Improper use of the “donut hole” in Part D calculations

Medicare Set-Aside Blog on November 11, 2008
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A recent discussion on the NAMSAP listserv focused on the improper use of the “donut hole” in Part D calculations, at least in the context of workers’ compensation settlements. The donut hole was an ill-considered solution to the problem of expanding Part D allocations and has realistic potential to be the subject of litigation in the future.

Along with other industry sales gimmicks like free file copies, medically baseless DURs, guaranteed MSAs and the latest promise of full MMSEA compliance in exchange for an exclusive MSA relationship, the donut hole was used more to gain market share than as a good faith effort to provide expertise in settlements involving the MSP.

From a practical standpoint, for those of us who are involved in the settlement process beyond just furnishing an MSA recommendation, the donut hole is a major impediment to settling a case and to the ongoing administration of a claimant’s Medicare Set-Aside. When faced with an inadequately funded MSA, the path of least resistance for both the claimant and their attorney is to simply refuse a settlement. Alternatively, informed attorneys request that additional funds be added to the settlement as compensation for the co-pays and deductibles that were excluded from the MSA. Either way, there is little real savings for the carrier, an increased burden of administration on the custodian/claimant and a long-tail liability created for all parties.

There are legitimate, defensible ways to minimize Part D allocations that do not jeopardize a settlement or compromise the reasonableness standard when protecting Medicare’s interests. By our estimation, the donut hole is not one of them.

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