Pennsylvania Workers’ Compensation Settlements and Medicare Set Asides

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When you settle your Workers’ Comp claim, the employer/insurance carrier will pay you a lump sum that covers what they would have paid you as ongoing benefits. This money will likely include payment for lost earnings you will continue to face, but it will also include money for medical care. If a significant portion of the settlement is for future medical care that you expect to get, and you currently or potentially will qualify for Medicare, then some of the money needs to be set aside to assure Medicare you will use that money rather than billing them for services to treat your work injury.

A Workers’ Compensation Medicare Set Aside is a financial arrangement that allocates a certain portion of a Workers’ Comp settlement for future medical care. The Medicare Set Aside funds must be used up before Medicare pays for the work-related injury or illness. This essentially assures Medicare that the employer/insurance carrier is paying for your future medical care related to the injury, not them.

For help with your claim and potential settlement, contact Cardamone Law’s Certified Pennsylvania Workers’ Compensation Specialists at (267) 651-7945 today.

What is the Purpose of a Medicare Set Aside in a Pennsylvania Workers’ Comp Settlement?

The purpose of a Medicare Set Aside is to protect Medicare’s interests. Medicare doesn’t want the burden of work-related medical treatment shifted to them; when you get hurt at work, your employer and their insurance carrier are supposed to pay for that, not Medicare. Indeed, Medicare is a secondary payer, and it needs assurances that they are not going to start getting bills that should have been paid by your employer. The Medicare Set Aside protects Medicare by ensuring that the Workers’ Compensation insurer is funding payments for future work-related treatment.

How Does a Workers’ Comp Medicare Set Aside Work?

If you were getting ongoing benefits for a work-related injury, then the insurance carrier would continue to pay for your medical care related to the injury as it shows up. If you go through a settlement, all of the money is already paid to you, and you cannot go back to the insurance carrier for more coverage. Medicare essentially wants assurances that your settlement will cover any future care you need so that they do not have to. We accomplish this by setting up a set-aside, which is literally money set aside or put into a different account specifically to cover your future medical care related to this injury.

Example

Seeing an example of this is extremely helpful: Imagine you slipped a disc in your back while lifting a box at work. Let’s imagine that you needed surgery initially, but then your doctors recommend that you see a chiropractor or physical therapist every 6 months for the rest of your life. If you continue to receive ongoing medical benefits, then the insurance carrier would pay for that appointment every 6 months. However, most insurance carriers do not want open cases on the books for decades, so they would rather settle the case, giving you the money ahead of time to cover those periodic appointments as part of your settlement.

How the Set Aside Works

When you are already on Medicare or you might be on Medicare soon, a set aside is used to show Medicare that the money for those ongoing care needs has already been provided by the insurance carrier and set aside for those costs. Then, as you go to these appointments every 6 months, you would pay for them from the set aside rather than billing Medicare.

Case-By-Case Analysis

The question of whether the insurance carrier settled for a fair value and whether your set aside contains enough money to cover those future appointments is a matter our Pennsylvania Workers’ Comp lawyers can help you address on a case-by-case basis. It is also something that changes depending on your care needs. For example, something like a check-up every 6 months might have a predictable cost, but something like cancer is going to be a lot harder to predict when it comes to future care needs and costs.

When Medicare Set Asides Are Required for Workers’ Comp Settlements in Pennsylvania

The Medicare Set Aside process is done on a case-by-case basis. There is no blanket requirement that every case has a Medicare Set Aside, and, in fact, many cases would not need one because you either are not on Medicare or there is little chance of you needing Medicare in the near future. While no statute requires a Medicare Set Aside, it is highly recommended or required in the following situations.

Required Situations

First, if you are already on Medicare, then you probably need a set aside. Medicare recipients are going to be under the most scrutiny for set asides – and at the most risk of Medicare denials if they do not have one.

Alternatively, if you are going to be on Medicare in the next 30 months, it may be a good idea to use a set-aside. When we talk about “future medical expenses,” these are usually going to be services you will get in the next few months or years, as anything beyond that is harder for a doctor to be certain about. This means that if there is any chance you will soon be on Medicare before you get all of the work-related injury treatments you need, you might need a set aside established.

Second, there is a monetary threshold where Medicare Set Asides become necessary: The Center for Medicare and Medicaid Services (CMS) will review a Workers’ Compensation Medicare Set Aside proposal in two situations. If you are actually a Medicare beneficiary already, then they will only look at a set aside if your settlement is over $250,000. Similarly, if you are expected to be on Medicare within the next 30 months after the settlement and the anticipated total settlement for future medical and disability/lost wages over the life or duration of the settlement is expected to be greater than $250,000, then they will also check the set aside.

Potential Situations

Attorneys and injured workers who are involved in Pennsylvania Workers’ Compensation cases should be cautioned that every settlement has to consider Medicare’s interests.

Does that mean every case needs a Medicare Set Aside? No. Per the above, CMS will only review settlements for a Medicare Set Aside when certain factors apply. But, to protect yourself, it is recommended that you have a lawyer assess your case and potentially set up a Medicare Set Aside for edge cases as well.

Tips for All Settlements

In any case, even where you can be pretty sure Medicare will not be involved, there are a few steps you can take in how you structure the settlement to avoid any potential issues.

In many cases, your attorneys should ensure that a certain portion of the settlement proceeds are clearly designated as future medical expenses for treating this work injury, even if a set aside is not required. This is especially helpful in certain cases where 1.) the claimant is on Medicare already, 2.) the claimant will soon be on Medicare, 3.) the Pennsylvania Work Comp Settlement is large, 4.) you reasonably expect some future work-related medical treatment to take place, or if there is a combination of these factors.

To do this, your lawyer would insert language into the Pennsylvania Compromise and Release Agreement that Claimant (i.e., you) will set aside X amount of dollars to pay for future work-related treatment. Our lawyers can add this language into standard settlement language or negotiate with the insurance carrier to include it in any settlement language or documents they provide. Usually, insurance carriers are going to have no problem with this language being included, as it really just clarifies what portions of the payments are for what needs. Many settlements will already include similar language, but it is important to be precise.

Are Set Asides Required for Annuities?

Many Workers’ Comp settlements are considered lump sum settlements because they are paid as one settlement instead of as ongoing benefits. However, many lump sum settlements are still dispersed to the injured worker as annuities, with periodic payments. In these cases, how do you determine if the settlement meets the $250,000 threshold for a set aside, and how do you set aside the money if you do not have it all at once?

Medicare determines the value of an annuity based on how much the annuity is expected to pay over the life of the settlement, not on the present-day value or cost of funding the annuity. Many defendants are more concerned with the present-day value – the conversion of future payments to what they are worth today – so it is important for your Workers’ Compensation lawyers to assess the value the way that Medicare will look at it.

As for how you set aside the money for future medical care, you do it the only way you can: as the money comes in, the portion assigned as future medical care costs is saved separately. You do not have the whole pot of money at the outset to set it aside all at once, so you set it aside as it comes in. In the settlement agreement, the amount set aside for medical care will be listed to help assure Medicare it is being properly attributed to medical care for the work injury.

What Happens if I Don’t Have a Medicare Set Aside and Need One?

There are a few potential risks to skipping a Medicare Set Aside when you actually need one.

First, the judge will usually require the settlement to be approved by CMS before entering it, which means that if you need a set aside and do not have one, Medicare will reject the settlement. This can delay settlement and potentially hinder your ability to get the funds you need, so always have a lawyer review your settlement and discuss the process with you before it gets to the stage of potentially being rejected.

Second, if there were no red flags that a set aside was needed, but then you end up on Medicare sooner than you thought, you could run into difficulties getting your care approved or covered by Medicare. If Medicare thinks that you are trying to use them as the primary coverage for work-related injuries after your settlement, then they might deny the claim saying that they are only able to be the secondary coverage. This would make it harder for you to get care and potentially jeopardize your Medicare coverage. If you ultimately did reserve the money from your settlement for future medical care costs, this might never come up in the first place, but if Medicare wants proof of a set aside and you don’t have it, it could hurt your benefits.

Third, Medicare Set Asides are separate accounts that have limited uses; you cannot just mingle these funds with the rest of your money. That means that set asides are often ignored when it comes to assessing your eligibility for other need-based programs like SSI, Medicare, SNAP (food assistance), CHIP (child health insurance), Medicaid, and more. If your money isn’t in a set aside, it could make you seem “wealthier” than you truly are, hurting eligibility for these kinds of programs.

Can I Skip a Medicare Set Aside if I Promise Not to Use Medicare for Work-Related Costs?

You cannot just promise not to use Medicare for your future medical care needs related to the work injury. The regional officers who review the Medicare Set Asides cannot approve settlements that simply promise not to bill Medicare; they need hard evidence that the money is actually set aside.

When Do I Not Need a Medicare Set Aside for Workers’ Comp Settlements

As mentioned, not every case is going to need a Medicare Set Aside. If the settlement is under $250,000 or you are not on Medicare now and will not be on Medicare in the next 30 months, CMS will not require approval first, but you could be in an edge case where a set aside might be prudent. However, the following factors often mean that you decidedly do not need a Medicare Set Aside.

First, you won’t need a set aside if your settlement is only compensating you for past medical care. This often happens in cases where the coverage was contested and you had to pay for your own care in the meantime while the case went to a Workers’ Comp Judge. If the facts of your case and the language of the settlement are clear that the only medical payments in the settlement are for past medical care, you do not need a set aside.

Second, it needs to be clear in your settlement that you are not trying to rearrange the settlement just to doge a situation where a Medicare Set Aside is needed. For example, if you have clear future care needs but your settlement includes $0 for future medical care and $250,000 listed as something else, it is pretty evident that that was mislabeled just to avoid needing a set aside. As long as you’re not cheating the system, this shouldn’t be an issue.

Lastly, a Medicare Set Aside isn’t necessary if your doctor can show that you don’t need future medical care for the injury. Your doctor’s report can attest that, to a reasonable degree of medical certainty, you will no longer require any Medicare-covered treatments for the work injury, and that should be enough to show Medicare that you aren’t going to run into any problems with trying to bill them for your future medical care.