HB 2649 and SB 1514: Congress’ Renewed Attempt to Streamline the Workers Compensation and Medicare Set Aside Settlement Process

Article by Rafael Gonzalez, Esq. Vice President, Strategic Solutions HELIOS Settlement Solutions

Article by
Rafael Gonzalez, Esq.
Vice President, Strategic Solutions
HELIOS Settlement Solutions

US House Bill 2649 and US Senate Bill 1514 were filed on June 4, 2015 by US Representative Reichert and US Senator Portman to amend title XVIII of the Social Security Act to provide for the application of Medicare secondary payer rules to certain workers’ compensation settlement agreements and qualified Medicare set-aside provisions. Co-sponsored by US Representative Thompson and US Senator Nelson, the bills were read twice and referred to the House Ways and Means, and thereafter referred to the House Energy and Commerce Committee, and on the Senate side, referred to the Committee on Finance. What follows is a summary of the proposed companion bills as introduced.

Settlements Under $25,000 are Exempt

House Bill 2649 and Senate Bill 1514 amend Section 1862 of the Social Security Act (42 U.S.C. 1395y) by adding a new subsection (p). The first change the bill introduces is a threshold for “certain workers compensation settlements whereby a workers’ compensation law or plan shall not be treated as a primary plan.” The bill proposes that “any workers’ compensation settlement agreement that does not exceed $25,000 or such greater amount as the Secretary may specify in regulations” would exempt the plan or claimant from having to take Medicare’s future interests into consideration. In other words, in any workers compensation settlement under $25,000 with a current Medicare beneficiary, Medicare would become the primary payer for any medical care related to the workers compensation claim, as neither the claimant nor employer/carrier would have to set aside any monies from such settlement to protect Medicare’s future interests.

Also exempt from taking Medicare’s future interests into account would be settlements where “the settling claimant is not eligible for Medicare benefits as of the effective date of the agreement; and is unlikely to become so eligible within 30 months after such effective date, settlements where the claimant subject to such agreement is not eligible for payment of medical expenses incurred after the effective date of the agreement from the workers’ compensation law or plan of the jurisdiction in which such agreement will be effective, or settlements in which such agreement does not limit or extinguish the right of the claimant to payment of medical expenses incurred after the effective date of such agreement by the workers’ compensation law or plan of the jurisdiction in which the agreement will be effective.”

Claimants Unlikely to Become Medicare Eligible

House Bill 2649 and Senate Bill 1514 indicate that “a workers’ compensation claimant shall be deemed unlikely to become eligible for Medicare benefits within 30 months after the effective date of the agreement unless, as of the effective date of the agreement, such claimant is insured for disability insurance benefits and the individual has been awarded such disability insurance benefits, the individual has applied for such disability insurance benefits, the individual has been denied such disability insurance benefits but anticipates appealing that decision, the individual is in the process of appealing or refilling for such disability insurance benefits, the individual is at least 62 years and 6 months of age, or the individual is medically determined to have end-stage renal disease but does not yet qualify for Medicare benefits based on such disease.”

Determination of Total Settlement Amount

House Bill 2649 and Senate Bill 1514 propose to define the total settlement amount of the agreement as “the sum of monetary wage replacement benefits, attorney fees, all future medical expenses, repayment of Medicare conditional payments, payout totals for annuities to fund the expenses listed above, and any previously settled portion of the workers’ compensation claim.”

Qualified Medicare Set Aside

House Bill 2649 and Senate Bill 1514 further amend Section 1862 of the Social Security Act (42 U.S.C. 1395y), by adding a method to satisfy the Secondary Payer requirements through the use of a Qualified Medicare Set Aside. Although the bills do not require any notice to CMS of the actual creation of a Qualified Medicare Set Aside, the amount of the set aside, how much was set aside for treatment and for prescription needs, whether funded through a lump sum or structured, and if self administered or professionally administered, the bills make it clear that “if a workers’ compensation settlement agreement includes a Qualified Medicare Set Aside, such set aside shall satisfy any obligation with respect to future payment reimbursement related to such claim.” The bills also indicate “submission of a Qualified Medicare set-aside to the Secretary is not required,” but would remain a voluntary choice of the settling parties.

The bills indicate that a Medicare set-aside shall be deemed to be a Qualified Medicare set-aside if “the Medicare set-aside amount reasonably takes into account the full payment obligation of the settling payer, based on the illness or injury giving rise to the workers’ compensation claim involved, the age and life expectancy of the claimant involved, the reasonableness of and necessity for future medical expenses for treatment of the illness or injury involved, the duration of and limitation on benefits payable under the workers’ compensation law or plan involved, and the regulations and case law relevant to the State workers’ compensation law or plan involved.”

A Qualified Medicare set-aside shall include “payment for items and services that are covered and otherwise payable under the Medicare system as of the effective date of the workers’ compensation settlement agreement and that are covered by the workers’ compensation law or plan. The Qualified set-aside amount “shall be based upon the payment amount for items and services under the workers’ compensation fee schedule (effective as of the date of the agreement) applicable to the workers’ compensation law or plan involved.”

Compromise Settlements and the Use of Percentage Reduction MSAs

In the case of a compromise settlement agreement, defined in the bills as a “workers’ compensation settlement agreement in which the workers’ compensation claim has been denied or contested, in whole or in part, by a workers’ compensation payer involved under the workers’ compensation law or plan applicable to the jurisdiction in which the agreement has been settled that does not provide for a payment of the full amount of benefits sought or that may be payable under the workers’ compensation claim,” contrary to CMS current policy which does not permit any reduction of set asides resulting from a compromise settlement, House Bill 2649 and Senate Bill 1514 propose that “a claimant or workers’ compensation payer who is party to the agreement may elect to calculate the Medicare set-aside amount by applying a percentage reduction to the Medicare set-aside amount.

Such percentage reduction would be used “with the total settlement amount that could have been payable under the applicable workers’ compensation law or similar plan involved had the denied, disputed, or contested portion of the claim, had it not been subject to a compromise agreement.” The percentage reduction “shall be equal to the denied, disputed, or contested percentage of such total settlement.” However, such election may be made “only with the written consent of the other party to the agreement .” If the claimant or workers’ compensation payer elects to calculate the Medicare set-aside amount under this percentage reduction formula, “the Medicare set-aside shall be deemed a Qualified Medicare set-aside.

Voluntary Approval Process

As previously indicated, House Bill 2649 and Senate Bill 1514 propose that the creation of a Qualified Medicare set-aside satisfies secondary payer obligations. However, “a party to a workers’ compensation settlement agreement that includes a Medicare set-aside may submit to the Secretary the Medicare set-aside amount for approval of the set-aside as a Qualified Medicare set-aside.

If in fact parties seek such approval, the bills indicate that “not later than 60 days after the date on which the Secretary receives a submission, the Secretary shall notify in writing the parties to the workers’ compensation settlement agreement of the determination of approval or disapproval.” If the determination disapproves such submission, “the Secretary shall include with such notification the specific reasons for the disapproval.” In the case of a failure by the Secretary to mail or deliver the notice of the determination within 60 days, “the party involved may file an appeal directly to the administrative law judge within 30 days after such failure.

Medicare Set Aside Appeals Process

House Bill 2649 and Senate Bill 1514 propose that “a party to a workers’ compensation settlement agreement that is dissatisfied with a determination may file a request for reconsideration with the Secretary not later than 60 days after the date of notice of such determination.” The Secretary “shall conduct and conclude such reconsideration within 30 days from the date that the request for such reconsideration was filed.” If a party to the workers’ compensation settlement agreement is dissatisfied with the Secretary’s reconsideration, “that party may file an appeal within 30 days of date of receipt of the notice of the decision and request a hearing before an administrative law judge.” In the case of a failure by the Secretary to mail or deliver the notice of the reconsideration decision within 30 days, “the party involved may file an appeal directly to an administrative law judge not later than 30 days after such failure.”

Although other federal administrative procedures for similar type appeal processes do not include such time limitations, and without any funding to carry out such time sensitive tasks, House Bill 2649 and Senate Bill 1514 indicate that “an administrative law judge shall conduct and conclude a hearing on a decision of the Secretary or a determination with respect to which the Secretary failed to render a timely decision within 90 days, beginning on the date that a request for such hearing was timely filed.” Bypassing the usual appeal to the Appeals Council, the bills propose that a decision by an administrative law judge constitutes a final agency action and “is subject to judicial review.” In the case of a “failure by an administrative law judge to render a decision within 90 days, the party requesting the hearing shall be entitled to judicial review of the decision.”

Administration of Medicare Set Asides

House Bill 2649 and Senate Bill 1514 propose that, effective 30 days from the date of enactment of the bills, “with respect to a claim for which a workers’ compensation settlement agreement is or has been established, a claimant or workers’ compensation payer who is a party to the agreement may elect, but is not required, to transfer to the Secretary a direct payment of the Qualified Medicare set-aside.”

There are three permissible methods of calculating the Qualified Medicare set-side when directly making such payment to the Secretary. First, “in the case of any Medicare set-aside in a compromise settlement agreement, the parties may use the percentage reduction formula to calculate the amount of the Qualified Medicare set-aside.” Second, “in the case of any Medicare set-aside, the amount based upon the payment amount for items and services under the workers’ compensation fee schedule (effective as of the date of the agreement) applicable to the workers’ compensation law or plan involved.” And third, “in the case of any Medicare set-aside, the payment amount applicable to the items and services under the Medicare system as in effect on the effective date of the agreement. Such transfer shall be made only upon written consent of the other party to the agreement.”

If the parties do not choose to make such direct payment to the Secretary, then House Bill 2649 and Senate Bill 1514 indicate that “nothing prohibits an individual from electing to utilize professional administration services or to self-administer payments of their Medicare Set-Aside in accordance with existing law.”

Protection from Liability

House Bill 2649 and Senate Bill 1514 propose that no claimant, payer, employer, administrator, or legal representative of the parties “shall be liable for any payment amount established under a Medicare set aside for an item or service provided to the claimant that is greater than the payment amount established under the workers compensation fee schedule (or in absence of such schedule, the medical reimbursement rate) under the compensation law of the jurisdiction where the agreement will be effective.” In order to provide uniformity, the bills indicate that “a provider may not bill (or collect any amount from) the workers compensation claimant, payer, employer, administrator, or legal representative an amount that is greater than the payment rate established under the Medicare set aside of the agreement.”

The bills further propose that “if a provider willfully bills (or collects an amount) for such an item or service in violation of same, the Secretary may apply sanctions against the provider in accordance with 42 USC section 1842(j)(2) in the same manner as such section applies with respect to a physician.”

State Workers’ Compensation Law is Final and Conclusive

House Bill 2649 and Senate Bill 1514 propose that “if a workers’ compensation settlement agreement is accepted, reviewed, approved, or otherwise finalized in accordance with the workers’ compensation law of the jurisdiction in which such agreement will be effective, such acceptance, review, approval, or other finalization shall be deemed final and conclusive as to any and all matters within the jurisdiction of the workers’ compensation law, including the determination of reasonableness of the settlement value; any allocations of settlement funds; the projection of future indemnity or medical benefits that may be reasonably expected to be paid under the State workers’ compensation law; and, in the case of a compromise agreement, the total amount that could have been payable for a claim which is the subject of such agreement.”

Private Cause of Action

House Bill 2649 and Senate Bill 1514 propose that paragraph (3)(A), the private cause of action provision of the Medicare secondary payer law, be amended to include the words “Subject to subsection (q),” before the beginning of the first sentence. Therefore, the bills propose the first sentence to read “Subject to subsection (q), there is established a private cause of action.”

Meeting Requirements of the Law

House Bill 2649 and Senate Bill 1514 propose that “if the parties to a workers’ compensation settlement agreement met the provisions of section 1862(b) of the Social Security Act (42 U.S.C. 1395y(b)) on the effective date of settlement, it shall be accepted as meeting the requirements of such section notwithstanding changes in law, regulations, or administrative interpretation of such provisions after the effective date of such settlement.” The bills indicate that “amendments made by the bill, unless otherwise specifically specified, shall apply to workers’ compensation settlement agreements with an effective date on or after October 1, 2015.”

This is the sixth version of similar proposals to amend the MSP Act specific to WCMSAs dating back to 2007. As in the past, as these proposals make their way through the legislative process, Helios Settlement Solutions will report on these bills’ score, reported savings or costs to taxpayers over the next 10 years as a result of the changes proposed, any co-sponsors in either chamber of Congress, any amendments made by members and committees, as well as CMS’ reaction and position on same.

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