Is CMS Submission really voluntary?
Question posted on Mark Walls’ “Work Comp Analysis Group” on Linked-in.
Submission of WCMSAs to CMS for approval? Is it really a “voluntary” process?
It seems there is a belief among some MSA companies that many times it is best to forego CMS approval although the WC case meets the current CMS review thresholds. Although CMS may state that WCMSA approval is a “voluntary” process, I question the motives of those giving this advice. I’m curious to hear the WC group’s thoughts on this issue.
I know from experience that many savvy plaintiff attys are insisting on CMS approval of the MSA arrangement before finalizing the settlement of the WC claim and for good reason. Here is an excerpt from a CMS memo of 7/11/05 that outlines the dangers for their client if CMS approval is not sought and the MSA is not fully funded per CMS recommendations:
The parties may proceed with the settlement, but any statement in the settlement of the amount needed to fund the WCMSA is not binding upon CMS unless/until the parties provide CMS with documentation that the WCMSA has actually been funded for the full amount as specified by CMS that adequately protects Medicare’s interests as a result of its
If CMS does not subsequently provide approval of the funded WCMSA amount as specified in the settlement and proof is not provided to CMS that the CMS-approved amount has been fully funded, CMS may deny payment for services related to the WC claim up to the full amount of the settlement. Only the approval of the WCMSA by CMS and the submission of proof that the WCMSA was funded with the approved amount, would limit the denial of
related claims to the amount in the WCMSA. This shall be demonstrated by submitting a copy of the final, signed settlement documents indicating the WCMSA is the same amount as that recommended by CMS.
As a reminder, the claimant may be at risk if the WCMSA is funded for less than the amount that CMS determines to be adequate to protect Medicare’s interests.
As most MSA assignments are done at the expense of the defense, protecting the claimant’s future Medicare benefits might not matter to some MSA vendors or their clients. Given the above written guidance from CMS, WCMSA approval when review thresholds are met just doesn’t seem so “voluntary” to me.
Response from MEDVAL
To answer your original question, the motivation of any reputable MSA vendor is to ensure you are in full compliance with the MSP while diligently working toward an MSA does not create an unlawful financial burden or become an impediment to reaching a settlement. In 2003, I began using the phrase “lowest defensible allocation” to capture our philosophy of MSP compliance. Since then, the phrase has been widely co-opted by the marketing/sales arm of the Medicare Set-Aside industry with a limited understanding of its implications- past, present and future.
Lowest – That is the easy part. Anyone can make an MSA low and just about everyone did, particularly on the Part D component prior to June 1, 2009. In a race for market share and backed by private equity investors, some companies threw caution to the wind in exchange for business growth and did everything possible to make the number low. Drug Utilization Reviews, Donut hole calculations, patent expirations, off-label exclusions, generic substitutions; the world was their oyster. Sometimes the MSA was so low, you couldn’t understand how this claimant that was previously spending $12,000 per month on Rx was now going to switch to OTC ibuprofen for the remainder of their 44 year life expectancy. Mark, you were absolutely right to seek a “second opinion” when the MSA was too good to be true because you correctly understand per your post that “the goal of this entire exercise with MSAs is so that CMS does not have to make payments for medical treatment related to a workers’ compensation claim” If that standard is met then there will never be an issue with CMS down the road. The question now becomes, what happens when something goes wrong?
Defensible– Now it gets a little trickier. I think the jury is out on whether CMS will ultimately disregard their prior approvals. There is a lot of low hanging fruit for them to go after before tackling this legal burden.
One exception may very well be in the Part D portion of the MSA. Prior to independently reviewing Rx, CMS would send their “approval” letters out with this language (emphasis added by me)
“You proposed that a WCMSA in the amount of x be available for the purposes of paying future medical services related to the work injury or disease that would otherwise be reimbursable by Medicare. We note that an amount of x was submitted for future prescription drug treatment. We have evaluated your proposed to protect Medicare’s interests with a WCMSA for future medical expenses related to x’s work injury or disease. We have determined that x which is a combination of the reviewed future medical treatment and the future prescription drug costs that are noted in the submitted cover letter, adequately considers Medicare’s interests”.
A careful reading of that language seems to indicate they have left the door open on the Rx issue. I personally do not believe that CMS will come after these settlements, except in the most egregious instances, but I do think they have reserved the right. I do not spend much time worrying about the issue because we never supported the use of DURs or Donut hole calculations in WCMSAs under the theory that we couldn’t defend our use of the methodology if and when we were called upon to do so.
Here is a scenario that I have often imagined being applied to those firms that couldn’t resist the market pressure.
Plaintiff Attorney: “Why did you artificially reduce the use of my client’s drug allocation in your MSA report dated 5/31/2009? At the time he was currently taking over $12,000 per month in prescription medications and you allocated $1,000 per year. Can you enlighten us on your methodology?”
Self-Insured MSA Vendor (because E&O limits have long since been exhausted): “Well we received this equity investment and had to grow revenues 170% per year. So we began having our sales force push DUR’s for $500 per case and applying the donut hole calculations to gain market share by convincing our clients we would save them millions of dollars. Since CMS wasn’t actually reviewing what we sent, it was a great strategy. We figured we would be long gone before any of this came home to roost”.
John Williams makes a valid point. Your vendor has to be prepared to stand behind their work product over the long-term and have the internal legal and clinical resources to defend themselves and assist their clients if and when challenged by CMS. It becomes a lot easier when you operate under the assumption that one day you will be called to answer for your actions.
In the interest of full disclosure, my firm did use patent expirations and off –label exclusions because we believed these practices were inherently defensible and supported by independent evidence and the law (regardless of what CMS does in their independent review program). Our goal was never to make the MSA artificially low. The goal was to make it a reasonable protection of Medicare’s interests without creating a windfall for the claimant or increasing the defendant loss ratio by a couple of percentage points.
In addition to all the problems John correctly identified with the WCRC “voluntary” review program, they simply do not understand the concept that the plaintiff may have motivations for treatment other than medical necessity. The treating doctor’s opinion is the gold standard as far as CMS is concerned (in most jurisdictions) and the claimant’s past treatment is considered a reliable predictor of future needs. That coupled with the problems noted above, is why so many people are willing to abandon the comfort of CMS approval for the great uncertainty future enforcement action.
Where I disagree with Mr. Williams is his theory that it is better to have CMS approval in hand, even if you elect to disregard their opinion later, than to forego the process altogether. Keep in mind the only cases were future payments made by CMS are going to be an issue is when an allocation was inadequate from the beginning and the claimant seeks treatment from Medicare in the future. In that scenario, I would rather be the carrier that made a good faith allocation based on the facts at the time of settlement and in accordance with state law, than the carrier with a CMS opinion letter in hand and a prematurely exhausted allocation. In the first scenario, the burden of proof is on Medicare to demonstrate how their interests where not adequately protected. In the latter, the burden shifts to the carrier to prove Medicare’s interests were protected. I think that will be a difficult hurdle to overcome particularly when the allocation is exhausted. It’s a fine distinction but our opinion is that if you ask for CMS’ opinion (which they consistently say is voluntary and not to ask if you don’t like it), then you are stuck with the outcome and not much of a defense if and when the case resurfaces in the future.
The suggestion that you should be worried about a vendor that suggests not submitting to CMS is totally without merit. I believe you should be more worried about a vendor that DOES NOT present the option to you for consideration. That doesn’t mean you need to follow the advice. In fact, after the June 2009 memo and contrary to our best advice at the time, most of our clients chose to continue to submit to CMS. Once the decision was made, it was time to figure out how to mitigate the additional costs. Some, like Janice indicated in her post above, decided certain claims were just too expensive to settle. Others took a wait and see approach and closed the indemnity in the hopes of setting medicals in the future (or that the medical record would improve by virtue of the claimant not seeking as much treatment). Still others believe a settled WC claim is the best WC claim. They made the decision to seek CMS approval on all eligible claims.
We believe best practice now dictates taking the time to resolve ambiguous issues prior to submitting to CMS (e.g. getting clarification on that three year old SCS recommendation or asking the treating doc exactly what medications are being prescribed and for what duration). The goal is to leave nothing to the imagination of our friends at the WCRC. WCRC creativity with future treatment regimens equals large and unexpected counter approvals. And even if you expend your best efforts, CMS may still come back with an opinion riddled with mistakes and inaccuracies.
Submitting a case for CMS’ opinion is a risk management decision that the payer needs to make. Some of our clients have analyzed the risks and decided to completely forgo the review program and indemnify the claimants on the back end of the claim. They believe (as do I) that it is better to develop a sound methodology to protect Medicare’s interests, fairly evaluate and pay the claim and defend or pay a small percentage of claims that go wrong in the future. The alternative is to settle 100% of their claims for more than they are currently worth. Some times much more.
Ultimately, a cost/benefit analysis has to be made. Will CMS be able to recover funds post settlement when a valid MSA was created but was not subjected to the flawed and arbitrary review program? Or should we adhere to the WCRC review protocols where some cases will not be adversely affected but where others end up costing 2X to 5X more than necessary? The answer really depends on the types of claims you handle and your organization’s appetite for risk. Personally, I think too much weight is being put on future hypothetical actions by CMS (which to date they have shown little interest in pursuing against payers or attorneys that have made good faith efforts to comply with the MSP) and not enough interest in the cost of foreclosing the risk. But reasonable people can have a different opinions. I see our job as presenting the pro’s and con’s of any proposed action and letting our clients make the decisions that only they are in a position to decide.