Dispelling MSP Compliance Misconceptions

“Fake News”, “alternative facts” and rumors have been in the forefront of the news cycle over the past year. The discussions all highlight the need to scrutinize the source of the information that is being shared and assess its credibility. Although Medicare Secondary Payer compliance issues may not be as exciting as some of the news stories that have come out, there are certain misconceptions that should be examined in greater detail. This article will review and dispel some of the more common misconceptions in the area.

Fact or Fiction

Fiction: If you meet CMS’ review thresholds, the parties must seek CMS review of the Medicare Set-Aside (MSA).

Fact: Since CMS review of an MSA is voluntary, CMS review of a Medicare Set-Aside proposal is never required. Should the parties elect to seek CMS review, CMS has indicated a willingness to review settlements when the “projected settlement” meets specific workload review thresholds. For a current Medicare beneficiary, the projected settlement should exceed $25,000.00. For a claimant with a “reasonable expectation of Medicare entitlement within 30 months of settlement”, the projected settlement should exceed $250,000.00. Failure to meet CMS’ review thresholds, however, does not mean that an MSA is inappropriate or that this failure provides a “safe harbor” from CMS.

Fiction: The CMS workload review thresholds have changed.

Fact: The Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA) Reference Guide, Version 2.5 (April 4, 2016) provides information about CMS’ workload review thresholds. The current Guide notes that these thresholds may be adjusted by CMS. Changes to the review threshold would be posted on CMS’ website. As of today’s date, CMS’ workload review thresholds are unchanged.

Fiction: Only workers’ compensation settlements need to consider Medicare’s interests.

Fact: Medicare is a secondary payer to liability insurance (including self-insurance), no-fault insurance and Workers’ Compensation under certain circumstances. This is based on 42 U.S.C. §1395y(b)(2)(A)(ii) that states that Medicare may not make a payment for medical services where “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. An entity that engages in a business, trade, or profession shall be deemed to have a self-insured plan if it carries its own risk (whether by a failure to obtain insurance, or otherwise) in whole or in part.” Id. In light of these provisions, it is clear that Medicare’s secondary payer status is not limited to workers’ compensation insurance.

CMS’ guidance, albeit limited, further clarifies Medicare’s secondary payer status in liability claims. CMS’ September 30, 2011 memo states “where a beneficiary’s treating physician certifies in writing that treatment for the alleged injury related to the liability insurance (including self-insurance) “settlement” has been completed as of the date of the “settlement”, and that future medical items and /or services for that injury will not be required, Medicare considers its interest, with respect to future medicals for that particular “settlement” satisfied.” This memo, coupled with CMS’ search for a new Workers’ Compensation Review Contractor that has the ability to review liability and Non-Group Health Plan MSAs, suggests that CMS will be establishing a voluntary review process for these types of settlements as well.

Fiction: MSA funds may be used to reimburse Medicare’s conditional payments involving pre-settlement treatment.

Fact: Parties should not use MSA funds to reimburse Medicare’s conditional payment claims for injury-related Medicare covered treatment incurred prior to a final settlement. The MSA is intended to prevent a cost shift of future injury-related expenses to Medicare and should be funded at time of final settlement. See McCarroll v Livingston Parish Council and Louisiana Workers’ Compensation Corporation (LWCC), 2014 La. App.LEXIS 2570.

Fiction: MSA funds may not be used for injury-related treatment before the claimant is a Medicare beneficiary.

Fact: Since the MSA funds are based on the claimant’s life expectancy at time of settlement, the funds in the MSA cover the claimant’s care prior to Medicare entitlement. This is confirmed in CMS’ July 11, 2005 Memorandum.

Fiction: The MSA treatment projections should be based on the Medicare reimbursement rate.

Fact: Since Medicare’s secondary payer status is based on the primary payer’s responsibility to make payment 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 MSA treatment projections are priced consistently with the State’s Workers’ Compensation law.

If the state does not have a fee schedule, the projections are based on actual charges. Liability MSA projections would generally be based on the “usual and customary” charges for treatment in the particular jurisdiction.

Fiction: Present Cash Value of the future treatment plays a role in the amount of the MSA.

Fact: CMS indicated in its October 15, 2004 Memorandum that WCMSAs may not be discounted to present-day value. The funds also do not need to be adjusted for inflation. This position remains consistent with information contained in the WCMSA Reference Guide Version 2.5. (April 4, 2016).

The MSP Act, corresponding Federal Regulations, CMS Memorandums, the WCMSA Reference Guides and the WCRC’s internal practices all play a role in determining the best MSP compliance option for your particular case. Given the highly specialized nature of MSP compliance, it is especially important to remember that “a little knowledge is a dangerous thing.”