- Sometimes the insurance company will contact you to ask if you are interested in a cash settlement of your future medical award. No one can force you to settle your future medical award if you don’t want to. On the other hand, you can’t force the insurance company to settle your case by a lump sum, either. Both parties have to agree, and the settlement must be approved by a Worker’s Compensation Appeals Board Judge. If you are currently eligible for Social Security benefits, keep in mind the anti-windfall provisions which will give Social Security an “off set”, a credit against what benefits they think you are owed. Without proper structuring of the settlement, you could lose part of your monthly payment amount or put yourself at risk for a repayment claim by the federal government for overpayment of benefits.
There are methods to structure a further medical settlement so that it does not reduce your Social Security monthly payments. We can amortize (spread out over your remaining life expectancy – how long you are expected to live) a lump sum payment. That way, Social Security will calculate your $30,000 settlement at $11.59 per months over 25 years, instead of as a lump sum payment. You cannot retroactively amortize a lump sum settlement after it has been approved by the WCAB. It is important to include the right language in your settlement, otherwise, you could easily run into serious problems.
Additionally, if you have applied for Social Security benefits, not even receiving them yet – you are still considered a potential Medicare beneficiary. Medicare is the Medical treatment and prescription drug coverage portion of Social Security. By law, the worker’s compensation insurance carrier is required to check and see if you are getting Social Security. If you are, then they have to “take Medicare’s interests into account.” What this means is that so many people were taking a lump sum for their future medical care under a worker’s compensation claim, then going to Medicare for the treatment and prescriptions they were already paid.
Regulations were passed requiring any settlement of future medical has to consider what Medicare might be stuck paying in the future. The insurance carrier has to prepare a summary of what your medical file says you need. This estimate of an injured worker’s future medical care is called a Medicare Set Aside (MSA). It can take several months to prepare and obtain approval of a medical settlement.
A third party, paid by the insurance company, reviews your medical file and comes up with an estimate for treatment, diagnostic testing, prescriptions, and possible future surgery. This amount is calculated down to the number of aspirin you’d need per month times your remaining life expectancy, based on the Official Medical Fee Schedule. This MSA analysis is then sent to the Centers for Medicare Services, who will review the proposed amount and either approve or disapprove it.
Once you have the amount determined and agreed upon with the insurance carrier, the parties draft the settlement, called a Compromise and Release. This settles everything, including your medical award. The medical treatment you seek in the future will be PAID BY YOU. Once per year, you have to send in an “annual accounting” – a single page form telling Medicare how much you spent that year for medical care out of that account. If you use the funds for something else, Medicare can and will refuse to pay for any medical treatment related to your work injury until you show receipts for the missing funds.
I would never recommend an injured worker try to settle future medical care with an insurance company on their own. If you have an attorney representing you for settlement of medical care, their fee is 15% of the settlement obtained. The insurance carrier is obligated to pay the FULL AMOUNT of the Medicare Set Aside, any attorneys’ fees must be paid by the insurance company on top of the medical settlement. There is no reason to try and negotiate a future medical settlement on your own. An attorney can avoid common pitfalls and loss of your Social Security benefits by advocating for you and guiding you through the process.