Late in 2018, our federal government announced that in 2019 that it intends to regulate how and when to take Medicare’s future interests into account.
Time may be up on “MSA not necessary” assumption
You have heard it a million times: Medicare Set Asides (MSA) are not required. You have been told again and again, there is no law that requires submission of MSAs to the Centers for Medicare and Medicaid Services (CMS) for review and approval. Well, both of these statements may come to an abrupt end if, as announced, the federal government produces Code of Federal Regulations (CFR) to ensure that beneficiaries and payers meet future medical obligations under the Medicare Secondary Payer Act (MSP).
Non-submit MSAs—likely triggering new regulations
Involved in the MSP program since 1983, I had a feeling this moment was coming. And, as the industry’s appetite for non-submit MSAs has grown, I began to write and speak publicly about the potential that such behavior would, in fact, encourage or push the federal government into mandatory regulatory mode.
Federal actions foretell changes ahead
The latest announcement by the Executive Office of the President and the expected efforts HHS/CMS will undertake in 2019 and beyond certainly seem to indicate this will be the beginning of a new course for payers as well as current and anticipated Medicare beneficiaries. These federal actions may mandate the creation of MSAs in auto, liability, no-fault, and work comp claims, and possibly require submission of such MSAs to CMS for review and approval.
No legal requirement to produce or submit MSAs, but…
As we have learned since 2001, a current/potential Medicare beneficiary may, but is not legally required to, consider Medicare’s future interests by putting together an MSA and seeking CMS approval of the proposed MSA amount. The primary benefit for doing so has been the certainty of CMS reviewing and approving the proposed amount with respect to the sum that must be appropriately exhausted before Medicare becomes the primary payer for future claim related medical expenses.
How we got here
When the Medicare program was enacted in 1965, Medicare was the primary payer for all services, with the exception of those covered and payable by workers’ compensation. In 1980, Congress enacted the first of a series of provisions, known as the Medicare Secondary Payer Act, found in section 1862(b) of the Social Security Act (SSA), that made Medicare the secondary payer to certain additional primary plans.
Pursuant to the MSP, any Medicare beneficiary who receives an auto, liability, no-fault, or work comp settlement, judgment, or award that includes an amount for future medical expenses must take Medicare’s future interest into account. If Medicare’s interests are not considered, CMS has a priority right of recovery against any entity that received any portion of a third-party payment, either directly or indirectly, a right to recover, or take back, that payment. CMS also has a subrogation right with respect to any such third-party payment. 42 USC Section 1395y(b)(2). 42 CFR Section 411.
Medicare is permitted to make conditional payments
Medicare may also refuse to pay for future medical expenses related to the injury associated with the auto, liability, no-fault, or work comp claim until the entire settlement is exhausted. But, if the parties chose to put together an MSA and submit it to CMS for review and approval, once the CMS-approved set-aside amount is appropriately exhausted and accurately accounted for to CMS, Medicare will be the primary payer for future Medicare-covered expenses related to the injury claim that exceed the approved set-aside amount. 42 CFR Section 411.
In other words, the MSP prohibits Medicare from paying if payment has been made or can reasonably be expected to be made by a workers’ compensation law or plan, automobile and liability insurance (including self-insurance), or no-fault insurance. If payment has not been made or cannot reasonably be expected to be made promptly, Medicare is permitted to make conditional payments—because, if Medicare makes conditional payments, the MSP statute imposes an obligation for Medicare to recover those conditional payments, once it is established that another individual or entity is responsible for primary payment.
Are parties shifting future medical care responsibility?
For future medical payments related to a workers’ compensation, automobile, liability (including self-insurance), or no-fault claim, Medicare remains the secondary payer post settlement until all settlement proceeds are appropriately exhausted—unless the parties obtain approval from CMS for a specific amount to be set aside or allocated from settlement proceeds for future medical expenses related to the claim. https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Workers-Compensation-Medicare-Set-Aside-Arrangements/Downloads/WCMSA-Reference-Guide-Version-2_8.pdf
Voluntary MSA status to change?
This review and approval process by CMS began in July 2001 and has remained voluntary since then. Although there was a dramatic increase in the number of MSAs submitted to CMS for review and approval from 2001 thru 2010, between 2011 and 2019, fewer requests for review and approval were filed with CMS. With more payers seeking and MSP vendors offering non-submit MSA products, from 2016 to 2018 there was a significant drop in the number of MSAs submitted to CMS for review and approval.
CMS questions whether its future interests are considered
With more and more settlements going without an approved MSA to protect Medicare’s future interests, CMS and its MSA review contractor have begun to wonder whether parties are appropriately taking Medicare’s post-settlement interests into consideration. In other words, without reviewing and approving such MSAs, CMS has begun to wonder whether parties are underfunding future set-aside allocations, and thereby transferring the responsibility of such future medical care related to the workers’ compensation, automobile, liability (including self-insured), or no-fault claim to tax payers of America by shifting responsibility to the Medicare Trust Fund.
Government’s response to industry’s non-submit trend
Because of the lack of consideration for CMS’ future interests, it is not a coincidence that in December 2018, the Office of Information and Regulatory Affairs, Office of Management and Budget, Executive Office of the President, published HHS/CMS RIN 0938-AT85 —“Miscellaneous Medicare Secondary Payer Clarifications and Updates (CMS-6047-P).” This document points out that “currently, Medicare does not provide its beneficiaries with guidance to help them make choices regarding their future medical care expenses when they receive automobile and liability insurance (including self-insurance), no-fault insurance, workers’ compensation settlements, judgments, awards, or payments, and their need to satisfy their Medicare Secondary Payer (MSP) obligations.” As a result, RIN 0938-AT85 proposes a Notice of Proposed Rule Making (NPRM) by September 2019 that would produce Code of Federal Regulations (CFR) which would “ensure that beneficiaries are making the best health care choices possible by providing them and their representatives with the opportunity to select an option for meeting future medical obligations that fits their individual circumstances, while also protecting the Medicare Trust Fund.” https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=201810&RIN=0938-AT85
CMS’ past attempts to remediate
This is not the first attempt at creating federal regulations pertaining to future medicals. In 2012, HHS/CMS published “Medicare Secondary Payer and Future Medicals (CMS-6047-P)” proposing an Advance Notice of Proposed Rulemaking (ANPRM) that would “announce CMS’ intention regarding the means that beneficiaries or their representatives may use to protect Medicare’s interest with respect to Medicare Secondary Payer (MSP) claims involving automobile and liability insurance (including self-insurance), no-fault insurance and workers’ compensation where future medical care is claimed or the settlement, judgment, award, or other payment releases (or has the effect of releasing) claims for future medical care.” https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=201210&RIN=0938-AR43
Although later withdrawn, in June 2012, HHS/CMS published the ANPRM “soliciting comments on standardized options available to beneficiaries and their representatives to clarify how they could meet their obligations to protect Medicare’s interest with respect to MSP claims involving automobile and liability insurance (including self-insurance), no-fault insurance, and workers’ compensation when future medical care is claimed or the settlement, judgment, award, or other payment releases (or has the effect of releasing) claims for future medical care.” https://www.govinfo.gov/content/pkg/FR-2012-06-15/pdf/2012-14678.pdf
A coincidence or a hint of things to come?
If the December 2018 announcement wasn’t enough to get us thinking, on January 4, 2019, CMS published its latest version 2.9 of the Workers Compensation Medicare Set Aside Arrangement Reference Guide, once again making it clear that “if the parties to a workers’ compensation (WC) settlement stipulate to a WCMSA amount but do not receive CMS approval, then CMS is not bound by the set-aside amount stipulated by the parties. And CMS may refuse to pay for future medical expenses related to the WC injury, even if they would ordinarily have been covered by Medicare.” In other words, “if CMS approves the WCMSA amount and the account is later appropriately exhausted, Medicare will pay Medicare-covered, WC injury medical bills for services otherwise covered and reimbursable by Medicare regardless of the amount of care the beneficiary continues to require.”
Reference Guide signals Medicare protection
The new Reference Guide continues to indicate that “there are no statutory or regulatory provisions requiring that anyone submit a WCMSA amount proposal to CMS for review.” But, the new Reference Guide also makes it very clear that “the CMS thresholds are created based on CMS’ workload, and are not intended to indicate that claimants may settle below the threshold with impunity.” In other words, “Claimants must still consider Medicare’s interests in all WC cases and ensure that Medicare pays secondary to WC in such cases.”
The Reference Guide leaves no doubt that “if Medicare’s interests are not reasonably considered, Medicare will refuse to pay for services related to the WC injury (and otherwise reimbursable by Medicare) until such expenses have exhausted the entire dollar amount of the entire WC settlement.” In addition, “Medicare may also assert a recovery claim, if appropriate.”
CMS review process identifies obligations
Therefore, it can be said without any hesitation that “CMS’ WCMSA review process is the only process that offers both Medicare beneficiaries and workers’ compensation entities finality, with respect to obligations for medical care required after a settlement, judgment, award, or other payment occurs.” In other words, “when CMS reviews and approves a proposed WCMSA amount, CMS stands behind that amount. Without such CMS’ approval, Medicare may deny related medical claims, or pursue recovery for related medical claims that Medicare paid up to the full amount of the settlement, judgment, award, or other payment.”
What to expect this time
The question payers and beneficiaries are asking is whether this latest attempt to create federal regulations on MSAs will be similar or different from the 2012 attempt? What exactly does HHS/CMS mean when they say such new federal regulations will “ensure” that beneficiaries are making the best health care choices possible by providing them and their representatives with the opportunity to select an option for meeting future medical obligations that fits their individual circumstances, while also protecting the Medicare Trust Fund? Will MSAs remain a voluntary program with multiple options to choose from? Or is the federal government thinking about making MSAs mandatory, providing parties regulatory options from which to select how to take Medicare’s future interests into account?
Have the feds had the power all along?
Although both plaintiffs and defendants in auto, liability, no-fault, and work comp claims do not agree or accept their foundational perspective, many federal law scholars believe current MSP statutory language provides CMS with the authority to make MSAs mandatory, as the MSP prohibits Medicare from making payment if payment has been made or “can reasonably be expected to be made” by a workers’ compensation law or plan, automobile and liability insurance (including self-insurance), or no-fault insurance. In other words, if “can reasonably be expected to be made” is interpreted as future payments, then many believe the federal government has always had the authority to control, maneuver, and regulate such instances, including when and how MSAs should be used to make certain Medicare remains a secondary payer post-settlement.
Many of us involved in the MSP program since its inception have had a feeling this moment was coming. Most of us at one point or another guessed when it would happen. And certainly as the industry’s appetite for non-submit MSAs has grown, some of us began to write and speak publicly about the potential that such behavior would in fact encourage or push the federal government into mandatory regulatory mode. I think we are there now. I believe this latest announcement and the efforts HHS/CMS will undertake in 2019 and beyond will be the beginning of a new course and new requirements for current and anticipated Medicare beneficiaries, as well as payers, mandating MSAs and possibly requiring submission and approval of MSAs by CMS in auto, liability, no-fault, and work comp’ claims.
Advice for clients
To our automobile, liability, no-fault, and workers’ compensation insurers, self-insured, and TPA clients, we encourage you to stay tuned and informed, as we believe the MSA process will undoubtedly change drastically as a result of the anticipated changes forthcoming. As always, we hope you will continue to rely on the expertise of Optum Settlement Solutions team to provide you with consistent and conservative advice on MSP compliance during this challenging time period and thereafter.