The Centers for Medicare & Medicaid Services (CMS) will begin imposing mandatory requirements on .all workers' compensation insurers and self-insured employers to report information to CMS in regard to most claimants who are Medicare beneficiaries (or are eligible to receive Medicare benefits even if not enrolled) and are receiving or seeking workers' compensation benefits. These new mandatory reporting requirements have once again brought to the forefront of workers' compensation litigation the need to understand the interplay between workers' compensation and Medicare benefits.

Federal regulations preclude Medicare from making payment for medical services when payment has been made or can be reasonably expected to be made under a workers' compensation law or plan. If Medicare makes medical payments that are later determined to be related to a workers' compensation injury (referred to as conditional payments), Medicare is entitled to reimbursement of those payments. In addition, to make sure that the liability for payment of future medical treatment related to a work injury is not transferred from the workers' compensation carrier or claimant to Medicare after the settlement of a workers' compensation claim, federal regulations require that Medicare's interests must be considered in workers' compensation settlements (see 42 U.S.C. 1395y(b)(2) and 42 CFR 411.46-47).

To meet the requirements imposed by these federal regulations, four issues must be considered by the parties to a workers' compensation claim:

1. Mandatory Reporting

It is anticipated that by Spring 2010, it will be mandatory for all workers' compensation insurers and self-insured employers to report to CMS information on most claimants who are Medicare beneficiaries (or are , eligible to receive Medicare benefits even if not enrolled) and are receiving workers' compensation benefits. In order to comply with this mandate it is imperative that. all parties to a workers' compensation claim gather information on a claimant's Medicare status early in a claim, The information obtained should include whether the claimant is currently receiving or eligible for Medicare, as well as whether the claimant has a "reasonable expectation" of being Medicare eligible within the next 30 months.

2. Determination of Conditional Payments made by Medicare

The determination of the amount of conditional payments made by Medicare on behalf of a workers' compensation claimant is important in litigated claims, as well as in claims moving toward possible settlement, In litigated claims, an award of benefits to a *claimant means that the insurer/self-insured employer becomes responsible for repayment of any Medicare conditional payments made during the litigation. In cases of possible settlement, the determination of conditional payments made is essential to the negotiation process as the settlement documents must address which party will be liable for repayment of conditional . payments made by Medicare.

Before preliminary conditional payment information can be obtained from CMS, a party to the claim must notify the coordination of benefits coordinator (COBC) (at 600.999.1118) of the pending claim and request conditional payment information. Until such notice is made, the file will not be reviewed by CMS for identification of possible conditional payments. This is a separate step from submitting a Medicare Set-Aside proposal (MSA) to CMS for review, and simply submitting the MSA, will not trigger the CCBC to produce conditional payment information. Claimants may obtain preliminary conditional payment information at www.mymedicare.gov after obtaining a PIN number. Information on conditional payments can also be obtained by any third-party administrator (TPA) or insurer if made on official stationary or by any party with a release signed by the claimant.

CMS warns that the accuracy of the charges identified as conditional payments depends on the accuracy and specificity of the information provided by the parties to CMS as to the nature and extent of the work injury. An overly broad or inaccurate description of injury provided to CMS will result in charges identified as conditional payments that are not related to the work injury.

It is also important to remember that while preliminary conditional payment information is available at any time after notice of the pending claim is given to CMS, final totals for conditional payments made will not be provided by CMS until after a settlement is final.

3. CMS Approval for Medicare Set-Aside Proposals

In all cases where (a) the total value of the settlement is $25,000 or more and, the claimant is Medicare eligible; or (b) there is a reasonable expectation that the claimant will become Medicare eligible within the next 30 months and the total value of the settlement is greater than $250,000; submission of a proposed MSA to CMS for review and approval is recommended. The term settlement value, as used above, is defined by Medicare as including wage loss, attorney fees, future medical payments, repayment of conditional payments and previously paid settlement amounts (see CMS Guidance Memorandums ofApril25, 2006, and May 23, 2003.)

While not required by any statute or regulation, submission and approval of an MSA will provide the parties with some certainty as to how much of the settlement amount must be exhausted for future medical treatment/prescription drug expenses before Medicare would resume liability for such payments.

MSA proposals can be prepared either professionally or by any of the parties. Regardless of who prepares the MSA proposal, it must include a projection of the Medicare-reimbursable future medical and .prescription drug expenses expected to be incurred by the claimant for the treatment of the work injury over the claimant's life expectancy. In reviewing the MSA proposal, CMS will consider the supporting medical documentation, pricing method used, the projected services and the proposed method of funding the account (either by lump sum or structured payment). The MSA will be approved if the amount proposed is sufficient to assure that future costs associated with care for the workers' compensation injury is not shifted to Medicare.

The MSA can be prepared using either workers' compensation fee schedule charges or actual charges for medical care. CMS will not question payments made out of the MSA funds under either method as long as both the MSA and the payments made out of the MSA utilize the same payment structure. As of June 1, 2009, CMS began using the average wholesale price to estimate future drug treatment costs in MSA proposal. This change could significantly impact the amount of money required to fund future drug treatment costs (see CMS Guidance Memorandums of July 24, 2006, and April 3,2009.)

The current turnaround time, from submission of an MSA proposal to CMS to response from CMS, is currently 56 days if the NSA proposal submission is complete and properly prepared. CMS reports that most delays are caused by incomplete or incorrect submissions by the parties. Guidelines for submissions, and a list of the rules used by CMS to review MSA proposals, have been published by CMS and are posted on their Web site at www.cms.hhs.gov/ workerscompagencyservices/

4) Settlement Issues to Consider

CMS has made several “suggestions" for handling workers' compensation settlements and Medicare issues:

a. Parties should obtain up-to-date conditional payment information before moving forward with a settlement.

b. Initial approval of an NSA by CMS is conditional. The approval becomes final only after the entering of a written order by a judge in a court proceeding with a transcribed record. The order and the signed agreement must also be submitted to CMS to complete the approval process.

c. The best way to insulate funds paid in settlement of wage loss from possible recovery of conditional medical payments is for pasties to ensure that the settlement agreement contains language clearly defining who will be responsible for the repayment of all conditional payments made and identified by Medicare.

d. Once final conditional payment information is issued and a “demand for payment" letter is sent out by CMS, the claimant may seek a waiver of the recovery requested. Instructions for obtaining a waiver and/or filing an appeal are contained in the "demand for payment" letter from CMS.

In cases where the facts of a case make the swift preparation and approval of an MSA unlikely, the parties may wish to consider bifurcating the workers' compensation settlement and compromising the wage loss and medical benefits in separate agreements. This method can be used as a means of moving settlement of the indemnity benefits forward, while waiting for CMS approval of an MSA proposal.

More information on this topic can be obtained at the CMS Web site:
www.cms.hhs.gov/workerscompagencyservices/