By Jeff Gurtcheff, VP & General Manager, Settlement Solutions, Helios
When preparing a claim for settlement that involves a Medicare beneficiary, clients often ask if they should submit a Workers’ Compensation Medicare Set-Aside allocation (WCMSA) to the Centers for Medicare & Medicaid Services (CMS) for approval. To their surprise, the answer can vary. The decision on whether to submit is an important one to manage the economics of settlement, ensure compliance, and protect the injured worker’s future Medicare eligibility and the Medicare trust fund.
The Purpose of an MSA
The Medicare Secondary Payer Act provides that where a primary payer exists, that Medicare shall be secondary. 42 USC §1395y (b)(2). MSAs were introduced by CMS through memoranda on July 23, 2001 as a mechanism to provide for the protection of Medicare’s future interests.
If a settlement forecloses future medical expenses, and there is no specific allocation amount in the settlement for future medical services, Medicare will require the claimant to exhaust the entire settlement on Medicare-covered expenses before Medicare will provide coverage. 42 CFR §411.46 (a).
However, if the settlement agreement allocates a certain amount for specific future medical services, Medicare does not pay for those services until medical expenses related to the injury or disease equal the amount of the lump-sum settlement allocated to future medical expenses. 42 CFR §411.46(d) (2). This means that if a portion of the settlement is allocated toward future medicals, the claimant will only have to spend that portion before Medicare will provide coverage. Therefore, providing a specific allocation for future medicals assists in protecting the claimant’s future Medicare benefits.
As the Medicare Secondary Payer (MSP) landscape and CMS policies continue to evolve, payers should assess their current MSP compliance strategies and ensure the plan meets their tolerance for risk, provides adequate and reasonable protection of the Medicare Trust Fund, and serves the injured worker or claimant’s future treatment needs.
WCMSA Submission to CMS is a Recommended Process
On May 11, 2011, CMS issued a memorandum reiterating guidance regarding the submission of WCMSAs. The memorandum states:
Submission of a WCMSA proposal to CMS for review and approval is a recommended process. There are no statutory or regulatory provisions requiring that a WCMSA proposal be submitted to CMS for review.
The memorandum also reiterates CMS’ review thresholds:
- The claimant is currently a Medicare beneficiary and the total settlement amount is greater than $25,000; OR
- The claimant has a “reasonable expectation” of Medicare enrollment within 30 months of the settlement date and the anticipated total settlement amount for future medical expenses and disability/lost wages over the life or duration of the settlement agreement is expected to be greater than $250,000.
If the settlement falls outside the review threshold, submission is not necessary. Further, CMS has stated that the Workers’ Compensation Medicare Set-Aside Portal (WCMSAP), which is currently under development, will not accept WCMSAs that do not meet review thresholds.
So what does CMS mean when it says this is a recommended process? Do you need to submit when there are no statutory or regulatory provisions requiring submission of WCMSAs to CMS? What is gained if the WCMSA is submitted through the recommended process versus not submitting to CMS?
Whether to Submit WCMSAs to CMS for Approval
One reason to submit is certainty. In a world of ambiguity, a definitive answer is comforting. If CMS reviews your WCMSA and agrees with the allocation or issues a revised figure to protect their interests, an opinion is now in place and therefore allows most payers to remove future liability “from the books.” Additionally, the payer is protected as he has shown that Medicare’s interests have been appropriately considered based on the production of a WCMSA, approval from CMS, and funding the WCMSA as part of settlement agreement. Assuming the claimant can provide proof of appropriate expenditures from the WCMSA, so is the injured worker and his or her counsel.
The second reason to submit a WCMSA to CMS for approval is to set a standard and consistent pattern of practice. CMS and the review contractor serve as an entity to keep everyone honest in their assessment of future medical needs of the claimant and protecting the Medicare trust fund. If the WCMSA is not submitted to CMS for approval and the parties remove this oversight, the parties involved in the settlement process may be inconsistent in evaluating the future medical needs of the claimant. Will payer economics diminish the recommended set-aside amounts? The WCMSA process should be a consistent one, following clear standards and best practices. Best practices will enable a payer to determine future treatment needs and costs consistently regardless of whether CMS reviews the case. If processes are inconsistent, then CMS may question if its interests were taken into consideration.
Finally, a reason to submit WCMSAs for approval is the fact that MMSEA Section 111 reporting requires all claim settlements with Medicare beneficiaries to be reported under TPOC (Total Payment Obligation to the Claimant). At some point in the near future, CMS will cross reference TPOC from Section 111 reporting data with WCMSA data received via CMS submissions, and could begin auditing Responsible Reporting Entities (RREs) for compliance. As with previous components of MSP compliance, CMS may break this task into smaller components and may take a long time to build it out. Therefore, CMS could very easily choose to review all cases with TPOC values in excess of a set threshold where there is no evidence of a WCMSA submitted to CMS for review. The payer may have completed a WCMSA, but is he confident that the process and programs are sound in producing that WCMSA? The answer to that will be solely up to CMS to decide.
Reasons Not to Submit WCMSAs for CMS Approval
The submittal process can be very lengthy and can significantly increase the time to settle a claim. In the past two years, the time period for CMS and its review contractor to provide a decision on the allocation amount has ranged from 45 days to greater than one year. Currently, most entities are seeing average turnaround time of 60 days for a matter to be reviewed. Most cases that reach the point of requiring a WCMSA are incurring indemnity benefits and ongoing medical treatment while the determination is simply waiting for review. Some Helios customers have estimated the cost to submit to CMS exceeds $3,000 when loss costs and administrative oversight is considered.
If CMS seeks additional documentation that is not readily available in the claim file, this can further delay the process. For example, if CMS requests records from a claimant’s personal treating physician that are unrelated to the injuries. Generally, these developments can bring the settlement process to a halt while the parties attempt to secure information that the adjuster is not privy to or consider alternative strategies to resolve the claim. Had the payer chosen not to submit, it may have been able to reduce loss costs associated with the delay—not to mention the added frustration.
Just as CMS can add time to the settlement process, it can also return a counter-high assessment for the WCMSA. Counter amounts greater than the submitted WCMSA amount will often derail the settlement process, especially if the economics of settlement no longer make sense for the case under review. In reality, payers usually settle cases where they can secure agreement at a percentage of the future value of indemnity and medical costs. If the present cash value is eroded by an unexpected counter-higher WCMSA allocation, it may make better economic sense to leave the claim administratively open versus settling. Although CMS has recently announced review of these guidelines, there is still no formal re-review process when there is a material disagreement over future medical needs. As long as CMS remains reluctant to review a case again if they feel their initial determination was without error, not submitting may be an appropriate and reasonable alternative for some.
Finally, a reason not to submit is the methodology CMS requires for quantifying a WCMSA allocation. CMS requires the allocator to price medications at average wholesale price (AWP) for each medication. This is not always a reasonable pricing method as the pricing the payer has negotiated with their PBM may be far less or the claimant may be able to secure their medications “post settlement” for less than AWP. Further challenges arise because CMS doesn’t take into consideration brand patent expirations which will make generic medication available at a lower price at a future date or will not consider clinical recommendations to wean medication use based on the claimant’s age or when a medication is detrimental to the claimant if used for a prolonged duration. An adjustment to the allocation would only be considered if the treating physician has agreed in writing to such a weaning or generic medication program and clear transaction evidence is shown. If a payer can assure the same type of medication and the same number of medications over the claimant’s lifetime post-settlement and at a lower cost than AWP, shouldn’t this be acceptable to CMS in protecting their interests?.
Similar to the AWP scenario, medical treatment is generally priced at State Fee Schedule (SFS). If the claimant can access their treatment post-settlement at rates less than SFS, shouldn’t CMS allow the WCMSA to reflect that, regardless of the pricing methodology?
Making the Decision: Sample Employer Program
The decision whether to submit your WCMSA to CMS should not be taken lightly. Here is an example of how an employer might accomplish this goal:
1. Assure all WCMSAs are completed with the same methodology, regardless of whether or not they are submitted to CMS for approval
2. Do not submit WCMSAs to CMS for approval unless the services of a qualified, trusted and responsible Professional Administrator is leveraged:
- The claimant can access medications and medical treatment at rates lower than AWP or SFS
- Proper documentation of annual fund expenditures can also be submitted to CMS annually
- The claimant does not use WCMSA funds for items which they were not intended, and are used to pay for medical treatment and prescriptions related to the claim that Medicare would otherwise allow for and pay
3. Work with a WCMSA Professional Administrator who can offer their services at a fee so that professional administration becomes economically feasible in every case, regardless of size.
The question of whether to submit a WCMSA is one that requires careful consideration. Most importantly, the decision should be one that can be practiced consistently among a payer’s book of claimants, with standard procedures. In doing so, a mutual understanding can be assured for all of the parties involved in settlement – claimant, payer and Medicare.
About Jeff Gurtcheff
As the Vice President and General Manager, Jeff Gurtcheff is responsible for all aspects of the Helios Settlement Solutions business, including product development, account management, and driving operational efficiencies to ensure compliance and achieve optimal client satisfaction.
Prior to joining Helios, Jeff served as Regional Vice President of Auto Claims at The Hartford and Director of Workers Compensation Claim Practices where he was responsible for the development of a proprietary internal Mandatory Insurer Reporting tool, claim standards and procedures associated with Medicare Set-Asides, and Structured Benefit Services operations.
Helios, the new name for Progressive Medical and PMSI, is bringing the focus of workers’ compensation and auto-no fault pharmacy benefit management, ancillary services, and settlement solutions back to where it belongs – the injured party. Along with this new name comes a passion and intensity on delivering value beyond just the transactional savings for which we excel. To learn how our creative and innovative tools, expertise, and industry leadership can help your business shine, visit www.firstfilltosettlement.com or call 800.777.3574.