The use of Medicare set-aside trusts in workers' compensation settlements.

• Author: Haines, Susan G.

The Health Care Financing Administration has announced an all-out effort to collect monies owed to Medicare under the Medicare Secondary Payment statute qualified at 42 U.S.C. [sections] 1395y. HCFA intends to make referrals to the Department of Justice for prosecution. A pilot project is already underway in New York. HCFA has stated: "We are vigorously investigating liability and workers' compensation settlement situations wherein settlements involving Medicare beneficiaries have occurred absent the knowledge, consent and participation of HCFA such that Medicare's interest was not considered and protected." Insurance carriers and claimant's attorneys are in jeopardy if they fail to obtain Medicare's approval of any settlement and set aside sufficient funds to cover the claimant's future medicals.

Under the applicable federal regulations, Medicare can assert a secondary payer claim for conditional payments that have been made prior to a personal injury settlement. 42 C.F.R. [sections] 411.24. Under the regulations, a "conditional payment" is a Medicare payment for services for which another payer, such as a products liability insurer or a workers' compensation insurer, is responsible. 42 C.F.R. [sections] 411.21. Medicare may make a conditional payment for services if Medicare does not reasonably expect the third party insurer to make its primary payment promptly. 42 C.F.R. [sections] 411.24(a)(2). This is especially true if Medicare has information that services for which Medicare benefits have been claimed are for treatment of an injury or illness that was allegedly caused by another party. 42 C.F.R. [sections] 411.52. There is no provision under the regulations that would permit Medicare to assert secondary payer claims because of services paid for after receipt of a lump sum personal injury settlement, provided Medicare's conditional payments were reimbursed prior to settlement. Medicare's right to recover prior to settlement is described in the regulations as a Medicare secondary payer claim.

The regulations regarding Medicare's secondary payer claim for services provided prior to settlement are the same whether the third party is a liability insurer, a no-fault insurer, or a workers' compensation insurer. In the context of either a commutation or a compromise, a workers' compensation plan is a primary payer with respect to services also covered under Medicare. 42 C.F.R. [subsections] 411.20(a)(2)(I), 411.40. Conditional payments may be made by Medicare if the beneficiary has filed a proper claim and Medicare determines that the workers' compensation plan will not pay promptly (including cases in which the workers' compensation claim has...