A very serious concern to parties settling a claim under the Longshore & Harbor Workers Compensation Act (LHWCA) is liability under the Medicare Secondary Payer Regulation (MSP). The LHWCA is specifically mentioned in the Medicare Manual as one of the workers' compensation statutes in which Medicare is a secondary payer.

There has been considerable activity recently within Medicare, much of which is not common industry knowledge that could have a profound impact on LHWCA settlements. The Centers for Medicare and Medicaid Services (CMS) has not enforced compliance with the Medicare Secondary Payer Regulation (MSP) prior to January 2002, however, since that date they have taken an aggressive stance to insure compliance in the future.

An indication of the government's total commitment to MSP compliance can be found in the new Medicare Prescription Drug Bill. In addition to clearly stating that Medicare can collect double damages and interest from any carrier that is a party to a non-compliant settlement, it goes on to add that a determination or admission of liability is not a factor in enforcing compliance. It is clear that additional measures are forthcoming. It is also important to understand that Medicare can refuse to recognize any settlement that failed to protect Medicare's interest. Class action suits against carriers are another real possibility and one such case is currently in the courts.

A company that has not been complying but commences to do so creates no additional liability for themselves, but a continued failure to comply with the law for fear of being identified will only increase the opportunity for Federal scrutiny and severe penalties. Will you be able to prove to government auditors that you have made a definite effort to prevent ongoing fraud and abuse of the Medicare system in your company?

It must be noted that Medicare views LHWCA settlements as identical to any other Workers' Compensation Settlements. As such they must comply with the Centers for Medicare and Medicaid Services' July 11, 2001 Policy Memorandum and subsequent FAQs posted since then; CMS requires that certain Workers' Compensation settlements, those seeking to limit or close future medical benefits with a qualified claimant, obtain CMS Regional Office approval of the settlement and MSA Allocation. An MSA Allocation is simply an accurate projection of the lifetime future medical costs covered by Medicare. Qualified claimants are often referred to as Class I and Class II claimants or beneficiaries and are determined as follows:

CLASS I - Any claimant who is currently Medicare eligible and the total the settlement value is greater than $25,000.
CLASS II - Any claimant who has a reasonable expectation of Medicare enrollment in 30 months or less and the total the settlement value is greater than $250,000.

The preparation of a LHWCA Set-Aside is a complex and challenging issue. Inexperience often leads to increased settlement costs, inappropriate Set-Aside amounts and significant time delays in Medicare approval. Gould & Lamb is the industry leader, assisting our clients in navigating this difficult field. Gould & Lamb is the only Medicare Set-Aside expert that has a division dedicated to Maritime and Admiralty Law. Whether you are a carrier, self-insured, TPA or attorney, you can rely on our experience and expertise to help protect your interests.