A look at the results and what’s ahead for the controversial MSP Act.
This content was originally posted to Optum’s Workers Comp & Auto No-Fault Insights Blog.
The Medicare Secondary Payer Act turns 38 years old in December 2018. While it’s credited with saving more than $100 billion in taxpayers’ money since 1999, it’s not without its critics.
The MSP Act was passed to protect the Medicare fund from paying claims that are the responsibility of other payers. From its inception, Medicare was designed to be a “secondary payer” to workers compensation, auto, liability, and no-fault primary or other obligated payers. However, it didn’t take long for the system to figure out that Medicare was paying for medical care related to claims that other payers were responsible for.
Safeguarding Medicare for future recipients
Given the growth of Medicare beneficiaries expected over the next 25 years, and the shrinking number of workers contributing to the trust fund, Medicare is expected to face increasing financial challenges. As a result, many believe that Medicare must become significantly more aggressive about recouping payments it’s not responsible for, especially from auto and liability primary payers.
Criticism of the MSP Act
Some argue that the MSP Act is a government program run amuck. These critics condemn its ever-changing policies and procedures, standards that change at the whim of the Centers for Medicare and Medicaid Services (CMS) leadership, without any input or comments from stakeholders or taxpayers. And there are many who contend that it’s an expensive, lengthy and overwhelming process that renders no real results to the Medicare Trust Funds.
Proof of billions of dollars saved
But the annual Social Security and Medicare Trustees Report, the only public study available that documents Medicare savings attributable to the MSP Act, proves that the MSP program has saved billions of dollars. This study focuses on seven different groups designated as primary payers that are affected by or have some responsibility under the MSP Act―workers compensation, auto, liability, working aged, end-stage renal disease, disability benefits and veteran/other claims.
The savings numbers discussed below are reported in CMS Statistics from 2000 to 2016, using data from 1999 to 2015, covering beneficiaries with traditional Medicare coverage, Medicare Advantage Plans and Prescription Drug Plans.
Workers’ compensation―$14.46 billion savings attributable to MSP provisions
Savings from conditional payments
Workers’ compensation specifies a claimant, employer, or insurance carrier as the primary payer. So, MSP savings come from conditional payments recouped by CMS. Payments that CMS makes related to the work comp injury are called conditional payments because CMS is paying on the condition that if there’s a settlement, CMS will be reimbursed.
Savings from Medicare Set Aside
As of 2007, MSP savings also include funds allocated and approved by CMS in a Workers’ Compensation Medicare Set Aside (WCMSA). This WCMSA ensures that if a claimant receives money from settling the case, a portion is set aside for future medical needs relating to the work comp claim so that Medicare isn’t tapped to pay for treatment that’s the responsibility of the employer/insurance carrier.
Challenges with CMS’ voluntary approval system—savings numbers too low
Because WCMSA is a voluntary approval program, it’s widely accepted that many Medicare-eligible litigants settling workers compensation claims do not submit their WCMSAs to CMS for approval. Therefore, it’s believed that the $14.46 billion reported by CMS in this report, since 2009, may be a small fraction of the real dollars that the WCMSA process truly is saving American taxpayers―not just today, but more significantly, over the lifespan of those Medicare beneficiaries.
A word of caution
Many in the workers compensation and WCMSA industry also believe that unless the WCMSA approval process is made mandatory by Congress and CMS, there is a great likelihood that medically planned for anticipated funds, supposedly warehoused in WCMSAs, are not being used for their intended purposes and are, therefore, not real savings to American taxpayers. In other words, many believe that because the claimant is allowed to take home and self-administer WCMSA funds, these funds are being misspent or not saved for the anticipated future medical needs associated with the work accident.
Auto―$4.17 billion savings attributable to MSP provisions
Auto liability identifies individuals, defendants, or insurers as the primary payer. So, MSP savings come from recouped conditional payments and payments made by the claimant, defendant, or insurer that Medicare does not pay for.
Savings could be higher but reporting is lacking
CMS has been recouping conditional payments for auto claims since December 1980. However, despite the millions of auto claims in the U.S. annually, and the hundreds of thousands of Medicare beneficiaries settling auto claims, the number of dollars recouped is miniscule compared to other entities designated as primary payers. The reason is, although auto primary payers are required to provide CMS with detailed information about claims to enable CMS to recoup payments, it’s widely believed that since no penalties have been levied against auto insurers, they have not been as diligent as other primary payers in reporting these claims to Medicare ― hence the lackluster conditional payments recouped in this area.
Liability―$5.8 billion savings attributable to MSP provisions
Similar to auto, liability designates individuals, defendants, or insurers as the primary payer. So, MSP savings come from recouped conditional payments and payments made by the claimant, defendant, or insurer that Medicare does not pay for. As of 2011, these savings also include conditional payments recovered from global settlements, that is, a large number of beneficiaries settle their claim under one cause of action instead of seeking reimbursement on each claim. Medicare allows for a single amount from the overall or global settlement proceeds as reimbursement of all conditional payments
No Medicare Set Asides for auto and liability insurance has reduced MSP savings
Unlike work comp, the savings from both auto and liability insurers do not include MSAs. CMS has remained silent on exactly how such entities can take Medicare’s future interests into account when coverage, comparative negligence, policy limits and other legal issues particular to these areas exist. However, CMS has announced its intent to revisit auto and liability MSAs and provide leadership on how to protect Medicare’s future interests when settling liability claims.
But, as of today, the government’s inactivity in this area means Medicare has lost out on billions of dollars―indicated by the miniscule $4.17 billion in auto savings and $5.8 billion in liability savings since 1999.
Other savings attributable to MSP provisions
|Working Aged||$47.26 billion|
|End-Stage Renal Disease||$4.5 billion|
|Veterans Administration/Other||$0.24 billion|
CMS has said it’s considering expanding its voluntary MSA review process to include the review of proposed liability insurance (including self-insurance) and no-fault insurance MSA amounts.
Anticipating opposition from the plaintiff bar, litigation groups, legal organizations, and the auto and liability insurance industry, CMS also has indicated it plans to work closely with the stakeholder community to identify how best to implement this potential expansion.
As the evolution and growth of MSP continues, Optum Workers’ Comp and Auto No-fault will be watching as CMS takes aim at auto and liability Medicare set asides. Stay tuned.