The Interaction of Workers' Compensation Benefits on Medicare

Reprinted with permission of California Workers' Compensation Enquirer, June, 1992

There exists two separate and distinct government programs providing medical benefits and coverage to eligible individuals. The first is Medicaid, a program which is funded by the federal government and administered in the State of California under the name "Medi-Cal." It is administered by the State of California and is governed by separate state regulations. Coverage of Medi-Cal benefits is not included within the scope of this article, which is limited to Medicare, the second government program.

Medicare is federally administered program providing two types of benefits: hospital insurance coverage benefits. Medicare (Part A) and Medicare (Part B), medical insurance coverage services (such as doctor's visits). Currently, Part A Medicare charges no monthly premiums for most beneficiaries. Currently, Part B premiums are $29.90 per month. Most individuals who are enrolled in Medicare choose to receive both Part A and Part B benefits. Since the introduction of Medicare in 1966, many legislative changes have been made to reduce the liability of Medicare as the primary payer. As each new provision is enacted, medical practitioners and providers of items medically necessary are expected to know when Medicare is the primary or secondary payer.

Since October 20, 1966, expenses have been non-reimbursable for payment for services made under the state or federal workers' compensation law. Medicare will not pay for services rendered as a result of an injury or disease suffered in connection with employment for employees covered under a workers' compensation program or the Federal Black Lung Program. Claims are to be filed with the appropriate compensation plan first. If workers' compensation does not cover the service, Medicare will be the primary payer.

Furthermore, the Social Security Act specifically excludes cross-coverage under the Medicare program stating "any item or service to the extent that payment has been made, or can reasonably be expected to be made (as determined by in accordance with regulations), with respect to such item or service, under a workers' compensation law or plan of the United States or a state." This is fairly clear language and means what it says. Under Medicare there is no coverage or service to the extent coverage has been or can be provided under the workers' compensation statue. This exclusion has always been part of the Medicare statue. The specific regulations involving exclusion of services covered under workers' compensation are covered in the Code of Federal Regulations (42 Code of Federal Regulations, 411 et seq).

APPLICABLE LAW

Title 42 Code of Federal Regulations, Section 411 et seq. Defines insurance coverage, the limits of Medicare payments, and the general provisions. It states, in part, that Section 1862 (b)(1) of the Act excludes Medicare payments for services to the extent that the payment has been made or can reasonably be expected to be made by (I) workers' compensation. The regulations also contain provisions for recovery of conditional payments made by Medicare (42 CFR, Section 411.24) and mandate that the beneficiary's cooperation is required. If the beneficiary fails to cooperate or if Medicare is unsuccessful in obtaining the funds because of beneficiary's lack of cooperation, Medicare may recover the funds from the beneficiary (42 CFR, Section 411.23).

The regulations also state that Medicare may waive recovery in whole or in part if the probability of recovery or the amount involved does not warrant pursuit of the claim (42 CFR, Section 411.28). 42 CFR, Section 411.40 precludes Medicare payments for services covered under workers' compensation. Workers' compensation is defined as including state workers' compensation and provisions of Federal Employees Compensation Act, as well as Longshoremen and Harbor Workers' Compensation Act. As defined within that section, Medicare will not pay for any service for which payment can reasonably be expected to be made promptly under workers' compensation. However, if the payment for the service may not be made under workers' compensation because the service is furnished by a source not authorized to provide that service under the particular workers' compensation program, Medicare pays for the service.

The law provides that the beneficiary is responsible for taking whatever action is necessary to obtain any payment that can be reasonably expected to be made under workers' compensation (see 42 CFR Section 411.43). Furthermore, a CONDITIONAL Medicare payment can be made in a workers' compensation case if the beneficiary has filed the proper claim for workers' compensation benefits but the intermediary or carrier determines that the workers' compensation carrier will not pay promptly. This includes cases in which a workers' compensation carrier has denied a claim (see 42 CFR Section 411.45). In addition, Medicare will pay conditionally when the beneficiary, because of physical or mental incapacity, failed to file the proper claim with the workers' compensation carrier (see 42 CFR, Section 411.45, Subsection (b)).

HOW MEDICARE VIEWS LUMP SUM PAYMENTS

The laws regarding lump sum payments are contained in 42 CFR 411.46. The law clearly states that if a lump sum compensation award stipulates that the amount paid is intended to compensate the individual for all future medical expenses required because of a 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 (see 42 CFR Section 411.46). Furthermore, the lump sum compromise settlement is deemed to be a workers' compensation for Medicare purposes, even if the settlement agreement stipulates that there is no liability under the workers' compensation law or plan (see 42 CFR 411.46, Subsection (b)).

If the settlement appears to Medicare to be an attempt to shift the responsibility for payment of medical expenses for the treatment of a work-related condition to Medicare, the settlement will not be recognized. For example, cited in the regulations, if the parties attempt to maximize the amount of Disability Benefits paid under workers' compensation by releasing the workers' compensation carrier from liability for medical expenses for a particular condition, even though the facts show the condition is work-related, Medicare will not pay for treatment of that condition (see 42CFR, Section 411.46 (b)(2)).

THE EFFECT OF THE WORKERS' COMPENSATION SETTLEMENT FOR SERVICES FURNISHED AFTER THE DATE OF THE SETTLEMENT

The basic rule is that, in general, the settlement agreement allocates certain amounts for specific future medical services; Medicare does not pay for those services until medical expenses related to the injury or disease equal the amount of the lump sum settlement allocated to future medical expenses. Without exception, if a lump sum compromise forecloses a possibility of future payment of workers' compensation benefits, medical expenses incurred after the date of the settlement, are payable under Medicare (see 42 CFR 411.46 (b)(2), Subsection (D). The law has very specific regulations with regard to apportionment of lump sum compromise settlements of workers' compensation claims, citing specific examples of same. The law reflects that if a compromise settlement allocates a portion of the payment for medical expenses, and also gives reasonable recognition to the income replacement element, that apportionment may be accepted as a basis for determining Medicare payment.

If, however, both elements are not given reasonable recognition or the workers' compensation award does not apportion a sum granted, the portion to be considered as payable or medical expenses is computed by a formula which is contained in 42 CFR, Section 411.47 9 (a)(2)(i)(ii).

Federal law requires that the determination of the ration of the amount awarded, less reasonable and necessary costs incurred in procuring the settlement, to the total amount that would have been payable under workers' compensation, had the claimant not been compromised, multiplied by the total medical expenses incurred as a result of the injury or disease up to the date of the settlement, is the product of the amount of the workers' compensation settlement to be considered as payment for medical expenses. There are examples given in the Regulation.

The regulations also cover specific requirements for determining the amount of Medicare overpayment where conditional Medicare payments have been made and the beneficiary receives a compromise settlement (see 42 CFR, Section 411.47(b)). It is clear that federal legislation ahs also established that the parties involved may not settle a claim without satisfying Medicare's interests. Should a settlement occur without Medicare being reimbursed, the beneficiary or the beneficiary's estate or other parties can be held liable for the amount due to Medicare.

Furthermore, Section 1862(b)(1) of the Social Security Act (42 USC, Section 1395(y)(b)(1) provides that Medicare payments may not be made with respect to items or services to the extent that the payment is made or may be made under an automobile, medical, no-fault, liability insurance plan or workers' compensation plan.

Attachment "a" explains in detail to a claimant, the rights and potential effects that a workers' compensation recovery may have with regard to Medicare and Social Security Disability benefits. It should be noted that the potential for Medicare attempting to recover a conditional payment made always exists with regard to an individual receiving Social Security Disability payments, as the Social Security Administration may deem that the monies paid were "overpaid" and attempt recoupment of the overpayment, including, but not limited to potential action against the claimant's Social Security Disability payments or other benefits payable by the federal government.

WHERE DOES AN ATTORNEY GO TO COMPROMISE A MEDICARE LIEN?

In the State of California, which is part of the federal government, Region IX, contacts for Medicare claims and for workers' compensation repayment are handled by three government appointed intermediaries which are:

Blue Cross of California - Medicare
P.O. Box 70000
Van Nuys, California 91470
ATTN: Medicare Secondary Payer
Supervisor: Joel Adler (818) 712-6621
Coordinator: Pamela Dall (818) 712-6621

Aetna Life & Casualty - Medicare
P.O. Box 80819
Petaluma, CA 94975-8018
ATTN: Medicare Secondary Payer
Supervisor: Lynn Bishop (707) 792-5808

Mutual of Omaha - Medicare
P.O. Box 1602
Omaha, Nebraska 68101
ATTN: Medicare Secondary Payer
Supervisor: Linda Spenser (402) 978-2804

The specific intermediary that deals with the Part A Medicare claim for workers' compensation matters in this state depends on the hospital in which the claimant was treated. As a general rule, you should contact Blue Cross in Southern California and AETNA in Northern California.

It should be noted that at this time, because of budgetary constraints within the federal government funding of the intermediary program, workers' compensation cases and liens are only being placed on Part A claims, which are hospital claims. Medicare has instructed its intermediaries that on Part B Medicare claims (as of September 22, 1989), the intermediaries were to close the workers' compensation cases in other words, to resolve all liens, excluding Part B claims. This, of course, is a temporary action and could change at anytime. Cases in which liens were established or had Part B claims initiated prior to September 22, 1989 may remain open.

Current procedures within this district for the Medicare intermediary to obtain information regarding potential workers' compensation claimants, include copies of all applications for adjudication of claims occurring and entered into a computer bank, conditional billings from hospitals which indicate a workers' compensation carrier or potential job injury, notifications from beneficiaries, including questionnaires sent to the beneficiary, inter-contractor communications and notifications from applicant's attorneys or from the carrier's attorneys.

At most workers' compensation cases are compromised and concluded through a compromise & release, some thought and strategy should be given as to how to compromise the Medicare lien.

From the attorney's point of view in dealing with the Medicare intermediary, information which is helpful in reducing the amount of the Medicare lien can be medical reports documenting that the condition is only partially work-related, or that work-related and non-work-related conditions were both treated and what the proportion of medical billings for each are. Types of documentation that can be helpful in compromising and reducing the amount of the Medicare lien in that regard can also include medical reports, hospital reports, etc.

From a defense carrier's standpoint, information which could be helpful in compromising or reducing the amount of the lien includes the amount of exposure for that specific carrier, eg., where an individual has worked 10 different places and each is only 10% liable.

Insofar as to the amount set aside for future medical benefits, if future medical benefits are reimbursable for a work-related condition and Medicare ceases to act as primary payer for that condition, it can be helpful in delineating in a compromise & release what medical conditions are work-related if the individual is entitled to future medical care in a findings and award.

Regarding the language contained within a compromise & release, careful consideration must be given to two conflicting factors, one of which is the effect of lump sum settlements in workers' compensation cases on Social Security Disability benefits, particularly for the low wage earner, as Social Security may reduce the amount of Social Security benefits based upon the amount contained within a settlement for permanent or temporary disability benefits paid. However, as one can see, the past practice of placing these benefits in a category for "future medical" is even more fraught with danger insofar as Medicare may effectively cutoff the claimant's Medicare, and if no other provision are made for future medical treatment the individual may be prevented from obtaining medical treatment. Without informed consent of the beneficiary, this may subject the attorney to a potential malpractice action (see attachment "a").

One potential strategy is to designate the amount set aside for future medical expenses for non-Medicare coverage services. For what Part A and Part B Medicare services covers, or at least a brief summary of same, see attachment "b". However, what is covered and what is non-covered changes quickly. This is also fraught with danger insofar as Medicare may then determine that this was an attempt to shift payment responsibility from workers' compensation to Medicare, inappropriately.

A second possible strategy leads one to suggest that in those cases in which there is no effect on the individual's Social Security Disability benefit payments by allocation of sums to permanent or temporary disability, to place as much of the funds as possible in permanent and temporary disability benefits and rehabilitation benefits and state regarding the small amount of benefits left, that the amounts are in dispute and do not name any specific amount with regard to future medical benefits. As you can see, this is an area fraught with considerable danger because of the broad scope of the regulations as they are currently written.

Several broad characterizations can be made with regard to this area. If a period of hospitalization for medical condition which was work-related is anticipated prior to compromise & release or a finding & award issuance, and Medicare has paid for a period of hospitalization, it is necessary to get either clearance or cover the lien and notify the Medicare intermediary so that this matter will not reappear to haunt the claimant after settlement of the case.

Secondly, the former practice of putting all of the funds for future medical expenses to avoid a potential workers' compensation offset of Social Security Disability benefits is no longer appropriate and can be devastating to the individual's ability to receive Medicare benefits.

INFORMED CONSENT

My attorney has explained that the settlement of my workers' compensation claim by Agreement with the insurance company and my employer means that workers' compensation will not be responsibly for any future medical expenses incurred after the date of signing the Agreement.

I also have been told that because I was injured on the job and collected workers' compensation benefits, if I am found disabled by the Social Security Administration and eligible for Medicare health insurance benefits, Medicare may not pay for medical expenses related to my workers' compensation injury.

I understand that this means that if my condition worsens and requires future medical treatment, the cost of this future medical treatment will be my responsibility and Medicare may not be required to pay those expenses because it was a work injury. I understand this even though Medicare will pay other non work medical expenses.

I also understand that since this condition may be considered pre-existing, it is unlikely that any private health care company will insure me for health benefits related to this workers' compensation injury.

I understand that this means that it is likely that nay future medical openness incurred related to my work injury will probably have to be paid by me out of the proceeds of this settlement. My attorney had advised me of this an has suggested that I make appropriate arrangements to ensure that I will have funds available from the proceeds of this settlement to pay any future medical expenses that may arise as a result of this injury.

I understand that the payments that are made to me through this workers' compensation settlement will be considered by the Social Security Administration in deciding on the amount of any Social Security benefit I may receive. I understand that the terms of the Workers' Compensation settlement are not binding on the Social Security Administration and that Social Security will make their own decision about the amount of my monthly benefits.

I understand that the acceptance of this Settlement Agreement may mean that my Social Security benefits are affected and therefore, reduced, due to the money I receive under this Settlement Agreement.

I understand that there is some risk involved and I elect to proceed and settle this workers' compensation claim, knowing of the possible adverse effect on my Social Security and/or Medicare benefits.

I have read the above and have had it explained to me by my attorney in the presence of a witness of my choice who acknowledge that the same was done in their presence on the undersigned date.

Date_______________________ ___________________________________

Claimant

Date_______________________ ___________________________________

Attorney at Law

Date_______________________ ___________________________________

Witness

State of California

County of __________________

I, _____________________________, a Notary Public for the said County and State, do hereby certify that _______________________ personally appeared before me this day and acknowledge the due execution of the foregoing instrument.

Witness my hand and official seal, this __________ day of ______________, 1990

___________________________________

Notary Public

My commission Expires: