New CMS Guideline Alters Impact of Skipping WCMSA Submissions
Last week, the Center for Medicare Services quietly issued a new Memorandum that directly affects its view of Workers’ Compensation Medicare Set-Asides. The updated rules are contained in CMS’ Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA) Reference Guide Version 3.5, which was released on January 10 and can be found here. Of primary importance in these new rules is section 4.3, quoted here in its entirety with emphasis on the new change:
4.3 The Use of Non-CMS-Approved Products to Address Future Medical Care
A number of industry products exist with the intent of indemnifying insurance carriers and CMS beneficiaries against future recovery for conditional payments made by CMS for settled injuries. Although not inclusive of all products covered under this section, these products are most commonly termed “evidence-based” or “non-submit.” 42 C.F.R. 411.46 specifically allows CMS to deny payment for treatment of work-related conditions if a settlement does not adequately protect the Medicare program’s interest. Unless a proposed amount is submitted, reviewed, and approved using the process described in this reference guide prior to settlement, CMS cannot be certain that the Medicare program’s interests are adequately protected. As such, CMS treats the use of non-CMS-approved products as a potential attempt to shift financial burden by improperly giving reasonable recognition to both medical expenses and income replacement.
As a matter of policy and practice, CMS will deny payment for medical services related to the WC injuries or illness requiring attestation of appropriate exhaustion equal to the total settlement less procurement costs before CMS will resume primary payment obligation for settled injuries or illnesses. This will result in the claimant needing to demonstrate complete exhaustion of the net settlement amount, rather than a CMS-approved WCMSA amount.
Under section 4.3, if a settlement meets the voluntary workload review thresholds but is not submitted to and approved by CMS, CMS will now presume that the settlement does not adequately consider Medicare’s future interests and is instead an attempt to shift liability to Medicare. Consequently, Medicare will deny payment for any treatment that it deems is related to the industrial injury until the claimant’s entire net settlement recovery (including not only future medical care but also indemnity and all other aspects of the settlement) has been exhausted. Accordingly, even if an MSA has been included in the settlement, if the MSA has not been approved by CMS then the entire MSA will be disregarded.
Submission of a WCMSA has always been voluntary. Indeed, CMS will not review a submission unless the claim meets certain review thresholds (i.e., the claimant is a Medicare beneficiary and the total settlement amount is greater than $25,000; or the claimant has a reasonable expectation of Medicare enrollment within 30 months of the settlement date and the anticipated total settlement amount for future medical expenses and disability/lost wages over the life or duration of the settlement agreement is expected to be greater than $250,000). But this new rule effectively makes submission of a WCMSA mandatory. Where the parties obtain a CMS approval of an MSA, section 4.3 will still require that the applicant exhaust the MSA amount before paying for future medical treatment related to the workers’ compensation claim; but where CMS approval is not obtained (e.g., non-submit and/or evidence-based MSAs), CMS will now require that the applicant prove that they have spent down the entire net settlement amount before Medicare starts paying. The Reference Guide does not provide an effective date, which presumably renders the new rule effective immediately.
Ostensibly, the new rule does not directly affect carriers and self-insured employers. The same statutory obligation to reasonably protect Medicare’s interests still applies. But in practice, the applicants’ bar will quickly recognize the dangers of their clients having to spend down an entire C&R settlement and will begin insisting on CMS approval of MSAs. Section 4.3 will result in fewer global settlements, inasmuch as obtaining CMS approval requires both extra time and extra expense while routinely overvaluing future medical expenses.
ESL/