Commission Rules Medicare Settlement Math Does Not Add Up
In Hill v. Loudon County Public Schools, JCN VA00001901843 (August 4, 2025), the Commission affirmed a Deputy Commissioner’s rejection of a proposed compromise settlement on the basis that it was not in the claimant’s best interest.
Proposed settlements are rarely rejected. Usually, an affirmation by the claimant that a settlement is in their best interest is sufficient for a Commission to approve a settlement, provided all other requirements for a settlement are satisfied in the documents. In Hill, however, the claimant was a Medicare recipient. Though his settlement formally announced that he would receive less than the $25,000.00 threshold required for the submission of a Medicare Set Aside (“MSA”) to the Center for Medicare and Medicaid Services (“CMS”), the parties submitted a stipulated order earlier in settlement negotiations which agreed to pay sums for permanent total disability benefits contingent upon settlement of the claimant’s case. The permanent total disability benefit amount, when combined with the settlement proceeds, was greater than $25,000.00.
In all workers’ compensation settlements, Medicare’s interests must be considered. However, if Medicare’s interests are not properly considered, CMS has a priority right of recovery and can bring an action to recover payments made by Medicare. Medicare may also refuse to pay for future medical expenses until the entire settlement is exhausted. Here, because the total amount of payments conditioned upon the proposed settlement’s approval exceeded the $25,000.00 threshold, the Commission determined that Medicare’s interests were not properly considered absent the submission of an MSA to CMS. The prospect of these penalties was enough for the Commission to conclude that the settlement was not in the best interest of the claimant.
The lesson from Hill is to be careful with the division of funds in a settlement. Had the permanent total disability payments not been conditioned upon the settlement of the claim, it is unlikely the Commission would have determined an MSA submission was necessary or that the settlement was not in the best interest of the claimant. To avoid an MSA submission, the claimant must receive less than $25,000.00 from a settlement. That threshold remains, to the chagrin of the parties in Hill.