Workers' Compensation and Medicare Update - WordPress.com

Workers’ Compensation and Medicare Update David J. Korch, AIC, SCLA, CMSP

• The funds at issue were paid into the trust prior to Vice President of Workers’ Compensation & Medicare Practices October 1, 2011. Why You Shouldn’t

Volume 5 Issue 15

Funding the Medicare Set Aside v. Administration? The issue presenting itself today is the confusion of many parties as to the difference between the administration of the funds and how the MSA is funded. We have recently seen several cases throughout the country where the WC claim settles and the adjuster advises it includes the MSA of $XXX. When our consultant contacts the adjuster they are advised “I spoke to injured worker and he advised that he would prefer to self administer the MSA, no annuity will be needed.” This is like saying I offered my child ice cream for dessert, but they decided they wanted to go to school. FUNDING OF MEDICARE SET ASIDES Medicare recognizes structured settlements as a viable method of funding MSA Accounts and gives specific instructions for calculating an MSA using a structured settlement annuity. They further advise that Medicare will become the primary payer of medical expenses once documentation is provided showing funds were spent appropriately, and continue to pay medical expenses until the next annual payment is made from the structured settlement. As anyone can realize, spreading lifetime funds over an individual’s life expectancy can result in a lower

November 7 2012 cost of settling the claim. Numerous individuals have conducted studies concerning the cost differential between the life time lump sum and the cost of funding the MSA via periodic payments. When looking at the different studies they all reach the same conclusion, a savings of greater than 30% This percentage is even higher with males since CMS began using non-gender-specific life expectancies. In addition to allowing the settlement of workers’ compensation claims at a cost that is more acceptable to the P&C industry, the funding via an annuity creates advantages and additional protection to the disabled worker. Structured settlement annuities are uniquely designed to preserve wealth by paying periodically versus in a single lump sum. Using annuities to fund the Medicare Set Aside Account (MSA) is an essential means to preserve the integrity of the Medicare Set Aside and comply with the Section 1862 if the Social Security Act 42 U.S.C. § 1395y(b)(2). Should the injured party use the Medicare Set Aside funds for other than the intended purpose of the funds, they at least have the assurance that they will receive future payments in order to pay some of their medical expenses. While the use of annuities can't eliminate the premature exhaustion of funds, they do eliminate the exposure to the total exhaustion of said funds. ADMINISTRATION (Professional or Administration) of a Medicare Set Aside

EPS Settlements Group Corporate: 5613 DTC Parkway, Suite 600, Greenwood Village, Colorado 80111 Toll Free: 800-354-4098 CA License #0B97963

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Self-

Medicare allows Medicare beneficiaries to self administer their Medicare Set Aside (MSA) funds or have them professionally administered.

Professional Administration – An MSA Custodial Account can be set up with a professional administrator to administer the allocation. –

The professional administrator ensures compliance to Medicare’s criteria, thereby protecting the injured person’s Medicare benefits.

Self Administration – The injured person administers the MSA allocation on his/her own –

If the injured person does not adhere to Medicare’s guidelines for administering the allocation, he/she could jeopardize their future Medicare benefits.

Medicare has the same requirements whether the allocation is self administered or professionally administered through a Medicare Set-Aside Custodial Agreement. This is a complex and sectionalized process; people will typically have a lot of questions. The number one question asked by many WC injured workers who are also Medicare beneficiaries is: “Can I spend my Medicare Set Aside money?” The short answer is Yes. This money belongs to you and not to Medicare. It is yours. It is money that was afforded to you by your settlement, and thus, it is your asset. But if they would ask “Should I spend my Medicare Set Aside money?” The answer would be No. If the beneficiary does not utilize the funds set aside from the workers’ compensation settlement correctly, Medicare can refuse to pay medical expenses until the funds are properly spent.

Medicare Set Asides can be handled in 4 ways: 1. Lump sum self-administered. The total amount of Medicare covered medical expenses over the lifetime of the injured party are paid directly to the individual and they are to set the money aside and only use same for those medical expenses. 2. Annuity funded self-administered MSA. The MSA is funded using Medicare’s formula for a structured settlement as outlined in the Medicare memorandum (4/21/03, 10/14/2004). The funds are paid directly to the injured party to set the money aside and only use same for those medical expenses. (Usually saving 30% or more from lump sum amount). 3. Lump sum professionally administered. The total amount of Medicare covered medical expenses over the lifetime of the injured party are paid directly to a professional administration company who sets the money aside and administers the funds and makes payments on the injured party’s behalf. There is an additional cost associated with these accounts to cover the fees of the administrator. 4. Annuity funded, professionally administered MSA. The MSA is funded using the Medicare formula for the use of a structured settlement as outlined in the Medicare memorandum (4/21/03, 10/14/2004). The funds are paid directly to professional administration company who sets the money aside and administers the funds and makes payments on the injured party’s behalf. There is an additional cost associated with these accounts to cover the fees of the administrator. There is a cost savings over the lump sum, but an additional cost for professional administration.

Factoring of WC Case Not allowed in Louisiana IN THE MATTER OF: DOCKET NO. 95829 A TRANSFER OF STRUCTURED SETTLEMENT PAYMENT RIGHTS BY DANIEL B. HUGHES NKN DANIEL B. HUGHES. JR. Daniel B. Hughes was injured in January 2006 while employed as a field superintendent for Wood Group.


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He brought a Longshore Harbor Workers claim and settled the claim in 2011 for $200,000 lump sum and $3,000 per month for life with a guarantee of 20 years. Within the body of the settlement agreement, which was approved by the courts, was the provision: "Claimant

acknowledges that the periodic payments cannot be accelerated, deferred, increased, or decreased by any payee: nor shall any payee have the power to sell, mortgage, encumber, or anticipate the periodic payments, or any part thereof, by assignment or otherwise." On May 21, 2012 he entered into an agreement with Genex Capital (not affiliated with GENEX Services, Inc) to assign half of his monthly payments ($1,500.00) beginning May 15, 2012 through June 15, 2030 (216 payments or $324,000) in exchange for $122,00.00 which represented a discounted value of $283,805. This reflected a discount rate of 14.4% and he was to receive 42.99 percent of present value. The court was petitioned to approve the assignment pursuant to La. R.S. 9:2715 (transfer and assignment of structure settlement payments) which defines a structured settlement as “an arrangement for periodic payment of damages for personal injury established by a settlement or judgment in resolution of a tort claim. La. R.S. 9:2715 (A)(6). The court felt Hughes transfer was not authorized under the law since it did not arise out of a tort claim. The statute also provides: "I. This Section shall not be construed to authorize any transfer of workers' compensation payment rights in contravention of applicable law or to give effect to any transfer of workers' compensation or other payment rights that is invalid under applicable law." La. R.S. 9:2715(1). Additionally the LSHWA (Longshore Harbor Workers Act) is also implicated in the transfer which prohibits such transfers: "No assignment, release, or commutation of compensation or benefits due or payable under this Act, except as provided by this Act, shall be valid,

and such compensation and benefits shall be exempt from all claims or creditors and from levy, execution, and attachment or other remedy for recovery or collection of a debt, which exception may not be waived.” The courts also found that the transfer and assignment were also prohibited by the settlement agreement. The court, in its decision, also considered Mr. Hughes testimony regarding his financial difficulties. (He received $200,000 less attorney fees and apparently dissipated the balance in about a year). The court recognized this in its analysis: “The Court understands the financial difficulties being experienced by Mr. Hughes. However, when one considers that barely a year into the term, he proposes to sell one half of his settlement rights for less than half its value, thereby reducing by half his settlement income for the remainder of his life, it is impossible to conclude that the proposal is in his best interest.” The court rejected the transfer and assignment. What was interesting in this matter was looking at the Genex Capital Corporation website, they list what they do and do not buy. The first item: “We do not buy: •

Workers compensation payments”

In their frequently asked questions they indicate: “What if your settlement agreement or annuity policy contains anti-sale or anti-assignment language?” “Anti-assignment or anti-sale language does not prevent you from selling your payments. Some settlement agreement or annuity policies contain anti-sale or anti-assignment wording such as: "none of the periodic payments may be accelerated, deferred, increased or decreased and


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may not be anticipated, sold, assigned or encumbered." Since you must get a court order approving the sale of your payments, a judge will review and evaluate your case.” The best comment in their website is: “Are you legally permitted to sell workers compensation payments?” “It is not legal for you to sell a structured settlement annuity arising from workers compensation claims. You must keep the annuity until all of the payments are made to you.” Apparently someone forgot to read their website before entering into this agreement.

CMS Working on Overhaul of Medicare Secondary Payer Program The Centers for Medicare and Medicaid Services (CMS) has issued four contracts in preparation of overhauling its Medicare Secondary Payer (MSP) recovery process with a new Coordination of Benefits and Recovery Center expected to launch next February, according to interviews with MSP compliance firms, federal records and one of the companies involved. Strategic Health Solutions, an Omaha, Nebraskabased firm has been hired by CMS to serve as the Medicare Secondary Payer Integration Contractor (MSPIC). Their role is to coordinate with other contractors hired for the program. The MSPIC (Strategic Health Solutions) will administer the contract from its offices in Omaha and Columbia, Maryland. Awarded on April 27, the MSPIC contract to Strategic Health Solutions requires them to develop a program-wide implementation system, draw up a blueprint for the program, manage security and

documents and provide education and quality assurance. The second contract was awarded to an unnamed company on June 20, 2012, to serve as the Medicare Secondary Payer Recovery Audit Contractor (MSPRAC). That company, whose name was redacted from CMS documents, will be responsible for identifying debts owed Medicare by group health, workers' compensation, liability and no-fault auto insurers for claimants' payments made by Medicare. Also contracted in June, 2012 was General Dynamics Information Technology, a Fairfax, Virginia.-based subsidiary of defense contractor General Dynamics, to build the information technology system for the program as the Medicare Secondary Payer Systems Contractor (MSPSC). General Dynamics will develop the coordination of benefits and recovery center software for CMS and maintain and consolidate more than 20 software applications within the MSP program. General Dynamics said CMS has budgeted $4 billion over a 10-year period to upgrade its information technology. CMS contracted with IntegriGuard, also of Omaha, on Sept. 27, 2012, to serve as Business Programs Operations Contractor (BPOC). The CMS work plan calls for the BPOC to coordinate the submission of Medicare eligibility information to insurers, selfinsureds and third-party administrators required to report data to CMS under Section 111 of the Medicare, Medicaid and SCHIP Extension Act. The CMS work plan also requires the BPOC to coordinate the destruction of scanned documents. CMS contracted with Group Health Inc. (GHI) to take over MSP recoveries on an emergency basis after CMS decided not to renew the contract for Medicare recovery services with Chickasaw Nation Industries (CNI) after CNI’s performance came under fire by the U.S. Subcommittee on Contracting Oversight. The CMS work plan, released in September 2011, calls for creation of the Coordination of Benefits &


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Recovery Center as a centralized operation that "provides quality customer service and a single source to Medicare providers, suppliers, beneficiaries, insurers and other stakeholders by streamlining the MSP data and debt-collection processes while ensuring the integrity of the Medicare Trust Funds." Consolidation of these two programs with an award to a single prime contractor would create a substantially large program and continue to impose restrictions on CMS related to its ability to monitor and react to a contractor's performance, CMS said in the work plan. To circumvent this situation, CMS will establish a matrix organization of independent contractors to manage the major functions. It looks like the 'super-recovery' contractor is coming together next year. Clearly the message is that primary plans need to have their houses in order with MIR and MSP in the near term.


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