Under the Medicare Secondary Payer Act, Medicare is alwayssecondary to workers' compensation and other insurance such asno-fault and liability insurance. Accordingly, all beneficiariesmust consider and protect Medicare's interest when settling a case.Centers for Medicare and Medicaid Services (CMS) memorandumsmention the creation and establishment of Medicare Set-Asides(MSAs) as an acceptable available method of reasonably takingMedicare's interests into account regarding future medical expensesrelated the claimed injury.

Old Thresholds Continue to Apply

Over the last 10 years, CMS has published several memosoutlining the specifics of when Medicare's interest should beconsidered. Such memos indicate that if the claimant is a currentMedicare beneficiary at the time of settlement, Medicare recommendsthat the settlement and MSA allocation be submitted for approvalonly if the settlement is for more than $25,000. While Medicarerecognizes that there is no statutory basis for the mandatoryrequest, the stated benefit to the Medicare beneficiary is thatonce an allocation is approved, future Medicare coverage is assuredafter the approved allocation has been appropriately exhausted.

The same memos also indicate that if the claimant is not yet aMedicare beneficiary, but may reasonably be expected to becomeMedicare-eligible within 30 months of the settlement and thesettlement is above $250,000, Medicare expects that its interestswill be taken into account by making a reasonable allowance for thefuture projected costs. If such an allowance is not made in theform of an allocation or set-aside arrangement for future medicals,Medicare may claim the entire settlement amount as an allowance formedicals. Also, Medicare will pay no benefits to the claimant forany medical services that may be linked to the injury until theentire settlement amount is exhausted.

Situations where an individual has a "reasonable expectation" ofMedicare enrollment for any reason include but are not limited to:a) the individual has applied for Social Security DisabilityBenefits; b) the individual has been denied Social SecurityDisability Benefits but anticipates appealing that decision; c) theindividual is in the process of appealing and/or re-filing forSocial Security Disability Benefits; d) the individual is 62 yearsand 6 month old (i.e., may be eligible for Medicare based upon hisage within 30 months); or e) the individual has an End Stage RenalDisease (ESRD) condition but does not yet qualify for Medicarebased upon ESRD.

The same memos also indicate that if the claimant is not acurrent Medicare beneficiary, is not expected to become a Medicarebeneficiary within 30 months following the settlement, and thetotal settlement amount is less than $250,000, Medicare's positionis that they waive any interest in the settlement. In other words,it is unnecessary for the individual to establish a Medicare setaside if all of the following are true: a) the facts of the casedemonstrate that the injured individual is only being compensatedfor past medical expenses; b) there is no evidence that theindividual is attempting to maximize the other aspects of thesettlement to Medicare's detriment; and c) the individual'streating physicians conclude that to a reasonable degree of medicalcertainty the individual will no longer require any Medicarecovered treatments related to the workers' compensation injury.

Latest Changes on Life Expectancy Tables and RatedAges

On May 20, 2008, CMS delivered its ninth memorandum on theMedicare Secondary Payer Act and workers' compensation. The memoindicated that effective with submissions received by CMS'Coordination of Benefits Contract on or after July 1, 2008, CMSwill only accept life expectancies obtained from the CDC Table 1,"Life table for the total population."

On May 14, 2010, CMS published its fourteenth memorandum since2001. The memo changed the rated age language to be included inWorkers' Compensation Medicare Set-Asides (WCMSAs). The previousrated age statement from the submitter that all rated ages obtainedon the claimant had been included is now rescinded. Instead, allWCMSA submitters must include the following certification statementin association with the rated age information: "Our organizationcertifies that all rated ages obtained on the claimant, at any timeduring that individual claimant's lifetime, have been included aspart of this submission to the Centers for Medicare & MedicaidServices."

The CMS will not accept any variation or substitute wording. Ifa submitter is including rated age information in its WCMSAproposal, the new certification language must be included aswritten, with no exceptions. If this appropriate statement is notincluded as part of the WCMSA proposal, CMS will not accept therated age provided. Instead, CMS will estimate the claimant'sremaining life expectancy using actual age. All other requirementsof acceptable proof of a rated age for a claimant are unchanged.Acceptable proof of rated ages is demonstrated through inclusion ofindependent rated ages on the letterhead of an insurance carrier orsettlement broker.

Changes on Medication Pricing, Tapering, Off-label Use,and Generics

On April 3, 2009, CMS published its twelfth WCMSA memorandumsince 2001. The purpose of the memorandum was to set forth CMS'procedures regarding the methodology of pricing future prescriptiondrug treatment costs/expenses in WCMSA proposals. As a result ofthis memo, CMS began independently pricing future prescription drugtreatment costs/expenses in WCMSA proposals beginning June 1, 2009.Where the related injury warrants the need of prescription drugsfor the ongoing treatment of the related injury, CMS' independentpricing of the prescription drug amount will be calculated andpriced using average wholesale price (AWP). The CMS will not use orrecognize any other pricing, discounting, or calculation methodswhen determining the adequacy of the prescription drug amounts inWCMSA proposals.

Although not published in its usual memorandum format, on June1, 2009, CMS published a guidance piece to supplement the April 3,2009, CMS policy memorandum announcing prescription drug reviewseffective June 1, 2009. The guidance indicates that the source forevaluation of sufficiency of WCMSA prescription drug component isthe Red Book.

On May 14, 2010, CMS published its fourteenth memorandum since2001. The purpose of this memorandum was to clarify guidanceprovided in CMS's April 3, 2009, and July 1, 2009, procedurememoranda regarding prescription drugs administered to Medicarebeneficiaries for off-label and/or unlabeled outpatient uses andwhether these drugs are considered covered by Medicare Part D and,therefore, appropriately included in a WCMSA proposal.

A covered Part D drug is "a drug that may be dispensed only upona prescription and that is described in subparagraph (A)(i),(A)(ii), or (A)(iii)" of 42 U.S.C. section 1396r-8(k)(2). 42 U.S.C.Section 1395w-102(e)(1)(A). For a Part D drug to be covered byMedicare, and thus included properly in a WCMSA, the drug should beprescribed for an outpatient use that is approved under the FederalFood, Drug, and Cosmetic Act [21 U.S.C.A. ? 301 et seq.], orsupported by one or more citations included or approved forinclusion in any of the compendia described in subsection(g)(1)(B)(I) of 42 U.S.C. Section 1396r-8.

Effective June 1, 2010, for those workers' compensationsettlements effectuated prior to June 1, 2010, and where thesettlement included non-covered Part D drugs as part of the WCMSA,CMS will consider funds spent for those non-covered Part D drugs bybeneficiaries and claimants as being an appropriate expenditure offunds as part of the WCMSA.

For those workers' compensation claims that were not settledprior to June 1, 2010, and where the settlement includesnon-covered Part D drugs as part of the WCMSA, CMS will consider are-pricing of those cases that included non-covered Part D drugs.Once CMS performs the re-pricing of the WCMSA, beneficiaries andclaimants may not use funds from their WCMSA to pay for non-coveredPart D drugs. Doing so constitutes an inappropriate expenditure ofWCMSA funds.

For those workers' compensation settlements resolved on or afterJune 1, 2010, and where the settlement does not include non-coveredPart D drugs as part of the WCMSA, beneficiaries and claimants maynot use funds from their WCMSA to pay for those non-covered Part Ddrugs. Again, doing so constitutes an inappropriate expenditure offunds as part of the WCMSA.

Rafael Gonzalez is CEO of The Center forMedicare Set Aside Administration, LLC in Clearwater. He may becontacted at 877-433-8853; www.msacenter.com. Gonzalez willmoderate a panel discussion entitled "The Bold New World of TakingMedicare's Interests Into Account" on Wednesday, Aug. 18, at the65th Annual Workers' Compensation Educational Conference and 22ndAnnual Safety and Health Conference in Orlando. Conferenceinformation is available at www.fwciweb.org.