Reasonable consideration of Medicare's interests in workers' compensation settlements: a comprehensive analysis of significant developments affecting injured workers, employers, carriers, physicians, and their attorneys.

• Author: Gonzalez, Rafael

The United States administers the Medicare program through the Department of Health and Human Services (HHS). HHS administers Medicare through the Centers for Medicare and Medicaid Services (CMMS), formerly known as the Health Care Financing Administration (HCFA), an agency of the HHS. While the local SSA office processes applications for enrollment, day-to-day administration and operation of the Medicare program is handled through private insurance companies that have contracted with the government as either Part A intermediaries or Part B carriers.

Medicare is health insurance for the elderly and disabled available as a result of contributions through payroll deductions (FICA). Medicare is divided into two parts that differ in terms of benefits, eligibility, and administration. Medicare Part A covers the hospital insurance program, including hospital expenses, skilled nursing facilities, home health care, and hospice care. Medicare Part B is the supplemental medical insurance program, covering physicians' services and miscellaneous ancillary health care expenses.

Part A will primarily cover hospitalization and will pay partially for semiprivate room and board, general nursing, and miscellaneous services and supplies while a beneficiary is hospitalized, as well as home health care and hospice care for qualified beneficiaries. Part B pays partially for physician's services, inpatient and outpatient medical and surgical services and supplies, physical and speech therapy, diagnostic tests, durable medical equipment, and similar items, in or out of the hospital.

The act at 42 U.S.C. [section] 1395 et seq. provides, in relevant part, that Medicare shall not make payments with respect to any item or service to the extent that payment has been made, or can reasonably be expected to be made, promptly under a workers' compensation law or plan of the U.S. or a state or under an automobile or liability insurance policy or plan including a self-insured plan or under no fault insurance. See also 42 C.F.R. [section] 411.40. Therefore, if CMMS determines that the workers' compensation settlement language represents an attempt to shift responsibility from the workers' compensation carrier to Medicare, CMMS can disregard the settlement provisions and apportion the lump sum between indemnity and medical allocations. 42 C.F.R. [section] 411.46.

CMMS not only has a subrogation right but also a direct right of action to recover payment against any entity that is required or responsible (directly, as a third-party administrator, or otherwise) to make payment with respect to such item or service. The government also has a right to join or intervene in any action related to the events that gave rise to the need for the item or service. CMMS will recover benefits from third parties that issue or receive payments including employer, insurance carrier, plan, program, third-party administrator, beneficiary, provider, supplier, physician, attorney, state agency, or private insurer.

If CMMS is successful in the action against the third party payer (wc carrier), the third party payer is liable to reimburse Medicare even if the claim has settled and the beneficiary or provider paid. If CMMS is successful in an action against the beneficiary and the settlement funds are depleted, future Medicare benefits or Title II benefits may be reduced or delayed.

Medicare's Handling of Workers' Comp Settlements

Medicare regulations distinguish between a commutation and a compromise settlement. Commutation settlement is a lump-sum compensation award that stipulates that the amount paid by the employer/ carrier is intended to compensate the individual for all future medical expenses required because of the work-related injury or disease. Medicare payments for such services are excluded until medical expenses related to the injury or disease equal the amount of the lump-sum payment. 42 C.F.R. [section] 411.46(a). Medicare will not pay injury-related benefits until the claimant presents injury-related medical bills totalling an amount equal to the total amount the settlement allocated to future medical care and treatment. The settlement must allocate a reasonable amount for future medicals, and Medicare will confer coverage for injury related expenses when the claimant has exhausted the...