Top 10 Medicare Secondary Payer Myths Debunked: Part 2
Written by: Heather Schwartz Sanderson, Esq.
About two weeks ago, we issued Part 1 of our Top 10 MSP Myths blog series. This blog is Part 2 of the 3-part series and will focus on the misconceptions surrounding Medicare Set-Asides (MSAs), both in workers’ compensation and liability settlements. You can review Part 1 of this series by clicking here. Stay tuned for the final blog (Part 3) to be issued in the next few weeks.
Myth #4: Non-Submit MSAs are not legitimate and/or compliant with the Medicare Secondary Payer (MSP) Act.
Debunking the myth: Workers’ Compensation Medicare Set-Asides (WCMSAs) and the review process by the Workers’ Compensation Review Contractor (WCRC) for MSAs is an administrative review process created by the Centers for Medicare & Medicaid Services (CMS) as a fully voluntary process. No part of the Federal MSP Act requires MSAs or the submission of such to CMS even if the CMS review threshold is met. 42 CFR § 411.46 (d)(2) supports settlement agreements allocating a specific amount for future medical services, which protects the rest of the settlement funds outside of future medical. This Federal Regulation thus allows for Non-Submit MSAs which protect Medicare’s interests outside of the CMS review process. Additionally, the WCMSA Reference Guide issued by CMS notes, “[t]here are no statutory or regulatory requirements that parties submit an MSA to CMS.”
Best Practices: Parties should not focus on CMS review thresholds to determine whether an MSA is necessary to protect Medicare’s interests but rather look at the claimant’s Medicare status and future medical needs. If the claimant is a current Medicare beneficiary or reasonably expected to become a Medicare beneficiary within 30 months of the settlement and requires future medical care because of the injury, an MSA is likely warranted. Parties should not utilize an arbitrary figure for a Non-Submit MSA that is not based upon the injured worker’s actual future medical needs and should work with a third party to provide an MSA that is defensible and based upon the medical records/needs of the claimant.
Non-Submit MSAs should be evidence-based, well documented/supported in the file as to how it is allocated, and professional administration is recommended. A Non-Submit MSA should be based upon the claimant’s reasonable anticipated need for future medical care. Ultimately, an allocation that is defensible, indemnified by the MSA vendor, and aims to protect Medicare’s future interest/fund the claimant’s injury-related medical care is optimal over establishing bright line rules on MSA needs dictated by CMS thresholds.
Myth #5: The CMS voluntary review thresholds dictate whether a WCMSA is necessary. Accordingly, if a workers’ compensation settlement is under $25,000 (i.e., $24,999 or less), an MSA is not necessary.
Debunking the myth: CMS’ voluntary review thresholds are currently: Class 1: Medicare beneficiary and total settlement of greater than $25,000; and Class 2: Claimant has a “reasonable expectation” of Medicare entitlement within 30 months of the anticipated settlement of greater than $250,000. It is noted within the WCMSA Reference Guide in several sections regarding these foregoing thresholds that these are simply workload thresholds, and not a safe harbor. Medicare notes two “below threshold” settlement examples in the WCMSA Reference Guide which would require a future medical allocation to protect its interests.
WCMSA Reference Guide, Section 8.1 – Review Thresholds:
Example 1: A recent retiree aged 67 and eligible for Medicare benefits under Parts A, B, and D files a WC claim against their former employer for the back injury sustained shortly before retirement that requires future medical care. The claim is offered settlement for a total of $17,000.00. However, this retiree will require the use of an anti-inflammatory drug for the balance of their life. The settling parties must consider CMS’ future interests even though the case would not be eligible for review. Failure to do so could leave settling parties subject to future recoveries for payments related to the injury up to the total value of the settlement ($17,000.00).
Example 2: A 47-year-old steelworker breaks their ankle in such a manner that leaves the individual permanently disabled. As a result, the worker should become eligible for Medicare benefits in the next 30 months based upon eligibility for Social Security Disability benefits. The steelworker is offered a total settlement of $225,000.00, inclusive of future care. Again, there is a likely need for no less than pain management for this future beneficiary. The case would be ineligible for review under the non-CMS-beneficiary standard requiring a case total settlement to be greater than $250,000.00 for review. Not establishing some plan for future care places settling parties at risk for recovery from care related to the WC injury up to the full value of the settlement.
Best Practices: For under CMS threshold scenarios in which CMS will not review a WCMSA, workers’ compensation payers should remember that all settlements over $750.00 must be reported to CMS via Section 111 Reporting or face up to $1,000 per day/per claim penalty. Thus, CMS may later audit any reported settlements over $750 to determine whether Medicare’s interests were protected with a future medical allocation. Further, workers’ compensation payers should consider a Non-Submit allocation in certain scenarios to avoid the entire settlement being subject to recovery by CMS under the MSP Act.
Myth #6: MSAs are only for workers’ compensation claims and do not apply to liability claims.
Debunking the myth: Twice in the last decade, CMS has attempted to issue a legislative rulemaking around Liability Medicare Set-Asides (LMSAs) but both have been withdrawn. Despite no formal rule around LMSAs, over the years we have seen CMS take several steps toward a future LMSA review process such as including a field in the Common Working File (CWF) for an LMSA amount, as well as providing notice to medical providers to bill LMSAs in primary payer situations. Further, the last several RFPs for the WCRC contractor have required that the contractor be willing to review a certain number of LMSAs annually. Despite no formal rulemaking regarding LMSAs, settling parties are still expected to protect Medicare’s interests in liability settlements. On September 30, 2011, CMS published a memorandum (dubbed, the “Benson Memo”) which confirmed that the only exception to whether an LMSA is required is if the injured claimant’s treating physician provides a statement certifying that no future medical care is necessary. To date, the Benson memo has not been superseded by updated memoranda or rulemaking.
Best Practices: When settling a liability claim with a Medicare beneficiary, it is recommended that parties look at the big picture regarding the settlement amount and the beneficiary’s future medical needs. While CMS does not have a formal review process for review of a proposed LMSA, parties can still protect Medicare’s interest with a non-submitted LMSA or other future medical allocation which might be compromised/reduced based upon other settlement factors such as attorneys’ fees, liens, and other costs. Similarly, working with an MSP expert on setting Best Practices/determining settlement strategies in liability claims with Medicare beneficiaries is recommended.
Did you know? As a rapidly growing full-service law firm solely focused on MSP services across MSAs, Section 111 Reporting & Audits, as well as conditional payment resolution services, we provide our clients with “out of the box” and innovative solutions for settlements and MSAs in workers’ compensation and liability claims. For questions, please contact me at heather@sandersoncomp.com.
