The Mandatory Second Payer Act (MSP) prohibits the Centers for Medicare and Medicaid Services (CMS or Medicare) from making injury-related payments for Medicare beneficiaries if there’s another carrier or provider with a primary obligation to do so. When working to settle an injury claim by a Medicare beneficiary, the parties to the case must take CMS’s ‘interests’ in the case into account and establish a Medicare set-aside account (MSA) that covers current and future medical costs so CMS doesn’t have to step in in the future on behalf of its insured.
Until recently, parties were strongly recommended to have their MSA proposals reviewed by CMS prior to settlement to ensure that the agreement does, indeed, protect CMS. A newly revised Nebraska statute, however, now gives parties the right to declare upon submission of the proposed deal to CMS that, by its included terms, it protects CMS. By doing so, these parties will avoid the scrutiny previously required by the preceding rule, as well as speed up the resolution process.
The question that arises from NE’s action: how do parties to the case demonstrate conclusively that their agreement conforms to the MSP? While the new statute suggests that simply wording the document correctly should suffice, review of the CMS criteria for determining its ‘interests’ indicates that there is much to consider when asserting that an NE agreement meets the requirements of the federal statute.
Protecting CMS’s Interests
Not all worker’s compensation cases (WC) will require a submission; the federal agency has identified two instances (thresholds) of factsthat indicate that an submission is an appropriate element of case resolution:
- When the injured is a Medicare beneficiary AND the settlement value is or is greater than $25,000, or
- The injured person will become Medicare eligible within 30 months of the settlement, and the value of the settlement is $250,000 or more.
Unless a case has one or the other of these circumstances, it will not trigger the need for submission of an MSA proposal for resolution. Those cases that do trigger the threshold, then, must provide information that the parties have taken the interest of CMS into account as they resolved the long-term funding issue. They must determine and assert that the long-term costs of treating the injury are covered so that CMS isn’t required to provide additional healthcare funding for it in the future.
By its wording, the NE statute allows presumptive approval of MSA proposals that include:
- the terms of the agreement;
- a brief statement of the circumstances of the underlying case;
- a statement of the injured worker’s wages or pay rate;
- a description of the healthcare services incurred that are unpaid and have been denied, and
- a statement that’… the parties … have considered the interests of Medicare and have taken reasonable steps to protect any interests of Medicare. … .”
When the proposal includes these terms, then the NE WC Court will … “presume that the parties’ agreement … conforms to the compensation schedule and [is] for the best interests of the employee … under all circumstances.”
So, What, Exactly, ARE the Interests of CMS in the WCMSA Situation?
While the NE statute is silent, CMS itself outlines the criteria of the WC injury or illness that require consideration of its interests in an MSA proposal, and review of those elements both provides insights and raises concerns about future assertions of ‘CMS consideration’ in the MSA proposal:
- The date of Medicare entitlement – when the injured worker became or will become eligible for benefits.
- The basis for the Medicare entitlement – is the injured person eligible by age or did the injury or illness cause disability or end-stage renal disease?
- The type and severity of the injury or illness – This criterion requires an overall evaluation of how the injury or illness has impacted the worker. Diagnosis codes are expected, as they connect the injury to the corresponding Medicare healthcare code. CMS is also interested in whether a full or partial recovery is expected; whether the injuries resulted in permanent or temporary conditions such as paralysis, and whether the illness or injuries might cause further health deterioration.
- Whether the injury is expected to shorten the claimant’s lifespan.
- The claimant’s WC classification regarding full or partial disability, and the percentage of that disability.
- Any previous conditional Medicare payments made that should be recovered, including those that were not covered by the WC carrier.
- The amount of the proposed gross payment and how it addresses income replacement, loss of function, and/or medical benefits.
- Whether the settlement value addresses the rest of the claimant’s life or just a specific period of recovery. If the proposed settlement does not contemplate lifetime coverage, CMS wants to know its anticipated term and the basis for that determination.
- The circumstances of the claimant’s current living situation and whether that requires extra coverage expenses. CMS is looking for the identity of the payor if the Claimant is receiving or will receive skilled nursing care at home or in a facility as a result of the injury.
- Whether the expected costs for Medicare-covered services are appropriate considering the claimant’s existing and future condition. For this criterion, CMS wants to know if the proposal contemplates all possible consequences of each type of injury. Some injuries often cause related bodily failures that may or may not be foreseeable based on the nature of the injury itself; when foreseeable, the care for those injuries should be covered by the proposed settlement. Additionally, CMS encourages claimants and other parties to consider the cost schedules set out in Medicare Parts A and B for disabled people as a parameter for estimated the anticipated costs of these injuries or illnesses.
One Statute Does Not Preclude the Other
A simple reading of the NE statute might suggest to some that parties to the WC case need no longer contemplate the full scope of CMS’s interests in a WCMSA case when crafting a proposal that will be presumptively approved. However, there is nothing in either state or federal law that asserts that complying with CMS’s ‘interest criteria’ is no longer necessary as a consequence of the passage of the Nebraska statute. Further, CMS and its recovery agencies are constantly on the lookout for cases where the federal carrier pays more than its share of an injured person’s healthcare costs and will pursue those costs as necessary. It is not known if NE’s revised law will invite more such CMS investigations in the future.
Consequently, as a suggested best practice in Nebraska, claimants and other WC case parties would be wise to generate a statement of facts that respond to the CMS Interests Criteria before submitting their proposal for approval. By doing so, they will have the evidence and documentation necessary to prove the appropriateness of their settlement valuation if and when CMS comes calling for that information.