What Can We Expect from Medicare Set Asides in 2013?

This year certainly got off to an exciting start with the signing of the Strengthening Medicare and Repaying Taxpayers (SMART) Act by President Obama on Jan. 10. This important new law, in certain circumstances, will change how we handle Medicare conditional payments and Section 111 reporting. But what does the SMART Act say about Medicare Set Asides (MSAs)? What changes are in place for MSAs in 2013?

In a nutshell, the SMART Act gives us a statute of limitation for Medicare’s lawsuits for collection of unreimbursed conditional payments, a new process for obtaining conditional payment information prior to settlement, and a new definition for when CMS will assess Section 111 penalties. The new law, however, is silent as to MSAs. In other words, nothing about the SMART Act changes CMS’ existing recommendations around preparation and submission of MSAs.

So what, if anything, has changed in MSA practice for 2013, and to what do we have to look forward?

Workers’ Comp Review Contractor

Last December, CMS, through its new review contractor Provider Resources, Inc., cleared thousands of backlogged, pre-July 2012 workers’ compensation MSAs by issuing a mass approval of these submissions. Some of these MSAs had been pending review at CMS for many months.

The quick action by CMS and its new contractor certainly bodes well for improved MSA approval turn-around times going forward into 2013. That is good news in light of the April 2012 Government Accountability Office (GAO) report, which indicated CMS’ timeline to review MSAs increased by 400 percent from April 2010 to September 2011. Certainly, CMS needed to take action on the backlogged MSAs and approvals going forward, and it appears the tide is turning in the right direction—at least for now.

To avoid additional delay in the approval of your MSA, follow an evidence-based MSA preparation process. For example, CMS requires you to include, among other documents, as part of a workers’ compensation MSA submission, the following: last two years of treatment records; currently dated medical/indemnity pay history; and a currently dated prescription pay history. CMS places the greatest weight on the opinion of the treating physician and, most often, treats independent medical examinations or claimant affidavits as less persuasive.

Therefore, highlight the opinion of the treating physician in the MSA submission and be sure to present the most recent prescription drug recommendations (those in the last six months) to CMS as the relevant pharmacy protocol. Spending more time on the submission package and following CMS’ submission instructions to the letter avoids a CMS development letter requesting more information from you to approve an MSA.

Advanced Notice of Proposed Rulemaking

Last summer, CMS released its Advanced Notice of Proposed Rulemaking (ANPRM). While the ANPRM covers workers’ compensation and liability settlements, it is most instructive on the topic of CMS’ implementation of new requirements for future medicals, including Liability Medicare Set Asides (LMSAs). In fact, one of the most frequently asked questions I receive from CLM fellows and members is this: “Is an MSA required in a liability claim and, if so, when?”

The only guidance CMS has given is the Sept. 29, 2011, CMS memorandum outlining when not to do an LMSA. CMS indicates in this memo that situations in which the beneficiary’s treating physician certifies treatment related to the settlement is complete and no future medicals are required, CMS’ interests with respect to future medicals are considered satisfied. No LMSA, therefore, is necessary.

Courts across the country also have wrestled with this issue when parties to a liability settlement cannot, or do not, come to a meeting of the minds as to whether or not an LMSA is necessary. The unpublished decision of Sipler v. Trans Am Trucking, Inc., (July 24, 2012) is a case cited frequently for the proposition CMS does not require LMSAs.

A more careful reading of the case reveals the true crux of the matter and the rationale behind the court’s holding, however. Since the parties did not agree at mediation as to whether or not an LMSA would be included in the settlement documents, defendants could not require plaintiff to include the LMSA in the terms of the settlement. The court enforced the mediated settlement agreement, therefore, as it was written (without reference to an LMSA).

Furthermore, the Sipler court did not embark on an exhaustive examination of all the legal issues involved in addressing future medicals in liability claims, including the true legal weight that should be given CMS policy memos and regulations.

For practical purposes, this is an excellent case to read for a description of the lack of authority requiring an LMSA in liability cases. Sipler, however, also illustrates that while there are no formal requirements for an LMSA at this time, the parties must still consider and protect Medicare’s future interests in liability settlements. In addition, there must be a meeting of the minds between the parties to the claim on how Medicare’s future interests will be protected.

This is where the ANPRM allows us to see where CMS may go as far as promulgating regulations around future medicals in liability settlements. The ANPRM is not law but rather a notice that CMS published last year that indicated it would be promulgating proposed rules regarding Medicare Secondary Payer (MSP) compliance obligations in relation to “future medicals.” The options outlined by CMS actually encompass all settlements in which an individual “receives, reasonably anticipates receiving, or should have reasonably anticipated receiving” future Medicare-covered expenses.

If the settlement falls within these parameters and is not otherwise exempted for future medical consideration, then specific compliance measures to protect Medicare’s future interests would be necessary. These proposed options include the beneficiary or individual using the entire settlement for future medicals, creating an LMSA, or making an “upfront” payment to Medicare based on specific criteria set forth by CMS. 

CMS invited comment and received feedback on these proposed options from carriers, TPAs, self-insured entities, and attorneys. Many respondents felt that these options were unrealistic and unworkable. However, the ANPRM has hinted that CMS may issue some rule or regulation this year around LMSAs. CMS has yet to respond to the comments it received in response to the ANPRM, but I will continue to monitor the situation closely and report to you if we receive additional comment or guidance from CMS.

As always, I welcome your questions, comments, CLM stories, etc. Please email me at jsmythe@cpscmsa.com, and I will do my best to include them in my “Reports from the Field.”

I hope to see you at the next CLM event!   

Jessica Smythe is a national Medicare compliance consultant with Crowe Paradis Services Corp., a member of the Verisk Insurance Solutions group at Verisk Analytics. She has been a CLM Fellow since 2011 and can be reached at jsmythe@cpscmsa.com.