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CMS Changes Position Regarding Medicare Set Aside Arrangements CMS Changes Position Regarding Medicare Set Aside Arrangements

CMS Changes Position Regarding Medicare Set Aside Arrangements


When settling a claim with a Medicare beneficiary that has the impact of resolving medical care issues, all parties are required to consider Medicare’s potential interests as part of the settlement process. For liability settlements, the parties currently only need to determine whether the Center for Medicare and Medicaid Services (CMS) made any conditional payments for which it will seek reimbursement. Parties to a worker’s compensation claim settlement have an additional requirement to consider CMS’s interest related to future medical care and, in some cases, establish a Medicare Set-Aside Arrangement (MSA). An MSA is a financial agreement that allocates a portion of a worker’s compensation settlement to pay for future medical services required for to the work-related injury or disease. These funds must be depleted before Medicare will pay for treatment related to the work injury. The amount of the MSA is determined on a case-by-case basis.

This spring, CMS established procedures to shorten the process for obtaining CMS’s determination of its potential interests related to Final Conditional Payment decisions and MSA determinations.

Zero Dollar MSA Policy

Traditionally, CMS has provided a Zero-Dollar MSA (“no liability” or “Zero allocation” MSA) determination based on the employer’s or insurer’s complete denial of the worker’s compensation claim. CMS published a memorandum opinion in 2003 reflecting that a MSA is not required in this situation because there is no attempt to shift liability to CMS. CMS has not published a formal Zero-Dollar MSA policy in its reference guide; however, it regularly issued a determination letter stating no MSA was necessary if the claim was completely denied and the settlement was a strict compromise.

Under a proposed new approach, CMS recently advised that its Worker’s Compensation Review Contractors (WCRC) will no longer approve proposed Zero-Dollar MSA amounts based solely on the denial. CMS will now require submission of one of two documents to support the Zero-Dollar MSA opinion:
  • Court ruling regarding compensability; or
  • Treatment records which demonstrate that no further treatment for the alleged injury or condition is required.
Although obtaining this information provides the most protection to the parties, CMS did not provide advance notice of this abrupt change to its long-standing rule. On October 31, 2016, CMS published an announcement that, effective immediately, the WCRC will utilize procedures that were previously in effect. It appears CMS made this change after it received comments raising concerns that CMS did not provide prior notice of the proposed change. For now, it appears that parties may continue to submit Zero-Dollar MSA proposals without obtaining a judicial determination on the merits of the claim.

With prior notification, we anticipate that CMS will move forward with its plan to change its MSA requirements.

MSAs and Liability Settlements

In June, 2016, CMS posted an announcement on its website:
[CMS] is considering expanding its voluntary [MSA] amount review process to include the review of proposed liability insurance (including self-insurance) and no-fault insurance MSA amounts. CMS plans to work closely with the stakeholder community to identify how best to implement this potential expansion. CMS will provide future announcements of the proposal and expects to schedule town hall meetings later this year.

CMS hasn’t issued further announcements regarding potential new requirements for parties considering liability settlements with a Medicare beneficiary. It recently revised its Statement of Work for its Request for Proposal (RFP) from recovery contractors to include the review of “other” Non-Group Health Plan (NGHP) set-aside arrangements. The only other type of NGHP are liability and no-fault.
Stay tuned

The revisions to CMS contractor’s RFP requirements along with last week’s announcements demonstrate MSA requirements continue to be a moving target – for parties to worker’s compensation settlements as well as, potentially, to litigants contemplating liability settlements. CMS will likely continue its plans to expand the scope of MSAs after it provides prior notification of the proposed rule changes. Please contact Ann Stewart or another member of Ice Miller’s Worker’s Compensation practice if you have questions about CMS’s current requirements for settlements with Medicare beneficiaries.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstances.
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