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Using California’s Independent Medical Reviews to Challenge the Set Aside Amount

By , May 27, 2015 1:20 pm
Article by Rafael Gonzalez, Esq. Vice President, Strategic Solutions HELIOS Settlement Solutions

Article by
Rafael Gonzalez, Esq.
Vice President, Strategic Solutions
HELIOS Settlement Solutions

Introduction

What happens when Medicare requires that a Workers Compensation Medicare Set Aside include the future costs of medical treatment and prescriptions that may not be covered under a state workers compensation law particular or applicable to the claim? What is CMS’ policy on situations where a state statutory provision, administrative rule, regulatory provision, or case law indicates the recommended care is not allowed, permissible, or otherwise awardable as part of or resulting from the workers compensation claim?

What about the legal dispute resolution process? Short of an executive branch administrative law judge or constitutional member of the state judiciary system rendering a decision on the merits of the claim as to whether medical care and/or prescriptions requested are or are not related to the workers compensation claim, what is the Centers for Medicare and Medicaid Services doing with administrative decisions on the compensability of such requests? In other words, will CMS recognize and give credibility to non-judicial, but statutorily authorized methods of medical conflict resolution such as California’s Independent Medical Review?

The Medicare Secondary Payer Act

Section 1862(b)(2) of the Social Security Act indicates that Medicare may not pay for a beneficiary’s medical expenses when payment “has been made or can reasonably be expected to be made under a workers’ compensation plan, an automobile or liability insurance policy or plan (including a self-insured plan), or under no-fault insurance.” See also 42 C.F.R. § 411.21. As a result, the Medicare Secondary Payer Act (MSP) not only requires parties to take Medicare’s past interests into account, but also consider Medicare’s future interests into account when settling future medical care related to a workers’ compensation claim by making sure Medicare remains the secondary payer at all times. 42 USC Section 1395y(b)(2).

Medicare Set Asides

Although not statutorily mandated, the “preferred” manner for parties to take Medicare’s future interests into consideration when settling future entitlement to medical benefits related to the workers compensation claim is through the creation of a Medicare set aside (MSA). In addition, the parties to a workers’ compensation (WC) settlement may voluntarily choose to get the Center for Medicare and Medicaid Services (CMS) approval of the MSA amount in order to establish that they have in fact taken Medicare’s future interests into account and to further provide certainty with respect to the amount that must be properly spent before Medicare becomes the primary payer for the work comp claim-related care.

Workers Compensation Medicare Set Asides

As defined by CMS, a workers’ compensation Medicare set aside (WCMSA) “allocates a portion of the WC settlement for all future claim-related medical expenses that are covered and otherwise reimbursable by Medicare.” WCMSA Reference Guide, Section 3.0 (1/5/2015). Therefore the goal of establishing a WCMSA is to “estimate, as accurately as possible, the total cost that will be incurred for all medical expenses otherwise reimbursable by Medicare for claim-related conditions during the course of the claimant’s life, and to set aside sufficient funds from the settlement, judgment, or award to cover that cost.” WCMSA Reference Guide, Section 3.0 (1/5/2015). Thus, only future medical costs and prescription needs that have been determined to be related to the claim, and for which the employer/carrier is legally responsible for under the state specific workers compensation law, are to be included in the WCMSA.

When State Law Conflicts with CMS Policy

But what happens when Medicare requires that the WCMSA include the future costs of medical treatment and prescriptions that may not be covered under the state workers compensation law particular or applicable to the claim? What is CMS’ policy on situations where a state statutory provision, administrative rule, regulatory provision, or case law indicates the recommended care is not allowed, permissible, or otherwise awardable as part of or resulting from the WC claim? What is CMS or its Workers Compensation Review Contractor (WCRC) doing in such situations? Are they excluding such care and prescription costs based on state law, or are they including these in the MSA allocated amount nonetheless?

The WCMSA Reference Guide specifically addresses this issue. Section 9.4.3 specifically indicates that “the WCRC strives to comply with the laws of the state determined to be the appropriate state of venue. The reviewers research the applicable state regulations.” Section 9.4.4 specifically states that “CMS will recognize or honor any state-mandated, non-compensable medical services and will separately evaluate any special situations regarding WC cases. A submitter requesting that CMS review the applicability of a state WC statute must include a copy of the statute with the submission and indicate to which topic in the submission the statute applies.”

California’s Independent Medical Review Process

What about the legal dispute resolution process? Short of an executive branch administrative law judge or constitutional member of the state judiciary system rendering a decision on the merits of the claim as to whether medical care and/or prescriptions requested are or are not related to the workers compensation claim, what is CMS doing with administrative decisions on the compensability of such requests? In other words, will CMS recognize and give credibility to non-judicial, but statutorily authorized methods of medical conflict resolution such as California’s Independent Medical Review?

Senate Bill 863 was passed by California’s Legislature on August 1, 2012 and signed by Governor Brown on September 18, 2012. Among its many changes, the bill, which took effect on January 1, 2013, made significant changes to California’s workers’ compensation system by introducing a new process called independent medical review (IMR) to resolve disputes about the medical treatment of injured employees. As of July 1, 2013, medical treatment disputes for all dates of injury are to be resolved by physicians through IMR, rather than through the court system.

A request for medical treatment in the workers’ compensations system must go through a “utilization review” process to confirm that it is medically necessary before it is approved. If utilization review denies, delays or modifies a treating physician’s request for medical treatment because the treatment is not medically necessary, the injured employee can ask for a review of that decision through IMR. California Labor Code §3610.6(h).

The decision issued by the IMR is deemed to be the determination of the Administrative Director (AD) and it is binding on all parties. If the disputed treatment is determined to be medically necessary, the claims administrator must promptly implement the decision unless it disputed liability for the treatment on a basis other than medical necessity or it files an appeal. If the disputed treatment has already been provided, the claims administrator must reimburse the medical provider within 20 days. If the disputed treatment has not been provided, the claims administrator must authorize the treatment within five business days. California Labor Code §3610.6(h).

If either party is unsatisfied with the IMR determination, the dissatisfied party may file a petition with the Workers’ Compensation Appeals Board (WCAB) within 30 days of the mailing of the final determination. The final determination is presumed correct. Should the WCAB reverse the final determination, then the WCAB returns the dispute to the AD for either assignment to a different IMR, or assignment to a different medical reviewer where a different IMR is not available. California Labor Code §3610.6(h).

If after going through the IMR process and obtaining a decision that such requested care is not permitted or authorized by the specific state statute, CMS through its WCRC still includes such treatment or prescriptions in the WCMSA, the parties have the option to submit a re-review request of the approved WCMSA amount. WCMSA Reference Guide, Section 16.0 (1/5/2015). When either party disagrees with CMS’ decision because either one believes (1) CMS’ determination contains obvious mistakes; or (2) there is additional evidence, not previously considered by CMS, which was dated prior to the submission date of the original proposal and which warrants a change in CMS’ determination, either party may request such re-review. WCMSA Reference Guide, Section 16.0 (1/5/2015).

Challenging CMS’ Inclusion of Medical Care and Prescription in the MSA

Helios Settlement Solutions recently submitted several California MSAs to CMS without any of the medical care and prescriptions denied by the IMR. However, despite such uncontroverted evidence, the WCRC included the medical services which had been denied by the IMR in the approved WCMSA. As a result, our team requested re-review, or reconsideration.  We argued that the post traumatic stress disorder, cervical condition, and pain and psychiatric disorders included in each of the MSAs should be excluded because an IMR had concluded that such treatment was not medically related and necessary as a result of the work comp claim. CMS had included such services in each case based on its policy that it would not provide deference to an IME opinion.

Our team however argued that the IMR is not an IME, but a resolution process conclusion mandated by California’s workers compensation law and therefore such opinion should be upheld, allowing the post traumatic stress disorder, cervical condition, and pain and psychiatric disorders to be removed. Our position was that pursuant to California Labor Code §3610.6(h) (Senate Bill 863), the IMR decision is final and binding upon the parties. We therefore argued that CMS cannot include such medical services in the WCMSA where the employer/carrier is not legally responsible for same under California’s state law.

In response to our request for reconsideration, CMS removed the unrelated post traumatic stress disorder treatment (saving $251,507), treatment for the unrelated cervical condition (saving $187,876) and unrelated pain and psychiatric medications (saving $70,383).

Conclusion

The Medicare Secondary Payer Act not only requires parties to take Medicare’s past interests into account, but also to consider Medicare’s future interests into account when settling future medical care related to a workers’ compensation claim by making sure Medicare remains the secondary payer at all times. Although not statutorily mandated, the “preferred” manner for parties to take Medicare’s future interests into consideration when settling future entitlement to medical benefits related to the workers compensation claim is through the creation of a Medicare set aside. A workers’ compensation Medicare set aside allocates a portion of the work comp settlement for all future claim-related medical expenses that are covered and otherwise reimbursable by Medicare. If however state law conflicts with CMS policy, CMS will recognize or honor any state-mandated, non-compensable medical services and will separately evaluate any special situations regarding the specifics of the work comp case.

Senate Bill 863 was passed by California’s Legislature on August 1, 2012 and signed by Governor Brown on September 18, 2012. The bill, which took effect on January 1, 2013, made significant changes to California’s workers’ compensation system by introducing independent medical review to resolve disputes about the medical treatment of injured employees. As of July 1, 2013, medical treatment disputes for all dates of injury are to be resolved by physicians through IMR, rather than through the court system. The decision issued by the IMR is deemed to be the determination of the Administrative Director and it is binding on all parties. If after going through the IMR process and obtaining a decision that such requested care is not permitted or authorized by the specific state statute, CMS still requires inclusion of such treatment or prescriptions in the set aside, the parties have the option to submit a re-review request of the approved amount.

Helios Settlement Solutions is committed to making sure that any set aside we produce, and which is ultimately approved by CMS, includes only those items that are related to the claim, awardable pursuant to state law, and allowed under Medicare law. As a result, we are always on the lookout for any administrative orders, findings of a court, or regulatory body conclusions that pursuant to state law has the authority to conclude whether such medical care is related to the claim and awardable under state law. Upon verifying same, our experienced and knowledgeable staff will produce a WCMSA that will not include any medical services or prescriptions denied by the IMR, and should CMS include such items in the WCMSA, guide you through the current CMS appeals process, allowing for re-review or reconsideration of its approved set aside amount.

CMS Web Address Change for Section 111 COBSW

By , May 27, 2015 11:32 am

Insurance LawCMS has released an alert to notify all users that the web address for the NGHP Section 111 COBSW will change effective June 14, 2015. Starting on that date, users navigating to the old address will be redirected to the new address. The redirect will be in effect for 90 days only and users will need to use the new address as of September 13, 2015.

No other changes to the COBSW are being announced at this time other than the address change. The new address is as follows, but is not expected to be active prior to June 14, 2015: https://www.cob.cms.hhs.gov/Section111/

This alert dated May 18, 2015, but released publicly on May 26, 2015, can be found at the following address: http://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Mandatory-Insurer-Reporting-For-Non-Group-Health-Plans/Downloads/New-Downloads/Technical-Alert-New-Web-Address-for-the-Section-111-COBSW.pdf

For more information, please contact Frank Fairchok, Senior Manager of MedicareConnect at Frank.Fairchok@helioscomp.com.

Generic Abilify (Aripiprazole) Approved

By , May 1, 2015 2:20 pm

Pills and DollarsOn April 28, 2015 the U.S. Food and Drug Administration (FDA) approved the generic formulation (Aripiprazole), of Otsuka America Pharmaceuticals’ brand Abilify®.

Aripiprazole is an atypical antipsychotic indicated for the treatment of bipolar depression and schizophrenia. It is also indicated as adjunct therapy in the treatment of depression when antidepressant monotherapy is inadequate. Non-bipolar depression with or without psychotic symptoms, is a common co-morbid condition in patients with chronic pain due to an industrial injury.   Four manufacturers had their generic formulations approved for release to the market. Alembic Pharmaceuticals, Ltd., Hetero Labs Ltd., Teva Pharmaceuticals and Torrent Pharmaceuticals Ltd. The generics are available in 2, 5, 10, 15, 20 and 30mg strengths. As of Thursday, April 30th, the AWP (Average Wholesale Price) for the generic formulation ranges from $32.07 to $45.41 per tablet depending on the strength and manufacturer in comparison to $35.67 to $50.45 for brand Abilify®.

The HELIOS 2015 Workers’ Compensation Drug Trends Report identified Abilify® as number 19 of the top 25 medications ranked by total spend. It also noted that the therapeutic class, antipsychotics, accounted for 2.3% of total drug spend in 2014, but only 0.7% of the total transactions. This disparity was attributed to the high cost of these medications which was heavily influenced by Abilify®. The report went on to say Abilify® accounted for 50% of total spend in this therapeutic class at an average cost of $1,017 per prescription. The availability of the new generic formulations will definitely impact prescription costs within the workers’ compensation industry as well as the Medicare Set Aside Allocations (MSA).

As prescription drug costs continue to rise dramatically, impacting the workers’ compensation industry, it is increasingly important for claim professionals to evaluate this exposure and mitigate costs when possible. HELIOS Settlement Solutions realizes the importance of keeping you up to date on new generic formulations as part of an overall approach to reduce overall claim costs and ultimately the prescription drug portion of the MSA.

As Medicare Conditional Payment Appeal Rules for Plans/Payers Become Effective 4/28/15, CMS to Host Webinar to Explain New Process and Offer Tips and Suggestions for Plans/Payers

By , April 24, 2015 11:54 am

RG Helios Professional Pictures (2)On April 22, 2015, the Centers for Medicare and Medicaid Services Financial Services Group (CMS) published a memo announcing the latest changes on “Appeal Rights for Applicable Plans for Liability Insurance (Including Self-Insurance), No-Fault Insurance, and Workers’ Compensation.”

By way of background, the memo indicates that “on February 27, 2015, CMS issued a final rule implementing certain provisions of the Strengthening Medicare and Repaying Taxpayers Act of 2012 (SMART Act). This final rule established a formal appeals process for applicable plans in situations where the Secretary seeks Medicare Secondary Payer (MSP) recovery directly from an applicable plan. The rule is effective on April 28, 2015 and applies to demand letters issued on or after April 28, 2015.”

As defined in the new regulations, “applicable plans include liability insurance (including self-insurance), no-fault insurance, and workers’ compensation laws or plans. The SMART Act further requires that the Medicare beneficiary who received the items and/or services in question be notified of the applicable plan’s intent to appeal. The final rule can be found at 80 FR 10611, February 27, 2015.”

If an MSP recovery demand is issued to the beneficiary as the identified debtor, the beneficiary has formal administrative appeal and judicial review rights. Prior to this regulation however, “recovery demands issued to the applicable plan as the identified debtor had no formal administrative appeal rights or judicial review.” However these new rules change that as” the appeals process established in the final rule parallels the existing process for claims-based beneficiary and other appeals for both non-MSP and MSP, and is used for appeals involving both prepayment denials as well as overpayments.”

The memo explains that the final rule establishes a formal multilevel appeal process for applicable plans where MSP recovery is pursued directly from the applicable plan. This process includes:

  • An “initial determination” (the MSP recovery demand letter),
  • A “redetermination” by the contractor issuing the recovery demand,
  • A “reconsideration” by a Qualified Independent Contractor,
  • A hearing by an administrative law judge (ALJ),
  • A review by the Departmental Appeals Board’s Medicare Appeals Council, and
  • Judicial review.

The memo makes it clear that “the applicable plan is the only entity with appeal rights/party status when Medicare pursues recovery directly from the applicable plan. The beneficiary is not a party to applicable plan appeals. However, CMS is required to provide notice to the beneficiary of the applicable plan’s intent to appeal and will provide such notice if the applicable plan files a request for a redetermination.”

The memo also explains that “proper proof of representation must be submitted in writing prior to or with a request for appeal in order for an attorney, agent or other entity to file an appeal on behalf of an applicable plan or act on behalf of an applicable plan with respect to an appeal that has been requested.” Appeal requests without proper proof of representation will be dismissed. “Proper proof of representation may be submitted with a request to vacate the dismissal, but the better course of action is to make sure that proper proof of representation has been submitted when requesting a redetermination.” Separate proof of representation is required even where an applicable plan may have identified an agent for recovery correspondence as part of the Medicare, Medicaid & SCHIP Extension Act of 2007 Section 111 reporting process.

The memo indicates that “the applicable plan may appeal the amount of the debt and/or the existence of the debt. However, the regulation does not permit applicable plans to appeal the issue of who is the responsible party/correct debtor. Requests for appeal on the basis that the applicable plan is not the correct debtor will therefore be dismissed. Medicare’s decision regarding who or what entity it is pursuing recovery from is not subject to appeal.”

CMS’ memo can be found here.

In order to assist and inform interested parties and stakeholders, CMS also announced it will be presenting a webinar on “Applicable Plan” Appeals. The presentation will include “an introduction to the appeals process (as the process is new to applicable plans), information on the appeals process specific to applicable plans, and tips/suggestions to applicable plans regarding the recovery process, including appeals.” The webinar will be held on April 28, 2015 at 1:00 PM Eastern time, and sign-ups are now open. CMS has asked that those planning on attending begin logging in approximately 15 minutes before the start time, due to the large number of anticipated participants.

For those of you interested in learning more about what this new appeals process means for payers, please visit  this article on workcompwire.com where I discuss that the MSP Act has always provided the Medicare beneficiary with the right to seek an appeal if he or she disagreed with the amount of the reimbursement sought by Medicare. However, despite considering workers’ compensation plans, liability and no-fault insurers, and self-insurers as primary payers, the MSP Act did not include an appeals process for these non-group health plans (NGHPs). If a payer disagreed with Medicare’s assessment of a conditional payment owed, there was no formal process for an appeal. In 2013, the Strengthening Medicare and Reimbursing Tax Payers (SMART) Act proposed an amendment to the MSP, which would give NGHPs the right to appeal and a formal appeals process when Medicare pursued a recovery directly from them. After more than a year of collecting and considering public comment, CMS published the final rule, which becomes effective April 28, 2015. Finally, employers, carriers, and administrators in the workers’ compensation system will have a process to voice their disagreement or concerns with the items and amount of Medicare reimbursement.

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