Workers’ Compensation Medicare Set-aside Arrangements (WCMSAs)

Kevin — Sat, 28 Jan 2012 19:41:38 +0000

INTRODUCTION TO WORKERS’ COMPENSATION MEDICARE SET-ASIDE ARRANGEMENTS

All litigants to an Oklahoma City or Tulsa Workers’ Compensation case (i.e. the injured worker, his or her employer, its insurance company and any attorney or lawyer for any ot these respective parties) have significant responsibilities under the Medicare Secondary Payer (MSP) laws to protect Medicare’s interests when resolving any Oklahoma Workers’ Compensation case that involves in any way future medical treatment and expenses. The method most recommended by Medicare to protect its interest is a Workers’ Compensation Medicare Set-aside Arrangement (WCMSA), which arrangement allocates a portion of any Oklahoma City or Tulsa Workers’ Compensation settlement for future medical expenses. The precise amount of the set-aside will be determined on a case-by-case basis, and will be reviewed by the Centers for Medicare Services (“CMS”), when appropiate. Once the CMS determined set-aside amount has been exhausted and accurately accounted for to CMS, Medicare will then agree to pay primary for future Medicare covered expenses related to the injured employee’s work-related injury.

CMS REVIEW THRESHOLDS FOR OKLAHOMA WORKERS COMPENSATION CASE

Medicare has determined that it is not in its best interest to review every Oklahoma City or Tulsa workers’ comp settlement statewide in order to protect its interests pursuant to the Medicare Secondary Payer Statute. CMS has determined that an attorney or lawyer in Oklahoma need not prepare and submit to Medicare a detailed Workers’ Compensation Medicare Set-aside Arrangement (“WCMSA”) when settlement of the injured employee’s Oklahoma workers’ compensation case leaves the medical treatment aspects of the claim intact. However–a Workers’ Compensation Medicare Set-aside Arrangement should be submitted to CMS by any attorney or lawyer for a party to an Oklahoma City or Tulsa workers’ compensation settlement for proper consideration in the following situations:

The injured worker is currently a Medicare beneficiary and the total settlement amount is greater than $25,000–that is CMS will not review WCMSA proposals submitted by the injured worker &/or his or her attorney or lawyer where the employee is not currently a Medicare beneficiary and the “total settlement amount” is $25,000 or less (injured workers commonly referred to by CMS as “low dollar threshold Medicare beneficiaries”)*; OR
The hurt employee has a “reasonable expectation” of Medicare enrollment within 30 months of the settlement date and the anticipated total Oklahoma workers’ comp settlement amount for future medical expenses and disability/lost wages over the life or duration of the settlement agreement is expected to be greater than $250,000.

*NOTE: CMS sternly cautions that this is a CMS workload review threshold and not a substantive dollar or “safe harbor” threshold. In other words, if the total settlement amount is $25,000 or less, the insurance company, the injured employee &/or any attorney or lawyer for each, are still required to consider Medicare’s interests. The method recommended by CMS to protect Medicare’s interests is to enter into a Medicare Set Aside arrangement to protect Medicare’s interests, even though CMS will not review the proposal.

COMPUTING THE TOTAL SETTLEMENT AMOUNT FOR DETERMINING WHETHER A WCMSA MUST BE SUBMITTED TO CMS FOR APPROVAL. Insurance companies, injured workers and any attorney or lawyer for such parties should always keep in mind that in computing the total amount of any Oklahoma Workers’ Compensation settlement for determining whether such settlement reaches the threshold amount for preparation of a Workers’ Compensation Medicare Set-aside Arrangement that the total settlement amount necessarily includes, but is not limited to, wages, attorney or lawyer fees, all future medical expenses (including prescription drugs), and repayment of any Medicare conditional payments. Also, payout totals for all annuities to fund the above expenses must be used rather than costs or present values of any annuities. Finally–any previously settled portion of the Tulsa or Oklahoma City workers’ comp case must be included in computing the total settlement amount when determing whether a WCMSA must be submitted to CMS.

WHEN DOES AN INJURED WORKER HAVE A ‘REASONABLE EXPECTATION’ OF BECOMING A MEDICARE BENEFICIARY? When an injured Oklahoma City or Tulsa Workers’ Compensation claimant settles his or her case for more than $250.000 (as defined above) he or she is required to submit a fully compliant Workers’ Compensation Medicare Set-aside arrangement to CMS for approval if he or she is ‘Reasonably Expected to Become a Medicare Beneficiary’. According to CMS’ protocol an injured worker has a “reasonable expectation” of Medicare enrollment if he or she:

has applied for Social Security Disability Benefits;
has been denied Social Security Disability Benefits but anticipates appealing that decision;
is in the process of appealing &/or re-filing for Social Security Disability Benefits;
is 62 years and 6 months old (i.e., may be eligible for Medicare based upon his/her age within 30 months); or
has an End Stage Renal Disease (ESRD) condition but does not yet qualify for Medicare based upon ESRD.

To the extent an Oklahoma Workers’ Comp settlement meets both of the criteria (i.e., the settlement is greater than $250,000 AND the injured worker is reasonably expected to become a Medicare beneficiary within 30 months of the settlement date), then a CMS-approved Medicare Set-aside arrangement is appropriate.

CAUTION! CMS flatly warns that both the beneficiary and non-beneficiary review thresholds described above are subject to adjustment at any time and without warning. Any attorney or lawyer representing an injured worker or insurance company in an Oklahoma workers’ compensation compromise settlement should note that CMS reserves the right to modify or eliminate its review criteria if it determines that Medicare’s interests are not being protected or met.

WHEN A MEDICARE SET-ASIDE IS NOT REQUIRED ON OKLAHOMA SETTLEMENT

An attorney or lawyer representing an injured worker or insurance company in a Oklahoma City or Tulsa Workers’ Compensation compromise settlement should note that a Workers’ Compensation Medicare Set-aside Arrangement is not required to be submitted to CMS if ALL of the following apply:

The facts of the Oklahoma workers’ compensation compromise settlement demonstrate that the injured worker is only being compensated for past medical expenses (i.e., for services furnished prior to the settlement);
There is no evidence that the injured worker &/or his or her attorney or lawyer is attempting to maximize the other aspects of the settlement (e.g., the lost wages and disability portions of the settlement) to Medicare’s detriment; and,
The injured worker’s treating doctor concludes in writing that to a reasonable degree of medical certainty the hurt employee will not longer require any Medicare-covered treatments related to the Oklahoma worker’s comp injury.

STRUCTURED WORKERS’ COMPENSATION MEDICARE SET-ASIDE ARRANGEMENTS

A Workers’ Compensation Medicare Set-aside Arrangement can be established as a structured arrangement, where payments are made to the arrangement on a defined schedule to cover expenses projected for future years. In a structured Medicare Set-aside Arrangement, monies are apportioned over fixed or definite periods of time. In such cases, Medicare will not agree to cover the beneficiary if there is no verication that the funds apportioned in the arrangement have been exhausted. Medicare does not make any payments until the contractor responsible for monitoring the individual’s case can verify that the funds apportioned to the period, including any carry-forward amount, have been completely exhausted as set forth in the Medicare Set-aside Arrangement. Attorneys and Lawyers to an Oklahoma workers comp settlement should consider that CMS will approve a payout amount for services that would otherwise be reimbursable by Medicare from the Workers’ Compensation Medicare Set-aside Arrangement in the following manner:

The seed money for the Workers’ Compensation Medicare Set-aside Arrangement must include an amount equal to the amount of money calculated to cover the first surgery procedure &/or replacement and two years of annual payments.
The remainder of the approved amount should be divided by the remainder of the claimant’s life expectancy.
Subsequent annual deposits into the Workers’ Compensation Medicare Set-aside Arrangement are to be based upon a set “anniversary date” which cannot be more than one year after the settlement date.

NOTE: In a structured Medicare Set-aside arrangement, if funds are not exhausted during a given period, then the excess funds must be carried forward to the next period. The threshold after which Medicare would begin to pay claims related to the injury would then be increased in any subsequent period by the amount of the carry-forward. This carry-forward process continues until the accumulated carry-forward plus the payment for a given year is exhausted.

SETTLEMENT OF OKLAHOMA WORKERS COMP CASE PRIOR TO SUBMISSION TO CMS

The parties to an Oklahoma City or Tulsa workers’ compensation case, ie. insurance company, injured worker &/or any attorney or lawyer for such litigants, can proceed with the settlement of the medical expenses portion of an Oklahoma work comp claim before CMS actually reviews the proposed Workers’ Compensation Medicare Set-aside Arrangment and determines an amount that adequately protects Medicare’s interests. However, any statement in the compromise settlement documents or record of the amount needed to fund the WCMSA is not binding upon CMS unless/until the parties & their attorneys and lawyers provide CMS with documentation that the WCMSA has actually been funded for the full amount as specified by CMS that adequately protects Medicare’s interests as a result of its review.

If CMS does not subsequently provide approval of the funded Workers’ Compensation Set-aside Arrangement amount as specified in the compromise settlement documents/record and proof is not provided to CMS that the CMS-approved amount has been fully funded, CMS may deny payment for services related to the Oklahoma workmens’ comp claim up to the full amount of the settlement. Only the approval of the WCMSA by CMS and the submission of proof that the WCMSA was funded with the approved amount, would limit the denial of related claims to the amount in the WCMSA. This shall be demonstrated by submitting a copy of the final, signed settlement documents indicating the WCMSA is the same amount as that recommended by CMS.

NOTE: Any party to an Oklahoma compromise settlement and such party’s attorney or lawyer should be reminded that the injured worker could be at risk if the WCMSA is funded for less than the amount that CMS determines to be adequate to protect Medicare’s interests.

LISTING FUTURE MEDICAL COSTS IN AN OKLAHOMA WORKERS COMP SETTLEMENT

An Oklahoma workers’ compensation settlement that does not specifically account for past versus future medical expenses will be considered to be entirely for future medical expenses. This means that Medicare will not pay for medical expenses that are otherwise reimbursable under Medicare and are related to the Oklahoma City or Tulsa workmens compensation case, until the entire settlement is exhausted. Additionally, please note that any allocations made for lost wages, pre-settlement medical expenses, future medical expenses, or any other settlement designations that do not consider Medicare’s interests, will not be approved by Medicare.

USE OF OKLAHLMA FEE SCHEDULE vs. ACTUAL CHARGES FOR WCMSA

The CMS uses either the Oklahoma Workers’ Compensation Court’s work comp fee schedule or the full actual charges for its review of a proposed Workers’ Compensation Medicare Set-aside Arrangement based upon whichever methodology is used by the individual/entity or attorney/lawyer submitting the proposal. The administrator of the WCMSA (both professional administrators and self administrators) should make payments from the WCMSA on the same basis. That is, if the proposal was submitted and approved based upon full actual charges, the administrator should make payment from the WCMSA based upon full actual charges; if the proposal was submitted and approved based upon Oklahoma Workers’ Compensation fee schedule amounts, the administrator should make payment from the WCMSA based upon Oklahoma Workers’ Compensation Court’s fee schedule amounts.

ADMINISTERING OKLA WORK COMP SETTLEMENTS & WCMSAs

When an injured worker designates a representative payee, appointed guardian/conservator, or has otherwise been declared incompetent by a court, any attorney or lawyer for the injured worker or insurance company submitting the Oklahoma Workers’ Compensation Medicare Set-aside Arrangement must include that information in their Medicare set-aside arrangement proposal to CMS. In addition, the injured worker may self-administer his or her own Workers’ Compensation Medicare Set-aside Arrangement–and if he or she chooses to do so–must submit an annual self-attestation form when monies have been exhausted.

In professional administration situations, the administrator of the set-aside arrangement must forward annual accounting summaries concerning the expenditures of the arrangement to the CMS Medicare contractor responsible for monitoring the individual’s case. In turn–the Medicare contrator is responsible for verifying that no payments from Medicare are mode for medical expenses related to the Oklahoma workers’ compensation injury until the Workers’ Compensation Medicare Set-aside Arrangement is exhausted.

No Medicare Payments for a Claimant’s Work-Related Injury or Disease until the WCMSA has been Exhausted

(Ref: 7/23/01 Memo)

The purpose of a Workers’ Compensation Medicare Set-aside Arrangement (WCMSA) is to pay for all services related to the claimant’s work related injury or disease, therefore, Medicare will not make any payments (as a primary, secondary or tertiary payer) for any services related to the work-related injury or disease until nothing remains in the WCMSA. These arrangements are established in order to pay for all medical expenses resulting from work-related injuries or diseases; they are not designated to simply pay portions of medical expenses for work-related injuries or diseases. When WCMSAs are designated as lump sum commutations (i.e., the WCMSA is designated in a manner that the WC settlement is paid into the arrangement all at once), Medicare would not make any payments for the claimant’s medical expenses (for work-related injuries or diseases) until all the funds (including interest) within the WCMSA have been completely exhausted. These same basic principles also apply to structured settlements.

Generally, WCMSAs that are lump sums (i.e., the WCMSA is funded by the WC settlement all at once) present less of a problem to monitor than structured arrangements. Medicare would not make any payments for claimants that possess lump sum arrangements until all of the funds within the arrangement have been depleted. For example, if a set-aside arrangement were established for $90,000, Medicare would not make any payments until the entire $90,000 (plus interest, if applicable) were exhausted on the claimant’s medical care (for Medicare covered services only).

No Compromise of Future Medical Expenses

(Ref: 7/11/05 Memo Q11)

The CMS does not compromise or reduce future medical expenses related to a WC injury. Some submitters have argued that 42 C.F.R. §411.47 justifies reduction to the amount of a WCMSA. The compromise language in this regulation only addresses conditional (past) Medicare payments. The CMS does not allow the compromise of future medical expenses related to a WC injury.

In addition, CMS has no process to accept up-front cash payments in lieu of a CMS reviewed WCMSA.

No Waivers of Specific Services Related to a WC Case

(Ref: 4/21/03 Memo Q18)

There is no means by which a claimant can permanently waive his or her right to certain specific services related to a WC case and, thereby, reduce the amount of a WCMSA. CMS cannot approve settlements that promise not to bill Medicare for certain services in lieu of including those services in a Medicare set-aside arrangement. This is true even if the claimant/beneficiary offers to execute an affidavit or other legal document promising that Medicare will not be billed for certain services if those services are not included in the Medicare set-aside arrangement.

WC Claims Not Covered in the Settlement

(Ref: 4/21/03 Memo Q16)

If a current Medicare beneficiary has outstanding WC related claims that were not paid prior to the settlement and are not covered in the settlement or the WCMSA, Medicare will not pay those claims. Medicare cannot pay because it is secondary to the WC settlement and the Medicare set-aside arrangement cannot pay because it is created solely for future medical expenses related to the WC case. Medical expenses incurred prior to the settlement need to be accounted for in the compromise portion of the settlement. These services should be known to the parties. The provider/supplier will typically have billed Medicare and/or the WC carrier for these services and the beneficiary’s representative will have made inquiries about outstanding related claims. In addition, to the extent Medicare has made any conditional payments, Medicare will recover those payments pursuant to 42 CFR 411.47.

Loss of Medicare Entitlement after CMS Approval of a WCMSA

(Ref. 7/11/05 Memo Q9)

Claimants are not entitled to release of Workers’ Compensation Medicare Set-aside Arrangement (WCMSA) funds if they lose their Medicare entitlement. However, the funds in the WCMSA may be expended for medical expenses specified in the WCMSA until Medicare entitlement is re-established or the WCMSA is exhausted.

Use of the WCMSA is limited to services that are related to the workers’ compensation (WC) claim or settlement and that would be covered by Medicare if the individual were a Medicare beneficiary. The same requirements that Medicare beneficiaries follow for reporting and administration are to be used in the above cases. The CMS will not pay for any expenses related to the WC claim or settlement until a self-attestation document or a full accounting of all monies expended from the WCMSA are sent to the lead contractor upon the re-establishment of Medicare entitlement. At that time, the lead contractor will adjust the WCMSA record to reflect the expenses paid prior to entitlement.

Effect of WCMSA on Medicaid Eligibility

(Ref: 7/11/05 Memo Q13)

Workers’ Compensation Medicare Set-aside Arrangements (WCMSAs) are not subject to any special treatment under Medicaid resource rules. WCMSA funds should be evaluated to determine if they meet the legal definition of a resource for Supplemental Security Income (SSI) and, therefore, Medicaid purposes, i.e., “cash or other assets that an individual owns and could convert to cash to be used for his or her support and maintenance.” The funds must be in interest-bearing accounts. These funds may meet the SSI/Medicaid resource definition. There may be cases in which funds in a WCMSA are placed into trusts, possibly trusts that could satisfy the definition of “special needs trusts” under Section 1917 of the Social Security Act. In those cases, the funds might not be a countable resource, however, that result would be based solely on Medicaid, not Medicare rules.

Use of WC Settlement Funds Prior to Medicare Entitlement

(Ref: 7/11/05 Memo Q3)

For claimants who are not yet Medicare beneficiaries and for whom CMS has reviewed a Workers’ Compensation Medicare Set-aside Arrangement (WCMSA), the WCMSA may be used prior to becoming a beneficiary because the amount was priced based on the date of the expected settlement. Use of the WCMSA is limited to services that are related to the workers’ compensation (WC) claim or settlement and that would be covered by Medicare if the claimant were a Medicare beneficiary. The same three requirements that Medicare beneficiaries follow for reporting and administration are to be used in the above cases. The CMS will not pay for any expenses related to the WC injury, illness/disease until a self-attestation document or a full accounting of all monies expended from the WCMSA are sent to the lead contractor upon Medicare entitlement. At that time, the lead contractor will adjust the WCMSA record to reflect the expenses paid prior to entitlement. Even if there is no CMS-approved WCMSA, any funds from a WC settlement attributable to future medicals that are remaining at the time a claimant becomes a Medicare beneficiary must be used for Medicare-covered services related to the WC claim or settlement until such funds are exhausted. Only then will CMS pay for Medicare-covered services related to the WC claim or settlement.

WCMSAs in Cases Where There are Both a WC Claim and a Third Party Liability Claim

(Ref: 4/21/03 Memo Q19)

Third party liability insurance proceeds are also primary to Medicare. To the extent that a liability settlement is made that relieves a Workers’ Compensation (WC) carrier from any future medical expenses, a CMS approved Workers’ Compensation Medicare Set-aside Arrangement (WCMSA) is appropriate. The WCMSA would need sufficient funds to cover future medical expenses incurred once the total third party liability settlement is exhausted. The only exception to establishing a WCMSA would be if it can be documented that the claimant does not require any further WC claim related medical services. A WCMSA is also not recommended if the medical portion of the WC claim remains open, and WC continues to be responsible for related services once the liability settlement is exhausted.

For additional information concerning the Workers’ Compensation Medicare Set-aside Arrangement (WCMSA) process, please click on the links to our other WCMSA pages.

DATE: May 11, 2011

FROM:

Acting Director

Financial Services Group

Office of Financial Management

SUBJECT:

Medicare Secondary Payer–Workers’ Compensation–INFORMATION

: Consortium Administrator for Financial Management and Fee-for-Service Operations

The purpose of this memorandum is to reiterate guidance provided in the Centers for Medicare & Medicaid Services’ (CMS’) July 23, 2001, July 11, 2005, and April 25, 2006 procedure memoranda regarding CMS’ Workers’ Compensation Medicare Set-aside Agreement (WCMSA) proposal review thresholds, which can be found on CMS’ Web site at: http://www.cms.gov/WorkersCompAgencyServices.

Submission of a WCMSA proposal to CMS for review and approval is a recommended process. There are no statutory or regulatory provisions requiring that a WCMSA proposal be submitted to CMS for review. However, if an entity chooses to use the WCMSA review process, CMS requests that it comply with the established policies and procedures referenced on its Web site. Claimants, employers, carriers, and their representatives should be encouraged regularly to monitor this dedicated workers’ compensation Web site for changes in policies and procedures.

With respect to these policies and procedures, it is critically important to note the following information:

1. Medicare reviews certain workers’ compensation (WC) settlements in order to protect Medicare’s interests under the Medicare Secondary Payer Statute [codified at 42 U.S.C. Section 1395y] and its implementing regulations. [Ref: 7/23/01 Memo Q1(c))].

Note:

A WCMSA should not be submitted to CMS when the resolution of the workers’ compensation claim results in the medical portion of the claim is being left open.

2. A WCMSA meets CMS’ criteria for review when the following thresholds are met:

•

The claimant is currently a Medicare beneficiary and the total settlement amount is greater than $25,000; OR

•

The claimant has a “reasonable expectation” of Medicare enrollment within 30 months of the settlement date and the anticipated total settlement amount for future medical expenses and disability/lost wages over the life or duration of the settlement agreement is expected to be greater than $250,000.

Page 2 – Consortium Administrator

3. The CMS no longer reviews new WCMSA proposals if the above thresholds are not met. However, CMS wishes to stress that these threshold requirements reflect a CMS operational workload standard. These requirements do not constitute a substantive dollar or “safe harbor” threshold. It remains true that Medicare beneficiaries still must consider Medicare’s interests in all WC cases and ensure that Medicare is the secondary payer to WC in such cases.

4. Both the beneficiary and non-beneficiary review thresholds are subject to change. [Ref: 7/11/05 Memo Q2; 4/25/06 Memo]. CMS reserves the right to modify or eliminate these thresholds, doing so relative to a proper consideration of Medicare’s interests.

Your staff may direct questions or concerns on the above referenced policies and procedures to Frank Johnson of my staff at (410) 786-2892.

Charlotte Benson

***ALERT***New CMS Memorandum dated July 24, 2006 regarding WCMSAs and Prescription Drugs for 2007. Please click on the Downloads below for the document.***ALERT***

Pursuant to the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), prescription drug coverage under Medicare will be available starting on January 1, 2006.

All Workers’ Compensation (WC) settlements that occur on or after January 1, 2006, must consider and protect Medicare’s interests when future treatment includes prescription drugs along with the future medical services that would otherwise be reimbursable by Medicare. The recommended method to protect Medicare’s interests is to include a Workers’ Compensation Medicare Set-aside Arrangement (WCMSA) as part of the WC settlement. (Ref: 12/30/05 Memo Q1)

For WCMSA proposals received by CMS’ Coordination of Benefits Contractor (COBC) on or after January 1, 2006, the submitter’s cover letter must include separate amounts for: (1) future medical treatment, and (2) future prescription drug treatment. In addition, the cover letter must include an explanation as to how the submitter calculated the future prescription drug treatment amount (i.e., actual costs, average wholesale price, etc.). (Ref: 12/30/05 Memo Q2)Beginning January 1, 2006, Medicare will begin its Part D prescription drug coverage as a
result of the implementation of the Medicare Modernization Act of 2003 (MMA). This
memorandum includes policy regarding the inclusion of prescription drugs that Medicare
will cover as of January 1, 2006, in Workers’ Compensation Medicare Set-aside
Arrangements (WCMSAs).
NOTE: References to prescription drugs in this document are limited to those prescription
drugs that are for the treatment of the Workers’ Compensation (WC) related injury(ies)
and/or illness(es)/disease(s), (hereinafter referred to as “WC injury”) and those where
Medicare provides coverage.
Question 1: What is the Centers for Medicare & Medicaid Services’ (CMS) policy
regarding the inclusion of prescription drugs in WCMSAs with the implementation of
the MMA?
Answer 1: All WC settlements that occur on or after January 1, 2006, must consider and
protect Medicare’s interests when future treatment includes prescription drugs along with
the future medical services that would otherwise be reimbursable by Medicare. The
recommended method to protect Medicare’s interests is to include a WCMSA as part of the
WC settlement.
Question 2: Will the submission of WCMSA proposals change with the
implementation of the MMA on January 1, 2006?
Answer 2: Yes, the submission of WCMSA proposals will change with the
implementation of the MMA on January 1, 2006. For WCMSA proposals received by
CMS’ Coordination of Benefits Contractor (COBC) on or after January 1, 2006, the cover
letter must include separate amounts for: (1) future medical treatment, and (2) future
prescription drug treatment. In addition, the cover letter must include an explanation as to
how the submitter calculated the future prescription drug treatment amount (i.e., actual
costs, average wholesale price, etc.).
Question 3: What happens if a WCMSA proposal received on or after January 1,
2006, does not include an amount for future prescription drug treatment?
Answer 3: If the cover letter does not include an amount for future prescription drug
treatment, and the current treatment records indicate that the claimant has been prescribed
drugs and/or may need prescription drugs related to the WC injury in the future, the
submitter did not adequately consider Medicare’s interests. In such a case, CMS will
advise the submitter in its written opinion that the parties to the WC settlement may not
have protected Medicare’s interests.
If the cover letter does not include an amount for future prescription drug treatment, and
there is no indication in the current treatment records that the claimant will need future
treatment with prescription drugs related to the WC injury, then CMS will accept that
Medicare’s interests have been adequately protected. Medicare will then pay primary for
future prescription drugs if the beneficiary has enrolled in a Medicare prescription drug
plan and does not have any other coverage that is primary to Medicare.
Question 4: Will CMS’ review of WCMSA proposals change with the implementation
of the MMA on January 1, 2006?
Answer 4: The CMS’ review of WCMSA proposals will not change until it begins to
independently price for future prescription drug treatment for WCMSAs received by the
COBC on or after January 1, 2007. Until the review of future prescription drug treatment
begins on January 1, 2007, CMS will continue to review and independently price for future
Medicare-covered medical expenses in WCMSAs in accordance with CMS’ published
policy memoranda dated: July 23, 2001; April 21, 2003; May 23, 2003; May 7, 2004;
October 15, 2004; and July 11, 2005.
For a WCMSA proposal received by COBC on or after January 1, 2006, CMS will provide
in its written opinion the total WCMSA amount that adequately protects Medicare’s
interests with regard to the claimant’s future medical treatment. In addition, CMS’ written
opinion will note the submitted prescription drug amount. The CMS’ written opinion will
provide the total WCMSA amount, which is a combination of the future medical treatment
reviewed by CMS and the future prescription drug costs noted in the submitter’s cover
letter. The parties to the WC settlement must note the total WCMSA amount in the final
settlement agreement. Once the final settlement agreement is submitted to CMS’ COBC,
the claimant and all other parties to the WC settlement can rely on CMS’ written opinion
regarding whether the WC settlement adequately protects Medicare’s interests.

Please click on the Download below for information concerning the inclusion of future prescription drug treatment in Worker’s Compensation Medicare Set-aside Arrangement (WCMSA) proposals.

For more information concerning Part D and Coordination of Benefits (COB), please click on the MMA COB Guidance link below.

The total WCMSA amount (future medical treatment and future prescription drug
treatment) must be deposited in an interest bearing account. The administrator of the
WCMSA must forward an annual accounting, separately identifying the expenditures for
the medical treatment and prescription drug treatment to the Medicare contractor
responsible for monitoring the claimant’s case. For example, if the total WCMSA amount
in CMS’ written opinion is $10,000 ($7,000 identified for future prescription drug treatment
and $3,000 identified for future medical expenses), then the administrator must forward an
annual accounting that separately identifies how much of the $10,000 was spent for medical
expenses and prescription drugs. Exhaustion of the total WCMSA amount is not limited to
the separate amounts set-aside for future medical expenses and future prescription drug
treatment. As long as the annual accounting shows bona fide payments were made from the
total WCMSA account, CMS will consider the account appropriately exhausted. For
example, final actual expenditures may be $6,000 for future prescription drug treatment and
$4,000 for the future medical expenses that may appropriately exhaust the $10,000
WCMSA.
Question 5: Will the submission of WCMSA proposals change when CMS begins to
review and independently price for future prescription drug treatment on January 1,
2007?
Answer 5: When CMS begins to review and independently price for future prescription
drug treatment on January 1, 2007, the submitter must include in the cover letter separate
amounts for: (1) future medical treatment, and (2) future prescription drug treatment. In
addition, the cover letter must include an explanation as to how the submitter calculated the
future prescription drug treatment amount (i.e., actual costs, average wholesale price, etc.).
Moreover, the submitter must include with the submission a payment history of the
prescription drugs paid by the WC carrier, as follows:
• If the injury occurred less than 2 years from the date of the submission, a payment
history should include those prescription drugs paid from the injury date through the
date of submission.
• If the injury occurred more than 2 years from the date of the submission, a payment
history should include the last 2 years of payments for prescription drugs.
The CMS will review WCMSAs that include an allocation for future treatment with
prescription drugs based on the required payment history, anticipated future prescription
drug treatment information, and Medicare Part D data. If the submitter fails to provide a
payment history or the payment history reflects that the WC carrier did not previously pay
for prescription drugs indicated for the claimant’s future treatment, CMS will independently
price the Medicare-covered prescription drugs using CMS information available from
current Medicare Part D data.
Question 6: Should funds for future prescription drug treatment be included in the
calculation of the total settlement amount to determine if the WCMSA proposal
should be reviewed by CMS?
Answer 6: Yes, the total settlement amount calculation should include an amount for
prescription drugs if the future treatment indicates that the claimant has been prescribed
drugs and/or may need drugs in the future. As stated in the July 11, 2005 memorandum, the
computation of the total settlement amount includes, but is not limited to, wages, attorney
fees, all future medical expenses, and repayment of any Medicare conditional payments.
Payout totals for all annuities to fund the above expenses should be used rather than cost or
present values of any annuities. Also note that any previously settled portion of the WC
claim must be included in computing the total settlement amount.
Current review thresholds for Medicare beneficiary and non-beneficiary WCMSA
proposals will remain in effect as stated in the following policy memoranda: July 23, 2001;
April 21, 2003; May 23, 2003; May 7, 2004; October 15, 2004; and July 11, 2005.
Note: Question/Answer #6 is not a change in CMS’ policy for determining whether a WC
settlement that includes a WCMSA meets CMS’ review thresholds.
Question 7: Do claimants have to resubmit their WCMSA proposals if CMS already
issued a written opinion as to the total WCMSA amount?
Answer 7: No, claimants do not have to resubmit their WCMSA proposals, if CMS has
already issued a written opinion as to the total WCMSA amount for settlements occurring
prior to January 1, 2006, or where the WCMSA review occurred prior to January 1, 2006,
the MMA implementation date.
Note: If the WC settlement occurred prior to January 1, 2006, and the WC settlement
included an allocation for future prescription drug treatment, then the claimant must
exhaust those funds prior to billing Medicare for those future prescription drugs. For
example, if the WC settlement allocates $5,000 for prescription drugs related to the WC
injury, then the claimant must exhaust that amount from the settlement funds before billing
Medicare for prescription drug costs incurred on or after January 1, 2006. However, the
claimant does not have to transfer these funds to the existing WCMSA account or include
them in the annual WCMSA accounting.
THE ABOVE NOTE CLARIFIES Q/A #15 OF THE JULY 11, 2005
MEMORANDUM.
This memorandum supersedes the Part D and Workers’ Compensation Medicare Set-aside
Arrangements (WCMSA) memorandum that was published on December 30, 2005. It
includes policy regarding the inclusion of future prescription drug treatment costs/expenses
in WCMSAs.
NOTE: References to prescription drugs in this document are limited to those
prescription drugs that are for the treatment of the Workers’ Compensation (WC)
related injury(ies) and/or illness(es)/disease(s), (hereinafter referred to as “WC
injury”) and those where Medicare provides coverage.
Question 1: What is the Centers for Medicare & Medicaid Services’ (CMS) policy
regarding the inclusion of prescription drugs in WCMSAs with the implementation of
the MMA?
Answer 1: All WC settlements that occur on or after January 1, 2006 must consider and
protect Medicare’s interests when future treatment includes prescription drugs along with
the future medical services that would otherwise be reimbursable by Medicare. The
recommended method to protect Medicare’s interests is to include a WCMSA as part of the
WC settlement. However, if the WC claim settled prior to January 1, 2006, the WCMSA
proposal does not need to include an amount for future prescription drug treatment.
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Question 2: How does CMS define a WC “settlement”?
Answer 2: A WC “settlement” is an executed settlement agreement that is approved by the
court of competent jurisdiction for the applicable state.
Question 3: What are CMS’ submission requirements if the WC claim did not
“settle” (as defined in Answer 2 above) prior to January 1, 2006?
Answer 3: If the WC case did not “settle” (as defined in Answer 2 above) prior to January
1, 2006 and the WCMSA proposal is received by CMS’ Coordination of Benefits
Contractor (COBC) on or after January 1, 2006, then the submitter must include separate
amounts for future medical treatment and future prescription drug treatment in the cover
letter. In addition, the cover letter must include an explanation as to how the submitter
calculated the future prescription drug treatment amount (i.e., actual costs, average
wholesale price, etc.).
For structured WCMSA proposals, the submitter must also indicate whether any portion of
the future prescription drug treatment amount has been included in the initial deposit (i.e.,
seed money). Per Question and Answer Number 5 of the October 15, 2004 memorandum,
the seed money for a structured WCMSA must include a sum equal to the amount of
monies calculated to cover the first surgery procedure and/or replacement and two years of
annual payments (which must include prescription drug treatment). The remainder of the
approved amount should be divided by the remainder of the claimant’s life expectancy (or a
shorter defined period of time if CMS has agreed to a shorter time period).
NOTE: The amount for future prescription drug treatment should not be a separate
annuity from the future medical portion of the WCMSA.
Question 4: What happens if CMS closes its case because the submitter failed to
provide requested information in a timely manner?
Answer 4: If the WC case did not “settle” (as defined in Answer 2 above) prior to January
1, 2006, and the submitter provides additional documentation with regard to the closed case
on or after January 1, 2006, the case is considered a new WCMSA submission and the
requirements included in this memorandum related to: (1) future medical treatment; and, (2)
future prescription drug treatment will be applied to the new WCMSA submission.
If the WC claim settled prior to January 1, 2006 and the submitter provides additional
documentation with regard to a closed case, the case is considered a new WCMSA
submission; however, the WCMSA proposal does not need to include an amount for future
prescription drug treatment./s/

Question 5: Should submitters provide an explanation in the cover letter when the
claimant has not been prescribed drugs for the work-related injury, illness/disease or
if the drugs prescribed are excludable under the MMA?
Answer 5: Yes. Submitters should provide such an explanation in the cover letter when
submitting their WCMSA proposals to CMS.
Question 6: Where a WC claim settled prior to January 1, 2006, can the claimant use
the WCMSA funds to pay for prescription drug expenses related to the WC injury?
Answer 6: No, the claimant cannot use the WCMSA funds to pay for prescription drug
expenses related to the WC injury. If the WC settlement included an allocation for non-
Medicare covered medical and/or prescription drug expenses, the claimant must exhaust
those funds prior to billing Medicare for prescription drugs. However, the claimant does
not have to transfer these funds to the existing WCMSA account or include them in the
annual WCMSA accounting. After exhausting these funds, if the claimant enrolls in a Part
D plan, Medicare may be billed for prescription drug expenses related to the WC injury,
assuming that the claimant does not have any other coverage primary to Medicare.
NOTE: The above questions clarify Question and Answer Number 5 of the
July 11, 2005 memorandum.
Question 7: Should submitters include an amount for future prescription drug
expenses if the claimant has not enrolled in a Part D plan?
Answer 7: Yes. Claimants who have not enrolled in a Part D plan need to include future
prescription drug expenses in their WCMSA proposals if the current treatment records
indicate that the claimant has been prescribed drugs and/or may need future prescription
drug treatment related to the WC injury.
Question 8: Has CMS’ review of WCMSA proposals changed with the
implementation of the MMA on January 1, 2006?
Answer 8: The CMS’ review of WCMSA proposals has not changed with the
implementation of the MMA. The CMS continues to review and independently price for
future Medicare-covered medical expenses in WCMSAs in accordance with CMS’
published policy memoranda dated: July 23, 2001; April 21, 2003; May 23, 2003; May 7,
2004; October 15, 2004; July 11, 2005; and April 25, 2006.
For a WCMSA proposal received by COBC on or after January 1, 2006, CMS will provide
in its written opinion the total WCMSA amount that adequately protects Medicare’s
interests with regard to the claimant’s future medical treatment. However, CMS’ written
opinion will also note the submitted prescription drug amount. The CMS’ written opinion
will provide the total WCMSA amount, which is a combination of the future medical
treatment reviewed by CMS and the future prescription drug costs noted in the submitter’s
cover letter. The parties to the WC settlement must note the total WCMSA amount in the
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final settlement agreement. Once the final settlement agreement is submitted to CMS’
COBC, the claimant and all other parties to the WC settlement can rely on CMS’ written
opinion regarding whether the WC settlement adequately protects Medicare’s interests.
The total WCMSA amount (future medical treatment and future prescription drug
treatment) must be deposited in an interest-bearing account. The administrator of the
WCMSA must forward an annual accounting, separately identifying the expenditures for
the medical treatment and prescription drug treatment, to the Medicare contractor
responsible for monitoring the claimant’s case. For example, if the total WCMSA amount
in CMS’ written opinion is $10,000 ($7,000 identified for future prescription drug treatment
and $3,000 identified for future medical expenses), then the administrator must forward an
annual accounting that separately identifies how much of the $10,000 was spent for medical
expenses and prescription drugs. Exhaustion of the total WCMSA amount is not limited to
the separate amounts set-aside for future medical expenses and future prescription drug
treatment. As long as the annual accounting shows bona fide payments were made from the
total WCMSA account, CMS will consider the account appropriately exhausted. For
example, final actual expenditures may be $6,000 for future prescription drug treatment and
$4,000 for the future medical expenses that may appropriately exhaust the $10,000
WCMSA.
Question 9: What happens if a WCMSA proposal received by the COBC on or after
January 1, 2006, does not include an amount for future prescription drug treatment?
Answer 9: If the cover letter does not include an amount for future prescription drug
treatment, and the current treatment records indicate that the claimant has been prescribed
drugs and/or may need prescription drugs related to the WC injury in the future, the
submitter did not adequately consider Medicare’s interests. In such a case, CMS, in its
written opinion, will advise the submitter that the parties to the WC settlement have not
protected Medicare’s interests.
If the cover letter does not include an amount for future prescription drug treatment, and
there is no indication in the current treatment records that the claimant will need future
treatment with prescription drugs related to the WC injury, then CMS will accept that
Medicare’s interests have been adequately protected. Medicare will then pay primary for
future prescription drugs if the beneficiary has enrolled in a Medicare prescription drug
plan and does not have any other coverage that is primary to Medicare.
Question 10: Has CMS published any guidelines about how to price for future
prescription drug expenses in WCMSAs?
Answer 10: No. The CMS has not published any guidelines regarding the pricing for
future prescription drug expenses in WCMSAs.

Question 11: Should funds for future prescription drug treatment be included in the
calculation of the total settlement amount to determine if the WCMSA proposal
should be reviewed by CMS?
Answer 11: Yes, the total settlement amount calculation should include an amount for
prescription drugs if the future treatment indicates that the claimant has been prescribed
drugs and/or may need drugs in the future. As stated in the July 11, 2005 memorandum, the
computation of the total settlement amount includes, but is not limited to, wages, attorney
fees, all future medical expenses, and repayment of any Medicare conditional payments.
Payout totals for all annuities to fund the above expenses should be used rather than cost or
present values of any annuities. Also note that any previously settled portion of the WC
claim must be included in computing the total settlement amount.
Current review thresholds for Medicare beneficiary and non-beneficiary WCMSA
proposals will remain in effect as stated in the following policy memoranda: July 23, 2001;
April 21, 2003; May 23, 2003; May 7, 2004; October 15, 2004; July 11, 2005; and April 25,
2006.
NOTE: Question and Answer Number 11 is not a change in CMS’ policy for
determining whether a WC settlement that includes a WCMSA meets CMS’ review
thresholds.
Question 12: Do claimants have to resubmit their WCMSA proposals if CMS already
issued a written opinion as to the total WCMSA amount?
Answer 12: No, claimants do not have to resubmit their WCMSA proposals if CMS has
already issued a written opinion as to the total WCMSA amount.
NOTE: If the WC settlement occurred prior to January 1, 2006, and the WC
settlement included an allocation for future prescription drug treatment, then the
claimant must exhaust those funds before Medicare can be billed for those future
prescription drugs. For example, if the WC settlement allocates $5,000 for
prescription drugs related to the WC injury, then the claimant must exhaust that
amount from the settlement funds before Medicare can be billed for prescription
drug costs incurred on or after January 1, 2006. However, the claimant does not
have to transfer these funds to the existing WCMSA account or include them in the
annual WCMSA accounting.
NOTE: The above note clarifies Question and Answer Number 15 of the July 11,
2005 memorandum.
Question 13: Will CMS begin to independently price for future prescription drug
treatment in WCMSAs beginning on January 1, 2007?
Answer 13: No. Beginning January 1, 2007, CMS will not change its current procedures
and will not independently price for future prescription drug treatment in WCMSA
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proposals. The CMS will provide advanced notification when it plans to begin to
independently price for future prescription drug treatment in WCMSAs. The CMS will
continue to review and independently price for future Medicare-covered medical expenses
in WCMSAs in accordance with CMS’ published policy memoranda dated: July 23, 2001;
April 21, 2003; May 23, 2003; May 7, 2004; October 15, 2004; July 11, 2005; and April 25,

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