S.2731 – Medicare Secondary Payer and Workers’ Compensation Settlement Agreements Act of 2013 Introduced to Senate

Commentary, Medicare Set-Aside Blog, Medicare Set-Asides, MSP News on August 1, 2014
Posted by Jennifer Jordan, JD, MSCC

On July 31, 2014, Senator Bill Nelson of Florida introduced the Senate version of H.R. 1982. Currently co-sponsored only by Senator Rob Portman, the bill was read twice, referred to the Committee on Finance and then the Senate promptly began its summer break. With introduction this late in the session, it will be interesting to see what progress the legislation makes. Once the Senate returns from break in September, there are only 27 days in session remaining in the 113th Congress. I’m not saying that it is impossible for the bill to pass given that the SMART Act was passed in a similar lame duck session, but it will be challenging.

The language of the bill appears to be essentially the same as the House version. It still outlines criteria for creating a “qualified MSA” and codifies some aspects of the voluntary CMS approval process, so at least legally requiring an appeal and timely processing that we don’t enjoy now if you elect to obtain approval. The bill however creates safe harbors below which many WC claims will magically start settling, and also the questionably constitutional provision to turn over MSA funds to the government in exchange for protection from “certain liability.” Short of being classified a tax, I’m not sure what right the government has to those funds which will ultimately fall into the general Medicare Trust and prop up the system currently predicted to exhaust in 2030, meaning that the beneficiaries who once had funding provided by a primary payer for maybe 30+ years of medical expenses will no longer be guaranteed lifetime medical care if the Medicare program fails, as predicted by its own trustees.

Fundamentally, the “qualified” requirements can never overcome the entirely subjective process of MSA evaluation. We can currently, without any legislation, do the same thing as this bill proposes and still run the same risks of CMS later disagreeing, unless of course we voluntarily seek its opinion prior to settlement and in doing so agree to fund the exposure at the Agency’s preferred calculation rates. So while the bill outlines what it takes to be considered “qualified”, there is still no guarantee that a party to the settlement will still not run the risk of CMS later determining that in its opinion, a particular MSA is not qualified because the agency finds some aspect of the MSA did not meet its standards. One glaring omission is that the bill statutorily requires CMS to recognize state fee schedules but as most of those do not include exact rates for pharmaceuticals, what is the proper calculation rate? Essentially we are right back in the same position of feeling obligated to seek CMS’ approval just to alleviate the fear of the unknown that will not likely take place for some years, if ever.

While this bill certainly does fix many of the procedural problems with the current system, it does not do much to reduce our overall costs. The vast majority of the nation to this day still prefers to obtain CMS approval when it is available, even if they understand the voluntary nature of the program. Due to the long term risk, historical actions of the industry would indicate that our WC community would rather pay more and obtain the only certainty available, rather than self-insure this unknown.  Despite all the doubt touted this week about the newly available MSA insurance, we can currently accomplish all these same things and more by identifying and insuring the future medical exposure pursuant to state law requirements, as opposed to CMS preferences, and put into place an entity that will preserve the record and mount that battle at such time as CMS makes an actual benefit determination subject to all the current appeal rights under the Medicare laws, and all without relinquishing any further control to the federal government over this state law issue. This legislation provides some bandaids for the current administrative problems but does not truly address the overall WC settlement cost drivers because at the end of the day, it will still be CMS who someday subjectively determines just how much was enough.


The text of the bill is not yet posted but will soon be available here from the Library of Congress.