By John V. Cattie, Jr., Managing Partner at Cattie
For years, the workers’ compensation (WC) industry has suffered from Medicare Set-Aside (MSA) blind spots. Current WC industry practices do not align with Centers for Medicare and Medicaid Services (CMS) expectations. Largely driven by the employer side of the table, those MSA protocols have missed the mark, needlessly exposing thousands of injured workers to CMS recovery actions in the future.
CMS clearly discusses its expectations in its WCMSA Reference Guide (the “Reference Guide”). Until the danger posed by these MSA blind spots is remedied, parties resolving WC claims will continue to possess an exposure for future medicals, which it fails to account for today. Injured workers are first in line to suffer at the hands of CMS. These MSA blind spots may be remedied, however, by a lawyer well-versed in MSA obligations under the Medicare Secondary Payer (MSP) Act.
Medicare’s WCMSA Workload Review Thresholds
In Section 8.1 of the Reference Guide, CMS shares the situations under which it is willing to review a WCMSA proposal. Those are:
- 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 or lost wages over the life or duration of the settlement agreement is expected to be greater than $250,000.00.[1]
These thresholds are well-known and cited often by WC industry stakeholders. Most WC industry stakeholders, however, interpret these to be the only situations where a WCMSA might be warranted. Taking CMS guidance at face value, the WC industry is dead wrong in its safe harbor interpretation. This incorrect interpretation has created huge MSA blind spots for parties resolving WC claims.
Section 8.1 explains in detail that the workload review thresholds provide no safe harbor.
“These thresholds are created based on CMS’ workload, and are not intended to indicate that claimants may settle below the threshold with impunity. Claimants must still consider Medicare’s interests in all WC cases and ensure that Medicare pays secondary to WC in such cases.”[2]
CMS is unequivocal here and always has been. One can go as far back as at least 2005 to witness CMS’ position that these workload review thresholds do not equal safe harbors for parties resolving WC claims.[3]
Note that all WCMSA guidance issued by CMS has been incorporated into the Reference Guide as of March 2013.
Workload Review Thresholds Do Not Equal Safe Harbors
As early as 2005, CMS has been saying that its WCMSA workload review thresholds do not equal safe harbors. For at least 12 years, parties resolving WC claims have virtually ignored this MSA blind spot. How has the WC industry’s interpretation missed the mark here so widely?
Here’s one example to help establish the boundaries of the MSA blind spot. Parties are settling a WC case involving a Medicare beneficiary and closing future medicals. They agree to settle for $24,500. In so doing, they believe they do not have to worry about an MSA issue. Have you seen that? Would it surprise you to hear that ignoring the MSA issue because you settled just under threshold does not mean CMS grants you safe harbor?
For too long, parties have ignored the MSP Act when it involves future medicals. The MSP Act says Medicare won’t pay where payment has been made under a workers’ compensation policy or plan.[4] CMS says, “Claimants must still consider Medicare’s interests in all WC cases and ensure that Medicare pays secondary to WC in such cases.”[5] If one accepts CMS guidance here at face value, that means that the MSA issue should be addressed in every WC settlement, not only those involving Medicare beneficiaries.
Who’s to Blame for the Bad Advice?
There’s plenty of blame to go around. As an attorney representing injured workers, perhaps you have been on autopilot, ignoring the MSA blind spot because the other side has been handling the MSA issue in your cases. Consider this your wake-up call. You have an MSA blind spot that endangers yourself and your clients. The size of the blind spot corresponds to the number of WC cases you are handling annually.
CMS doubled down on this point in January 2019. In version 2.9 of the Reference Guide, CMS added case-specific examples to the workload review thresholds. Those new examples do not advise what to do when a case meets the threshold. Instead, they contemplate situations where the case does not meet the threshold. Those examples are:
“Example 1: A recent retiree aged 67 and eligible for Medicare benefits under Parts A, B, and D files a WC claim against their former employer for the back injury sustained shortly before retirement that requires future medical care. The claim is offered settlement for a total of $17,000.00. However, this retiree will require the use of an anti-inflammatory drug for the balance of their life. The settling parties must consider CMS’ future interests even though the case would not be eligible for review. Failure to do so could leave settling parties subject to future recoveries for payments related to the injury up to the total value of the settlement ($17,000.00).
“Example 2: A 47 year old steelworker breaks their ankle in such a manner that leaves the individual permanently disabled. As a result, the worker should become eligible for Medicare benefits in the next 30 months based upon eligibility for Social Security Disability benefits. The steelworker is offered a total settlement of $225,000.00, inclusive of future care. Again, there is a likely need for no less than pain management for this future beneficiary. The case would be ineligible for review under the non-CMS-beneficiary standard requiring a case total settlement to be greater than $250,000.00 for review. Not establishing some plan for future care places settling parties at risk for recovery from care related to the WC injury up to the full value of the settlement.”[6]
In both examples, the WCMSA review process is not available to the settling parties. However, CMS expects steps to be taken to ensure that Medicare is not asked to pay future bills that are someone else’s responsibility. Parties resolving WC cases under threshold are not taking the steps necessary to protect themselves on this issue. To continue to do so will further jeopardize your clients and your firm.
Immediate Action Should Be Taken to Remedy the MSA Blind Spot
The MSA status quo is broken, and it must change to protect all injured workers. I highly encourage you to reassess how you handle the MSA issue. I know that most readers leave the issue up to the other side to handle. No matter what your rationale for that is, injured workers deserve a higher level of attention to the issue. You should be proactively addressing the MSA issue in advance of mediation, followed by appropriate steps post-mediation to ensure the client’s future Medicare benefits are protected.
MSA issues may be looked at from either the medical perspective or the legal perspective. Traditionally, MSAs are thought off only in terms of medicals. Figure out what an injured workers’ future cost of care looks like, then bifurcate that between Medicare covered and non-Medicare covered expenses. The Medicare covered portion then becomes the MSA figure. Obtaining this type of report may be a good starting point for you.
The problem, however, is that the medical approach does not align with the realities of your case. Medically based MSAs are calculated based on the assumption that the case will settle for 100 cents on the dollar. You and I both know that rarely happens, especially once the injured worker hires an attorney. Most settlements at that point will result in a compromise settlement as opposed to a full commutation of benefits.
For compromise settlements, adopting a legal approach to the MSA makes much more sense. Legal analysis of the MSA issue most likely yields a lower MSA figure, one that complies much more readily with the statutory obligations imposed by the MSP Act. The legal analysis will allow the client to spend down and exhaust the MSA faster, allowing them to begin sending bills to Medicare for payment confident that Medicare will pay those bills no questions asked.
If this type of analysis is something you are not comfortable providing the injured worker, you should consider an MSA legal opinion from a lawyer well-versed in MSA legal obligations. Ask your client to grant you permission to hire an MSA lawyer to review MSA obligations and provide legal advice about the MSA exposure. Seeking MSA legal advice from outside counsel has become an acceptable means of “considering and protecting” Medicare’s interests in 2020.
According
to Medicare, the MSA issue needs to be examined in every WC case. Anything less
than that needlessly exposes injured workers to potential CMS recovery actions
post-settlement. And we can all agree that no one wants to see that.
[1] Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA) Reference Guide. (2019). 3rd ed. [ebook] Available at: https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Workers-Compensation-Medicare-Set-Aside-Arrangements/Downloads/WCMSA-Reference-Guide-Version-3_0.pdf [Accessed 15 Jan. 2020].
[2] Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA) Reference Guide. (2019). 3rd ed. [ebook] Available at: https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Workers-Compensation-Medicare-Set-Aside-Arrangements/Downloads/WCMSA-Reference-Guide-Version-3_0.pdf [Accessed 15 Jan. 2020].
[3]Cms.gov. (n.d.). Archive | CMS. [online] Available at: https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Workers-Compensation-Medicare-Set-Aside-Arrangements/Archive [Accessed 15 Jan. 2020].
[4] United States Code, 2006 Edition, Supplement 4, Title 42 – THE PUBLIC HEALTH AND WELFARE.1395y(b)(2)(A)(ii).
[5] https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Workers-Compensation-Medicare-Set-Aside-Arrangements/Downloads/WCMSA-Reference-Guide-Version-3_0.pdf
[6] https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Workers-Compensation-Medicare-Set-Aside-Arrangements/Downloads/WCMSA-Reference-Guide-Version-2_9.pdf