Skip to main content
Unintended Medicare Consequences from Workers’ Compensation Claim Handling
Medicare exposure can be significantly impacted by claim decisions made early in the handling of a workers’ compensation case. Medicare is a secondary payer to an applicable workers’ compensation insurance plan meaning that Medicare should not be paying for past and future treatment that is compensable under workers’ compensation. If Medicare does pay for treatment that should have been paid by a workers’ compensation insurance plan, Medicare has a right to recover such conditional payments from the workers’ compensation plan. Further, the workers’ compensation plan is required to protect Medicare’s future interests by not shifting the burden of related future medical payments to the Medicare system. Medical payments, reporting of diagnosis codes to the Centers for Medicare and Medicaid Services (“CMS”) and denial letters, if handled properly, can substantially mitigate the indemnity and expenses associated with protecting Medicare interests.
Medical Payments: The employer reports a workers’ compensation claim that appears to be compensable as the employer does not question the accident. A claim file is opened. An emergency room bill from ABC Hospital for treatment on the accident date is submitted two weeks after the accident date. The bill is paid by a medical only claim handler based on the notes in the file stating the employer reported the claim was compensable. After a month-long investigation, it is determined the claim is actually not compensable. A denial letter is issued. No TTD has been paid. No other medical or pharmacy bills have been paid. The worker retains an attorney who files a workers’ compensation claim. The worker has medical complications related to the alleged injury and as a result, is no longer able to work. The worker applies for and is awarded Social Security Disability (SSD) benefits. Two years after the SSD benefits start, the worker qualifies for Medicare. The workers’ compensation case is still pending. The future medical is likely hundreds of thousands of dollars. The carrier is concerned about the pure exposure and wants to settle the case. The worker’s attorney recognizes that liability is thin for the worker. The parties agree to settle the case for $50,000.00, which is 5% of the pure exposure for past and future benefits. The carrier refers the case to our office requesting we obtain a zero-dollar MSA approval from CMS given the case was denied.
We request and analyze the claim payment history and pharmacy benefit manager history. We find the payment to ABC Hospital for treatment on the date of the accident. Because of this one medical payment, the likelihood of CMS approving a zero-dollar MSA is significantly less than had there been no payment by the carrier of any medical bills or other benefits. Why? Because CMS takes the position that the payment of just one medical bill related to the work accident is evidence the carrier accepted the claim. While there are sometimes arguments to overcome CMS’s default position, the need to make these arguments could have been avoided in this hypothetical if the emergency room bill had not been paid.
Because CMS will typically approve a zero-dollar MSA (“Legal Zero”) proposal in a denied case when no benefits have been paid, it is critically important that no payments, inadvertent or otherwise, are made on a claim until there is reasonable certainty the claim is compensable.
The same care regarding payment for medical treatment needs to be taken when the claim involves an accepted body part and a denied body part. It is very important to take all necessary steps to avoid payment issuing for the denied condition. For example, if there is a bill for a doctor visit that includes treatment for the accepted body part and the denied body part, consideration can be given to issuing a letter to the medical provider stating the office visit bill is only being paid because there was treatment for the accepted condition. Provided there have been no payments made for the denied body part, CMS will typically allocate nothing for the denied body part in their MSA determination.
ICD Codes Reported to CMS: The ICD (International Classification of Diseases) Codes reported to CMS are used to determine what Medicare payments may be related to the work accident. CMS searches its database for Medicare payments with the same or similar reported ICD codes. As with the first medical payment on a claim, caution should be taken with the first report to CMS of the ICD Code(s) for the work injury. It is important to only report code(s) related to accepted body part(s)/condition(s). Additional codes can be added when it becomes clear that another body part/condition is related to the work injury. For example, what was originally thought to be a neck injury, can become a neck and shoulder injury. Report the neck injury when it is clear the neck is related, and later report the shoulder injury when it is clear the shoulder is related.
If there is any doubt as to the nature of the injury, the first reported code for an accepted body part/condition should be a general ICD Code. For a neck injury, consider reporting ICD 10 Code S13.4: Sprain of ligaments of cervical spine. If it becomes clear the work accident caused a herniated disc (e.g. IME doctor causally connects herniated disc), consideration can be given to adding a more detailed code such as M50.222: Other cervical disc displacement, at C5-6 level. While reported ICD codes can be removed, best practice is to try to avoid reporting unrelated ICD codes.
It is important not to report all ICD codes listed on a submitted medical bill as some of the codes may be for diseases or conditions that pre-existed or have no relationship to the work accident. Hospital bills typically include codes for the patient’s chronic diseases and conditions, such as diabetes, hypertension or depression. If codes for non-work-injury diseases and conditions are reported to CMS, Medicare could seek reimbursement for payments that are clearly unrelated to the work accident. While it is typically not difficult to successfully dispute or appeal clearly unrelated conditional payments, the need to do so is avoided if only related diagnosis codes are reported to CMS.
Claim Denial Letters: Many workers’ compensation claims are denied following the completion of an investigation. In most cases, a claim denial letter is issued by the claim handler to the claimant informing the claimant that after investigation, the claim has been denied. Often times, the denial letter will state the reason or reasons for the claim denial. For Medicare purposes, it is important to promptly issue a claim denial letter upon a determination that the claim in not compensable or a particular body part is denied. Later in the claim if Medicare issues arise, it is very helpful to have a denial letter issued shortly after the accident or the determination that a condition is not related to the accident when trying to persuade Medicare to waive reimbursement of conditional payments or approve a partial or complete Medicare Set Aside waiver.
Conclusion: Improper handling of medical payments, reporting of related diagnosis codes to CMS and claim denial letters could result in unnecessary claim expenses related to Medicare compliance and increased medical indemnity to Medicare. Proper handling of these claim tasks will help ensure that Medicare issues are handled efficiently, and Medicare’s interests are not overprotected.