In January the Centers for Medicare and Medicaid Services (CMS) announced a change to their Workers’ Compensation Medicare Set Aside (MSA) Reference Guide. The change only included one section and it’s clear they are targeting the use of “Evidenced Based” or “Non-Submit” MSAs (EBMSA). They explicitly state these products attempt to shift financial burden to Medicare, and they are now providing a consequence for not seeking CMS approval of MSAs prior to settlement.

The recent update provides the following (revised addition in bold):

4.3 The Use of Non-CMS-Approved Products to Address Future Medical Care.

  • A number of industry products exist with the intent of indemnifying insurance carriers and CMS beneficiaries against future recovery for conditional payments made by CMS for settled injuries. Although not inclusive of all products covered under this Section, these products are most commonly termed “evidence-based” or “non-submit”. 42 C.F.R. 411.46 specifically allows CMS to deny payment for treatment of work-related conditions if a settlement does not adequately protect the Medicare Program’s interest. Unless a proposed amount is submitted, reviewed, and approved using the process described in this Reference Guide prior to settlement, CMS cannot be certain that the Medicare program’s interests are adequately protected. As such, CMS treats the use of non-CMS-approved products as a potential attempt to shift financial burden by improperly giving reasonable recognition to both medical expenses and income replacement.
  • As a matter of policy and practice, CMS will deny payment for medical services related to the WC injuries or illness requiring attestation of appropriate exhaustion equal to the total settlement less procurement costs before CMS will resume primary payment obligation for settled injuries or illnesses. This will result in the Claimant needing to demonstrate complete exhaustion of the net settlement amount, rather than a CMS-approved WCMSA amount.

Essentially, CMS has drawn a line in the sand with regards to MSAs that are not submitted for CMS approval. The consequence comes with a heavy price for the injured employee and could even create exposure for all parties involved in the settlement including employers, insurers and the applicant’s attorneys. CMS will deny payment of benefits until the full amount of the net settlement is exhausted, as opposed to just the MSA portion. This includes not only the non-submit MSA portion, but also the indemnity, mileage, self-procured medical costs, and any other matters resolved in the settlement.

It remains to be seen exactly how this new policy will impact the industry, but any settlement involving a required MSA is going to be considered differently going forward. Many of us are now asking whether it is safe to proceed with a non-submit MSA.

Here’s what we can anticipate:

  • Applicant’s attorneys are required to protect their client’s interests. We anticipate most applicant attorneys will require CMS approval for qualifying injured employees going forward. We also anticipate the California Applicants’ Attorney Association (CAAA) will be making this recommendation.
  • In the past, EBMSAs have been advantageous in securing settlement resolutions because of their cost efficiency, indemnification and the ability to forgo the time-consuming CMS approval process. By requiring CMS approval, we know the settlement process could take longer to negotiate due to the often overvalued MSA cost. When settlement agreements do occur, the timeframe to secure the approved award will be delayed pending the CMS approval turnaround time, which currently takes 30 days longer.
  • It also must be considered whether the WCAB is going to allow these types of settlements to proceed given the new policy. If settlements are ultimately approved, the self-insured employer, and any party involved in the settlement, carries the risk of exposure should Medicare deem the settlement insufficient and pursue reimbursement for Medicare covered costs. Many of the vendors for non-Submit MSAs have rescinded their indemnification of these MSAs shifting the burden of risk back to the employer or the insurer.
  • Excess carriers will update their requirements regarding settlements for claims requiring MSAs. Athens will ensure compliance with any adjustments in their handling guidelines.

If you would like more information on how to proceed with securing settlements with adequate consideration of Medicare’s interests, please contact your claims team at Athens Administrators.

MSA 101 Basics

What is the Centers for Medicare and Medicaid Services (CMS)?

The Centers for Medicare and Medicaid Services (CSM) provides health coverage to more than 100 million people. In 1980, Congress passed legislation that made Medicare the secondary payer to primary payers, such as primary health insurance. Workers’ Compensation is also considered a primary payer. CMS states that all parties in a workers’ compensation case have significant responsibilities under the Medicare Secondary Payer laws to protect Medicare’s interests when resolving cases that include future medical expenses. The recommended method to protect Medicare’s interest is a Workers’ Compensation Medicare Set Aside (MSA)

CMS is allowed to deny payment for treatment of work-related conditions if a workers’ compensation settlement does not adequately protect the Medicare program’s interest. CMS indicates, that unless a proposed amount (MSA) is submitted, reviewed and approved prior to settlement, CMS cannot be certain that the Medicare program’s interests are adequately protected.

What is a Workers’ Compensation Medicare Set-Aside Arrangement (MSA)?

MSAs are a financial agreement that allocates a portion of a workers’ compensation settlement to pay for future medical services related to the workers’ compensation injury, illness or disease. These funds must be depleted before Medicare will pay for treatment related to the workers’ compensation injury. All parties have significant responsibility under the Medicare Secondary Payer (MSP) laws to protect Medicare’s interests when resolving cases that include future medical expenses.

The amount of the MSA is determined on a case-by-case basis with the goal to establish, as accurately as possible, the total cost that will be incurred for all medical expenses otherwise reimbursable by Medicare for work-injury-related conditions during the course of the employee’s life. These funds are set aside specifically within the settlement to cover these costs. MSAs can be funded by a lump sum or structured, with a fixed amount of funds paid each year for a fixed number of years, often using an annuity.

Any injured employee who receives a WC settlement that includes an amount for future medical expenses must take Medicare’s interest into account. While there are no statutory or regulatory provisions requiring that a MSA proposal be submitted to CMS for review, submission of a MSA proposal is CMS’s recommended process.

What is a Non-CMS-Approved product?

These products are known as “evidence-based” or “MSA non-submit” set-asides (EBMSA/Non-Submit). Unlike the traditional set-aside, EBMSAs are based on clinical, and sometimes state-specific, evidence-based guidelines. These products are generally more cost-effective because they contemplate treatment that is both medically appropriate and reasonable, and they anticipate decline in treatment over time consistent with medical evidence and trends. These products also allow the negotiation process to begin quickly expediting settlements. Obtaining approval from CMS can be a time consuming process, but since these products are not submitted, settlement negotiations can begin as soon as the product is prepared. EBMSAs have usually been indemnified by the vendor to protect the employer, insurer, and CMS beneficiaries against future recovery for conditional payments made by CMS for settled injuries.

What’s the threshold requirement for a MSA?

CMS will only review MSA proposals that meet the following criteria:

  • The claimant is a Medicare beneficiary and the total settlement amount is greater than $25,000.00; or
  • 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/lost wages over the life or duration of the settlement agreement is expected to be greater than $250,000.00