What Does It Mean To “Settle” A Workers’ Compensation Case?
A settlement is a private agreement between two parties in a legal action where one party agrees to end the legal proceedings in exchange for something, usually money. In the Workers’ Compensation context this is a called a “section 32 agreement.” In a section 32 agreement the injured worker agrees to close their workers’ compensation case, releasing the carrier from their responsibility to pay on-going weekly benefits and medical expenses, in exchange for a lump sum of money. This money represents both the value of the on-going benefit and, usually, the cost of on-going medical treatment. It is therefore very important that a claimant seeking a section 32 agreement have a good understanding of what kind of medical treatment they will need going forward because, by accepting a cash settlement, they are agreeing to close their workers’ compensation case forever, even if they need surgery in the future.
But What If I have Medicare? Will Medicare Cover My Treatment After My Settlement?
If you will need on-going treatment of your workers’ compensation injury after you settle your case, and the total value of your settlement is greater than $25,000, then you may need to make a “Medicare Set-Aside” arrangement (sometimes called an “MSA”). An MSA is an account into which the workers’ compensation carrier deposits a certain amount of money from your settlement to be used exclusively for medical treatment of your workers’ compensation injury (for things like prescription drugs, surgery, rehabilitation and other medical treatment). Once that money is exhausted, then Medicare will begin to pay for treatment of your on-the-job injury the same way they do any other kind of injury or illness. Be careful though. Medicare doesn’t cover all your related medical expenses like workers’ compensation does.
For example, let’s say Jim injures his back on the job. After a year or so, Jim applies for social security disability and gets approved. The next year he becomes Medicare eligible. Eventually, he decides to try and settle his workers’ compensation case. His case is submitted to the Center for Medicare and Medicaid Services (CMS) to evaluate the expected cost of his future medical treatment. CMS wants to know how much they could be on the hook for if workers’ compensation stops covering Jim’s back treatment after his settlement. CMS estimates Jim will need $25,000 of future care, including another surgery, some MRIs, physical therapy, prescription drugs and other related treatment. Jim’s attorney negotiates a settlement with the workers’ compensation carrier for $75,000: $25,000 goes into an MSA fund for his future medical treatment and $50,000 goes to Jim as upfront, lump sum payment of the workers’ compensation benefits that would otherwise be owed to him overtime. Jim then uses the $25,000 in his MSA account for surgery and the subsequent hospital stay and rehabilitation. His care ends up costing $30,000. Assuming Jim can then show Medicare proof that he used the $25,000 to pay for his back treatment, Medicare will then pick up the rest of the bill and all future expenses related to his back injury.
If you have a workers’ compensation claim and are interested in settling it for a lump sum, call Segar & Sciortino to discuss your options.