Understanding Medicare Set-Asides

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Hurt in N.J.? Biggest pain is workers' comp
Feds delay some payouts for years
Sunday, October 07, 2007
BY JOHN P. MARTIN AND DUNSTAN MCNICHOL

Star-Ledger Staff

The federal agency that administers Medicare has stalled payments to thousands of injured workers across New Jersey and the country, plunging some of the most needy into a bureaucracy that freezes their money for months or years, state officials and attorneys say.

The delays started about five years ago when the Centers for Medicare and Medicaid Services, wary of paying for treatment that it contends should be covered by private insurers, began reviewing workers' compensation settlements involving its participants and threatening legal action to recoup any losses.

But critics say Medicare's review process is so slow, disorganized and inaccessible that it is punishing workers and threatening to paralyze compensation courts across the country.

"It's really a scandal," said state Labor Commissioner David Socolow.

The backlog of New Jersey cases awaiting Medicare approval last year topped 5,000 -- believed to be among the highest in the nation -- before dipping to 3,700 last month, state data show. Many of the workers have been waiting at least a year to collect their payouts -- typically $25,000 or more. About 250 started with claims that stretch back a decade or more.

The slowdown has emerged as one of the most persistent problems in New Jersey's $2 billion-a-year workers' compensation system, established almost a century ago to pay employees after work-related injuries and protect their employers from costly lawsuits.

"The odd thing is there's no rhyme or reason for which (Medicare) cases move," said Peter Calderone, the state's chief workers' compensation judge. The logjam has eased slightly this year, he said, "but for the individual person waiting for relief, it's a very trying experience."

Critics say the issue is especially trying because it often affects workers who need the money the most.

"It's totally disabled people and people over age 65. In many cases, it's both," said Arthur Kravitz, a Princeton attorney who represents injured workers and serves on the Labor Commissioner's Advisory Panel on Workers Compensation.

Quantifying the problem has itself proved to be a problem. Earlier this year, U.S. Rep. John Tanner (D-Tenn.) introduced a bill to exempt all settlements under $250,000 from scrutiny and force Medicare to review the rest within two months after receiving the paperwork. Fifteen sponsors from both political parties in a dozen states joined the bill, which awaits action.

But the congressman's office, attorneys and insurers report it's impossible to say exactly how many people are affected because the Centers for Medicare and Medicaid Services has ignored requests for information about claims, costs or the contracts to review worker's compensation settlements.

"They just don't respond," said Melissa Shelk, vice president of federal affairs for the American Insurance Association, a lobby representing insurers.

HOW IT STARTED

The issue has been simmering nationwide since Medicare administrators, feeling the pinch of runaway health costs and fraud, began actively reviewing and challenging such settlements. One report by the Government Accounting Office at the beginning of the decade concluded that the agency, which provides hospital and health insurance to tens of millions of Americans, was unnecessarily shelling out more than $1 billion a year for treatment that should be covered by other insurers.


"The truth is, going back before 2001, workers' compensation people cheated Medicare sometimes," said Ed Welch, director of the Workers' Compensation Center in the School of Labor and Industrial Relations at Michigan State University.

Medicare responded by aggressively enforcing a 20-year-old law requiring it to review all such settlements and authorizing it to take steps to recover overpayments from workers, their attorneys and even the court system. That means poring over the injury claim, related medical bills and court settlements and comparing them to the treatment costs Medicare has already paid or might be asked to pay in the future.

Socolow said that what started as a "well-intentioned" effort to safeguard federal funds "has now turned into a nightmare for injured workers who deserve compensation."

He also suggested that the delays might be deliberate. "It's hard to resist the speculation that this denial of service is done to slow down payments in a misguided effort to save money," Socolow said. "Medicare should do a proper review. But the delays have gotten so bad, it's really hurting workers."

The affected workers include those who, because of their disability or age, would be eligible for Medicare within two years of their injury.

Medicare has pledged publicly "to review and make a decision" on the settlements within 60 days of receiving the necessary paperwork. But many say those timetables are rarely met.

In New Jersey, court statistics show about half the cases designated as settled but awaiting Medicare approval had been listed for hearings at least 22 times. Two cases started in 1986, but it was unclear how long they had been delayed by Medicare approvals. In New Jersey, workers' compensation cases can be closed and reopened.

Scott Kessler, an attorney from Rahway, said he typically warns his Medicare-eligible clients they will have to wait at least six months and sometimes a year for the federal agency to approve their payout. One of his clients, a 79-year-old man with a terminal illness, died last year after his case was settled but before Medicare approved it, Kessler said

"His heirs are still waiting for the money," he said.

Like other attorneys, Kessler declined to identify the client, because he said he worried that the publicity could lead to more delays. Court officials say privacy laws prohibit them from releasing information on specific cases.


CONSOLIDATION EFFORT

Medicare officials last year tried to ease the backlog by taking the task of day-to-day reviews from seven regional program administrators and consolidating it under a single national contractor, Chickasaw Nation Industries Inc. of Oklahoma.


Contacted by The Star-Ledger, an administrator at Chickasaw said company employees were not allowed to publicly discuss the Medicare contract and referred inquiries to CMS.

Attorneys, state officials and others say the review process has improved, but only slightly.

"It may be better, but that's like saying the food in prison got better," said Craig Livingston, a labor attorney from Nutley.

In Michigan, Welch said, more than 1,000 workers' compensation settlements were awaiting Medicare approvals.

Robert DeRose, an Ohio attorney and president of the Workers Injury Law and Advocacy Group, a national association with 450 members, said he couldn't gauge whether the backlog in any one state was worse than another's.

"This is a significant problem facing every jurisdiction," he said.

New Jersey attorneys and court administrators said they hope the federal legislation gains enough momentum in Congress to force a change.

Calderone, the chief judge, said the biggest frustrations include the inconsistent and sometimes contradictory information that Medicare officials provide about a case -- "where you think it's over, you worked out the whole case, benefits for the individual worker ... and before the case is closed, you are told that the numbers have changed."

Said Kravitz, the worker's attorney: "We think they're sending out zeroes without looking them up."