Tag Archive for: Medicare Set-Aside

CMS Gets Tough on Unapproved MSAs– Until They Don’t

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In January, 2022, CMS created an uproar when it published Version 3.5 of its Workers Compensation Medicare Set-Aside Reference Guide stating that it would essentially ignore “non-submit” or “evidence-based” Medicare Set-Aside allocations:

Unless an MSA is submitted and approved, CMS cannot be certain that Medicare’s interests are adequately protected. Therefore, CMS will treat any non-CMS-approved product as a potential attempt to improperly shift financial burden by denying payment for medical services related to the WC injuries or illness until the claimant demonstrates complete exhaustion of the entire settlement amount, less fees and costs, rather than a CMS-approved WCMSA amount.

CMS approval of an MSA was never required. Ten years ago, the LexisNexis Legal Newsroom for Workers Compensation Law published my article “Four Reasons To Avoid The CMS Approval Process For MSAs.” You can find an abstract of that article on this blog.

Then, the MSA industry created products known as “non-submit” or “evidence-based” MSAs. Since approval has never been required of any MSA, the purpose of this new version seemed to be to low-ball the MSA. CMS took notice.

If your MSA was priced correctly, they now say, it will be adequate to cover the injured worker’s medical expenses, and this will never be an issue. One problem with this approach is that injured workers do routinely exhaust their approved MSAs. Since MSA allocations do not account for inflation, they are likely to be depleted early; the younger the injured worker, the more likely the fund will be depleted.

CMS also took the position that if the MSA was paid via a structured settlement, Medicare wouldn’t pay a dime until every structured payment had been made. If the structure was set to pay for the life of the injured worker, that would never happen.

And Then They Backed Down

On March 15, 2022, CMS revised the relevant section to say:

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 … less procurement costs and paid conditional payments, before CMS will resume primary payment obligation for settled injuries or illnesses. . .

Administratively, CMS can more easily simply ignore unapproved MSA allocations rather than spend time reviewing them in order to exercise discretion. Line by line review takes time.

CMS has sent a message that it intends to crack down on settlements designed to avoid CMS review. We may see sterner pronouncements in future revisions.

How to Proceed

Think twice before choosing to forego the approval process when it is available. Don’t rely on an MSA allocation designed to short-change CMS.

Re-think your settlement agreements. If approval was not available or not pursued, consider including a what-if clause., This would provide that if CMS denies payment of a claim-related Medicare-eligible expense, the employer will provide counsel to defend the MSA allocation. In the short term, the employer would be responsible for the medical expense of the injured worker’s immediate needs, perhaps subject to a ceiling.

One can imagine that disputes could arise about what constitutes a claim-related Medicare-eligible short-term need. Include an agreement for alternative dispute resolution. But, holy-moly, nobody wants to keep litigating long after everyone thought the claim was fully and finally settled.

These dilemmas will probably force people to seek approval whenever it is available.

Which is just what the folks at CMS want.

Don’t Miss the Crossover Issues

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Crossover issues are not strictly workers compensation issues– which is why they are sometimes overlooked. That omission can cost a party money or even lead to a professional malpractice suit. Third Party Claims
Product liability, medical malpractice, and negligent roadway design are examples of third party claims usually unaffected by the exclusive remedy rule. Collisions may give rise to the most common third party claim.

SSDI
Whether and when to apply for Social Security Disability Income (SSDI) are not simple decisions. Federal law is written to make sure a disabled person does not earn more when not working than the person did on the job. The “80% rule” limits the combined total of SSDI and indemnity payments to an injured worker. This rule principally affects lower wage earners.

Medicare/Medi-Cal
Virtually all workers compensation professionals recognize the need for a Medicare Set-Aside in appropriate cases. Correct self-administration remains a challenge. Additionally, practitioners should be aware that two forms of Medi-Cal currently exist: traditional and expanded. Savvy negotiators can often use these programs to create a safety net to cover the injured worker’s medical expenses as part of a Compromise & Release completely closing the claim. C&Rs drafted without considering Medi-Cal issues could imperil medical care for the injured worker and the injured worker’s entire family.

Immigration
Undocumented injured workers are eligible for workers compensation benefits in California. Some undocumented workers have been in their jobs for decades. They remain under the legal radar until a workplace injury occurs. At that point, a false or stolen identity may come to light, creating issues for the injured worker and the employer. The Patriot Act’s provisions about identification required to open a bank account or to send money out of the country can also interfere with an injured worker’s decision to choose a Compromise & Release.

Tax
The tax code provides that money received on account of a physical injury is not taxable. Usually all payments made on a workers compensation claim arise from a physical injury. However, a number of circumstances could trigger taxation. Also, once an injured worker receives a buy-out, earnings on invested or banked sums are taxable.

Get Help
Workers compensation professionals should recognize crossover issues, and counsel should alert clients when these issues appear. The next step could be to bring in an expert in that area, provide one or more referrals, or advise clients to seek professional advice on their own.

Tricks of the Settlement Trade

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Negotiations can founder when parties (and some mediators) don’t know the tricks that remove settlement obstacles.

Structured Settlements

Structured settlements are ideal for funding Medicare Set-Asides. Structured settlements provide tax-free periodic payments over a specified period of time, which can be for the life of the injured worker. The structure costs less than lump-sum funding, freeing up the balance of the employer’s authorized settlement amount for the injured worker’s other needs. What’s more, unlike with lump-sum funding, lifetime payments cannot be exhausted. The injured worker receives the amount paid by the employer plus income earned from professional investment management. This trick can help bridge a negotiation gap.

From time to time I hear that a structured settlement broker was not called in order to avoid expense. This reflects a fundamental misunderstanding of how structures work. There is no cost to consult a structured settlement broker. The structured settlement life insurance company (not any party) pays the broker a commission if a structure is placed.

A structured settlement is not the right choice for every case.  But workers compensation professionals should always investigate this no-risk option.

Special Needs Trusts

Many injured workers and their families rely on Medi-Cal for their non-industrial medical needs.  However, receipt of a large sum pursuant to a Compromise & Release can disqualify the injured worker’s entire family from receipt of these benefits until funds are spent down. Placing settlement funds in a Special Needs Trust allows the injured worker to retain public benefits and still C&R the claim.

Pooled Special Needs Trusts are similar to an attorney trust account in that the trustee pays expenses from a fund holding money for many participants. Compared to a single-beneficiary trust, pooled special needs trusts are inexpensive and quick to set up and administer.

Professional MSA Administration

Did you know professional MSA administration which protects the injured worker’s continued access to Medicare benefits is available for little or no cost? One of the biggest faults of the Medicare Set-Aside system is its reliance on self-administration. Administration mistakes can jeopardize the injured worker’s continued access to Medicare.

Injured workers are more often laborers than MBA’s.  Determining which expenses are Medicare-eligible is complicated and requires constant vigilance as policies change. To retain benefits, the MSA beneficiary must submit an annual report, a burden many injured workers cannot handle. Knowing who to call to obtain free or low-cost professional administration, including reporting, can mean the difference between an open claim and a Compromise & Release.

Reversionary Trusts

The reversionary trust is probably the least used settlement trick.  When parties disagree about future medical needs, a reversionary trust can satisfy both sides’ interests.  A reversionary trust can pay for claim-related medical expenses over a specified time.  If the money is not needed, at the conclusion of the trust the money reverts to the payer.

Some adjusters object that there is no way to account for refunded amounts without leaving the claim open. Applicants may balk at the lack of unfettered access to trust funds. I had one case where the prospect of a reversionary trust caused the claimant to reduce the demand on condition the money was paid in cash now; the case promptly settled.

With the right parties, a reversionary trust is a solution which allows everyone to be right. Or just raising the possibility can get parties to settle.

There Are Many More Tricks

Every workers compensation professional in the process from Notice of Injury to Compromise & Release has a distinct role. If you are considering closing the claim, it’s time to bring in the person whose focus is settlement, a knowledgeable mediator.

Understanding Public Income and Medical Benefits after the Affordable Care Act

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acaThere’s a lot more to the Affordable Care Act than buying private health insurance through an exchange marketplace like www.CoveredCA.com.

Four kinds of public benefits can help people get the medical care they need:

  1. Subsidized premiums and co-pays for private health insurance purchased through an exchange.  Commercial insurers issue these policies, not the government.
  2. Medicare, for people who have contributed the necessary number of quarters during their years of employment. Medicare Set-Asides are required when a Medicare beneficiary settles a claim for future medical care.
  3. Expanded Medi-Cal for people with low income; there is no asset limit, no requirement for a set-aside
  4. Traditional Medi-Cal for the indigent; there are income and asset limits, no requirement for a set-aside

These types of benefits are frequently confused, especially because the names are so similar.  For optimal settlement of a Workers Compensation case, you need to know the injured worker’s eligibility for these plans.

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FOUR REASONS TO AVOID THE CMS APPROVAL PROCESS FOR MSAs

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Many Workers Compensation professionals believe they must secure approval of a Medicare Set-Aside (“MSA”) before they can close out medical benefits.  In California terms, professionals think they cannot complete a full Compromise & Release (C&R) without going through a lengthy administrative process.  This is not true.

1)                   MMSEA reporting makes approval unnecessary for Medicare beneficiaries.  Carriers and self-insureds already report at the beginning of a claim that they are assuming Ongoing Responsibility for Medicals and will report again when the claim is closed.  By the time an MSA is done, Medicare’s systems already block payments for treatment to those body parts.

2)                  Approval is not and never has been required.  The law merely requires that Medicare’s interest be taken into account, which is what you are doing when you incorporate the MSA terms into the C&R.

3)                  Approval does not protect anyone from liability.  When a non-Medicare-beneficiary Applicant self-administers and spends the money incorrectly, all parties could be subject to reimbursement liability.

4)                  The Approval process is unnecessarily torpedoing your settlements.

Do get an MSA Allocation report.  Do create a Set-Aside in accordance with the report.  Consider a structured settlement arrangement to make sure the Medicare Set-Aside is paid over the claimant’s anticipated lifetime.  Consider custodial administration for claims where it is cost-effective.  Seek CMS approval for settlements with a gross amount in excess of $250,000, but don’t let the process ham-string your settlement. 

 

This is an abstract of an article originally published at LexisNexis® Legal Newsroom Workers Compensation Law.  Find the full article at https://tinyurl.com/7f2c8n9.