February 28, 2022
Rasa Fumagalli JD, MSCC, CMSP-F
There has been much discussion in the Medicare Secondary Payer (MSP) compliance industry over the addition of Section 4.3 to the revised Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA) Reference Guide Version 3.5 (Guide) that was issued on January 10, 2022 by the Centers for Medicare and Medicaid Services (CMS). This controversial Section addresses CMS’ view of non-submitted Medicare Set-Aside (MSA) proposals. The provision states:
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 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 illnesses requiring attestation of appropriate exhaustion equal to the total settlement less procurement costsbefore 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.
Although CMS has always taken the position that in the absence of a CMS approved and properly exhausted WCMSA, it “may” refuse to pay future injury-related medical expenses until the entire settlement is exhausted, the language used in Section 4.3 is troubling. It is inconsistent with other statements in the Guide as well as the agency’s own regulations (42 C.F.R. § 411.46).
Section 1.0 of the Guide clearly states that “there are no statutory or regulatory provisions requiring that you submit a WCMSA proposal to CMS for review.” Since CMS review of a WCMSA proposal is voluntary, Section 4.3’s language that CMS will deny payment for injury-related medical expenses up to the total settlement amount less procurement costs as a matter of policy and practice is an overreach by CMS. Furthermore, this view creates a presumption that any non-submitted WCMSA is shifting a financial burden to Medicare without providing a method to rebut this presumption. It also overlooks the fact that CMS does not provide for a review of the cases that do not meet CMS’ internal workload review threshold for submissions.
Section 4.3 also points to 42 C.F.R. § 411.46 as general support for CMS to deny payment for treatment of work-related conditions if a settlement does not adequately protect the Medicare program’s interest. This reference however fails to address 42 C.F.R. § 411.46(d)(2) which discusses compromise settlements. This section states: “If the settlement agreement allocates certain amounts 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.”
The changes to the Guide have caused some parties to re-evaluate the pros and cons of entering into a settlement with a non-submitted WCMSA. This concern may have also been heightened by the circulation of a January 13, 2022, letter from CMS’ RO-9 Customer Service representative to a claimant in response to CMS’ receipt of notice of a workers’ compensation settlement that included funds for a non-submitted WCMSA. The CMS letter referenced portions of Section 4.3 of the Guide.
In a possible response to the industry’s concern about the addition of Section 4.3 to the Guide, CMS held a webinar on February 17, 2022, to discuss a variety of WCMSA topics. CMS’ representative, John Jenkins explained that Section 4.3 was added to the Guide to “clarify” CMS’ position on non-submitted MSAs. He advised that that when CMS reviews and approves a WCMSA, the marker in the Medicare beneficiary’s Common Working File (CWF) is fixed at the amount of the CMS determined WCMSA as opposed to the net settlement. Once the CMS determined WCMSA is properly exhausted, Medicare will pay as the primary payer for any additional injury-related care. On the other hand, whenever CMS becomes aware of a settlement that includes funds for a non-submitted MSA, a marker is placed in the Medicare beneficiary’s CWF reflecting the total value of the settlement less procurement costs and conditional payments. The impact of this marker is that injury-related claims may be denied until CMS removes the marker that is set at the net settlement amount. Medicare becomes aware of the existence of non-submitted MSAs when they are provided with MSA administration attestations and settlement documents. Jenkins advised that CMS does not use the Section 111 data to identify settlements that are not submitted to CMS for review. This author presumes this is due to the voluntary nature of CMS review of WCMSA proposals. Jenkins confirmed that Section 4.3 would apply as of January 11, 2022.
The impact of Section 4.3 will be felt at the time that a non-submitted WCMSA is exhausted, and Medicare is presented with an injury-related bill for payment. This will occur earlier when the non-submitted WCMSA is funded with a structure. When Medicare denies a bill, the Medicare beneficiary or their representative will have the opportunity to appeal the denial through the administrative appeal rights. The basis for the appeal would be the proper exhaustion of an objectively reasonable and defensible MSA that was prepared at time of settlement.
Jenkins also used the webinar to explain the projection methodology used by the Workers’ Compensation Review Contractor (WCRC) when evaluating a WCMSA proposal. Jenkins stressed the all-important need to protect Medicare from ever being presented with any injury-related bills. This is done by assuming the worst-case scenario when it comes to the need for possible future injury-related treatments. The fact than an individual has discharged themselves from any further injury-related treatment in the years prior to settlement is irrelevant when it comes to estimating future injury-related treatment. After all, it is possible that he may return for care. Similarly, an individual who is unable to move forward with an injury-related procedure due to co-morbid conditions, might get over the co-morbid conditions in the future and should have an MSA pay for the procedure. Jenkins also touched on the need to submit settlement documents in order to finalize a CMS approved WCMSA and addressed questions regarding the amended review timeline and other miscellaneous MSP compliance matters.
There is no doubt that Medicare is a secondary payer when “payment has been made or can reasonably be expected to be made under a workmen’s compensation law or plan of the United States or a State . . . .”(42 U.S.C. § 1395y(b)(2)(A)(ii), § 1862(b)(2)(A)(ii) of the Social Security Act, 42 C.F.R. § 411.20(2)(i)). It is also clear that Medicare is precluded from making payment for services to the extent that “payment has been made or can reasonably be expected to be made under a workers’ compensation plan, an automobile, or liability insurance policy or plan (including a self-insured plan), or under no-fault insurance.” (42 U.S.C. § 1395y(b)(2)(A)(ii), § 1862(b)(2)(A)(ii) of the Social Security Act, 42 C.F.R. § 411.20(2)(ii-iii)). Given an employer’s responsibility in an accepted workers’ compensation claim to pay for ongoing injury-related medical services, both defense and petitioner attorneys generally have no issue with the funding of a Medicare Set-Aside in certain settlements to avoid cost shifting these expenses to Medicare.
The main issue with CMS review is that it often results in overfunded CMS WCMSA determinations since CMS consistently projects for worst case future treatment scenarios. If an individual’s injury-related treatment has plateaued and he has not received any medical treatment for years before the CMS submission, it is extremely unlikely that a workers’ compensation carrier would ever have to pay for any further treatment. If the WCRC and CMS looked to evidence-based medicine guidelines and a “reasonably likely to occur” standard of projection rather than a possible worst case scenario standard in estimating future injury-related care, the number of WCMSA submissions would significantly increase. This simple action by CMS could alleviate the decline in WCMSA submissions.
An additional issue with the CMS submission process is that it is often unduly burdensome with development letters being issued for information that is simply unavailable. These conditions spawned the birth of the non-submit MSAs. The non-submit MSAs were never intended to cost shift to Medicare as evidenced by the voluntary sharing of their existence with Medicare.
Section 4.3 of the Guide will impact a Medicare beneficiary when the non-submitted MSA is exhausted since the marker in the beneficiary’s CWF will reflect the total settlement less procurement costs. Although this will trigger a denial of additional injury related expenses a non-submit MSA that is projected based on evidence-based medicine guidelines and properly exhausted should withstand scrutiny. It is also unlikely to exhaust prematurely. It is unfortunate, however, that CMS is placing additional and unnecessary burdens on Medicare beneficiaries that have suffered workplace injuries. The addition of Section 4.3 to the Guide is deleterious to the injury victim. Rather than relying on the defense to address the MSA in a settlement, the petitioner/applicant attorneys should take charge of the process. Synergy Settlement Services is here to help you with a wide array of services.