For all of the consternation with regard to protecting future medical interests when dealing with a potential for Medicare payments in the future, one Illinois court decided a Medicare Set-Aside trust is a marital asset and subject to division in the divorce proceeding. One concern is what might happen if the parties agreed to split the MSA on a 50/50 basis and claimant used all of the remainder to cover future medical expense? Could claimant then look to Medicare to pay future medical bills when only have of the required MSA amount was exhausted? To the extent this ruling appears to potentially contravene federal law, we respectfully side with the dissent but we would love to hear your thoughts. We are going to have to continue to watch how property rights related to MSA’s are dealt with in our courts.
In the case of In re MARRIAGE OF CHRISTOPHER WASHKOWIAK and ROSANA WASHKOWIAK 2012 IL App (3d) 110174, Christopher Washkowiak appealed from the trial court’s order awarding his ex-wife Rosana Washkowiak, $12,250, a figure which represented 17.5% of the portion of his workers’ compensation settlement that was placed in a Medicare Set-Aside trust account and the Illinois Appellate Court, Third District affirmed.
By way of further background Christopher had been injured at work and in divorce agreed to pay Rosana 17.5% of the net proceeds of his WC claim which was defined as award amount less attorneys fees and reasonable and customary litigation fees and expenses. Christopher eventually settled the claim for the following terms:
· Total amount of settlement $365,000 (this figure does not include a $70,000 Medicare Set-Aside Trust)
· Deduction: Attorney’s fees $67,903.35
· Deduction: Medical reports, X-rays $766.60
· Amount employee will receive $296,330
The settlement agreement also contained a provision noting “The parties agree that Centers for Medicare Services approval of the MSA is not required under CMS policy. The parties agree that of the total settlement amount of $435,000, the amount that is allocated to the MSA is $70,000. In entering into this Agreement, it is not the intentions of the parties to shift responsibility of the Claimant’s future medical treatment and/or prescription drug treatment to the Federal government. The allocation of $70,000 is intended directly for payment of Claimant’s future treatment related to the work injury that would normally be covered by Medicare so that the parties are in compliance with the Medicare Secondary Payer Act (42 U.S.C. § 1395(b)) and applicable Medicare rules and regulations.”
The soon-to-be-ex-wife Rosana argued the MSA belonged with the “net proceeds” so she should be entitled to 17.5% of the $70,000 set aside in the MSA because the MSA did not fall under the excluded category of “attorneys’ fees and usual and customary litigation fees and expenses,” as provided in paragraph 10 of the judgment of dissolution. The trial court held that the $70,000 set aside in the MSA was to be included in the net proceeds for purposes of calculating respondent's 17.5% share and thus ordered Christopher to pay Rosana $12,250. The court noted while Christopher argued the nature of the MSA precludes the funds in the MSA from being part of the “net proceeds” of the settlement and normally a trial court’s determination that an asset is marital or nonmarital is reviewed only for an abuse of discretion. However, in cases such as this where the determination is one of law and does not involve credibility determinations, their review is de novo.
The Illinois Appellate Court noted the MSP statute precludes Medicare from providing payment for services to the extent the payment in question has been made or can reasonably be expected to be made promptly under the applicable workers’ compensation act. See 42 U.S.C. § 1395y(b)(2)(A) (2006). This exclusion is also embodied in the Code of Federal Regulations (the Code), which expressly embraces workers' compensation as payment subject to reimbursement to Medicare. The Court noted the MSP is not an ‘act’ or legislation in the traditional sense but, rather, a series of amendments related to the Medicare Act and similar statutes. The court further noted the workers’ compensation settlement in this case included an MSA whereby the parties to the workers’ compensation claim allocated $70,000 of the total $435,000 settlement value provided for future medical expenses resulting from the work injury. Thus, Medicare will pay for covered medical services only after the exhaustion of the $70,000. Under their view, since the MSA was for the sole purpose of paying the ex-husband’s future medical bills; the settlement is reimbursing him for his future medical costs and was noted by the court to “fall squarely under the definition of ‘net proceeds’ contained in the dissolution agreement.” The Court ruled since the money did not actually go to Medicare, it was a proceed since Christopher could use it to pay future medical bills which would otherwise be paid by Medicare and further noted Petitioner could provide the 17.5% of the entire proceeds and still place $70,000 into the MSA from his portion of the remaining 82.5% and concluded they were simply enforcing the agreement Christopher had entered into with Rosana.
The dissent by Justice McDade makes a compelling argument the funds were not part of the proceeds as they were set aside for the SOLE purpose of satisfying Medicare’s interests. Justice McDade further noted the MSA arose from the separate workers’ compensation action which was approved by the IWCC and stands as created and cannot be attacked collaterally so the only question should have been if wife was entitled to the 17.5% portion of the MSA as part of the net proceeds and correctly points out the MSA was not included as a net proceed per the settlement contracts. The majority dismissed the dissent with specific response noting Petitioner would get to keep the money if he never had medical issues under which he would have to pay with the MSA.
This case appears to potentially open more issues with MSA issues in concluding settlements as the ruling appears to potentially open the door for attorneys fees being deducted from MSA values (under the above case, this fits the “contractual” argument theory since in many states the WC settlement is contingent on a percentage of the amount of settlement).
We feel this ruling also appears to allow individuals to use in contract portions of the MSA and could open the door for individuals to use the MSA as collateral even though the funds are technically only to be used to protect Medicare’s interests since they funds don’t move directly to Medicare. Could this be the first step to lead to a change in which MSA proceeds are sent directly to the federal government upon completion of settlements? We will provide updates as these sort of legal issues continue to further muddy MSA issues. For a copy of the case or with any other CMS related questions or questions regarding these ongoing cases, please email Shawn R Biery JD, MSCC at email@example.com or call him directly at 312-756-3701.