Allocation firms have extensive knowledge of the ever-changing regulations surrounding Medicare. For those individuals who have received settlements in Workers' Compensation or liability cases, allocation firms use the individual's medical history and needs to create a report that establishes a certain amount needed to fund a Medicare Set-aside (MSA) account. However, these reports may not take into consideration certain factors that could lower the amount of the MSA account and as a result, increase the percentage of recovery that your client can retain.
Here are some of the elements that allocation firms may neglect:
- The MSA review process is voluntary for both Workers' Compensation and liability cases: Through a series of memos and website notifications, the Centers for Medicare and Medicaid Services (CMS) has repeatedly stated that the requirement is to demonstrate adequate consideration of Medicare's interests, not to submit the proposed allocation for CMS review and approval. Even with the recent introduction of the Medicare Secondary Payer Recovery Portal, the review process can be cumbersome. A comprehensive approach to determining the appropriate Medicare Set-aside amount can be effective for your client, while still satisfying the requirement to consider Medicare's interests.
- Life expectancy: Life expectancy can–and should–be a major determining factor in assessing the future cost of care and therefore, the set-aside amount. Higher rated ages (based on a number of health-related factors) mean a shorter life expectancy, resulting in lower projected costs for future medical care. Effective January 19, 2013, CMS will use the Centers for Disease Control (CDC)'s 2008 United States Life Tables for Workers' Compensation MSA life expectancy calculations. However, for liability cases, CMS has not released any guidance, so establishing rated ages for your client will be an important step in helping them retain more of their recovery.
- Use of estimated generic pricing: According to CMS, pharmaceutical pricing for Workers' Compensation cases is determined using the Average Wholesale Price (AWP) methodology. The AWP can be calculated using a number of methods, but the general result is a markup of the drug's actual cost. As there are no regulations for pharmaceutical pricing in liability cases, generic prescription medications can be substituted for brand name prescription medications, resulting in an overall lower Medicare Set-aside allocation.
- Use of structured arrangements: In Workers' Compensation cases that require future surgical care, the claimant can elect to receive a lump sum in an amount equal to the first expected surgery and/or replacement, and two years of annual payments. The remaining funds are then annuitized and divided as annual payments over the course of the client's life expectancy. If the claimant selects this option, once the payment for a given year has been exhausted, Medicare will cover any additional costs related to the work injury during that year. This approach can lower the lifetime MSA funding requirement significantly. A similar approach may be useful in a liability case as well.
Whether you are determining a Medicare Set-aside allocation for a Workers' Compensation or a liability case, utilize common-sense best practices that prove you have adequately considered Medicare's interests. Little guidance for Medicare Set-asides in liability cases allows for a more liberal approach, but for the sake of ensuring that your client's long-term medical needs are met, it is wise to defer to the more stringent recommendations for Workers' Compensation Medicare Set-asides. A comprehensive settlement planning firm can help you maximize your client's recovery through the use of rated ages, estimated generic pricing, and structured arrangements, while ensuring that Medicare's interests are considered and protected.
A West Point graduate where he served as captain and military aviator, John Bair continues his commitment to our country through his efforts within the settlement planning industry. He has represented families of victims lost in the Flight 3407 crash, offered pro bono services to the families of 9/11 victims and drafted the first consumer protection bill for plaintiffs (H.R. 3699).