Effect of Settlement

30.7 – Effect of Settlement (Rev. 12438; Issued: 01-04-24; Effective: 02-06-24; Implementation: 02-06-24) If the beneficiary agrees to a settlement, and the settlement has given reasonable recognition to the income replacement objectives of the WC law, the settlement may be accepted as a basis for applying the WC award amount agreed to in the compromise lump sum settlement. The MSP Contractor recovers, from the beneficiary, any Medicare payments made for items or services that have also been paid for by the WC settlement. (See the Medicare Secondary Payer Manual, Chapter 2, § 50 and 42 CFR § 411.45). Pursuant to 42 CFR § 411.47(b), where the award does not identify the items of medical or hospital expense covered, the MSP Contractor allocates the amount of the award for medical and hospital expenses incurred up to the date of the award, in the following manner: a) First to any beneficiary payments for services payable under WC but not covered under Medicare; b) Second to any beneficiary payments for services payable under WC and also under Medicare Part B. (These include deductible and coinsurance amounts and, in unassigned cases, the charge in excess of the reasonable charge); and c) Third to any beneficiary payments for services payable under WC and also covered under Medicare Part A. (These include. Part A deductible and coinsurance amounts and charges for services furnished after benefits are exhausted). The difference between the amount of the WC payment for medical expenses and any beneficiary payments constitutes the Medicare overpayment. The beneficiary is liable for that amount. The following examples illustrate the above concepts: a) A WC settlement paid for $6,000 of the total medical expenses. The $18,000 in medical expenses included $1,500 in charges for services not covered under Medicare, $7,500 in charges for services covered under Medicare Part B, and $9,000 in hospital charges for services covered under Medicare Part A. All charges were at the workers’ compensation payment rate, that is, in amounts the provider, physician, or other supplier must accept as payment in full. The Medicare allowed charge for physicians’ services was $7,000 and Medicare paid $5,600 (80 percent of the reasonable charge). The Part B deductible had been met. The Medicare payment rate for the hospital services was $8,000. Medicare paid the hospital $7,480 ($8,000 minus the Part A deductible of $520) In this situation, the beneficiary’s payments totaled $3,920 as follows: Services not covered under Medicare totaled $1,500. Excess of physicians’ charges over reasonable charges totaled $500. Medicare Part B coinsurance was $1,400. Part A deductible was $520. Total: $3,920 The Medicare overpayment, for which the beneficiary is liable, would be $2,080 ($6,000 -$3,920). If it appears that a settlement represents an attempt to shift to Medicare the responsibility for the payment of medical expenses for the treatment of a work-related condition, it will not be recognized. Settlements of this type may occur, for example, when the parties attempt to maximize the amount of disability benefits paid an injured employee under WC by releasing the WC carrier from liability for a particular course of treatment, despite facts showing a relationship between the work injury and the condition that necessitated the treatment. b) A Medicare beneficiary had surgery for a hip fracture received in the course of employment. Following surgery, the individual went into postoperative shock and suffered a cerebrovascular accident that required hospitalization for an additional three (3) months. The total hospital bill was $12,000. Despite the fact that, under these circumstances, the State WC plan would have covered the individual’s entire hospital bill, the beneficiary ‘s attorney instructed the hospital to bill the WC carrier only for the expenses incurred through the date of the hip surgery, pending the outcome of the disability settlement that was being negotiated. The State WC agency subsequently approved a compromise settlement, under the terms of which the WC carrier admitted liability for the hip fracture but not for the stroke. The settlement provided payment to the beneficiary of $18,000 plus payment to the hospital of $1,200 for his stay through the date of the surgery. Following the settlement, the beneficiary requested the MSP Contractor to pay for the three months of hospitalization following the surgery, since the settlement did not stipulate that treatment of the stroke was work-related. The MSP Contractor determined that payment under WC for treatment of the stroke could reasonably have been expected if the beneficiary had not agreed to give up his right to such compensation. It, therefore denied the claim. The provider, physician, or other supplier has the right to bill the beneficiary, since these services would have been covered by WC and, therefore, are not payable by Medicare. c) A Medicare beneficiary settled a WC claim which stipulated, among other things, that the WC carrier would: i. Pay the individual a lump sum of $50,000 as compensation for permanent and total disability; ii. Pay all of the individual ‘s medical expenses related to his work injury until he became entitled to benefits under Medicare or any other Government medical benefit program; and iii. Continue to pay, without any time limitation, any portion of his medical expenses for the work injury that was not reimbursable under a Government program. It further stipulated that the employee would seek payment for the medical care related to the work injury from State and Federal Government programs to reduce the obligation of the employer/ other plan sponsor and carrier as much as possible. Although the compensation order was designed to reduce the obligation of the employer/ other plan sponsor and carrier to pay for medical care by shifting medical expenses to Medicare and other Government programs where possible, the agreement recognized the WC carrier’s continuing responsibility for the individual’s medical care. Since Medicare is not bound by such covenants, benefits were denied for all expenses subsequently incurred for treatment of the work injury. The Medicare beneficiary may be billed for these services. d) In July, 1998, Mr. Y, age 30, was involved in an accident at work sustaining injury to his neck, back, right arm and legs. Beginning with the date of the accident, the WC carrier paid Mr. Y weekly benefits of $207 for temporary disability and also paid all of his medical expenses. In 2000, Mr. Y became entitled to Medicare based on disability. In July 2002, the WC insurer decided to terminate Mr. Y ‘s medical and disability payments based on medical advice that his continuing impairments were not attributable to the work injury. By this time, the insurer has paid a total of $90,000 for Mr. Y ‘s medical care. Mr. Y contested the termination of his WC benefits, and the case was settled by compromise. A lump sum of $46,000 ($6,000 of which was designated as attorneys’ fees) was paid to Mr. Y. As part of the settlement agreement, Mr. Y signed a final release that stipulated that future medical expenses were in dispute and that they were to be assumed by Mr. Y as his sole responsibility. The fact that Mr. Y accepted, and the State WC agency approved, a relatively small lump sum payment, compared with what Mr. Y would have received had his WC claim been approved in full, indicates that there was doubt as to the compensability of the injury. There was no indication that the lump sum was intended to be payment for future medical expenses, nor do these facts indicate that the settlement represented an attempt to shift the responsibility for future medical expenses from WC to Medicare. Therefore, Mr. Y’s signing of the final release of all rights under WC makes it possible for medical expenses incurred after the date of settlement to be reimbursed under Medicare.