October Updates

Several changes that may impact your settlement approach in workers’ compensation and liability claims are being implemented in October. The changes involve Medicaid recovery, the ability to close out active medical care under the Arizona WCA provisions and CMS’ addition of a liability or no-fault MSA field to its Common Working File. Highlights of the changes are summarized below. Please refer to our earlier blog postings for a more in-depth analysis of the topics.

Medicaid Recovery

Medicaid, just like Medicare, is a secondary payer when a third party has a legal obligation to pay certain medical benefits to a beneficiary under the programs.  Before October 1, 2017, Medicaid’s recovery of its payments from the third party settlement was limited to the portion of the settlement that was allocated for future medical expenses.  With the October 1, 2017, implementation of the Bipartisan Budget Act of 2013, section 202, also known as the Medicaid Secondary Payer Act, Medicaid will now be allowed to recover its costs from a beneficiary’s total settlement. Given the various state reporting requirements relative to Medicaid beneficiaries, whether through data exchanges or intercepts, we can expect an increase in the amount of reimbursement efforts that will be undertaken by states Medicaid departments.  The anticipated decreases in federal contributions to the Medicaid programs will further fuel the recovery efforts.

Medicaid liens should be addressed in settlements and awards.  From a practical aspect, the ability to recover from the whole settlement will put Medicaid in a stronger lien negotiating position. Early negotiation efforts, however, that focus on the uncertainty of potential trial results absent settlement, will increase the ability to secure significant Medicaid lien reductions. A systematic claims’ handling approach for cases involving Medicaid liens, in addition to Medicare and Medicare Advantage liens, is recommended in order to prevent future issues with these entities.

Arizona’s Repeal of Section 23-941.01

Arizona’s repeal of Section 23-941.01 that limited the parties’ rights to settle out future medical care in undisputed claims will take effect on October 31, 2017.  This provision had prohibited the closure of active medical care, such as surgery, in undisputed claims and only allowed the release of future supportive medical maintenance benefits.

The amended Section 23-041.01 provision allows represented employees to settle future medical but requires the settlement to include the following attestation:

  1. “The employee understands the rights settled and released by the agreement and was represented by counsel.
  2. The employee has been provided information from the carrier, special fund or self-insured employer that outlines any reasonably anticipated future medical, surgical and hospital benefits relating to the claimant the projected cost of those benefits and that provides an explanation of how those projected costs were determined.
  3. The employee understands that monies received for future medical treatment associated with the industrial injury should be set aside to ensure that the costs of such treatment will be paid.
  4. The parties have considered and taken reasonable steps to protect any interests of Medicare, Medicaid, the Indian Health Service and the United States Department of Veterans Affairs, including establishing a Medicare Savings Account if necessary.
  5. The parties have conducted a search for and taken reasonable steps to satisfy any identified medical liens.”

When a claimant is unrepresented, the Administrative Law Judge will meet with the claimant to make specific findings regarding whether the above paragraphs are satisfied. Additional requirements and provisions for handling disputed claims are also set forth in the complete amendment.

The repeal will be effective from and after October 31, 2017. (Title 23, Chapter 6, article 3, Arizona Revised Statutes)

As of October 31, 2017, workers’ compensation claims in Arizona may completely close out all future medical rights under certain circumstances. This change presents a new opportunity for final resolution of many workers compensation claims. In order to pursue this, we recommend that the parties secure a future injury-related medical treatment allocation, identify and negotiate liens and fund the future medical allocation in connection with the settlement.

CMS’ addition of a liability or no-fault MSA field to its Common Working File.

As of October 1, 2017, CMS’ Common Working File will now reflect the existence of liability or no-fault MSAs in the system. Medicare Administrative Contractors will be instructed to deny payment of any submitted claims that pertain to the liability or no-fault MSA.

CMS’ addition of a liability or no-fault MSA in its Common Working File further suggests CMS’ interest in offering an eventual review of liability and no-fault MSAs.

NuQuest is available to assist in all types of lien resolution. Our product line also provides a variety of innovative future medical allocations that suit the needs of the claim. Further information is available upon request.

Join Us on July 10th! Proper Administration Webinar

Join us on July 10th, 2017 at 1:00 (CST) Register here for a webinar that addresses the proper administration of an MSA. We will review CMS’ specific guidelines on this issue and address common mistakes that may be made in self-administration. We will also go over tools that may assist in the administration process.

Rasa Fumagalli, JD, MSCC, NuQuest’s Director of Compliance, holds a law degree from IIT’s Chicago Kent College of Law with an undergraduate business degree from the University of Illinois. Prior to joining NuQuest, she spent over twenty years specializing in workers’ compensation defense work in the Chicago area. Rasa utilizes her extensive experience in handling workers’ compensation cases when consulting with clients about Medicare Secondary Payer (MSP) compliance issues. She is admitted to practice law in the State of Illinois and is an active member of the National Alliance for Medicare Set- Aside Professionals (NAMSAP) organization, serving on the Evidence-Based Medicine, Communications and Liability Committees.

Arizona Legislature Repeals Section 23-941.01 limits on closure of future medical in undisputed claims

State workers’ compensation laws define the parameters of an employer’s potential liability in a claim. As such, they play a role in determining the amount of a future Medicare Set-Aside that may be funded in connection with a complete settlement.

Arizona’s legislature recently repealed Section 23-941.01 that limited the parties’ rights to settle out future medical care in undisputed claims.  This provision prohibited the closure of active medical care, such as surgery, in undisputed claims and only allowed the release of future supportive medical maintenance benefits.

The amended Section 23-041.01 provision allows represented employees to settle future medical but requires the settlement to include the following attestations:

  1. “The employee understands the rights settled and released by the agreement and was represented by counsel.
  2. The employee has been provided information from the carrier, special fund or self-insured employer that outlines any reasonable anticipated future medical, surgical and hospital benefits relating to the claim ant the projected cost of those benefits and that provides an explanation of how those projected costs were determined.
  3. The employee understands that monies received for future medical treatment associated with the industrial injury should be set aside to ensure that the costs of such treatment will be paid.
  4. The parties have considered and taken reasonable steps to protect any interests of Medicare, Medicaid, the Indian Health Service and the United States Department of Veterans Affairs, including establishing a Medicare Savings Account if necessary.
  5. The parties have conducted a search for and taken reasonable steps to satisfy any identified medical liens.”

When a claimant is unrepresented, the Administrative Law Judge will meet with the claimant to make specific findings regarding whether the above paragraphs are satisfied. Additional requirements and provisions for handling disputed claims are also set forth in the complete amendment.

The repeal will be effective from and after October 31, 2017. (Title 23, Chapter 6, article 3, Arizona Revised Statutes)

Selecting the Best Funding Method for the Medicare Set Aside

Medicare is a secondary payer when a primary payer is available in a claim. A primary payer’s responsibility for 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 in a claim against the primary plan, or the primary plan’s insured, or by other means.” 42 U.S.C. Section 1395 y(b).

A Medicare Set Aside (MSA) arrangement is a settlement tool that enables parties to allocate a portion of their settlement funds for future injury related Medicare covered treatment.  The purpose behind the MSA is to avoid a cost shift of this future treatment to Medicare given Medicare’s status as a secondary payer.

At times, parties may seek a review of the workers’ compensation MSA proposal from the Centers for Medicare and Medicaid Services (CMS), provided the settlement meets CMS’ workload review threshold. The review process however is voluntary. If CMS review is sought, the submission has to identify if the MSA will be funded through a lump sum or a structured arrangement. The WCMSA Reference Guide, Version 2.5  notes that in a structured arrangement, the initial “seed money” deposit is followed by subsequent annual deposits, unless CMS agrees to a reduced schedule. The CMS determination sets out the recommended initial seed deposit, the annual amount for a specific number of years and the anniversary date.    If the CMS determination is finalized by funding the WCMSA recommendation and sending in a copy of the final executed settlement agreement that reflects this, CMS has indicated that it will become primary upon proper exhaustion of the MSA.

Since CMS review of an MSA is voluntary, parties may also elect to simply fund a reasonably projected MSA and forego CMS review. The non-submitted MSA may similarly be funded by a lump sum or with an annuity. The funding of the MSA may occur at the same time as the indemnity settlement or at a later date. The benefit associated with structured annuity funding is that it costs less than lump sum funding. Rated ages secured from the structured settlement brokers may also result in further cost savings.

It is important to consider the type of structured annuity that will be used in connection with the settlement and the non-submitted MSA payout. The structured annuity funding options that parties are most familiar with involve different payout periods.  A temp life annuity guarantees annual payments over a fixed period of time, while a whole life annuity guarantees annual payments for the beneficiary’s life.  Since a settlement should avoid a cost shift of injury related Medicare covered treatment to Medicare, the indemnity and MSA components of the settlement should be funded in the same manner.  Failure to do so, may result in the appearance of an attempt to cost shift expenses to Medicare. For example, the selection of a whole life annuity to fund the indemnity payments coupled with the selection of a temp life annuity to fund the MSA, may result in an exhausted MSA account while ongoing indemnity payments are being made. CMS’ practice of allowing temp life annuity funding in their determinations is irrelevant since the non-submitted MSA is governed by MSP laws and not CMS’ voluntary review process.

Structured settlements have many benefits. The type of payout selected however should always keep the bigger picture in mind.

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.