Medicare Set-Asides and Workers’ Compensation Settlements
The Code of Federal Regulations (C.F.R.) distinguishes workers’ compensation settlements into two categories: commutations and compromises. Compromise settlements represent situations where claimants settle for less than full reimbursement for lost wages and lifetime medical treatment, usually occurring in heavily disputed claims. In cases where there is a true compromise foreclosing the possibility of future benefits and not an attempt to label settlement proceeds as lost wages, medical expenses payable after the date of settlement are payable under Medicare. The exception to that rule is if the settlement agreement allocates specific amounts to future medical expenses. In that instance, Medicare will not extend benefits for treatment of the work injury until that amount has been fully exhausted on the same.
A commutation settlement, on the other hand, is your typical workers’ compensation settlement. The award generally “stipulates that the amount paid is intended to compensate the individual for full medical expenses required because of the work-related injury or disease” and, again, Medicare will not extend benefits for treatment of the work injury until that amount has been fully exhausted on the same. It is not uncommon for settlements to have both compromise and commutation segments, but Medicare is primarily concerned with commutations.
Why is this important?
Essentially, if you “attempt to shift to Medicare the responsibility for payment of medical expenses for the treatment of a work-related condition,” Medicare may disregard your settlement and either continue to seek repayment from the employer or workers’ compensation carrier, or deny benefits to the claimant until the claimant can prove that the total settlement amount was used for payment of medical expenses related to the work injury.
Questions? Contact us for more information.
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