Defense Digest

CMS Updates Its Guidance On Medicare Set-Asides

On July 11, 2005, Centers for Medicare/Medicaid Services (CMS) issued a new Guidance concerning Medicare set-asides.

The most important thing that CMS has done with the new Guidance is to finally allow a minimal workers' compensation settlement to proceed without a set-aside. CMS has indicated that, even if someone qualifies for a card, CMS will no longer review settlements where the amount is less than $10,000.

CMS has also taken care to indicate that this threshold, along with the $250,000 threshold, are only workload review thresholds. Thus, they have retained the right to change these thresholds in the future. This is nothing new.

Next, CMS has finally answered a nagging question with regard to set-asides. If someone is not actually qualified for Medicare benefits when the set-aside is approved (a case over $250,000), can the claimant use the set-aside monies to pay for medical bills that would be qualified under Medicare before the recipient actually qualifies? In the past, this was an open question and was a "Catch 22." A claimant could set-aside funds and then not be able to use them because they were not Medicare eligible. CMS has answered this limited question by indicating that the set-aside funds may be used prior to becoming a beneficiary because the amount was priced based on the expected settlement. Use of these funds, of course, is limited to services that would be covered by Medicare as if the individual were a Medicare beneficiary. The accounting would be the same, and once the funds were used up, if the claimant was eligible, CMS would again pay for future medicals.

Next, CMS agrees that parties can settle the indemnity portion of the file before the medical portion is settled, and if the indemnity portion is settled only, no Medicare set-aside is needed. However, this eliminates the need to continue paying indemnity benefits. A Medicare set-aside proposal can then be sent later in order to resolve the medical portion of the claim. However, in splitting up the file, the total amount of the settlement (indemnity and medical) must be included when submitting the application to Medicare. CMS has also agreed that parties can proceed with the settlement of the medical expenses before CMS actually reviews the proposal, but that the final amount as approved by CMS must be funded.

CMS has also indicated that if the interest bearing account generates taxable income, the amount of tax required to pay for the interest can be deducted from the set-aside account.

Other minor matters which CMS answers have been discussed before, such as a set-aside is still necessary if the claimant has private health insurance or is covered under the Veterans Administration, and a claimant is not entitled to a release of the set-aside funds if Medicare entitlement is lost.

CMS also indicates that a claimant may have part of a set-aside released for personal purposes. However, monies cannot be removed unless there is approval from CMS. The only way that CMS would approve such a proposal is if the treating physician concludes the beneficiary's medical condition has substantially improved. If so, the claimant can ask for a 25 percent reduction. Further, this type of proposal may not be submitted until at least five years after a previous CMS approval letter.

In conclusion, CMS indicates that they will not compromise the amounts of future medical expenses and that there is still no formal appeal stemming from the determination of the appropriate amount of a set-aside. Instead, CMS falls back on the fact that the claimant may always contact the regional office for clarification and that, if a mistake has been made, the regional office can correct errors. CMS also allows a claimant to resubmit a case if the submitter believed there was "additional evidence not previously considered by CMS which would warrant a change."

The new guidance has been printed on the CMS website at: www.cms.hhs.gov/medicare/cob/attorneys/att_wc.asp.