H.R. 5284 – ‘‘Medicare Secondary Payer and Workers’ Compensation Settlement Agreements Act of 2012’’ – Continued

Medicare Set-Aside Blog on May 7, 2012
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The new Medicare Secondary Payer bill became available over the weekend and, as expected, is almost identical to H.R. 2641 as it died in the 111th Congress. Other than some sections being reordered, the majority of the changes are adoptions of CMS protocols from the voluntary review program that the previous bill attempted to improve in ways that made more sense to the settling parties. This new version panders to CMS and gives the appearance that CMS’ policies are reasonable or even consistent with the MSP. The major changes are as follows:

1. Total settlement amount is now calculated exactly as CMS does in determining if WCMSAs are eligible for review.

2. All provisions about procurement cost reductions have been eliminated.

3. The section about authority to modify or terminate an MSA was removed in its entirety.

4. The safe harbor provision for settlements under $250,000 was changed from 10% to 15% excluding any conditional payment reimbursement and previously settled claims and that are mandatorily paid into the Medicare Trust fund whereas previously it was worded as an election by the parties.

5. The provision in the previous bill that all WCMSAs submitted would be presumed approved unless the Secretary disapproved within 60 days was altered to require notice of approval or disapproval within 60 days.

6. In an appeal, if the Secretary does not respond by a designated date, it is presumed approved whereas the previous version only allowed the parties to request an ALJ hearing.

7. Limitation on Liability section deleted the severability clause and added if the parties met their MSP obligations on the effective date of settlement then there would be no greater liability except in the case of fraud.

So is this bill better than the last three? I personally don’t think so. It still doesn’t address the fundamental flaw of the CMS review program and the subjective and overreaching nature of the review itself. Beyond the time it takes to obtain the approval, the amounts of the MSAs are the real issue. They are generally way in excess of Medicare’s exposure in the future treatment of these individuals and more than likely more than work comp would have paid out over the lifetime had medicals been left open. The industry is still being held hostage to unrealistic medical cost projections in exchange for the ability to close claims and take down reserves with some degree of finality. So long as the review program itself remains voluntary and unregulated, we will continue to pay too much for the vast majority of settlements to hedge against an unknown and potentially unrealized liability. But if the bill passes, we will at least be able to write those large checks sooner than before, if that is to be considered a victory.

It is the safe harbor that has the most potential for disaster for Medicare. The claims that Medicare needs protection from most will likely start settling magically for $249,999 or less because a maximum $37,500 MSA will statutorily protect its interest in cases that would otherwise have had six digit MSAs in excess of the now total settlement amount. While it is a great improvement to place those funds mandatorily into the Medicare trust fund as opposed to the claimants’ pockets, since at least that guarantees the funds will be spent appropriately on only Medicare covered related medical treatment, the cases that prevail themselves of that option will likely only be the ones where Medicare’s exposure greatly exceeds the contribution. If Congress is amenable to such a flat rate, it could just assess a tax on all settlements, not just work comp, meeting the CMS review criteria and dispense with the whole MSP program. Between the assessment and the $106,845,845.00 they would have saved last year in contractor costs, Medicare could just provide medical benefits to beneficiaries are otherwise entitled to Medicare through that lifetime mandatory payroll contributions and the issue would be moot. Of course I’d be unemployed with the exception of the years of MSP litigation we have to look forward to stemming from the past decade of bad MSA decisions.

So is the fourth time a charm? The bill was introduced with bipartisan support and Congressman Reichert is a member of the Trade and Health Subcommittee of Ways and Means. But it is already May of an election year. The bills in all previous versions, all introduced interestingly around this same time of year, have never obtained more than 22 sponsors, so the idea that the bill could get the necessary support prior to the election is a stretch of the imagination and we really can’t expect any progress until the 113th Congress starts in 2013. And let us not forget that many of the sponsors of the previous bills did not survive re-election so any progress made this summer could prove futile again anyway. Then there is the contents of the bill to consider. Even though it has improved significantly over the four versions, it will still have issues scoring. It carves out any MSP obligations for settlements under $25,000 and creates the costly safe harbor discussed above while still necessitating the contractors to administer the MSP programs on behalf of CMS; therefore, there is no way it could show no negative financial impact. And let us not forget that the bill is limited in scope to workers’ compensation, so what about under threshold claims and all the liability settlements where the parties have the most uncertainty and Medicare’s interests go ignored more often than not due to the uncertainty? Amendment of the SMART Act to statutorily define MSAs in such a manner that the CMS review program becomes unnecessary would be a far easier solution to the problems addressed in this bill and, with over 100 cosponsors already, has a far better chance of passing this term. Unfortunately, no one wants to make that bill “more complicated” so that it does stand a chance of passing this term, leaving those of us with MSA issues out in the cold.

Of course we could always take control of the issue privately and leave the government out of the process entirely and not need any legislation. If Medicare never makes a payment for which it is statutorily entitled to reimbursement, then we’ve met our obligations under the MSP and nothing in the voluntary CMS review program changes that. View the issue like the risk management issue that it is and maybe we can stop dreaming that the government is ever going to help us with it.

Full text of the new bill is available here.