However, the distribution can only occur once Medicare’s regional office and the contractor responsible for monitoring the beneficiary’s case ensures that all of the beneficiary’s claims have been paid and Medicare’s interests have been protected.  Protecting Medicare’s interest may involve holding the Medicare set-aside arrangement open for some period after the date of death, as providers, physicians, and other suppliers are permitted to submit their initial bill to Medicare for a period ranging from 15-27 months after the date of service.

As a general rule federal law requires parties involved in workers’ compensation claim to consider Medicare’s interests in the event of a settlement. 42 CFR 411.46. However there is one major exception to this rule. According to the October 15, 2004, policy memorandum issued by the Center for Medicare and Medicaid Services (CMS) workers’ compensation parties need not consider Medicare’s interest when the medical aspects of a claim are to remain open.

In layman’s terms leaving medical open simply means that the employer will continue to pay for an injured worker’s medical treatment long after the settlement funds are dispersed.   There are many reasons an employer might choose to keep medical open. In my experience this usually happens when the injured worker’s medical treatment is extremely costly or his medical condition indicates a possible shortened lifespan.  In any case, parties involved in a compensation case where the employer has agreed to continue to pay medical bills do not need to worry about Medicare or creating a Medicare set-aside.

As April 15^th draws nearer and my mailbox starts to fill with W-2 and yearly interest statements I am reminded of the old adage, only two things in life are certain; Death and Taxes.  Oddly enough my recent dealings with Medicare Set-Asides (MSA) also remind me of this old adage.

When a workers’ compensation claim settles the injured worker often receives funds to pay for future medical care related to his workers’ compensation injury. When the injured worker is a Medicare beneficiary federal law requires that the funds for medical treatment be set-aside in an account called a workers’ compensation Medicare Set-Aside account (WCMSA).   The WCMSA can take the form of a lump sum payment or a structured settlement annuity.  In either case, the injured worker places these funds with a bank or insurance company for safe keeping.  The financial institution in return rewards the injured worker with interest.  At the end of the year the Internal Revenue Service (IRS) considers this interest a form of income and taxes the MSA beneficiaries accordingly. To alleviate some of this tax burden, The Centers for Medicare and Medicaid Services (CMS) makes exceptions in its normal policy which requires that all set-aside funds be used solely for medical treatment.

According to CMS’ July 11, 2005, policy memorandum a claimant or his Medicare Set-Aside administrator may withdraw enough money from a WCMS account to pay for taxes.  However, CMS requires that the administrator of the account, be it the injured worker or a professional administrator, account for the removed by submitting documentation of the taxes imposed along with the annual WCMSA accounting statement.