1. Medicare Set-Aside Presented By: VP Medical Consulting, LLC

2. Medicare 1966- inception of Medicare under SSA Administered by The Centers for Medicare and Medicaid Services (CMS) Medicare is federal health insurance program for -Social Security Retirement (SSR) *Age entitlement of 65 years or older -Social Security Disability Income (SSDI) *40 quarter work hours -End Stage Renal Disease (ESRD)

3. When does Medicare begin? Age 65/older is automatic enrollment Certain disabled workers are entitled to Social Security Disability (SSDI) SSDI eligibility – 5 months after date of disability Medicare eligibility – 24 months after SSDI Medicare benefits begin 29 months after date of disability

4. Medicare Part A Hospital Insurance Most people paid for Part A through payroll taxes when working – no premium Pays for -hospitalization -skilled nursing facility -home health -hospice -blood transfusions

5. Medicare Part B Medical Insurance Majority pay monthly premium for Part B Yearly deductible and 20% co-pay Pays for – physician services – some in-patient care – some medical equipment – some supplies

6. Medicare Part D Covers presciption medications Effective January 2006 Average monthly premium $37 Enrollees pay $250 deductible per year Enrollees pay 25% drug costs up to $2,250/yr Enrollees pay next $2,850 (doughnut hole) Enrollees pay 5% drug costs over $5,100/yr Medicare pays 95% drug costs over $5,100/yr

7. Medicare Part D Calendar YearYou PayPlan Pays Deductible$250100%0% $250-$2,25025%75% $2,251-$3,600100%0% >$3,6005%95%

8. Meds not covered by Medicare Benzodiazepines -Xanax, Klonopin, Valium, Ativan Barbiturates -’Barbital’ medications (Phenobarbital) Over the counter/nonprescription Weight loss

9. Medicare Secondary Payer Act In 1980, Congress created the Medicare Secondary Payer Act (MSP) Congress wanted to slow rising cost of Medicare Congress prohibited Medicare from paying for medical treatment that was also covered by other insurers (workers’ compensation, liability, automobile, no-fault, or employer insurance) Medicare becomes ‘secondary payer’

10. Medicare Secondary Payer Act Two provisions of MSP - Medicare prohibited from making payments for covered medical items/services if payment has been made or can reasonably be expected to be made by another source - If payment by another source cannot be reasonably expected to be made promptly, Medicare may make conditional payments. Medicare may seek reimbursement for its conditional payments when payment becomes available from another source.

11. Medicare Secondary Payer Act Medicare can seek reimbursement of conditional payments from entities who have made payment or received payment Entities- beneficiary, attorneys, medical providers, insurers, employers Medicare can take legal action to recover conditional payment (MSP recovery claim) If so, Medicare can seek double amount of Medicare reimbursement (double damages)

12. Medicare Secondary Payer Act Between 1991 and 1998, federal government paid nearly $40 billion for medical care in WC cases where Medicare was secondary payer Medicare’s interest must be given consideration when settling WC case If not, claimant may lose Medicare coverage or Medicare can sue for double damages

13. Medicare Set-Aside If primary payer (WC carrier) is settling for Medicare benefits for qualified individual, CMS requires that future injury related Medicare allowable expenses be set-aside from settlement, and Approval of adequacy of the amount to be set-aside must be obtained from CMS Conception of Medicare Set-Aside Arrangement

14. Medicare Set-Aside No enforcement of MSP until CMS distributed July 2001 memo to insurance industry To date, CMS distributed nine memos outlining MSA process when settling WC case These memos only apply if settlement is for permanently closing future medical benefits and dealing with ‘qualified individual’

15. Qualified Individual Class I – individual receiving Medicare benefits at the time of settlement (new threshold – total settlement more than $25,000), OR Class II – individual is anticipated to enroll in Medicare within next 30 months and total settlement amount is equal to/greater than $250,000 $25,000/$250,000 = medical, indemnity, and attorney fees + conditional payments

16. Rule of Thumb (65/$25,000 or 30/$250,000) Worker who is age 65 or older AND $25,000 or more of total settlement, or Worker with a reasonable expectation that he/she will enroll in Medicare @ 30 months from date of injury/disability AND $250,000 or more of total settlement

17. Two types of settlement 1.Compromise- settlement that intends to compensate for medical expenses incurred prior to date of settlement 2.Commutation- settlement that intends to compensate for any medical expenses after date of settlement WC settlement agreement can include compromise and/or commutation settlement

18. CMS Memos July 23, 2001 April 21, 2003 May 23, 2003 May 7, 2004 October 15, 2004 July 11, 2005 December 30, 2005 April 25, 2006 July 24, 2006

19. CMS website CMS Requirements Checklist CMS MSA Sample http://www.cms.hhs.gov/WorkersCompAgencyServices/01_overview.asp

20. MSA Process – Part 1 Coordination of Benefits CMS Regional Offices Medicare Lead Contractor Conditional Payments Lien Investigation

21. Coordination of Benefits Coordination of Benefits (COB) is clearinghouse that collects information for Medicare process As early as possible, all WC cases that involve Medicare beneficiary must be reported to COB Contractor (COBC) This flags Medicare beneficiary’s record to ensure Medicare does not pay claims when WC carrier is responsible

22. Coordination of Benefits www.cms.hhs.gov/medicare/cob 1-800-999-1118 CMS c/o Coordination of Benefits Contractor MSP Claims Investigation Project P.O. Box 5041 New York, NY 10274-5041

23. Coordination of Benefits Report the following information to COBC: -Claimant’s name -Medicare Health Insurance Claim # or SSN -Date of accident -Nature of illness/injury -Name and address of WC carrier -Name and address of attorney -Name and address of employer -Policy/claim number -Diagnosis codes (ICD-9)

24. CMS Regional Offices COBC assigns Regional Office (RO) based on beneficiary’s state of residence & electronically forwards information to CMS Regional Office COBC also assigns Medicare Lead Contractor COBC sends letter to beneficiary regarding assigned Regional Office, assigned Medicare Lead Contractor, Medicare Secondary Payer statute, and Medicare’s right to recover

25. CMS Regional Offices COBC also sends Medicare release form for beneficiary’s signature CMS is divided into 10 Regional Offices to assist with operation of Medicare CMS Regional Office oversees all activity of Medicare Lead Contractors within specific geographical area

26. CMS Regional Offices Medicare Lead Contractor is private contractor within region (example, Palmetto GBA is Medicare Lead Contractor for North Carolina) Medicare Lead Contractors communicate directly with attorneys, beneficiaries, claims adjustors, and MSA Allocators Any requested info should be sent to COBC (not RO, not Medicare Lead Contractor)

27. Medical Lead Contractor Proposed MSA Arrangements are sent to COBC which is then forwarded to Medicare Lead Contractor Medicare Lead Contractors are Fiscal Intermediaries based on state of residence Medicare Lead Contractors make sure all proposed MSA Arrangements take Medicare’s interest into consideration

28. Medicare Lead Contractor This information is forwarded to RO which then approves/denies Proposed MSA Arrangement Medicare Lead Contractors research and keep track of payments which may be related to WC injury that were paid by Medicare Once Medicare beneficiary receives settlement, the settlement agreement/award notice, procurement information, and signed release is sent to COBC, and then to Medicare Lead Contractor

29. Medicare Lead Contractor Medicare Lead Contractor calculates MSP recovery claim amount and sends recovery letter. This letter includes amount to be reimbursed to Medicare and rights to seek waivers/administrative appeals Medicare Lead Contractor responsible for indentifying all outstanding conditional payments and liens made by Medicare

30. Conditional Payments Payment paid by Medicare that is subject to reimbursement if another payer (WC carrier) is determined to be responsible for that payment May occur when primary payer does not pay promptly (120 days) and medical provider bills Medicare

31. Conditional Payments May occur in disputed or denied WC claims May occur when injured worker/Medicare beneficiary gave incorrect information to medical provider (Medicare instead of WC) Duplicate payment made to provider by Medicare and primary payer for same DOS

32. Conditional Payments Medicare Lead Contractor receives information from Medicare beneficiary which helps determine amount of conditional payments Medicare made on his/her behalf CMS requires that Medicare beneficiary refund CMS for conditional payment within 60 days of receiving settlement from primary payer

33. Conditional Payments If CMS does not receive full refund or adequate proof that overpayment does not exist (within 60 days), interest will be assessed from mailing date of demand letter Interest continues to be charged every 30 days until reimbursement is made If no payment after 120 days of demand, case will be referred to Office of General Counsel to recover payment (legal action)

34. Lien Investigation Obtain SSA release from beneficiary Request from Social Security Administration - Entitlement dates for SSD, Part A & Part B - Status of any SSD application (pending, denied, appealed) - Number of eligible quarters work hours - Has representative payee been assigned

35. CMS Website CMS Requirements Checklist CMS MSA Sample http://www.cms.hhs.gov/WorkersCompAgencyServices/01_overview.asp

36. MSA Process – Part II MSA Allocation Report - Narrative - Recommendations - Coding - Cost Projection - Medicare Allowable State Jursidiction Life Expectancy Rated Age

37. Referral Referral form Authorization - SSA - Medicare - General (HIPAA) Medicals (last 2-3 years) Supporting medicals Medical payouts (all) Indemnity payouts (all) Pharmacy (last 2 years)

38. MSA Allocation Report MSA Proposal Requirements Checklist State Medicare’s interest has been considered Should document that client acknowledges an understanding of Medicare/MSA process MSA proposal can be submitted on paper or CD-ROM (PDF format) Medicals must be submitted in chronological order

39. MSA Allocation Report Cover letter must include: - Claimant info - Date of entitlement for SSDI/Medicare - State of jurisdiction - WC carrier/employer/attorney info - Injury/disease date -Type of injury/disease - Total WC settlement amount - Proposed medical treatment amount - Proposed prescription amount & calculation - Total MSA amount

40. Narrative Specifics of injury/disease (ICD-9 codes) Brief description of past medical treatment Current medical treatment Anticipated future treatment Patient’s medical recovery prognosis (full/partial) Pre-existing or unrelated medical condition

41. Recommendations Comprehensive review of medical records - Should be performed by qualified professional - Note type and frequency of services received - Heaviest weight given to post surgery or MMI - Note if more than one treatment pathway Review of payout history - Compare payments to medical records - Identify missing medical records - Assess annual cost of care over past 2-3 years

42. Cost Projection Amount for future medical treatment Amount of MSA Allocation determined by - Comprehensive review of medical records - Review of payout history - Physician recommendations - Standards of care

43. Cost Projection Physician recommendations - Identify for future care - Obtain/clarify physician recommendations * Primary treating physician * Specialist vs. non-specialist * IME, second opinion Standards of Care - Research - Articles, studies - Manufacturer recommendations - Supporting documentation

44. Coding CPT (Current Procedure Terminology) - Physician services - Home health services - Diagnostic studies - Lab work - Surgeries - Hospitalizations - Therapeutic evaluations/modalities

45. Coding HCPCS (Healthcare Common Procedure Coding System) - Medical supplies - Durable medical equipment - Orthoses and prosthetics - Medications

46. Medicare Allowable Searching the Medicare Manuals Paper based manual vs. internet manual Document Medicare allowable in writing cms.hhs.gov/manuals

47. Medicare Allowable Common Medicare covered services - Physician visits - Diagnostic studies - Lab work - Hospitalizations - Surgery - Physical therapy

48. Medicare Allowable Common Medicare non-covered services - Custodial care - Some durable medical equipment - Some medical supplies - Home modifications - Mileage

49. State Jurisdiction MSA projected costs are figured on state of jurisdiction (not state of residence) Fee schedule state vs. usual & customary Search web for state WC agency info

50. Life Expectancy CDC Life Expectancy tables http://www.cdc.gov/nchs/products/pubs/pubd/lftbls/life/1966.htm Updated every year in July Documentation from medical provider regarding justification for alternative life expectancy

51. Rated Age Based on physician/medical opinions and pre- existing medical conditions (ex., obesity, diabetes, hypertension, smoke/alcohol, etc.) Can be obtained from structured settlement broker and medical underwriter/life insurance companies Attach copy of rated age(s) on company letterhead with proposed MSA Arrangement Use median of rated ages

52. MSA Process – Part III MSA Funding Administration Submission to CMS Office Rejection of MSA

53. MSA Funding Costs of MSA is based on WC fee schedule or usual/customary charges MSA funds are to be placed in an interest bearing account MSA account can be funded by – Lump Sum payment – Annuity

54. MSA Funding Lump sum- entire amount of MSA allocation is paid into account at time of settlement No inflation added No discount to present day value Medicare will not pay for injury related care until entire lump sum amount is properly exhausted

55. MSA Funding Annuity- designated amount of MSA allocation is paid annually into account Seed money- amount equal to two years of future medical treatment and initial surgery, procedure and/or replacement Structured settlement can fund the annuity

56. MSA Administration Interest earned on MSA account is taxable State/federal taxes may be deducted from MSA account CMS has not mandated particular type of administration – Self administration – Professional administration (custodial or trust)

57. Self Administration Claimant manages MSA fund Claimant must have clear understanding of MSA process and specifics of self administration Self-administration not allowed if claimant has been assigned ‘representative payee’ by SSA

58. Professional Administration If claimant has been assigned ‘representative payee’ by SSA – professional administration mandatory Professional administrator handles all aspects of MSA fund Flat rate charge or 0% charge to set up administration of MSA fund, yearly rate to handle MSA fund

59. Documents for CMS submission Proposed MSA Allocation Settlement agreement - Total amount of WC settlement - Proposed MSA amount - Proposed MSA amount for prescriptions - Total proposed MSA amount Medical records (last 2-3 years) Supporting medicals Life Care Plan (if available)

60. Documents for CMS submission Medical claims history (all) Indemnity history (all) Pharmacy history (last 2 years) Life expectancy Median of all rated ages (if requested) CMS & SSA releases Administrator & fees MSA account info

61. Submission to CMS Proposed MSA Allocation and supporting documents submitted to COBC COBC in Detroit Regional Office or private contracture reviews MSA Allocation Regional Office decides on accept/denial

62. Coordination of Benefits CMS c/o Coordination of Benefits Contractor P.O. Box 33849 Detroit, MI 28232 Attention: WCMSA Proposal

63. MSA denied Reasons why MSA Arrangement may be returned: incomplete or insufficient Medicare Lead Contractor will send letter requesting required information Response should be sent to COBC within 45 days If not received within 45 days, CMS will close file Process starts all over again

64. MSA accepted RO provides written notification of approval or denial of proposed MSA Arrangement MSA Arrangement then sent to WC state agency for approval Once CMS approves MSA Arrangement, a copy of final settlement that has been signed by beneficiary and approved by the WC state agency must be sent to RO

65. Comments Calculating prescription medications Update ICD-9, CPT, HCPCS codes Update fee schedules & UC charges Update life expectancy tables State of jurisdiction vs. state of submission Rated age Medicare allowable Update DME regional carriers

66. Non workers compensation There is no formal CMS policy on how to consider Medicare’s interest in liability cases CMS states they are working on memorandum to frequently asked questions about liability cases Liability cases still must consider Medicare’s interest

67. Similarities & Differences LCP MSA Methodology X X Standards of practice X X Stand alone documents X X Entitlement status X Claimant visit X Provider contact X X? UCR X X? Fee schedule X Medicare allowable X

68. Ethical Perceptions Does an MSA need a LCP? Does a LCP need an MSA? Should a Life Care Planner perform MSA on LCP? Should a Life Care Planner perform LCP on MSA?

69. Helpful websites http://cms.hhs.gov/quarterlyproviderupdates http://cms.hhs.gov/manuals www.ssa.gov/disability/professionals/bluebook http://www.cms.hhs.gov/medicare/ http://www.cms.hhs.gov/medicare/cob