GAO Released MSP NGHP Report

Medicare Set-Aside Blog on April 5, 2012 | Posted by


Well the long awaited GAO study requested by Congressman Stark in August 2010 was finally release this week and I am not certain whether my reaction is underwhelmed or disappointed. What was hoped to shed light on the MSP problems endured by the insurance industry for Congress, this report does little more than acknowledge and support CMS’ recent “efforts” to alleviate some of the problems. Yes they carved out some cases where they will not pursue recovery (how many cases have you settled this year for less than $300?). And yes, they did not renew the MSPCR contract (which was granted under suspicious circumstances to begin with and likely should have been terminated for performance issues years ago – average call wait time of 38 minutes noted on page 21 is laughable). But instead CMS intends to create a whole new hierarchy of contractors which they have started putting out to bid, which will ultimately bring in a whole new crew of people even more unfamiliar with the MSP applications and underlying legal issues than those that were are at least used to dealing with. By the time they award this contract and we endure another series of GAO bid protests, it could be another 2 years before we see this new combined contractor operational.

But the two biggest issues that needed Congressional attention were apportionment and subjectiveness of the contractors and this report will not bring the needed attention to them. Both issues were glossed over in passing as if insignificant. On page 28, the section titled “Demand Amounts in Liability Settlements” addresses what they call “proportionality.” GAO lets the issue rest on CMS’ assertion that the concept is “in conflict with MSP provisions granting CMS a priority right of recovery, which entitles Medicare to full recovery for the expenses it paid up to the settlement amount.” Problem is that is CMS’ interpretation of the MSP, and Chevron deference aside, that concept is not stated in the MSP itself. Case law dictates that Medicare is entitled to recover only from medical damages, and the total settlement amount represents other legal claims for damages, such as lost wages and pain and suffering. To give Medicare unfettered access to unrelated property would be akin to allowing your mortgage company to repossess your car for failing to make mortgage payments. Yet that is a topic currently being presented to the Supreme Court so I won’t fault GAO for avoiding it. However I do take offense at the justification of CMS’ position by accepting its’ assurances that the ROs can be contacted to request pre-demand compromises in the event that the total settlement would eat up the entire settlement [yeah, how often does that happen]. This doesn’t change the due process implications in that CMS routinely take more than its share from the vast majority of its recovery actions; this merely adds equal protection issues in that some beneficiaries can be treated differently than others.

As to the WCRC, yes we send more cases than anticipated, yes we send cases that are not reviewable and yes, we want assurances that no MSA was appropriate – because CMS has everyone scared to death that they have infinite perpetual recovery rights and stakeholders will pay any amount to believe that their obligations to the federal government have been met. When I refer to paying any amount, I mean the ridiculous numbers occasionally churned out by the WCRC with little to no support from the underlying legal claims, however once made, maintains the full support of CMS. MY hope from a financial standpoint was that the GAO would have recognized that the efforts of the WCRC are redundant in that the private sector already pays 3rd party vendors to perform that function and that the WCRC is meant to review those proposals for adequacy. Instead it reviews all of the supporting evidence independently, essentially rendering the proposal superfluous. With a little transparency in the review criteria, CMS could tell stakeholders how to calculate a WCMSA in the manner in which it prefers, right or wrong, and allow the WCRC to audit submissions to ensure compliance and in turn, be able to move many more cases through the system and likely less cost. Instead we are going to rely on automation of the web portal and blame submitters for delays in hopes that they will stop sending non-reviewable cases. Well I guess that’s progress. I was also humored that a lot of hope rests upon the study CMS’ contracted due to be complete by June [no pressure there to those involved 🙂 ] and that we are expecting an MSA User Guide [no comment].

With regard to the GAO’s recommendations, there were 5, all of which CMS agreed to consider because none placed any undue burden upon it:

review recovery thresholds periodically for appropriateness to ensure that the agency’s recovery efforts are being conducted in the most cost-effective manner possible, and not require NGHPs to report on cases for which the agency will not seek any recovery [People will settle cases for one cent less to avoid reporting and Medicare will again be placed in a position of ignorance in direct contradiction of the purpose of the statute. Just because no reimbursement obligation existed at the time of settlement doesn’t mean that CMS does need to know to exclude related future benefits as well].

consider making the submission of ICD-9 codes an optional component of reporting for liability NGHPs. [It’s better to rely on CMS to determine what is related an not when making future benefit exclusions?]

develop a centralized MSP program website, to include links to information about the various parts of the MSP process; [about time – good luck if you don’t know where to find them]

develop guidance regarding liability and no-fault set-aside arrangements; [again, about time]

review and revise the correspondence with beneficiaries to ensure that beneficiary rights and responsibilities are more clearly communicated. [isn’t that what they should have done following the Haro injunction?]


Now we wait and see if the Ways and Means committee takes any action on the basis of the report before the session runs out. Given we are in an election year, action needs to take place this summer if we are to hope that anything happens at all. If no action is take, H.R. 1063 and S.B. 1718 will die and MSP related legislation will have to be reproposed in the 113th Congress, which is not necessarily a bad thing. MSAs were not addressed in those bills and this would be an opportunity to propose a more comprehensive solution. But regardless, we shall continue to suffer in the interim.

For the full report, click here.