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It’s no secret to workers’ compensation practitioners that one of the most challenging aspects of settling workers’ compensation claims is preparing and obtaining approval of Medicare set-aside proposals for Medicare-eligible claimants in a timely fashion. In some cases, the inability to obtain a timely set-aside approval has ruptured settlements or seriously altered their terms to the detriment of insurers and injured workers alike. For those who have experienced this challenging aspect of workers’ compensation settlements, the preparation, submission and approval of proposals can be complex, confusing, frustrating and time-consuming. This is particularly true when policies have not been established for the new Medicare prescription drug plan that took effect on Jan. 1. Nevertheless, it is the delay in getting approval of Medicare set-aside proposals, not the proposals themselves, that poses the most serious impediment, and while the Centers of Medicare and Medicaid Services (CMS) are constantly tuning up their procedures to improve service, delays of four to eight months are currently the rule rather than the exception. This has caused some practitioners to look for alternatives to Medicare set-aside proposals, and one such alternative may have been found in an arcane section of the Pennsylvania Workers’ Compensation Act (PAWCA) that allows employers and claimants to enter into board-approved structured arrangements under �317 of the act. Section 317 permits an employer or insurer to place the proceeds of a compensation award into a savings bank, trust company or life insurance company in trust for the claimant without further recourse against the employer or insurer; in other words, to establish a structured settlement for medical care over the remainder of the claimant’s life. The structure requires board approval to assure that the payments made by the trustee are in the same amounts and in the same manner as required by the employer. Section 317 trusts do not release the employer or insurer from their obligations under the act, as they are the guarantors of the trust. It does, however, release the employers or insurers from future administration of the claim and, if properly funded, further claims exposure. The real advantage of �317 trusts is that they can be reviewed and approved by the appeal board in the space of one hearing similar to commutations, as opposed to a period of months by CMS. Nevertheless, the question remains, can these trusts act as an alternative to Medicare set-aside proposals in a full compromise and release situation? The answer, in my opinion, is yes and no. While �317 medical trusts can eliminate an employer’s or insurer’s ongoing responsibility to administer medical benefits and may even cap their exposure to medical benefits, these trusts are not settlements under �449 of the act, and the employer or insurer remains the guarantor of the claimant’s ongoing care should the trust prove inadequate. Consequently, while the funding mechanism alone does not require CMS approval, as there is no exposure to the Medicare trust fund, its inclusion into a compromise and release agreement is likewise premature without jeopardizing the interests of all parties involved by circumventing CMS. Consequently, if the intent of the parties is to obtain a full compromise and release of medical benefits, CMS approval of the structured settlement is required using the same criteria as any Medicare set-aside proposal. The real difference is that a broad-approved �317 medical trust can serve as a bridge until there is an eventual determination by CMS. Regardless of which option the parties select, the key to approval of Section 317 medical trusts is to assure adequate funding. Here are some suggestions on how to assure adequate funding of your structured trust that will pass muster by the appeal board and/or CMS: • Make sure that the nature and description of the work injury is properly identified through the compensation agreement or judicial decision. If the injuries have a current ICD-9 Code, be sure to include that in your structure; • Create a chronological record of medical care based on all available medical records and reports; • Prepare a summary of current treatment based on records and reports from the claimant’s attending physicians; • Determine through the claimant’s treating or attending physicians, as well as independent medical evaluators, future medical needs — including, but not limited to, the estimated cost of future medical care based upon the claimant’s life expectancy; • For highly complex claims, consider a life-care plan setting forth the financial needs of the claimant over the duration of his lifetime, as well as an estimate for prescription medication needed; • Select a life insurance company, trust company or similar instruction to administer trust that has the highest financial ratings within the industry. The purchase of a policy or trust should specify the scope of medical care and amount of the trust or annuity-based estimated costs over the claimant’s life expectancy; • For high-end costs, such as surgery and equipment needs, consider allocating at least two years’ seed money in the trust; and finally, • Prepare the appropriate stipulations and documents for consideration by appeal board, as well as CMS. Naturally, not all claims will require sophisticated planning as suggested above, since each claim is determined upon the complexity of the injury, the scope of future treatment and prescription medication required. Accordingly, an injured worker with chronic back pain, who has reached maximum medical improvement and is not a candidate for further surgery, may not require a life-care plan; in-depth analysis, not past, present and future treatment; or upfront seed money if treatment is limited to periodic medical examinations and prescription medication. But an injured worker with complex health care issues may require the services of professionals schooled in the preparation of Medicare set-aside trusts. Regardless of the circumstance, Section 317 medical trusts may prove to be an effective alternative to Medicare set-aside proposals, or as a bridge to such proposals, where time is a deal breaker in settling a workers’ compensation claim. Daniel V. DiLoretto practices in the workers’ compensation law practice area with Harvey Pennington in Philadelphia. He has developed extensive experience in the defense of workers’ compensation litigation, as well as related employment issues such as the Americans with Disabilities Act, and the Family and Medical Leave Act. He can be contacted at [email protected].

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