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.
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.
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.
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 ....