When it comes to settling workers’ compensation claims that involve Medicare beneficiaries, one crucial aspect that must be considered is the establishment of a Workers’ Compensation Medicare Set-Aside (WCMSA). A WCMSA allocates a portion of the settlement to cover future medical expenses that would otherwise be paid by Medicare. There are two primary ways to fund a WCMSA: through a lump-sum arrangement or a structured arrangement. Each option has its own advantages and considerations, making it important for claimants, attorneys, and insurers to understand the differences between them. In this blog post, we will explore the distinctions between lump-sum and structured WCMSAs and discuss when each might be the appropriate choice.
What is a WCMSA?
A Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA) is a financial arrangement that sets aside a portion of a workers’ compensation settlement to pay for future medical expenses related to the injury that would otherwise be payable by Medicare. The goal of a WCMSA is to ensure that Medicare remains a secondary payer, only covering medical expenses after the set-aside funds are properly exhausted.
Lump-Sum WCMSAs
A lump-sum WCMSA involves setting aside a single, upfront payment intended to cover all of the claimant’s future medical expenses related to the workers’ compensation injury. Once this lump sum is allocated and the account is funded, Medicare will not make any payments for injury-related medical expenses until all the funds in the WCMSA are completely exhausted.
Advantages of Lump-Sum WCMSAs:
- Simplicity: A lump-sum WCMSA is straightforward and easier to manage. The entire amount is deposited into the WCMSA account at once, and the funds are used until they are depleted.
- Predictability: Claimants and administrators know exactly how much is available to cover future medical expenses, making it easier to plan and manage these funds.
- Finality: Once the lump sum is exhausted and properly accounted for, Medicare steps in as the primary payer for any additional medical expenses related to the injury.
Considerations for Lump-Sum WCMSAs:
- Risk of Depletion: Since the entire amount is available at once, there is a risk that the funds could be depleted quickly if unexpected medical expenses arise or if the funds are not managed properly.
- No Replenishment: Unlike structured arrangements, once the lump sum is exhausted, there are no additional funds. If the set-aside amount was not sufficient, the claimant may face financial challenges until Medicare begins covering the costs.
Structured WCMSAs
A structured WCMSA, on the other hand, involves periodic payments into the set-aside account over time. This arrangement typically includes an initial deposit (often referred to as “seed money”) to cover immediate medical expenses, followed by regular annual payments designed to cover future expenses for a set number of years.
Advantages of Structured WCMSAs:
- Ongoing Funding: Structured WCMSAs provide a steady stream of funds over time, reducing the risk of premature depletion of the account.
- Alignment with Medical Needs: Payments are structured to align with the claimant’s expected medical needs, which can provide greater financial security over the long term.
- Potential Cost Savings: By spreading payments out over time, structured WCMSAs may reduce the overall cost of the settlement, as the total amount needed for future medical expenses might be less than a lump sum due to the time value of money.
Considerations for Structured WCMSAs:
- Complexity: Structured WCMSAs are more complex to set up and administer. They require careful planning to ensure that the payments are sufficient to cover the claimant’s medical expenses as they arise.
- Potential Gaps in Coverage: If the structured payments are not properly aligned with the claimant’s medical needs, there may be periods where the available funds are insufficient to cover necessary medical expenses.
- Administrative Responsibility: The ongoing nature of structured WCMSAs requires diligent record-keeping and administration to ensure that funds are used appropriately and in accordance with CMS guidelines.
Which WCMSA Option is Right for You?
The decision between a lump-sum and a structured WCMSA depends on several factors, including the claimant’s medical prognosis, life expectancy, financial situation, and the complexity of their medical needs. A lump-sum arrangement may be preferable for those who prefer simplicity and certainty, while a structured arrangement might be better suited for claimants who anticipate ongoing, long-term medical expenses.
Conclusion
Choosing between a lump-sum and structured WCMSA is a critical decision that can significantly impact a claimant’s future financial and medical security. Understanding the differences between these two options is essential for ensuring that the chosen arrangement effectively protects both the claimant’s and Medicare’s interests. Consulting with experienced legal and financial professionals can help determine the most appropriate WCMSA structure based on the unique circumstances of each case.
For more guidance on WCMSAs and other workers’ compensation matters, feel free to reach out to our team at Yrulegui & Roberts, where we specialize in protecting our clients’ rights and ensuring their long-term financial well-being.
