MSP Compliance Blog

Workers’ comp payers regularly measure the performance of different aspects of their programs. Understanding injury frequency rates, the average cost per claim, timeliness of claims processing, lost-time and return-to-work rates help them identify cost drivers and improve processes. Payers also evaluate the performance of external partners — provider networks, bill review, pharmacy benefit managers, third party administrators, physical therapy networks, home health and case management vendors, etc.

But do they evaluate their Medicare Set-Aside (MSA) programs and vendors – not so much.

Why not? Well, some employers, TPAs, and insurers have their Medicare Secondary Payer (MSP) services integrated into a multi-service contract. As a result, they may assume that MSAs are just part of the process – they are all the same – they take the time they take – and they cost what they cost.

Without metrics to benchmark your performance against some sort of standard, how would you know?

In the case of MSAs, until recently, payers did not have benchmarks to determine what to measure.

In 2022, for the first time, the Centers for Medicare and Medicaid Services (CMS) published some metrics that can give payers a benchmark for comparison. While CMS’ data points are limited, they offer a great place to start.

Average MSA Amount

Providing statistics from fiscal years 2020 through 2022, CMS found the average MSA recommended amount was $84,563.33 in 2020, $80,740.94 in 2021, and $81,571.75 in 2022. (“Recommended” in CMS language means CMS believes the dollar amount of the allocation will be sufficient for the lifetime medical cost of the injury. It’s equivalent to a CMS-approved amount.)

Having captured, benchmarked and analyzed our MSA submitted amounts for more than six years, Tower was excited to see how our outcomes compared to CMS’s published numbers.

One example is the average amount of an MSA. CMS’s average in 2022 was $81,571.75, while the average of Tower’s CMS-approved MSAs was $54,715. That’s nearly $27,000 less than CMS’ number, a whopping 33% less than the CMS’s average amount.

And this didn’t just happen in 2022. The average amounts of Tower’s MSAs were 32% lower in 2021 and 30% lower in 2020.

This is a credit to our powerful and persistent clinical interventions.

Approved Rx Drug Cost

CMS also broke out the cost of prescription drugs on its recommended/approved MSAs. The agency’s average prescription drug cost for 2022 was $20,776, compared to Tower’s $11,405.

Tower’s averages in this category have steadily declined since 2020 when Tower’s average Rx drug cost was $17,941, then $14,079 in 2021. If it seems like we’re boasting a little, we are. Our CEO’s strong background in pharmacy management has paid off over the years.

We have concentrated on pharmacy costs since Tower was founded in 2011. We always examine claims for unnecessary cost drivers like duplicate scripts, discontinued prescriptions, and opportunities to change from brand to generics. And Tower led the charge in identifying inappropriate opioid use on MSAs along with all the prescriptions needed to handle side-effects.  Notably, in 2022, only 15% of Tower’s CMS-approved MSAs included opioids.

We don’t stop at identification, either. Our clinicians work with physicians, gain their agreement to taper injured workers off opioids and follow up to ensure changes happen.

Re-reviews

Tower also doesn’t let CMS get away with errors and misinterpretation of medical records with the MSA submission.  We know our MSAs and we know the rules so that we can confidently challenge CMS when we believe it’s wrong.

While there is no formal appeals process when an MSA comes back higher than proposed, we can submit a re-review request to reduce the MSA.  In 2022 Tower had a 63% success rate at obtaining a partial or full reduction from the CMS MSA counter-higher using the re-review process.

Conditional Payment Disputes and Appeals

When it comes to Medicare conditional payments, in many, many cases, the reimbursement demand is inaccurate. If the client approves, we’ll chase every dollar of savings.  We’re aggressive because we have the records, fee schedules, technology, and CMS response data to fight for our clients. In 2022, our conditional payment disputes and appeals yielded an overall 92% reduction. In 70% of these cases, the demand was reduced to $0.

While CMS did not publish metrics on conditional payments, Tower believes it’s an important point to measure.  There are numerous other areas that we measure and our Chief Compliance Officer Dan Anders is happy to discuss these and work with you on developing metrics for your own program.  Contact him at daniel.anders@towermsa.com.

In response to a Medicare conditional payment demand, payers can access a five-level appeals process, including a hearing before a Centers for Medicaid and Medicaid Services (CMS) administrative law judge (ALJ). Most conditional payment demand appeals are resolved at the first two levels: redetermination and reconsideration.  However, some are escalated to an ALJ as happened in this case.

ALJ Appeal Success Story

On July 24, 2020, the Commercial Repayment Center (CRC) issued a demand for reimbursement of $149,902.98.  The work injury had aggravated a pre-existing left knee skin graft, resulting in an infection of the left knee.  The payer accepted the aggravation but not the long-term condition of the knee.

Charges on the demand were either completely unrelated to the left knee or for treatment deemed related to the longstanding pre-existing condition of the left knee.  An appeal was filed, and the CRC redetermination decision stated that none of the charges would be removed.

At this point, a second-level appeal was filed with the Qualified Independent Contractor (QIC). CMS contracts with the QIC to provide an independent review apart from the CRC. Its March 26, 2021 reconsideration decision was partially favorable because almost all the charges related to body parts other than the left knee were removed from the demand. The revised demand was $79,489.97, which also included interest.

The next step was an ALJ appeal submitted on May 12, 2021.  It can take two to three years to receive a hearing date, but in this case, it took a little over a year to receive a hearing date set for June 28, 2022.

The difficulty in this appeal is that after some initial treatment in the state where the injury occurred, the injured worker moved to another state where he received further treatment.  The payer never received bills from the out-of-state medical providers whose charges were listed in the conditional payment demand.  Fortunately, we could work with the defense attorney who subpoenaed the medical records.  Unfortunately, upon review, the medical records were unclear on causation.

Nonetheless, we put our best argument forward at the hearing and through our brief to the ALJ that the work-related infection was a temporary aggravation of a long-standing condition of ulcers to both knees.  This was supported by an inconsistent history from the injured worker and medical notes, which implied that the post-injury infection had resolved shortly after the accident.

What is helpful at the ALJ appeal level is that you can speak to the judge, explain your position and answer his or her questions.  This differs from the first two levels of appeal, which come down to submitting the appeal and receiving a decision.

In a September 12, 2022 decision, the ALJ agreed with our position.  As a result, the demand, which by then exceeded $80,000, was reduced to $441.19.

Keys to Appeal Success

Here is what made this appeal successful:

Appeals Deadline Met

All five levels of appeal have specific timeframes for an appeal submission. It is essential to file an appeal by the designated deadline which should also prevent the CRC from referring the debt to the Treasury Department for collection (assuming the debt is not paid during the pendency of the appeal).

In this case, our client had designated Tower as its recovery agent, which means we receive copies of letters and notices the CRC sends this client.  As the recovery agent, we can immediately advise the client of a Conditional Payment Notice or Demand Letter, what it means, and the deadline for action. As a result, all appeals deadlines were met.

Cooperation Between Tower and Client

Successful conditional payment appeals are often based on medical records, Independent Medical Exams and utilization reviews, as well as legal documentation.  It is imperative that the claims professional and defense attorney work with Tower to obtain the documentation necessary to support the appeal.  In this case, the defense attorney’s diligent efforts at subpoenaing and then follow-up with the medical provider resulted in the timely receipt of the out-of-state medical records.

Knowledge and Experience with Conditional Payment

In addition to having supporting documentation, the appeal must provide an acceptable basis for why the charges should be removed from the demand.  Tower’s team of professionals has the knowledge and experience to combine the facts and law to make successful arguments to the CRC and QIC. Additionally, any matter appealed to the ALJ will be handled by Tower’s Chief Compliance Officer, Dan Anders, who has two decades of experience in Medicare Secondary Payer compliance, including prior successful ALJ appeals, as exemplified in this case.

Whatever your conditional payment scenario, we stand ready to assist.  Learn more about our conditional payment services here, where you can also refer a matter for handling.

There was much expectation that the Centers for Medicare and Medicaid Services (CMS) would meet the February 18, 2023 deadline to release a final rule on Section 111 reporting civil money penalties (CMPs). However, it was not to be.  CMS extended its deadline for publishing the final rule by a year to February 18, 2024.

Recall that the purpose of the rule is to set out specific criteria for when CMS may impose penalties for what it considers a failure to report or improper reporting.  A summary of the proposed rule can be found here.

In the notice, CMS explains the reason for the extension:

. . . We are not able to meet the initial targeted 3-year timeline for publication due to delays related to the need for additional, time-consuming data analysis resulting from public inquiry. It was not possible to conclude this data analysis on the initial, targeted timeline for the proposed rule because public listening sessions raised additional concerns that CMS believed were important to properly and thoroughly research prior to publishing the final rule. We have decided that it is critical to conduct additional analysis about the economic impact of the rule. We are preparing additional data analysis and predictive modeling to better understand the economic impact of the proposed rule across different insurer types. This data analysis is designed to review the actual current reporting and model potential penalties that would be imposed were the final rule in place. Along with delays resulting from the agency’s focus on the COVID- 19 public health emergency, we determined that additional time is needed to address the complex policy and operational issues that were raised. We are extending the publication deadline so as to provide the most accurate, complete, and robust data possible to confirm the intent and economic impact of the final rule.

Practical Implications

Besides not having to worry about penalties for another year, we are pleased CMS is taking the time to complete a data analysis of the impact of its penalty regulation.  While in its initial regulatory announcement, CMS indicated its rule would not have a significant economic impact, we, as well as others, noted in our comments to the proposed regulation that the authority to impose penalties of up to $1,000 per day per claim could lead to millions of dollars of penalties on even one claim.  This is most definitely a significant economic impact.

As required by law, CMS will eventually make its penalties rule final and issue penalties.  Accordingly, while we await that final rule, you have been granted more time to ensure the accuracy and timeliness of your reporting.

Current Tower Section 111 reporting partners have access to our Section 111 Management Dashboard, which gives you complete visibility into your claims from a global level all the way down to specific claims.  This, along with our standard error reports and consultation on error correction, is the best path forward to eliminate the potential for CMS to impose penalties.

If you do not yet partner with Tower for Section 111 reporting, now is an excellent time to consider the benefits of a platform which seamlessly manages Section 111 reporting, conditional payments, Medicare Set-Aside triage, clinical and legal interventions, MSA preparation, and CMS submission activities.  Don’t hesitate to contact Tower’s Chief Compliance Officer, Dan Anders, at 888.331.4941 or daniel.anders@towermsa.com, with any questions.

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Tower MSA Partners is pleased to launch “Tower Partners: People Behind the Settlements.”  This quarterly series will dig into the elements that go into smooth, cost-effective settlements and introduce Tower’s team members and corporate partners who make them possible.

First up is Kevin Puckett, owner and president of KP Underwriting, who is responsible for assigning a rated age on most of the MSAs we write.  As Kevin explains, a rated age is the statistical age of a person due to their medical conditions.  A person’s actual age may be 60, but their comorbidities and other conditions could cause their rated age to be 65.

Why is this important to the MSA?  Because an MSA is calculated over the injured worker’s life expectancy. A higher rated age that reflects a shorter life expectancy reduces future medical costs. This reduction can be significant, sometimes tens or even hundreds of thousands of dollars.

Case in point: a 67-year-old woman with a rechargeable spinal cord stimulator (SCS) would have required two revisions (one every nine years) over her 18-year life expectancy, in addition to other medical costs. The MSA’s initial allocation was $142,410.64. However, the rated age came back at 72, reducing life expectancy from 18 to 14 years.  This allowed Tower to remove one SCS revision along with other medical costs. The revised MSA was $98,586.35, a $43,824.29 reduction to the allocation.

Now, let’s turn to our rated age expert and partner, Kevin Puckett.

Q & A with Kevin Puckett

What is a rated age? 

A rated age is an adjusted age and reduced life expectancy, that is the expected number of years of life remaining at a given age based on an individual’s medical impairments and the impact they have on their body and life expectancy.  The US Health & Human Services National Vital Statistics life expectancy tables set the baseline for life expectancy determinations.

What is your background in providing rated ages?  What qualifies you to provide this service?

I have been the President and Owner of KP Underwriting, LLC, an independent underwriting company since 2004.  KP Underwriting provides rated ages and modified life expectancies for companies that provide structured settlements, Medicare Set-Asides, and medical cost projections. Our services are also used for settlement purposes and to help set reserves. During my 30+ year career in medical underwriting, I worked with multiple life insurance companies, developing and managing underwriting departments before launching KP Underwriting.  I’ve also written underwriting manuals, audited underwriting departments, and provided expert witness testimony on life expectancy in multiple states and for the Department of Justice.  I earned my BBA in Business Administration with a minor in Biology from Eastern Kentucky University, an Associates designation from the Academy of Life Underwriting, and an FLMI (Fellow, Life Management Institute).

Is KP Underwriting approved to provide rated ages for CMS?

Yes, we’ve been approved since 2006. KP Underwriting is the single largest provider of rated ages in the country, having provided several hundred thousand rated ages to the Centers for Medicare and Medicaid Services (CMS).

What documentation do you require to calculate the rated age?

Medical records should contain two primary categories of records as listed below.  Medical records within the past two years are considered current and have more weight in rated age calculations.

• Current status of the claimed injury includes:
  • Length of time since injury, permanency of the condition, functional status, stability of treatment, nature of the ongoing treatment.
• Overall medical status of the individual including:
  • All co-morbidities, personal medical history, pharmaceutical use and related conditions.

Medical records older than two years can be utilized, however, the rated age will normally be more conservative as health history and medical impairments can change drastically over a two-year timeframe or longer.

Can you provide examples of diagnoses that will increase the rated age?

Two conditions can impact the rated age and life expectancy: the injury itself and medical impairments.  Good examples of both are as follows:

• Injuries
  • Spinal Cord Injuries, head injuries, amputations, burns, chemical exposure, and falls are the most significant. The best thing to consider with injuries is how and if it impacts daily functioning.
• Medical impairments
  • Most major health impairments will impact the rated age, such as diabetes, stroke, coronary artery disease, obesity, smoking, peripheral artery disease, kidney, colon, and liver diseases, HIV/AIDS, post-covid syndrome, and major respiratory disorders, to name a few. This is a very broad category.  One of the things I cannot stress enough is that medical impairments usually have the biggest impact on the rated age.

Do you solely consider the injury-related diagnoses or both the injury and non-injury-related diagnoses?

The injury and residuals and any medical impairments are both considered in processing the rated age.  We try to let our clients know that not only healthy people get injured.  Medical impairments usually have the biggest impact on rated ages.  In some instances, medical impairments can prevent or delay healing from the injury. For example, diabetes can delay healing in cuts or burns, leading to amputation or slower response to treatment.

What is your typical turnaround time to provide a rated age?

KP Underwriting’s turnaround time is usually 2-3 hours, with rush requests completed within an hour.  All cases that come in before 4 pm EST are completed the same day.  All cases after 4 pm are completed first thing the next business day.

What does your rated age report contain?

 The rated age report sent back to our clients is on KP Underwriting letterhead and contains the name, date of birth, gender, current age and current life expectancy, rated age and rated life expectancy, a brief medical summary of the impairments and injuries used in consideration of the rated age, and the table used in our calculations.  These are tailored to meet our clients’ needs.

How long has KP Underwriting been in business?

KP Underwriting has been in business since 2004. Initially, we prepared rated ages mainly for life companies and structured settlements.  We branched out in 2006 to include rated age services for MSAs.

Do you do all the rated age calculations, or do you have a staff that assists you?

KP Underwriting grew quickly to the point that I needed help to do them.  I currently have a staff of 10-from underwriters to processors- who assist in the rated age process.

If you want more information on KP Underwriting, you can visit their website or contact Kevin at kevinp@kpunderwriting.com or (502) 345-8048.  And if you have a question about a specific MSA or the impact of rated ages on MSAs in general, I am happy to speak with you.  Email Daniel.Anders@TowerMSA.com.

Tower’s MSP Compliance blog analyzes the nuances of Medicare Set-Asides (MSAs) and other aspects of Medicare Secondary Payer Compliance. It covers topics like re-reviews and the termination of ongoing responsibility for medicals (ORM), along with tweaks to WCMSA Reference Guide. Most of our posts drill down into the fine details that our readers need to know.

Every now and then, though, it’s good to pull back and take a high-level view of MSAs as our Chief Compliance Officer Dan Anders does in this Risk and Insurance article. Keep it handy in case you need to explain MSAs to an injured employee … or a colleague.