Medicare Set-Asides: Determining the Best Path

Submission of a Medicare Set-Aside (MSA) to the Centers for Medicare & Medicaid Services (CMS) is a recommended but voluntary procedure. CMS states there “are no statutory or regulatory provisions requiring that a Workers’ Compensation Medicare Set-Aside (WCMSA) proposal be submitted to CMS for review.”

However, the lack of legal regulation around submission of MSAs to CMS does not infer that primary payers and beneficiaries do not need to consider inclusion of a future medical allocation in their settlement to protect Medicare’s interest pursuant to the Medicare Secondary Payer Act (MSP).

The question, then, is, what factors do parties consider when contemplating whether to either submit an MSA to CMS for approval or utilize a Non-Submitted MSA? Obtaining a WCMSA approval letter and funding the approved amount should leave all questions with respect to future Medicare obligations answered: The parties can settle with finality, and there should be no future recourse from CMS regarding the WCMSA.

However, depending upon the circumstances of the claim, obtaining that CMS approval of an MSA may not be possible or practical. For example, every WCMSA submittal requires the last two years of medical records (whether related or unrelated to the injury), and, for some cases, medical records are missing on the workers’ compensation payer and/or Medicare beneficiary side. If the necessary documentation requested by CMS is not provided, the WCMSA will remain “in development,” CMS will not issue an approval on the proposed WCMSA, and complete settlement of the claim becomes much more challenging.

Another example would be a settlement that does not meet CMS’ workload review thresholds, but where the parties still need to protect Medicare’s interests. Currently, CMS will review a proposed WCMSA in only the following scenarios: 1) The claimant is a Medicare beneficiary and the total settlement amount is greater than $25,000; or 2) The claimant has a reasonable expectation of Medicare enrollment within 30 months of the settlement date and the anticipated total settlement amount for future medical expenses and disability or lost wages over the life or duration of the settlement agreement is expected to be greater than $250,000.

Non-Submitted MSAs

CMS acknowledges Non-Submitted MSAs would be appropriate in certain scenarios where the settlement would not meet CMS’ review thresholds. The WCMSA Reference Guide provides an example involving a claimant who would be reasonably expected to be Medicare-eligible within 30 months of the settlement, but where the settlement was $225,000. CMS notes that such a settlement would be “…ineligible for review under the non-CMS-beneficiary standard requiring a case-total settlement to be greater than $250,000 for review. Not establishing some plan for future care places settling parties at risk for recovery from care related to the [workers’ comp] injury up to the full value of the settlement.”

The statement in the Reference Guide that encourages “some plan for future care” clearly describes a Non-Submitted future medical allocation, in which the parties protect Medicare’s interest via a future medical allocation without CMS approval. Further, CMS states the goal of establishing a WCMSA is to estimate, as accurately as possible, the total cost that will be incurred for all medical expenses otherwise reimbursable by Medicare for work-related conditions during the course of the claimant’s life, and to set aside sufficient funds from the settlement, judgment, or award to cover that cost. 

A Non-Submitted, or Evidence-Based, MSA (EBMSA) would involve an MSA, prepared and set aside by the claimant, based upon the medical records, medical and clinical principles, and adherence to state workers’ compensation laws and statutes. Arguably, such an MSA would be defendable, and preserves the claimant’s and insurer’s rights to administrative appeal should Medicare ever question the MSA amount.

In fact, according to 42 CFR 411.46(d)(2), if a specific amount of the settlement is designated for future medical services, CMS will only require that amount to be exhausted before providing coverage. In other words, CMS submission is not required, but designating a specific amount for future medical, which is reasonable and based upon the medical records, is. Undergoing the preparation and incorporation of a defensible, evidence-based allocation into a settlement aims to protect all parties and comply with the applicable federal MSP regulations.

Further, inclusion of a future medical allocation can protect the beneficiary’s future Medicare benefits in that only the future medical allocation/MSA amount will have to be exhausted before Medicare becomes a primary payer again for injury-related care. While the claimant may self-administer her Non-Submitted MSA/EBMSA if she is competent to do so, it is important to acknowledge that management of any MSA can be challenging and confusing. Because of this, Professional Administration is recommended for MSAs/Non-Submitted MSAs/EBMSAs to assist the claimant in protecting the longevity of her allocation and ensure proper reporting.

Which Is Better?

Over the years, many primary payers have shifted from the submit to the non-submit model. They have found that, particularly on complex claims, the CMS-approved figures were improperly inflated, CMS’ contractor was not consistently following protocols in the evaluation of the WCMSA, and CMS’ contractor typically did not follow the best practices from an evidenced-based medicine standpoint. The inappropriately inflated CMS approved figures are an impediment to getting claims settled reasonably, which may not be in the best interest of all parties involved in the claims.

The WCMSA approval process is voluntary. Whether or not workers’ compensation payers engage in this voluntary process is a risk-management decision. The primary risk associated with funding a non-submitted WCMSA is that, someday in the future, CMS could come back and deny Medicare coverage to the claimant up to the entire settlement amount if CMS deems the set-aside to be inadequate. However, for CMS to do that, three things need to happen:

•     First, the claimant needs to appropriately exhaust the MSA on injury-related Medicare-covered care.

•     Second, the claimant needs to have full documentation that all funds were spent appropriately.

•     Third, CMS needs to have evidence to refute that the set-aside was inadequate at the time it was completed.

We have never seen or heard of these three things happening (at least not yet).

The worst case from a carrier’s perspective is that, if all three of these steps occurred, the carrier may need to provide additional funds for a set-aside to avoid further litigation. Again, if the Non-Submitted MSA/EBMSA has, at the time of its creation, estimated, as accurately as possible, the total cost that will be incurred for all medical expenses otherwise reimbursable by Medicare for work-related conditions during the course of the claimant’s life, this is likely a very low-probability risk.

There are two steps that carriers can do to minimize this risk when utilizing a non-submit program. First, payers should have the set-aside evaluation allocation based on evidence-based medicine and fund it appropriately. This provides documentation showing that the parties considered Medicare’s interest in the settlement of the claim.

Second, utilizing professional administration for the set-aside ensures that the funds are spent appropriately, and that the CMS-required documentation is completed. That way, in the event settlement funds are exhausted, the claimant should have little trouble getting CMS to step in.

Ultimately, the decision to choose a WCMSA or a Non-Submitted MSA/EBMSA is both situationally and risk-tolerance specific for workers’ compensation payers. Factors such as the claimant’s Medicare status, the total settlement amount, complexity of the claim, and availability of medical records are all factors that parties should consider in determining whether to submit the MSA to CMS.