Medicare Set-Aside (MSA)
The issue:
The Center for Medicare Services (CMS) has threatened Medicare Set-Aside (MSA) implementation in liability settlements for nearly ten years. It has been a staple of the Worker’s Compensation claims process since 2001, with the following guidelines for use and implementation:
1. Any case with a settlement value of $25,000 or more where the claimant is already a Medicare recipient.
2. Any case with a settlement value of $250,000 or more where the claimant is expected to become a Medicare recipient within the immediate 36 months of the settlement date.
3. Any case where the claimant is in end stage Renal failure.
CMS tried to mandate MSA use in liability matters but quickly realized that the process was wrought with issues and that the sheer volume was too much for their regional offices to handle. As a result, and under the threat of a $1,000/day fine for non-compliance, CMS required all liability insurers (including self-insured companies) to submit quarterly reports listing all of their open liability claims involving bodily injury. CMS would then review the submission and flag any claimants who were current Medicare recipients. When the case settles, the total settlement value is to be noted on the quarterly submission, allowing CMS to review and “cherry pick” files for audit.
With this process in place, and with multiple arguments from defense carriers that MSA’s cannot be fairly implemented in a liability case due to factors like: contributory negligence, co-defendants, questionable liability, pre-existing diagnosis, etc., CMS stated that in liability matters, every party has the responsibility to: “consider, identify and protect the interests of Medicare”. If CMS finds that these interests were not protected, they reserve the right to collect from “any party to the settlement”.
While most of the 10 regional CMS offices are not currently reviewing Liability MSA’s, there are one or two who will and there is mounting evidence that they are auditing large settlement cases to monitor how MSA’s were addressed and if, in fact, the interests of CMS were identified and protected. While they may initially approach the plaintiff for reimbursement, the ultimate target for collection, of course, is the defense.
The solution:
Having an MSA Allocation report prepared and presenting that to opposing counsel, with an annuity illustration to fund the MSA, is the only way, in the current environment, to make certain that your company is adequately protected against future CMS action. There is a cost associated with the development of the MSA Allocation report, however, if you are spending over $250,000 to settle a case, investing an additional $1,850 -$3,500 is a nominal expense to protect your company and/or law firm.
It is anticipated that Plaintiff counsel will not choose to implement the MSA, and that is okay. The objective is to insulate your company and your law firm from any future CMS actions or attempts to collect. In developing an MSA Allocation, at your expense, presenting it to opposing counsel in it’s entirety, along with annuity illustrations to fund the MSA (the most affordable means of doing so), it cannot be argued that your company failed to take into consideration the needs and interests of CMS, or that you failed to protect those interests.
Most structured settlement or MSA vendor firms will work closely with outside counsel to incorporate necessary MSA language into the Settlement Agreement and Release, further insulating your company from any future actions by CMS. Many defendants, in fact, are incorporating a separate MSA Addendum to the Release and requiring that it be notarized, to further insulate themselves from potential future CMS actions.
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How is the MSA Allocation report prepared?:
An MSA vendor representative will contact the adjuster and/or outside counsel and request that a MSA Referral Form be filled out and sent to their office with the following:
1. A description of the injury
2. The last two years of medical records.
3. The last two years of prescription records.
From there, a team of nurses will review the claimant materials and history and assemble the MSA Allocation report, adhering to the appropriate ICD 9 and ICD 10 codes provided by Medicare. This process takes up to 10 days from the receipt of all necessary records. It can be done in 5 days, but most MSA vendors will charge additional fees for the rush request.
Upon completion of the review, the MSA vendor should provide back to your company the following:
1. An executive summary of the MSA Allocation.
2. The full MSA Allocation report, with ICD 9 and ICD 10 coding.
3. An annuity quote to fund the MSA via self-administration.
4. An annuity quote to fund the MSA via third-party administration (Medivest is the preeminent provider in the market).
5. An invoice and W9 for payment.
What will the MSA Allocation report reveal?:
The Allocation report will illustrate the claim related injuries and future care costs associated with that injury over the lifetime of the plaintiff/claimant. MSA vendors should also carefully review any plaintiff provided Life Care Plan simultaneously, to identify any areas of duplication, illustrating those areas as well, so not to be paid for twice in the course of settlement.Liability Medicare Set-Asides are an important new tool to help settle claims, attack future medical treatment numbers presented by opposing counsel, and fully protect the needs and interests of Medicare, while also protecting your company and law firm.