Introduction to WC

When Medicare is a Secondary Payer to a Workers' Compensation (WC) Plan

Pursuant to 42 U.S.C. §1395y(b)(2) and § 1862(b)(2)(A)(ii) of the Social Security Act, Medicare is precluded from paying for a beneficiary's medical expenses when payment “has been made or can reasonably be expected to be made under a workers' compensation plan, an automobile or liability insurance policy or plan (including a self-insured plan), or under no-fault insurance.”

Overpayments and Recovery

Federal law (42 U.S.C. § 1395y(b)) not only establishes that Medicare is a secondary payer to WC, but also that Medicare has a priority right of recovery over any other entity to the proceeds of any settlement.  To the extent that Medicare has made any “conditional payments”, Medicare will recover those payments pursuant to 42 C.F.R. § 411.47.

Pursuant to 42 C.F.R. § 411.21, “conditional payments” are Medicare payments for services for which another payer is responsible, made either on the bases set forth in 42 C.F.R. § 411 subparts C through H, or because the intermediary or carrier did not know that the other coverage existed.

Future Medical Services

The burden of future medical expenses in WC cases may not be shifted to Medicare.42 C.F.R. § 411.46 and § 411.47 provide that Medicare's interest must be considered in WC settlements, when future medical expenses are a component of the settlement.

Because Medicare does not pay for an individual WC related medical services when the individual receives a WC settlement that includes funds for future medical expenses, it is in the best interest of the individual to consider Medicare at the time of settlement. For this reason, CMS recommends that parties to a WC settlement set aside funds, otherwise known as Workers' Compensation Medicare Set-aside Arrangements (WCMSAs) for all future medical services related to the WC injury or illness/disease that would otherwise be reimbursable by Medicare. 

All WCMSA proposals submitted for CMS review must be sent to:

CMS
c/o Coordination of Benefits Contractor
P.O. Box 33849
Detroit, Michigan 48232-5849
Attention: WCMSA Proposal

Please click on the link for Workers' Compensation Medicare Set Aside Arrangement for more information.

If Medicare's interests are not considered, CMS has a priority right of recovery against any entity that received a portion of a third party payment either directly or indirectly.  Medicare may also refuse to pay for medical expenses related to the WC injury until the entire settlement is exhausted.  To avoid future overpayment negotiations and to protect the injured worker's future Medicare benefits, it is in the best interests of all parties to work together, including Medicare, the WC agencies, attorneys, WC carriers, and claimants. 

Commutation vs. Compromise

WC cases may involve past medicals, future medicals, or both. When a settlement includes compensation for future medical expenses, it is referred to as a “WC commutation case.” When a settlement includes compensation for medical expenses incurred prior to the settlement date, it is referred to as a “WC compromise case.” A WC settlement can have both a compromise aspect as well as a commutation aspect.  Additionally, a settlement possesses a commutation aspect if it does not provide for future medical expenses when the facts of the case indicate the need for continued medical care related to the WC illness or injury. These different situations are described in more detail by clicking on the download below titled “Commutation vs. Compromise”.  (Ref:  7/23/01 Memo Q4)

It is important to note that parties involved in WC cases have significant responsibilities under MSP laws to protect Medicare's interests in these different situations. For more information, please click on the links for Workers' Compensation Medicare Set-aside Arrangements.