Use Of MSAs In Workers’ Compensation Settlements

Question:
I am settling a workers’ compensation case for $100,000 and closing out medicals in a disputed claim. My client is 66 and on Medicare. Is it acceptable to have the Insurer fund a MSA with an amount that they "deem" sufficient (without CMS review) and agree in the settlement documents to supplement the MSA account if CMS later finds that more funds were necessary to be in compliance? Is this sufficiently protecting Medicare's interest?

Answer:
Current law (42 USC 1395y(b)) and guidance about the use of MSAs in Workers’ Comp settlements (via CMS Policy Memos) tells us that settling parties have to properly consider and protect Medicare’s interests at the time of settlement. Those interests are two fold, past interests and future interests. The MSA question arises as part of properly considering and protecting Medicare’s future interests. Unlike handling Medicare’s past interests, where Medicare may seek recovery from any entity that MAKES/RECEIVES a primary payment, when properly considering and protecting Medicare’s future interests, Medicare will only pursue any entity that RECEIVES a primary payment. Based on this, it is the claimant’s (and claimant’s attorney’s) responsibility to ensure that the MSA is properly funded and MSA proceeds are properly spent, not the insurer’s responsibility. While submitting a MSA proposal to Medicare is voluntary, that MSA must still properly consider and protect Medicare’s future interest. If those future interest issues are not handled appropriately, Medicare will look to your client and you, not the insurer.

Under your fact pattern, the insurer would fund the MSA with an amount it deems appropriate, and will agree to supplement that MSA should CMS later find that it was under funded. The penalty for failure to properly consider and protect Medicare’s future interests (i.e., properly funding a MSA when appropriate) is Medicare revoking the claimant’s Medicare card for a certain amount of time until Medicare determines, in its sole discretion, that its future interests have been satisfied. Practically speaking, that means your client would lose Medicare benefits and have to pay out-of-pocket for future care until Medicare restores their benefits.

Overall, I believe setting up the MSA for the amount determined by the insurer to be sufficient may sufficiently protect Medicare’s future interest, but only with the caveat that should Medicare revoke your client’s Medicare card in the future for failure to properly fund the MSA, then the insurer will be responsible for all injury-related medical expenses otherwise covered by Medicare until such time when Medicare restores your client’s Medicare benefits. Because the insurer has no liability to Medicare on these future interest issues, it really has no incentive to ensure the MSA is properly funded. Therefore, it will blindly accept the work product provided by the MSA Allocation house with whom it contracts and then fund the MSA for that amount, whether it is sufficient or not. Therefore, if the safeguard of subsequent funding by the insurer is built into the settlement docs, this may be a sufficient way of considering and protecting Medicare’s future interest. If not, your client may face significant problems with Medicare in the future without the ability to seek additional recovery from the insurer.

A more appropriate method for protecting Medicare’s interests would be for you to seek a plaintiff-oriented MSA Allocation that would provide a more realistic allocation amount for future injury-related care. Since the exposure to Medicare on future interest issues goes directly to your client and you, you should be “driving the boat” on the MSA issues as opposed to the defense. If the insurer is willing to supplement the MSA in the future should Medicare find the original MSA lacking, it should be willing to fund it appropriately from the start.


Hope this helps…
John Cattie