Tag Archive for: MSA Allocation

CMS Gets Tough on Unapproved MSAs– Until They Don’t

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In January, 2022, CMS created an uproar when it published Version 3.5 of its Workers Compensation Medicare Set-Aside Reference Guide stating that it would essentially ignore “non-submit” or “evidence-based” Medicare Set-Aside allocations:

Unless an MSA is submitted and approved, CMS cannot be certain that Medicare’s interests are adequately protected. Therefore, CMS will treat any non-CMS-approved product as a potential attempt to improperly shift financial burden by denying payment for medical services related to the WC injuries or illness until the claimant demonstrates complete exhaustion of the entire settlement amount, less fees and costs, rather than a CMS-approved WCMSA amount.

CMS approval of an MSA was never required. Ten years ago, the LexisNexis Legal Newsroom for Workers Compensation Law published my article “Four Reasons To Avoid The CMS Approval Process For MSAs.” You can find an abstract of that article on this blog.

Then, the MSA industry created products known as “non-submit” or “evidence-based” MSAs. Since approval has never been required of any MSA, the purpose of this new version seemed to be to low-ball the MSA. CMS took notice.

If your MSA was priced correctly, they now say, it will be adequate to cover the injured worker’s medical expenses, and this will never be an issue. One problem with this approach is that injured workers do routinely exhaust their approved MSAs. Since MSA allocations do not account for inflation, they are likely to be depleted early; the younger the injured worker, the more likely the fund will be depleted.

CMS also took the position that if the MSA was paid via a structured settlement, Medicare wouldn’t pay a dime until every structured payment had been made. If the structure was set to pay for the life of the injured worker, that would never happen.

And Then They Backed Down

On March 15, 2022, CMS revised the relevant section to say:

CMS may at its sole discretion 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 and paid conditional payments, before CMS will resume primary payment obligation for settled injuries or illnesses. . .

Administratively, CMS can more easily simply ignore unapproved MSA allocations rather than spend time reviewing them in order to exercise discretion. Line by line review takes time.

CMS has sent a message that it intends to crack down on settlements designed to avoid CMS review. We may see sterner pronouncements in future revisions.

How to Proceed

Think twice before choosing to forego the approval process when it is available. Don’t rely on an MSA allocation designed to short-change CMS.

Re-think your settlement agreements. If approval was not available or not pursued, consider including a what-if clause., This would provide that if CMS denies payment of a claim-related Medicare-eligible expense, the employer will provide counsel to defend the MSA allocation. In the short term, the employer would be responsible for the medical expense of the injured worker’s immediate needs, perhaps subject to a ceiling.

One can imagine that disputes could arise about what constitutes a claim-related Medicare-eligible short-term need. Include an agreement for alternative dispute resolution. But, holy-moly, nobody wants to keep litigating long after everyone thought the claim was fully and finally settled.

These dilemmas will probably force people to seek approval whenever it is available.

Which is just what the folks at CMS want.

HOW POLITICS DRIVES UP THE COST OF YOUR MSA

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For President George W. Bush and Congress to get Medicare Part D drug coverage passed in 2003, they had to make significant concessions to big business, including the drug industry. One of the law’s provisions forbids the government from setting rules for negotiating better drug prices. The “noninterference” section says:

In order to promote competition . . . the Secretary [of Health and Human Services]:
(1) may not interfere with the negotiations between drug manufacturers and pharmacies and PDP [Prescription Drug Plan] sponsors; and
(2) may not require a particular formulary or institute a price structure for the reimbursement of covered part D drugs.
42 USC 1395w-111(i)

The result according to a new policy brief from the Carlton University School of Public Policy and Administration is that Medicare Part D plans pay on average 73% more than Medicaid and 80% more than the Veterans Health Administration for brand-name drugs. If Part D plans could negotiate drug costs the way Medicaid and the VA do, savings could reach $16 billion a year.

The study shows that the average per capita expenditure by Americans for pharmaceuticals is more than double the average of 32 other industrialized nations. Contrary to their publicity, American drug companies do not devote the wealth gained from Part D on new research initiatives. Half of new medical research initiatives come from non-profit entities such as universities. Rather, drug companies have spent their millions in recent years on increased lobbying. If drugs costs decreased, Medicare beneficiaries could expect Part D premiums to also decrease.

Although private insurers pay Part D medical expenses, workers compensation professionals are painfully aware that anticipated Part D-covered expenses must be included in a Medicare Set-Aside. The increased use and rising cost of pharmaceuticals has torpedoed many a proposed workers compensation buy-out. If the purpose of an MSA is to protect Medicare, why are Part D expenses which are paid by private insurers included in the allocation anyway?

Casualty insurance companies and the American Association for Justice are big political players. With the 2016 election cycle coming up, now would seem to be the time for their lobbyists to twist some arms to modify the noninterference provision for the benefit of all Americans.