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By Teddy Snyder, Esq., Ringler Associates - Beverly Hills, CA
1. MMSEA reporting makes approval unnecessary for Medicare beneficiaries.
Reporting under the Medicare, Medicaid and S-Chip Extension Act, aka “section 111 reporting”, started January 1, 2010 for workers compensation claims where there is “Ongoing Responsibility for Medical” for a Medicare enrollee. Carriers and self-insureds now report certain data at the beginning of the claim. This data includes the claimant’s Medicare HICN (Health Insurance Claim Number), date of incident and the applicable ICD (International Classification of Diseases) codes. The result is that if a claimant treats non-industrially and presents a Medicare card for proof of insurance, when the provider bills Medicare, the invoice will be rejected.
One of the motivators for obtaining approval of an MSA at the conclusion of a claim is presumably to escape Medicare reimbursement liability. However, if an MMSEA report was previously submitted, no reimbursement liability can arise because any bill to Medicare for treatment for the reported person, date of occurrence and ICD code, will be rejected.
2. Approval is not and never has been required
The law requires that parties take Medicare’s interests into account. The folks at CMS have repeatedly said that the approval process is optional. For example, in a telephonic town hall meeting on March 24, 2009, CMS staffers said:
“…both of them, worker’s comp and liability neither one of them has ever been required to participate in a CMS review process”
http://www.cms.gov/MandatoryInsRep/Downloads/MMSEA111March24NGHPTranscript.pdf Page 61
http://www.cms.gov/MandatoryInsRep/Downloads/MMSEA111March24NGHPTranscript.pdf Page 61
If you get an MSA allocation report and document a Set-Aside in the settlement documents, you show you are making a good faith effort to take Medicare’s interests into account. Approval is not required.
We know that insurance carriers are particularly risk-adverse, but that is no reason to blindly adhere to a false standard. Some carriers use a cost-benefit analysis in deciding when to seek CMS approval, which seems appropriate and enlightened.
3. Approval does not protect you from liability
The idea that obtaining approval bullet-proofs the primary payer is probably the biggest misconception in the MSA process. Medicare Set-Aside funds are almost always paid directly to the claimant. Whether paid as a lump sum or in a structured settlement, when the claimant is handling the money, this is self-administration.
If the claimant spends the money on anything other than claim-related Medicare-eligible expenses, and Medicare makes a conditional payment for treatment of the settled condition, the fact that there is approval of the maximum amount of anticipated expenses will not provide first-dollar protection to the primary payer. Per Code of Federal Regulations, the primary payer could be called upon to pay up to the amount of the set-aside again.
Read a CMS Approval letter. CMS approval does one thing: It sets a ceiling on reimbursement liability. The language reads:
We have determined that $_____, which is a combination of the reviewed future medical treatment and the future prescription drug costs that are noted in the submitted cover letter, adequately considers Medicare’s interests.. . .Funds must be available for payment of services and prescription drug expenses that would otherwise be covered by Medicare. . . Once the funds in the WCMSA account have been exhausted and Medicare has been provided with information to document that payments from the account were appropriate, Medicare will begin paying for the beneficiary’s Medicare-covered services that are related to the work injury or disease [emphasis added].
Whether self-administered MSA funds have been spent appropriately is exclusively within the control of the claimant. Usually, workers compensation claimants were blue-collar laborers, and may not be competent to accurately determine which expenses are Medicare-eligible or to submit the required annual self-attestation reports. Anecdotal evidence is that once the claimant has control of the money, it is quickly spent on items other than claim-related Medicare-eligible expenses.
An important reason for paying out the MSA via a structured settlement is to limit the damage a claimant can do. If the claimant spends the money inappropriately in one year, the deficit will be made up, at least in part, by future annual payments.
Custodial administration is a sure-fire way to assure MSA funds are appropriately administered, but custodial administration is not cost-effective most of the time.
So why ever close a workers compensation claim? For all the other reasons you close workers compensation claims. Claimants want to conclude claims to get cash, to leave an estate, to take control over their own medical treatment. Primary payers want to stop escalating medical expenses, to stop administration expense, to recover any bond paid by a self-insured, to avoid inflation risk and mortality risk (that the claimant will live longer than expected.) These are all bona fide reasons for closing a claim. The MSA tail should not wag the claim-closure dog.
4. The Approval process is unnecessarily torpedoing your settlements.
The CMS approval process has become so time-consuming that by the time approval comes back, settlement is no longer possible. I had one file that was at CMS 10 months without resolution; then the claimant died. Disclaimer: since the electronic submission portal was opened to general use on 12/11/2011, review times on claims submitted through the portal seem to be shorter.
CMS is not following their own rules in setting amounts which “adequately protect their interest.” I recently had CMS Approval come back on a $160,000 settlement of both indemnity and medical claims; CMS asked for $285,000.
The self-attestation annual report form requires the following:
I acknowledge and understand that failure to follow any of the Medicare requirements for the use of this money will be regarded as a failure to reasonably recognize Medicare’s interests and that Medicare will deny coverage for all my medical treatments and prescription drug expenses due to work-related injuries up to the total workers’ compensation settlement amount.
“Up to the total workers’ compensation settlement amount”? That would have been a $125,000 savings right there!
Both CMS and the MSA allocation companies seem to ignore the commutation vs. compromise distinction set out in the original 7/23/2001 Patel memo which is the grandfather of the MSA behemoth we find ourselves battling today. If the settlement is a compromise of the amounts claimant has demanded, then the MSA should reflect that the future Medicare-eligible expenses may not be fully funded, because whether such expenses are claim-related is in dispute.
42 CFR 411.47 explicitly provides for the proportionate determination of the MSA for a compromise settlement and provides instructions on how to do it:
“i) Determine the ratio of the amount awarded (less the reasonable and necessary costs incurred in procuring the settlement) to the total amount that would have been payable under workers’compensation if the claim had not been compromised.
(ii) Multiply that ratio by the total medical expenses incurred as a result of the injury or disease up to the date of the settlement. The product is the amount of the workers’ compensation settlement to be considered as payment for medical expenses.”
Remember that this references the amount to be awarded for medical expense, not indemnity.
Practice tip: be sure to include a statement in the settlement documentation that this is a compromise settlement, not a pure commutation.
So here’s my pitch. Do get an MSA Allocation report. Do create a Set-Aside in accordance with the report, taking proportionality into account. Structure the MSA to make sure the benefits are paid over the claimant’s anticipated lifetime. Consider custodial administration for claims where it is cost-effective. (This depends on the amount of the MSA and the life expectancy of the claimant.) Seek CMS approval for settlements with a gross amount in excess of $250,000.
The opinions expressed in this essay are those of the author alone and not of any organization with which she may be affiliated.