On Jan 11^th, 2022 Centers for Medicare & Medicaid Services (CMS) updated its WCMSA Reference Guide to include information related to non-submit MSA products and how it views them in terms of exposure for Medicare. Then on March 15, 2022, CMS updated its Reference Guide again.  We blogged about each updated guide here: WCMSA Reference Guide Version 3.6 Updates of Significance.

In the Workers’ Compensation arena, there are a number of MSA products that do not adhere to standard CMS methodology for preparing a Medicare Set-Aside allocation as outlined in the WCMSA Reference Guide. Since these products do not follow CMS methodology, submitting these types of products for approval will typically result in CMS countering higher to an amount aligned with CMS methodology standards. If a non-submit MSA product is used in WC settlements, CMS has indicated it will not step in and become the primary payer once the MSA funds have been exhausted unless the beneficiary can prove the MSA was properly funded and that all of the MSA funds were used in accordance with CMS guidelines. If CMS determines that the MSA was underfunded, it has indicated it will or at least may deny payment for case related, Medicare covered items, services, and expenses, up to the Medicare beneficiary’s net settlement amount.

The recent WCMSA reference guide updates demonstrate that Medicare believes some non-submit WCMSA allocation reports are potentially shifting the burden of payment for future medical items, treatment, and prescriptions to Medicare.  While non-submit WCMSAs that meet workload review thresholds are not automatically deemed to not protect Medicare’s interest, it seems that CMS has created a presumption of this unless the injured worker can show otherwise.  In comes solid allocation methodology and perhaps more importantly, the professional administrator, offering tools and assistance to show that both the amount was reasonable and that the money set aside was properly exhausted.

Why is this important for liability settlements? In the liability arena, CMS has yet to issue any new guidelines with respect on to how to handle liability settlements for a Medicare beneficiary.  The May 25, 2011, Stalcup Memo from a CMS Regional Office in Texas indicated that there should be no difference between how Medicare’s interests would be protected between liability and Workers’ Compensation.  It indicated that “The law requires that the Medicare Trust Funds be protected from payment of future services whether it is a Workers’ Compensation or liability case.  There is no distinction in the law.”  The Stalcup Memo announced that “CMS does expect the funds to be exhausted on otherwise Medicare covered and otherwise reimbursable services related to what was claimed and/or released before Medicare is ever billed.”  It further cautions that “each attorney is going to have to decide, based on the specific facts of each of their cases, whether or not there is funding for future medicals and if so, a need to protect the Trust Funds.”

The new WCMSA Reference Guide has indicated that unless a prior memo is specifically referenced in the Reference Guide, it should not be relied upon.  However, the Federal Statute, The Medicare Secondary Payer Statute, 42 U.S.C. Section 1395y(b) has itself not ever made a distinction between liability and Workers’ Compensation settlements and prohibits Medicare from making payment for any injuries compensated by a primary plan a/k/a Non Group Health Plan payment (including payments, settlements, judgments, awards, or other arrangements).  Even though CMS has not promulgated specific regulations in the Code of Federal Regulations (CFR) for liability settlements and has not yet issued specific guidelines for liability settlements, liability is one of the primary plans outlined in the MSP statute that are considered primary to Medicare (Liability Insurance Including Self-Insureds (with the sub-set Automobile specifically mentioned in the CFR, No Fault, and Workers’ Compensation). In the Hinsinger v. Showboat Atlantic City, 420 N.J. Super. 15, 18 A.3d 229 (2011) case, the Superior Court of New Jersey found. . .

              “. . . no reason to apply a different standard to set asides created with money obtained from third-party liability claims than it applies to set asides created with money obtained from workers’ compensation claims. The statutory and policy reasons for creating both of them are the same:  to protect the government, and the Medicare system in particular, from paying medical bills for which the beneficiary has already received money from another source.”

The court reasoned that in the absence of specific liability regulations concerning the MSP, it was appropriate to analyze the regulations geared toward WC.  This would seem like a reasonable starting point for CMS as it relates to futures.  Of course, liability cases have different types of damages that can be awarded, most notably non-economic damages that are not awardable in WC cases.  Causation issues and percentages of liability can limit the recovery for plaintiffs in liability cases with specific percentages being parsed out/negotiated in states with pure comparative negligence.  Lastly, plaintiffs in liability can often argue that they were not Made Whole when the injuries and damages are present but the at fault party’s funding is limited by low policy limits.

These factors have not yet been addressed in any regulations or current guidance by CMS.  However, when a WC settlement may not be reviewed by CMS because it is outside CMS workload review thresholds, CMS takes the position that parties must still consider Medicare’s interests in the settlement.  Currently, liability settlements are still not being reviewed by CMS even though CMS had included reviews of liability MSA’s in a prior Request for Proposal when searching for its last WCRC MSA review contractor.  Therefore, it makes sense that for liability settlements, parties should still be considering Medicare’s interests and especially so, when the settlement involves a Medicare beneficiary or one with a reasonable expectation of becoming a beneficiary within 30 months of the settlement.  The WCMSA Reference Guide could contain part of the puzzle in helping an injured party being compensated for future medicals in planning their future care.

As of May 25, 2022, CMS has neither issued regulations nor new guidelines with respect to protecting Medicare’s interests when liability settlements compensate for future medicals covered by Medicare.  CMS needs to provide such a roadmap if it is serious about protecting the Medicare Trust Funds for future generations.  Because the MSP law itself sets the standard for the protection of Medicare, and the law and its regulations enable Medicare’s ability to deny payments and/or make conditional payment recovery, does it really make sense to ignore planning the injury related future care of your client even when the regulatory agency has been slow to act?

Each attorney should provide their clients with enough information to help them assess their risks and to determine if denial of injury related future medicals or the potential for recovery of future conditional payments by Medicare is a risk they are willing to take.  There are a wide range of products being offered to address MSP exposure and to protect Medicare’s interests in liability settlements based on the varying risk tolerance levels of your client.  Count on Medivest to help you spot these intricacies so you can deliver prudent advice to your clients.