Recent Developments in the Medicare Secondary Payer (MSP) Compliance Arena

Parties involved in the area of MSP compliance have seen interesting developments over the past few weeks. They include the introduction of Senate Bill 2731 and the Third Circuit Court of Appeals’ decision in Taransky vs Secretary of the US Department of Health and Human Services 2014 US App. LEXIS 14408 (3rd Cir. 7-29-2014).

Senate Bill 2731

Senate Bill 2731 was introduced to the Senate on July 31, 2014 by Senators Nelson and Portman. It provides for limited application of MSP laws to certain settlement agreements and presents qualified Medicare Set-Aside arrangements as a means of satisfying MSP obligations. Highlights of the Bill include Section 1 which seeks to exclude workers’ compensation plans as primary plans when the total settlement amounts are under $25,000.00 or any such greater amount as determined by the Secretary. Also excluded are workers’ compensation settlements involving claimants who are not Medicare eligible at the time of settlement and are unlikely to become eligible within thirty months of the settlement. These thresholds, and the definition of “likely to become eligible” are similar to those set out in CMS’ workload review thresholds. Since workers’ compensation settlements are based on permanent partial disability (PPD) rates linked to claimants’ average weekly wages, insurers of industries with low wage employees would benefit from the $25,000.00 settlement exemption. A claimant with the minimum PPD rate of $220.00 in Illinois, for example, may settle his accepted claim for close to full value and be spared the burden of complying with the MSP laws. Industries that employ workers whose wages are linked to self reported or under reported tips are likely to benefit from this.

The Bill also seeks to allow for satisfaction of MSP requirements through the use of “Qualified Medicare Set-Asides” (QMSAs) in workers’ compensation settlement agreements. It notes that a QMSA “shall” satisfy the parties MSP obligations provided that it “reasonably takes into account” the parties’ full payment obligations. Of interest is the statement that “the reasonableness of and necessity for future medical expenses for treatment of the illness or injury involved” is one of the factors that affect the determination of the adequacy of the QMSA. This would seem to represent a welcome departure from CMS’ view that the mere mention of possible treatment by the treating physician supported the inclusion of the treatment in the MSA.

A second type of QMSA outlined in the Bill allows parties to a compromise settlement agreement to proportionally adjust the MSA amount of the agreement. The Bill states that the QMSA amount may be calculated by “applying a percentage reduction to the Medicare set-aside amount for the total settlement amount that could have been payable under the applicable workers’ compensation law or similar plan involved had the denied, disputed, or contested portion of the claim not been subject to a compromise agreement”. Although this type of QMSA may be new to some, a similar formula has been set forth in 42 C.F.R. 411.47 in the context of conditional payments.

Although the submission of the QMSA to the Secretary for review is optional, the Bill sets out a 60 day turn around time for the Secretary to review the submission and notify the parties in writing of the adequacy of the QMSA. Should the Secretary fail to deliver the notice of the determination in a timely manner, the parties would have a right to an appeal to an Administrative Law Judge. Under the proposed Bill, the parties may elect to make direct payment of the QMSA to the Secretary. The services and items funded in the MSA should be based on the applicable workers’ compensation fee schedule in effect as of the date of the agreement. Since there is no requirement that the QMSA be approved by the Secretary prior to the Secretary’s acceptance of the direct payment, one may argue that upon receipt of the payment, the Secretary has “acquiesced” or agreed that the amount of the QMSA is reasonable.

The last noteworthy section of the Bill discusses final workers’ compensation settlement agreements. Court approved settlement agreements would be deemed “final and conclusive” as to any and all matters within the jurisdiction of the workers’ compensation law. Specific examples of matters included are “any allocation of settlement funds, the projection of future indemnity or medical benefits that may be reasonably expected to be paid under the State’s workers’ compensation laws”. This deference to the parties stipulations would clearly make the settlement process less burdensome as it concerns MSP compliance.

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