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Workers' Compensation & Medicare

It is extremely important that a determination is made as to whether the petitioner is a Medicare beneficiary prior to settlement of his workers’ compensation claim. Federal law precludes Medicare from making payments towards a petitioner’s medical expenses when payment has been made or can reasonably be expected to be made under a workers’ compensation plan. The federal law also requires the parties to protect the interest of Medicare. Failure to do so can have severe implications to all parties involved. The petitioner/recipient of Medicare could be denied future Medicare coverage. Further, the employer, its workers’ compensation insurance carrier, and the attorneys for all parties could be subject to penalties and be liable for damages claimed by Medicare. If the petitioner is a Medicare beneficiary, the parties need an approval of the workers’ compensation settlement before disbursing the funds.

There are two classes of Medicare beneficiaries. An individual is considered a Class I beneficiary if any of the following are met:

  • petitioner is 65 years or older;
  • petitioner has been on Social Security Disability Income ("SSDI") for 24 months or longer; or
  • petitioner has End Stage Renal Disease.

An individual is considered a Class II beneficiary if there is a reasonable expectation of Medicare enrollment within 30 months or less. The reasonable expectation of Medicare enrollment is found if any of the following apply:

  • petitioner is on SSDI but not yet Medicare eligible;
  • petitioner has applied for SSDI benefits;
  • petitioner has been denied SSDI benefits but plans to appeal;
  • petitioner is in the process of appealing or re-filing for SSDI;
  • petitioner is 62 ½ years old; or
  • petitioner has End State Renal Disease but does not yet qualify for Medicare.

If the petitioner is a class I beneficiary, a workers’ compensation Medicare set-aside ("WCMSA") must be submitted to Centers for Medicare & Medicaid Services ("CMS") if the total workers’ compensation settlement is $10,000 or more. (See CMS 07/11/2005 Memo). If the petitioner is a class II beneficiary, a WCMSA must be submitted to CMS if the total uncommuted value of the settlement is $250,000 or greater. Included in this $250,000 threshold is any indemnities, medical expenses and attorneys’ fees. The $250,000 could also be computed based upon the payout over the lifetime of the settlement, and not discounted to present value. Click here to see sample WCMSA submission to CSM. As of January 01, 2006, all workers’ compensation settlements must further protect Medicare’s interest with respect to prescription drugs. The WCMSA must incorporate a section pertaining amounts needed to cover prescriptions drugs related to the workers’ compensation injury. (See CMS 12/30/2005 Memo).

A WCMSA is not recommended if all of the following conditions are met:

  • the facts of the case demonstrate that petitioner is only being compensated for past medical services (i.e. prior to settlement date);
  • there is no evidence that the petitioner is attempting to maximize the other aspects of the settlement (e.g. lost wages or permanent partial disability); and
  • the petitioner’s treating physician concluded in writing to reasonable degree of medical certainty that the individual will no longer require Medicare covered treatments related to the workers’ compensation injury.

However, if Medicare has made conditional payments for treatment prior to settlement, it requires recovery of said payment. (See CMS 04/21/2003 Memo).