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John Bair
John Bair
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Funding a WCMSA: Lump Sum vs. Structured Arrangement

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Last week, the Centers for Medicare and Medicaid Services released a Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA) Reference Guide. The guide provides a good overview of what WCMSAs are, when they are necessary, how to fund them, and what the submission and approval process looks like.

Within the reference guide, CMS discusses the two different methods of funding WCMSAs—either with a lump sum or a structured arrangement. CMS claims that lump-sum payments are easier to monitor. It makes sense that CMS would advocate funding with a lump sum, because Medicare has a far lesser chance of having to make any injury-related payments.

As stated in the guide,

”When a WCMSA is designated as a lump-sum commutation settlement, Medicare will not make any payments for the claimant’s medical expenses (for work-related injuries or diseases) until all the funds within the MSA (including any interest earned on funds in the account) have been completely exhausted.”

Note—“all the funds,” meaning that until the entirety of the WCMSA allocation is exhausted, Medicare is not responsible for making any payments.

On the other hand, if a structured arrangement is utilized to fund a WCMSA, the claimant is required to make an initial deposit in an amount equal to the first surgical procedure or replacement and two years of annual payments. After the initial deposit, the structure is designed to allocate regular deposits over a designated period of time. Once the funds are exhausted in a given period, Medicare will pay primary for further injury-related expenses during that period.

For example, let’s say a WCMSA is funded with a structure that will pay $15,000 annually over a period of 15 years, beginning January 1, 2013.

If the structure is designed to disburse $15,000 on January 1 and the allocation is used up* by September 30, 2013, then Medicare will make payments for the services for the remainder of 2013. Once the second period begins on January 1, 2014, the $15,000 WCMSA allocation for that period regains responsibility for payments.

For those claimants involved in Workers' Comp cases who need WCMSAs, funding with structured arrangements can allow them to retain more of their settlement recovery over the long-term.

*On Medicare-covered services

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