Medicare set asides (MSAs) in Missouri workers' compensation cases are a lot like the great white shark scene in Jaws.  People scream.  People run. Babies cry.  No matter how many people scream and run and cry, there is always some fool paying no attention and going back in the water. 

The underlying concept behind the MSA is simple: workers' compensation carriers pay workers’ compensation expenses.  Medicare has enough problems with trying to keep itself from running out of money.  It does not need to pay workers’ compensation bills too.  This is known as the secondary payor rule.  This rule keeps Medicare dollars paying retirees and shifts future medical workers’ compensation expenses back to employers. 

The simple question then, is: 1) does it apply to my case? 2) what do I have do? 3) and where can I find my lost shaker of salt?   

Medicare has issued eleven different memorandums over recent years with conflicting directives. Review initially involved all cases, then only cases with settlements over $10,000, and now cases with settlements over $25,000.  Several claimants, though, are automatically exempt: claimants who keep medical open forever and claimants who die while waiting for CMS approval. 

There is a mistaken notion that CMS hunts only the Abig fish@ and everyone else is in a safe harbor.  CMS requires scrutiny of settlements in which the claimant has submitted prior bills through Medicare, the claimant has not submitted bills but is on Medicare and settlement exceeds $25,000, or claimant is not on Medicare but might be in thirty months and the settlement exceeds $250,000.  These questions must be asked at every client intake and every deposition. In all instances the parties must still consider Medicare=s interests, even if they are not required to go through the formalities of requesting approval for set asides.  CMS may not purposely chase little fish, but it has no qualms about eating them if they swim too close.  The failure to take Medicare=s interests into consideration disqualifies the claimant for Medicare benefits equal to the entire settlement. 

Attorneys should always consider Medicare=s interests and explain this to their clients—this might include noting that you have included their interests, but determined that nothing should be allocated. The zero allocation is harder to justify in cases in which an expert allocates considerable future medical care expenses. 

Attorneys should be able to explain any reductions in Medicare=s expected interest over the claimant=s normal life expectancy through the rated age.   A rated age means the claimant is expected to die sooner so less money should be set aside for Medicare=s interests.

Attorneys might also consider submitting their own proposals or hiring outside vendors if drafting set asides is outside their expertise.  In minor cases, with little chance of future medical care, Medicare=s interest is adequately protected by proposing nothing, or the Azero allocation.@  Medicare usually responds six months later with great guffawing.  Now that Medicare benefits include medication, this increases the number of cases potentially subject to CMS review and substantially slows down the review process. 

The MSA delays also create ethical duties of due diligence. Attorneys must exercise some oversight regarding how MSA proposals are calculated and adequately protect their client=s interests.  Some MSA projections are based on treatment recommendations which are not accurate or repudiated later by a physician.  Vendors or carriers who do not provide all pertinent records for Medicare consideration may subject themselves to additional liability outside chapter 287 benefits. Attorneys also have the ethical obligation not to use AMedicare issues@ as a mantra for endless continuances, if they are not diligently pursuing resolution of the case.  

Attorneys involved in Medicare set aside issues should anticipate the erosive effects on client relationships.  Oftentimes, an attorney may wait for months to hear from CMS.  It is a helpful technique to include dates of settlement so Medicare can prioritize its review of the set aside.

Parties who ask CMS to suggest their own allocations, risk receiving estimates for future medical expenses on matters not even considered by any examining physician on the case.  Examples of this include future surgery revisions and various diagnostic.  If this occurs, the parties can always request that the CMS reviewer reconsider the matter.  However, there is no formal appeal process.

The settlement contracts should specify whether the settlement is self-administered, which means the claimant must preserve the funds in a separate interest bearing account.   This scenario raises ethical concerns as to whether the claimant has the financial sophistication or mental soundness to comply with CMS.

The claimant and insurance carrier also share a common interest in keeping the MSA small.  The claimant aspires to spend down the MSA and eliminate any reporting and accounting requirements to CMS and get back on the Medicare rolls for any medical conditions that are arguably work-related.  The carrier wants to pay as little as possible to fund an MSA—obviously to limit its overall expenses on a claim.

The attorney has ethical issues regarding calculation of MSA and its impact on child support liens. MSA arguably is a trust for Medicare and not part of the disposable lump sum ordinarily subject to child support liens. Creditors cannot reach disability benefits.  This prohibition generally includes disability and ERISA-qualified benefits, '513.430.  Similarly, '287.260 protects worker=s compensation benefits, but creates an exception for child support. If MSA dollars are reduced for child support this does not support the federal interest of the program. A claimant could over-allocate portions of the settlement to MSA fund to avoid the 50% reductions imposed by child support liens.  CMS has no guidelines as to how a claimant comes up with their allocation, and CMS is not going to object if more money goes in the MSA since this protects their interests of not bankrupting Medicare.

The attorney should consider potential impact of '287.260 on MSA funds if settlement for any permanent disability does not satisfy the lien.  Before MSA, '287.260 clearly applied to lump sum settlements that included unallocated components of future medical care.  There is clearly a protected state interest to collect child support for past and current needs which may outweigh the interest of the Claimant=s future medical needs.  This raises the dilemma of whether a carrier may be liable for not honoring the lien by exempting MSA allocation from the amount subject to the 50% reduction.

There remain many uncharted and dangerous waters in this emerging area of workers’ compensation litigation. Like the shark, Medicare is always hungry and needs to feed. Approach it slowly, cautiously, and with some trepidation so that it does not chomp your learned hand.  Medicare is going to be here long after the initial screaming stops.