Countdown to October – Are You Ready for LMSAs and NFMSAs?
We are currently four months away from CMS implementing their new workflows for Medicare Administrative Contractors (MACs), which outline how they will handle bills when there is a Liability Insurance Medicare Set-Aside Arrangement (LMSA) or No-Fault Insurance Medicare Set-Aside Arrangement (NFMSA) involved in the settlement. You may be aware that, in February 2017, CMS took another step to clarify that, pursuant to the Medicare Secondary Payer Act (MSP) , Medicare’s interests need to be considered in liability insurance  and no-fault insurance  claims, wherein Medicare is a secondary payer. Interestingly, the news came from CMS in the form of a one-time announcement in a February 3, 2017 MLN Matters Article (Article) , which was noted to be intended for physicians, providers and suppliers that submitted claims to MACs; specifically, the Article advised the physicians/providers/suppliers and their billing departments that, effective October 1, 2017, the MACs will not pay for services or items that should be paid from an LMSA or NFMSA.
Minimal direction, with respect to claim payments as related to LMSAs and NFMSAs, can be found in CMS’ publication, Change Request 9893 (CR 9893) . CR 9893 and the February 2017 CMS Article indicated that CMS will establish two new set-aside processes for LMSAs and NFMSAs; moreover, the system will be able to detect an LMSA or NFMSA record based on diagnosis codes, similarly to the way a Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA) record is detected. CR 9893 instructs MACs on when to deny payment for items or services that should be paid from an LMSA or NFMSA fund; specifically, when denying a claim based upon the existence of an open LMSA or NFMSA MSP record, the MAC should include the following remark codes as appropriate to the situation:
- N723—Patient must use Liability Set-Aside funds to pay for the medical service or item.
- N724—Patient must use No-Fault Set-Aside funds to pay for the medical service or item.
- MSN 29.33 – Your claim has been denied by Medicare because you may have funds set aside from your settlement to pay for your future medical expenses and prescription drug treatment related to your injury(ies).
Where appropriate, MACs may also override and make payment for claim lines or claims on which:
- Auto/no-fault insurance set-asides diagnosis codes do not apply, or
- Liability insurance set-asides diagnosis codes do not apply, or are not related, or
- When the LMSA and NFMSA benefits are exhausted/terminated, and an accurate accounting has been completed.
How Does CMS’ One-Time Announcement Impact You?
At first view, the February 2017 CMS announcement appears to affect only the medical community; however, it should also absolutely serve as notice and a warning to those attorneys, claims professionals, and stakeholders, who have not been considering Medicare’s interests in liability and no-fault (including auto) claims for which Medicare is a secondary payer. CMS has clearly indicated that it is in the midst of establishing two new set-aside processes – for LMSAs and NFMSAs – with “the policies, procedures, and system updates required to create and utilize an LMSA and an NFMSA MSP record, similar to a WCMSA MSP record.” Again, this language is a notice to stakeholders that Medicare’s interests should be protected in liability and no-fault claims, where Medicare is a secondary payer.
It’s Time to Be Prepared
If you already have a plan in place and are currently considering Medicare’s interests in liability and no-fault (including auto) claims, we simply suggest you take a fresh look at your internal policies to ensure the proper protocols are in place to adequately protect Medicare’s interests and attain MSP compliance. If you do not have a plan in effect, it is time to make one. While we expect CMS guidelines (and, perhaps a formal CMS review program for those who opt to participate in the same), no such formal guidance is yet available; nevertheless, in an effort to achieve MSP compliance, we recommend you create a plan of action and establish internal policies to consider Medicare’s interests. As you develop your plan, we suggest consideration of the following:
- Establish proper internal protocols and best practices to identify the liability and no-fault claims for which Medicare’s interests should be considered;
- As you move toward settlement, complete a thorough medical-legal analysis for each claim;
- If an LMSA/NFMSA is determined to be appropriate, be aware that several factors may impact the actual funding of the LMSA/NFMSA, such as: insurance policy limits, statutory tort caps, case law, and negligence rules; and
- Have a plan to handle the potential for insufficient funds.
The settlement of a liability claim for less than full value can pose a problem – and red flag – for CMS as, (1) CMS is entitled to full reimbursement of all medical expense payments made under the claim by Medicare (i.e. conditional payments); additionally, (2) regarding anticipated future medical expenses, CMS (as the secondary payer) has historically taken the position that it is the primary payer’s responsibility to set aside funds that will cover future Medicare-covered medical expenses related to the injury over the individual’s life expectancy. Unfortunately, CMS’ expectation of full recovery is inconsistent with liability cases that typically settle for less than the full value of the claim. Ultimately, the problem is that there may not be enough money to fully cover conditional payments, damages, future medicals, and other related costs; furthermore, CMS may not recognize apportionment of said costs, or the manner in which settlement funds are allocated per agreement by the parties. With insufficient settlement funds to cover conditional payments and/or fully fund the LMSA, the parties are unable to comply with MSP policies in accordance with CMS practices. The consequences could be profound as cases may not be able to settle or will require court intervention, thereby resulting in an inundated court system weighed down with an onslaught of expensive and time-consuming cases.
Ensuring that Medicare’s interests have been considered in both liability and no-fault claims is mandatory. Failure to do so can impact all parties involved so that the Medicare beneficiary may be prohibited from obtaining medical care, and the attorneys could be subject to malpractice claims.
From CMS’ recent publications, it is clear: CMS is in the process of developing two new set-aside processes for LMSAs and NFMSAs. It is not yet clear, however, how these processes will be implemented; notwithstanding the same, awareness of the factors that could impact LMSAs and NFMSAs, and the resolution of liability and no-fault claims should be considered prior to October 1, 2017. The preparation of a reasonable and defensible LMSA or NFMSA should be supported with efforts to attain MSP compliance, and such actions should be documented and memorialized in every settlement. As an MSA provider, we are committed to helping you put the proper protections in place to achieve MSP compliance. If we can be of service to you regarding your Liability, No-Fault, or Workers’ Compensation claims, please contact us at email@example.com.
 42 U.S.C. § 1395y(b)(2)(A)(ii) specifically mentions liability claims, but for years, a formal interpretation of the MSP Act as related to liability settlements did not exist.
 Liability insurance is insurance (including a self-insured plan) that provides payment based on legal liability for injury or illness or damage to property. It includes, but is not limited to, automobile liability insurance, uninsured motorist insurance, underinsured motorist insurance, homeowners’ liability insurance, malpractice insurance, product liability insurance, and general casualty insurance. 42 C.F.R. § 411.50(b).
 No-fault insurance is insurance that pays for medical expenses for injuries sustained on the property or premises of the insured or in the use, occupancy, or operation of an automobile, regardless of who may have been responsible for causing the accident. This insurance includes but is not limited to automobile, homeowners, and commercial plans. It is sometimes called “medical payments coverage”, “personal injury protection”, or “medical expense coverage”. 42 C.F.R. § 411.50(b).