ADVISING YOUR CLIENT ON HOW TO SELF-ADMINISTER A MEDICARE SET-ASIDE
All attorneys practicing in the area of workers' compensation today must have at least a basic understanding of the Medicare Secondary Payer Statute
. Although most have a handle on the pre-settlement requirements of the Statute, many still do not fully comprehend the post settlement requirements enough to adequately advise and protect their clients. This article seeks to shed some light on the post-settlement requirements of the Medicare Secondary Payer Statute and provide some guidance to attorneys so as to avoid dissatisfied clients and possible professional liability.
One of the first and most important decisions an attorney must make when settling a case involving a workers' compensation Medicare set-aside (WCMSA) is how the account is going to be administered. The Centers for Medicare and Medicaid Services (CMS) allows a WCMSA to be either professionally or self-administered. The cost of hiring a professional to administer a WCMSA over the claimant's entire life expectancy is often too expensive for either party to seriously consider. The result is that a large number WCMSA accounts are self-administered by the Claimant. Although, there is no requirement that the WCMSA be administered according to any formal written instrument, such as a trust or custodial agreement, CMS' guidelines can be very difficult to implement and claimants rarely have the experience or knowledge to properly administer a WCMSA. It is therefore imperative that a claimant be advised in detail as to what the responsibilities and potential pitfalls are as administrator so that they can make an informed decision whether, and how to properly administer the account. An attorney must know when self administration is not appropriate or advisable. Where a Claimant is incompetent, has very little education, is unable to read, speak or write English or the there is the threat of family misappropriation of the funds, Claimant's counsel should strongly recommend professional rather than self administration.
A Claimant who has decided to self-administer must first be educated as to what a WCMSA is, and why a portion of their settlement has been put into this account. As the administrator of the account, a Claimant will often be called on to explain why medical providers should be paid out of the WCMSA account rather than billing Medicare directly. If the administrator does not understand why the WCMSA has been set up, they will certainly not be able to effectively communicate the need to use the account with a medical provider. At the very least, a Claimant's attorney must make sure their client understands the underlying principle that Medicare is a considered a "secondary payer" in situations where another party, such as a workers' compensation carrier could be responsible for their injuries. Clients must understand that their workers' compensation settlement cannot shift the responsibility of their medical care from the workers' compensation insurance company to Medicare. They should be fully aware that WCMSA funds should only be used to pay for medical services related to their work injury that would normally be paid by Medicare. Any items not covered by Medicare should not be paid from the WCMSA account. Claimants should know that Medicare does not pay for items such as acupuncture, routine dental care, eyeglasses, hearing aids and certain types of prescription drugs. If the administrator makes an improper distribution from the WCMSA, Medicare will not cover the claimant's future injury-related medical expenses until the funds are returned to the WCMSA and then expended properly.
It is recommended that you provide your client with a copy of the booklet "Medicare & You" which can be obtained from any local Social Security office for a more extensive list of services not covered by Medicare. If you or your clients have questions regarding Medicare's coverage of a specific item or service to determine if you they can pay for it from the WCMSA account you should inform them to call 1-800-MEDICARE (1-800-633-4227).
It is important to note that the administrator of the WCMSA does not need to determine how much Medicare pays for a particular item or service. The administrator also does not need to consider or calculate Medicare deductibles or co-payment amounts. CMS does however, require that the administrator pay the services from the account in the same manner in which the WCMSA was calculated and funded. Accordingly, the Claimant needs to know how the WCMSA was calculated and funded.
A WCMSA must be calculated and funded by using either "full actual charges" or the worker's compensation fee schedule from the state where the claim was brought. Whether medical expenses are to be paid on a "full and actual" basis or at workers' compensation fee schedule rates will be referenced in the WCMSA submission to CMS. Future prescription drug costs must be priced and paid based upon the average wholesale price. Failure to pay medical expenses in the manner in which the WCMSA was calculated, could lead to a premature exhaustion of the WCMSA funds. It is therefore very important that the Claimant be advised how the WCMSA was calculated and at what rates the bills should be paid.
[1] It is strongly recommended that the Stipulations not only specify the amount of the WCMSA but also how it was calculated so that the Claimant clearly understands how expenses are to be paid out of the account.
In order for the WCMSA to be effective, a copy of the final settlement agreement must be forwarded to the Coordinator of Benefits. Forwarding a copy of the approved stipulations to the MSA vendor, or directly to the Medicare Coordinator of Benefits (COB), must be part of your post settlement process. If CMS does not receive a copy of the approved stipulations they will not consider the process complete and will not recognize the settlement.
Once the stipulations are approved and forwarded to the Coordinator of Benefits, the WCMSA funds must be placed in an interest-bearing account, separate from their personal savings or checking account. All interest or investment yield earned must remain in the account. As administrator of the account, the Claimant will be responsible for keeping accurate records of establishing the account as well as of all payments made from the account. These records may be requested by CMS' lead Medicare contractor as proof of appropriate payments from the WCMSA account. Although CMS requires these records be retained for seven years, it is highly recommended that the Claimant retain the records until CMS provides confirmation that all of the WCMSA funds were properly exhausted.
The Claimant may use the WCMSA account to pay for photocopy charges, postage and banking fees that are directly related to the account. The funds may now also be used to pay capital gains taxes associated with the interest earned on the account. CMS does not allow the WCMSA funds to be used for payment of fees for trustees, custodians, administrators or any other professionals hired to assist in administration of the account. Additionally, the funds in the WCMSA may not be used to pay premiums for Medicare supplemental ("Medigap") insurance for the beneficiary.
The Claimant must annually, sign and forward a self-attestation form demonstrating that payments from the WCMSA account were made appropriately and only for treatment or services related to their work-related injuries that would otherwise be reimbursable by Medicare. The annual accounting shall 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 to the CMS lead Medicare contractor. CMS has the right to demand and receive a complete accounting of payments made from the account at its discretion. A final self attestation should be forwarded to CMS once the WCMSA account becomes permanently depleted.
WCMSA's that are funded by an annuity have different rules as to when Medicare will begin paying for services. Once the initial seed money and any annual annuity payment are exhausted from the account, Medicare will pay for injury related treatment for the remainder of that year. When the account is funded by another annuity payment, Medicare will again refuse to pay for treatment or prescription drugs until the Claimant proves they have exhausted the funds in the account for that year. If the funds in a given year are not exhausted, the excess funds must be carried over to the next period. This then increases the amount that must be exhausted in the next period before Medicare will pay for treatment or prescription drugs.
If five years have elapsed from the approval of the WCMSA, and the WCMSA funds are not being expended as projected, CMS will consider allowing the release of some of the funds from the account. In order to do this, a new proposal must be submitted demonstrating that the Claimant's condition has improved enough to justify at least a 25% reduction in the remaining balance of the WCMSA funds. The new proposal should include all documentation, including an opinion from the treating physician, demonstrating how the Claimant's condition has improved and what previously recommended treatment is no longer reasonable and necessary. Only after CMS approves the new proposal may the excess funds be withdrawn. The cost of submitting the new proposal may not be paid out of the WCMSA account.
If the WCMSA funds still remain in the account at the time of the Claimant's death, the remaining balance should be distributed in accordance with any will or the laws of intestacy of the State in which the account was created. The administrator or executor of the Claimant's estate should keep the account open for a reasonable period before disbursing the remaining funds to insure that all injury related bills are properly paid. If the administrator or executor of the estate is uncertain whether there are still outstanding injury-related medical bills, it is recommended that the account remain open for as long as 2 1/2 years from the last medical service provided, as medical providers have twenty-seven months from the date of service to bill Medicare. After the administrator or executor of the estate is certain that all medical bills have been paid, they should petition CMS to dissolve the WCMSA and release the funds to the estate or designated beneficiary.
Informing your clients regarding the process and rules for administering their WCMSA account is not only good practice, it can help insure your client's Medicare coverage is not improperly interrupted. Informing yourself of the requirements of the Medicare Secondary Payer Statute is the first step in that process. The most prudent way of insuring that your client has received and understands this information is by including language in the full and final stipulations. By including language in the stipulations, the Claimant not only signs off that he understands the consequences of non-compliance, but also provides the added security of the Commission canvassing them on these issues before the stipulations are approved. Another method is by having the Claimant sign a separate Informed Consent that acknowledges that you have gone over the requirements of administering the WCMSA with them. Whatever method you chose, it is imperative that Claimants be fully informed and provided with all the necessary resources and support before allowing them to self-administer their WCMSA account.
[1] Although providers are not required to take the workers' compensation fee schedule after a case is settled, the Claimant should make every effort to have the doctor continue to bill them based upon the fee schedule. If the provider refuses to accept payment in the manner the WCMSA is set up, the Claimant should document their efforts to be billed in the appropriate manner.
ADVISING YOUR CLIENT ON HOW TO SELF-ADMINISTER A MEDICARE SET-ASIDE
By: Gregory F. Lisowski
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