The MSA – A Nexus of Legal and Medical Interests

Just as no two car crashes are the same, neither are two Workers’ Compensation cases (WC), especially when the need for a Medicare Set Aside (MSA) account is a possibility. To ensure the protection of the interests of both the injured worker and the Centers for Medicare and Medicaid Services (CMS) throughout the WC claim process, CMS uses both medical and legal principles to confirm the values submitted in every MSA proposal. Companies submitting MSA proposals should be familiar with those principles to avoid unnecessary delays or other complications when working to resolve the case.

No Two Injured Workers are the Same

Lawyers will tell you that every legal case is unique. Even incidents with almost identical fact patterns will differ based on the individual circumstances of those specific occurrences. Doctors will tell you the same thing; patients with identical diagnoses will have different treatment plans and prognoses based on their biological circumstances. Consequently, when the Workers’ Compensation Review Contractor (WCRC) reviews an MSA proposal, they look at the individual and unique circumstances of both the legal and medical situations when deciding to accept, modify or reject it. Not surprisingly, those reviews are comprehensive and complex. WC claimants and parties to the WC case who understand and follow the WCRC's procedural review guidelines stand a better chance of obtaining a swift response and acceptance of their proposal so they can resolve the case and move on.

New Guide - Clearer Guidelines

CMS recently updated its Workers’ Compensation Medicare Set Aside Reference Guide (now version 3.2) to clarify the steps its WCRCs take when reviewing submitted MSA proposals. Any party seeking an MSA should follow these guidelines and use the same tools used by the WCRC to determine the values they include in their documents.

Legal Principles and Factors

The WC case incorporates both legal and medical factors. To resolve the issues in the legal proceeding, the parties work together to determine the exact cause of the injury, who (or what) was responsible for causing it, the nature and extent of the damage, and who will pay for the medical costs needed to help the injured worker recover from it.

The WCRC begins its review by ensuring all the legal requirements are met and appropriate:

CMS requires that all claimant information be included and accurate, including their status as a Medicare beneficiary or their eligibility for Medicare services within the appropriate timeframe. A signed consent document must also be submitted with the proposal.
It then looks for documentation asserting that the case's facts are clearly established and that there are no discrepancies or outstanding issues that might negatively impact their findings. Documentation included here would be the court filings and agreed-upon settlement documents that state how the injury occurred, who or what caused it, and an agreement by the appropriate party that they are responsible for the costs.
In addition to the legal documents indicating liability factors are the medical documents showing diagnosis and prognosis and records of payments made for care received to manage the injury. In most MSA cases, CMS covered initial costs of care services until the finalization of the legal determination. CMS is reimbursed for these payments, so the MSA proposal must include a complete payment history of all costs incurred related to that injury. Further, the costs summary must clarify whether payments made were for expenses, medical care, or indemnity.
Once the claimant's identity and eligibility are clear, and the documentation is complete, the WCRC then looks at the WC rules that exist within the jurisdiction where the injury occurred. Each of the fifty states uses its individual interpretation of WC laws, so the WCRC will structure its response to the proposal based on the rules that govern within the specific jurisdiction.

Medical Principles and Factors

The medical evaluation is more complicated than the legal review. Every claimant presents with individual characteristics, each of which can influence how they experience their injury, the choice of treatment they receive, and the nature and extent of their recovery period. To properly evaluate every claimant, the WCRC team uses a series of tools to ensure their review is as comprehensive to that individual as possible.

The team itself is populated by healthcare professionals, including doctors, nurses, and counselors. Many carry a variety of credentials and certifications that indicate their expertise in rehabilitation, life care strategies, and medical coding, as examples. Some are also lawyers and bring that dual perspective to the review.
Their medical evaluation tools are extensive and include the International Classification of Diseases (ICD)-9 and -10, and the practice guides for Current Procedural Terminology (CPT) and Healthcare Common Procedure Coding Systems (HCPCS).
They also look to current research and industry best practice standards to understand the nature of the injury, the claimant's characteristics, and the medical intervention options that offer the best opportunity for a full recovery. These tools are comprehensive in their oversight of healthcare practices:

- Milliman - This resource connects diagnoses with procedural codes and helps to identify the proper code for the particular medical procedure. It is also used as a resource to determine evidence-based medicine guidelines.
- MediRegs - This resource provides pricing and payment guidelines while connecting the actual services to their corresponding CPT codes.
- PubMed - This source is a portal to over 22 million biomedical and scientific citations and offers the opportunity to find researched evidence needed to prove the appropriateness of medical protocols.
- MicroMedex/DrugDEX - Pharmaceuticals are usually included in the MSA treatment plan. This resource provides informative guidance on the Federal Drug Administration (FDA) indications for prescription drugs, including for their off-label use.
- Stat!Ref - This tool is a secondary resource to the DrugDex, and also includes a medical dictionary, evidence-based medicine references, and information on clinical conditions.
- Red Book - This resource indexes and compiles the Average Wholesale Prices for prescription drugs to use in MSA proposal calculations.
They are also well-versed in physiology, anatomy, pharmacology, clinical standards and practices, healthcare privacy regulations, and WC guidelines and pricing practices.

The MSA Proposal Review

After the relevant medical and legal elements are clarified, the WCRC then reviews them to determine whether the MSA values suggested are appropriate in this circumstance. This review also looks for other factors that might influence their final valuation estimate. Questions they might ask include:

Whether the injured party suffered from pre-existing injuries that might affect the resolution of this injury. Recovering from a job-related knee injury might take longer if the knee was already compromised when the damage occurred.
Whether the claimant has other conditions (not caused by the injury) that might slow the recovery period or hamper the efficacy of the recommended medication or treatment protocols.
Clarification of the identities of the treating physicians. In many cases, the injuries require treatment by a series of professionals; CMS looks to ensure that the treatment plan was prepared and overseen by the treating provider.
Whether the pricing standards used in the proposal are appropriate for that region.

The WCRC team also reviews the details of treatment and therapy already received as an indicator of the level of treatment that may be needed in the future. This review includes not just doctor visits and lab tests but also pharmaceutical recommendations and allocations, specialist inputs, and any other factors that might influence the claimant's recovery period and the cost of future medical care. At any time in the review process, the team can send the proposal back, requesting more information or corrections for information previously submitted.

Getting to Approval

The WCRC team looks at all this documentation to determine whether the proposed future treatment costs - medical, pharmaceutical, and therapeutic - are acceptable, given the parameters and protocols required by CMS and MSA rules. When they conclude the review, they submit a recommendation to CMS about accepting the proposal and whether it protects Medicare's interests:

If the team recommends a lump-sum MSA amount within 5% of the claimant's proposal, then that recommendation acts as an approval of the proposal.
In a structured resolution, if the recommended initial 'seed' money is within 5% of the proposer's initial deposit, then the recommendation acts as an approval of the proposal.
In those cases where the WCRC's recommended value differs by more than 5% from the proposal, then the team can reply with a counter-offer of a higher or lesser amount, with a detailed rationale as to why their number is more appropriate. This counter-offer allows all the parties, including CMS, to negotiate towards a case resolution that protects both the injured person and their future medical coverage and CMS.

Developing an MSA proposal requires attention to detail and extensive legal and medical knowledge. The revised Reference Guide provides a roadmap for MSA professionals to craft a comprehensive document that should move quickly through the CMS approval process.

The MSA & Liability Cases: Who’s Going to Pay for That?

Decades of continuing silence on the role of Medicare Set Aside (MSA) accounts in liability cases may prove disastrous in the face of the injuries and damages caused by the COVID-19 pandemic. America's aging population is growing, and more people reach Medicare-eligibility every day. Any injuries they suffer due to the virus and its debilitating disease will become an issue for the Centers for Medicare and Medicaid Services (CMS).

Liability Cases Raise Different Issues than Workers Compensation Cases

The challenge is this: any entity - any business, any service provider, and even any individual - could be found liable if something they did or didn't do is proven to have caused a COVID-19 infection in a successful plaintiff. When that plaintiff is also a Medicare recipient or is Medicare-eligible (Beneficiaries), resolving the liability case should also include the establishment of an MSA to ensure compliance with the Medicare Secondary Payer Act (MSP) and to protect CMS from paying for injuries that are rightly attributed to that primary payer.

However, that there are no clear rules in place regarding MSAs in liability cases will create havoc for all entities involved in the issue:

plaintiffs who want to ensure long-term coverage for lingering, COVID-related injuries;
defendants who intend to accept their responsibility for causing those injuries, and
CMS, if it has to pursue primary liability parties who aren't covering the plaintiff's costs.

There’s Not So Much Awareness of MSAs in the Liability Community

Most employers and insurers are aware of the MSP obligations mandated when Beneficiaries are injured on the job (although many entities are looking to limit that liability for workers who contract COVID on the job). However, the general public may not be mindful that those mandates also apply to non-WC cases where a person or entity is deemed responsible for injuries occurring to a Beneficiary outside the workplace setting. The majority of the general public may not have ever heard about the MSP. They aren't aware that the Act requires no-fault and liability insurance to be the primary payer for accidental or 'other situation-related health care services, claimed or released' when the injured party is a Beneficiary. When these cases arise (and they will), those entities grappling with confounding legal concerns will be even more baffled by a lack of CMS guidance on the wisdom of including MSA calculations for the liability lawsuit.

Making things worse are two aspects of the pandemic that are converging ominously:

the rising number of current and eligible Beneficiaries, and
the rising number of COVID patients who are also Beneficiaries.

The American Population is Aging

The 'Baby Boomer' generation, those born between 1946 and 1964, is aging, and now numbers more than 52,000,000. In 2011, the first wave of these 'Boomers' hit Medicare eligibility, and the last of them won't cross that threshold for another nine years. Further, of the 52 million, approximately 45 million are retired and drawing their Social Security Benefits. Those who contract the COVID-19 virus and require medical help to recover from it will have to find another healthcare resource to pay for those services. For many, that identity of that resource may only be revealed in the courtroom.

Non-Workers are Beneficiaries, Too

Almost everyone in that older population group has the potential to be a Beneficiary plaintiff:

As customers and clients - Several classes of senior populations pose unique circumstances in the event of a COVID-19 outbreak:

- Senior homes - The startling number of COVID-19 deaths occurring in nursing homes and assisted living facilities underscores the magnitude of the problem for liability cases: those losses account for as many as 40% of all the COVID-19 deaths in the country. Potentially, each of those deaths also represents a wrongful death lawsuit. Senior home residents who recovered from the disease but still suffer from lingering symptoms are also potential plaintiffs in cases filed against the facility where they contracted the illness.

- Subsidized housing residents - Many seniors live in subsidized housing complexes across the country, and in some cases, apartment management stopped the services that regularly checked in on them. Those stoppages have led to unnecessary deaths, certainly, and caused illnesses to worsen, again impacting the need for long-term healthcare support.

- Participants at public gatherings - despite warnings, many people have elected to gather without masks in public places, such as at the Sturgis Motorcycle Rally in Sturgis, South Dakota, and in the many senior communities in Florida and along the Gulf Coast. When attendees are also Beneficiaries, their only obvious option for medical services may be CMS, but there will also be claims of negligence against the businesses and areas that hosted them. These claims will consequently raise many, many assertions that event participants 'assumed the risk of illness' when they attended, knowing that COVID-19 could be in the vicinity.

As business colleagues - Most businesses deal with other entities, and long-term relationships tend to be more relaxed. Interactions that never posed threats in the past may be overlooked as potential transmission threats now.

As personal friends, too - Friends and neighbors, trusted for years, are now only as safe as their last interaction with their friends and neighbors. In those cases where the only resources available to cover long-term medical care are through a lawsuit, even these relationships become vulnerable to a legal challenge.

Still No CMS Guidance on MSAs for Liability Cases

The CMS has promised some form of 'guidance' on using MSAs in liability cases for years. In its Fall 2018 notification, CMS indicated that the new rules would give Beneficiaries better opportunities to manage their future healthcare needs while also protecting Medicare's interests. It suggested the new guidance would be issued sometime in 2019. That didn't happen.

Instead, in 2020, an updated notice stated that the new rule would 'clarify' that it would be the Beneficiary's responsibility to protect Medicare's interest in the liability suit and that more information would be made available by August. August has now come and gone, and still, no word from CMS about the liability MSA question.

The delay is, however, causing its own angst:

For some, no guidance is good guidance. The ClaimsJournal, an adjunct of InsuranceJournal, asserts that mandating an MSA in every liability suit involved Beneficiaries would be unnecessarily burdensome on the parties within those lawsuits. Their analysis suggests that such a rule would be beyond the scope of CMS's authority and that applying the mandate would dramatically slow the progress of those lawsuits to a swift but fair end. In the interim, Beneficiary health might deteriorate, which would (in the event the parties can't reach a settlement) compel Medicare to assume the responsibility for those costs, as well as the expenses incurred due to the original injury or illness.

For others, any statement by CMS on liability MSAs is, at this point, will be as confusing as no statement at all. In its proposal, CMS could assert any number of parameters, including who would be responsible for what, where limitations and exclusions might lie, and whether there will be financial thresholds to meet before filing. Those unknowns raise their own questions. Additionally, the CMS proposal should also contain a procedure or process to follow to become compliant. The questions raised by the 'theoretical how' and the 'practical how' are many. Not insignificantly, 'when' these new rules come into play is also a question; it often takes months or years to get all the systems in place, and there's usually a long and significant learning curve required for everyone involved.

Clearly, the process of designing and implementing an MSA strategy for liability cases involving Beneficiaries is complex at the best of times. The COVID-19 pandemic makes these, arguably, the worst of times to be mandating the use of such a complicated tool in an entirely new class of cases. However, the MSP is clear: Medicare is the mandatory secondary payor for Beneficiary healthcare costs caused by a third-party. Failing to clarify that point in any Beneficiary-related liability lawsuit threatens the stability of that case resolution, and/or opens CMS to risk of using Medicare funds to pay for another entity's errors.

What we do know is this:

The MSP is still the law and applies to any case where the plaintiff is a Beneficiary.

The large number of beneficiaries who have fallen ill with the COVID-19 virus suggests that at least some of them will file lawsuits against the entities that they believe are responsible for their illness and the costs of the damage it caused.

Even without CMS's official guidance on the specific liability issue, making an effort to get clearance from CMS for an MSA within the COVID-19 liability lawsuit would be best practice:

- It protects the Beneficiary's future Medicare resources;
- It provides appropriate funding for the COVID-19 related medical costs, and
- It protects the interests of CMS by including it in the review and structure of the resulting settlement.

There are (most likely) a lot of Beneficiary-related, liability-based lawsuits on the way. Planning now to manage a possible CMS MSA application within them will save all parties time, money, and stress.

CMS is Hard at Work in Summer 2020

Incoming Changes to WCMSA Activities

Even in the face of the health and civic challenges the country is enduring, the Centers for Medicare and Medicaid Services (CMS) maintains its pursuit its institutional goal of keeping its constituents current with evolving standards. Recently, the CMS issued two new directives, one for MSA calculations and one for improved MSPRP portal functionality, which became or will become operable on April 25 and July 13 of this year, respectively. Readers are encouraged to update their practices and policies to reflect the changes.

New 'Life Table' for MSA Life Expectancy Estimates

On April 25, the Agency switched over to using the 2017 version of the United States Life Tables for calculating life expectancies, as the National Vital Statistics Report publishes those. The 2017 table replaces the 2016 schedule, which has been in official use just since October 12, 2019. The newer version, reflected in Manual Version 3.1 released May 11, 2020, reflects the differences in life expectancies revealed by 2017's final mortality data.

The CMS uses life expectancy tables for many reasons, only one of which is to calculate an estimated term for the duration of a Medicare Set-Aside Account (MSA). The life expectancies' statistical values provide guidance for MSA participants to determine the number of years and the projected value of costs to include in the overall calculation of the MSA financial reserve.

Many Uses for Life expectancy Data

The availability of an MSA is an enticing option for anyone who suffers a debilitating injury that will impede their earning capacity for their foreseeable future. The account will ensure that the costs incurred because of those injuries will be paid for by the entity legally responsible for making those payments. Only a small percentage of Medicare-eligible or recipient people will suffer injuries that will require the establishment of a life-long MSA. At this time, only those injured on the job and who have Workers’ Compensation claims are specifically identified as appropriate candidates for an MSA. However, CMS has recently been considering also adding cases involving injuries legally caused by neglect or intention (claims arising from 'liability' cases) to their roster of 'encouraged' MSA candidates.

But, as an agency, CMS also has an interest in establishing an MSA for any person who may need long-term funding for injuries AND who is also Medicare-eligible or will be eligible for Medicare within two years. By law, CMS is responsible for funding healthcare costs for millions of current and future Medicare beneficiaries. The Agency must manage the funding received for that purpose to allow for comprehensive coverage as its recipients need it, and that pool of beneficiaries is growing as the general population ages. Also, by law, however, CMS is NOT responsible for covering healthcare costs for injuries or damages caused by a third-party, such as injuries that occur in a job-related accident or car crash. Any healthcare costs attributable to those injuries must be paid for by the legally responsible entity. To establish an MSA for any reason, the claimants must clarify which entities are responsible for covering costs of specific injuries or damages, to ensure that Medicare doesn't inadvertently pay for something that is rightly the responsibility of another person or company.

Data Reveals Significant Changes

CMS's capacity to properly manage Medicare payments is becoming more complex, too. In just the last ten years, the number of Medicare recipients has more than doubled, rising from 11.1 million in 2010 to over 24 million today. By 2060, the number of Americans aged 65 and over will grow by 23% (up from 16% in 2018). CMS will be responsible for funding the healthcare services for most, if not all, of them. During that same decade, as well, improved living standards and evolving healthcare capacities are also helping Americans live longer lives, and the healthcare funding supplied by CMS will have to cover those extended lifespans as well. Accordingly, when Medicare-eligible people or recipients are injured, their potential lifespan - the number of years they expect to live - becomes an integral factor in the calculation of their long-term healthcare costs.

According to the Vital Statistics Report, between 2016 and 2017, overall life expectancies declined by .1, from 78.7 years to 78.6 years, for whites in general (primarily white males) and non-Hispanic whites. It did not change for blacks, non-Hispanic blacks or Hispanic populations, however. MSA applications submitted on or after April 25, 2020, are required to be calculated per the new statistical measurement. Considering the size of the Medicare-eligible population, even small drops in lifespan can make a difference in long-term CMS funding decisions.

Making CMS Recovery Cases Easier to Manage

As readers know, CMS works hard to recover payments made on behalf of Medicare beneficiaries that should have been made by other parties or entities. The recovery of unnecessary fees is critical to the mission of CMS, which must limit its healthcare coverage payments only to legitimate Medicare and Medicaid beneficiaries, including those who have established a Workers’ Compensation Medicare Set-Aside Account (WCMSA). The CMS Benefits Coordination and Recovery Center (BCRC) will open a recovery case to retrieve funds when the Agency makes provider payments erroneously or as a conditional payment made before the establishment of legal liabilities.

To facilitate the recovery action, the BCRC provides an online portal - the Medicare Secondary Payer Recovery Portal (MSPRP) - through which third-parties and MSA case participants can communicate about recovery case data and details. Cases that originate through the BCRC and through the Commercial Repayment Center (CRC) can be managed through the portal. Users of the portal include claimants, their representatives, attorneys, insurers, beneficiaries, and recovery agents. The portal allows users to interact digitally with the Agency about the case, whether they're requesting updates, contesting claims, or signaling that a resolution has been reached, among many other actions.

In recovery cases, the Agency has begun proceedings to retrieve reimbursement of previously made payments from the claimant or party that is ultimately responsible for paying an obligation. To maintain current recovery-related communications among the parties and with CMS, users can access the portal to retrieve files needed to support their claims or record their activities. The recovery case file is organized around the various actions taken by both the Agency and case parties and includes tabs related to:

payment information,
electronic payment histories,
refund information,
letter activities (mail),
waivers, redemptions, and
compromise information, and
final conditional payment processes.

The portal helps users find the information they need to respond to, defend, and resolve the recovery case.

Currently, however, the portal isn’t particularly user-friendly. Users haven't been able to view or print documents contained in the Letter Activity tab, which has hindered their capacity to maintain a complete file of documents issued by the Agency, or track case developments. CMS has recently remedied that situation, however, and, as of July 13, 2020, users who access the site through double authentication procedures will be able to both view and print the documents they seek through the portal's Letter Activity tab.

The Letter Activity tab is rife with crucial case data because it contains all the documents generated by the Agency concerning the claim. Maintained chronologically, each record sets out information about the status of issues arising within the materials, including the opening date of the document, its closing date, and a sent date if the Agency moved the matter onto another agent or office.

Accessing the portal to view and print documents gives users better control over the information they need, so there is no longer any confusion about the opinion or standing of the CMS at any point within the recovery case. The CMS issued version 4.8 of the MSPRP User Guide on March 30, 2020.

COVID-19 and the Evolving Landscape of WC Litigation

For America’s employers, the COVID situation is creating havoc. Those who have shuttered their businesses for the duration of the crisis may not be able to open again once it subsides. Those who are open, however, especially those that offer essential services like grocery stores, are finding themselves facing workers’ compensation (WC) concerns that are unique to this pandemic. These businesses are already facing the challenges that typically arise from public crises and their subsequent recessions. Now, they must also navigate the new world of work-related injuries and illnesses directly related to the COVID-19 virus itself.

Nowhere is that concern more significant than in those companies whose workers are on the front lines of the challenge.

Healthcare Organizations

The healthcare industry, as a whole, is reeling from the effects of managing the virus. Not enough supplies and too many patients have overwhelmed entire healthcare systems. As the pandemic evolves, healthcare workers themselves are contracting the disease caused by the virus, which reduces the number of people who work in the clinics and wards. Further, the virus is not only impacting the capacity of the medical professionals, but it is also compromising the capacities of lateral and support services upon which they rely, such as lab services, clinic technicians, and even the janitorial crews. Employees working in a healthcare setting or with healthcare professionals are exposed to a heightened risk of being infected with the virus.

First Responders

Community services providers aren't immune from the concern, either. Firefighters, ambulance personnel, and distributed healthcare clinic workers, as well as the staff who work with them, are also exposed to the virus through their work. Frequently the first on the scene of a healthcare crisis, these workers face any number of threats posed by the environments in which they find their patients, in addition to the threat posed by the virus, all of which increase the likelihood that they will suffer an injury or illness while on the job.

Essential Services Personnel

Services deemed 'essential' are those that provide the goods and services people need simply to survive even when there isn't a viral threat in the air. Grocery stores, gas stations, pharmacies, and the like provide vital supplies that keep communities functioning. However, every day, their workers face health threats posed by shoppers who are infectious but not yet symptomatic, a circumstance that is unique to COVID-19. Without knowing they are infected, these workers can infect their coworkers and customers for days before they become symptomatic themselves.

The organizations and businesses that employ these vital workers must now attempt to prevent the virus from causing illness or injuries in their workplace. The fact that there is still much that is unknown about the virus and few proven resources available to avoid or combat it makes their jobs that much more difficult.

Consequently, today's employers are not just facing increased WC and SSDI claims due to the unemploymentcaused by the coronavirus, but they are also facing a new wave of a different type of WC created by the health threats caused by the virus.

COVID Will Change WC Litigation

The unique and evolving constellation of symptoms and conditions caused by the virus are not just confusing medical personnel, however. Legally, there are new challenges presented by the virus that have never before been seen by the WC and legal systems. As cases flowing from these issues mature and claimants seek support as they recover, their claims will most likely change how work-related COVID cases - and cases originating from the pandemic itself - are managed in the legal setting.

Legal Cause Concerns

One fundamental legal mandate will trigger much of the incoming legal deluge: proving 'cause.' The legal system flows from a simple relationship: cause and effect. Lawyers must identify the cause of a legal issue and connect the damage that it creates (its effect) directly with the entity presumed responsible for the action or situation where the injury or damage occurred. Defenses to the 'cause' element center on two possible options: nothing the defendant did (or did not do) caused the injury, and/or the claimant themself contributed to the cause of their own damages.

COVID cases confound this fundamental legal concept because, in many cases, there's no way to prove with certainty that any one location or exposure 'caused' the transmission of the virus. Yes, healthcare personnel are more likely to contract the virus because of their exposure to it through their occupation or workplace. However, science has determined that asymptomatic people are spreading the disease - people who show no evidence of being sick. So, while, yes, healthcare workers are more likely to contract the disease at their workplace, they also live in a community where the virus is active. These workers are also susceptible to contracting the virus through their interactions at home, while at their grocery store, or any place where they may come in contact with an asymptomatic person.

The virus's capacity to spread via non-symptomatic people makes it extremely difficult to assign 'cause' to one specific entity or location. This challenge to proving 'cause' poses new questions to all parties to a WC case:

For WC claimants, the legal challenge moving forward will be to establish, with certainty - that their COVID-related injuries or damages are directly connected to their actions on the job.
For employers, especially healthcare employers, the challenge is that virtually every staff-person-COVID case will have an assumption that it is work-related. Companies will find it difficult, if not impossible, to determine where, if not at work, the claimant was exposed to the disease.
For insurers, the inability to determine the specific cause of the claimant's illness or injury will undoubtedly create economic challenges as the number of healthcare-based, COVID-related cases increases.

Legislative Changes

As if the legal challenges aren't tricky enough, WC cases will also face challenges posed by the increased flood of local, regional, and national legislative efforts to stem the spread and contain the damages caused by the virus. Every state has been scrambling to manage their specific COVID crisis, with many passing laws and emergency regulations on a weekly (or sometimes daily) basis.

However, these short-term legislative fixes address only the crisis of the day. In many (if not most) cases, their potential long-term impacts have not been fully vetted, and those who act in accordance with the new rule may create additional challenges and liabilities in the future.

These issues and more will be the subjects of an increasing number of litigations as future lawsuits and WC claims are processed in the coming months and years.

MSA Litigations May Also Increase

Increasing numbers of COVID-related WC claims will almost certainly prompt a rise in MSA applications, as claimants seek as much coverage as possible for future services related to their COVID injuries. In these cases, it will be even more important to consider the interests of the Centers for Medicare and Medicaid Services (CMS) when crafting those MSA documents. As the Mandatory Secondary Payor, CMS is not authorized to spend Medicare resources on health conditions caused by or the responsibility of a third party. The 'COVID cause' concern will pose challenges in these cases, too, if there is an insufficient declaration of cause in the MSA application.

(On a side note, the COVID crisis may also trigger a rise in Social Security Disability Insurance (SSDI) claims, too. The number of those cases also rises in the aftermath of a societal crisis. These SSDI claims will also be plagued by the 'COVID cause' challenge insofar as science has yet to determine if the virus can cause permanent disabilities as well as as-yet-undiscovered injuries and illnesses.)

The COVID-19 virus has already caused countless job-related injuries and illnesses in businesses and industries across the country. It is on track to generate thousands more before healthcare and scientific resources can fully contain it. Even without the myriad of legal challenges it is engendering, the related WC claims it will generate will also trigger the demand by both injured parties and the CMS to develop comprehensive MSA applications to manage the costs of covering those injuries. As the country works through both the pandemic and its ensuing recession, the coronavirus of 2019-2020 will almost certainly restructure how America's workers' compensation and Medicare Set Aside sectors operate in the future.

The Effect of COVID-19 on WC and MSAs

Even before the COVID-19 virus situation was declared a global pandemic by the World Health Organization (WHO), world events indicated that a future recession was possible. Now that we are living amidst the full force of the COVID-19 effect, it seems like a recession is inevitable. Further, the high numbers of newly unemployed workers and shuttered businesses indicate that any recession that might emerge during the pandemic will be more severe than it would have been without the virus surfacing. The whole situation makes it difficult for business leaders to know what to expect once the COVID threat subsides. However, there are lessons to be insights to be gained for those who take the time to evaluate how the global community experienced and managed past recessions.

Swift, Massive and Unrelenting

The origins of the onset of the pandemic remain unclear; scientists only recently learned that the first two American deaths attributable to the virus (on February 6 and 17, respectively) occurred well before the first reported such death (February 29). If confirmed, it means that the coronavirus has been in the U.S. longer than previously believed and that its spread is wider than previously asserted. That assertion would help to explain the astonishing speed with which the virus overtook many U.S. cities and communities. As of this posting, the number of reported cases in the country tops 850,000, and the number of deaths caused by the virus is over 50,000, all having occurred in less than three months.

The earlier transmission date of early February also indicates that more people have probably contracted the coronavirus or are at risk of suffering from it than was previously thought. Making the situation worse is the vast array of unknowns still surrounding the disease, its spread, its treatment, and its actual toll. Without a clear idea of where the virus is spreading or what methods are truly containing it, government leaders can't re-open their communities for fear of triggering an even larger pandemic much closer to home.

Early Responses Also Cause Chaos

The most comprehensive response to the virus (so far) has been to order people to remain 'safer at home' to stop unintended viral transmissions through inadvertent social contact. The mandate became necessary in early 'hot spot' locations, including cities in Northern Italy, across Europe, San Francisco, and New York City. In those situations, the calamitous rise in the volume of critically ill patients quickly consumed all available medical resources, which, in turn, lead to more deaths because there were no resources left available to treat those later arriving patients. To prevent this situation in areas where the rise in case numbers was slower, many communities around the globe elected to tell their constituents sooner rather than later to stay home so that they did not face the unacceptable risk posed by a lack of sufficient medical interventions.

The consequence of the 'safer at home' mandate is that millions of people are now quarantined in their homes, unable to leave except for 'essential' reasons such as grocery shopping or if their work requires them to be out. Those who can work from home are now doing so. For the millions who can't, the stay-at-home mandate also means the loss of their job.

In the U.S., some 26,000,000 people have filed for UI (UI) as of late April, as the shops, restaurants, and services companies that employed them were forced to close their doors. Too many of those workers were existing on a paycheck-to-paycheck basis, meaning they don't have the resources they need to sustain their living situation while the pandemic runs its course. The UI funds will allow them to pay their rent and buy food until the situation lightens, their previous jobs become available again, or they can find another line of work. Unfortunately, for many of them, the old job will be forever gone, and there will be no other resource available to assist them after they exhaust their short-term unemployment benefits.

For workers already suffering from a work-related injury or disability, the current crisis is creating an even more dire situation. Workers who are currently unemployed or receiving disability coverage because of an on-the-job event have been working to regain their health and capacity to return to their occupation. With so many healthy workers now available to take that job as soon as it becomes available again, these workers now find themselves essentially 'unemployable.' Even when they are strong enough to return to the workforce, the current situation indicates that there will be no jobs available for them to take. What will they do when that day comes?

The analysis of events that occurred after previous recessions and economic downturns suggests that many of today's unemployed workers will file worker's compensation (WC) claims or, if appropriate, social security disability claims (SSDI) to fill the void created by no job and exhausted UI benefits. Further, that research also shows that an increase in both WC and SSDI claims often also leads to an increase in requests for Medicare Set Aside accounts.

The Past Informs the Present

It's always helpful to look at relevant past events to make sense of current happenings. The economic crisis generated by today's COVID-19 pandemic is certainly similar to the housing crisis that caused the 2007-2009 Great Recession, so social responses to that situation can provide insights and direction for today's business leaders.

The message in brief: expect an influx of both UI and SSDI claims, as well as a swell of MSA applications. Data gathered over time reveals that the number of both UI and SSDI claims rose during the last seven recessionary periods, all of which occurred during the past five decades. Simply put, people who can't find work will seek alternative resources to fill that economic void. That pivot away from a work search to alternative financial supports usually takes them to either WC or SSDI options, and, in both cases, the opportunities to file an MSA application grow.

Newly Unemployed Workers:

Many employees will continue to work through an on-the-job injury if they can, prefering to retain their incomes even if that means slowing their recovery. These now unemployed workers may not be able to return to their old jobs, nor are they likely to find new work as stronger, healthier competitors vie for what is sure to be a limited opportunity for employment post-pandemic. These former employees may turn to WC resources as an alternative to returning to their old job or looking in vain to find a new one. They may also see the value of establishing an MSA within the case to ensure their health needs are covered regardless of the state of the future global economy

SSDI Recipients

In a similar vein, workers who are already collecting SSDI benefits may find themselves also blanked out of any work they might have taken or returned to as healthier applicants compete against them for that work.

Further, many of them may now also qualify for an MSA if they've been on SSDI for more than two years. This option is available regardless of their age. In 2008, the number of displaced workers who applied for SSDI benefits topped 2.3 million, which was the record at that time.

Research conducted after the Great Recession receded confirmed that many workers who struggled through that event filed either or both WC and SSDI claims to replace lost wages and healthcare coverage. The population receiving federal disability benefits grew from 7.6 million in 2009 to 8.9 in 2013 because their combined health and employment challenges provided the opportunity to access these resources rather than attempt to return to work. And F subsequent research indicates that 'most' Medicare MSA claimants are eligible because they have been on SSDI for the requisite two years, and not because of their chronological age.

Impact on CMS

This research suggests that many of today's unemployed workers will be turning to both UI and SSDI for alternative financial support during and after this pandemic. That influx of cases will significantly increase the already high demands being made on UI and SSDI providers, as well as on the Centers for Medicare and Medicaid Services (CMS). Making things worse for CMS: the Agency is already facing massive budget challenges as the number of workers who continue to pay into the system is shrinking while the number of those taking resources out of it is rising.

These unique and difficult challenges suggest that, as a response to heightened demand and reduced resources, the Agency will also become significantly more stringent regarding MSA compliance practices. Its efforts to enforcing the Mandatory Secondary Payor Act will almost certainly require more stringent attention to detail in every MSA case to prevent CMS from shouldering any inappropriate economic burdens that belong to other entities.

Protect the Future with an MSA

In the Workers’ Compensation (WC) world, evaluating the appropriateness of a Medicare Set Aside account (MSA) is (or should be) a standard case management practice for any person with a work-related injury who is nearing or over the age of Medicare or Medicaid eligibility. However, because setting up the MSA in a WC case remains optional per Centers for Medicare and Medicare Services (CMS) regulations, many injured workers and their work- or insurer-based case managers elect not to submit an MSA proposal to CMS. Instead, after filing the requisite notice to CMS that a Medicare-eligible person suffered an injury at work, they then resolve the case without further consideration of the interests of that federal agency. Their failure to include CMS in those deliberations, however, may lay the foundation for significant barriers for the injured person in the future.

The MSA as a Case Marker

The primary reason for the Mandatory Secondary Payor Act is to prohibit the use of Medicare funds for medical expenses when another legally obligated person or party should bear those costs. For this reason, CMS requires WC insurers to notify it when an injured worker is also a current or soon-to-be Medicare recipient. On its end, the CMS creates a file for every injured Medicare recipient (or soon-to-be) who is or will receive payments from a group health insurer, including WC insurers. Using the resulting database, CMS can determine the primary versus secondary payer responsibilities of its beneficiaries and ensure that it is not making payments that are the obligations of those primary carriers. Once it receives the notification of this particular injury, the CMS file can reflect that their current or future beneficiary has/had an injury that is/was being managed by an appropriate third-party obligor.

Unfortunately, after the notification, there's no requirement to do more regarding the CMS, and many WC claimants don't follow up their CMS notification by also submitting an MSA proposal or otherwise reporting the circumstances of the conclusion of the case. This oversight leaves a significant gap in the CMS file since that agency now has only half a record of the injury in its archives, but no history of the resolution of that claim. And it's in that gap that so many problems can fester.

From Half a Claim to Legal Morass

From a legal perspective, that incomplete CMS file can trigger numerous challenges:

One element of the notification report is the submission of the ICD-9 codes that describe the injury. The notification is made (usually) toward the beginning of the case as the injury and its related IDC codes are determined.

However, as the case evolves, the evidence may reveal that some of the injuries noted are not actually attributable to the work-based incident but instead may be pre-existing or due to some other cause. The WC carrier may appropriately decline to cover those costs, so they are not included in the final settlement negotiations, nor are they covered by the MSA. The CMS file, however, retains that code as attributable to the WC injury, which can lead to CMS declining to cover its care, thereby leaving the claimant/beneficiary with no coverage by either the CMS or its WC insurer.

Other challenges can also arise when the CMS file is left incomplete.

Conflicting data from different sources - the plaintiff's lawyer and the healthcare providers, as examples - can cause duplicate demands by CMS for reimbursement of conditional payments, a circumstance that can trigger its own lawsuit.
Future injuries can also cause problems for the insured if any future CMS injury/claim reports include the same or similar codes as those submitted in the WC case. With no record of how the WC case parties managed those prior injuries, CMS can justifiably require proof that the second injury is separate from the first, WC injury, and that request will cause unnecessary delays. Alternatively, CMS can deny that second claim, believing it to be related to the previous case, which leaves the injured Medicare beneficiary with no medical coverage for their new injury.

Submitting an MSA proposal and including CMS in the WC case can alleviate these challenges.

More Than a Bank Account

Establishing an MSA is much more than just the negotiation of a settlement figure and the opening of a trust account. The process of creating an MSA provides a host of benefits for the claimant and parties to the case, both immediate and future:

In the Near-term:

The process of creating an MSA proposal generates a wealth of data for everyone involved in the case. The analysis of the injury, its physical manifestation, its medical intervention requirements, and the cost for long-term recovery all provide information that will inform the legal management of the case. With this data, the parties to the case gain the knowledge they need to come to a reasonable resolution:

For the WC insurer-payor, the analysis forms the basis for its resolution negotiations so it can set appropriate funding levels and manage its resources properly.
For CMS, the analysis included in the proposal clarifies the extent of the injury, provides a defined scope for its care and recovery, and offers assurance that its beneficiary will not require Medicare funds for treatment of this particular concern.
For the claimant, the MSA analysis clarifies the treatment plan for their particular injury and the cost estimate for the care and recovery period. With this information, they can settle their case and move on with their life.

In the Long-term:

After the case closes, the parties can move on to other projects, knowing that the WC case is behind them:

Insurers can fund the account and then close the case with a reasonable assurance that it will not require additional funding or attention.
For CMS, submission of the resolved case and its accompanying MSA will bring its files current with those of the case participants. The agency will know what the evidence revealed in terms of contingent liability, who is paying for what, the extent of the injuries, the prognosis for future care, and the estimated costs of that care. It also has a record of the beneficiary's health situation at the conclusion of the case and can refer back to that point in time when evaluating future claims.
For claimants, they can plan their future, knowing that they have the funding necessary to recover from their injury as completely as possible.

But Claimants now also have the added benefit of a clear record with CMS, which may prove essential for their future well-being. Why? Because, as Medicare recipients, they are aging, and that circumstance escalates the value of CMS to their future.

Medicare and the Aging Population

By definition, Medicare recipients are at or over the age of 65, and that population is growing. According to the US Census Bureau, the population of people 65 and over grew by 15.1 percent in the ten years between 2000 and 2010, outpacing the growth of the population in general. This year, the number of 65+ citizens should hit 55 million and, by 2030, is estimated to grow to 70 million. It will stress the funding for Medicare to service that further growth, so it is expected that the CMS will be more stringent than ever that primary payments be exhausted before an injured person seeks financial support from it as the secondary payer.

And that growing population also grows bigger concerns. With every passing year, the risk of developing a disease or incurring another injury rises for each senior. Declining eyesight, hearing loss, and slower reflexes can all contribute to declining health or reduced capacities. High blood pressure, diabetes, compromised pulmonary systems and similar conditions can cause a variety of symptoms, and many medications can cause physiological challenges even if the underlying condition for which they were prescribed doesn't.

Further, while many diseases and conditions related to aging can also increase the risk of injuries, many otherwise healthy seniors will suffer a serious injury simply by falling in their home or community. According to reports by the Centers for Disease Control (CDC), falls are the number one reason for fatal injuries in people over 65 years and they are the most common reason for nonfatal traumatic hospital admissions. Additionally, 25% of all Americans over 65 fall each year, resulting in more than 2.5 million trips to the emergency room, over 800,000 hospital stays, and 27,000 deaths.

Often when a fall occurs in this population, in many cases, Medicare is the only available option for health care services for these seniors. An insufficient case file at CMS that fails to provide information on the resolution of previous injuries could delay receiving care for an instant concern, which can also cause complications in getting help in a timely way. That confusion can also cause the denial of the new claim, which could trigger a drawn-out battle to clarify actual eligibility for new resources. Considering that 10% of all falls in seniors cause major injuries, even a slight delay in getting care could be disastrous for the aging patient.

How Does a Current MSA Alleviate Future Concerns?

The MSA clarifies for the CMS file what those previous injuries were and how they occurred, the details of the managed treatment plan, and who paid for those services. It also encapsulates the circumstances of that injury to that resolved case and reduces the likelihood that CMS will require information about that case before authorizing resources for the current concern. Not least significant, by submitting and gaining acceptance of an MSA in a WC case, the claimant's future file with the CMS is transparent as to prior injuries so that they are eligible to receive timely and appropriate care when future injuries occur.

To date, there is no requirement to submit an MSA proposal to CMS prior to resolving a WC case. However, considering the future challenges posed by failing to do so, it seems prudent and a best practice to develop and file one in every WC case with an injured Medicare (or soon-to-be) recipient. Not only will the process clarify the specifics of that injury, but the MSA itself will protect the worker's opportunity to receive Medicare benefits for future injuries.

Establishing the MSA in the WC Case

In today's post, we are completing our series on the how's and why's of the Medicare Set Aside (MSA) account. Last year, we wrote about the evolution of worker protection laws, the role of third-party liability workplace injuries, and why America's Medicare system gets involved in injured worker cases.

Next, we will explore how to engage the Centers for Medicare and Medicaid Services (CMS) in an evolving workers’ compensation (WC) claim, including some of the processes to follow before, during, and after that engagement is made.

CMS in WC Cases

CMS doesn't become interested in WC claims unless the injured worker is also a Medicare recipient (or soon to be eligible), is considering settling the case for $25,000 or more, or is considering settling for $250,000 or more and is eligible/likely to become a Medicare recipient within 30 months.

Once the status of the claimant is established, then CMS will get involved in the case for two reasons:

To ensure that Medicare funds aren't spent for injury care when there is another, more appropriate funding source (usually primarily insurance) available. According to the Medicare Secondary Payer law, Medicare funds are available for workplace injury care only after all other funds have been exhausted; its funding source is 'secondary' to all other funding sources.
To track the activities of the parties to the claim to ensure the proper use of any funding provided for injury care. This oversight activity assures that spending additional Medicare funds for injury reasons doesn't become necessary in the future. Recovery from workplace injuries can sometimes take months or even years, during which time the injured party is also aging and eligible for Medicare services for other purposes. The CMS wants to make sure that support and care stemming from the workplace injury are paid for by the appropriate third party so that Medicare dollars are preserved for their intended purpose: caring for the concerns that develop in aging Americans.

Engaging CMS

Even in cases where the status of the claimant is appropriate, there is no rule that requires them to submit an MSA proposal to CMS or even to report to CMS that a Medicare-eligible claimant exists. In fact, the law requires those beneficiaries to apply for all available WC and other benefits and resources before looking for support from CMS.

The law does strongly encourage, however, that any WC injury involving an existing or eligible Medicare beneficiary 'should' be reported to CMS's Benefits Coordination and Recovery Center (BCRC). Once alerted, the agency will open a file and prepare to monitor the case.

In most cases, the WC insurance is appropriate and sufficient to cover all the costs related to the injury, and CMS will close its file accordingly. However, there are circumstances when CMS attention is required at the beginning of the case to ensure that public dollars (Medicare funds) are protected, as well as the future interests of the injured Medicare beneficiary:

In some cases, CMS will pay for medical services on the condition that the responsible party will provide reimbursement for those after that responsibility has been established. Conditional payments often occur when the injury is severe and significant services are delivered before determining the appropriate funding source for those invoices. When the injured party is also a senior and appears eligible for Medicare, many health care providers will provide and bill for care and ask questions about appropriate funding sources later.
In other cases, several entities may share liability for a particular injury, and none will be making payments until those liability estimates are determined. In these cases, CMS will compensate medical providers under the conditional payment clause, ensuring that the injured person gets needed and timely care.

The circumstances of every case will determine if or when CMS should be involved and to what extent.

In every case, however, when the injuries are significant and medical services will be necessary over a longer term, then CMS should definitely be approached to assist in establishing a dedicated funding account to cover the cost of those services. The mechanism used to monitor and manage those funds is the Medicare Set Aside (MSA) account.

Setting Up the MSA Account

Many people recover quickly from on-the-job injuries, and the immediately available WC insurance resources cover the costs of care and rehabilitation. Some injuries, though, are more severe, cause more extensive damage, or are temporarily or permanently disabling. In these cases, funding to cover long-term medical costs must be established from the funding streams that flow from the injury itself: the WC insurance and other insurance or similar financial pools.

Pursuing these funds ensures that the entities responsible for the damage cover the entirety of care needed to achieve recovery. Setting up these funding streams also makes certain that, in the case of the Medicare recipient, Medicare dollars are reserved for their intended purpose.

The mechanism used to aggregate injury-related healthcare costs is the 'Medicare Set Aside' account (MSA). This account holds the 'set aside,' injury-related funding so that Medicare dollars are not needed or sought for that purpose. Additionally, the funds allocated to the MSA do not include the funding required for reimbursement of past payments; those transactions are outside the MSA structure. Instead, the MSA funds are for covering current and future medical and healthcare costs that are directly related to the on-the-job injury.

Estimating the Value of the MSA

Before submitting a draft MSA proposal to the CMS, parties to the case must determine what services and supports are most likely to accomplish the best possible recovery of the Claimant, and then to put an economic value on those services. The process can be fraught with challenges.

Determining the Extent of the Injuries

Every MSA is different and is based on the medical needs of the specific injured person.

In some cases, the injuries will require life-long supports, such as when a person is partly or wholly disabled.
In other cases, injuries may require extensive periods of rehabilitation and retraining, with the expectation being that the injured person will have a full recovery after completing those services.

Many of the cases that are best served by an MSA fall somewhere between these two extremes, with neither total disability nor full recovery possible. Consequently, the parties seeking to establish the MSA must review and elect the optimal types of services that will lead to the best possible outcome: some form of stability for the Claimant with as much independence and function as possible. Further, regardless of the actual or hoped-for outcome, the funding established within the MSA is expected to address all future medical requirements related to the injury.

Determining the Recovery and Rehabilitation Options

The type of injury determines the kind of care.

Acute Care

Most injured workers require some form of 'acute' medical services, short-term treatment in the immediate aftermath of the incident. These include surgeries, splinting, pain medications, etc., and are usually covered before any assignment of liability. When CMS pays these costs, it is generally reimbursed for them by the primary payor.

Chronic Care

Sometimes workplace injuries cause lingering effects that will take longer to recover from than just a few days or weeks. Injuries to systems are examples, such as when bodily organs are injured, or joints are affected. These patients often require extensive rehabilitation services, including those offered by rehabilitation specialists, physical therapists, and occupational therapists, and even psychologists. It is often impossible to know the cost of these services until the acute stage has passed, and the medical professionals are in a position to structure a prognosis. Accordingly, it can be particularly tricky to estimate these costs and the impact the services will have on the patient's ultimate recovery.

Long-term Care

In the most severe injury cases, the injured worker becomes so frail or disabled that long-term care is required, perhaps even until death. Head injuries and spinal cord injuries are often the cause of the need for long-term care. Sometimes these costs can also include the price of a care home or in-home services.

Estimating the Value of Future Healthcare Costs

Determining the value of injury-related medical costs includes not just the dollar amount but also the duration of time they are needed. After the patient stabilizes, then the medical professionals can usually estimate when, based on research and observation of similar injuries, that person will probably be as completely 'recovered' as possible. The claim management team must then ensure that the MSA includes funding to cover these requirements through to the patient's recovery.

In many cases, they use Medical Disability Guidelines to establish reasonable recovery costs and funding values. The guidelines are just that: guides. They do not state with certainty what the cost of any medical service might be. Instead, they provide a range of medical expenses and recovery time values based on extensive data collected about the same or similar injuries or conditions. The claim team can compare the specifics of the instant injury to those of similar injuries and, from those numbers, form an estimate as to what it will probably cost to bring this Claimant back to full functionality.

Once the estimated value of the recovery period is established, including all related medical, healthcare, and therapy costs, then the team can determine the value of the MSA. After creating that value, then they can develop and submit the claim to CMS for approval.

Gaining CMS Approval

There are several reasons to seek CMS approval for a proposed MSA. The most significant reason from the agency's perspective is because the submission allows CMS to review the recommended values as they potentially affect Medicare's interests. The agency reviews each submission for a variety of concerns:

to ensure that every relevant medical concern has been considered;
that the injury requires ongoing care;
that the Claimant is still receiving services related to the workplace injury;
that the proposed treatments, including medications, therapies and other interventions, are appropriate for the injury at hand;
that the primary payors are actively involved in making these decisions, and
that the settlement amount (the dollar value that will be 'set aside' is sufficient to cover the anticipated costs.

Other reasons for creating and submitting the proposal are to bring all parties to the case current regarding the costs of the Claimant's recovery and to provide assurance to the Claimant that there will be sufficient funds available for the duration of the recovery period.

Lump-Sum or Payments Over Time?

After CMS accepts the MSA proposal, there are still some issues to be determined, including whether funding the account should be managed in one lump sum - or in parts over time.

There are two perspectives as to which payment method is optimal in any given case. Claimants favor lump sums because then they have the full amount they believe they'll need to get back on their feet. However, a lump-sum payment doesn't reflect future inflation of the cost of services and may not be sufficient to get the Claimant all the way to optimal recovery.

A structured settlement, where the funds are distributed into the account on an annual basis, is the preferred method, for several reasons.

It allows annual vs. lifetime spending oversight, which makes it easier to ensure that MSA dollars are spent appropriately on injury-related services within any given year.
It gives Medicare direction for when it's appropriate to cover medical costs that aren't related to the injury.
It allows for inflation adjustments so the payors into the fund can adjust their annual amount based on current costs and not projected costs.

Studies reveal that structured settlements can save the payors as much as 34% over the all-in cost of a lump sum payment.

Moving on With Life

The establishment of the MSA as a dedicated account launches a new phase in the Claimant's case: with the WC claim settled, they can now move to recovery and rehabilitation. It does not mean, however, that CMS is no longer involved. Over the term of the recovery period, CMS and the payors will be tracking a variety of factors to ensure that the funds are well spent and that the injured party is recovering as completely as possible.

But that's a discussion for another post ....

Medicare and the Workers’ Comp System

The Medicare and Medicaid systems are fundamental sources for healthcare services for America's seniors and disabled people. The Centers for Medicare and Medicaid Services (CMS) runs the healthcare networks that span the country and provide medical services for millions of people. When Medicare-eligible people suffer injuries at work, CMS can only provide healthcare funding when there is no other entity who is or should be held liable for those costs. It is this circumstance - the nexus of the CMS and Workers’ Compensation (WC) systems - where numerous issues and concerns arise in many, many injured worker cases.

History of Medicare and Medicaid

Most people recognize that maintaining good health becomes increasingly expensive as one ages. The number and severity of chronic conditions - diabetes, high blood pressure, arthritis, etc. - often increase as strength and agility decline. For these reasons, in 1965, the United States government developed the Medicare system - to ensure older Americans had access to appropriate health care services. The system assured a universal right to health care at the age of 65 years, which also reduced the cost to public hospitals of caring for otherwise uninsurable elderly patients.

However, establishing the system took time, and its implementation was fraught with delays, confusion, and arguments: what services should be offered? By Whom? Who will pay for those services, and how will those payments be made? Over time, various state and federal officials worked through many of those 'kinks,' and today's system runs relatively smoothly, considering it retains thousands of healthcare professionals and provides services to more than 44 million Medicare recipients.

Back in 1965, during the development of the Medicare system, several decisions were made that have proved critical to the success of the public health care system:

A compromise among three competing structural proposals resulted in a two-part senior healthcare plan, with a third prong covering low-income and disabled persons:
- Medicare Part A provides insurance coverage for hospital costs of seniors, and
- Medicare Part B covers outpatient physician services.
- The third prong established a right to healthcare for low-income families (regardless of age), the blind, and the disabled and eventually was titled, "Medicaid."

The money to pay for these services would come from every employed worker in the country, who would contribute a small portion of every paycheck into the national fund. The system would record their contributions and, when those funds were needed, the worker would be guaranteed access to healthcare services, regardless of actual cost.

These two decisions - the services to be available and who would pay for them - laid the foundation for today's Medicare and Medicaid programs. These programs provide healthcare services for millions of seniors and disabled people who would otherwise have no access to relevant medical resources.

Medicare

Generally, one's age, legal status, and/or diminished capacity determines their eligibility for Medicare.

Medicare Part A - Hospital Insurance

Medicare Part A services are provided to every person 65 years or older who paid (or whose spouse paid) Medicare taxes for at least ten years. It is also available for younger people who have disabilities, and anyone with End-Stage Renal Disease. Recipients aren't required to pay premiums for the services if they are eligible to receive or are receiving Railroad Retirement or Social Security benefits. Otherwise, recipients can purchase Part A coverage.

Medicare Part B - Medical Insurance (Outpatient)

Part B coverage is optional, and everyone who wants it must pay for it. To qualify, each recipient must be at least 65 years and a citizen or legal resident of the United States. These payments are deducted from Social Security or Railroad Retirement benefits, or the recipient is billed every three months.

Medicare Part C – Privately Provided Add-ons

Part C is offered through private healthcare companies that provide additional services as well as Medicare Parts A and B (usually vision, dental, and hearing services, among others). These companies received payment from Medicare for their Medicare-eligible recipients, and charge an additional premium for the additional coverages.

Medicare Part D – Prescription Drugs

Neither Part A nor Part B includes coverage for prescription drugs, which are covered by Medicare Part D.

Exceptions

People under 65 years can also receive Medicare benefits if they have qualified for Social Security Disability Insurance (SSDI) and have been receiving those benefits for at least 24 months. The Social Security Administration manages these benefits.

Medicaid Eligibility

Medicaid is separate from Medicare in that it is administered by the States, according to federal rules. Both the state and federal governments pay into the funds providing Medicaid services. Medicaid recipients include low-income individuals and families, children, pregnant women, and people with disabilities.

Medicare's Connection to WC cases

As we noted in our post of September 3, 2019, Workers’ Compensation insurance gives both injured workers and their employers a 'litigation-free' venue for resolution of issues arising from on-the-job injuries. The process eliminates the need to determine liability (via expensive lawsuits) while ensuring that injured workers receive the medical and injury care they need to recover. In these cases, most often, the proceeds from the WC insurance are the sole funds used to cover the injured person's medical costs during recovery and rehabilitation.

Recently though, as the American population ages, more people are working well into their 60's and beyond. They may be eligible for both Medicare coverage in addition to WC coverage if they are hurt at work. A fundamental challenge arises from this scenario based on the original purpose of the funds that are used:

The employer pays a premium that provides WC funding for the specific purpose of ensuring its workers have access to medical resources in the event of an on-site injury. Several factors influence WC premium values, such as relative levels of on-site risk, available safety mechanisms, and worker safety training, among many other variables. Each of these worksite factors is designed to reduce the likelihood of an injury. The employer and its WC insurance company must use those calculated WC funds specifically to assist the injured worker while concurrently holding the employer safe from liability claims.
Medicare funds, on the other hand, are available only due to the worker's age or capacity and are earmarked to cover costs when there are no additional insurance or other funds available. Most importantly, these funds are intended to be used only when the person has no other healthcare resources available, and Medicare funds are their sole means of obtaining healthcare services.

In the case of an injured worker who is also over 65 years of age, these two funding sources are available for those medical costs because they qualify in both systems. Further, either or both sources are often tapped for use early on, in the immediate aftermath of the injury, when urgent care is necessary. It's usually only after that immediate care is provided and the patient is stabilized that the financial professionals look into the cause of the injury, and that's where Medicare funding can muddy up the WC case.

Causation and Medicare in a WC Case

In a straight-up WC case, the actual cause of the accident may not be significant to the case's final resolution (that's what the insurance is for). In the WC/Medicare cases, however, causal factors may matter a lot.

Under the Medicare Secondary Payor Act (MSP), Medicare funds are deemed 'secondary' (to be used after primary funds are exhausted) to those of other, non-employer entities if they contributed to the cause of the injury. However, that 'secondary' classification can't be made until those contributing factors are established, and that determination may not be made for days or even months after the incident. The MSP Act asserts that when another entity is deemed to have caused the injury, then it is improper to use Medicare funds to cover the cost of the recovery. Further, when that determination is made, but Medicare funds are already dispensed, then the CMS has a legal duty to go after that other entity to retrieve those funds back.

Investigations are Critical for Protecting Medicare Funds

Ergo, the investigation of both the cause of and the responsible parties for a workplace injury often drags out the WC case, and creates the need for CMS oversight and also, in many cases, litigation. As we noted in our October 1st blog post, there can be many contributors to the cause of a workplace injury. Many companies use third-party contractors in their business, whose on-site activities may have caused a dangerous situation. Other participants in the work at hand may also be contributors, such as the manufacturer of tools or machinery in use at the time. Consequently, in any case when a non-employer entity may be responsible for the conditions that caused the injury, then CMS will pursue the case to ensure that no Medicare funds are spent inappropriately for medical services related to that injury.

The Medicare Set-Aside Account

After making those determinations and identifying the entity(ies) responsible for causing the injury, then an account is often created to maintain the funding needed for those healthcare services until they are no longer necessary. For injured workers who are also Medicare-eligible or recipients, that account is (in most cases) a Medicare Set-Aside account, which holds injury-specific healthcare funds to prevent the use of Medicare funds for that purpose. Additionally, CMS tracks the use of those funds over time; entities responsible for managing those funds must report on how they are used and can be fined if they fail to report or misuse the money.

See our post next month to learn how Medicare Set-Asides are established and managed to protect the interests of both the Medicare recipient and the Medicare system in general.

Mid-Summer Summary and a Quick Look Forward

It's mid-summer, and many of our readers are off on well-deserved vacations. For those who are still in the office (and are as fascinated as we are by all things ‘workers’ comp'), we are taking this opportunity to offer some updates to one of the major subjects we've been following and to provide a heads up about what we'll be highlighting later this year.

Updates on Opioids

For more than two years, we've been profiling the challenges posed to the nation's workers and employers by opioids. We've tried to explain:

how the concern arose;
what the government is doing about it;
how it affects the Workers’ Compensation industry, and
even how it impacts the U.S. life expectancy statistics.

We've looked into what employers can to do (and their struggle with those activities) to reduce the likelihood that their injured workers will suffer the additional pain of a subsequent opioid addiction. And we've reported how some of America's medical professionals have contributed to (and profited dramatically by) the problem by prescribing so many of the drugs in inappropriate quantities and dosages.

Clearly, opioids as pain relief for workplace injuries have wreaked havoc across the country for at least two decades, and America's employers and employees have borne the economic and emotional brunt of that disaster.

Seeing a Turnaround?

However, increased attention to the issue has also increased responses to it, and all parties involved - employers, employees, insurers, healthcare providers, and government agencies - are now working in conjunction with each other to reduce the problem.

Consequently, we're now happy to report three good news stories about how those added attentions and intentions have had a positive impact on the opioid concern:

1) The Dollar Amount of Spending on Opioids is Falling

Recently released data reveals that in 2018, all 27 respondents to the 16th annual "Survey of Prescription Drug Management in Workers’ Comp" reduced their spending on opioids for injured workers by an aggregate of 23.2 percent in 2018. The drop signals the third year in a row that opioid spending was down, by 16% in 2017 and 13% in 2016.

Those reductions are the result of several changes in how medications are managed in the workers’ comp system. Insurers are now more careful about the number and dosage of opioids that they're will to cover, and ethical healthcare providers are reducing the numbers of opioid prescriptions that they write. And injured persons are also assuming more responsibility for their healthcare, by becoming more aware of the dosage and duration of prescriptions and moving off the drugs earlier in their recovery period.

In many cases, the shift in opioid usage reflects the growing reality that workers who remain on the drugs beyond medically accepted terms take longer to recover, are more likely to not return to work, and more likely to not regain their previous level of function even after they've recovered from the injury itself.

2) Adding Acupuncture to the List?

On a related note, in mid-July, the CMS (Centers for Medicare & Medicaid Services) for the first time suggested a willingness toauthorize the use of acupuncture treatments for their Medicare patients who suffer from chronic low back pain (cLBP). It's not available for everyone just yet, however; the agency issued a 'proposed' decision, indicating that they'd make a final determination on the question based on the results received by study participants who are enrolled patients in CMS-approved research or clinical trials sponsored by the NIH (National Institutes of Health).

Earlier in the year, CMS launched a National Coverage Analysis (NCA) of scientific evidence that supports or negates the use of acupuncture as a pain-relieving alternative to medical interventions such as opioids. While there's no posted information as to why cLBP is the current focus, again, statistics may reveal why the CMS chose that particular ailment. A 2016 National Health Survey showed that at least 50 million American adults suffered from some form of cLBP and that 19.6 million of those experienced "high impact chronic pain." Both levels of pain are associated with increased anxiety, depression, and, in many cases, opioid dependence. Using the non-medical intervention of acupuncture instead of opioids would be a game-changer for many people if it curtailed their pain and improved their quality of life without the need for opioids.

The NCA is also part of a Strategic Plan developed by the National Institute of Drug Abuse (NIDA) to reduce the impact of opioids on Americans. The strategy includes four approaches to improved pain management that might assist with the alleviation of pain but not exacerbate the health situation with an unnecessary opioid addiction. The approaches include exploring for more non-opioid medical interventions; assessing the efficacy of non-pharmacological pain treatments such as acupuncture and biofeedback; finding adjunctive supports for cases where opioids remain the best pain controlling mechanism and developing strategies to improve opioid management practices so that opioid use disorders don't develop.

3) The National Safety Council (NSC) Agrees with CMS

In a show of national unity, the NSC agreed publicly with the CMS and asserted its support of the decision to consider alternative pain treatment methods like acupuncture instead of opioids. The NSC put the opioid crisis in context by noting that the odds of dying prematurely because of a fatal opioid overdose have surpassed the odds of being killed in a car accident for the first time ever. The agency went on to encourage all employers and their benefits providers to consider accepting alternative pain treatments as a way to not just reduce the threat of opioid dependency but to avoid it altogether.

A Brighter Future

Both the reduction in opioid spending and the possibility of acupuncture coverage for controlling pain are significant strides toward a definitive solution to the opioid crisis. We will continue to monitor how the country is managing this scourge and keep our readers informed about how they can be part of that solution, too.

So, What IS an MSA?

CompEx MSA also intends to explore its roots and will be providing an overview of the need for and development of Medicare Set-Aside accounts. Protections for worker safety and healthcare management have evolved over a long period that also saw the institution of mandatory work hours, minimum wages, and safe working condition standards. Through it all, employers have had to walk a fine line between profitability and maintaining attention to emerging government and industry regulations. The MSA is one tool they can use to make that process easier.

At CompEx MSA, we believe we can assist our clients better if we help them to better understand how the MSA process works and how it works within America's industries and communities. We will be launching that series next month.

Are Non-Reporting Penalties on the Horizon?

The Medicare Secondary Payer (MSP) law requires that "Responsible Reporting Entities" (RREs) notify the Centers for Medicare and Medicaid Services (CMS) when a Medicare beneficiary (or soon-to-be beneficiary) is injured. Failure by an RRE to notify CMS of such an injured person may result in significant “civil monetary penalties” (CMPs), according to federal law. CMS has announced that it will begin developing rules around enforcing this CMP provision in late 2019. The announcement raises several questions that are of concern to insurers of any sized company (including self-insured companies).

Why is CMS focused on this issue now?

In a nutshell, the proposed rule would create and clarify reporting standards for insurers to follow so they do not trigger an inquiry or subsequent CMP related to their RRE reporting activities. The Medicare Access and CHIP Reauthorization Act of 2015 repealed duplicative MSP reporting requirements but opened up to public discussion what might the potential criteria be for enforcing non-compliance with the remaining reporting requirements. One such requirement is that of reporting to CMS when a Medicare beneficiary (or soon to be beneficiary) is injured and needs medical care because of those injuries.

There is no current legislation that details when non-compliance with this reporting rule should trigger a CMP, nor are there standards that clarify what insurers can do to prevent being subject to such a fine. (The statute does, however, clarify that provisions (e) and (k) of §1128a (42 U.S.C. 1320a-7a) of the Social Security Laws apply to these CMPs the same way they apply to Social Security non-compliances. Those provisions detail how to appeal if such a penalty is assessed (at paragraph (e)) and authorizes the Secretary to proceed to federal courtif it learns that a company might become subject to a CMP (at paragraph (k).)

Enforcing the rule provides CMS with two benefits:

1) It will comply with the MSP law.

Being a secondary payer, Medicare resources cannot be touched until those of the primary payer are exhausted. CMS has an affirmative legal duty to avoid paying for injuries that are covered by a primary healthcare insurer and the statute gives it the authority to know when its participants are receiving that support from their primary insurance resource. By mandating notice in every applicable case, CMS can monitor all of its injured participants and plan appropriately for providing benefits when the primary benefits run out. Without advance notice, that oversight and planning can't happen.

2) It may increase its revenues

Ostensibly, every unreported case could become a future Medicare case requiring access to Medicare dollars. Without notice of the extent of earlier medical care, a subsequent claim to CMS could trigger an expensive investigation into whether those primary benefits were properly utilized in every case.

From the carrier's perspective, and while there is no statistical data about how many unreported cases exist, any insuring company may have relevant cases going back years, and therefore may have hundreds of eligible claimants on their books. Each one of those claimant's cases might trigger a monetary penalty of up to $1,000 per day of non-compliance and applying such a fine to even just a few cases in any one company could raise millions of dollars which the federal agency could use to provide even more care for its enrollees.

Who will be affected?

The statute itself applies to insurers that provide medical coverage to their insureds, including companies that are self-insured. In statutory language, a “Responsible Reporting Entity” is any "applicable plan" offered by any liability insurance company, no-fault insurance company or workers’ compensation insurance carrier (42 U.S.C. 1395y(b)(8)).

Insurers that issue these types of plans must register with CMS as an RRE and report to CMS when they become aware of an injured person within their plan who is also a Medicare beneficiary (or soon-to-be beneficiary.)
Their report must include the identity of the injured person and any other information that assists the CMS secretary in determining eligibility and coordination of benefits (42 U.S.C. 1395y9b)(7)(B)).
Failure to file the notification can result in a "civil money penalty" of $1,000 for each day of non-compliance for each individual about whom a report should have been filed (42 U.S.C. §1395y(b)(7)(B)(i)).

Why would an insurer not report?

Despite the rule that every eligible case must be reported, not all insurers are dedicated to pursuing that mandate. Some companies may not be aware of their insured’s Medicare eligibility, so they don’t know about Medicare and MSP requirements. In some cases where Medicare eligibility is a factor, the injuries will, in all likelihood, heal well within the scope of the primary carrier's obligation, so Medicare resources will never be needed. In other cases, insufficient internal resources or 'operator error' may have inadvertently missed the requirement to make a notification in any given situation. In all likelihood, most if not all insurance carriers probably have at least some percentage of cases that should have been reported to CMS but were not.

What should insurers do now?

In anticipation that the enforcement procedure becomes clearer, there are two steps every insurer should take now to avoid as much as possible being fined for non-compliance with this reporting rule:

1) Begin an assessment of all cases to determine if any are or may be subject to the CMP rule. Insurers with thousands of open cases will find this task burdensome; however, that investment of time to set records straight will be well worth it when weighed against the cost of the potential but avoided CMPs.

2) Contribute to the conversation about what the new reporting standards should or could be. The proposed rule would seek public comment on the criteria and practices applicable to CMPs assessed under the MSP. At the moment, that rule is silent about the CMP specifics, such as how companies can avoid the penalties for past failures, or when the $1,000/day period should begin. Although it states the CMP is applicable for “each day of non-compliance,” when does ‘non-compliance’ begin? Would it be back-dated to the time of injury? What if the injured person became Medicare-eligible after medical treatment had begun?

Other questions also come to mind: Should the CMP value have a cap? Would that cap change depending on the size of the insuring company? How might CMS pursue their CMP opportunity? (Paragraph 1128(k) suggests that a federal lawsuit might be the method by which CMS can enforce its fining provision although there are, at present, no standards or rules established that detail how CMS might go after those penalties.)

The recent notice of rulemaking indicates that CMS is intending to tighten its oversight of injury cases when potential Medicare recipients are involved. RREs who have been lax about their reporting processes or haven't updated or audited them recently may be facing significant CMPs if they have on their books multiple unreported Medicare beneficiaries receiving medical benefits because of accidental or work-related injuries.