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Clearing Up Non-Submit MSAs

Actually, there is still a choice when it comes to submitting MSAs for CMS review

May 27, 2022 Photo

In January 2022, the Centers for Medicare & Medicaid Services (CMS) released Workers’ Compensation Medicare Set-Aside (WCMSA) Reference Guide version 3.5 to “clarify” the use of non-submit (or evidence-based Medicare Set-Asides) when settling future medicals. However, the language used in the guide had quite the opposite effect: it increased confusion for many regarding the use of these allocations.

Specifically, section 4.3 of the guide, “The Use of Non-CMS-Approved Products to Address Future Medical Care,” stated 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.

Although CMS issued no legislative rule that would require notice, no changes to the law were made (with a comment period and approval to carry the force of law), and the accompanying Code of Federal Regulations remained the same, some quickly opined that use of non-submit or evidence-based Medicare Set-Asides (MSAs) were no longer valid. These opinions were voiced, despite the fact that CMS acknowledged in the same guide that submission of an MSA to CMS for approval has never been required and remained a voluntary process.

After the release of version 3.5, CMS was called to task regarding the language in section 4.3. CMS held various meetings with Medicare Secondary Payer groups and vendors, who asked CMS to eliminate or revise the language in section 4.3 to be consistent with applicable law and with CMS’ own policies.

As a result, CMS held a webinar on February 17, 2022. Many in the industry thought the webinar would provide a much-needed explanation of section 4.3. Instead, it focused more on CMS allocation methodology. However, during the last portion of the webinar, CMS appeared to concede that all MSAs are treated the same and they have challenged the payment of medical for those WCMSAs that were approved by CMS but were not administered appropriately. CMS also noted that the language in section 4.3 did not describe a change or represent a deviation from prior policy.

Conversely, this acknowledgement appeared inconsistent with the language CMS presented in section 4.3 of version 3.5 dated January 10, 2022. Although CMS noted that the slides and a transcript of the webinar would be released, as of the date of this article, neither have been posted on the CMS website.

March Update Attempts to Clarify Language

On March 15, 2022, CMS provided some much-needed clarification with the release of version 3.6 of the guide, which in section 4.3 states (bold emphasis added):

A number of industry products exist for the purpose of complying with the Medicare Secondary Payer regulations without participation in the voluntary WCMSA review process set forth in this reference guide. 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 may at its sole discretion deny payment for medical services related to the WC injuries or illness, requiring attestation of appropriate exhaustion equal to the total settlement as defined in section 10.5.3 of this reference guide, less procurement costs and paid conditional payments, before CMS will resume primary payment obligation for settled injuries or illnesses, unless it is shown, at the time of exhaustion of the MSA funds, that both the initial funding of the MSA was sufficient, and utilization of MSA funds was appropriate. This will result in the claimant needing to demonstrate complete exhaustion of the net settlement amount, rather than a CMS-approved WCMSA amount.

Pursuant to the above language, CMS “may” (instead of “will”) deny payment for medical service up to the settlement amount less procurement costs and paid conditional payments, “unless” when the MSA funds are exhausted, it is shown the MSA funding was sufficient, and the funds were properly spent.

It is important to acknowledge that this language is more in accordance with the Medicare Secondary Payer Act and code. It is also equally important to understand the other limitations set forth in these provisions. First, MSAs are never mentioned in the Medicare Secondary Payer Act. It is a term of art, a vehicle, to prevent the shift of burden to CMS to pay for injury-related, Medicare-covered expenses. Rather, the Act states that CMS can make payment for medical expenses if prompt payment is not received by the primary payer. This payment is conditioned on CMS being paid back.

Second, 42 CFR 411.46(d)(2) allows parties to carve out a portion of their settlement for future injury-related medical expenses and does not indicate that CMS involvement is required in this process. Further, payment of medical by CMS occurs when this amount is exhausted. 42 CFR 411.46(d)(2) states: “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.”

There Is a Choice

Why is it important to have the option of either submitting an MSA to CMS for review or utilizing an evidence-based MSA as part of the claims resolution process?

CMS has experienced various issues throughout the development and implementation of the WCMSA review process, many of which are still present today. As a result, many insurers and self-insured entities began utilizing evidence-based MSAs to expedite claims resolution while still reasonably considering Medicare’s interest. While significant delays in issuing WCMSAs may be a thing of the past, there are still a variety hoops that CMS can require parties to jump through before receiving a WCMSA determination. CMS may also take a “what if” rather than a “what is” approach when allocating future medicals costs, which can lead to inflated MSAs and cause breakdowns in the settlement process.

The right to “appeal” WCMSAs has been further eroded by CMS in the newest WCMSA Reference Guide, which now limits the number of re-reviews parties can request. Specifically, section 16.1 of the guide states that if, in response to a request for re-review, no error was identified by CMS, an additional request for re-review of the same error will not be entertained.

If parties forego the re-review process, they are left with either accepting CMS’ determination (even if it may be incorrect); not settling the case; keeping the medical portion of the claim open and settling wage loss only; or waiting for a year to explore the CMS amended review process. During this time, claims costs continue to rise and claimants must wait to move forward with the settlement of their claims.

In the end, whether the parties choose to submit an MSA to CMS for review or utilize an evidence-based MSA, the choice is (and has been) theirs to make. Creating confusion around this choice and these options only prevents settlements from moving forward.

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About The Authors
Multiple Contributors
Barbara Fairchild

Barbara Fairchild is co-chief executive officer at IMPAXX. bfairchild@impaxx.com

Jon Gunter

Jon Gunter is co-chief executive officer at IMPAXX.  jgunter@impaxx.com

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