CMS Adds LMSA NFMSA Arrangement Rules

In a continuing effort to contain costs and remain fiscally responsible, the Centers for Medicare and Medicaid (CMS) is finally addressing inconsistencies in its payment processes based on the underlying nature of its Beneficiary's health care claims. Beginning October 1, 2017, the agency will launch two new set-aside procedures, one for Liability Insurance injury claims and one for No-Fault Insurance injury claims (collectively known as Non-Group Health Plans, or NGHPs). By doing so, CMS intends to reduce or eliminate payments made to Beneficiaries who have other insurance opportunities available to cover the costs of their injuries, regardless of the cause of those injuries.


The changes are in response to a long-awaited General Accounting Office (GAO) report that investigated Medicare program effectiveness in cases where there was also liability or no-fault insurance available. In its Change Request (CR) 9893, the GAO addresses the policies and program updates necessary to create Liability Medicare Set-Asides (LMSAs) and No-Fault Medicare Set Asides (NFMSAs), similar to Workers Compensation MSAs. CR 9893 also instructs Medicare contractors to deny payments when there is an LMSA or NFMSA account available.


Specifics of Denied Codes

After October 1, no Medicare payments will be made for claims related to diagnosis codes connected to an open LMSA or NFMSA. The contractor will use Claim Adjustment Reason Code 201 and Group Code PR. Additionally, the contractor will include the Remittance Advice Remark Codes that are appropriate to the case, such as:

  • N723 - Patient must use Liability Set-Aside funds to pay for a service or item, or
  • N724 - Patient must use No-Fault Set-Aside funds to pay for the service or item


Driven by Economics

After implementation of the rule that all NGHPs report payments made on behalf of injured Medicare beneficiaries, the GAO investigation revealed the workloads of all three CMS contractors grew significantly. During the three years from 2008 to 2011, the number of voluntary NGHP MSP reports rose from 142,000 to approximately 392,000; the number of recovery cases grew from 238,000 to about 480,000, and the number of Medicare Set-Aside proposals went from about 20,000 to about 29,000.


Each of these cases represented a situation where Medicare was asked to or had already covered costs that were or should be the obligations of another insurer. The agency estimates the savings of costs avoided or recovered totaled approximately $124 million over those three years. Because neither Liability insurers nor No-Fault insurers are currently required to establish Set-Asides for the future health care costs of injured Medicare beneficiaries, adding rules that require them to do so would reduce Medicare's obligation to pay for those when the primary insurance runs out.


CMS Follows Through on Previous Comments

In 2016, CMS sent out an Alert that it was contemplating expanding its voluntary MSA review process to include reviews of both NFMSAs and LMSAs. When it issued its Workers Compensation Review Contractor (WCRC) Request for Proposals (RFP), that document included language suggesting that the chosen Contractor would review LMSAs and NFMSAs, as well as its traditional Workers Compensation MSAs. The RFP also indicated that those reviews could begin as early as July 2018.


As of October 2016, CMS was still in the process of developing the guidelines for LMSA and NFMSA arrangements, especially the sub-regulatory guidance principles, although, at that time, it also noted that the guidance would be available "within the next two years." Establishing an LMSA or NFMSA may prove trickier than setting up a WCMSA due to complicating factors such as comparative negligence or apportionment issues; presumably, the guidelines will address these matters.


What does appear certain is that CMS will add fields to its Common Working File to account for LMSAs and NFMSAs by October 1, and that, beyond that date, providers will not be permitted to bill Medicare when the Beneficiary has an LMSA or NFMSA account available.


The GAO report suggests there may be significant financial savings available to CMS if liability and no-fault claims are subject to the same MSA requirements as workers compensations claims. Accordingly, it is more than likely that the agency has just started its process to capture those gains, and that the incoming instructions are just the first step.