Most of us in the workers’ compensation industry are familiar with the CMS Medicare set-aside review thresholds for workers’ compensation claims. However, there is still some confusion – especially for third-party liability cases – about the applicability of the thresholds. The following guidelines explain the thresholds, both for workers’ compensation settlements and in third-party liability settlements.

Medicare Set-Aside Review Thresholds – Workers’ Compensation Cases

Over the past six years, CMS has implemented several Medicare set-aside review thresholds because of their workload. These thresholds apply to workers’ compensation cases only. The review thresholds are as follows:

1. If a workers’ compensation claimant is eligible for Medicare at the time of settlement of a workers’ compensation claim, and the total settlement amount is greater than $25,000, CMS will review the settlement and any proposed Medicare set-aside to determine whether its interests have been appropriately considered.

2. If a workers’ compensation claimant is not currently a Medicare beneficiary, but may be eligible for Medicare within 30 months of the settlement date, CMS will review if the total settlement amount is greater than $250,000.

We receive numerous inquiries every week asking whether anything must be done to protect Medicare’s interests in cases that do not meet CMS’ review thresholds. The answer is “Yes!” The review thresholds are just that, review thresholds. In the settlement of workers’ compensation claims that fall below the thresholds, CMS will not review the settlement. However, parties still have a legal obligation to avoid a burden shift to Medicare, and a Medicare set-aside analysis is the best tool for compliance. The Medicare Secondary Payer Act still requires Medicare’s interest to be reasonably considered in cases falling below the review thresholds.

To protect Medicare’s interests in cases falling below the review thresholds, the best way to ensure compliance with the Medicare Secondary Payer Act is to perform a Medicare set-aside analysis in the same manner as would be performed in any case above the threshold. During the analysis, a Medicare set-aside allocation can be determined, earmarking a portion of the settlement proceeds to pay for future medical expenses related to the underlying workers’ compensation claim. The allocation should be documented in the settlement agreement and the claimant should be advised of his duty to properly administer the funds. Finally, CMS should be put on notice that a settlement was completed that contained a Medicare set-aside allocation. Although CMS will not likely review the settlement, the parties can be assured that they have properly complied with the Medicare Secondary Payer Act.

Liability Cases

The Medicare set-aside review thresholds are irrelevant in third-party liability cases. What is relevant is that the Medicare Secondary Payer Act still requires that a settlement not shift the burden of the plaintiff’s future medical expenses to Medicare. Similarly to workers’ compensation cases, a Medicare set-aside is the best vehicle to ensure compliance. The Medicare set-aside has become a common and effective tool in resolving workers’ compensation claims and lends itself to similar application in third-party cases. While the types and nature of claims in a liability case may differ from workers’ compensation cases, the same basic settlement principles apply – settlements address both medical and non-medical damages.

As noted above, the review thresholds only apply to workers’ compensation cases. CMS has not yet announced review thresholds for liability cases (though some practitioners have mistakenly applied the workers’ compensation thresholds to third-party cases). Lack of review thresholds for liability cases do not imply that Medicare’s interest do not need to be considered, rather, they imply that Medicare will not review settlements for adequacy.

Until CMS arrives at review guidelines for third-party liability cases, the most prudent course of action is for parties is to address settlements in a similar manner as workers’ compensation cases. To protect Medicare’s interests, the best way to ensure compliance with the Medicare Secondary Payer Act is to perform a Medicare set-aside analysis. During the analysis, a Medicare set-aside allocation can be determined, earmarking a portion of the settlement proceeds to pay for future medical expenses related to the underlying injury. The allocation should be documented in the settlement agreement and the claimant should be advised of his duty to properly administer the funds. The one caveat is that the allocation will need to account for the additional causes of action and damages pled in the underlying lawsuit and the fact the settlement likely results from a compromise. Finally, CMS should be put on notice that a settlement was created with a Medicare set-aside allocation (as would be done in a workers’ compensation case).

Please contact Henry Kohnlein for further information.

This article was taken from Protocols' blog.  To read and comment on this and other articles, click here.

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A team from Protocols^® attended and exhibited at the 2007 Risk Insurance and Management Society (RIMS) conference in New Orleans on April 30, 2007. This year’s RIMS conference drew more than 700 first-time attendees. This was a great opportunity for Protocols^® to speak with others in the industry and to meet other vendors and service providers. In addition, the team took advantage of the New Orleans cultural offerings by attending notable restaurants and enjoying local jazz and blues.

The 2007 conference drew more than 9,000 risk practitioners, and featured 160 educational sessions and 400 speakers.  Also, the conference featured 435 exhibitors, of which 122 were new to the RIMS annual conference.  Next year's conference is planned to be held in San Diego.  For more information, please visit RIMS' website.

Please contact Erin Wallace for further information.

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RIMS Conference Raffle Winners

During the RIMS conference, Protocols^® held a raffle for several prizes.  The following attendees are the lucky winners:

Portable DVD Player

Paul Alexander
Burlington Electric Department in Burlington, VT
Manager of Risk Management and Governmental Affairs

Nintendo Wii

Chris Boroski
Duke University in Durham, NC
Corporate Risk Manager

Apple iPod

Carmen Haskell
AutoZone in Memphis, TN
Risk Manager

Please contact Erin Wallace for further information.

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Our Staff Spotlight intends to help our clients get to know the people behind Protocols.  This month's spotlight focuses on Emily Gardner, one of Protocols' newest case managers.  Emily was born in Tulsa, Oklahoma and moved to Littleton, Colorado at an early age. She graduated from Metro State in 2005 with a B.S. in Criminal Justice and Criminology. When out of the office, Emily enjoys going out to eat, shopping, being outdoors, and traveling. Emily recently went on a cruise to Cozumel, Belize, Costa Maya, and Nassau.

Please contact Emily Gardner for further information.

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