The Economics of Medicare Set-Asides

Medicare Set-Aside Blog on November 2, 2012
Posted by

On November 8, 2012, MEDVAL’s General Counsel, Jennifer Jordan, will be presenting “The Economics of Medicare Set-Asides” at the 21st Annual National Workers’ Compensation and Disability Conference® in Las Vegas.

While Medicare Secondary Payer (MSP) sessions have become rather commonplace at insurance conferences, this one will prove to be rather unique. Despite over ten years of active MSP enforcement by the Centers for Medicare and Medicaid Services (CMS), the industry continues to struggle with the post-settlement obligations with regard to future medical treatment and how they are addressed in a settlement situation. Many hold the erroneous assumption that the CMS MSP review programs are legal or regulatory obligations. Industry participants have spread misinformation without necessarily understanding the legal implications of the inaccuracies in their articles, websites and presentations. This session proposes to debunk some of these MSP myths and provide attendees with some new considerations to achieve a better MSP compliance protocol.

With a clear understanding of the legal requirements of the MSP law and repudiation of the whims of CMS, the parties recognize that they have choices and MSP compliance becomes a whole different ballgame. Because the federal government does not have any rights to insurance settlement proceeds unless and until it makes a related Medicare payment for which it is entitled statutory reimbursement, the exercise suddenly becomes how to prevent those reimbursement rights from being triggered.

Seeking CMS approval prior to settlement of future medical allocations is certainly one way to address the MSP. But it is not the only way, can be very costly and may not necessarily provide the assurance assumed by the industry. During this presentation, Tim Michels from Maryland’s Injured Workers’ Insurance Fund (IWIF) will present some very telling historical claim data that demonstrates exactly what expenses his organization absorbed, beyond its actual future medical exposure, when seeking CMS approval of WCMSAs prior to settlement. As an organization that entirely opted out of the CMS voluntary review program for a period prior to the State of Maryland enacting emergency regulations requiring CMS approval prior to settlement, this data is also able to show the affects the CMS voluntary approval program had on the overall settlement process at IWIF.

The other misconception that will be explored is the concept that obtaining CMS approval provides some kind of finality to an insurance settlement. The prevailing belief throughout the industry is that funding a CMS-approved WCMSA, even if self-administered, terminates primary payer’s exposure under the MSP. Certainly CMS has told us that we can reasonably rely upon its opinion; however, only a statutory or regulatory provision can guarantee those assurances. No such provision exists nor has Congress addressed such provision in either piece of pending MSP legislation. If obtaining CMS approval of a WCMSA means having to calculate the future medical exposure in a more costly manner, with the additional costs associated with the great delay in obtaining that approval, shouldn’t we get more than just a reasonable assurance that CMS’ opinion is meaningful?

Panelists Jim Kennedy of Carlton Fields and John Scott of MGU Speciality Risk Services will conclude the presentation with discussion of some exposures that aren’t typically considered when making MSP decisions.

In addition to having no guarantee that a CMS approval will backstop a primary payer’s future exposure, nearly 90% of all MSAs are self-administered by claimants, meaning that primary payers have no control or means to track whether MSA funds are used for their intended purpose. It is important to understand that while the MSP is the trigger for the statutory reimbursement, it is actually other federal debt collection laws that come into play when triggered. These should be well understood given that they carry separate regulations and penalties that aren’t typically considered in MSP decisions. For example, in 2009, the Federal False Claims Act was amended to extend liability to anyone who causes the federal government to make an overpayment, regardless of intent. Any payments made by Medicare post-settlement that it is statutorily prohibited from making due to the MSP exclusion is technically an overpayment and susceptible to a FCA claim.

Given that the majority of the insurance industry has dealt with the MSP throughout the past decade with an overabundance of caution and unwavering deference to the federal government’s recommendations, the goal of this presentation is to provide attendees with the rest of the story so that they can make informed decisions rather than operate out of fear of the unknown. The funding of future unknown medical expenses to prevent Medicare from making a statutorily-prohibited payment is a risk management issue, not a compliance issue. It is time the risk management industry recognized it as such. If, at the end of the day, attendees still elect to obtain CMS approval, given those assurances are the only ones being offered by the government at this time, then at least they will do so with the knowledge of cost of the approval and the dubiousness of the guarantee it provides. Perhaps next year the conference will be ready to discuss alternative risk transfers and other means of dealing with MSP issues.

Session Information:

The Economics of Medicare Set-Asides (LR4)
Thursday, November 8, 2012
8:45 – 10:00 A.M.
LVCC N254-N256


Also come by and visit representatives from MEDVAL in the exhibit hall at Booth #841.

Email your comments to Comments