By: Jennifer C. Jordan, Esq./MSCC, General Counsel, MEDVAL, LLC
I am interested to know how many readers thought this article would be about what MSAs are or their mysterious appearance in 2001. The mystery I chose to write about is the one that has had me stumped since the publication of the infamous Patel Memo, and that is when did workers’ compensation lawyers stop practicing law? For all the angst endured during the past decade and the significant financial outlay, I have personally witness millions of dollars unnecessarily spent on the evaluation and funding of MSAs mainly because the people involved in workers’ compensation settlements don’t seems to understand what they are agreeing to or why. So what I propose is that we get back to basics and try to understand the MSA beast so that maybe we all can work together to solve the problems that CMS appears unwilling to.
To begin, MSAs are not a legal requirement. You will not find any reference to a “Medicare set-aside” in any federal statute or regulation. It was a term coined by CMS in the first WCMSA memo for its preferred method of allocating funds from the comp settlement specifically for the protection of Medicare’s interest in the claimant’s future medical treatment. Therefore the most important thing to understand is that there is no legal requirement to do an MSA in any settlement, for any type of insurance. Any statements that an MSA must be done and/or approved by CMS are inaccurate, unless of course the act is a contractual obligation between the parties to the settlement.
So if not a legal requirement, then why do an MSA at all you may ask? What is expressly required by the Medicare Secondary Payer Act is that Medicare never make payment for medical treatment when other insurance is available. If you have a situation where you have a legal requirement to provide for the medical care related to an act of negligence, the claim will trigger the MSP exclusion. The nature and extent of that liability are subject of great debate primarily because CMS has decided that any trigger is sufficient to alleviate it of the burden of treating that injury in perpetuity, however I will save discussion of that for a future article.
With respect to workers’ compensation settlements (let’s leave liability alone for now), the Code of Federal Regulations expressly states that if an allocation is made for future medical expenses, then Medicare is excluded from payment until that amount is exhausted on related treatment. There is no mention as to how much should be allocated, just that if any is, then Medicare may not pay until that is gone.
So in review, if an insurance payment includes compensation for future medical expenses, then Medicare may not pay. If the payment did not include compensation for future medical, there had better be good reason, otherwise Medicare’s interests were not considered and you have a different section of the CFR to contend with which states that CMS can disregard your settlement entirely if not adequately considered. CMS in its policy memoranda limits that to the extent of the entire settlement amount, however no such limit is expressed in the law or regulations. So in reality, CMS could just as easily attempt to disregard your settlement indefinitely.
Now if Medicare is not supposed to pay and the insurer is no longer paying, that leaves the claimant assumingly using the MSA to continue to treat. Absent an MSA, the claimant can be left without access to medical treatment or worse, forced to spend the entire settlement that would have included compensation for indemnity and other things on only Medicare covered medical services. Basically this entire exercise boils down to the federal government only asking that claimants who receive compensation for future medical benefits actually spend that on future medical treatment so that Medicare doesn’t. Kind of reasonable given the state of the Medicare trust fund.
Here’s where the practicing law part come in. The most important thing to the parties to a settlement need to recognize is that creating an MSA to protect Medicare’s future interests and submitting it to CMS for approval are two entirely different acts. The first is an act of compliance with federal law and the other is risk management. You can reasonably identify Medicare’s future exposure in a manner different that CMS in its voluntary WCMSA review program if you are prepared to assume the risk of asserting a defense if and when the funds run out and the claimant attempts to seek Medicare coverage for treatment of the injury in question.
What does happen when the money runs out? The promise when you obtain CMS approval of a WCMSA is that Medicare will cover anything in excess of the approved amount. If funded with a structured settlement, that can happen year after year. If the WCMSA did not meet the CMS review thresholds, yet was created in the exact same manner utilizing all know CMS guidance available, who is to say that the federal government can deny equal protection simply because the voluntary federal program was not made available to it? If the WCMSA was created utilizing all available limitations available under state law in the settlement of the claim, will CMS be able to overcome the limits to your liability, especially in light of the fact that the regulations don’t permit cases to be referred to DOJ unless they have a fairly decent chance of recovery. These are all reasons why this is a risk management issue.
Finally, when the money does run out, denial of Medicare coverage of related treatment becomes a benefits determination for which the beneficiary is entitled to the full five step Medicare appeal process concluding in federal court where all evidence of relatedness and rules of law that CMS routinely disregards matter again. This is actually the first opportunity to dispute a bad CMS determination, as there is no appeal available at the time the opinion was rendered. If your MSA was reasonable and defensible based upon the medical status at the time of settlement and funded in accordance with your state law obligation, will the federal government be able to force you increase the value of your claim on the basis that the claimant happened to be entitled to Medicare? These are the magic questions that will significantly benefit from calculated organizational policy decisions that can be a lot more financially palatable than fully funding what CMS wants in every WCMSA.
To conclude, so many of the industry problems that we face daily are directly related to misinformation perpetuated within the industry, so anything we can do to get back to basics and make our own decisions as to what the law may or may not require may prove to the best way to deal with the MSA problem. Every case will be different and should be considered individually and so long as you are comfortable in your level of MSP compliance and the possibility of defending it in the future, you will likely be far better off that funding CMS approved WCMSAs in every case.
About Jennifer C. Jordan
Jennifer Jordan, JD, MSCC is General Counsel and a founding member of MEDVAL, LLC. Starting with the first CMS memo on MSAs and workers’ compensation, Jen has focused on providing practical advice and in-depth knowledge to virtually every type of entity subject to Medicare Secondary Payer (MSP) compliance. Jen is Editor-in-Chief of The Complete Guide to Medicare Secondary Payer Compliance, published by LexisNexis. She received the 2010 Workers’ Compensation Notable Person Award from LexisNexis.
Jen received her J.D. from the University of Baltimore, School of Law where she was a member of the Law Review and acting Editor-in-Chief of the University of Baltimore Intellectual Property Law Journal. She received her MBA from the University of Baltimore, Robert G. Merrick School of Business. She received her B.A. in Economics and Fine Arts from Virginia Polytechnic Institute and State University.
MEDVAL delivers a fully-integrated Medicare Secondary Payer Compliance solution. From initial MSA evaluation to administration of MSA funds, MEDVAL serves attorneys, carriers, and TPAs seeking a better MSP compliance process for complex personal injury and workers’ compensation claims. For more information, visit www.medval.com.