The New WCMSA Reference Guide Version 3.5 “Clarification” Regarding Evidence-Based MSAs

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by B. Smith

The Centers for Medicare and Medicaid Services (“CMS”) issued an updated Workers’ Compensation Medicare Set-Aside Arrangement (“WCMSA”) Reference Guide (the “Guide”), Version 3.5, dated January 10, 2022. As noted by CMS, changes to the Guide includes “clarification” regarding “non-CMS-approved products to address future medical care” which can be found in Section 4.3.

Section 4.3 of the Guide provides as follows:

A number of industry products exist with the intent of indemnifying insurance carriers and CMS beneficiaries against future recovery for conditional payments made by CMS for settled injuries. Although not inclusive of all products covered under this section, these products are most commonly termed “evidence-based” or “non-submit.” 42 C.F.R. 411.46 specifically allows CMS to deny payment for treatment of work-related conditions if a settlement does not adequately protect the Medicare program’s interest. Unless a proposed amount is submitted, reviewed, and approved using the process described in this reference guide prior to settlement, CMS cannot be certain that the Medicare program’s interests are adequately protected. As such, CMS treats the use of non-CMS-approved products as a potential attempt to shift financial burden by improperly giving reasonable recognition to both medical expenses and income replacement.

As a matter of policy and practice, CMS will deny payment for medical services related to the WC injuries or illness requiring attestation of appropriate exhaustion equal to the total settlement less procurement costs before CMS will resume primary payment obligation for settled injuries or illnesses. This will result in the claimant needing to demonstrate complete exhaustion of the net settlement amount, rather than a CMS-approved WCMSA amount.

NuQuest Commentary:

Pursuant to the Medicare Secondary Payer Act (the “Act”), 42 U.S.C. 1395 y(b)(2)(A)(ii), Medicare may not make payment where payment has been made or can reasonably be expected to be made under a workers’ compensation law or plan, automobile or liability insurance policy or plan except as provided in subparagraph (B). Subparagraph B enables Medicare to make payment if these “primary plans” have not made or cannot reasonably be expected to make payments promptly. 42 U.S.C. 1395 y(b)(2)(B)(i).

The accompanying Code of Federal Regulations (“CFR”) to the Act, 42 CFR § 411.46 and 42 CFR § 411.47 address future benefits in connection with commutation settlements and lump sum compromise settlements. 42 § CFR 411.46 provides in pertinent parts as follows:

(b) Lump-sum compromise settlement…
(2) If a settlement appears to represent an attempt to shift to Medicare the responsibility for payment of medical expenses for the treatment of a work-related condition, the settlement will not be recognized…
(d)“If the settlement agreement allocates certain amounts for specific future medical services, Medicare does not pay for those services until medical expenses related to the injury or disease equal the amount of the lump-sum settlement allocated to future medical expenses.”

The term Medicare Set-Aside (“MSA”) is absent from both the Act and the CFR. An MSA is a term of art first used by the MSP compliance community and CMS as a tool that allows parties to delineate what portion of a settlement is for future injury related care. In addition, the submission of an MSA to CMS has always been, and remains, voluntary. Even in this most recent version of the Guide, CMS acknowledges the same. Section 1.0 of the Guide provides as follows:

There are no statutory or regulatory provisions requiring that you submit a WCMSA amount proposal to CMS for review. If you choose to use CMS’ WCMSA review process, the Agency requests that you comply with CMS’ established policies and procedures

Section 8.0 further states:

If the parties to a WC settlement stipulate a WCMSA amount but do not receive CMS approval, then CMS is not bound by the set-aside amount stipulated by the parties, and it may refuse to pay for future medical expenses related to the WC work-related injury, even if they would ordinarily have been covered by Medicare… There are no statutory or regulatory provisions requiring that you submit a WCMSA amount proposal to CMS for review. If you choose to use CMS’ WCMSA review process, the Agency requires that you comply with CMS’ established policies and procedures in order to obtain approval.

The Use of evidence-based MSAs grew from the clear statutory and regulatory requirement to reasonably consider Medicare’s interest as part of settlement, which did not and does not require the submission of an MSA to CMS for review. It also grew, in part, to prevent inflated allocations that were delayed by endless requests for development of claims, which impacted not only primary payers but claimants as well. The parties utilizing evidence-based allocations do so to reasonably consider Medicare’s interest in a reasonable and efficient manner, without shifting the burden to Medicare for payment of related future, Medicare-covered medical expenses.

 The inclusion of the updated language in 4.3 of the new Guide, appears inconsistent with the statutory, regulatory, and administrative framework that established the obligation to consider Medicare’s interest through a reasonable allocation of future injury-related medical care. It also creates a presumption that all “non-CMS-approved products” are a “potential attempt to shift financial burden” to Medicare yet provides no means to rebut this presumption. Such a presumption is not contained in the Act or CFR and does not consider the ability of the parties to reasonably allocate future care without going through the voluntary CMS review process.

In addition, there are thousands of cases that are not submitted to CMS every year because they do not meet the CMS review thresholds. Based upon the language in the new Guide, CMS could consider these allocations as an attempt to shift financial responsibility to Medicare because they are not subject to CMS review.

Section 4.3 of the Guide also does not consider the other parts of settlement including wages loss that is clearly contemplated in the CFR that limits liability not to the total settlement amount, but to the consideration of future medical.

In sum, the ability of the parties to allocate without voluntary CMS review has not been changed under the law. However, this is a good time for parties to assess that the evidence-based or non-submit allocation that is being utilized does adequately protect Medicare’s interest through proper pricing, review of treating physician recommendations and the ability to assist claimant/plaintiff in the future through professional or self-administration with support services.

NuQuest will continue to work with our customers on Medicare compliance solutions that fit their needs through submission or non-submission of the Medicare Set-Asides and will continue to work with CMS and industry organizations to effectuate any needed change in the Medicare compliance arena.