CMS Approval of Medicare Set-Asides
For Workers’ Compensation Medicare Set-Asides (WCMSAs) the Centers for Medicare and Medicaid Services (CMS) has provided a review process to seek approval for the amount of a MSA Allocation. While CMS review is not statutorily required, CMS has provided guidance that Injured Workers who do not submit a MSA to CMS for approval do so at their own peril.
CMS Guidance Regarding Non-Submit or Evidence-Based MSAs
On January 11, 2022, CMS released new guidelines regarding “Non-Submit” Medicare Set-Aside Allocations. Under §1.1, of Version 3.5 of its Workers’ Compensation Medicare Set-Aside Arrangement Reference Guide (Guide) “Clarification has been provided regarding the use of non-CMS-approved products to address future medical care (Section 4.3)” as follows:
“A number of industry products exist with the intent of indemnifying Insurance Carriers and CMS beneficiaries against future recovery for conditional payments made by CMS for settled injuries. Although not inclusive of all products covered under this section, these products are most commonly termed “evidence-based” or “non-submit.” 42 C.F.R. 411.46 specifically allows CMS to deny payment for treatment of work-related conditions if a settlement does not adequately protect the Medicare program’s interest. Unless a proposed amount is submitted, reviewed, and approved using the process described in this reference guide prior to settlement, CMS cannot be certain that the Medicare program’s interests are adequately protected.
As such, CMS treats the use of non-CMS-approved products as a potential attempt to shift the financial burden by improperly giving reasonable recognition to both medical expenses and income replacement. As a matter of policy and practice, CMS will deny payment for medical services related to the WC injuries or illness requiring attestation of appropriate exhaustion equal to the total settlement fewer procurement costs before CMS will resume primary payment obligation for settled injuries or illnesses. This will result in the Claimant needing to demonstrate complete exhaustion of the net settlement amount, rather than a CMS-approved WCMSA amount.”
The language referencing an “improper shift” mimics the language of the Medicare Secondary Payor (MSP) statute. 42 CFR Section 411.46 (b)(2) reads: “If a settlement appears to represent an attempt to shift to Medicare the responsibility for payment of medical expenses for the treatment of a work-related condition, the settlement will not be recognized.” In essence, CMS is treating Non-Submit MSAs as an attempt to improperly shift the financial burden in workers’ compensation cases and is signaling its willingness to use MSP’s statutory authority to set aside the term of the settlement and refuse payment for injury-related care.
The Current CMS Review Threshold
CMS will review proposed MSA Allocations if the Claimant is currently a Medicare beneficiary and the total settlement is more than $25,000.00, or if the settlement amount exceeds $250,000.00 and the Claimant has a reasonable expectation of becoming a Medicare beneficiary within thirty (30) months of the settlement date. A “reasonable expectation” exists if:
- The Claimant has applied for Social Security Disability Benefits, or;
- The Claimant has been denied Social Security Disability Benefits but anticipates filing an appeal, or;
- The Claimant is in the process of appealing and/or refiling for Social Security Disability Benefits, or;
- The Claimant is (or will be) at least 62 years and 6 months old, 120 days from today, or;
- The Claimant has End-Stage Renal Disease (ESRD) but does not qualify for Medicare based on ESRD.
In determining the total amount of the settlement, the amount of any prior settlements for the same date of injury is added to the current settlement. For structured settlements, the amount the annuity is expected to pay out over the life of the settlement is used to determine the settlement amount. The present-day value or the cost of the annuity may not be used. For cases where the CMS review threshold is not met, Medicare’s interests must still be considered.
What are Non-Submit and Evidence-Based MSAs (EBMSAs)
Non-Submit MSAs are products sometimes pushed by the Insurance Carrier to set-aside an amount lower than what would normally be approved by CMS or to avoid the settlement delays involved in obtaining CMS approval. Evidence-Based MSAs consider guidelines developed by the insurance-centric medical panels to justify weaning care based on generic treatment assumptions rather than considering the Injured Worker’s personal treatment history as required by CMS. As a result, the amount allocated is usually lower than the amount CMS would approve. To learn more about Non-Submit MSAs, click here to read our blog article.
The Risks of Non-Submit MSAs
CMS has stated that if the MSA is not submitted, reviewed and approved, it may require the Injured Worker to spend the entire net settlement amount on injury-related care before Medicare will pay bills. The net settlement is the total settlement minus attorneys’ fees and litigation costs, as well as conditional payment. The net settlement includes:
- Future prescriptions
- Other Medicare and non-Medicare covered medical expenses
- Indemnity (lost wages)
- Payout totals for annuities rather than the cost or present-day value
- Settlement advances
- Amounts forgiven by the Carrier
- Prior settlements on the same claim
- Liability settlement on the WC injury
With the way CMS defines the net settlement, the amount of the net settlement may be more than the Injured Worker actually received in-pocket! This creates a situation where the Injured Worker would be forced to forgo treatment or appeal Medicare’s denial and try to argue after the fact that the Non-Submit MSA was adequate. The Medicare Appeals Process is a 5-step process that is quite onerous. Click here to learn more.