Question: Someone told me the law required setting aside an amount for an LMSA in a $200,000 settlement.
Answer: Simply put, the “law” that gives you any indication of the need for set asides only applies to workers’ compensation cases in all cases that do not involve a specific allocation of future (medical) costs of care for which Medicare would otherwise pay. (See 42 C.F.R. §411.46 reproduced here):
“Medicare will not pay for any medical expenses related to an injury after settlement until the time the portion of the settlement allocated to future medical expenses covered by Medicare is fully exhausted.”
Creating any MSA, requires you find two elements:
1. Future costs of care (FCC) as part of an agreed allocation; and
2. Permanent burden shift of payment (PBS) of that care over to Medicare.
Simply stated, in LMSAs, FCC + PBS = need to determine MSA.
Absent both of these elements, you do not have a LMSA issue. If you have both elements, then the value of the FCC becomes the ceiling for an MSA, but not the MSA. At that point, you would consider your life care plan (if you have one), and redact out all those items Medicare does not cover (homes, cars, non-medical equipment, services, etc.), leaving the ones Medicare would. Then you take a look at the value of actual services to be rendered and perhaps, using structured settlement annuities, use present dollar values to cover the FCCs (except for the first 2 years of meds, which is part of the seed money).
As a result, settlements must “adequately consider” Medicare’s interest, no shifting of Medicare to be primary payer for past & future medical care. We do not want to leave you with anything but a better understanding that MSAs are all about protecting your client’s Medicare card. In workers’ comp cases, situations suggesting use of MSAs are more easily identifiable because of the non-fault nature of those cases. CMS provides 12 non-statutory policy memos for Workers’ Compensation MSAs because they can easily identify the three buckets of damages (indemnity, past meds, future meds).
Liability cases have more buckets and they have more detail behind them. So if you have a case where your client is injured, is receiving Medicare, and the defense has agreed to provide funds for a future surgery, as an example, where you settle a case involving a large settlement and a loss of a limb, you can hardly argue that FCC and PBS do not exist. In those circumstances, showing the damage allocation, calculating the expenses to Medicare, and documenting your file properly are the ways to properly consider Medicare’s interests and protect your client’s Medicare card.
To suggest that a $200,000 liability settlement with no allocation for FCCs as part of the negotiations requires an LMSA is taking part in the fear-mongering intended, in my opinion, to help continue an MSA industry.
I trust this has been helpful. Finally, anyone who tells you that MDSs are a requirement, should be pointed in the direction of a House Bill, sitting in the Sub-committtee on Health since June, 2007, H.R. 2549, which purports to create the very statute that this person is claiming exists.
We have, some might say, been on a mission to debunk the LMSA myth and to properly show counsel how to address these issues of interpretation of Federal rules and guidelines. As you can see, we take this job very seriously and would be very pleased to further discuss these matters with you at your earliest convenience.
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