NCCI Research Brief on Medicare Set-Asides and Workers' Compensation

NCCI has recently examined the demographics related to MSAs (distributions of amounts of MSAs and total settlements that include MSAs; distributions of ages of claimants) and the aspects of the CMS review process (length of time from submission to CMS approval; relation between submitted and CMS-approved MSA amounts).  Overall, NCCI finds a decline in CMS’ processing time for MSAs, this after a period of “dramatic lengthening”, as well as a decline in the ratio of CMS-approved MSA amounts to submitted MSA amounts. NCCI further finds differences between proposed and approved MSA settlements are largely due to prescription drugs costs, MSAs make up about 40 percent of total proposed settlements—with prescription drugs making up half of that 40 percent—and most MSAs are for claimants who are Medicare-eligible at the time of settlement because they have been on Social Security Disability for at least two years. You can read the NCCI research brief here.

Commentary by Jennifer C. Jordan, Esq.:

While the NCCI report is an interesting look into Gould & Lamb’s client base and MSA practices, it may not be representative of the MSAs prepared by the industry as a whole. “First and foremost, it only reflects the MSAs submitted to CMS for review,” points out Jennifer C. Jordan, Esq., General Counsel at MEDVAL, LLC. “The data reviewed in this report is insufficient to make any generalized assumptions about MSAs.”

Jordan explains that “MSA clients will often obtain evaluations and not be able to settle or not be able to obtain CMS approval, therefore, the only portion of any one client’s MSAs that an MSA vendor can be certain that settled are those approved by CMS and final documents submitted to render it effective.” Jordan further explains that “even some portion of cases approved do not settle because CMS counter highers put them out of reach. So the $1.8 billion in MSAs approved by CMS last year does not represent all MSAs funded in that calendar year and may not even represent MSAs that were actually funded because CMS reported the number approved, not the total number rendered effective.”

Furthermore, it is arguable whether the CMS approval program has improved. In Jordan’s opinion, “Nothing has improved and in reality things are worse than ever.” As explained by Jordan, “Such conclusions are reached by basing the comparison of turnaround times today to a period under a prior vendor not permitted to address a back log in the same manner they are today.”

Jordan warns that it is impossible to make meaningful broad generalized assumptions because every MSA is an independent and extremely subjective event affected by a number of outside factors, one of which is the insurer/employer’s jurisdiction, book of business, the treating physician/known bad players in any given area, etc. “The MSA as prepared by one vendor can reflect a practice of projecting the worst case scenario in every case so as to ensure that CMS approves on first pass rather than counter, whereas others may aggressively advocate for their clients’ position and win some or lose some,” explains Jordan. “Overall, the number of CMS counter highers is at an all time high with little to no justification to support the determination.”

Jordan also points out that any assumptions made about pharmaceutical drugs, i.e., that half an MSA can be expected to represent drugs, are misleading. “In most cases where there is a high pharmaceutical component, drugs represent 75% or more of the total MSA, not half,” explains Jordan. “And that is balanced by the cases where there is no Part D component to reach the 50% assumption. The data presented in this report at most is reasonably accurate in the aggregate as an average, but it certainly does not reflect the reality of the problem. Without even commenting on how ridiculous it is to price drugs at average wholesale price so that CMS can utilize a national standard in its program, the amount of drugs reflected in an MSA is contingent only upon what the pharmacy payment records reflect and not necessarily what is actually in use. A medical record can show blood work in which it cannot be proven that a claimant is actually consuming the drugs prescribed and yet the MSA still comes out the other side with every drug ever filled projected at AWP. Counter highers are also frequently caused by AWP price changing between the time the MSA is reviewed. Drugs are and forever will be the major cost driver in the majority of MSAs.”