Blog

On May 21, 2009, a bill was introduced by Democrat House member John Tanner as HR 2641 entitled “Medicare Secondary Payer and Workers’ Compensation Settlement Agreements Act of 2009.”  At the time of this post, the bill is sitting in the House Ways and Means subcommittee.  The Congressional Research Services summarized the act as follows “Medicare Secondary Payer and Workers' Compensation Settlement Agreements Act of 2009 - Amends title XVIII (Medicare) of the Social Security Act to: (1) create an exception to Medicare secondary payer requirements for certain workers' compensation settlement agreements; and (2) provide for the satisfaction of such requirements through use of qualified Medicare set-asides under workers' compensation settlement agreements.”

HR 2641 would establish a “Safe Harbor” for settlements $25,000 or below.  These settlements would be by operation of law exempt from the Secondary Payer provisions relating to set asides.  Also included would be settlements where the claimant is unlikely to become Medicare eligible within 30 months.  Where a “compromise settlement” was reached and the claim was denied in whole, there would be no need for a set aside.  A “compromise settlement” is defined as a settlement where the Workers’ Compensation claim is denied or contested, in whole or in part and the settlement does not provide full compensation of benefits.  Where a claim was denied in part, the set aside amount could be reduced by a percentage in direct proportion to the full value of the claim.  In this scenario, the percentage reduction for the set aside would be equal to the percentage of benefits denied as compared to full value.  This provision deals with the problem of settlements where injuries are disputed and the injured worker gets half or less of the full value of the claim.  Under the current system, an MSA must be funded for the value of all future medical even though the settlement is well below full value.

The bill also requires the allocation be based on the claimant’s state Workers’ Compensation fee schedule.  A very important aspect of the legislation is that the parties could deduct from the set aside the costs and expenses incurred in establishing, administering and securing approval of the MSA.  The MSA would be reduced by a proportional share of costs and expenses such as attorney’s fees, third-party vendor costs and any set aside administrator fees incurred by the parties.  MSAs submitted to CMS for approval are automatically approved, under the new legislation, unless disapproved no later than 60 days after receipt of the submission.  It also sets up an appeal process for adverse decisions.   Review includes reconsideration by the Secretary of Health and Human services; a hearing before an administrative judge and a judicial review of the Secretary’s final determination. 

While this proposed legislation would bring welcome clarity to the Workers’ Compensation MSA process, it is not a panacea and most importantly it does not address liability settlements.  The framework created by this legislation could be the backbone of legislation relating to set asides in the liability context.  However, it does not appear at this point that there is any push to codify set asides outside of Workers’ Compensation cases.

To view the full text of the bill go to http://www.govtrack.us/congress/billtext.xpd?bill=h111-2641

To track the bill go to http://www.govtrack.us/congress/bill.xpd?bill=h111-2641