The Centers for Medicare and Medicaid Services’ updated Workers’ Compensation Medicare Set-Aside Reference Guide (Version 3.5) has a new section on the use of “Non-CMS Approved Products to Address Future Medical” that says CMS views non-submit/evidence-based MSAs “as a potential attempt to shift financial burden” to Medicare.  Below is the new section followed by key takeaways and Tower answers to questions stemming from the new policy.

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.

Key Takeaways

1. CMS specifically speaks to evidence-based / non-submit MSAs for the first time in the reference guide.
2. CMS will treat the use of non-CMS approved products as a potential attempt to shift the financial burden to Medicare, calling this process “improper”
3. As a matter of “policy and practice,” CMS will deny payment for medical services related to WC injuries until total settlement has been exhausted. 
4. CMS does not limit this to future MSAs only…this could impact existing non-submit MSAs.

Questions and Answers

Does this represent a change in CMS policy toward non-approved MSAs?

No. As mentioned in other sections of the reference guide, CMS has consistently stated that when an MSA is not approved, Medicare may deny related medical claims or pursue recovery for related medical claims that Medicare paid up to the full amount of the settlement.

What CMS does do in this version of the reference guide is to directly address evidence-based and non-submit MSAs along with MSA vendor indemnifications that sometimes accompany such MSAs.  It presumes non-CMS-approved products may represent a cost-shift to Medicare.

This presumption then leads to their next statement in which they indicate the claimant will need to demonstrate complete exhaustion of the net settlement amount before CMS will pay primary for injury-related medical care.  Consequently, this could mean that even with an MSA, the claimant would need to access their settlement funds to pay for future injury-related medical care.

Is Section 4.3 applicable to all MSAs ever done or prospective MSAs?

There is no indication that this policy only applies to future MSAs and settlements.  Consequently, unless CMS says otherwise payers should assume that CMS takes this position for any settlement whether past or future.

If a non-submit MSA was used to settle a case does the beneficiary have cause for concern?

Keep in mind that CMS involvement is only triggered when Medicare is requested to pay for injury-related medical care.  If the MSA amount sufficiently pays for such care, then the beneficiary does not have to worry. However, if the MSA amount is exhausted, then CMS has made it clear that it will deny payment.

What happens if the claimant wants to dispute the denial?

The claimant Medicare beneficiary has a statutory right to appeal Medicare’s denial.  Presumably, the beneficiary or someone on their behalf will need to submit an appeal.  The appeal would assert that the non-submit or evidence-based MSA was reasonable at the time of settlement.  The outcome of this is uncertain as to date CMS has not routinely denied medical care in settlements involving non-submit and evidence-based MSAs.

If a non-submit MSA was utilized to settle a case does the payer have cause for concern?

If the payer provided some type of indemnification or guarantee or is otherwise open to liability for a failure to properly fund future medical, those provisions may be tested.

What about non-submit MSAs that could not be submitted because the CMS MSA review threshold was not met?

If CMS was to deny payment in these cases the Medicare beneficiary could rebut the denial based on the reasonableness of the MSA at the time of settlement and on the basis that there was no CMS WCMSA review process available to ascertain whether the amount appropriately addressed Medicare’s interests.

How does this affect my MSA program?

If you have a program that largely obtains CMS MSA approval when review thresholds are met, then Section 4.3 is not relevant except for MSAs that were under threshold. (However, I believe Section 4.3 targets settlements that meet CMS MSA review thresholds.)

On the other hand, if you have maintained a program that largely does not submit MSAs to CMS for approval, then the risk of MSA exhaustion and denial of injury-related medical is real.

Tower recommends taking a critical look at whether non-submit/evidence-based MSAs remain the best policy for you and the injured worker.  Once plaintiff attorneys review this policy, they may not consider a non-CMS-approved MSA sufficient to protect their client’s access to Medicare for injury-related care in the future.

Cost-Effective CMS-Approved MSAs are Possible

The non-submit MSA route has usually been taken based on an assumption that all CMS-approved MSAs contain unrealistic allocations.  While there are some of those, Tower has found that MSA costs can be contained so that a CMS-approved MSA can pave the way to settlement.  We do this through a clear understanding of CMS’s MSA pricing methodology and knowing exactly what will lead to MSA increases or development letters that delay CMS MSA approval.  Tower proactively obtains records and physician statements or works with our clients to do this so cases can be settled without concern that CMS may deny payment for future injury-related medical care.

Please contact Chief Compliance Officer, Dan Anders, with any questions about this or any other MSP compliance issue at Daniel.anders@towermsa.com or 888.331.4941.

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