What’s Up with Liability Medicare Set-Asides (LMSAs)? 2022 Mid-Year Update

Sanderson Firm has been receiving numerous inquiries lately as to the status of LMSAs and/or CMS guidance on the potential need to protect Medicare’s interest in liability settlements with Medicare beneficiaries. The industry has been buzzing about the Proposed Rule on “MSP and Future Medicals” which is believed to be a proposed legislative framework for parties to comply with the MSP/protect Medicare’s interest in liability insurance settlements. The description of the Proposed Rule indicates that the legislative rule may also impact workers’ compensation and no-fault settlements as well. The description of the Proposed Rule on the White House Office of Regulatory Information and Affairs (OIRA) website (link here) states the following:

This proposed rule would clarify existing Medicare Secondary Payer (MSP) obligations associated with future medical items services related to liability insurance (including self-insurance), no fault insurance, and worker’s compensation settlements, judgments, awards, or other payments. This proposed rule would also remove obsolete regulations.

The timetable for release of the Notice of Proposed Rulemaking (NPRM) as listed on the OIRA website indicates February of 2022, thus it would seem we are past the deadline. However, just a few months ago, we blogged about the fact that the Rule seemed to be moving forward because the text of this Rule was sent by the CMS to OIRA for review. As far as process goes, the Proposed Rule needs to be reviewed by OIRA before the Agency publishes the Proposed Rule, allowing for industry comments. Since CMS has finished its work on the Proposed LMSA Rule, it has been believed that the Proposed Rule would be issued in just weeks assuming no pushback from OIRA.

However, here we are nearly 4 months after the timetable set for the Proposed Rule to be published. So, what’s up with LMSAs? If we dig in a little deeper to the OIRA site listing the LMSA Proposed Rule, we can see that CMS held a meeting with industry stakeholders[1] on the LMSA Proposed Rule back in March. Industry stakeholders cited numerous concerns with an LMSA requirement/review program by CMS, including, but not limited to: lack of regulatory authority for CMS to promulgate such a program, alleged ineffectiveness of the current Workers’ Compensation Medicare Set-Aside (WCMSA) program at CMS (insinuating that CMS should fix issues with WCMSAs before tackling LMSAs), the varying nature of liability settlements versus workers’ compensation settlements (i.e., apportionment, comparative negligence, disputed liability, etc.), and that if CMS promulgates such an LMSA policy, that it will delay and/or inhibit liability settlements with Medicare beneficiaries.

We assume that this meeting was more of a “listening session” in which CMS listened to concerns set forth by the industry stakeholders, because as the Proposed Rule is still pending, CMS would not be able to comment on those industry concerns while a legislative rule is in progress. CMS now seems to be stuck between a rock and a hard place, with the pushback from industry stakeholders as a 2012 GAO study instructed CMS to set forth guidance on Medicare Set-Asides in liability and no-fault settlements.

The 2012 GAO recommendation stated the following: “To improve the effectiveness of the MSP program and process for NGHPs, and to improve the agency's communication regarding the MSP process for situations involving NGHPs, the Acting Administrator of CMS should develop guidance regarding liability and no-fault set-aside arrangements.”

A decade later, CMS is seeking to fulfill this ask of the Agency, but the industry continues to push back as it did when a Proposed Rule was issued on MSP and Future Medicals back in 2012, but later withdrawn. However, it seems CMS and its contractors are pushing forward anyway and will be ready once a Rule is published. A very recent Sources Sought Notice (SSN) seeks proposals for contractors to review MSAs for CMS not just in workers’ compensation claims, but also for Other Non-Group Health Plan MSAs (which would be liability and no-fault). 

Thus, what’s up with LMSAs now? We are still in limbo awaiting guidance from CMS. We will continue to monitor and publish updates as they arise. In the interim, parties should work with an MSP expert to determine any needed steps regarding future medical protection of Medicare’s interest in liability settlements.

Contact me at Heather@sandersoncomp.com with MSP compliance concerns/questions.

[1] The March 9, 2022 meeting appears to have been requested by and open to MARC Coalition members only.