For Workers Compensation Medicare Set-Asides (WCMSA), there is no requirement that they be submitted to the Centers for Medicare & Medicaid Services (CMS) for approval, although it is common for settling parties to do so. What are the benefits of not submitting a WCMSA to CMS, and when does it make sense to take that course of action?
In 2001, CMS issued a memorandum—referred to as the “Patel Memo”—that introduced a voluntary review and approval process for WCMSAs. Where a workers compensation settlement involves a Medicare beneficiary or an injured worker who has a reasonable expectation of Medicare entitlement within 30 months of the settlement, and CMS’ settlement-review threshold is met, the WCMSA may be submitted to CMS for review and approval.
A WCMSA allocates a portion of a workers compensation settlement for all future work injury-related medical expenses that are covered and otherwise reimbursable by Medicare (Medicare-covered). When a proposed WCMSA amount is submitted to CMS for review and the claimant (who may or may not be a beneficiary) obtains CMS’ approval, the CMS-approved WCMSA amount must be appropriately exhausted before Medicare will begin to pay for care related to the beneficiary’s settlement, judgment, award, or other payment.
Essentially, the goal of a WCMSA is to protect Medicare’s interest post-settlement. Through the WCMSA vehicle, the injured worker can set aside specific funds that would otherwise be covered by Medicare to pay for injury-related expenses instead of billing Medicare.
However, it is important to note that submission of an MSA to CMS is not required. CMS states that “there are no statutory or regulatory provisions requiring that a WCMSA proposal be submitted to CMS for review.”
Further, 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 approval of a WCMSA is not required. Designating a specific amount of funds for future medical services that is reasonable and based upon the medical records is arguably the only legal requirement in order to protect Medicare’s interest as a secondary payer, and for the entire settlement not to be subject to recovery of conditional payments by Medicare.
Why would settling parties decide not to seek CMS approval of a WCMSA? While CMS review of a WCMSA provides finality, parties who submit to CMS must abide by all CMS submission requirements, and, unfortunately, the parties have limited recourse if they believe CMS’ WCMSA approval amount or calculation is erroroneous.
In some workers compensation claims, not all medical records desired by CMS are available, and CMS will not review a WCMSA unless all requested documentation is provided for review. As for “appealing” CMS’ decision on a WCMSA, a reconsideration/re-review is available, but if after the administrative re-review process the parties still feel that CMS made an error, there is no further due process or recourse. In other words, the parties are, for the most part, married to the amount that CMS approves.
Further, typically the largest cost driver in an MSA is prescription drugs. It is not unusual for a CMS approval of an MSA to include an allocation for multiple opioids over an injured worker’s lifetime, even if such a regimen of painkillers could be harmful or lethal to the injured worker. In addition, while historically CMS has taken the position that off-label drugs are not required to be included in WCMSAs, since Medicare does not cover non-FDA approved usage of prescription drugs, the industry has recently experienced inconsistency in application of that policy. For example, over the last couple of years, CMS has been allocating for the very expensive prescription drug Lyrica in WCMSAs, even where the claimant may be taking the drug for off-label purposes, which is contrary to CMS policy.
Limited appeal options, strict guidelines in documentation requirements, and an over-allocation of prescription drugs are just some of the many reasons for the alternative and growing popularity of non-submitted MSAs. Non-submitted MSAs are similar to approved MSAs in that the allocation is prepared and set aside by the injured worker in a separate, interest-bearing checking account to ensure Medicare is not improperly billed. The non-submitted MSA is prepared based upon the medical records and evidence-based medicine principles, and applies any applicable state workers compensation laws to the allocation.
Arguably, such an MSA would be defendable and preserves the claimant’s rights to administrative appeal should Medicare ever question the MSA amount. In accordance with 42 CFR 411.46(d)(2), the injured worker would only have to expend the specific non-submitted MSA amount before Medicare would again provide coverage for injury-related treatment, rather than subjecting the entire settlement amount to recovery.
While CMS did institute a process for WCMSAs, CMS has not, to date, created a formal process for Liability Medicare Set-Asides (LMSAs) and No-Fault Medicare Set-Asides (NFMSAs). Since 2012, though, CMS has taken incremental steps, through issued guidance, toward instituting a similar review process for LMSAs and NFMSAs. And, while no review process is in place currently, a notice of proposed rulemaking regarding protection of Medicare’s future interests in workers compensation, liability, and no-fault claims is currently posted on the Office of Management and Budget website, with a scheduled release in September 2019.
Additionally, even though no formal process is in place, many liability and no-fault settlements with Medicare beneficiaries are beginning to incorporate LMSAs to protect Medicare’s interests, which are, of course, not submitted to CMS for review and approval since no formal review process currently exists. Therefore, protection of Medicare’s interests through a non-submitted MSA is not unusual across the board in liability, no-fault, and workers compensation claims alike.
Which Path to Take?
When looking to submit an MSA to CMS, taking a step back to look at the total picture of future medicals for consideration is a must and an absolute best practice. Being proactive far in advance of settlement and looking for potential problems that could arise from medical records or payment histories will avoid unwelcome surprises in the MSA. A proactive MSA approach includes conducting a thorough claims review to determine if there is complete documentation, which ultimately alleviates potential future inconsistencies. Additionally, ensuring that all documentation is available avoids delays in the submission process and confirms that a complete picture of potential work-related injury costs is displayed.
Transparency in communication is imperative so that all parties involved in an MSA submission understand the process for CMS review. There are times when an attorney for an injured worker will not be knowledgeable about MSAs and MSP requirements, and, as such, the claims professional may need to articulate and educate the attorney. Providing clear, accurate, and consumable information facilitates understanding and alleviates fear of the unknown for the injured worker.
If the decision is made to not submit an MSA to CMS, the key is accurately calculating future medication and medical costs. Having strong partnerships to complete accurate assessments of future medical needs includes having complete documentation as if the MSA was going to be submitted. This documentation and history allows for full use of evidence-based medical guidelines. Depending on the logistics of the settlement, it is usually a good idea to consult with your legal team to properly assess non-submission. Legal partners can also provide proper support to communicate with an injured worker.
Regardless of whether an MSA is completed with the intent of submission or non-submission, funding with a structured settlement is a great cost-savings option to reduce the overall expense of the MSA as well as settlement. Further, for the injured worker, there is a consistent disbursement of funds. Professional administration of the MSA should also be considered, as it ensures the MSA funds are appropriately spent and can reduce the risk of an injured worker losing their benefits from inappropriate use. By having the funds professionally administered, the injured worker can have greater buying power for future medical treatment. This assists the injured worker in having the funds last if possible, without potential repercussions of misuse.
There are numerous factors to weigh when determining whether to submit an MSA to CMS. Settling parties should weigh several factors when making this decision, which include but are not limited to risk tolerance on the claim, current medical treatment/usage of off-label medications, availability of medical records, and the desire to maintain the availability for an appeals process beyond administrative review. Further, keep an eye out for the upcoming notice of proposed rulemaking as mentioned previously, which is scheduled for release later this year and may impact processes and procedures for MSAs in workers’ compensation, liability, and no-fault claims alike.