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Structured Settlements: The Whole Truth about
the “Doughnut Hole”
Interview with Steve Chapman
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HARRIS: Steve,
there is a lot of confusion among adjusters and attorneys about
the “doughnut hole” and
whether we need to include money in a structured settlement for
this “coverage gap,” as Medicare calls it, for prescription
drugs under Medicare Part D. Can you explain this “hole” or “gap” and
why attorneys should or should not be concerned with it when settling
a case.
CHAPMAN: The Medicare Part D “doughnut
hole” is
a gap in the prescription drug coverage where the Medicare beneficiary
(Applicant) is responsible for paying for their medications. Since
January 1, 2006 when Medicare Part D went into effect, the cost
of Medicare covered prescription drugs had to be factored into
Medicare Set-Asides (MSA). There has been an ongoing debate among
the MSA vendors on whether to include or exclude the doughnut
hole amount in the MSA calculation. However, regardless of whether
the MSA factored in the doughnut hole or not, it is important for
the applicant’s attorney to make provisions in the settlement
that will cover this amount after settlement. Once the case
has settled and the Applicant goes to purchase their prescription
drugs, when they reach the coverage gap threshold, they will have
to pay for the drugs out of their own pocket. They will not be
able to use the funds in the MSA since those funds can only be
used to pay for expenses that are Medicare’s responsibility.
Since the coverage gap is not Medicare’s responsibility,
the Applicant will have to pay for this. Thus the settlement should
include the doughnut hole amount separately and in addition to
monies allocated in the MSA. |
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HARRIS: Who
needs to provide these calculations – the MSA vendor company, almost always
hired by the defendant, or the applicant’s attorney? Or do
you figure this out for your clients?
CHAPMAN: I am able
to provide an estimate of the doughnut hole calculations. Each
case will have different amounts since the figures are dependant
on the Applicant’s
current and future prescription drug usage. The doughnut hole is
a set amount established each year by CMS and thus easily verifiable.
The MSA vendor can provide these calculations; however, it is important
for the applicant’s attorney to review these calculations
since the MSA vendor is not always aware of all the medications
the Applicant is taking.
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Each
case will have different amounts since the figures are dependant
on the Applicant’s current and future prescription drug
usage.
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HARRIS: President Obama unveiled
a plan to cut the doughnut hole in half. How will this affect injured
workers?
CHAPMAN: If the doughnut hole is cut in half it
will mean less out of pocket expenses for the injured worker. |
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HARRIS: Many applicants’ attorneys fear
MSAs and liability that may attach to them if something goes wrong.
They are also scared by the doughnut hole issue and how to calculate
it for settlement purposes. How realistic are these fears? Do
they warrant leaving medical open?
CHAPMAN: There is no reason
to fear settlements that involve MSAs. Once the MSA has been
approved, CMS provides instructions to the injured worker on
how to administer the MSA account. If the applicant’s attorney
is concerned about the injured worker’s ability to manage
the MSA account, then other options include professional administration
of the MSA funds or a self administration assistance program
for the injured worker. While the doughnut hole issue has created
a bit of a controversy, there is no reason to avoid a Compromise
and Release because of it. To fully protect the injured worker
in cases involving a MSA with significant prescription drug expenses,
the settlement as previously indicated should include the doughnut
hole amount outside the MSA total. The structured settlement
specialist is able to assist applicants’ attorneys in developing
doughnut hole figures and explaining to their clients how the
system works.
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The settlement should include
the doughnut hole amount separately and in addition to monies allocated
in the MSA.
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Steve Chapman has been a structured settlement specialist
for more than 24 years. For the past 15 years, he has specialized
in workers’ compensation structured settlements. He has
appeared at every Appeals Board throughout California.
During
the past 5 years, he has participated in settlements totaling
over $750 million. Mr. Chapman strives to remain current on all
issues affecting the settlement of the case, including Medicare
set-aside allocations, life care plans, medical cost trends,
Long Term Disability, and Social Security issues.
To contact
Steve Chapman:
Steven F. Chapman
National Settlement Consultants
12039
Jefferson Blvd.
Culver City, CA 90230
Phone: 800-845-2969
Fax:
310-450-3132
Cell: 310-480-5742
Email: SettleMan@aol.com
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