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Medicare Set Asides: 10 Mistakes to Avoid

Medicare Set Asides (MSAs) are a critical component of many settlements. After settlement, the injured party must spend, track and report the MSA carefully according to guidelines provided by the Centers for Medicare and Medicaid (CMS):

  1. Funds will be deposited in a separate interest-bearing account.
  2. All treatments and prescriptions need to be verified as being related to the injury and covered by Medicare.
  3. All expenses, treatments, dates of service and related ICD- 9/10 codes must be tracked annually; reporting must be sent to CMS.
  4. Bills must be paid according to the specific state workers’ compensation fee schedule or “usual and customary” pricing.

Reporting is complex, and, if the injured party fails to report properly, he runs the risk of having Medicare benefits denied. Additionally, paying retail rates for medical treatment can mean he is not abiding by the guidelines and will quickly run out of funds.

For this reason and more, many rely on professional administration services, like Ametros’ CareGuard service, to help manage their medical bills and reporting. Additionally, these services help save the MSA money by securing discounted rates for medical treatments.

Let us describe some of the most common mistakes, so your injured party can make an informed decision about how to best manage settlement funds.

1. Overpaying

When an injured party handles MSA funds on her own, she pays retail prices on drugs, doctor visits, procedures and medical equipment. In most states, Medicare guidelines indicate that the injured person should pay the lower state fee schedule for treatments — even after settlement. However, doctors and providers do not know how to bill at the correct rates. If the injured party does not demand to be billed accurately, she will be overpaying!

We find that, on average, the fee schedule is 55% below what doctors actually bill. Why should someone pay $100 for a doctor visit instead of $45? A professional administrator ensures that the injured person pays the required price on the fee schedule — and, often times, even less.

2. Assuming that, when funds run out, Medicare or private insurance will automatically cover 100% of healthcare costs

The settlement process has many moving parts. Often, we find that injured parties are told that, when their MSA funds exhaust, Medicare or private insurance will kick in and pay for everything. This is a huge misunderstanding. The injured party is responsible for copays and deductibles after funds exhaust.

The injured party also needs to be enrolled in Medicare or private insurance and pay the premiums. If she is enrolled in a plan when funds run out, insurance/Medicare will begin picking up the bills, but she will still need to contribute copays, deductibles or coinsurance. Typically, she is expected to contribute around 20% of medical costs. It is important to have a professional administrator to ensure that an injured party does not overpay on medical expenses and never has to use personal funds once MSA funds are exhausted.

See also: How Medicare Can Heal Workers’ Comp  

3. Failure to enroll in Medicare or personal insurance altogether

Many injured individuals assume that having an MSA means they are on Medicare automatically. This is not the case. The injured individuals still need to enroll in Medicare or private insurance to have coverage if their funds run out. While Medicare Part A (emergency visits) does not require enrollment, parts B (regular doctor visits), C (private Medicare plans) and D (prescription drugs) all have monthly premiums. Medicare requires that they enroll in plans B, C or D. If they do not enroll in a plan, when their MSA funds exhaust, they will have to pay 100% of their healthcare costs.

At Ametros, we also offer extra insurance protection with Medicare supplement plans.

4. Believing that Medicare will play some part in managing the billing of the MSA

After settlement, Medicare will not receive the injured person’s bills and verify information. A professional administrator will do this, but, if the person is managing his funds on his own, it is his responsibility. Many injured individuals wrongly assume their medical bills will go directly to Medicare after settlement, and the MSA is used for copays or deductibles.

This is a dangerous misunderstanding, as Medicare will most likely reject paying for these treatments, and injured parties may be underestimating the true cost. As long as they have funds in their MSA, they are responsible for collecting bills and paying for them IN FULL. Medicare will rely on their annual reporting to see that they did the right thing. Only once their MSA is exhausted will Medicare contribute, and they will be responsible for just the copays.

5. Using MSA funds to pay for medical expenses that are unrelated to the injury or not covered by Medicare

Many view their MSA as a pool of funds they can use for their general medical care related to their injury. In reality, Medicare’s guidelines are very specific. Medicare requires they only use the funds to pay for the entire cost of medical treatments that are 1) related to the injury and 2) would be covered under Medicare. A professional administrator verifies that each medical expense is eligible and will go the extra mile with doctors to document that each treatment and prescription is related to the injury. Our team receives constant questions about whether medical treatments meet both requirements.

It is important that the injured party’s doctor verifies that medical treatments are causally related to their injury — for instance, a knee injury may trigger a hip problem that requires surgery. When the problem is related to the injury and Medicare would cover the treatment, it should be paid for with the MSA. It’s best to document this chain reaction so that, if Medicare has questions, the patient has all records on hand.

It’s equally important to verify that Medicare would cover the expense. Oftentimes, injured individuals are caught off guard that expenses such as transportation and long-term care facilities are not covered by Medicare.

6. Using MSA funds to pay for copays, deductibles, premiums or administrative fees

Medicare guidelines state that MSA funds are not to be used for copays, deductibles, premiums or administrative fees. Some injured individuals purchase Medicare supplement plans for coverage gaps they may run into if their MSA funds exhaust. While this can be a good idea, Medicare does not allow the use of MSA funds to pay premiums for Medicare supplement plans — nor premiums for any other plan (including Medicare Part B, C or D).

Medicare also does not allow the use of MSA funds to pay investment advisers or other administrative services. At Ametros, our fee for professional administration always comes from funds that are separate from the MSA funds.

7. Failure to coordinate with providers and pharmacists on which items to bill to the MSA vs. Medicare or private insurance plan

Staff at most pharmacies and doctors offices have never heard of an MSA, so there is often confusion about billing. An individual managing her MSA is responsible for making sure each bill is paid properly with the MSA funds and for routing unrelated bills to Medicare or an insurance plan. It may sound simple, but often the injured person will visit the pharmacy to pick up medications that should be covered by the MSA, as well as medications that should go to the health insurance company or Medicare.

It’s important to be very specific with healthcare providers and staff to make sure they are separating bills. If the injured person is doing bill administration himself, tracking can be a huge hassle; it’s a challenge to request that the insurance plan reverse bills or try to secure a refund from doctors if bills are routed improperly.

See also: Top 10 Mistakes to Avoid as a New Risk Manager  

8. Mingling MSA funds with other accounts or investments

Medicare requires that funds be placed in a separate, interest-bearing bank account. Oftentimes, injured individuals skip this step. This may not seem like a big deal at first, but, as the account is used for other expenses, it can be a challenge to separate items and produce reporting for Medicare. In addition, depositing MSA funds into a personal checking account means the injured party may use the money incorrectly by accident.

Likewise, while Medicare has not given specific guidance on placing MSA funds into investment vehicles, industry experts agree that Medicare will not step in to cover any losses incurred from placing funds into the stock market.

9. Failing to notify Medicare properly when funds exhaust or replenish (if someone has an annuity)

Medicare must hear from the injured party every time her MSA funds run out and every time she receives another annuity check to replenish the account. If not, Medicare will not be prepared to cover healthcare if she has exhausted her funds and continues to be treated.

Medicare’s self-administration guide has a letter template for every time funds run out and another letter template for every time funds are replenished. Some injured individuals find themselves running out of MSA funds frequently. This means they need to send two letters a year to Medicare (not counting the annual reporting). Another frequent confusion of MSA holders who have annuities is whether they technically “exhausted” their funds because they spent more than their annuity check for that one year.

They only need to report exhaustion to Medicare when their aggregate account balance reaches zero. When their account is out of money entirely, they are required to notify CMS. A professional administrator verifies reporting for fund exhaustion and replenishment; this way, the hassle of keeping Medicare up-to-date is taken care of.

10. Failing to report MSA spending to Medicare annually

The annual attestation is the most basic requirement of the MSA: Medicare expects to hear from the injured party on the anniversary of the injury, every year for the rest of his life. The only exception is if he has notified Medicare that he has no funds remaining and no future annuity checks. As long as he has MSA funds or expected future annuity checks coming, Medicare will count on the report.

Annual reporting to Medicare is the fundamental requirement that MSA holders need to fulfill to ensure their Medicare benefits are protected. Unfortunately, many injured individuals forget the date of their settlement and file their reports late, and some do not file at all. When we take on administering MSAs where injured individuals did not complete their reporting, we usually have to make multiple phone calls, and, often, the injured individual is left waiting for approval for a medical treatment or prescription that Medicare needs to help cover.

At Ametros, we’re constantly encountering new issues with MSA accounts, and our team is always adapting to take the burden off the shoulders of the injured individual. After all, injured parties with MSAs have been through enough; they deserve help so they can settle well and remain on the path to better health.

Get a Grip on Non-Medicare Costs

Would you buy a house if you didn’t know its price or the continuing cost of your mortgage? It seems like a ridiculous question, but many claimants are asked to make decisions of the same magnitude on the non-Medicare covered portion of their settlements with little to no reliable information.

Most of the time, claimants don’t know the current cost of their medical treatment nor the future expected increases. While a Medicare Set Aside may provide a vote of confidence to the claimant for the MSA portion of a settlement, given that Medicare approves the amount, the costs that would not be covered by Medicare (also known as “non-qualified costs”) can be particularly daunting.

Many adjusters try to avoid addressing the issue of non-Medicare covered items altogether in a settlement, but oftentimes it is a necessary component of the offer and a very contentious one. Estimating the pricing on big-ticket items, such as facility costs, custodial care service and home healthcare can be extremely difficult and often result in many cases never reaching settlement.  Working with a hands-on professional administration company, you can gain transparency into real-world pricing for these items and reach a definitive number for the costs.

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What are some of the most significant non-Medicare covered expenses?

  • Long-term skilled nursing facilities
  • Home health aides and custodial care services
  • Home modifications
  • Certain creams, gels & compounds (Lidocaine, Voltaren, )
  • Transportation
  • Medical supplies sold over the counter
  • DME bathroom supplies
  • Services like acupuncture, gym memberships, home IV therapy

See Also: Healthcare Costs: We’ve Had Enough

There is no exact science for how to appropriately cost out these expenses for a settlement. Many adjusters are trained to look at the past two years’ cost and then project out the future costs based on the claimant’s life expectancy. The issue with this method, as many applicant attorneys will be quick to point out, is that the carrier has sophisticated cost-containment systems in place to reduce what it pays on its bills. The true expense can be dramatically higher after settlement when the claimant is no longer covered by the payer’s systems and instead faces these costs alone, paying retail prices with cash.

Other adjusters rely on MSA vendors to put together a “non-qualified” projection for these costs. It is worthwhile to examine the basis of these projections, given that, unlike MSAs, there is no specific guideline across the industry that the vendor must follow, so the figures can vary significantly.

In contrast, with a professional administration provider you can often discover the exact cost that the claimant will incur after settlement for these expenses. Professional administration companies can go out and secure pricing for some of the largest cost-drivers, and often minimize or at least lock in inflation risks. For example, at Careguard, we have locked-in rates for claimants at specific facilities for long periods: 10 to 15 years, or for the rest of their lives. In other instances, we have been able to secure rates for home health treatment, depending on the type of care and requirements of the claimant. In addition, many professional administration companies have pharmacy networks that drive discounts on the creams, gels and medications that are non-qualified.

Case Study: California Facility Costs

An attorney introduced a case to CareGuard that was not going to settle due to disagreements over non-Medicare covered costs. The claimant was in a long-term skilled nursing facility in California. He and his family were interested in settling, but hesitant about the continuing expense of the care and medical cost inflation.  CareGuard took the following steps to help move the case forward:article data

In this case, CareGuard was able to negotiate a rate with the facility that was about $54 a day less than the carrier had been paying. This reduced rate over 17 years generated a significant savings that allowed the carrier and claimant to find a middle ground and to settle the case.article ideaaaaaa

Non-Medicare covered expenses will continue to become more significant components of settlements. Reports indicate that home health attendant costs have risen between 1% and 2% over the past five years, that nursing facility costs have risen approximately 4% per year and that, in the last year alone, rates for adult day care rose almost 6% nationwide. There is also enormous price inflation and variance in the cost of the prescriptions. These challenges are not going away any time soon. As the parties to a settlement try to come to a resolution, knowing and using real-world pricing through a platform such as CareGuard can help bridge the gap.

Don’t let the discrepancy in estimates of non-Medicare costs become a huge sticking point in your negotiations. Instead, introduce visibility into the cost and let a professional administrator help get everyone on the same page so claimants can feel confident that they’ve made an informed choice when they settle their case.

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A Better Reality for Injured Workers

When is the last time you haggled with your doctor over pricing?

It’s certainly not a negotiation most Americans are prepared for or even one they know how to approach. However, when it comes to workers’ compensation settlements, the system anticipates that, after settlement, injured workers can persuade their doctors to bill them fairly, according to the state’s fee schedule. In reality, the system is naïve, and injured workers are instead being unfairly stripped of their settlement funds because they are routinely overpaying for treatment.

Injured workers deserve better, and engaging a professional administration service like CareGuard provides them just that. CareGuard offers injured workers a sophisticated advocate and group-buying power to make sure they can navigate the healthcare system and get the lifetime of treatment they were promised in their settlement, with money to spare.

Each year, tens of thousands of injured workers decide to settle their cases. The vast majority (more than 95%) of these workers have no help when it comes to properly spending their funds on healthcare. After settlement, most injured workers pay out-of-pocket for treatments related to their injury, relying on their often limited knowledge of healthcare to figure out what treatments they should pay for with their funds. When they do decide to use their funds to pay, they must navigate a complex maze of fee schedule guidelines that have been provided by the state to find the correct prices. In reality, it’s nearly impossible to comply with the guidelines without a computer application deciphering the numerous pages of schedules, CPT codes, rates, modifiers and rules.

The result is that, in most instances, when injured workers are left on their own after settlement, they fail to manage their care appropriately. They overpay for treatments and drugs, depleting their funds more rapidly than expected. They lose track of bills and fail to comply with regulations, putting their Medicare and other benefits at risk. And even when they are aware they can negotiate, injured workers are left to haggle out pricing on their own, pitted against a complex and apathetic medical system. Keep in mind that most of these individuals have far more healthcare needs than the average person.

Professional administration services provide access to discounted drug, provider and medical equipment pricing, as well as access to technology that provides a hassle-free experience with medical care. Those services also provide support from a dedicated team of representatives and advocates to answer questions and help the injured worker navigate their medical care. With professional administration, there is no utilization review or any requirement to use a medical provider network (MPN). Instead, injured workers can see any provider they would like, giving them the freedom to get the care they need with the added support to help minimize administrative red tape.

The culmination of all these benefits is that professional administration helps alleviate injured workers’ concerns about settling their cases. It is a tool that can help everyone at the settlement table prepare the claimant for post-settlement success and minimize any backlash or misunderstandings after settlement.

Professional administration is often overlooked because of a common misconception that it is very expensive, costing tens of thousands of dollars. At CareGuard, our pricing is typically below $5,000, and it can be even less for smaller cases. As a result of the low pricing and high discounts we offer our members, we also find that, on average, we save the injured worker over five times the cost of our services each year.

The workers’ compensation system was built to protect injured workers. Significant work and resources are dedicated to ensuring the system runs well. However, the system was poorly designed to care for injured workers who have settled their case and have exited the system. Professional administrators pick up where the system left off and ensure the injured worker has a smooth transition to life post-settlement.

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New Tool for Settling Open Medical Claims

The almighty dollar is often just one component of a successful workers’ compensation settlement. Savvy negotiators recognize that they have several tools at their disposal when it comes to bridging the gap between the payer’s offer and the plaintiff’s demand, many of which dictate how and when the settlement dollars can be used.

On both sides of the negotiating table, many are adept at minimizing or maximizing the medical cost projection or the amount that goes into a Medicare Set Aside (MSA). Many in the industry also understand how a structured settlement (annuity) can unlock value and allow for the pacing of stable income for the claimant.

Now, a small but growing number in the industry are beginning to understand how offering professional administration (PA) of the claimant’s future medical funds can help facilitate a settlement. PA provides the claimant with a dedicated support team after he settles the case, along with technology to ensure he saves money when he actually spend the settlement dollars on healthcare.

What settlement issues can you use PA to help address?

The most often cited concerns of injured workers when they face the prospect of settling are regarding: 1) access to their medical treatment and 2) how long it takes to get a response from their adjuster, attorneys or the board as they go through settlement process. Examples of these concerns are easily found by reading the comments directly from injured workers in a survey by the New York Workers’ Compensation Board. Issues like “denied treatment” and “delayed processes” are at the core of nearly every complaint.

PA is effective in addressing these concerns because PA services do not restrict the claimant’s access to medical treatment via utilization review or a medical provider network (MPN); PA services provide expanded choices for treatment. In addition, many PA services have call centers that offer support to their clients, the injured workers. CareGuard, for instance, offers 24/7 coverage to its members and prospective members to answer any questions they may have as they navigate the complex healthcare maze after settlement.

Through the life of their claim, many injured workers simply lose trust in the attorneys, judges or system in general. This is often because the settlement process sets the parties up at a table for purposes of a one-time transaction, but then each group walks their own separate way.

There is sparing research done on injured workers’ attitudes toward settling their case, but a survey in Minnesota in 2013 scratched the surface of what a daunting undertaking settling is for the injured individual. The study found that about one-third of injured workers did not fully understand their settlement. Further, it revealed that around three-quarters of injured workers did NOT believe they achieved a “fair” settlement. The sample used were folks who actually overcame their concerns and settled regardless of the negative sentiment the process evoked. Many claimants do not have the courage to push forward with settlement and instead decide to leave their future medical claim, if not their entire claim, open.

PA can be a valuable tool, whether for adjusters, defense attorneys or plaintiff attorneys, to inject trust and solutions into a contentious situation. A team becomes available to address claimants’ concerns about their future medical treatment. PA also introduces a party to the settlement negotiation whose interests are aligned with the claimant’s, because the PA provider will be the only party continuing to provide service to the claimant after settlement. This can give the claimant much-needed peace of mind that a partner is looking out for his best interests, and it is this peace of mind that helps reluctant claimants see that settling could in fact be their best decision. PA services give claimants comfort and confidence that life after settlement can be a rewarding and hassle free experience.

How can you leverage PA in a settlement?

To leverage PA effectively, negotiators on either side of the table should introduce the service early on in the process and clearly explain its benefits to the claimant. Often times, it’s useful to connect the PA provider directly with the claimant or her attorney so that a relationship is established and the service is well-understood. After all, the agreement between the PA provider and the claimant will exist for years beyond the settlement; it’s better to begin that relationship early on rather than try to throw it in last minute.

The PA provider can serve as a neutral party that helps explain to the claimant what she can expect after settlement. Some PA providers, like CareGuard, can go further to provide cost analyses of what treatments will cost on their platform and demos of how their service works. PA providers understand that they do not get paid until the case settles, so they are a source of information and guidance toward settlement for all parties involved.