In a May 11, 2011 memorandum, the Centers for Medicare and Medicaid Services (CMS) reiterated its guidance regarding CMS’ Workers’ Compensation Medicare Set-Aside Agreements (WCMSA). The memorandum confirmed submission of a WCMSA proposal to CMS for review and approval is a recommended process. There are no statutory or regulatory provisions requiring a WCMSA proposal be submitted to CMS, regardless of the claimant’s status as a Medicare beneficiary or the settlement amount. As such, a number of industry products exist with the intent of indemnifying insurance carriers and CMS beneficiaries against future recovery for payments made by CMS for settled injuries. These products are commonly referred to as “evidence-based” or “non-submit” MSAs.
A WCMSA meets CMS’ criteria for review when the following thresholds are met:
- The claimant is currently a Medicare beneficiary, and the total settlement amount is greater than $25,000; or
- The claimant has a “reasonable expectation” of Medicare enrollment within 20 months of settlement and the anticipated settlement amount is greater than $250,000.
While CMS does not review WCMSA proposals if the above thresholds are not met, CMS stressed that these thresholds only reflect a CMS operational workload standard. They do not constitute a “substantive dollar” or “safe harbor” threshold. All Medicare beneficiaries must consider Medicare’s interests in all WC cases, and ensure Medicare is the secondary payer to WC, in such cases. Title 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 interests.
In January 2022, CMS released WCMSA Reference Guide 3.5 to “clarify” the use of non-submit or “evidence-based” MSAs by adding section 4.3. The section, titled “Use of Non-CMS-Approved Products to Address Future Medical Care” was to set forth CMS’s policy regarding evidence-based MSAs or non-submit MSAs. As part of section 4.3, CMS stated that it viewed these arrangements as “a potential attempt to shift financial burden by improperly giving reasonable recognition to both medical expenses and income replacement” and when a settlement includes a non-CMS approved MSA, “as a matter of policy and practice, CMS will deny payment for Medicare-covered medical services related to the WC injuries until it is satisfied the entire settlement amount was spent for claim-related treatment”. [Emphasis supplied.] On its face, this provision would result in the claimant needing to demonstrate complete exhaustion of the net settlement amount, rather than a CMS-approved WCMSA amount, prior to Medicare resuming payment for WC-related medical benefits.
Although CMS issued no legislative rule, no changes to the law were made, and the accompanying Code of Federal Regulations remained the same, rumors quickly spread that non-submit or evidence-based MSAs were no longer valid. There was substantial confusion on both sides of the WC bar regarding section 4.3, with two questions at the forefront, (i) whether CMS intended this policy to apply retroactively, or prospectively, and (ii) whether CMS intended the policy to apply to non-CMS approved MSAs that did not meet CMS’s WCMSA review thresholds. Due to the prevailing confusion, settlements stalled pending clarification of the new section. Medicare Secondary Payer groups and vendors began asking CMS to eliminate, or revise, the provisions of section 4.3 to be consistent with applicable law.
On March 15, 2022, CMS released version 3.6 of its Reference Guide clarifying the confusing provisions of section 4.3, by the inclusion of both revised and additional language. As to the provisions effective date, CMS added language indicating the policy set forth in section 4.3 applies to “all notifications of settlement that include the use of a non-CMS approved product received on, or after, January 11, 2022.” Regarding the second question, CMS added language stating it, “does not intend for this policy to affect any settlement that would not otherwise meet its WCMSA review thresholds”, although it reminds settling parties that its “comment does not relieve the settling parties of an obligation to consider Medicare’s interests as part of the settlement; however, CMS does not expect notification or submission when thresholds are not met”. CMS further revised the provisions of section 4.3 to indicate CMS “may at its sole discretion deny payment of medical services related to WC injuries or illnesses . . . unless it is shown, at the time of exhaustion of the MSA funds, that both the initial funding of the MSA was sufficient and the utilization of the MSA funds was appropriate.” [Emphasis added.] Version 3.6, with its clarifications to section 4.3, establishes that whether the parties choose to submit a MSA to CMS for review or utilize an evidence-based MSA remains theirs to make. The full text of Section 4.3, as revised in WCMSA Reference Guide Version 3.7, can be downloaded by clicking here.
Please feel free to contact any of the attorneys at BGAM Law if you have any questions regarding CMS’ recent updates, WCMSA issues, or any issue involving workers’ compensation.
