Proposed Rule on Liability Medicare Set-Asides (LMSAs) Withdrawn, Again

Just a few days ago, the Office of Information and Regulatory Affairs (OIRA) at the White House’s Office of Management and Budget (OMB) issued notice that the Center for Medicare and Medicaid Services’ (CMS) proposed rule titled “Medicare Secondary Payer and Future Medicals” has been withdrawn. The abstract of the withdrawn Proposed Rule had indicated that it would provide legislative guidance on the protection of Medicare’s future interest in liability claims/settlements (LMSAs), No-Fault claims (No-Fault MSAs), and even was potentially going to impact workers’ compensation settlements (WCMSAs).

This notice being withdrawn indicates that the Proposed Rule is no longer pending, and it provides no indication as to whether the Proposed Rule will be re-filed. If this feels reminiscent to some, back in 2012 CMS released a future medicals advanced notice of proposed rulemaking which was also ultimately withdrawn without explanation.

Sanderson Firm Commentary:

What does this mean for LMSAs, and will CMS attempt to file another Proposed Rule regulating the protection of Medicare’s interest in liability claims? This remains unknown. Perhaps rather than taking the regulatory/legislative route in providing guidance on LMSAs, CMS will issue administrative guidance through memoranda/Reference Guide instead, but this is merely speculation. It is unknown what the future may hold, and in the interim, parties settling liability claims with Medicare beneficiaries are currently without clear guidance on future medical obligations in liability claims.

This lack of clarity around LMSAs has increasingly become an issue amongst settling parties with Medicare beneficiaries over the last decade. Some recent examples of this are decisions such as Abate v. Wal-Mart Stores East, L.P., 2020 U.S. Dist. LEXIS 222363 (November 30, 2020), and Silva v. Burwell, 2017 U.S. Dist. LEXIS 195032 (November 28, 2017). In both the Abate and Silva decisions, what would otherwise have been settled and closed liability claims were held up in Court for years unnecessarily due to the lack of understanding/agreement on LMSA requirements. Settling parties were concerned in these settlements that if no LMSA was established, that Medicare could coordinate benefits and/or seek conditional payment recovery for post-settlement medical treatment paid for by the Medicare program that was the responsibility of the primary payer.

Courts across the country have had to grapple with questions in proposed liability settlements with Medicare beneficiaries such as: 1) Is an LMSA required? 2) Do the parties need a treating physician statement to avert an LMSA? 3) If Medicare’s interests need to be protected, who’s obligation is it to establish an LMSA, the plaintiff/Medicare beneficiary or primary payer? While courts have been helpful in guiding parties on LMSAs, the obligations that may be present under the MSP must come from the administrative agency (CMS) as closest to and having jurisdiction over the MSP program.

The potential need to protect Medicare’s interest in liability claims (LMSAs) is certainly a tough issue due to the nature of liability claims (i.e., comparative negligence, acceptance of liability, and policy limits). Each individual claim is unique and blanket rules would be hard to apply, unlike in workers’ compensation where claims are more often clearly delineated as accepted or denied.

While it appears that the P&C industry will continue without formal guidance for now on LMSAs and when they might be appropriate to be included in liability settlements, this lack of formal guidance does not negate the underlying MSP Act requirements.

Working with an MSP expert that can look at each case uniquely to analyze the specific facts of the settlement, the settlement language, and the overall MSP compliance strategy is highly recommended in this nebulous time. Sanderson Firm is available to provide guidance, MSP Opinion Letters, LMSAs, and other MSP compliance services to the liability industry. Please contact me if you have any questions on this update or MSP compliance obligations in liability claims generally.