By: Vanessa Lipsky, Partner and Section Lead Medicare Compliance, Miami

When developing a plan of action for overall claim settlement, it is important to determine whether there are Medicare implications that may apply to your claim.  Otherwise, issues could arise that can prolong or prevent settlement and in some cases, even undo settlement agreements.  

The first step in the process is identifying whether Medicare applies to your case. The first type of claimant that would have implications is an actual Medicare beneficiary. An easy way to identify this type of claimant is by way of their age.  If the claimant is 65 years old or older, he is Medicare eligible and a Medicare Set-Aside (MSA) is recommended. Alternatively, if he has been on Social Security Disability for 2 years, he could be a Medicare beneficiary at any age. This information would be confirmed with the receipt of a DWC-14 or Medicare inquiry. 

In addition to the Medicare beneficiary, there are implications for a second type of claimant: those who have a reasonable expectation of Medicare enrollment within 30 months.  This again can be identified by age, 62.5 years, if the claimant has applied for Social Security Disability or was recently picked up on SSD, but not yet Medicare eligible.

For these two types of claimants, it is recommended that an MSA be calculated prior to settlement discussions in order to determine exposure and decide on the best course of action to protect involved parties when moving forward with settlement.

The next question should be: “Is CMS approval of the MSA required?”  First, it is important to remember that submission of an MSA for CMS review is a voluntary process.  That said, it is recommended that any settlement meeting the CMS review threshold — $25,000.00 involving a Medicare beneficiary and $250,000.00 involving a claimant with a reasonable expectation of Medicare enrollment within 30 months — be submitted to CMS for review and approval. Otherwise, CMS is not bound by the MSA amount stipulated to by the parties, and it may refuse to pay for future claim-related medical expenses, even if they would ordinarily have been covered by Medicare. See CMS WCMSA Reference Guide, p. 7.  

How does this impact settlement? If Medicare implications are first identified at the time of settlement negotiations, it may slow down the settlement process as parties may need to reconvene to allow for an MSA allocation to be calculated and possibly be submitted to CMS for approval. If only partial Medicare information is available and contingencies to the settlement are made, the agreement can fall apart if they turn out to be impossible to meet. For example, if a settlement agreement is contingent upon CMS approval, the settlement cannot proceed if it turns out the proposed MSA does not meet CMS review thresholds, as the contingency cannot be met. 

Finally, if the claimant is not fully informed on the terms of the agreement, such as an unapproved MSA that was otherwise reviewable that could impact his Medicare benefits, there could be an argument that there was no “meeting of the minds,” voiding a settlement. The judge could review the agreement, and decline to enforce it if the claimant refuses to sign the settlement documents.  This scenario recently played out in California, in the case of Alvarenga v. Scope Industries, where the court vacated a settlement when there were multiple mistakes made in the settlement agreement as to MSA guidelines and identifying the possible impact of the settlement on future Medicare benefits.  

The earlier Medicare implications are identified in a case, the better. That way, a settlement plan of action can be made as to whether an MSA should be calculated and whether CMS review thresholds apply, and how this could ultimately impact the terms and timing of settlements. Be certain that claimants understand the process, the obligations, and their rights within the Medicare system.