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 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:
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:
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.
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.
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.
Every MSA is different and is based on the medical needs of the specific injured person.
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.
The type of injury determines the kind of 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.
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.
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.
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.
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:
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.
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.
Studies reveal that structured settlements can save the payors as much as 34% over the all-in cost of a lump sum payment.
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 ....
Arizona has taken a step toward fully resolving the medical coverage uncertainties that linger when its workers suffer injuries on the job. While many workers’ compensation (WC) injuries resolve relatively quickly, others take longer to respond to treatment in both the acute and post-acute phases, resulting in an extended recovery period and higher healthcare costs over that term. However, the focus of those entities that cover the costs of care is usually on wrapping up both the healthcare payments and the WC case itself as quickly as possible to keep their costs down. Only by fully resolving both the WC and the medical cases can the insurer or employer close their books on the case with certainty.
In Arizona, however, before Fall 2017, WC insurers or self-paying employers were rarely able to fully close a WC claim because the law allowed injured workers to reopen their claim if they required additional medical care after the closure of the WC case. The rule applied even if there had been an otherwise full resolution to the other issues of the case (cause, liability, etc.). Consequently, many AZ insurers and employers were left on the hook for additional payments for WC medical services for months or years after the rest of the case resolved.
In April of this year, Arizona's governor signed into law Senate Bill 1100(SB 1100) which (finally) gives some relief to the state's beleaguered employers and WC insurers. The new law gives parties to an accepted WC case more authority to reach and agree to a final and full settlement of the case by permitting claimants to knowingly waive their rights to future claims and their rights to future changes to their claim. The new law does not apply to WC claims that have been denied.
In many ways, the reset of AZs WC laws simply allows the parties to settle all issues more quickly by ensuring that they all have a full understanding of the terms of the settlement and its consequences:
SB 1100 also allows the parties to attest to certain conditions which pertain to full disclosure and due process:
The new law also addresses the interests of other interested parties to the case:
All parties are required to attest to the fact that they made a diligent search to protect the interests of Medicare and Medicaid, as well as the Indian Health Service and the U.S. Department of Veterans Affairs (pursuant to AZ regulations).
The parties must attest that they took reasonable steps to identify and compensate any liens or outstanding bills for healthcare services related to the WC injury.
The second aspect of the new law specifically addresses "Supportive Medical Maintenance Benefits," those supports necessary to maintain health after the claimant achieves "maximum medical improvement" (MMI). This is the section that carriers and employers are most excited about: it allows claimants to waive their right to future maintenance benefits by accepting a current financial award that represents that value. With this agreement in place, Arizona employers and WC carriers can resolve every aspect of the case and close it completely with no threat that it may be opened in the future.
However, the new opportunity also comes with documentary and due process requirements:
SB 1100 also recognizes the presence or absence of legal counsel in some WC cases and offers unrepresented claimants the opportunity to have their case heard by an administrative law judge (ALJ). The ALJ will review the settlement agreement to ensure the facts are accurate and that all parties have properly executed the appropriate attestations. The ALJ will also inquire into the claimant's understanding of their rights, their obligations under the agreement including using the settlement funds to make future payments for injury-related healthcare costs.
Resolving a workers’ compensation case requires a balancing of the interests of all parties. The new Arizona law gives Arizona WC claimants more control over the decisions made within their case while also respecting the need for employers and insurers to resolve and close cases as quickly and expeditiously as possible.
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.
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:
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:
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."
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:
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.
Federal law protects the funding used by Medicare to cover healthcare costs of injured beneficiaries. When another entity - a primary insurance or healthcare plan (the primary payor, or PP) - has a legal obligation to cover those costs, the Medicare Secondary Payor Act (MSP) authorizes Medicare to obtain reimbursement from that PP entity of any payments made by Medicare on behalf of Medicare members before that payor's involvement. Further, the MSP specifically allows Medicare to seek double its damages via a "private right of action" against a primary payor if it is compelled to sue for recovery of its conditional payments.
In recent years, several Medicare Advantage Plans (MAPs) have attempted to invoke the MSP private right of action to obtain double damages from primary plans that allegedly owe them reimbursement funds. Defendants, usually the PP entity and litigants in the underlying injury case, have pushed back, claiming that MAPs are not Medicare and that they don't have a comparable MSP right to a private right of action nor the right to double damages. The resulting confusion in the nation's Circuit Courts is causing heartburn for every MSP participant, as they try to sort out where their obligations and opportunities lie.
The private cause of action and its double damages rule is vested in Medicare via the MSP statute, and it's used to discourage PPs from trying to avoid reimbursing the federal agency for payments it made on its member's behalf. Simply by making the reimbursement payment to the federal agency, the payor eliminates the risk of having to pay it twice (as well as the added costs of litigating the issue).
Confusion was wrought, however, when the MAPs organizations invoked the MSP private right of action and its companion double damages claim, while defendants declared them to be ineligible to do so because they are not Medicare. The challenges instigated a series of federal court fights to determine when, if ever, and under what circumstances a MAPs agency had the standing to invoke the MSP private right of action rule. So far, three federal circuit courts have weighed in on the issue, and other courts in both federal and state jurisdictions are watching to see how the concern ultimately rolls out.
At least in the 2nd, 3rd, and 11th Circuit Court districts, MAP entities can sue primary plans via the MSP rule for recovery of conditional payments and claim double damages in the process. In the most recent opinion, issued March 13, 2018, by the 2ndU.S. District Court of Connecticut in Aetna Life Ins. Co v. Guerrera, the Court concurred with the 3rd and 11th District Courts, each of which had previously held that a MAP has the same private right of action for recovery of conditional payments as Medicare proper, and therefore, it also can claim double damages under the law. The court rightfully distinguishes the main differencebetween Medicare, which is a representative of the United States, and MAPs, which are private companies. It then points to Title 42 of the Code of Federal Regulations § 422.108(f), which provides that a " ... [MAP] will exercise the same rights to recover from a primary plan, entity, or individual that the (Medicare) Secretary exercises under the MSP regulations . . . .” The Court also cited the findings of both the 3rd Circuit (Pennsylvania, In re Avandia Marketing, Sales Practices, &Products Liability Litigation (In re Avandia), 685 F.3d 353 (3d Cir. 2012)) and the 11th Circuit (Florida,Humana Med. Plan, Inc. v. W. Heritage Ins. Co., 832 F.3d 1229, 1238 (11th Cir. 2016), and affirmed that it, too, would follow their reasoning allowing the MAP to pursue the private cause of action and its double damages opportunity.
Even with these concurring decisions, the dissent in the Western Heritage case still gives one pause before assuming that the MAP's private cause of action right is now firmly established. In that dissenting opinion, Judge Gerald Tjoflatargued that the distinctions between a government agency and a private insurer should preclude the use of federal rules to protect the interests of private entities. Among other concerns, he argues:
There may yet be other justices out there that find these arguments compelling.
Further, cases coming out of the 5th and 6th Circuits continue to add depth to the 'MSP private cause of action' discussion:
It appears likely that both individual and corporate plaintiffs will continue to bring federal cases to test the scope of the MSP private right of action rule. By doing so, they are giving the court system more opportunities to clarify just when, when and by and against whom those claims can be made.
Until the issue is settled on all elements, best practices remain:
For the first time, parties involved in a Workers' Compensation Medicare Set-Aside (WCMSA) can request a re-review of the MSA value when they dispute the CMS determination or when the financial circumstances of medical care vary from the approved MSA amount by ten percent or $10,000. In the past, insurers, corporations, and injured persons had only one opportunity to seek a re-review of the CMS MSA value determination by submitting a re-review request to the CMS Regional Office (RO) at the time of the settlement. If they remained unsatisfied with the CMS decision after that process, there was no other opportunity to seek an adjustment of what CMS determined to be the appropriate value of their MSA amount. For insurers and self-insured corporations, no further review meant they remained on the hook for the additional costs of care for work-related injuries, even when those costs were appropriately assignable to the MSA.
The newly released “re-review” opportunity, now titled an “Amended Review” allows all MSA constituents a new opportunity in which to argue that the costs of care for these injuries should shift to the MSA. The revised WCMSA Portal User Guide, version 5.1, released July 10, 2017, includes an "Amended Review” section at §12.4.3 that sets out the procedure and grounds for making an Amended Review request.
As of July 2017, WC case participants can seek an Amended Review if they disagree with the RO decision on the original settlement value, or if the projected cost of care has changed so significantly that the new proposed settlement amount totals more than ten percent or $10,000 from the original CMS approved amount. Only cases that have an approved status with the RO and have no other existing re-review requests pending can seek an Amended Review of the MSA value.
It is not unusual for the professionals involved in MSA cases to offer differing values for the claim. Both the insurance company or corporation and the CMS are obligated to keep their costs as low as possible, which means they must look for ways to reduce current and future costs of care for injured workers. Consequently, sometimes the net value of the MSA determination is insufficient to properly manage their injury or its long-term health consequences.
The new rules authorizing further review of a disputed MSA value allow MSA parties to submit additional information about the case and the projected costs of care to be considered within the original settlement discussions. Although how this actually affects MSA negotiations and agreements remains to be seen, the opportunity to seek another opinion about the future cost of care is most likely a boon to all involved.
The option to review an existing MSA value is new to the CMS and arises from cases where the work-related injury worsens over time, requiring additional, unforeseen medical care costs. While many states permit reopening of WC cases if there is medical evidence that the injury has gotten significantly worse over time, those laws refer only to the original WC claim with the insurance company, and not to the resolution of the claim with CMS. Until this WCMSA Portal User Guide revision, MSA beneficiaries or their insurers had no opportunity to adjust the MSA value to reflect the long-term reality of the WC-related injuries.
Appropriately, the new WCMSA rules establish parameters that limit the timing and circumstances of Amended Review requests:
Workplace injuries impair both the life and future of injured workers and businesses and insurance companies work hard to be sure injured workers are well cared for through the term of the injury. MSA accounts are designed to cover the future medical costs of those injuries. The Amended Review process gives injured workers and those who support them the opportunity to seek an adjustment to the MSA account when its value doesn't meet the needs of the medical case.
For more information about establishing or maintaining a Worker's Compensation MSA, contact CompEx MSA today.
Last month, CompEx MSA National Division LLC (CompEx MSA) received notice that the State of Florida has certified it as a Minority-Owned Florida Certified Business Enterprise. The certification secures our position as a valued vendor of Medicare Set-Aside services within the state and the country and celebrates the fact that our Hispanic American heritage expands the State's rich history and culture.
Florida enjoys a reputation for being pro-business and its recognition of Woman-, Veteran-, and Minority-owned businesses underscores its commitment to the work of all its diverse populations. By encouraging and actively supporting businesses owned and operated by women, veterans, and citizens of minority heritage, the state provides a healthy and robust economy for all its citizens.
As a certified Florida Certified Business Enterprise, CompExMSA is now eligible to work directly with state government procurement professionals to ensure they and their people receive the best possible services if the need for a Medicare Set-Aside agreement arises. The Minority-owned designation opens doors to new business and economic opportunities that promise growth for our company, our community and the State of Florida. We appreciate the leadership and support provided by the state of Florida as it works to improve economic opportunities for all Floridians, regardless of their gender, ethnicity or other distinguishing factor. We look forward to many years of growing the State's economy by providing exceptional MSA plan establishment and management services, employment opportunities and the chance to share our Hispanic culture with our Floridian friends and neighbors.
We at CompEx MSA are proud to offer our Medicare Set-Aside services to people all over the country while enjoying the great benefits of living in and working with the great state of Florida.
Settling a Workers' Compensation (WC) claim can be a long and arduous journey that many resolve through the establishment of a Medicare Set-Aside (MSA). However, the terms of these legally binding agreements are expected to cover all contingencies over the course of the worker's lifetime. What happens when circumstances change and the conditions of the settlement no longer achieve the goals of the injured party? A recent California case indicates that trying to change the terms of an MSA may end up being another long and arduous journey.
The Medicare Set-Aside (MSA) agreement is designed to provide resources for the long-term best possible care for a lingering injury and its consequences. Through the process of the workers' compensation case, the parties to the case - the worker, the employer, the insurance company and Medicare - negotiate to ensure proper compensation for the injured worker while containing the long-term health care costs to those related solely to the workplace injury itself. The resolution of the case, via a settlement agreement providing an MSA, is intended to ensure the worker's long-term comfort (as much as possible) and offer reasonable assurance to the insurance company and Medicare that the case will remain forever closed.
Recently in California, however, an MSA agreement was tested for its capacity to address all contingencies after the WC closes. There, an injured worker sought to change the terms of his MSA so he could eliminate the third-party contractor from the MSA agreement and assume its administration personally. The injured worker, Applicant Fernando Villalpando, filed a claim before a Worker's Compensation Administrative Judge where he argued that he was not satisfied with the care he received through the services of the MSA administrator and that his experience justified the modification of the agreement. By filing and arguing the case, however, Mr. Villalpando inadvertently revealed several legal anomalies specific to MSAs that are not yet resolved but will, in all likelihood, continue to arise in future MSA cases.
Villalpando based his WC complaint on injuries suffered between 2002 and 2003; the Compromise and Release (C&R) agreement containing an MSA and a third-party administrator, was reached in 2011. Although the agreement contained a clause whereby Villalpando released the third-party company from liability for "failure to ... correctly administer a Set-Aside account ...," it may not have included language that allowed for such a modification at any time, even though the agreement was set to run for 29 years. Villalpando argued that the medications he was on when he agreed to the settlement prevented him from fully comprehending the nature of the contract; that the third-party administrator moved forward with the MSA without his consent, and that the MSA failed to include two medications potentially because they were too expensive.
The WC judge (WCJ) denied the petition because the Applicant had not shown that the administration of the account was inappropriate. Villalpando appealed, and the WC Appeals Board (WCAB) remanded the case back to the WCJ. In its written opinion, the WCAB spoke to the many unanswered questions posed by the case starting back when the MSA was established in the first place.
The WCAB sent the case back not just to the WCJ, but also to Villalpando's original attorney, so he could get the legal assistance he needed to understand the terms of the MSA agreement and his rights and obligations contained within it.
The case offers insights for any entity charged with the crafting of an MSA agreement. At the least, they should consider and account for all possible future contingencies, including the need for any party to the agreement to seek a change to its terms after the case closes. Depending on the facts of each WC case, it may be wise to include language allowing the injured individual to review and modify terms after sufficient time as passed for that person to gain clarity about the sufficiency of the agreement to meet long-term needs. And, to alleviate the need for unnecessary judicial review, perhaps the MSA should include language that lists the requirements necessary for an injured person to self-administer their MSA and the evidence required to prove competency for that purpose.
By addressing the concerns revealed by the Villapando case into each MSA going forward, claimants, attorney’s, and MSA administration agencies may prevent the need for another long, arduous legal journey through the WCAB process.