Medicare is a secondary payor — that is, it does not have primary payment responsibility on behalf of its beneficiaries when another entity is responsible for paying for medical care before Medicare. Workers’ compensation is a primary payor for work-related illnesses or injuries. So Medicare will not pay for a beneficiary’s medical expenses when payment has been made or can reasonably be expected to be made by a workers’ compensation insurer.
Medicare’s interests must be considered and protected in any workers’ compensation settlement of future medical care involving a Medicare beneficiary or someone who is reasonably expected to enroll in Medicare within 30 months of settlement. So the CMS has established a process to enable parties to submit a Medicare set-aside (MSA) analysis for approval. An MSA is a written analysis of how much lifetime medical care an injured worker will need for which Medicare otherwise would be liable. That amount is set aside as part of the settlement to cover an injured worker’s future medical expenses that are covered and otherwise reimbursable by Medicare.
When the CMS approves an MSA, it has determined that the amount adequately protects Medicare’s interests and that the agency will stand behind it. Once the approved set-aside amount is exhausted and accurately accounted for, Medicare will pay future expenses related to the workers’ compensation claim that exceed that amount.
The Reference Guide is clear, however: “There are no statutory or regulatory provisions requiring that you submit a WCMSA amount proposal to CMS for review.” As a result, parties frequently settle a workers’ compensation claim without submitting an MSA to the CMS for approval.
The updated Reference Guide adds a new section to address “evidence-based” or “non-submit” Medicare set-aside allocations. Generally, they are prepared at the request of the parties to allocate an amount to cover an injured worker’s future medical care needs, but are not submitted to the CMS. The intent of the parties is to demonstrate that they’ve made the effort to protect Medicare’s interests by having the value of future medical determined by an objective third party as part of the settlement process.
To address, evidence-based or non-submit allocations, the Reference Guide adds section 4.3, which states:
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.
With its most recent update to the Reference Guide, the CMS is sending a strong warning to parties about the use of non-submit MSAs. It’s advising them that it views unapproved MSAs “as a potential attempt to shift financial burden” to Medicare to cover an injured worker’s future medical care costs. The CMS ultimately retains authority to review an MSA allocation, and it views non-submit MSAs as an effort to bypass the process.
The CMS warns that a settlement using an unapproved MSA “will result in the claimant needing to demonstrate complete exhaustion of the net settlement amount, rather than a CMS-approved WCMSA amount.” That is, the CMS will deny payment of medical services unless the injured worker demonstrates that he or she has fully exhausted a settlement and spent the money on medical expenses that are covered and otherwise reimbursable by Medicare.
Still, the Reference Guide is clear that parties are not required to submit an MSA to the CMS for review. Moreover, the guide does not expressly prohibit the use of non-submit MSAs. But the CMS is making clear that the only way the parties can be sure they are adequately protecting Medicare’s interests in a workers’ compensation settlement is by utilizing the CMS submission process; it’s clearly trying to discourage the use of non-submit MSA allocations. So parties must consider carefully the consequences of proceeding with a settlement involving a claim for a Medicare beneficiary without first obtaining approval of the MSA allocation from the CMS.