The claimant is a Medicare beneficiary and the total settlement amount is greater than $25,000.00; or
• The claimant has a reasonable expectation of Medicare enrollment within 30 months of the settlement date and the anticipated total settlement amount for future medical expenses and disability or lost wages over the life or duration of the settlement agreement is expected to be greater than $250,000.00.
Note: Please see Part 10.5 in this Reference Guide for more details about what information is included in determining this amount.
A claimant has a reasonable expectation of Medicare enrollment within 30 months if any of the following apply:
• The claimant has applied for Social Security Disability Benefits
• The claimant has been denied Social Security Disability Benefits but anticipates appealing that decision
• The claimant is in the process of appealing a denial of or re-filing for Social Security Disability benefits
• The claimant is 62 years and 6 months old
• The claimant has an End Stage Renal Disease (ESRD) condition but does not yet qualify for Medicare based upon ESRD
If a threshold is met, a WCMSA can be submitted to CMS for approval.
These thresholds are created based on CMS’ workload, and are not intended to indicate that claimants may settle below the threshold with impunity. Claimants must still consider Medicare’s interests in all WC cases and ensure that Medicare pays secondary to WC in such cases.
Also note that both of these workload review thresholds are subject to adjustment. CMS reserves the right to change or remove these thresholds based on Medicare’s interests. Claimants, employers, carriers, and their representatives should regularly monitor the CMS website at http://go.cms.gov/wcmsa for changes to these thresholds and for other changes in policies and procedures.Further, note that if a claimant’s WC settlement does not meet the current workload review thresholds, CMS will not issue a “verification letter” indicating that the review criteria have not been met, or indicating that a WCMSA is unnecessary. CMS will honor the threshold in effect at the time of settlement.
9.4.3 WCRC Review Considerations
After the WCRC case reviewer validates that the injury has been accepted as a compensable injury, the next step is to project related future medical care. These considerations are key to review accuracy:
• Are there previous injuries that affect the resolution of the accepted injury?
• Are there underlying medical conditions that will affect the type of future care or the length of care necessary to bring about the best possible outcome?
• Are there underlying conditions requiring concurrent medications or treatment, but which are not related specifically to this claim?
• Are non-treating provider reviews and examinations taking precedence over the treating providers’ treatment plan?
• Are the medical pricing rules used appropriate for the particular region?
The WCRC team reviews all of the submitted records and attempts to determine the future care required for the individual claimant, taking into consideration the claimant’s specific condition, other comorbidities, and the claimant’s past use of healthcare services. Reviewers use evidence-based rationale for their determinations, taking into account both published guidelines and current peer-reviewed medical literature.
Medical pricing may vary based on injury, age, location, and other factors. Each submission is reviewed independently of other submissions for claimants with the same injury and age. This accounts for any differences in WCMSA amount determination.
For example, a reasonably healthy and active 45-year-old claimant who recently had total knee replacement surgery is likely to require a revision of the surgery (second knee replacement) during his 30-year life expectancy, as the replacement joint wears out. However, another 45-year-old claimant with a recent total knee replacement but who is sedentary and in poor health due to diabetes mellitus and coronary artery disease may not require or be a satisfactory risk for such a revision in the future.
If a claimant might need a revision or replacement surgery in the last 1–3 years of life expectancy, the decision to include this revision in the WCMSA depends on the type of revision and on the claimant’s overall condition. For example, a claimant in the last 1–3 years of life expectancy is unlikely to have a revision of a total hip replacement surgery, but a spinal cord stimulator (SCS) for pain management would likely be revised if needed.
The WCRC considers both the claimant’s past history of treatment and the recent trending of treatment in determining plans for future treatment frequency. For example, if a claimant was seeing the physician every year initially, but records indicate more frequent visits recently, that will be considered in the determination. There is currently no plan to establish a set of standards for specific conditions.
The WCRC relies on evidence-based guidelines for prescription medication and medical treatment allocations; however, these are guidelines, not rules. The final determination is also based on the claimant’s past use and future recommended treatment as supported by the medical records and by current peer-reviewed medical literature. See Appendix 4 for a list of resources the WCRC uses.
The WCRC strives to comply with the laws of the state determined to be the appropriate state of venue. The reviewers research the applicable state regulations and fee schedules. In previous years, the WCRC has priced WCMSAs using the highest fee schedule zone possible within any state that uses fee schedules. Currently the WCRC prices WCMSAs according to the correct region for the state of venue. Hospital fee schedules are currently determined using the Diagnosis-Related Groups (DRG) payment for a Major Medical Center within the state, and this fee is applied to all locations within the state.
Multiple dates of injury that are settling can be included in one WCMSA. Document each date of injury (DOI) with the accepted and alleged body parts for each date of injury. The submitter also has the option to submit separate WCMSA proposals for different DOIs for the same claimant.
It is helpful if the submitter includes the ICD-9 or ICD-10 codes for each condition on each DOI. Do not use both ICD-9 and ICD-10 codes on one submission; use only ICD-10 codes for DOIs on or after 10/1/2015. (ICD-9 codes will continue to be allowed for submissions with a DOI of 9/30/2015 or earlier.)
It is also helpful to include medical records, a payment history, and detailed prescription history for each DOI being settled.
The reviewer will determine whether parties are settling on all body parts or portions of the claim, or if some portions of the claim will remain open. If the carrier will continue to pay for all claim-related medical care for the claimant, then the case is ineligible for review. If the proposal involves settling all medical claims for all body parts, the case is eligible for review. Also, if the agreement states that the carrier will continue to pay for some medical services but not others for the same body part, the WCRC considers this as not settling for all treatments for that body part. For example, the WCRC cannot work a case where a submitter wants to settle medical claims for a body part, but leave open prescription drugs for the same body part.
If settlement documents are included, the state listed in these documents is used as the pricing state. If no settlement documents are provided, the reviewer uses the pricing state listed in the submitter letter.
If the state does not have a fee schedule (Indiana, Iowa, Missouri, New Hampshire, New Jersey, Virginia, Wisconsin), the reviewer will price per actual charges, even if the submitter proposed fee schedule pricing. The reviewer will also default to actual charges if “Medicare fee schedule” is indicated in the cover letter. CMS uses only state fee schedules or actual charges.
If the state has a fee schedule and the submitter chooses fee schedule per the cover letter, the reviewer will use the most current version of the state fee schedule to price the medical services.
When annuity is selected, the submitter provides a proposed “seed” or initial deposit amount. This amount should include the cost of the first procedure and first replacement, if any. The seed includes the first two years of the annual amount. See Section 05 – Cover Letter in this Guide for instructions on how to calculate the seed amount, with an example.
The seed includes the cost of the first surgery, including all costs such as prescription drugs, physician fees, anesthesia fees, and facility fees. If the surgery is preceded by an associated trial, i.e., trial SCS or trial intrathecal (IT) pump, the cost of the trial is also included since it is considered part of the same procedure. If there are no surgeries, the first procedure (if any, such as injections) is included. Series of spinal injections are not included but series of knee viscosupplementation is included if three are anticipated to be accomplished as a series of three weekly injections.
The first replacement of Durable Medical Equipment (DME), prosthesis, or orthotics is included in the seed funds if the cost of such items exceeds $500.
The seed includes the cost of surgeries, procedures, drugs, or replacement items as noted above. It does not include the cost of diagnostic studies, complications, and hospitalizations for non¬surgical treatment.
Calculate life expectancy using standard age or median rated age.
Rated ages (RAs) are optional. For all cases with BCRC receipt dates of 10/01/08 or later (or reopened cases where the scan date of the reopening document is 10/01/08 or later), the submitter must supply a statement that all rated ages obtained on the claimant have been included. If this is missing, the WCRC will use actual age in processing the submission.
If an RA is provided, acceptable proof of the RA is necessary. Rated ages must name the claimant, must be by an insurance company, must be on insurance company or settlement broker letterhead, must be independent, and must give a specific rated age or life expectancy. If there is not at least one RA that meets these criteria, the WCRC will use actual age in processing the submission. Reviewers may drop RAs that are not valid.
If no RAs are provided, if there are no valid rated ages, or if the appropriate RA statement is not provided, actual age is used in calculating the life expectancy.
To determine life expectancy, the reviewer uses the current Centers for Disease Control (CDC) life expectancy table (see Section 15 – Rated Age Information or Life Expectancy for details). Per CMS memo of May 20, 2008, Table 1 for total population is used.
Independent Medical Examination (IME) reports, Qualified Medical Examination (QME) reports, and Agreed Medical Examination (AME) reports are not a substitute for medical records. If the submitter provides an IME report that notes the claimant has not been treated for a work injury since 2008, the reviewer also needs the 2007 and 2008 treatment records.
9.4.5 Medical Review Guidelines
Diagnostics
In general, the reviewers include x-rays every 3 to 5 years, but include yearly x-rays if there was or will be a major joint replacement. Magnetic Resonance Imaging (MRI) scans are included every 5 to 7 years. These are guidelines only. Since the determination is made on a case-by-case basis, other factors are considered, such as claimant life expectancy, past surgeries, functional status, age of injury, treatment pattern, and provider recommendations.
The WCRC follows the most recent guidance from CMS on SCS pricing and frequencies. Permanent placements of SCS or intrathecal (IT) pump devices are included every 7 years: the claimant’s life expectancy is divided by 7, decimals are dropped, and the whole number is used for determining replacement over the life expectancy.
Surgery/Procedure Pricing
Surgery pricing includes physician fees, facility fees, and anesthesia fees, if applicable.
• Physician fees: CPT codes are identified and priced per the fee schedule (or usual and customary charges if claimant is in an actual-charges state).
• Facility fee: DRG codes for inpatient procedures are priced for a major medical center in that state, unless the fee schedule has pricing for that DRG (such as Illinois). If the procedure is an outpatient procedure, pricing is per the Ambulatory Payment Classification calculator for a facility in that state, unless the fee schedule has a maximum reimbursement amount for that procedure.
• Anesthesia fee: anesthesia fee is calculated per fee schedule formula using a reasonable time for the specified procedure for the time-value unit and base value as established by the fee schedule, or Medicare and conversion factors per fee schedule.
• Preadmission Testing will be included where appropriate.
• Trials: If the surgery is preceded by an associated trial, such as for a spinal cord stimulator, the trial is assumed to be successful and included with the cost of surgery. This does not apply if there is evidence that the trial was performed and was unsuccessful.
9.4.6.1 Prescription Drug Review
The WCRC reviewer verifies that the prescription drugs included are for the direct treatment of the work injury or injuries by reviewing the submitted clinical documentation.
Validate that prescription drugs ordered and taken in the past two years were directly for treatment of the injuries.
• Determine if the drug products would be covered under the Part D benefit. This includes assessment of medically accepted indications (drug usage), drug dosage, and drug frequency.
• Determine if the claimant is taking brand or generic drug products.
• Price all drug products using AWP, with generic drugs being priced at the lowest non-repackaged generic AWP.
At any time during the process, if a reviewer is unsure of drug pricing, indication, or allocation amount, those questions are deferred to a pharmacist or pharmacist’s designee before the case is finalized.
The WCRC allocates drugs into WCMSAs based on whether the drug is used for a condition related to the WC claim, is considered a Part D or Part B drug, and is used for a medically accepted indication. The WCRC compiles a drug list from medical records and pharmacy records. This list is then used to project future drug costs for the duration of a claimant’s life expectancy. The reviewers must see prescription drug and medical treatment payment records/histories dated within 6 months of the date of submission or reopening. When evaluating drug use, the WCRC reviewers assess the drug dosage, frequency, formulation, patents expiring, newer more expensive drugs, and use of brand-name versus generic drugs. Various drug formulations can vary significantly in cost. For example, there are large differences in cost of oxycodone immediate release versus OxyContin (an extended release formulation of oxycodone). It is very important to gain an accurate picture of the specific formulation for an accurate pharmacy allocation.
Analytics’ Red Book database. The WCRC uses a program for drug pricing that uses Red Book flat files updated quarterly and monthly. For generic drugs, the WCRC uses the lowest non-repackaged generic drug AWP.
The WCRC prices for generic drugs unless one of the following applies, in which case the WCRC uses brand-name:
• A brand-name drug is in the proposal and there is an indication that the claimant is actually taking the brand-name drug.
• A generic is in the proposal, but no generic exists.
• A generic is in the proposal, but all the evidence indicates that the claimant is taking the brand-name drug.
• The claimant or claimant’s attorney insists on a brand-name drug in writing.
• No drugs are indicated in the submitted proposal, but the condition requires certain drugs, or the medical records indicate certain drugs. In this case, the WCRC will default to pricing for brand-name medications.
• Medically Accepted Indications and Off-Label Use
• For a drug to be covered under the Part D Benefit, and thus included in a WCMSA, it must be used for a medically accepted indication. A medically accepted indication is any use for a covered outpatient drug which is approved by the FDA, or a use which is supported by one or more citations included or approved for inclusion in the recognized compendia.
• Off-label use is when a drug is prescribed in a manner that is different from the FDA-approved product labeling. There are many off-label indications that are listed in recognized compendia, and thus would be covered under the Part D Benefit, and so should be included in a WCMSA.
• For example, trazodone is approved by the FDA for the treatment of major depressive disorder, but is commonly given off-label to treat insomnia. So the WCRC would include trazodone in a WCMSA if used to treat insomnia, if it is related to the workers’ compensation injury.
• Hydrocodone Combination Products
• Hydrocodone combination products were reclassified effective October 2014 from C-III controlled substances to C-II controlled substances. Normally, C-IIIs require a new prescription after five refills or after six months, whichever occurs first. C-IIs require new prescriptions at intervals no greater than 30 days; however, a practitioner may issue up to three consecutive prescriptions in one visit authorizing the patient to receive a total of up to a 90-day supply of a C-II. WCMSA guidelines changed on January 1, 2015 for all new cases submitted after that date to allocate a minimum of 4 healthcare provider visits per year when schedule II controlled substances (including hydrocodone combination products) are used continuously, unless healthcare provider visits are more frequent per medical documentation.
Many drug products in workers’ compensation are used on an as-needed basis. This is rightfully so, as many drug products are used to relieve pain on an as-needed basis. There are drug products that may be used as needed, but there are other drug products that should be used continuously. When allocating as-needed (PRN) drugs, the WCRC first assesses if the drug should or may be used under a PRN designation or if the claimant is just being non-compliant or non-adherent. Note: non-compliance or non-adherence is not a reason to reduce a WCMSA amount.
The WCRC defines PRN drugs as those with a variable usage in a two-month or greater period within the last year of pharmacy claims records, as long as the variability is not related to non¬adherence. They also assess the medical records to determine how the PRN drugs are documented. For example, is the prescription written using a PRN frequency? If so, this signals a possibility that as-needed use may occur in the future.
Reviewers at the WCRC assess the past pharmacy and medical history in these cases to
determine a reasonably probable usage of these drugs in the future. For example, some things the WCRC considers are:
• Is the claimant’s condition improving?
• Is the claimant’s condition getting worse?
• Has the drug usage gone up or down in the past three to six months?
• Has the claimant started on any other medication that may reduce the as-needed drug usage?
• Has the claimant received a medical intervention that has changed their medical situation so as to reduce their drug usage, or has their condition declined that they may need more drug usage in the future?
The WCRC mainly bases as-needed drug usage on past drug history, and makes judgments on what may be reasonably probable in the future based on the claimant’s current condition.
Drug Weaning/Tapering
Drug weaning commonly occurs with pain medications, such as opioids, especially when claimants’ work injuries improve. The WCRC takes all evidence of drug weaning into account, although in most circumstances the WCRC cannot assume that the weaning process will be successful. Usually, the latest weaned dosage is extrapolated for the life expectancy, but again, they assess all records when making these types of determinations. Where a treating physician believes tapering is possible and in the best interests of the claimant, CMS will consider all evidence in making a WCMSA determination, including medical evidence of current actual tapering.
When submitting one or more rated ages with a request for CMS approval of a WCMSA, the following criteria must be met in order for the rated age to be considered in reviewing the case:
1. Rated age confirmation with original proposal documents as outlined in current
procedure memorandums. CMS will not accept any variation or substitute wording. As of June 30, 2010, the statement is as follows: “Our organization certifies that all rated ages we have obtained/and or have knowledge of regarding this claimant, and generated at any time on or after the Date of Incident for the alleged accident/illness/injury/incident at issue, have been included as part of this submission of a proposed amount for a Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA) to the Centers for Medicare & Medicaid Services.” If this specific language is not included as part of the WCMSA proposal, CMS will not accept the RA provided. Instead, CMS will estimate the claimant’s remaining life expectancy using Actual Age.
2. A stand-alone statement indicating that all rated ages obtained on the claimant are included.
3. Each rated age is presented on company letterhead for each insurance company (or companies) that made the rating and for each settlement broker that obtained them from the insurance company. Note: Letterhead includes the name and address of the insurance company or settlement broker.
4. All rated age sources shall be independent, in fact and appearance, of the submitter, carrier, and claimant.
5. If more than one rated age is submitted, CMS will use the median of all rated ages submitted.
6. When multiple rated ages are provided, the submitter becomes subject to enforcement of the requirement to use the median rated age and must provide all rated ages to CMS.
7. All rated ages shall be accompanied by a written justification on how such age was determined. For example, if a rated age obtained from life insurance companies for like injuries/illnesses is the method of evaluation, include documentation to support the life expectancy. CMS will project the cost of the claimant’s future treatment over the claimant’s life expectancy, using the Centers for Disease Control (CDC) Tables (http://www.cdc.gov/nchs/data/nvsr/nvsr61/nvsr61_03.pdf).
Please see the WCMSA site (http://go.cms.gov/wcmsa) for information on the latest tables to use.
Do not include the following:
• Actuarial charts or life expectancy charts from the CDC or elsewhere, or statements that there are no rated ages.
• Do not include any documents on rated ages that contain redacted data. They will not be considered.
10.4 Section 20 – Life Care / Future Treatment Plan
A Life Care Plan is a dynamic document based on published standards of practice,
comprehensive assessment, data analysis, and research that provides an organized concise plan for current and future needs with associated costs for individuals who have experienced catastrophic injury or have chronic health needs. A life care plan is appropriate when the claimant’s injury or disease is extensive and serious, e.g., paraplegia, quadriplegia, brain damage.
Although submission of a life care plan is optional, you are required to include drug and dosage lists. Include all pricing charts, cost projections, pricing information, and explanatory narratives and analyses.
When the parties to a WC settlement present CMS with “life care plans” or similar evaluations prepared by non-treating physicians to support and justify their proposed WCMSAs, Medicare will consider accepting such evaluations if the physician does all of the following:
• Examines the claimant;
• Reviews the claimant’s medical records;
• Contacts any of the claimant’s treating physicians (if applicable);
• Is available to answer CMS’ questions;
• Prepares a report that summarizes the above; and
• Offers a written medical opinion as to all of the reasonably anticipated future medical needs of the claimant related to the claimant’s work injury or illness/disease.
Please note that such a life care plan or evaluation is not automatically conclusive. The CMS may not credit the report if there is information that calls the evaluation or plan into question for some reason, such as contrary evidence, internal conflicts, or if the plan is not credible on its face.
Indicate How Much of the Settlement is for Past v. Future Medical Expenses
If the settlement does not specifically account for past versus future medical expenses, it will be considered to be entirely for future medical expenses once Medicare has recovered any conditional payments it made. This means that Medicare will not pay for medical expenses that are otherwise reimbursable under Medicare and are related to the WC case, until the entire settlement is exhausted.
Example: A claimant is paid $50,000 by a WC carrier, and the parties to the settlement do not specify what the $50,000 is intended to pay for. If there is no CMS-approved WCMSA, Medicare will consider any amount remaining after recovery of its conditional payments as compensation for future medical expenses.
Additionally, please note that any allocations 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 approved by Medicare.
Example: The parties to a settlement may attempt to maximize the amount of disability/lost wages paid under WC by releasing the WC carrier from liability for medical expenses. If the facts show that this particular condition is work-related and requires continued treatment, Medicare will not pay for medical services related to the WC claim until the entire settlement has been used to pay for those services.
Use of WC Fee Schedule vs. Actual Charges for WCMSA
CMS uses either the WC fee schedule (for states that have such schedules) or the full actual charges for its review of a proposed WCMSA based on whichever methodology is used by the individual or entity submitting the proposal.
Note: The following states do not have a fee schedule: Indiana, Iowa, Missouri, New Hampshire, New Jersey, Virginia, and Wisconsin. Do not use a fee schedule in a state that does not have a fee schedule.
The CMS reviews WCMSAs on a case-by-case basis in order to determine whether Medicare has an obligation for services provided after the settlement that originally were the responsibility of the WC plan or insurer. Accordingly, in reviewing a WCMSA, CMS must know whether the arrangement is based on WC fee schedule amounts or full actual charge amounts.
Medical Records
Include the first report of injury, medical records of major surgeries, and medical records for the last two years of treatment, no matter how long ago those last two years were or who paid for the services. Also include depositions from medical providers. Ensure that any “last treatment date” mentioned in the life care plan, carrier letter, or payment history is accompanied by a medical record that matches that date, as well as all medical records for the last two years prior thereto.
• All medical records from all treating physicians for the last two years of treatment related to the claim, even if the WC carrier has not paid for the treatment and even if the treatment was long ago. Remember, CMS needs medical records for the last two years of treatment, which may not be within the last two calendar years.
For example, if the carrier’s records indicate that the last treatment was in February 2006, then treatment records for February 2004–February 2006 should be supplied. A statement indicating that “the claimant has not been treated in the last two years” is not a substitute for medical records for the last two years of treatment. Remember, the information is not for the last two calendar years, but the last two years of treatment.
• If the claimant has not been treated by any doctor for any reason within the last two calendar years, CMS generally needs all treating physicians to state when the last two years of treatment for any reason occurred. The treating physicians must also state, in writing, the specific condition/injury the claimant was last treated for, and any related therapy.
Do not submit:
• Independent medical evaluations. These are not treatment records, nor are invoices or insurance forms. (They may be appropriate to determine future treatment
requirements under certain circumstances; they are not appropriate as medical records.)
• Incomplete or insufficient medical treatment records for the last two years of treatment or incomplete/insufficient medical records for that period. Some examples of this include:
a) A letter from the claimant or his attorney indicating that the claimant has not received treatment for the work-related injury in the last x years
b) A letter from the carrier or its attorney indicating that it has not paid for treatment for the last x years
c) A statement from the carrier or attorney that no treatment is being provided; the claimant is only receiving medications
d) A letter enclosing recent independent medical evaluations, which indicate that the claimant has not been treated for the work injury in x years
e) A statement from the carrier or its attorney that the claimant’s last treatment date was xx/xx/xx, but the file shows 1) the claimant is moving and will receive further treatment in the new location, 2) the claimant is currently in severe pain or is scheduled for surgery, 3) the claimant now treats with the Veterans’ Administration, or 4) the last medical record received is dated before the last treatment date
f) 15.2.1 Compromise of Future Medical Expenses
g) CMS does not compromise or reduce future medical expenses related to a WC claim. Some submitters have argued that 42 C.F.R. § 411.47 justifies reduction to the amount of a WCMSA. The compromise language in this regulation only addresses conditional (past) Medicare payments. The CMS does not allow the compromise of future medical expenses related to a WC claim. In addition, CMS has no process to accept up-front cash payments in lieu of a CMS reviewed WCMSA.
h) 15.2.2 No Waivers of Specific Services Related to Future Medicals
i) There are no means by which a claimant can permanently waive his or her right to certain specific services related to a WC case and, thereby, reduce the amount of a WCMSA. CMS cannot approve settlements that promise not to bill Medicare for certain services in lieu of
j) 49 WCMSA Reference Guide
k) including those services in a WCMSA. This is true even if the claimant offers to execute an affidavit or other legal document promising that Medicare will not be billed for certain services if those services are not included in the WCMSA.
l) Account Set-Up and Administration 17.1 Administrators
m) WCMSAs should be administered by a competent administrator (a professional administrator, the representative payee, the claimant, etc.). When a claimant designates a representative payee, appointed guardian/conservator, or has otherwise been declared incompetent by a court; the settling parties must include that information in their WCMSA proposal to CMS.
n) Claimants may also administer their own WCMSAs, if State law allows. Claimants should submit annual self-attestations, just as a professional administrator would. This arrangement is subject to the same rules and reporting requirements as any other WCMSA. See Part 17.5 for more on this annual attestation.
o) 17.2 Interest-Bearing Account
p) You must deposit the total WCMSA amount (future medical treatment and future prescription drug treatment) in an interest-bearing account, separate from any other account such as personal savings or checking.
q) 17.3 Use of the Account
r) WCMSA funds may only be used to pay for medical services and prescription drug expenses related to your WC claim.
s) WCMSA funds may only be used to pay for those expenses that would normally be paid by Medicare. Examples of some items that Medicare does not pay for are: acupuncture, routine
t) dental care, eyeglasses or hearing aids; therefore, these items cannot be paid from the WCMSA account. For a more extensive list of services not covered by Medicare, get a copy of the booklet “Medicare & You” from your Social Security office or from http://www.medicare.gov/medicare-and-you/medicare-and-you.html.
u) If you have a question regarding Medicare’s coverage of a specific item, service, or prescription drug, to determine if you may pay for it from the WCMSA account, please call 1 800-MEDICARE (1-800-633-4227) or visit CMS’ website: http://www.medicare.gov/.
17.4 Medicare Entitlement and WCMSAs
Your Medicare entitlement status may change over time. Your use of the WCMSA should not. Use of the WCMSA is limited to services that are related to the WC claim and that would be covered by Medicare if the individual were a Medicare beneficiary. The same requirements that Medicare beneficiaries follow for reporting and administration are to be used by non-beneficiaries as well. The CMS will not pay for any expenses related to the WC claim or settlement until a self-attestation document is sent to the BCRC upon Medicare entitlement or re¬establishment of Medicare entitlement. At that time, the BCRC will update the records Medicare uses in the claims process. Even if there is no CMS-approved WCMSA, any funds from a WC settlement attributable to future medicals that are remaining at the time a claimant becomes a Medicare beneficiary must be used for Medicare-covered services related to the WC claim until such funds are exhausted. Only then will CMS pay for Medicare-covered services related to the WC claim.
17.4.1 Loss of Medicare Entitlement after CMS Approval of a WCMSA
Claimants are not entitled to release of WCMSA funds if they lose their Medicare entitlement. However, the funds in the WCMSA may be used for medical expenses specified in the WCMSA until Medicare entitlement is re-established or the WCMSA is exhausted.
17.4.2 Use of WC Settlement Funds Prior to Medicare Entitlement
For claimants who are not yet Medicare beneficiaries and for whom CMS has reviewed a WCMSA, the WCMSA may be used prior to becoming a beneficiary because the accepted amount was priced based on the date of the expected settlement.
17.5 Annual Attestation and Record-Keeping
The administrator of the account will be responsible for keeping accurate records of payments made from the account. These records may be requested by CMS as proof of appropriate payments from the WCMSA account. (For more on Medicare contractors’ monitoring accounts, see Part 18.0.)
Every year, beginning no later than 30 days after the 1-year anniversary of settlement, the administrator must sign and send a statement that payments from the WCMSA account were made for Medicare-covered medical expenses and Medicare-covered prescription drug expenses related to the WC claim. This annual attestation must be submitted no later than thirty days after the end of each year, beginning one year from the establishment of the WCMSA account. Annual self-attestation should continue through depletion of the WCMSA account. A final self-attestation should be forwarded to CMS once the WCMSA account becomes permanently depleted. CMS has the right to demand and receive a complete accounting of payments made from the account at its discretion.
Blank attestation letters with the appropriate identification numbers are included in the approval package sent by CMS. This letter includes the total amount of WCMSA outgoing payments that should separately identify the amounts spent for medical treatment and for prescription drug treatment. For example, if the total WCMSA 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 administrator must send an annual attestation that identifies how much of the $10,000 was spent for medical expenses and how much was spent for prescription drugs. If you use the account funds appropriately on claim-related expenses that might otherwise have been covered by Medicare, you may reallocate the relative amounts for medical expenses vs. prescription drugs. For example, you may have set aside $7,000 for prescription drugs and $3,000 for medical expenses, and you may instead spend $6,000 and $4,000 respectively. CMS will still consider the $10,000 appropriately spent.
You may use the WCMSA account to pay for the following costs that are directly related to the account:
• document copying charges
• mailing fees/postage
• any banking fees related to the account
• income tax on interest income from the set-aside account
You may not use the WCMSA account to pay for:
• administrative fees
• expenses for administration of the WCMSA
• attorney costs for establishing the WCMSA
If such administrative funds are part of your settlement, do not combine those funds with the WCMSA, as CMS will not recognize administrative fees as legitimate WCMSA expenses.
Should a WC settlement provide for items and services that are not covered by Medicare but later become covered, those funds should then be considered part of the set-aside and treated accordingly, i.e., used to pay for any services as they were designated in the non-Medicare portion of the set-aside included in the WC settlement. These funds do not have to be transferred to a separate WCMSA bank account or be included in the annual WCMSA attestation.
18.0 CMS’ Monitoring
CMS will not monitor the money spent from the WCMSA until the claimant becomes Medicare-eligible (a beneficiary). However, if you have a WCMSA as part of your settlement, the WC-related medical expenses should be paid from the WCMSA even before the claimant becomes a beneficiary. Medicare beneficiaries and claimants who are not yet beneficiaries follow the same reporting rules discussed in Part 17.5 above. When the RO approves a WCMSA, CMS will check the National Medicare Enrollment database regularly to find out when a claimant becomes enrolled in Medicare. Once the claimant is enrolled in Medicare, the BCRC is responsible for monitoring the individual’s case.
The WCMSA administrator must send annual attestations summarizing the account transactions to the contractor responsible for monitoring the case. The contractor is then responsible for verifying that the funds from the WCMSA were spent on medical services for Medicare-covered services, or to pay the tax for the interest income from the account. Additionally, the contractor must ensure that Medicare makes no payments related to the WC claim until the WCMSA has been used up.
19.0 What Happens if Circumstances Change? 19.1 WCMSA is Under-Funded
Medicare does not make any payment until CMS can verify that the funds apportioned to the period, including any carry-forward amount, have been completely exhausted as set forth in the WCMSA.
19.2 Death of the Claimant
If a claimant dies before the WCMSA is completely exhausted, the RO and the BCRC will ensure that all claims have been paid. Then any amount left over in the WCMSA may be disbursed pursuant to state law, once Medicare’s interests have been protected. This may involve holding the WCMSA 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 of 12 months after the date of service. Often, the settlement itself will dictate the appropriate dispersal of funds upon the death of the claimant.
19.3.1 Funds Left Over/Carried Forward
If funds for a structured WCMSA are not exhausted during a given period, then excess funds must be carried forward to the next period. The threshold after which Medicare would begin to pay for expenses related to the claim would then be increased in any subsequent period by the amount of the carry-forward.
Example: A structured set-aside is designed to pay $20,000 per year over the next 10 years for an individual’s Medicare-covered services. Medicare would begin paying covered expenses in any given year after this $20,000 is exhausted. However, in 2012 the injured individual needs only $15,000 to cover all related expenses. The administrator would need to carry forward the excess $5,000 into 2013. Therefore, in 2013 a total of $25,000 of Medicare-covered expenses would need to be spent before Medicare would begin to cover claim-related expenses, but only for the balance of 2013. This carry-forward process continues until the accumulated carry-forward plus the payment for a given year is exhausted.
19.3.2 Funds Used in a Given Period
If a structured WCMSA proves to be under-funded for a given period because the funds are exhausted by the claimant’s medical expenses before the period ends, and if CMS receives verification of exhaustion of both the structured amount for the period and any available roll¬over funds, then Medicare will pay for additional medical expenses incurred during this period.



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