CMS’ Updated WCMSA Reference Guide Emphasizes Importance of Satisfying MSP Obligations

CMS, Medicare Set-Asides, MSP News on January 9, 2019
Posted by Jean S. Goldstein, JD

Earlier this week, the Centers for Medicare & Medicaid Services (CMS) issued a revised Workers’ Compensation Medicare Set-Aside (WCMSA) reference guide, which we first alerted our readers to here on our blog.  Some of the changes found within the update guide addressed a few of the recent alarming CMS approval trends we have been tracking.  However, some additional language was included by CMS in this guide and was interestingly not noted as a revision by CMS in its summary section of the updated reference guide (Section 1.1).  Specifically, CMS added examples to Section 8.1 Review Thresholds,

“Example 1: A recent retiree aged 67 and eligible for Medicare benefits under Parts A, B, and D files a WC claim against their former employer for the back injury sustained shortly before retirement that requires future medical care. The claim is offered settlement for a total of $17,000.00. However, this retiree will require the use of an anti-inflammatory drug for the balance of their life. The settling parties must consider CMS’ future interests even though the case would not be eligible for review. Failure to do so could leave settling parties subject to future recoveries for payments related to the injury up to the total value of the settlement ($17,000.00). (Emphasis Added.)

Example 2: A 47 year old steelworker breaks their ankle in such a manner that leaves the individual permanently disabled. As a result, the worker should become eligible for Medicare benefits in the next 30 months based upon eligibility for Social Security Disability benefits. The steelworker is offered a total settlement of $225,000.00, inclusive of future care. Again, there is a likely need for no less than pain management for this future beneficiary. The case would be ineligible for review under the non-CMS-beneficiary standard requiring a case total settlement to be greater than $250,000.00 for review. Not establishing some plan for future care places settling parties at risk for recovery from care related to the WC injury up to the full value of the settlement.” (Emphasis Added.)

CMS also added the following language to Section 4.2, Indications That Medicare’s Interests are Protected,

“CMS’ voluntary, yet recommended, WCMSA amount review process is the only process that offers both Medicare beneficiaries and Workers’ Compensation entities finality, with respect to obligations for medical care required after a settlement, judgment, award, or other payment occurs. When CMS reviews and approves a proposed WCMSA amount, CMS stands behind that amount. Without CMS’ approval, Medicare may deny related medical claims, or pursue recovery for related medical claims that Medicare paid up to the full amount of the settlement, judgment, award, or other payment.”

Takeaway and Commentary:

Through this updated reference guide, CMS is continuing to reiterate the requirements of complying with the Medicare Secondary Payer (MSP) act, by conveying that the established work review thresholds are not to be considered safe harbors.  This means that just because a settlement is not eligible for review through the voluntary review program, it does not mean that Medicare does not have an interest in the settlement.  Most importantly, CMS is stating that even if the work review thresholds are not met, the parties are not relinquished from satisfying their MSP obligations.

The MSP provisions were established to ensure that Medicare does not pay for future covered medical treatment when there is other insurance coverage that is primary to Medicare.   Therefore, Medicare has an interest in any settlement of a claim where there are foreseeable future medical treatment needs that would be covered by Medicare.  Through this updated WCMSA reference guide, CMS is stating that parties cannot circumvent MSP obligations simply because a claim does not meet the established work review thresholds.  This is clear from the two examples included in the guide, which suggest that the parties would have by-passed the Medicare Set-Aside process simply because the work review thresholds were not met. 

Furthermore, CMS’ choice of words indicating that the WCMSA review process is the only process that offers finality is possibly aimed at the increasing number of settlements that are addressing MSP obligations with a reasonable and defensible Medicare Set-Aside allocation, supported by solid medical and legal evidence, but which the parties have opted against submitting to CMS for voluntary review.  However, CMS has used very similar language in prior memos.  As we often discuss, while there may be some benefits to obtaining CMS’ approval of a WCMSA, CMS continues to state that it remains a voluntary process, and therefore it is a risk management decision. CMS continues to recommend allocations using average wholesale pricing, may disregard state law and often allocates for treatment that is not reasonably probable. These and other potential complications associated with CMS review can lead primary payers to fund future medical expenses in excess, above and beyond what is reasonably anticipated or required by state law.  These are some of the challenges with the CMS review process, as it stands today, and for these reasons we believe opting out of the voluntary review process will remain a prevalent practice. 

In summary, the added language and examples in the updated guide are simply emphasizing that CMS’ review and approval of WCMSAs is and continues to be voluntary.  It is also reminding parties of the existence of their MSP obligations, whether or not the work review thresholds are met, and the requirement to satisfy MSP obligations.  For those whose risk management position aligns with participating in the voluntary review program, this reference guide provides clarification of some recent trends in CMS approved WCMSAs.  There are certainly other ongoing issues with the process, which must be clarified to add transparency to the WCMSA review program.  Hopefully, these issues will be addressed by CMS soon. 

As always, we will update our readers on additional CMS issued correspondence.

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