Workers' Compensation Settlements and Medicare

• Jurisdiction: Colorado,United States
• Citation: Vol. 33 No. 1 Pg. 77
• Pages: 77
• Publication year: 2004

33 Colo.Law. 77 Colorado Lawyer 2004.

2004, January, Pg. 77. Workers' Compensation Settlements and Medicare

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77

Vol. 33, No. 1, Pg. 77

The Colorado Lawyer
January 2004
Vol. 33, No. 1 [Page 77]

Specialty Law Columns
Workers' Compensation Report
Workers' Compensation Settlements and Medicare
by Curt Kriksciun

This column provides information about workers' compensation updates on decisions of the Colorado Supreme Court and Court of Appeals. It intends to help practitioners keep up with both the appellate interpretations of the Workers' Compensation Act and the potential ramifications of those interpretations

Column Editor

Ralph Ogden, Denver, of Wilcox & Ogden - (303) 399-5005

About The Author

This month's article was written by Curt Kriksciun, Denver, a prehearing Administrative Law Judge for the Division of Workers' Compensation - (303) 764-1465, curt.kriksciun@ state.co.us. Nothing in this article should be taken as an official pronouncement of the Division. In preparing this article, the author consulted with the regional office of the Centers for Medicare and Medicaid Services ("CMS") and thanks them for their assistance. However, unless supported by a citation to written material issued by CMS, nothing in the article should be taken as an official pronouncement of that regional office or of the national agency.

Medicare is a secondary payer of any benefits covered by a workers' compensation carrier. To avoid possible forfeiture of Medicare benefits, a portion of workers' compensation settlement proceeds must sometimes be set aside for payment of covered medical benefits. This article discusses Medicare and its involvement in the settlement process.

Louise Sawyer declared, "You get what you settle for," in the 1991 film, Thelma and Louise. In a different film (and certainly one less entertaining), Louise might have added that if you don't get what you settle for in a workers' compensation case, your attorney may have blundered. In the workers' compensation area, a claim by a third party against a portion of settlement proceeds may result in the injured worker "not getting what he or she settled for."

The Centers for Medicare and Medicaid Services (commonly referred to as "CMS") can be such a third-party entity with a claim against workers' compensation settlement proceeds. Medicare is a secondary payer of any benefits covered by a workers' compensation claim. Therefore, Medicare has an interest in ensuring that it does not make any payments for medical services that should have been paid by a primary workers' compensation carrier.

At the time a workers' compensation claim is settled, Medicare will seek to verify that any settlement proceeds intended to pay for future reimbursable medical services actually will be spent for that purpose. In other words, Medicare will not permit the shifting of the costs of covered services to Medicare merely because the workers' compensation claim has been settled.

As explained in this article, CMS protects its interests in workers' compensation settlements by requiring that a certain amount of a settlement specifically be set aside for payment of future medical benefits that Medicare otherwise would pay. If CMS is not given an opportunity to approve the set-aside amount prior to settlement, it may refuse to provide any Medicare-covered services until the entire amount of the settlement is exhausted. Therefore, to ensure that the injured worker gets what he or she settles for, Medicare's secondary status must be protected whenever certain workers' compensation claims are settled. This article focuses on when and how Medicare's status is to be protected. It also discusses the requirements for obtaining CMS review and approval of settlements.

Medical Benefits Under Workers' Compensation Act

One of the cornerstones of the Workers' Compensation Act ("Act") is the requirement that the employer or insurer provide

such medical, surgical, dental, nursing, and hospital treatment, medical, hospital, and surgical supplies, crutches, and apparatus as may reasonably be needed at the time of the injury or occupational disease and thereafter during the disability to cure and relieve the employee from the effects of the injury.1

The insurer's obligation to provide medical benefits is quite broad. For this reason, it is difficult to overestimate the importance of this medical component of the Act.

Medical benefits include all medical services that are "reasonable and necessary" to treat a work-related injury.2 The Industrial Claim Appeals Office has noted that "medical treatment" involves "not only improvement of the claimant's condition, but relief from symptoms including pain."3 Therefore, "medical treatment" may include such things as housekeeping services or child care.4 Medical treatment also may include periodic care following closure of the claim to make sure that the injured worker's condition does not deteriorate.5

In general, if the injured worker proves that the need for treatment was proximately caused by the work-related injury, the insurer is liable for the treatment, even if the worker suffers from a preexisting condition. As long as the industrial injury "aggravates, accelerates, or combines with" the preexisting condition, the insurer is fully liable for the medical treatment, without any apportionment.6

Settlement of Workers' Compensation Claims

It has long been a common practice for parties to reach full and final settlements of workers' compensation claims.7 Provision was made for settlement of claims with the enactment of the first Workers' Compensation Act of 1915 ("1915 Act").8 Section 93 of the 1915 Act provided that where the parties "reach an agreement in regard to compensation," the agreement must be filed with and approved by the Industrial Commission. The 1915 Act further required that approval be given only where the settlements "conform to the provision of this Act. . . ."

The Act has continuously included provisions permitting settlement of claims. The Act currently states that "[a]n injured employee may settle all or part of any claim for compensation, benefits, penalties, or interest." The Act requires that certain formalities be followed. The settlement agreement must be reduced to writing, signed by the employer or insurer, and sworn to by the injured employee. It also must be approved by an Administrative Law Judge or by the Director of the Division of Workers' Compensation ("Director" of the "Division"), and filed with the Division.9 The Act also contains a statute authorizing any party to request a settlement conference from the Director or from the Division of Administrative Hearings.10

Settlements usually include full and final resolution of the insurer's liability for medical benefits.11 It is possible to settle the carrier's liability for indemnity benefits and to leave open liability for future medical benefits. In such a situation, medical treatment then remains open, but sometimes is limited to specified treatment or for a limited period of time. Nevertheless, it is more common for the insurer to pay a lump sum in exchange for a waiver of any claim for all future compensation and medical benefits. In such cases, a portion of the settlement proceeds is intended to pay for that waiver of liability for medical benefits.

CMS has an interest in the portion of the settlement intended to cover future medical benefits. Because the workers' compensation carrier is primary with respect to that liability (and Medicare...