1. What are Medicare Set-Aside Allocations (MSAs)?
Medicare Set-Aside Allocations are funds that have been designated to cover Medicare allowables for future medical treatment related to an insured injury. For example, in a Workers’ Compensation case, an Injured Worker breaks his hip. Medicare requires that all future medical treatment for that hip be provided by the carrier. It stipulates in the promulgated rules that there can be NO transfer of risk from the Carrier/TPA to Medicare.
2. Why are MSAs necessary?
In 1981, Congress passed legislation requiring that Medicare is always a secondary payer. This legislation was called the Medicare Secondary Payer Act (MSP). This means that on any claim, other parties such as insurance carriers would be primary and therefore responsible for the bill. The pertinent legislation is contained in the Social Security Act, (42 USC 1395y (b)(2), section 1862(b)(2). This legislation required that Medicare payment may not be made for any item or service to the extent that payment has been made under a Workers’ Compensation law or plan. In 2001, CMS (the Centers for Medicare/Medicaid Services), promulgated rules for insuring that Medicare’s interests were considered in the future medical settlement for all Workers’ Compensation cases.
3. When do we have to do MSAs?
MSAs are required when settling the future medical benefits on a Worker’s Compensation or Liability Claim. Medicare requires that their interests be satisfied. There are two criteria for determining if a Workers’ Compensation MSA submission is required. If the Qualified Individual is a current Medicare beneficiary, then an MSA submission is required. New instructions from CMS in July 2005 indicated that settlements below $25,000 do not now require an MSA submission. The second category when an MSA is required is more complex. If a Qualified Individual has a “reasonable expectation” to be receiving Medicare benefits within the next 30 months and the settlement is over $250,000 then an MSA submission is required. For Liability MSA submission, the claim must be catastrophic in nature, and involve a large future medical settlement or the claimant is a Medicare Beneficiary or there is a third party worker’ compensation component.
4. What does “reasonable expectation” mean for receiving Medicare Benefits?
A “reasonable expectation” means that an individual has already applied for Social Security Disability or the individual is 62.5 years of age. In either case, with the six-month application period and the 2-year waiting period for Medicare benefits, that individual would be expected to be receiving Medicare benefits within the next 30 months. Situations where an individual has a “reasonable expectation” of Medicare enrollment include but are not limited to:
- The individual has applied for Social Security Benefits;
- The individual has been denied Social Security Benefits but anticipates appealing that decision;
- The individual is in the process of appealing and /or re-filing for Social Security Disability Benefits;
- The individual is 62.5 years old (i.e. may be eligible for Medicare based upon his/her age within 30 months); or
- The individual has End Stage Renal Disease (ESRD) condition but does not yet qualify for Medicare based upon ESRD
- The treating physician indicates that the individual will not be able to return to any type of gainful activity (work) due to the injury
5. How does Medicare determine if their interests have been satisfied?
Medicare uses a vendor called The Workers Compensation Review Center to review all of the MSA submissions to determine their adequacy. If a settlement does not specify the amount of future medical treatment then the total settlement may be considered for future medical expenses. Any allocations for lost wages, pre-settlement medical expenses, future medical expense or other designations that do not consider Medicare’s interest, will not be approved by Medicare.
6. What if the carrier does not agree to accept liability?
Medicare recognizes two types of settlements: Commutation and Compromise cases. When a settlement includes compensation for future medical expenses, it is referred to as a WC Commutation case. When a settlement includes compensation for medical expenses incurred prior to the settlement date, it is referred to as a WC Compromise case. A settlement possesses a commutation aspect if it does not provide for future medical expenses when the facts of the case indicate that the need for continued medical care related to the WC injury exists. If the facts show that this particular condition is work-related and requires continued treatment, then Medicare will not pay for medical services related to the WC injury until the entire settlement has been used to pay for these services. Medicare requires an MSA on even controverted files that meet the criteria for Qualified Individuals.
7. What is the process for MSAs?
To submit an MSA to CMS, information must be obtained to verify that an individual is now a Medicare beneficiary or will be a Medicare beneficiary. Signed releases are obtained to determine Social Security and Medicare status. Then a determination needs to be made by the designated Coordination of Benefits Lead Contractor as to any conditional payments. A potential settlement with the MSA amount specified must be reached with the legal stipulations drawn-up. The MSA narrative report and projection of future Medicare allowables must be completed. A proposed settlement can be used in lieu of an executed settlement.
8. What are conditional payments? Liens?
When Medicare sees a diagnostic code that suggests trauma, they red flag it for possible conditional payments. This means that Medicare will attempt to recover any payment that they may been have made from a primary payor. The longer an individual has been receiving Medicare Benefits the stronger the probability that conditional payments exist. These conditional payments are referred to as Liens, once a claim has been settled.
9. When did MSAs start being required?
In 2001, Medicare published their rules for MSAs. Since then, they have been refining the process by issuing a series of memos reflecting the further evolving processes for the MSAs. The most recent memo was dated 12/30/05 regarding prescription drug coverage under the Medicare Modernization Act of 2003 with an effective date of 1/1/06.
10. What are the penalties for not completing an MSA?
CMS will levy fines against Carriers and other parties who fail to satisfy Medicare’s interests by not addressing future medical on Medicare allowable expenses. The fines would be double what that anticipated MSA would have been. So if the Carrier settles a file without obtaining CMS approval, they pay out the settlement benefits, then they have to pay twice what the MSA would have been so they are paying three times. As an example, Liberty Mutual was fined four million dollars over a single case. CMS is now conducting audits in Florida.
11. Who is responsible for the MSA?
All parties to the settlement of future medical benefits are responsible to insure that Medicare’s interests are satisfied. No one can avoid an MSA by stating they will not apply for Medicare benefits and cannot waive their rights to Medicare. The Regional Offices will not approve settlements that promise not to bill Medicare for certain services in lieu of including those services in a Medicare Set-Aside Arrangement.
12. Who can develop an MSA?
CMS has no regulations on who can develop an MSA. However, there are certifications available to reflect appropriate training in the areas as well as certain standards of practice. Many times an MSA provider will also be a certified life care planner.
13. What is included in an MSA?
CMS requires the following information to be included in the proposal:
- Cover letter with claimant name, address, phone, date of birth, HICN or social security number, claimant’s release, claimants counsel information, entitlement status, employer information, WC insurer, state of venue, injury date, description of injury, total WC settlement amount and proposed MSA amount
- Documentation to include life expectancy, life care plan (if injury is extensive/serious), proposed WC Settlement Agreement, Current Treatment, Future Treatment, Patient Medical Recovery Prognosis, Total Settlement Amount, Amount of Future Medical Treatment, Total Amount of Future Prescription Drug Usage, Medicare Set –Aside Amount, Administrator, Medicare Set-Aside Arrangement Account, Fees and Final WC Settlement Agreement
14. What is the expected turn around time for the Regional Offices to review and make a decision on MSAs?
The goal is to have a determination made regarding the proposed WC Settlements within 45 to 60 days provided that all necessary documentation has been submitted.
15. May an individual self-administer his/her Medicare Set-Aside Arrangement?
Yes, if it permitted by CMS for an individual to self-administer provides that the established guidelines are followed. A self-administered arrangement is subject to the same rule and requirements as any other set-aside arrangement.
16. What happens if one of parties settling a WC case refuses to involve CMS, even though Medicare has an interest in the case?
In this situation the “cooperative” settling party should notify the Regional Office. Where the Regional Office believes it is appropriate, they will send the “uncooperative” party a certified letter conveying that Medicare’s interests must be considered in the WC settlement.
17. What about future medical settlements that do not fit the criteria for Qualified Individuals according to CMS regulations?
CMS Has indicated in their policy memo’s explaining the regulations that Medicare’s interests must be “considered” in all claims involving future medical costs. The review thresholds established by CMS are merely “workload thresholds”. This means that although an MSA is not required to be submitted that Medicare’s interest MUST be considered in all future medical settlements. CAMS-MSA recommends that an MSA be completed to document the file and “satisfy” Medicare’s interests but not be submitted to CMS. This will protect the settling parties from further litigation from CMS. Further, a consistent policy should be developed by each Carrier/TPA to demonstrate compliance with the Medicare Secondary Payer Act.
18. What impact does the Medicare Modernization Act of 2003 (MMA) have on MSAs?
The Medicare Modernization Act provides for prescription drug coverage for Medicare Beneficiaries. Prescription drug coverage was not available under Medicare until the MMA went into effect on 1/1/06. CMS now requires that related prescription drug be included in the total MSA Submission amount. In many cases this causes the amount of the allocation to double. Since this is such a new rule, promulgated on 12/30/05, it is uncertain what the ramifications will be for the future.
Abbreviations
Administrator Company or Injured Worker who is responsible for control and documentation of proper expenditures from the MSA account
CMS Center for Medicare & Medicaid Services
COBC Coordinator of Benefits Contractor
HICN Health Insurance Claim Number
MMA Medicare Modernization Act of 2003
MSA Medicare Set Aside Allocation
MSP Medicare Secondary Payer
SSD Social Security Disability
WC Workers’ Compensation
CAMS, LLC is a full-service MSA Company that can assist with developing and submitting MSAs. Educational seminars are also available at no charge. CAMS, LLC provides good communication and quick turn around times for completion of MSAs.