By Deborah (Pfeifle) Watkins, CEO
On June 8, 2016 the Centers for Medicare and Medicaid Services (CMS) posted an announcement stating that CMS is considering expanding its voluntary Medicare Set-Aside Arrangement (MSA) review and approval process for proposed liability insurance, including self-insurance and no-fault.
This announcement comes as no surprise considering the CMS requirement for Section 111 of the Medicare, Medicaid and SCHIP Extension Act of 2007 (MMSEA) Reporting under 42. U.S.C. 1395y(8)(F) that became effective January 1, 2011 for liability claim settlements entered into on or after October 1, 2010. Industry rumors spanning more than ten years coupled with the recent extended deadline for proposals for the CMS MSA review contractor has had everyone guessing.
Currently, Liability Medicare Set Asides (LMSA) are sent to the CMS Regional Office for review and approval. Most often, a letter is sent from the Regional Office (RO) in response to the request for review, explaining that the RO does not have the capacity or resources to review the LMSA. Despite the lack of review, a CMS threshold review letter serves as evidence for the primary payer, that CMS has acknowledged receipt of the request to review the LMSA, should the claim be challenged at any time in the future, by CMS, for compliance with future medical recovery.
What can we expect from a formal review of Liability MSAs?
To answer this question, one must first understand not only the Medicare Secondary Payer Statute and its intent, but also have an operational understanding of Coordination of Benefit, knowledge of CMS Medicare Coverage guidelines and claims adjudication practices, an understanding of the current review methodologies of the Workers’ Compensation Review Center (WCRC) for Workers’ Compensation Medicare Set Asides (WCMSA), and an awareness of case law involving future medical recovery by CMS for liability claims. Comparing, contrasting and integrating these concepts may provide a view into what we may expect from a formal review process for LMSAs.
Medicare Secondary Payer Statute 42 U.S.C. § 1395y(b).
In the 1980’s congress amended the Social Security Act to include a provision to protect Medicare from making primary payments when a primary payer exists. The law applies to primary plans defined as “a group health plan or large group health plan, to the extent that clause (i) applies, and a workmen’s compensation law or plan, an automobile or liability insurance policy or plan (including a self-insured plan) or no fault insurance, to the extent that clause (ii) applies. An entity that engages in a business, trade, or profession shall be deemed to have a self-insured plan if it carries its own risk (whether by a failure to obtain insurance, or otherwise) in whole or in part.”
Medicare Secondary Payer as a Coordination of Benefit CMS explains its Coordination of Benefit program as follows: “The primary payer pays up to its limits. The secondary payer only pays what the primary payer does not cover. The secondary payer might not pay all of the uncovered costs. Medicaid & TRICARE never pay first for services that Medicare covers.”
Medicare Coverage Guidelines & Claims Adjudication Practices
Medicare has a set of coverage guidelines to determine what health care goods and services Medicare will cover. Certain items/ services may only be covered when sufficient documentation is provided to support the definition of “medical necessity”.
CMS pays a set fee per code that is billed by the provider. If the provider bills a code that is not accepted by CMS, or in which there is another known primary payer, that bill may be denied and the provider will need to resubmit the required documentation in order to receive payment, under the rules of Medicare.
CMS uses a Prospective Payment System developed using Diagnosis Related Groups (DRG) for an excess of 400 diagnoses, categorized by degree of severity and mortality. This means that CMS uses a diagnosis formula for calculating what Medicare will pay. If any additional costs are incurred, beyond what the DRG allows, the provider, namely the hospital, will incur those additional costs. CMS knows the cost of care for certain diagnosis types in group health. CMS is now learning their medical exposures for NGHPs through MMSEA Section 111 Reporting data.
CMS applies utilization guidelines and evidence based medicine, according to the Agency for Healthcare Research and Quality (AHRQ), the Federal government’s clearinghouse for medical quality research.
Part D enrollment requires an annual utilization review of prescription drug treatment for all Medicare beneficiaries to ensure the safety and efficacy of prescription drug use.
These best practices are important to acknowledge as compared to the best practices that we see at the CMS Workers Compensation Review Center (WCRC), a CMS Contractor hired to review Workers Compensation Medicare Set Asides (WCMSAs).
Current review methodologies at the Workers’ Compensation Review Center (WCRC) for Workers’ Compensation Medicare Set Asides (WCMSA) are misaligned with CMS.
Use of higher billing codes for outpatient services. The most frequently billed physician office treatment code for primary care providers is 99213. The WCRC uses 99214, which equates to more time spent and higher cost. Higher codes are billed by Oncologists, Neurologists & cardiologists, but CMS statistics for billing codes demonstrates that 99213 is the code most commonly invoiced to Medicare. CMS also uses higher codes/ charges for diagnostic tests and other outpatient services and durable medical equipment, as well as over-utilization and inappropriate allocation of future diagnostic tests and procedures.
Redbook® AWP for prescription drugs. CMS requires that the RedBook® Average Wholesale Price (AWP) be used for Medicare Part D Prescription Drug calculations. Further, CMS requires the precise code and price for Redbook® that coincides with the exact date the MSA is reviewed at the WCRC. These prices can change day to day and week to week, so a reasonable estimate, not at exact price for prescriptions is more logical. In addition, CMS allocates prescription drugs taken at the time of the review, over the entire life expectancy of the beneficiary, regardless of whether the prescriptions are being filled, are safe and appropriate, meet CMS prescription drug utilization guidelines or can otherwise be expected to change with advancing age, according to evidence based medicine guidelines.
Does not recognize the limits of the primary payer. 23% of CMS determinations exceed the total settlement amount, agreed upon by all parties to the claim settlement. The WCRC does not take into consideration state rules/ statutes which govern the limits of the workers’ compensation claim under state law nor does CMS recognize liability policy limits under a policy.
Inconsistent application of Medicare coverage and evidence based medicine guidelines. There are many examples in the MSA review process where the WCRC does not adhere to CMS coverage guidelines, frequently over-extending CMS coverage rights, particularly associated with utilization guidelines for care and treatment, including prescription drug use.
While the CMS has made attempts to provide more transparency in the WCRC Medicare Set Aside review process in recent years, WCRC methodologies remain inconsistent and misaligned with CMS.
Case law involving future medical recovery, by CMS, for Liability claims
Big R Towing v. Benoit - Jones Act settlement in which total settlement amount was $150K and the court determined that $52,000 for future medicals adequately protected Medicare.
Schexnayder v. Scottsdale Insurance Company- The parties agreed to fund a MSA for $239,253.84 and the court approved what the parties themselves had determined.
Case law examples reveal that Medicare Set Asides are being written for Liability settlements and the future medical recovery amounts have been largely approved by the parties.
What can we expect from a formal review of Liability Medicare Set Asides?
Based on current trends, it is reasonable to expect that a review of Liability MSAs will mimic what we have experienced under workers’ compensation.
Throughout the evolution of the MSP program, more pieces are added to the compliance puzzle each year to create a whole. Within the MMSEA Section 111 reporting data, the only piece missing is a field to report the Medicare Set Aside allocation amount. Confirmation that Medicare’s future interests are being protected could be required within the reporting data, and it is rumored that this may be a next step in the evolution of the process. The Reporting data provides CMS with the ability to measure and ensure compliance with the Medicare Secondary Payer Statute, and comply with the goals of the Affordable Care Act to streamline payer models and improve the fiduciary management of federal healthcare dollars.
If a more formal LMSA review is forthcoming, what options are available? S. 1514, a bill to amend title XVIII of the Social Security Act offers some proposed relief in the review of Medicare Set Asides.
S. 1514/ H.R. 2649 is a bill to amend title XVIII of the Social Security Act to 1) create an exception to Medicare secondary payer requirements for certain Workers’’ compensation settlement agreements, and 2) provide for the satisfaction of such requirements through use of qualified Medicare set-asides. The bill offers some relief in the form of a voluntary MSA submission process, and the option to directly pay MSA funds to CMS while avoiding CMS submission for review and approval. The bill was last reviewed in June 2015 and is supported by the American Insurance Association, the Strategic Services on Unemployment & Workers’' Compensation (UWC), Property Casualty Insurers Association of America (PCI), American Bar Association, and the Workers’ Injury Law and Advocacy Group (WILG).
Primary payers may choose to get comfortable exercising voluntary non- submission and simply NOT submit MSAs to CMS for review and approval.
The option NOT to submit MSAs to CMS is gaining more consideration, given the current misalignments in the review of MSAs at the WCRC. As long as a MSA is reasonable and defensible, a primary payer may certainly benefit from not submitting to CMS, while still adhering to the statutory requirements, offering the ability to settle claims which might not otherwise be settled due to the over-reach of CMS in determining future medical costs. It is estimated that CMS MSA determinations are over-allocated by an average of 30%, over a 24 year life expectancy.
The future of LMSA generates many questions, not only about the review and approval process for LMSAs but it also highlights the commitment of CMS to recover dollars from non-group health plans, in its effort to protect the solvency of the Medicare Trust Fund.
Philosophically, Care Bridge International’ s MSP Compliance Bridge program supports the protection of the Medicare Trust Fund according to the Medicare Secondary Payer Statute, and its limits under the Coordination of Benefit program. Care Bridge International further supports the voluntary CMS submission standard for Medicare Set Asides, and encourages a post settlement support service to aid the beneficiary with a successful and proper expenditure of the MSA fund to fully comply with the intent of the law, with or without CMS Submission of the MSA for review and approval.
Care Bridge International uses data intelligence for MSAs aligned with the goals of CMS under the Affordable Care Act by 1) leveraging real population health data and 2) offering a streamlined Coordination of Benefit model for forecasting future care for non-group health plans. Care Bridge International uses predictive models/ machine learning algorithms and CMS business rules which meet CMS requirements, while aligning stakeholders’ obligations under the MSP Statute.
MSP Compliance Bridge offers both a full service traditional Medicare Set Aside program along with technology based solutions that place the Primary Payer in control of Compliance. For more information about MSP Compliance Bridge products and services, please contact Jessica Klement at 888-434-9326 Ext. 103 or email at firstname.lastname@example.org. For a free 10-Day trial visit: https://carebridgeinc.com/Demo