The California WCAB Considers the Administration of a WCMSA in Muniz Villalpando Case

The administration of a Workers’ Compensation Medicare Set Aside (WCMSA) was considered in a recent California Workers’ Compensation Appeals Board (WCAB) decision.  In the Muniz Villalpando v Doherty Brothers; Martin Dusters; State Compensation Fund  case,  ( 2017 Cal. Wrk. Comp.P.D.Lexis ADJ599176, 2396484, 795039),  the applicant sought reconsideration of the workers’ compensation law judge’s (WCJ) denial of his request to change the administration of his WCMSA funds from a professionally administered account to one that was self-administered . The WCAB returned the matter to the trial level so that the WCJ may review the terms of the professional administration contract that address a change in administration.

By way of background, applicant Muniz Villalpando settled his claims in August of 2011. The settlement terms included the funding of the CMS determined WCMSA and the parties’ agreement that the WCMSA be professionally administered through Bridge Pointe. In December of 2016, Muniz Villalpando filed a pro se Petition for Reconsideration before WCJ Ortega. The issues addressed in the hearing involved the appropriateness of the administration, the WCAB’s jurisdiction to set aside the MSA and the appropriateness of self-administration of the WCMSA.

During the hearing, the defense presented testimony from a Bridgepointe /NuQuest witness regarding the types of payments that may be properly made from a WCMSA fund. Since the payments may only be for injury related and Medicare covered services and drugs, services that did not meet this two prong test may not be paid from the WCMSA account.  In denying Muniz Villalpando’s Petition for Reconsideration, WCJ Ortega noted that Bridge Pointe/NuQuest did not inappropriately manage their custodial obligations within the Compromise and Release settlement agreement.  In light of this, no further issues were addressed by WCJ Ortega.

The WCJ Ortega recommendation highlights the challenges that some claimants may face when attempting to administer their own WCMSA accounts. Not every treatment is Medicare covered or related to the workers’ compensation claim. CMS’ specific guidelines that address the proper administration of a Medicare Set Aside (MSA) account must also be followed. We will keep you advised of further developments in this case.

The Social Security Number Removal Initiative (SSNRI) is coming to a Claim near You:

Medicare has generally used a beneficiary’s social security number as a part of the beneficiary’s Health Insurance Claim Number (HICN). The HICN is used to match medical bills and records with a particular beneficiary and is located on a beneficiary’s Medicare card. In light of the privacy and security issues this creates, the Centers for Medicare and Medicaid Services (CMS) will be phasing out its use of a Medicare beneficiary’s social security number/HICN in its outgoing correspondences and transition to a randomly generated Medicare Beneficiary Identifier (MBI). This process is expected to be completed by CMS by December 21, 2019. Beginning in July 2017, Medicare will be replacing the term “HICN” with “Medicare ID” in its correspondence.

In January of 2018, Medicare states it will begin to assign a randomly generated MBI to Medicare beneficiaries nationwide.  From April 2018 to April 2019, CMS will mail an updated Medicare card with the MBI to beneficiaries. This means that a MBI may be used by Medicare in its correspondence related to conditional payment recovery, section 111 reporting and WCMSA determinations beginning April 2018.

With respect to Section 111 reporting, the SSNRI continues to allow Responsible Reporting Entities (RRE) to report their Non-Group Health Plan claims using partial social security number, full social security number, HICN number or Railroad Retirement Board Number.  After January 2020, however, the Section 111 reporter will also be able to provide a MBI as a means to identify a particular beneficiary.  Further, employers will still be able to use the Social Security Number to obtain the most current Medicare identifier. If an RRE updates its section 111 reporting and updates the HICN to the MBI, all future recovery correspondence from CMS will reflect the MBI.

However, correspondence related to a WCMSA proposal will reflect whatever beneficiary identifier was submitted in the WCMSA and a social security number will still be useable with the Medicare web portals of MSPRP, CRCP, WCMSAP if the MBI or HICN/RRB is not available. Additionally, U.S. Treasury Department correspondence will no longer contain HICN or MBI and use a recovery case ID. The changes with the U.S. Treasury correspondences are expected to occur before the end of 2017.

The change from using HICN to MBI is an enormous undertaking and will require CMS to assign 150 million MBIs.  CMS has issued some benchmark dates:

  • January 2018 – Activate MBI and Translation Services
  • April 2018 – April 2019 – Issue new Medicare cards to beneficiaries
  • April 2018 – December 2019 – CMS will accept and process both HICN and MBI
  • January 2020 – HICNs will no longer be exchanged (except in limited circumstances)

This change will require the MBI to be used by medical providers, group health carriers and many other stakeholders by January /2020.  Although RREs may not need to obtain an MBI in order to report a Non-Group Health Plan claim, stakeholders in Medicare and the Medicare compliance community will need to adapt their systems to accept this additional identifier by April 2018 and also recognize that soon a U.S. Treasury collection correspondence will no longer have the claimant’s HICN or MBI listed. This likely will require extra training, oversight and analysis by the employer, beneficiary or insurer when such correspondence is received.

We will keep you updated as this historic change by CMS unfolds.

CMS Continues to Lay the Groundwork for Review of LMSAs and NFMSAs

The MSP Act clearly states that Medicare may not make a payment with respect to any item or service to the extent that “payment has been made or can reasonably be expected to be made under a workers compensation law or plan of the United States or a State or under an automobile or liability insurance policy or plan (including a self-insured plan) or under no fault insurance.” 42 U.S.C. §1395y (b)(2).  A primary plan’s responsibility for such payment may be “demonstrated by a judgment, a payment conditioned upon the recipient’s compromise, waiver or release (whether or not there is a determination or admission of liability) of payment for items or services included in a claim against the primary plan, or the primary plan’s insured or by other means.” 42 U.S.C. §1395y (b)(2)(B)(ii).  Given these provisions, many liability settlements allocate a portion of the settlement towards future injury related Medicare covered treatment in order to avoid a future cost shift of these expenses to Medicare. The apportioned funds are used to pay for injury related Medicare covered treatment with bills being submitted to Medicare upon exhaustion of the allocation.

CMS has provided limited guidance on the establishment of liability or no-fault MSAs in settlements focusing instead on Workers’ Compensation MSAs. CMS did however express interest in a liability MSA review process in 2012 when it posted an Advance Notice of Proposed Rulemaking for such review. After soliciting industry comment, CMS withdrew their Notice of Proposed Rulemaking on this issue.

 CMS renewed its interest in expanding the voluntary review process to include liability and no-fault MSAs in June of 2016 when it issued an Alert advising of its plan to work closely with stakeholders on this issue. In CMS’ latest search for a new Workers’ Compensation Review Contractor, CMS included a request that the contractor also be able to review liability and no-fault MSAs.  The Request for Proposal noted that the review process for the liability and no-fault MSAs may begin as of July 1, 2018.  A recent CMS Manual System update that was issued on February 3, 2017 confirms that as of October 1, 2017, CMS’ Common Working File will reflect the existence of a liability MSA or no-fault MSA in its system. Medicare Administrative Contractors will be instructed to deny payment of any submitted claims that pertain to the liability or no-fault MSA.

Given CMS’ Manual System Update of February 3, 2017, it is clear that CMS is laying the groundwork for greater involvement in liability and no-fault MSA review.   We expect CMS review of the liability and no-fault MSA to be voluntary.  As with workers’ compensation claims, we recommend that parties look to the unique facts of their liability and no fault settlements to identify the best MSP compliance approach that may or may not involve CMS review.

“Reasonable Consideration” of Medicare’s Interest in Future Medical in a Settlement?

The Medicare Act has been described by the Courts as “one of the most completely impenetrable texts within human experience.” Cooper Univ Hosp v Sebelius, 636 F.3d44,45 (3d Cir.2010) This article will help decipher it through a review of the key provisions of the Medicare Secondary Payer Act (MSP Act), corresponding Federal Regulations and the Centers for Medicare and Medicaid Services (CMS) guidance. Various options for providing Medicare with “reasonable consideration” when settling out future injury related medical rights will also be reviewed. Although a detailed discussion of Section 111 reporting obligations and conditional payment reimbursements is beyond the scope of this article, these must be addressed when settling claims involving Medicare beneficiaries.

Medicare is a federal health insurance program that was created in 1965 to provide insurance benefits for the elderly and disabled. An individual may generally become entitled to Medicare benefits if they have appropriately paid into the program and are: age 65 or older; entitled to Social Security Disability benefits for 30 months or longer; or those with End Stage Renal Disease. There are four parts to Medicare: Part A (hospital insurance), Part B (medical insurance), Part C (Medicare Advantage Plans) and Part D (prescription drug coverage). In the past, settling parties would often close out future injury related medical rights in their workers’ compensation or personal injury settlements and then submit their post settlement injury related treatment bills to Medicare for payment.

The MSP Act was enacted into law in 1980 in an effort to reduce the amount of payments to be made by Medicare and preserve it for the future. The Act specifically states that Medicare may not make a payment with respect to any item or service to the extent that “payment has been made or can reasonably be expected to be made under a workers compensation law or plan of the United States or a State or under an automobile or liability insurance policy or plan (including a self-insured plan) or under no fault insurance.” The exception to this is when the non-group health plan (NGHP) has not made or cannot reasonably be expected to make payment with respect to an item or service. This would typically occur when the NGHP has disputed the claim or the medical provider inadvertently bills Medicare directly.

Any payment made by Medicare is conditioned upon the reimbursement of the payment to the Medicare Trust Fund. In order to encourage the reimbursement, the MSP Act gives Medicare a direct right of action against the primary payer, a subrogation right against settlement funds and also has the possibility of obtaining penalties, interest and double damages. The conditional payment reimbursement obligation is imposed on a primary plan or entity that receives payment from a primary plan, where it is demonstrated that the primary plan has or had a responsibility for the item or service. 42 U.S.C. §1395y (b)(2)(B)(ii). “A primary plan’s responsibility for such payment may be demonstrated by a judgment, a payment conditioned upon the recipient’s compromise, waiver or release (whether or not there is a determination or admission of liability) of payment for items or services included in a claim against the primary plan, or the primary plan’s insured or by other means.” Id.

Chapter 42 of the Code of Federal Regulations provides additional detail regarding Medicare’s interpretation of the MSP Act. Section §411.24 notes that CMS may begin conditional payment recovery once it learns payment has been made or could be made by a primary payer. The establishment of Section 111 reporting requirements enhance this right. If CMS can recover payments without taking legal action, repayment is the smaller amount of either the Medicare primary payment or the amount the primary payer is obligated to pay. Id. If CMS files suit to take legal action, CMS may recover twice the amount of the payments made by Medicare. Id. If a primary payment is made, the beneficiary or other party receiving the primary payment, must reimburse Medicare within 60 days. In liability settlements and disputed employer group health plans, workers’ compensation insurance or plan and no fault insurance, if the primary payer reimbursed the beneficiary or other party and they do not reimburse Medicare, the primary payer must still reimburse Medicare. 42 C.F.R. §411.24(i).

Regulations 42 C.F.R. §411.40 through § 411.47 specifically discuss workers’ compensation claims. 42 C.F.R. § 411.47(a)(1) details Medicare’s recovery when there is a lump-sum compromise settlement of a workers’ compensation claim and the settlement allocates a portion of the payment for medical expenses and also provides a reasonable income replacement element. If there is not reasonable consideration of both medical and income replacement, a ratio between the amount awarded (minus reasonable procurement costs) and the total exposure is applied to the total medical expenses incurred as a result of the claim up to the date of settlement. The product is the amount to be considered as the reasonable payment of medical expenses from the settlement.

Given Medicare’s status as a secondary payer, settlements that close out future medical rights should give Medicare’s interests reasonable consideration in order to prevent a cost shift of the future medical expenses to Medicare. If appropriate, this may be accomplished by the establishment of a future medical allocation or Medicare Set-Aside (MSA) that is funded at time of settlement. This allocation reduces the probability of Medicare making future conditional payments in the claim.

CMS has issued memoranda to guide parties in assessing adequate consideration of Medicare’s interests in a settlement. The content of the memoranda, CMS’ policies and review procedures have been consolidated in several WCMSA Reference Guides. The most recent WCMSA Reference Guide, Version 2.5 was released on April 4, 2016. Sections 1 and 8 state the following: “There are no statutory or regulatory provisions requiring that you submit a WCMSA amount proposal to CMS for review.” If however, you choose to use the WCMSA review process, compliance with CMS’ established policies and procedures is expected.

CMS review of proposed WCMSA proposals is available when CMS’ internal workload review thresholds are met. The review threshold for a current Medicare beneficiary is a projected settlement that exceeds $25,000. If the claimant has a reasonable expectation of Medicare enrollment within 30 months of the settlement date, the projected settlement must exceed $250,000. The Guide further states the establishment of these workload review thresholds does not mean that claimants “may settle below the threshold with impunity.” Rather, settlements must consider Medicare’s interests in order to prevent a cost shift of WC injury related expenses to Medicare. If CMS review and approval is secured, Medicare will become the primary payer for future injury related Medicare covered treatment upon proper exhaustion of the MSA funds.

Medicare has also advised in its WCMSA Reference Guide (Version 2.5, April 4, 2016) that it has no interest in workers’ compensation claims when: (a) the facts of the case demonstrate that the individual is only being compensated for past medical expenses; (b) there is no evidence that the individual is attempting to maximize other aspects of the claim (disproportionate permanency or lost wages); and (c) the claimant’s treating physicians conclude (in writing) that to a reasonable degree of medical certainty the claimant no longer requires any Medicare-covered treatments related to the claim. Section 4.2, RG 2.5.

No court has determined that the MSP or the Code of Federal Regulations requires that workers’ compensation settlements use a specific method to project reasonably expected Medicare benefits, or that CMS should review the settlement. Medicare has clearly stated that there are no statutory or regulatory requirements that a WCMSA be submitted to CMS for review. In light of this, Medicare’s interests in a workers’ compensation or liability settlement may be given reasonable consideration in a variety of ways. These may include, but are not limited to: under threshold commutation MSAs that are not submitted to CMS for review; above threshold MSAs that may or may not be submitted to CMS for review; a compromise MSA funded from the net settlement; commutation and waiver MSAs; zero future treatment MSAs; zero waiver requests that are submitted to CMS for review; or a certified MSA. The selection of the best method for providing reasonable consideration of Medicare’s interests in a particular settlement should be done on a case by case basis.

Although the Medicare Act may be a convoluted text, its essence boils down to the fact that Medicare is a secondary payer when a primary payer is available. This means that settlements should consider Medicare’s interests in the particular claim and avoid cost shifting future injury related treatment expenses to it. Parties should also address reimbursement of Medicare’s conditional payments and those of any Medicare Part C plans in connection with their settlements.

Rasa Fumagalli, J.D, MSCC is the Director of Compliance at NuQuest, where Patrick Czuprynski J.D., MSCC, serves as an MSP Compliance Attorney.