2014 MSP Compliance Legal Highlights

Author: Rasa Fumagalli, J.D., MSCC
Senate Bill 2731

As of today’s date, it has been referred to the Committee on Finance. The Bill provides
for limited application of MSP laws to certain settlement agreements and presents

Medicare Set-Aside arrangements as a means of satisfying MSP obligations. Section 1
of the Bill 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

The Bill also seeks to allow for satisfaction of MSP requirements through 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.
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 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: “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.