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How Your Structured Settlement Broker Can Help Determine the Value of Future Medical Costs


By Steven F. Chapman and Gregg Chapman, Esq.
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Steve Chapman and Gregg Chapman, Esq. specialize in structured settlements of workers’ compensation cases. In this article they discuss how the structured settlement broker helps calculate future medical treatment costs.

For more information on structured settlements and the structure broker’s role, see:

 
 
Determining the value of future medical costs has always been complex since there are so many variables to consider. The consideration given to the federal government via the Medicare set-aside (MSA) has only made this determination more difficult. Your structured settlement broker can be a valuable resource to help you come up with an accurate calculation and make sure all future medical expenses have been considered.

First of all, consider a case that includes a MSA. Per the guidelines provided by the Centers for Medicare & Medicaid Services (CMS), the MSA includes all Medicare-covered items and services that are related to the work injury and that are “reasonably probable”. More specifically, Medicare provides hospitalizations under Part A, doctor’s services under Part B, certain prescription medication under Part D and some durable medical equipment.

However, there is more to future medical expenses than just what is included in the MSA. Since the MSA only provides costs for Medicare covered services, it is important to see if there are any non-Medicare covered expenses that need to be included in the future medical cost calculation. A few of the common non-Medicare expenses include:

  • Unskilled custodial care (home care)
  • Deductibles, coinsurance, copayments and the “donut hole”
  • Home modifications
  • Common medical supplies and over-the –counter drugs
  • Non Medicare Part D and off-label prescription medications
  • Transportation
 
Your structured settlement broker can be a valuable resource to help you come up with an accurate calculation and make sure all future medical expenses have been considered.
 
To determine what if any non-Medicare expenses need to be included in the future medical cost calculation, you should provide your structured settlement broker with the following:
  • Medical payment history report for the last 3 years
  • List of all medications (prescription & OTC) the applicant is taking for the industrial injury
  • Copy of MSA documenting “non-Medicare covered” expenses
  • Applicant’s Medicare status
The structured settlement broker will pour over the medical payment history and discover if it includes items such as mileage/transportation, housekeeping, gym memberships, interpreters, etc. These are not covered by Medicare. The broker will also put together a summary of the payment history that provides the average annual cost of the Medicare covered items (doctor visits, hospitalizations, diagnostic tests, etc.). This can then be compared to the annual amount provided in the MSA report for accuracy. Finally, the broker will be able to provide you with an analysis on whether the cost of a MediGap policy should be included in future medical expenses in order to cover the Medicare deductibles and co-pays.

Aside from the medical payment history, the structured settlement broker can provide valuable information regarding the cost of medications. By providing the broker with a current list of all medications the applicant is taking for the industrial injury, they can determine what is not included in the MSA and put a value on it. This will also help determine the actual cost of the “donut hole.” Medications that are not covered under Medicare Part D or are considered off-label will not be included in the MSA calculation. Your broker can provide the value of these drugs that will need to be added on top as a non-Medicare covered item. Additionally, the broker can research the retail cost of the drugs in the MSA via the internet to determine the discrepancy in costs. The applicant will be paying the retail cost upon settlement and not the average wholesale price (AWP) that is used to calculate the drug costs in the MSA. The drug costs reflected in the medical payment history reflect discounts to the WC carriers and not the retail cost. Thus, this separate analysis is necessary to provide accurate information.
 
The Medicare Part D coverage gap – informally known as the Medicare donut hole – is the difference of the initial coverage limit and the catastrophic coverage threshold, as described in the Medicare Part D prescription drug program administered by the United States federal government.
 
The non-Medicare future medical costs included in some MSA reports do not paint a complete picture. Some MSA vendors include a paragraph or chart on some non-Medicare medical costs. While they may contain some useful information, they should not be regarded as the total non-Medicare medical value. Even more worrisome is that some MSA reports do not list the off-label drugs even though these medications were included in the medical reports they reviewed when determining the value of the MSA. Your structured settlement broker can help you catch these discrepancies.

Another non-MSA future medical cost to consider is the Medicare monthly premium. Most applicants will have Medicare Part A but have never paid the premium for Medicare Parts B & D. Medicare will not pay for services under Parts B & D if the applicant did not pay to enroll for these services. The cost to enroll should be considered when determining the value of future medical:

Premium for Medicare Part B is $115.40/month for new enrollees with income of $85K or less;

Premium for Medicare Part D ($20 - $100/mo) varies depending on the Part D plan chosen.

Your structured settlement broker can provide the annuity cost present value of these monthly payments for inclusion in a settlement proposal. Settling future medical treatment without adequately taking non-Medicare medicals into consideration could leave the applicant in a difficult position.

For cases that do not include a MSA, there will be more reliance on the medical payment history for determination of the future medical costs. It is important to note that the payment history can be skewed due to utilization review denials as well as applicants treating on their own. This information should be provided to the structured settlement broker so s/he can take that into consideration. Additionally, there are vendors that provide a Future Medical Cost Projection (FMCP) that can be purchased by either side. You can instruct the vendor to include Medicare and Non-Medicare services and have them price the services at the usual and customary rate instead of the fee schedule rate. These reports are not as detailed as a Life Care Plan, which is another option.
 
Your structured settlement broker can help you catch discrepancies in the MSA.
 
Once the MSA report is provided to the structured settlement broker, s/he will determine its annuity cost present value. The broker takes the annual payment amount provided in the MSA report and prices out an annuity from a highly rated life insurance company that provides that payment stream. The cost of this annuity combined with the initial deposit (seed amount) also included in the MSA report provides the MSA present value.

When all the non-Medicare future medical costs have been determined, the structure broker will come up with the annuity cost of all the payment streams related to the different components (home care, off-label drugs, MediGap, etc.). The broker will then have a comprehensive analysis of all the future medical expenses (Medicare & non-Medicare). This can then easily be incorporated into a settlement proposal that will settle future medical costs.

Determining the value of future medical expenses is not an easy task. As illustrated, there are many components that need consideration. However, your structured settlement broker is a resource that can help break down many of the little known or complex issues that are involved. Don’t hesitate to give them a call.
 

Steve Chapman strives to remain current on all issues affecting the settlement of the case, including Medicare set-aside allocations, life care plans, medical cost trends, Long Term Disability, and Social Security issues.

Steven F. Chapman
National Settlement Consultants
12039 Jefferson Blvd.
Culver City, CA 90230
Phone: 800-845-2969
Fax: 310-450-3132
Cell: 310-480-5742
Email: SettleMan@aol.com
  Steve Chapman
 
Gregg Chapman has been a member of the State Bar of California for twenty years. Over the last eight years, he has worked for two of the largest national MSA vendors in various positions including General Counsel, National Sales Manager and Director of MSA Education. He has provided hundreds of presentations on all topics regarding Medicare Set-Asides to the insurance industry and attorney associations across the country.

Gregg Chapman
National Settlement Consultants
12039 Jefferson Blvd.
Culver City, CA 90230
Phone: 800-845-2969
Fax: 310-450-3132
Email: greggchap@aol.com

  Gregg Chapman