February 2, 2022 Article

Workers' Comp Alert: CMS Opposes Select Medicare Set-Asides in Updated Reference Guide

Maine Workers' Comp Alert

The Centers for Medicare and Medicaid Services Takes a Hard Stance Against “Non-Submit” Or “Evidence-Based” Medicare Set-Asides in an Updated Workers’ Compensation Reference Guide

It has long been established that the parties in a workers’ compensation case must protect Medicare’s interests when resolving cases that include future medical expenses. The recommended method to protect Medicare’s interests is a Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA). A WCMSA is a financial agreement that allocates a portion of a workers’ compensation settlement to pay for future medical services related to a workers’ compensation injury, illness, or disease. These funds must be depleted before Medicare will pay for further treatment.

While there are technically no statutory or regulatory provisions requiring that a WCMSA proposal be submitted to the Centers for Medicare and Medicaid Services (CMS) for review, submission of a WCMSA proposal is a recommended process. CMS will only review WCMSA proposals that meet the following criteria:

  • The claimant is a Medicare beneficiary and the total settlement amount is greater than $25,000.00; or
  • The claimant has a reasonable expectation of Medicare enrollment within 30 months of the settlement date and the anticipated total settlement amount for future medical expenses and disability/lost wages over the life or duration of the settlement agreement is expected to be greater than $250,000.00

Non-Submit MSAs, also referred to as Evidence-Based MSAs, have been used with frequency where parties have decided not to participate in the voluntary CMS WCMSA process. This type of MSA often results in a lower allocation amount than a CMS-approved MSA because of the use of so-called “evidence-based medicine.” With the traditional CMS review process, CMS gives very little consideration to examining physician opinions. However, with an “evidence-based” MSA, a treating physician may provide specific guidance on future medical care and there may be statements by the injured workers that he or she will not undergo certain care, treatment, and/or procedures. Such evidence would traditionally not cause CMS to exclude certain future treatment from an MSA, which is why non-submit MSAs have become attractive options. These MSAs often result in lower future medical estimates than CMS-reviewed and approved MSAs.

CMS’ updated Workers’ Compensation Medicare Set-Aside Reference Guide (Version 3.5) has a new section on the use of “Non-CMS Approved Products to Address Future Medical” that says CMS views non-submit/evidence-based MSAs “as a potential attempt to shift financial burden” to Medicare. The new section states:

4.3 The Use of Non-CMS-Approved Products to Address Future Medical Care

A number of industry products exist with the intent of indemnifying insurance carriers and CMS beneficiaries against future recovery for conditional payments made by CMS for settled injuries. Although not inclusive of all products covered under this section, these products are most commonly termed “evidence-based” or “non-submit.” 42 C.F.R. 411.46 specifically allows CMS to deny payment for treatment of work-related conditions if a settlement does not adequately protect the Medicare program’s interest. Unless a proposed amount is submitted, reviewed, and approved using the process described in this reference guide prior to settlement, CMS cannot be certain that the Medicare program’s interests are adequately protected. As such, CMS treats the use of non-CMS-approved products as a potential attempt to shift financial burden by improperly giving reasonable recognition to both medical expenses and income replacement.

As a matter of policy and practice, CMS will deny payment for medical services related to the WC injuries or illness requiring attestation of appropriate exhaustion equal to the total settlement less procurement costs before CMS will resume primary payment obligation for settled injuries or illnesses. This will result in the claimant needing to demonstrate complete exhaustion of the net settlement amount, rather than a CMS-approved WCMSA amount.

We now have clear guidance that CMS views non-submit MSAs as a potential attempt to shift the financial burden to Medicare. As a matter of “policy and practice,” CMS will deny payment for medical services related to workers’ compensation injuries until the total settlement has been exhausted.

This new guidance should be applied in all workers’ compensation settlements, particularly where the review threshold is triggered.