Accounting for MSA Drug Price Hikes

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Accounting for MSA Drug Price Hikes

In almost all Workers’ Compensation (WC) cases, the Medicare Set-Aside account (MSA) includes a certain percentage of funding to cover the pharmaceutical expenses that are involved in many recovery protocols. MSAs related to more significant injuries such as loss of limbs or temporary or permanent disabilities often reserve the highest financial value specifically for drugs prescribed due to the injury. Recent statistics and trends in CMS practices and the healthcare community indicate that those drug costs are going to rise even higher than they already are and that CMS is anticipating those escalating costs when reviewing MSA submissions for approval.

 

Drugs as a Percentage of the MSA

Medications assist in the recovery of injuries by preventing infections, reducing pain, and improving functioning. For more than one-third of all WC-related MSA submissions (37%), drugs are a relatively small aspect of the overall amount established to provide recovery care, comprising ten percent or less of the entire fund. In those cases, hospital and doctor visits costs, as well as other interventions such as surgeries and specialized therapies, make up the bulk of recovery healthcare services.

 

In the remaining 63 percent of WCMSA cases, however, the role of pharmaceuticals in the healing process becomes increasingly more significant. A recent report by the National Council on Compensation Insurance reveals the data that explains the critical role that pharmaceuticals play in the recovery process of workplace injuries.

  • Prescription drugs account for 13 percent of MSA settlements under $25,000. After that point, they increase in both volume and percentage of the MSA settlement amount; in all MSA’s over $100,000, the prescription drug cost accounts for more than half of the settled value, rising to over 60 percent in cases valued at over $200,000. Note also that approximately two-thirds of all submitted MSAs (65%) are for $100,000 or more.
  • Injury specifics determine MSA costs of medicines. Not surprisingly, more egregious injuries were prescribed more drugs over longer periods of time. The most devastating injuries, those that cause limb loss or disability, had the highest MSA values (>$100,000) and prescription drug expenses routinely make up more than 50 percent of that total settlement amount.

 

CMS Responds to Rising Need

Another fact revealed by the report is a widening gap between submitted MSA proposals and approved CMS settlements for prescription drug coverage.  Over the course of the NCCI study (2009-2015), the gap between submitted and approved values is relatively stable when it comes to Medicare Parts A and B (hospital and insurance costs, respectively), which reflects that those costs have remain relatively unchanged over those years.

 

However, when it comes to Medicare Part D, which covers prescription drugs, the gap between the “submitted” amount and the eventual approved amount is growing, with CMS asking claimants to increase their anticipated Part D values before signing off on the final settlement. The reason for the growing concern is probably two-fold:

  • Many MSA applications underestimate the long-term costs of pharmaceuticals and CMS requests changes to reflect a more accurate accounting for those costs over the life of the account. By setting a higher value at the beginning of the MSA lifecycle, CMS can prevent having to absorb those costs if the MSA value is exhausted, but the claimant still needs the support; and
  • The cost of the drugs is rising and is expected to continue rising.

 

Accounting for the Rising Cost of Medications

Across the whole healthcare spectrum, pharmaceutical costs are rising and becoming an ever-increasing share of overall healthcare costs:

  • In 2018, prescription drug costs for active employees and pre-65-year-old patients are expected to rise ten percent over 2017 prices;
  • The cost for specialty pharmaceuticals is expected to rise over 17 percent of 2017 prices. “Specialty” drugs are those prescribed for rheumatoid arthritis, Hepatitis C, cancer, and multiple sclerosis; they accounted for more 33 percent of all prescription spending in 2016 and are expected to consume up to 50 percent of all drug expenses by 2020. The cost of one treatment of a recently released medication for a particular type of leukemia is $475,000; while the expense is high, the gene-modifying drug may be launching a new paradigm in cancer treatments.

 

Drug costs rise for two primary reasons:

  • The sale price of the medicine is established by its maker and usually reflects the research and development costs associated with its efficacy and appropriateness. Additionally, in America, drugs are commodities and makers can charge whatever price the markets will bear.
  • The number of prescriptions of the drug is also rising as more physicians explore new therapies for their patients. This value is also affected by drug makers providing payment assistance for name brands to reduce the use of less-expensive alternatives.

In response to the escalation of price for brand-name prescriptions, many drug makers are now developing generic versions, offering consumers and their doctors more reasonably priced options.

 

CMS is apparently aware of this trend in prescription drug costs and is seeking increases in MSA medication values to ensure that the appropriate party absorbs that expense over the life of the MSA account. Participants in the WCMSA process will be wise to consider the long-term cost of prescription medications when developing the values to be included in those accounts.

By |2018-03-29T13:46:34+00:00March 29th, 2018|MSA, Opioids|

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