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MSA/MSP Frequently Asked Questions

Medicare Set-asides

Medicare Conditional Payments

(Revised 7-21-13)

This series of 93 questions and answers is a capsulized version of information found in the Author's 2013 text entitled Practitioner's Reference Manual To Settlements, Offsets & Set-asides published by Atlantic Law Book Company, West Hartford, Connecticut 06110.

For further information about this text click the "Practitioner's Reference Manual To Settlements, Offsets & Set-asides" tab on this web site or log onto:

http://www.atlanticlawbooks.com/practionersGuide.htm

The answers have been derived from various Regional Administrative Letters or "Memorandums" issued by The Centers for Medicare & Medicaid Services (CMS) since 2001, information found on CMS' web site www.cms.gov, as well as, the Workers' Compensation Medicare Set-Aside Portal (WCMSAP) Computer Based Training (CBT) manual and Workers' Compensation Medicare Set-Aside Arrangement (WCMSA) Reference Guide both issued by The Centers for Medicare & Medicaid Services.

The Q & A has been grouped into categories:

Contracting CMS

Q&A 1

Statutes, Regulations & Memorandums

Q&A 2-6

Medicare Secondary Payer & Medicare Conditional Payments

Q&A 7-22

Workers' Compensation Medicare Set-aside (WCMSA)

Q&A 23-33

Liability Medicare Set-aside (LMSA)

Q&A 34-35

Tax implications

Q&A 36

MSA Administration

Q&A 37-39

CMS Review Criteria and Referral Process

Q&A 40-57

Payments from the MSA

Q&A 58-62

Duration, Depletion & Termination of the MSA

Q&A 63-67

Valuation, Calculation & Reduction of the MSA

Q&A 68-74

Prescription Drugs & Medicare Part D

Q&A 75-89

Conflicts between State & Federal Laws

Q&A 90-91

Ethical Considerations

Q&A 92-93

Terminology: Throughout the Q & A the following terminology will apply:

  • "MSA", Medicare set-aside
  • "WCMSA", Workers' compensation Medicare Set-aside arrangement "LMSA", Liability Medicare Set-aside
  • "MSP", Medicare Secondary Payer Act
  • "CMS", The Centers for Medicare & Medicaid Services
  • "Beneficiary", the term used by CMS to indicate an individual who is on Medicare or is otherwise eligible to be on Medicare. This would be the Claimant in a workers' compensation case or the plaintiff in a civil liability case.
  • "COBC", Coordinator of Benefits Contractor
  • "MSPRC", Medicare Secondary Payer Recovery Contractor "WCRC", Workers' Compensation Review Contractor "MSPRP", Medicare Secondary Payer Recovery Portal

Comment: The answers provided are those suggested by CMS and may not reflect the opinion of Angelo Paul Sevarino, Esq. Where deemed appropriate, "Comment" will reflect the opinion of Angelo Paul Sevarino, Esq. This material is offered for general information only. While every effort is made to keep this material current there is no guarantee that the answers reflect current CMS opinion, policy or procedures. The reader should always reference www.cms.gov for the most up to date guidance provided by CMS. Additionally this material is not intended as legal advice. Consultation with an attorney experienced in MSAs is recommended to address individual issues.

Contacting CMS

Q1. How do I contact CMS?

A1. For WCMSA referrals and inquiries:

If the practitioner is in need of general information regarding the WCMSA referral process contact:

  • Medicare - Coordination of Benefits
  • P.O. Box 33847
  • Detroit, MI 48232-5847 800-999-1118

Note: This mailing address is for general information and not for submission of a WCMSA proposal.

If the practitioner has submitted a WCMSA but has not yet received an acknowledgment letter from the COBC contact:

CMS

  • c/o Coordination of Benefits Contractor P.O. Box 33849
  • Detroit, MI 48232-5849
  • Attn: WCMSA Proposal 800-999-1118

If the practitioner has submitted a WCMSA and has received an acknowledgment letter from the COBC contact:

  • MSPRC-NGHP
  • P.O. Box 138832
  • Oklahoma City, OK 73113 866-677-7220

A list of CMS' Regional Offices and the states they service along with contact information can be found at the CMS web site: http://www.cms.gov/RegionalOffices.

If the practitioner cannot get an answer from one of the above CMS may be contacted by mail at the following address:

  • Department of Health & Human Services
  • Centers for Medicare & Medicaid
  • Services 7500 Security Boulevard
  • Baltimore, Maryland 21244-1850

Statutes, Regulations & Memorandums

Q2. What is the Medicare Secondary Payer Act (MSP)?

A2. On 12-5-80 the Omnibus Budget Reconciliation Act of 1980 (OBRA) enacted the Medicare Secondary Payer (MSP) codified in Section 1862(b)(A)(ii) of the Social Security Act (42 U.S.C. §1395y(b)(2), 94 Stat. 2599 , Pub L. No. 96-499, §953; applicable regulations are found at 42 C.F.R. 420 et seq.

Since its inception in 1965 workers' compensation coverage has always been a primary payer to Medicare. The primary purpose of the passage of the MSP was to make Medicare a secondary payer to other insurance in addition to workers' compensation. This included group health plans (whether self-insured or commercial), automobile liability insurance, un/underinsured motorist, no-fault insurance, personal injury protection, homeowner, liability insurance (including self-insurance), product liability and medical malpractice liability.

The two primary players within the MSP are the Coordination of Benefits Contractor or "COBC" and the Medicare Secondary Payer Recovery Contractor or "MSPRC".

The COBC consolidates the activities that identify the group health, workers' compensation or liability benefits available to the Beneficiary, support the collection, management, and reporting of other insurance overage for the beneficiary and coordinate the payment of Medicare submitted medical services or prescription drug bills so as to prevent mistaken payment by Medicare of Medicare benefits. The COBC does not directly process Medicare claims.

The MSP also created the concept of "conditional payments", as well as, Medicare's rights to recovery of such payments. The responsibility for monitoring and resolving conditional payments rests with the MSPRC.

The MSPRC is responsible for any action to recover a mistaken Medicare payment(s). The MSPRC monitors the various payments made to the Beneficiary and issues demand letters (see Q & A 17) for repayment to any parties who may be obligated to repay Medicare e.g., employer, insurer, third party administrator, plan or other plan sponsor. If the MSPRC does not receive repayment or a valid documented defense in response to its inquiry the MSPRC may refer the debt to the Department of the Treasury for the Treasury Offset Program and other cross-servicing activities pursuant to the Debt Collection Improvement Act of 1996 (110 Stat. 1321, Pub l. 104-134, 31 C.F.R. 285).

The essence of the MSP is to prevent the shifting of responsibility for payment of work or accident related medical services and prescription drug charges from a primary payer to Medicare. The MSP provides that Medicare may not make payment on behalf of a Beneficiary for medical services or prescription drug charges where payment has been made or can reasonably be expected to be made promptly under (1) a workers' compensation law or plan of the United States or a State or (2) under a liability policy (including a self-insured plan) or automobile no-fault coverage or (3) group health policy. If one of these primary plans does not pay or cannot be expected to pay promptly Medicare may make the payment "conditionally" (see Q & A 7).

Under the MSP Medicare has a priority right of recovery from the primary payer, as well as, from parties in receipt of third-party payments such as a beneficiary, provider, supplier, physician, attorney, state agency or private insurer pursuant to 42 CFR 411.25(g). This recovery can result in Medicare recovering the entire settlement amount to satisfy its recovery claim.

Medicare benefits are secondary to benefits payable by a primary payer even

if State law or the primary payer states that its benefits are secondary to Medicare benefits or otherwise limits its payments to Medicare beneficiaries.

Medicare regulations specify in great detail the basis for the amount of any Medicare secondary payments. A Medicare secondary payment is the lowest of the actual charge by the supplier, the amount that Medicare would pay if the medical services were not covered by a primary payer, or the higher of the Medicare fee schedule, reasonable charge or other amount payable under Medicare.

Comment: Note that this is not a "super-lien" as some are fond of calling it but rather a "right of recovery". In the former the practitioner would have an obligation to "protect" Medicare's interest. Rather what the law requires is that the practitioner "considers" Medicare's interest. The practitioner's obligation is to protect his or her client's rights.

Q3. What is the SMART Act?

A3. The Strengthening Medicare and Repaying Taxpayers Act (SMART) H.R. 1845 passed in 2012 and was signed by President Obama on 1-10-13. This Act made significant improvements to the Medicare conditional payment reconciliation process and modified certain provisions of the MMSEA (see Q & A 4) reporting law thereby simplifying the current Medicare Secondary Payer Recovery Portal "MSPRP" online portal process (see Q & A 9) or calculating Medicare conditional payment reimbursements making the process more efficient and cost effective.

Comment: The Smart Act references a web portal and suggests the current MSPRP will either be revised or replaced by a new web portal. It is assumed these changes will be integrated in yet to be written regulations.

The SMART Act does NOT impact MSAs as it ONLY applies to Medicare conditional payments and certain provisions of the MMSEA. Some parts of the SMART Act will not be implemented for 18 months. Regulations for implementing the Smart Act have yet to be promulgated.

Chief among the Smart Act's provisions are:

1. Section 201

a. 42 U.S.C. §1395y(b)(2)(B)(vii)((I) will require CMS to issue a final demand for repayment of conditional payments before a settlement, judgment or award in claims involving liability, no-fault or workers' compensation claims. 42 U.S.C. §1395y(b)(2)(B)(vii)(I) further provides that beginning no sooner than 120 days before the reasonably expected date of a settlement, judgment, award, or other payment, the beneficiary or insurance carrier may provide notice of such settlement, judgment, award, or other payment to CMS that a payment is reasonably expected and the expected date of such payment. Comment: this provision does not replace existing reporting obligations by the carrier under the MMSEA.

b. under 42 U.S.C. §1395y(b)(2)(B)(vii)(II):

(aa) CMS is mandated to update the information on claims and payments on the revised or new web portal in as timely a manner as possible but not later than 15 days after the date that a Medicare payment is made. In addition the claim information shall include provider or supplier name, diagnosis codes (if any), dates of service, and conditional payment amounts.

(bb) provide information accurately so as to identify those claims and payments that are related to a potential settlement, judgment, award or other payment

(dd) provide via the revised or new web portal information with an official time and date that the information is transmitted

(ee) the revised or new web portal shall permit the beneficiary (and any authorized representative) and insurance carrier to download a "statement of reimbursement amounts" on payments for claims relating to a potential settlement, judgment, award or other payment. Comment: this will appear to replace the current conditional payment letter and payment summary form (see Q & A 12).

c. 42 U.S.C. §1395y(b)(2)(B)(vii)(III) provides that if an individual or other beneficiary or insurance carrier with the consent of the beneficiary obtains a statement of reimbursement amount from the revised or new web portal during the "protected period" and the related settlement, judgment, award or other payment is made during such period, then the last statement of reimbursement amount that is downloaded during such period and within 3 business days before the date of the settlement, judgment, award or other payment shall constitute the final conditional amount subject to recovery related to such settlement, judgment, award, or other payment.

"Protected period" is defined at 42 U.S.C. § 1395y(b)(2)(B) (vii)(V) as commencing from the date of notice to CMS and extending for 65 days, except that such period may be extended by CMS for a period of an additional 30 days if CMS determines that additional time is required to address claims for which payment has been made. The protected period shall also be extended and shall not include any days for any part of which CMS advises (regulations not yet promulgated) that there was a failure in the claims and payment posting system and the failure was justified due to exceptional circumstances (not yet defined but to be defined in such a manner so that not more than 1% of the repayment obligations would qualify as "exceptional circumstances").

d. Under 42 U.S.C. § 1395y(b)(2)(B)(vii)(IV) the beneficiary and any entity with the consent of the beneficiary, may dispute any entry in the statement of reimbursement amount. The beneficiary or representative must then provide documentation explaining the discrepancy and a proposal to resolve such discrepancy. Within 11 business days after the date of receipt of such documentation CMS shall determine whether there is a reasonable basis to include or remove claims on the statement of reimbursement. If CMS does not make such a determination within the 11 business day period then the proposal to resolve the discrepancy shall be accepted. If CMS determines within such period that there is NOT a reasonable basis to include or remove the claim on the statement of reimbursement, the proposal shall be rejected. If CMS determines within such 11 business day period that there is a reasonable basis to conclude there is a discrepancy then CMS must respond in a timely manner by agreeing to the proposal to resolve the discrepancy or by providing documentation showing with good cause why CMS is not agreeing to such proposal and establishing an alternate discrepancy resolution. In no case shall the process be treated as an appeals process or as establishing a right of appeal for a statement of reimbursement amount and there shall be no administrative or judicial review of CMS' determinations.

d. Establishes a limited right of appeal for insurance companies and the self-insured employer (this limited appeal process does not apply to the beneficiary) should CMS attempt a

recovery claim against a qualifying primary payer. Under 42 U.S.C. 1395y(b)(2)(B)(viii) the Smart Act requires CMS to promulgate regulations establishing a right of appeal and appeals process with respect to any determination for a payment made for an item or service for which CMS is seeking to recover conditional payments from an applicable plan that is a primary plan. The beneficiary shall be notified of the plan's intent to appeal such determination. Note, the deadline to implement this provision can be extended by CMS 1 or more periods of up to 1 year each if extension is necessary to protect patient privacy or protect the integrity of the MSP program.

2. Section 202 of the Act provides in 42 U.S.C. §1395y(b)(2)(B)(ii)(9) commencing in 2014 the establishment an annual (not later than November 15th of each year) minimum liability single threshold (including alleged physical trauma-based incidents but excluding alleged ingestion, implantation, or exposure cases) for Section 111 reporting where the costs to CMS is greater than the recovery. This now creates an exception so that there will no longer by an obligation to repay Medicare under 42 U.S.C. 1395y(b)(2)(B)(ii) or to report under 42 U.S.C. 1395y(b)(8) if a qualifying claim falls below the annual calculated threshold. Comment: this threshold is suppose to reflect the average costs per claim CMS spends on recovery. I suspect it will be relatively low but the Act did not include a fixed threshold number.

3. Section 203 of the Act allows under 42 U.S.C. 1395y(b)(2)(B)(8)(E)(1) a softening of Section 111 penalties giving CMS discretion when it issues such penalties. Now CMS may (as oppose to shall) impose a penalty of up to $1000 per day per claim rather than the current fixed $1000 penalty. Within 60 days of passage of the Act CMS must solicit public input for regulations addressing specification of practices for which sanctions will and will not be imposed. The Act does not provide for a deadline when these proposed regulations are to be promulgated.

4. Section 204 of the Act is effective eighteen (18) months after the passage of the Act 42 U.S.C. 1395y(b)(8)(B) makes the reporting of a beneficiary's SSN and/or HICN optional for Section 111 Reporting.

Section 205 of the Act is effective six (6) months after the passage of the Act and establishes under 42 U.S.C. §1395y(b)(2)(B)(iii) a 3 year statute of limitations on recovery efforts by CMS. The statute runs from 3 years after the date of the receipt via the MMSEA of notice of a settlement, judgment, award, or other payment.

Q4. What is the Medicare, Medicaid, and SCHIP Extension Act (MMSEA) of 2007?

A4. On December 29, 2007, former President George W. Bush signed into law the Medicare, Medicaid and SCHIP Extension Act of 2007, or "MMSEA"(PL 110-173). The MMSEA amends the Medicare Secondary Payer (MSP) provisions of the Social Security Act (Section 1862(b) of the Social Security Act; 42 U.S.C. 1395y(b)) to provide for mandatory reporting for group health plan arrangements, liability insurance (including self-insurance), no-fault insurance, and workers' compensation.

The MMSEA creates Responsible Reporting Entities or "RRE" . These entities include all liability insurers, self-insurers, no fault insurers , group health insurers and workers' compensation insurers. RREs are required to determine the Medicare eligibility status for the beneficiary and to report claim payments and settlements/judgments which involve a Medicare beneficiary.

Comment: The MMSEA is an electronic claim reporting statute which targets insurance carriers and self-insured entities. It imposes no reporting requirements upon the beneficiary or their counsel or upon the defense counsel AND IT DOES NOT REQUIRE USE OF MEDICARE SET-ASIDES IN EITHER WORKERS' COMPENSATION OR LIABILITY CASES. If the reader would like more information about the new MMSEA Section 111 requirements, please visit www.cms.hhs.gov/MandatoryInsRep.

The MMSEA requires group health plan insurers, third party administrators, plan administrators, fiduciaries of self-insured/self-administered group health plans known as "GHP" under 42 U.S.C. §1395y(b)(7), and liability insurers (including self-insurers), no-fault insurers and workers' compensation insurers known as "NGRP" under 42 U.S.C. §1395y(b)(8), as directed by the Secretary of the Department of Health and Human Services, inter alia, to:

(a) determine whether a beneficiary is entitled to Medicare benefits on any basis (disability, retirement, survivor benefits etc...), and if so

(b) to report information that the Secretary requires for purposes of coordination of benefits between Medicare and other insurance and/or workers' compensation benefits.

Pursuant to 42 U.S.C. §1395y(b)(8)(E) failure to comply with these provisions will subject the carrier to a possible $1000 penalty for each day of noncompliance per Beneficiary.

Comment: Section 203 of the SMART Act allows under 42 U.S.C. §1395y(b)(2)(B)(8)(E)(1) a softening of Section 111 penalties giving CMS discretion when it issues such penalties. Under this provision CMS may (as oppose to shall) impose a penalty of up to $1000 per day per claim rather than the current fixed $1000 penalty. Within 60 days of passage CMS must solicit public input for regulations addressing specification of practices for which sanctions will and will not be imposed. The Act does not provide for a deadline when these proposed regulations are to be promulgated.

The MMSEA effective date for workers' compensation and group health carrier's reporting of claims is 1-1-09. The MMSEA effective date for liability and no-fault reporting of claims has been a moving target with varying reporting dates now extended between January 1, 2012 and January 1, 2013 depending on the total payment obligation or "TPOC".TPOC refers to the dollar amount of a settlement, judgment, award, or other payment. It generally reflects a one-time or lump sum payment of a settlement, judgment, award or other payment intended to resolve/partially resolve a claim. It is the dollar amount of the total payment obligation to or on behalf of the beneficiary in connection with the settlement, judgment, award or other payment and includes individual reimbursements paid for specific medical claims. The TPOC date is not

necessarily the payment date or check issue date but rather the date the payment obligation was established (the date the obligation is signed if there is a written agreement unless court approval is required). If court approval is required it is the later of the date the release is signed or the date of court approval of a settlement or date of judgment. It there is no written agreement it is the date the payment (or first payment if there will be multiple payments) is issued.

Comment: Section 202 of the SMART Act provides in 42 U.S.C. §1395y(b)(2)(B)(ii)(9) commencing in 2014 the establishment an annual (not later than November 15th of each year) minimum liability single threshold (including alleged physical trauma-based incidents but excluding alleged ingestion, implantation, or exposure cases) for Section 111 reporting where the costs to CMS is greater than the recovery. This now creates an exception so that there will no longer by an obligation to repay Medicare under 42 U.S.C. §1395y(b)(2)(B)(ii) or to report under 42 U.S.C. §1395y(b)(8) if a qualifying claim falls below the annual calculated threshold. This threshold is suppose to reflect the average cost per claim CMS spends on recovery.

Q5. Has CMS issued any guidelines for MSAs?

A5. Yes. Since 2001 a number of Regional Administrative Letters or "memorandums" have been released explaining The Centers for Medicare & Medicaid Services (CMS) policy and practice as it relates to the establishment, valuation and approval process for WCMSAs. The vast majority of these deal exclusively with workers' compensation claims. The Stalcup handout (#17) and Release (#19) are not a Regional Administrative Letters but deal directly with liability claims. The original memorandums may be viewed by logging onto CMS' web site: http://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Workers-Compensation-Medicare-Set-Aside-Arrangements/WCMSA-Overview.html and clicking "Memorandums".

  1. Patel Memorandum dated July 23, 2001 entitled "Workers' Compensation: Commutation of Future Benefits" (Parashar B. Patel, Deputy Director Purchasing Policy Group Center for Medicare Management)
  2. Olenick Memorandum dated October 15, 2001 entitled "Mr. Michael G. Dileo's September 27, 2001 letter concerning Workers' Compensation Cases" (Paul J. Olenick, Director, Division of Integrated Delivery Systems)
  3. Grissom Memorandum dated April 22, 2003 entitled "Medicare Secondary Payer Workers' Compensation (WC) Frequently Asked Questions" (Thomas L. Grissom, Director Center for Medicare Management)
  4. Grissom Memorandum dated May 23, 2003 entitled "Medicare Secondary Payer Workers' Compensation (WC) Additional Frequently Asked Questions" (Thomas L. Grissom, Director Center for Medicare Management)
  5. Herb Huhn Memorandum dated May 7, 2004 entitled "Medicare Secondary Payer-Workers' Compensation (WC) INFORMATION" (Herb Kuhn, Director Center for Medicare Management)
  6. Walters Memorandum dated October 15, 2004 entitled "Medicare Secondary Payer (MSP)-Workers' Compensation (WC) Additional Frequently Asked Questions". (Gerald Walters, Director Financial Services Group, Office of Financial Management)
  7. Walters Memorandum dated July 11, 2005 entitled "Medicare Secondary Payer (MSP)-Workers' Compensation (WC) Additional Frequently Asked Questions" (Gerald Walters, Director Financial Services Group, Office of Financial Management)
  8. Walters Memorandum dated December 30, 2005 entitled "Part D and Workers' Compensation Medicare Set-aside Arrangements (WCMSAs) Questions and Answers" (Gerald Walters, Director Financial Services Group, Office of Financial Management)
  9. Walters Memorandum dated April 25, 2006 entitled "Workers Compensation Medicare Set-Aside Arrangements (WCMSAs) and Revision of the Low Dollar Threshold for Medicare Beneficiaries" (Gerald Walters, Director Financial Services Group, Office of Financial Management)
  10. Walters Memorandum dated July 24, 2006 entitled "Questions and Answers for Part D and Workers' Compensation Medicare Set-aside Arrangements" (Gerald Walters, Director Financial Services Group, Office of Financial Management)
  11. Walters Memorandum dated May 20, 2008 entitled "Medicare Secondary Payer - Workers' Compensation - INFORMATION" (Gerald Walters, Director Financial Services Group, Office of Financial Management)
  12. Walters Memorandum dated August 25, 2008 entitled "Medicare Secondary Payer - Workers' Compensation - INFORMATION" (Gerald Walters, Director Financial Services Group, Office of Financial Management)
  13. Walters Memorandum dated April 3, 2009 entitled "Medicare Secondary Payer - Workers' Compensation - INFORMATION" (Gerald Walters, Director Financial Services Group, Office of Financial Management)
  14. Walters Memorandum dated May 14, 2010 entitled "Medicare Secondary Payer - Workers' Compensation -INFORMATION" (Gerald Walters, Director Financial Services Group, Office of Financial Management)
  15. Walters Memorandum dated June 8, 2010 entitled "Medicare Secondary Payer - Workers' Compensation -INFORMATION" (Gerald Walters, Director Financial Services Group, Office of Financial Management)
  16. Benson Memorandum dated May 11, 2011 entitled "Medicare Secondary Payer - Workers' Compensation - INFORMATION" (Charlotte Benson, Acting Director, Financial Services Group, Office of Financial Management)
  17. Stalcup handout dated May 25, 2011(Sally Stalcup, MSP Regional Coordinator, Division of Financial Management and Fee for Service Operations)
  18. Benson Memorandum dated September 29, 2011 entitled "Medicare Secondary Payer - Liability Insurance (Including Self-Insurance) Settlements, Judgments, Awards, or Other Payments and Future Medicals -INFORMATION" (Charlotte Benson, Acting Director, Financial Services Group, Office of Financial Management)
  19. "Liability Insurance (Including Self-Insurance): Exposure, Ingestion, and Implantation Issues and December 5, 1980 (12/5/1980)" dated October 11, 2011, Release by Office of Financial Management/Financial Services Group
  20. Benson Memorandum dated August 1, 2012 entitled "Impact of the Removal of coverage of Transcutaneous Electrical Nerve Stimulation (TENS) Units for Chronic Low Back Pain (CLBP) on Workers' Compensation Medicare Set-Aide(sp) Arrangement (WCMSA) proposals - INFORMATION" (Charlotte Benson, Acting Director, Financial Services Group, Office of Financial Management)
  21. Tudor Memorandum dated October 2, 2012 entitled "Transition to Part D Coverage of Benzodiazepines and Barbiturates beginning in 2013" (Cynthia G. Tudor, Director, Medicare Drug Benefit and C & D Data Group)

In addition to these memorandums, handout and release CMS has hosted open forum conference calls allowing practitioners to participate along with CMS management and staff in an informal "Q & A" format aimed at providing the practitioner with a better understanding of CMS' requirements for the need to set up MSAs and the process by which that is accomplished.

Q6. What authority does CMS cite for the establishment of a MSA?

Comment: Because the vast majority of existing regulations apply only to workers' compensation claims there is great confusion as to whether or not there is any requirement for the use of the LMSA. Opponents of this view suggest (a) there is absolutely nothing in statutes or regulations that mandate any personal injury settlement proceeds be "set-aside" for future medical services or prescription drug charges and (b) 42 U.S.C.§1395y(b)(2)(B)(ii) does not apply to post-settlement/judgment medical expenses in liability cases. They argue that the reference to the term "reimburse" as found in 42 U.S.C. §1395y(b)(2)(B)(ii) makes it a subrogation statute for past or current payments and not to future payments. Those that advocate for this position suggest that once the case is closed, either by settlement or judgment, there is no longer a "primary" payer e.g., liability policy from which payment can be made or expected to be paid and therefore 42 U.S.C. §1395y(b)(2)(B)(ii) is not applicable. For a further discussion LMSAs see Q & A 34 & 35.

Comment: The statutes and regulations discussed herein do not constitute "legal authority" to mandate use of either a WCMSA or LMSA. Neither do these statutes and regulations require submission of a WCMSA or LMSA to CMS for prior approval. The submission and approval by CMS of a MSA is entirely optional. What they do reinforce is that Medicare is statutorily secondary to any available primary payer policy, whether that policy is a workers' compensation, liability or group health policy and that if a settlement "shifts" the primary payer status from a workers' compensation, liability or group health carrier to Medicare and Medicare makes a "conditional payment" CMS has a priority right of recovery against any entity (beneficiary, provider, supplier physician, attorney, state agency or private insurer) that received a portion of the settlement proceeds either directly or indirectly. Medicare may also refuse to pay for future medical services or prescription drug charges related to the injury or illness until the entire settlement is exhausted. That being said the existence of regulations and statues since 1980 clearly provide that Medicare is a secondary payer to workers' compensation, liability and group health policies and clearly provides Medicare the authority to deny payment when there is other valid and collectable coverage.

A6. On 12-5-80 the Omnibus Budget Reconciliation Act of 1980 (94 Stat. 2599 , Pub L. No. 96-499, §953; applicable regulations are found at 42 C.F.R. § 420 et seq.) enacted the Medicare Secondary Payer (MSP) Program codified in Section 1862(b)(A)(ii) of the Social Security Act [42 U.S.C. §1395y(b)(2)].

As discussed in Q & A 2 the essence of the MSP is to prevent the shifting of responsibility for payment of work or accident related medical services and prescription drug charges from a primary payer to Medicare.

42 U.S.C. §1395y(b)(2)(A)(I) and (ii) provides:

Payment under this subchapter may not be made, except as provided in subparagraph (B), with respect to any item or service to the extent that

(I) payment has been made, or can reasonably be expected to be made, with respect to the item or service as required under paragraph (1), or

(ii) payment has been made, or can reasonably be expected to be made under a workers' compensation law or plan of the United States or a State or under an automobile or liability insurance policy or plan (including a self-insured plan) or under no fault.

42 U.S.C. §1395y(b)(2)(B)(ii) provides:

A primary plan, and an entity that receives payment from a primary plan, shall reimburse

Medicare for any payment made by the United States under this subchapter with respect to an item or service if it is demonstrated that such primary plan has or had a responsibility to make payment with respect to such item or service. A primary plan's responsibility for such payment may be demonstrated by a judgment, a payment conditioned upon the recipient's compromise, waiver, or release (whether or not there is a determination or admission of liability) of payment for items or services included in a claim against the primary plan or the primary plan's insured, or by other means.(emphasis added)

The MSP provides that Medicare may not make payment on behalf of a beneficiary for medical services or prescription drug charges where payment has been made or can reasonably be expected to be made promptly (42 U.S.C. §1395y(b)(2)(B)(I), 42 C.F.R. 411.21 (workers' compensation), 42 C.F.R. 411.50 (liability), group health policy(42 U.S.C. §1395y(b)(2)(A)(ii), 42 C.F.R. 411.20(2).

Medicare regulations at 42 CFR 411.46 (workers' compensation) states that:

"If a lump-sum compensation award stipulates that the amount paid is intended to compensate the individual for all future medical expenses required because of the work-related injury or disease, Medicare payments for such services are excluded until medical expenses related to the injury or disease equal the amount of the lump-sum payment."

42 C.F.R. 411.46 therefore requires Medicare to exclude its payments when an individual receives a workers' compensation settlement award that is intended to compensate the beneficiary for future medical expenses required because of a work-related injury or disease. That is, Medicare must not pay for an individual's medical services or prescription drug when that individual received a workers' compensation settlement, judgment or award that includes funds for future medical services or prescription drug charges, until all such funds are properly expended. Section 1862(b)(2) and 42 CFR 411.46 do not explicitly require individuals who are not yet Medicare beneficiaries to consult with CMS prior to settling their workers' compensation cases. However, Section 1862(b)(2) and 42 CFR. 411.46 do require Medicare to exclude its payments once that eligible beneficiary actually becomes a Medicare entitled beneficiary.

Under the MSP Medicare has a priority right of recovery from the primary payer, as well as, from parties in receipt of third-party payments such as a beneficiary, provider, supplier, physician, attorney, state agency or private insurer (42 U.S.C. §1395y(b)(2)(B)(ii), 42 C.F.R. 411.25(g). This recovery can result in Medicare recovering the entire settlement amount to satisfy its recovery claim.

In addition the Medicare manuals (§3407.8 of the MIM, §2370.8 of the MCM) state:

"When a beneficiary accepts a lump-sum payment that represents a commutation [Q&A 25] of all future medical expenses and disability benefits, and the lump-sum amount is reasonable considering the future medical services that can be anticipated for the condition, Medicare does not pay for any items or services directly related to the injury or illness for which the commutation lump-sum is made, until the beneficiary presents medical bills related to the injury equal to the total amount of the lump-sum settlement allocated to medical treatment."

Comment: Accordingly, it is in the beneficiary's best interest to "consider" Medicare's interest well before the actual settlement date even though the beneficiary may not actually be a Medicare beneficiary at the time of settlement. Probably the most accepted method in which to document Medicare's interests have been considered in a settlement is the utilization of a MSA. Remember this is an optional process and there could be alternative methods utilized to document the settlement "considers" Medicare's interests. Beyond that, whether to utilize a MSA to protect the beneficiary's future entitlement to Medicare coverage is totally independent of the resolution of the question as to whether the MSA is ever actually referred to CMS. See Q & A 47 for a discussion on CMS review thresholds.

Medicare Secondary Payer & Medicare Conditional Payments

Q7. What is a "conditional payment?

A7. A "conditional payment" means Medicare made a payment for which another payer is claimed to be responsible. Conditional payments are payments made for Medicare covered services or portions of services that are not paid under other coverage that is or was primary to Medicare and for which another payer is claimed to be responsible (42 C.F.R. 411.21(workers' compensation), 42 C.F.R. 411.52 (liability claims)).

Medicare may make a "conditional payment" if an otherwise primary payer (liability, no-fault, group insurance or workers' compensation policy) does not pay or cannot be expected to be pay promptly (42 U.S.C. §1395y(b)(2)(B)(I), 42 C.F.R. 411.21, 42 C.F.R. 411.50. Promptly is generally defined to mean payment within 120 days after receipt of the claim. These conditional payments are made subject to being repaid to Medicare. A primary plan and any entity that receives payment from a primary plan shall reimburse Medicare fo

Accordingly, where the beneficiary is already Medicare entitled, it is always, prudent in the settlement of a workers' compensation or personal injury liability claim where another insurer may be or is primary for the practitioner to make a determination as to whether a Medicare reimbursement claim exists due to conditional payments being made. This should be done early in the process since reconciliation of Medicare conditional payments does take time to resolve.

Comment: The beneficiary always retains repayment obligations to Medicare and counsel for the beneficiary has the ethical obligation to inform the beneficiary of his or her repayment obligations including the possibility that failure by the beneficiary to reimburse Medicare for conditional payments may subject the beneficiary to collection action being brought against the beneficiary or interruption of beneficiary's Social Security Disability or Medicare benefits if Medicare's recovery claim is not paid. This should be documented in the practitioner's file by use of an Informed Consent type document which memorializes the client's understanding of his or her obligations and responsibilities.

Q8. How does the practitioner investigate whether there are Medicare Conditional Payments?

A8. Contacting the Coordination of Benefits Contractor (COBC) is always the first step in the process. The COBC for all workers' compensation and liability claims can be contacted at:

  • Medicare - Coordination of Benefits
  • P.O. Box 33847
  • Detroit, MI 48232-5847 1-800-999-1118

The initial Medicare conditional medical payment inquiry can be made by telephone, mail or fax although telephone reporting is highly recommended as it will save a great deal of time. The practitioner should first call the COBC at 1-800-999-1118 (Fax: 1-646-488-6762) and request that they open a file (known as a "common working file") under the client's Medicare or HICN number. Regardless of which method is used to make the initial request use of the proper authorizations is required which authorization should already be in the practitioner's file. See (Q & A 15) for discussion regarding the "Proof of Representation" authorization and (Q&A 16) for a discussion regarding the "Consent to Release" authorization.

Comment: Information regarding conditional payment information involving a workers' compensation carrier or no-fault insurer may be had without a Consent to Release authorization. However, information will not be provided to a liability insurer, including a self-insurance entity, without a proper Consent to Release document.

The practitioner will want to insure that the following information is available to initiate the process:

  1. Beneficiary name, address, telephone number, SSN/HICN, and date of birth
  2. Beneficiary's attorney's name, address and telephone number
  3. Employer (WC claims only) name and address.
  4. Insurer's name, address, telephone number and claim number
  5. Insurer's attorney's name, address and telephone number
  6. Date of injury
  7. Body part(s)/system(s) related to the incident
  8. Related ICD-9/10 codes (preferred but not mandatory)
  9. Description of how injury occurred or illness was contracted

Detailed reporting instructions can be found by clicking the "Coordination of Benefits Recovery" tab at http://www.cms.gov/COBGeneralInformation.

Either a Proof of Representation ( see Q & A 15) or Consent To Release (see Q & A 16) authorization should be in the practitioner's file prior to reporting the claim to the COBC.

Upon receipt of the request the COBC will reference it to the beneficiary's Medicare record and assign the case to the MSPRC (see Q & A 10). Within 30 days the COBC is to release a confirmation of receipt of claim letter to the beneficiary and any other entity that has a Consent To Release or Proof of Representation authorization on file.

Additionally, the COBC will send the beneficiary and any individual listed on the Consent to Release or Proof of Representation authorization a second letter containing the Secondary Claim Development (SCD) Questionnaire which is a MSP questionnaire that is sent to obtain information about other potential primary payers.

Effective 7-2-12 CMS implemented a new web based tool designed to assist in the resolution of workers' compensation, liability and no-fault recovery cases. This new tool is known as The Medicare Secondary Payer Recovery Portal or "MSPRP".

Q9. What is the Medicare Secondary Payer Reporting Portal "MSPRP" ?

A9. Comment: the practitioner cannot initially request a file be opened through the MSPRP as this initial request to open the file must still be made to the COBC either by telephone or mail. Also note that the MSPRP is not the same web portal referenced in the SMART Act (see Q&A 3).

Once the practitioner has the initial CPL with the 15 digit Case Identification Number (see Q & A 11) the practitioner may review updated conditional payment amounts through the MSPRP.

In order to use the MSPRP the practitioner must (1) first register at http://www.cob.coms.hhs.gov/MSPRP/. The registration process is relatively simple; however, the complete process will take approximately 30-45 days so that the CMS vetting process can be completed and (2) have the 15 digit "Case Identification Number" assigned by the COBC.

The MSPRP provides the practitioner with the ability to access and update certain case specific information online. What use to require written correspondence or telephone calls to the MSPRC can now be done through the portal. The following can be completed on the MSPRP:

1. Upload or view Proof of Representation or Consent to Release authorizations

2. Request Medicare conditional payment information such as a copy of the current conditional payment letter, current Consent to Release, current Proof of Representation and updated conditional payment amounts.

3. Review Medicare payment information and if necessary dispute unrelated payments. Presently the MSPRP has limited information e.g. it does not provide ICD-9 codes or provider names making reconciliation of unrelated entries difficult. This is being addressed under Section 201 of The SMART Act (see Q & A 3). The practitioner can however request via the MSPRP a current CPL with payment summary form which will be mailed to the practitioner.

4. Upload case settlement documentation similar to that found in the Final Settlement Detail Document (see Q & A 17). However, the practitioner cannot compromise the Medicare repayment amount claimed, request a waiver or appeal a final demand from the MSPRC.

Q10. Who is the Medicare Secondary Payer Recovery Contractor or "MSPRC"?

A10. Under the existing system the investigation process is commenced with the COBC who then assigns it to the MSPRC who then administers the recovery process. The MSPRC's purpose is to protect the Medicare trust fund by recovering payments Medicare has made when another entity had primary payment responsibility. The MSPRC accomplishes this goal under the authority of the MSP.

The MSPRC identifies and recovers Medicare payments that should have been paid by another entity as the primary payer either under a Group Health Plan (GHP) or as part of a Non-Group Health Plan (NGHP) claim which includes, but is not limited to, liability insurance (including self-insurance), No-Fault insurance and Workers' compensation insurance. The MSPRC does not pursue supplier, physician or other provider recovery.

Unlike the COBC, the MSPRC has specific responsibility for the collection of applicable conditional payment information and for distribution of that information to the beneficiary and to any individuals listed on the Proof of Representation or Consent to Release authorizations.

The MSPRC can be contacted at the following mailing addresses:

For Non-Group carriers (NGHP) such as liability or no-fault insurance, automobile liability, uninsured or underinsured motorists, homeowners, malpractice, produce liability and general casualty insurance:

  • MSPRC-NGHP
  • PO Box 138832
  • Oklahoma City, OK 73113

For group health carriers (GHP):

  • MSPRC GHP
  • PO Box 138856
  • Oklahoma City, OK 73113

The MSPRC, regardless of claim type, may be contacted at 1-866-677-7220, 1-866-677-7294 (TTY/TTD), 1-405-869-3309(fax) or by the web at www.msprc.info. As a general rule the caller will leave his or her name to schedule a call back time.

As of 10-1-11 the MSPRC contractor for both NGHP and GHP claims is Group Health Incorporated (who has also been the Coordinator of Benefits Contractor or "COBC" since 1999). The previous MSPRC contractor was Chickasaw Nation Industries, Inc in Oklahoma but due to numerous delays in processing conditional payment requests their contract was not renewed.

CMS has announced that it will eventually merge the COBC and MSPRC functions into a new entity known as the Medicare Secondary Payer Integration Contractor or "MSPIC". By creating the MSPIC it is hoped a single point of contact regarding conditional payment information and reconciliation will speed up the process. To date this consolidation has not been accomplished.

Q11. What is the "Medicare Secondary Payer Rights and Responsibilities Letter"?

A11. Effective for cases established on or after October 1, 2009, the "Right to Recovery Letter" was issued by the COBC when a claim for liability insurance (including self-insurance), no-fault insurance, or workers' compensation is reported to the COBC. As of July 2011 the COBC no longer issues this letter and it is now issued by the MSPRC. The letter was renamed the "Medicare Secondary Payer Rights and Responsibilities Letter". The letter has been revised to omit the statement made in earlier letters that Medicare should be repaid before funds are disbursed for other purposes. It also adds a statement that Medicare will not take any collection action if an appeal or waiver request is pending.

Normally within 45 days of receipt of the initial COBC acknowledgment letter the practitioner will be sent a "Medicare Secondary Payer Rights and Responsibility Letter" and brochure by the MSPRC.

The Medicare Secondary Payer Rights and Responsibility Letter provides general information on Medicare's and beneficiary's respective rights, as well as, other parties responsibilities. The beneficiary and any authorized individuals will receive this letter. It does not provide any conditional payment information. At this point the MSPRC begins the process of assembling interim conditional payment information.

This letter also provides the parties who have liability claims information about the (a) $300 threshold, (b) fixed percentage option for repayment and (c) self calculating option. These options only apply to liability cases and are discussed in depth in Chapter 5 of the writer's text entitled "Practitioner's Reference Manual To Settlements, Offsets and Set-asides (see the introduction to this Q&A for information about the text). The letter also contains the 15 digit "Case Identification Number" which will be necessary to have in order to access the MSPRP web portal, as well as, a Correspondence Cover Sheet with a specifically assigned bar code unique to the beneficiary's file. Any written correspondence or information the practitioner submits to the MSPRC (other than what is inputted though the MSPRP) should utilize the cover sheet.

Once the practitioner receives this letter the practitioner should send the MSPRC a letter enclosing the appropriate authorization and updating as needed items 1-9 referenced in (see Q & A 8).

Q12. What is the Conditional Payment Letter (CPL) and Payment Summary Form(PSF)?

A12. Effective October 1, 2009, the MSPRC will issue information concerning interim conditional payment amounts automatically (that is, without receiving a request for such information) as soon as an interim conditional payment amount is available.

Once the MSPRC has completed its initial investigation, but no later than 65 days after issuance of the Medicare Secondary Payer Rights and Responsibilities Letter, the MSPRC is suppose to provide either:

(a) the initial Conditional Payment Letter or "CPL" along with the Payment Summary Form or "PSF". The CPL provides a description of the responsibility the beneficiary has to Medicare regarding repayment. The CPL also identifies the total dollar amount to date of claims submitted to Medicare along with the total dollar amount constituting what the MSPRC believes constitutes the Medicare conditional recovery amount. This is not a demand for payment and no payment is due at this time.

The PSF individually lists each payment claimed as recoverable including provider name, diagnosis code, period the payment covers, total charge, reimbursed amount and claimed conditional payment amount.

The PSF (although not as detailed) is also available via the MSPRP or from www.mymedicare.gov and clicking the "MyMSP" tab. To use this website it is necessary that the beneficiary register on the site and obtain a user password. In order for the practitioner to utilize this site the beneficiary must provide the practitioner with this password. This website will display information such as case type, conditional payments, total charges and the date the case was last updated but generally only does so for the last 18-24 months. The information from this website will be updated weekly with any changes or newly processed claims. Comment: "MyMSP" is not an official listing of Medicare claimed conditional payments but has quick and easy access for what can be best described as an estimated Medicare conditional payment claim.

Its use does not constitute a substitution for reporting the claim to the COBC and completing the Medicare conditional payment reporting process.

(b) send a confirmation letter along with a blank Final Detail Settlement Document (see Q & A 17) that no Medicare conditional payments have been made at the present time. Note that even if the MSPRC issues a confirmation that no Medicare conditional payments have been made this will NOT be finalized until such time as the Final Demand Letter is filed (see Q & A 18).

The MSPRC will issue one or more CPL/PSFs (depending on the number of Part A and Part B carriers the MSPRC must contact) which will list the amount "paid" for each PSF entry. This will differ from the amount a medical vendor may in fact have billed or what the medical vendor's plan may" allow" or "reimburse" under its contract provisions.

These CPL/PSFs are advisory only and are subject to change as the MSPRC continues to investigate the conditional payments. The CPL is not a request for payment, rather the CPL/PSF provides a currently available itemized listing of Medicare conditional payments.

Once the practitioner has the initial CPL with the 15 digit Case Identification Number the practitioner may review updated conditional payment amounts through the MSPRP.

Note that the MSPRC presently does not include Part C (Medicare Advantage Plans) or Part D (prescription drug) payments in the CPL/PSF and does not seek recovery for either Part C or Part D payments made by a private insurance company. Keep in mind that private carriers administer Part C and D plan benefits and may allege a similar conditional payment lien.

Comment: Presently there is a split in the Federal District courts as to whether these private carriers who are administering Medicare Part C or D plans have such a lien. For a further discussion the reader is directed to Chapter 5 of the writer's text, "Practitioner's Reference Manual to Settlements, Offsets and Set-asides" discussed in the introduction of this Q & A.

Once the CPLs are issued the practitioner can commence the reconciliation process of those items shown on the PSF.

This is an on-going process which, depending on the degree of dispute as to an entry(s) on the PSF may take a period of time to resolve. This process should start at least 6 months before the anticipated settlement date or trial.

Q13. What is the Conditional Payment Notice (CPN)?

A13. What happens if MSPRC receives notification via the MMSEA Section 111 reporting process that a settlement, judgment, award or other payment has already occurred?

In this situation a "Conditional Payment Notice" or "CPN" is issued in lieu of the CPL. The CPN provides conditional payment information AND advises the beneficiary what action must be taken. The CPN is issued because the MSPRC has been notified of a settlement, judgment, award or other payment thru the MMSEA Section 111 reporting process rather than from the beneficiary or beneficiary's representative.

The CPN allows for review of the conditional payment information in a similar vein as with the CPL. However, unlike a CPL, if there is a claim payment on the CPN not related to the case being reported normal dispute proceedings within a condensed time frame are to be followed.

The MSPRC will allow up to 30 days for a response to a CPN and the response must include the following information (unless already submitted);

1. All proof of representation documents

2. Proof of any items and/or services that are not related to the reported claim

3. All settlement documentation

4. Itemization of any procurement costs and fees paid by the beneficiary

5.Documentation of any additional or pending settlement, judgment, award or other payment related to the same incident

Note that like a CPL, conditional payments may increase after the issuance of a CPN if Medicare paid for additional items and or services related to the claim.

If a response is received within the 30 day window the MSPRC will review it and issue a Final Demand Letter (see Q & A 18). If a response is not received within the 30 day window MSPRC will issue a Final Demand Letter (Q11) requesting repayment of all conditional payments related to the reported case without proportionate reduction for procurement fees or costs.

Q14. How are conditional payment information updated?

A14. Unless an update request for conditional payment information is received updated CPL amounts are generally unavailable until at least 90 days after the initial CPL is issued. CMS' systems retrieve additional paid claims for each established case once every 90 days. The updated CPL information will appear automatically on the beneficiary's "MyMSP" tab of the http://www.mymedicare.gov. website and is available from the MSPRP. However, any final settlement, judgment, award or other payment that is reached should be reported as soon as possible so that the MSPRC can take steps to expedite a Final Demand Letter (Q & A 18).

Q15. What is the "Proof of Representation" authorization?

A15. This is the form wherein the beneficiary has authorized the individual or entity (including an attorney) to act on the beneficiary's behalf in dealing with the MSPRC. The representative has no independent standing, but may receive from the MSPRC including responding to requests from the MSPRC, submit information/requests on behalf of the beneficiary to the MSPRC, receiving a copy of the Final Demand Letter if Medicare has a recovery claim, and filing an appeal with the MSPRC (if appropriate). Under these circumstances, the exchange of information is a two way street. The representative may provide necessary information to or interact with the MSPRC, on behalf of the beneficiary, in order to resolve Medicare’s Recovery Claim. Along with the beneficiary’s signature the representative must sign and date the Proof of Representation authorization to confirm the representative has agreed to represent the beneficiary.

Comment: Should counsel for the beneficiary allow or refer resolution of Medicare conditional payments with another attorney or entity who has been provided a Proof of Representation then counsel should instruct the holder of the Proof of Representation to provide copies of all correspondence between the holder of the Proof of Representation and the MSPRC so that the beneficiary's attorney is kept abreast of the negotiations with the MSPRC on the resolution of these conditional payments.

Q16. What is the "Consent To Release" authorization?

A16. This is the form wherein the beneficiary has authorized an individual or entity to receive certain information from the COBC, MSPRC or WCRC for a limited period of time. The release does not give the individual or entity the authority to act on behalf of the beneficiary. Under these circumstances, the exchange of information is a one-way street. The beneficiary has authorized the CMS, including the MSPRC, to provide privacy protected data to the specified individual/entity, BUT this does not authorize the individual/entity requesting information to act on behalf of/make decisions on behalf of the beneficiary. If the Consent To Release is not signed by the beneficiary applicable court papers must also be submitted e.g. guardian, power of attorney etc....

Q17. What is the "Final Settlement Detail Document"?

A17. Once the settlement has been finalized the "Final Settlement Detail Document" is prepared and sent to the MSPRC or uploaded from the MSPRP. Note that for automobile no-fault claims the form is labeled "No Fault Case Closure Detail Document".

The Final Settlement Detail Document includes the (1) total amount of the settlement, (2) in the case of a liability claim the amount, if any, of any medical payment, PIP, or other no-fault benefits recovered, (3) attorney fees, (4) itemization of procurement costs and (5) date of settlement. It is a good practice to attach a copy of the settlement document or judgment to the Final Settlement Detail Document.

Note, the practitioner does not submit payment of Medicare conditional payments at this time. Only after the settlement has been approved or a judgment entered and the Final Settlement Detail Document is received by the MSPRC will the MSPRC finalize its recovery claim and issue its Final Demand Letter(see Q & A 18). Only upon receipt of the Final Demand Letter can the practitioner know the actual final repayment amount claimed by the MSPRC. The Final Demand Letter will indicate the amount of recoupment MSPRC is seeking from the settlement, as well as, advising the beneficiary of rights to request a waiver or appeal.

This presents obvious problems for the practitioner since the settlement assumes Medicare conditional payments as advised by MSPRC. Should the practitioner later be advised that the conditional payments are more than previously reported the practitioner may be personally liable for the difference should the beneficiary not have funds available. It is therefore recommended that full settlement proceeds not be disbursement until after the Final Demand Letter has been received, any appeals filed with the MSPRC concluded and the practitioner has received a release from the MSPRC indicating all claims for recovery have been reconciled.

This means the practitioner must advise the beneficiary that the practitioner will not be able to guarantee what the actual final Medicare conditional payment recovery amount will be at the time of settlement. Comment: Assuming the practitioner has completed a bona fide good faith effort to identify those PSF entries that are related to the work or accident date of injury it is suggested that the practitioner retain in the practitioner's IOLTA or client's fund at least an additional 25% of the amount indicted in the Final Settlement Detail Document until the Final Demand Letter is received from MSPRC.

The Final Settlement Detail Documents is sent to:

For Workers' compensation, liability and no-fault, send to:

  • MSPRC-NGHP
  • PO Box 138832
  • Oklahoma City, OK 73113

For Group health plans, send to:

  • MSPRC-GHP
  • PO Box 138856
  • Oklahoma City, OK 73113

The MSPRC may be contacted by telephone at:

  • Tele: 1-866-677-7220
  • TTY/TTD: 1-866-677-7294
  • Fax: 405-869-3309

Upon receipt MSPRC will send the practitioner a "Final Demand Letter"

Q18. What is the "Final Demand Letter"?

A18. Upon receipt of the Final Settlement Detail Document MSPRC will either send the practitioner a "Final Demand Letter" or a letter indicating no conditional payments were made and their file is closed. As a general rule the MSPRC has 35 days to issue the Final Demand Letter. If the practitioner should not receive this letter within the 35 day period the practitioner should call the MSPRC and inquire.

The Final Demand Letter will indicate the amount of recoupment MSPRC is seeking from the settlement, provide a notice that payment is due within 60 days, and provide notice of penalties and interest of 11% will accrue if payment is delayed, as well as, collection efforts and appeal/waiver options. MSPRC will also advise the beneficiary that should the Medicare recoupment claim not be paid that it will be deducted from the beneficiary's Social Security monthly check.

Note that if the demand amount is not paid within 60 days of the issue date of the Final Demand Letter interest will begin to accrue at the rate of 11% from the date when notice of settlement or other information is received by CMS and is charged until reimbursement is made even if the beneficiary has filed a request for a waiver or the matter is under appeal. Accordingly it may be advisable to pay the amount in demand while the practitioner seeks a waiver or appeal on behalf of the beneficiary so as to not incur additional interest on the amount claimed as owed. If the waiver or appeal is successful a refund check will be issued.

Medicare's conditional payment claim must be paid up front out of any settlement proceeds (workers' compensation or personal injury) prior to any distribution to any other party including attorney fees. This recoupment can be sought from any judgment, compromise, waiver or release regardless of whether there is any admission of liability.

Upon receipt of the amount stated in the Final Demand Letter Medicare will issue its acknowledgment letter indicating the amount has been received and the recoupment claim is now closed.

If Medicare's conditional payments are more than $100,000 and the practitioner also wishes Medicare to compromise its recovery under the Federal Claims Collection Act (31 U.S.C. 3711) the case will be referred by the CMS Regional Office to the CMS Baltimore Central Office and then forwarded to the Department of Justice. All other cases can be negotiated directly with the CMS Regional Office.

Q19. Is a Pro-rata reduction for procurement costs allowed to reduce the Medicare recovery amount?

A19. Yes. Medicare's reimbursement claim against the beneficiary or the primary payer insurance carrier can be reduced by a formula that recognizes the pro-rata share of procurement costs e.g., attorney fees and most costs associated with the prosecution of the claim.

As to CMS' recovery rights against the party that receives the primary payment 42 C.F.R. 411.37(a)(1) provides that Medicare reduces its recovery to take account of the cost of procuring the judgment or settlement if:

(I) procurement costs are incurred because the claim is disputed; and

(ii) those costs are borne by the party against which CMS seeks to recover.

However, 42 C.F.R. 411.37(a)(2) states that if CMS must file suit because the party that received payment opposes CMS's recovery, the recovery amount is determined pursuant to 42 C.F.R. 411.37(e) which is the lower of the following:

(1) the Medicare payment, or

(2) the total judgment or settlement amount, minus the party's total procurement costs.

As to CMS' recovery rights against the primary payer, 42 C.F.R. 411.37(b) provides that if CMS seeks recovery from the primary payer, in accordance with 42 C.F.R. 411.24(I), the recovery amount will be no greater than the amount determined under paragraph (c), (d) or (e):

(c) Medicare payments are less than the judgment or settlement amount.

If Medicare payments are less than the judgment or settlement amount, the recovery is computed as follows:

(1) Determine the ratio of the procurement costs to the total judgment or settlement payment

(2) Apply the ratio to the Medicare payment. The product is the Medicare share of procurement costs

(3) Subtract the Medicare share of procurement costs from the Medicare payments. The remainder is the Medicare recovery amount.

(d) Medicare payments equal or exceed the judgment or settlement amount.

If Medicare payments equal or exceed the judgment or settlement amount, the recovery amount is the total judgment or settlement payment minus the total procurement costs. Comment: In effect the beneficiary may recover nothing from the settlement of his or her case and in some cases this may be a determining factor whether to initially accept the case or whether to continue to prosecute one.

Q20. Does the Medicare program have a claim against a lump sum workers' compensation payment before a beneficiary's Medicare entitlement commences?

A20. No. Medicare cannot make a formal determination until the beneficiary actually becomes entitled to Medicare. However, once the beneficiary becomes Medicare entitled, Medicare payment may not be made to the extent of Medicare's interests in the lump sum payment as outlined pursuant to 42 CFR 411.46 or if a WCMSA has been established according to the WCMSA provisions that adequately consider Medicare's interests.

Comment: There is no current similar regulation specifically addressing liability settlements however with liability settlements. However, with liability settlements which are interpreted to include an award of damages for future medical services and/or prescription drug charges similar Medicare arguments can be anticipated.

Q21. If a current Medicare beneficiary has outstanding workers' compensation related medical services or prescription drug bills that were not paid prior to the settlement is it Medicare or the MSA that pays those bills?

A21. Neither. Medicare should not pay these bills because it is secondary to the workers' compensation or liability settlement. The MSA cannot pay these bills because it is created solely for future medical and prescription drug expenses related to the case.

Medical expenses incurred prior to the settlement need to be accounted for and paid from the settlement proceeds. These medical services and prescription drug charges should have been documented by the parties in advance of the settlement. The provider/supplier may have billed Medicare, a group health carrier or the workers' compensation carrier for these medical services or prescription drug charges and the beneficiary's representative should have made inquiries about outstanding related bills. To the extent Medicare has paid these bills and therefore made conditional payments, Medicare will recover those payments pursuant to 42 C.F.R. 411.47.

Q22. From whom can CMS recover conditional payments if Medicare's interests are

ignored in a workers' compensation or liability settlement?

A22. Under 42 U.S.C. 1395y(b)(2)(A) and certain regulations found at 42 C.F.R. §§411.22 - 411.37 the MSP prohibits Medicare from making payments if payment has been made or is reasonably expected to be made by a workers' compensation plan, liability insurance, no-fault insurance, or a group health plan. This same statute and regulations require that a primary payer and any entity (defined as the beneficiary, provider, supplier, physician, attorney, State agency or insurer) that receives payment from a primary payer is required to reimburse Medicare if it is demonstrated that such primary payer has or had responsibility to make the payment initially.

This means that Medicare's right of recovery for past medical services and prescription drug charges which were made extends to all those medical services and prescription drug charges related to what was claimed and/or released in the settlement, judgment or award.

Medicare's payment for those past services and charges are therefore recoverable and payment for those services and charges is precluded by 42 U.S.C. §1395y(b)(2)(B)(ii)

CMS therefore has a direct priority right of recovery against any entity including an beneficiary, provider, supplier, physician, attorney, state agency, or private insurer that has paid or received any portion of the settlement proceeds whether directly or indirectly. CMS also has a subrogation right with respect to any such third party payment. See, for example, 42 C.F.R. 411.24(b), (e), and (g) and 42 C.F.R. 411.26.

Comment: This right of recovery clearly applies to any conditional Medicare payments made prior to the settlement; however there is no clarity as to whether CMS has a direct right of recovery under 42 U.S.C. §1395y(b)(2)(B)(ii) against any entity for payments Medicare may make for services provided after the settlement. Once again proper legislation is needed in this area to finally resolve the issue.

Workers' Compensation Medicare Set-asides (WCMSA)

Q23. Is it permissible for Medicare to accept an up-front cash settlement instead of establishing a WCMSA?

A23. No. An up-front cash settlement is only appropriate in certain instances when Medicare agrees to a compromise in order to recover conditional payments already made when the workers' compensation carrier or liability carrier did not pay promptly (promptly generally means payment will be made within 120 days of receipt of the claim). Unlike Medicare conditional payments CMS does not compromise prospective medical services or prescription drug charges recovery claims by lump sum payment.

Comment: Legislation has been proposed (most recently H.R. 1982 in the 113th

Congress) that would allow prepayment of a flat percentage of the gross settlement directly to Medicare to act as a "safe harbor" in lieu of doing a traditional WCMSA, however, this legislation, as well as, similar legislation in previous Congresses has seen little Congressional support.

Q24. How does CMS define "settlement"?

A24. A settlement is an executed settlement agreement that is approved by the court or agency of competent jurisdiction for the applicable state and will be recognized by Medicare. Medicare is not required to recognize a settlement that has not been approved by the court or agency.

Q25. What is the difference between a "commutated" and "compromise" settlement?

A25. Medicare's regulations 42 C.F.R. 411.46 and manuals MIM 3407.7 & 3407.8 and MCM 2370.7 & 2370.8 make a distinction between settlements that are commutations of future benefits and those that are due to a compromise between the insurance carrier and the beneficiary.

Commutation cases are settlement awards intended to compensate individuals for future medical services or prescription drug expenses (expenses incurred after the settlement date) which are required because of a work or accident related injury or disease. In contrast, compromise cases are settlement awards for a beneficiary's current or past but not future medical services or prescription drug expenses (expenses incurred prior to the settlement date) that were incurred because of a work or accident injury or illness.

It is important to note that a settlement agreement can possess both compromise and commutation aspects. That is, some settlement agreements can designate part of a settlement for a beneficiary's future medical services or prescription drug expenses and simultaneously designate another part of the settlement for all of the beneficiary's medical or prescription drug expenses up to the date of settlement. A settlement agreement will be deemed to possess a commutation aspect if it does not provide for future medical expenses when the facts of the case indicate the need for continued medical services or prescription drug charges due to the work or accident injury or illness.

MSAs are only used in cases that possess a commutation aspect; they are not used in cases that are strictly or solely compromise cases which do not provide for any work or accident related future medical services or prescription drug expenses.

One of the distinctions that Medicare's regulations and manuals make between a compromise case and a commutation case is whether there is a true absence of controversy over whether or not an insurance carrier is liable to make payments. This is much simpler an issue in workers' compensation cases due to the defined statutory parameters of the individual state acts. Settlements should not automatically be considered as compromise cases simply because the insurance carrier does not admit liability in the settlement agreement. Conversely, settlements should not automatically be considered as commutation cases simply because a workers' compensation carrier accepts liability in a settlement agreement. The best course of action is to clearly spell out the strengths and weaknesses of the cases in the MSA analysis which then supports the allocations made for future medical services and prescription drug charges.

Q26. Is CMS obligated to accept and be bound by language in a settlement document as to the allocation made for lost wages, medical services, prescription drug charges or any other settlement designations?

A26. Accordingly to CMS, if in its opinion the settlement does not adequately consider Medicare's interests it is not bound by the agreement.

Comment: The settlement agreement or release should clearly allocate between medical and non-medical components and further delineate past from future. The best way, and currently most acceptable method to do this is by way of a properly prepared MSA which, subject to CMS threshold guidelines, has been approved by CMS. Distinguish this, however, from a judicially determined allocation amongst past and future economic (wages and medical) and non-economic (pain and suffering) which would arguably be warranted due regard as to the proper allocation of settlement proceeds. Is it practical, however, to force every case to trial simply to satisfy some belief by CMS that it is the sole arbitrator of what can be considered Medicare's interest? Ultimately these issues may have to be resolved before the ALJ on a case by case basis of an appealed Medicare denial of payment, or by passage of intelligent federal legislation.

Q27. How does Medicare determine its interests in a case where the parties to the settlement do not explicitly state how much of the settlement is for past medical expenses and how much is for future medical expenses?

A27. A settlement that does not specifically account for past versus future medical or prescription drug expenses will be considered to be entirely for future medical or prescription drug expenses once Medicare has recovered any conditional payments it may have made. This means that Medicare will not pay for medical or prescription drug expenses that are otherwise payable or reimbursable under Medicare and are related to the workers' compensation injury or illness, until the entire settlement is exhausted.

Example: A beneficiary is paid $50,000 by an insurance carrier, and the parties to the settlement do not specify what the $50,000 is intended to pay for. Medicare has made $5,000 in conditional payments. If there is no MSA allocation stated in the settlement agreement Medicare will consider $45,000 as compensation for future medical and prescription expenses.

Q28. Is there a means by which an beneficiary can permanently waive his or her right to certain specific Medicare covered medical services or prescription drug coverage arising from a work or accident related injury or illness and thereby eliminate the need for or reduces the amount of a MSA?

A28. No, CMS will not approve settlements that promise not to bill Medicare for certain medical services or prescription drug charges in lieu of including those medical services or prescription drug charges in a MSA. This is true even if the beneficiary offers to execute an affidavit or other legal document promising that Medicare will not be billed for certain medical or prescription drug charges if those medical or prescription drug charges are not included in the MSA.

Q29. Is a WCMSA necessary where the medical component of the case if left open?

A29. No. A WCMSA would be unnecessary if the medical portion of the workers' compensation claim remained open and the workers' compensation carrier continues to be responsible for work related medical services or prescription drug costs since the workers' compensation carrier remains the primary payer and Medicare retains its secondary payer status.

Q30. Can you settle just the indemnity portion of a workers' compensation claim while awaiting a CMS determination of a proposed WCMSA?

A30. Yes since there is no resolution of the medical component of the case and like a "open medical" settlement (see Q & A 29) the workers' compensation carrier remains the primary payer. Any resolution of the subsequent medical component of the case would also have to resolve the Medicare conditional payment recoupment issues. If it does not the Medicare conditional payment recoupment can subject the indemnity proceeds (already disbursed to the beneficiary) to Medicare recovery efforts (see Q & A 22.

Q31. In a workers' compensation settlement, is a WCMSA recommended where the beneficiary is also covered under a group health plan, managed care plan, or has coverage through the Veterans Administration?

A31. Yes, a WCMSA is still appropriate because such other collateral health insurance or health service could in the future be canceled or reduced, or the beneficiary may elect not to take advantage of such medical services or prescription drug coverage. It is important to remember that workers' compensation, liability or group health coverage is always primary to Medicare for expenses related to the workers' compensation (or liability) settlement.

Q32. Does a MSA have an effect on Medicaid resources for purposes of eligibility for Medicaid?

A32. MSAs are not subject to any special treatment under Medicaid resource rules. The WCMSA funds should be evaluated to determine if they meet the legal definition of a resource for Supplemental Security Income (SSI), and therefore Medicaid, purposes, i.e., "cash or other assets that an individual owns and could convert to cash to be used for his or her support and maintenance."

There may be cases in which funds in a MSA are placed into trusts, possibly trusts that would satisfy the definition of "special needs trusts" under Section 1917 of the Social Security Act. In those cases, the funds might not be a countable resource, but that result would be solely on the basis of Medicaid, not Medicare, rules. Consultation with an Elder Law specialist should be sought.

Q33. What does CMS believe will be the impact WCMSAs will have on the Medicare payment systems and procedures?

A33. The simple answer is that it will reduce the financial payout Medicare would otherwise have made and therefore remove some of the financial strain placed on the Medicare system. According to CMS, because a WCMSA's purpose is to pay for all medical services and prescription drug charges related to the beneficiary's work or accident related injury or illness, Medicare will not make any payments (as a primary, secondary or tertiary payer) or pay portions of medical services or prescription drug expenses) for any medical or prescription drug charges due to the work related injury or illness until no further funds remain in the WCMSA.

Liability Medicare Set-asides (LMSA)

Q34. Does CMS require use of or referral of a LMSA?

A34. No. Effective 9-29-11 CMS announced its first "guideline" specifically addressing the LMSA. In this memorandum CMS considered its interest in a personal injury case satisfied if the treating physician "certifies in writing" that the treatment for the alleged injury related to the liability insurance (including self-insurance) settlement has been completed as of the date of the “settlement”, and that future medical items and/or services for that injury will not be required. If the plaintiff receives additional settlements (e.g., UM/UIM) related to the underlying injury or illness the plaintiff must obtain a separate physician certification for those additional settlements. When the treating physician makes such a certification, there is no need for the plaintiff to submit the certification or a proposed LMSA amount for CMS review.

As with workers' compensation cases CMS will not provide the settling parties with confirmation (known as verification letters) that Medicare's interest with respect to future medicals for that settlement has been satisfied. CMS suggests the certification be maintained in the file.

What constitutes a "certification" is not defined by CMS. Is it sufficient that the treating physician states his or her opinion within a reasonable degree of medical probability? Does the "certification" have to be acknowledged? Physicians are most likely to resist signing an affidavit entitled "certification" for fear that the document may someday surface in a malpractice action.

Careful drafting of the settlement documents is warranted and in the case of court side judgment the transcript should reflect no future medical costs have been awarded and in the case of jury verdicts special interrogatories to the jury should be submitted to confirm no award for future medical costs.

As with workers' compensation settlements there is no statutory or regulatory authority for CMS' position other than the Regional Director Memorandums interpreting the statutes and regulations to mandate the LMSA process. Reference may be had to The Centers for Medicare and Medicaid Services, NGHP Transcript, Town Hall Teleconferences: October 29, 2008 at page 18; September 30, 2009 at page 25; October 22, 2009 at page 64, March 2010 at page 41 all indicate a lack of statutory or regulatory requirement for the use of or referral of a LMSA and that the referral process is entirely optional.

Comment: It is unrealistic to attempt to distinguish a liability only settlement as somehow exempt from §1826(b)(2)(A)(ii) which clearly mandates that Medicare is a secondary payer to liability and no-fault coverage. This law has been in effect since 12-5-1980 but now has only now been invigorated because of the fiscal crisis Medicare finds itself. Make no mistake about it if there is a future medical component in a liability settlement or judgment Medicare will expect that amount to be exhausted before it steps up to the plate to pay. If there is no allocation whatsoever (e.g. simply a general release) expect Medicare to take the position that it does not have to pay for accident related medical expenses and prescription drug charges until the full amount of the settlement or judgment has been exhausted. Taking a proactive approach by utilization of a LMSA will go a long way to protect a client's continued or potential entitlement to Medicare coverage and alleviate the client having to undergo the long arduous process of appealing a Medicare payment denial to the ALJ.

Q35. Does CMS propose that either WCMSA or LMSA be established in situations that involve both a workers' compensation and a liability settlement?

A35. Yes. There is also one reference to third party liability insurance proceeds to the extent that a liability settlement is made that relieves a workers' compensation carrier from any future medical expenses in which case CMS indicates a WCMSA is necessary and suggests the WCMSA would need sufficient funds to cover future medical expenses incurred once the total third party liability settlement less procurement costs of the judgment( e.g., attorney fees and costs) is exhausted. See Thomas Grissom, Medicare Secondary Payer-Workers' Compensation(WC) Frequently Asked Questions, Q & A 19, Centers for Medicare and Medicaid Services Memorandum (April 22, 2003).

Commonly referred to as a "moratorium" or "credit" to the extent that a liability settlement relieves a workers' compensation carrier from any future medical or prescription drug expenses, a CMS approved WCMSA is recommended by CMS. "Relief" could come in the form of a full and final settlement of the workers' compensation claim or a moratorium on future workers' compensation until the liability proceeds are exhausted.

Tax Implications with use of MSA

Q36. What tax liability does the MSA generate?

A36. 26 U.S.C. §§ 104(a)(1), 104(a)(2) exclude from the definition of "gross income" (a) compensation received for personal injuries or sickness except for punitive damages or (b) workers' compensation payments which are paid in lump sum or as periodic payments. This would allow the beneficiary the right to exclude lump sum funding of the MSA or investment earnings from a structured MSA (26 U.S.C. §130) from the taxable gross income of the beneficiary's Social Security number used to establish the MSA.

With lump sum funded MSAs any interest generated by the MSA will also generate an INT-1099 which is reportable on the beneficiary's annual tax return. Assuming there is adequate documentation for the amount of incremental tax that the beneficiary must pay for the interest earned on the MSA funds, the beneficiary or his/her administrator may withdraw an amount equal to the additional tax as a cost that is directly related to the MSA account to cover the additional tax liability.

Documentation of any such incurred interest and incremental tax liability should be submitted to CMS along with the annual accounting.

Administration of the MSA

Q37. Who may administrator a MSA?

A37. MSAs may be administered by a competent beneficiary (self-administered), a competent spouse, a representative payee for Social Security purposes pursuant to 20 C.F.R. 404.2010 and 404.2015 such as a spouse or adult child (e.g., an individual appointed by the SSA to receive Social Security and/or SSI benefits for someone who cannot mange or direct someone else to manage his or her money because the individual is legally incompetent, mentally incapable of managing benefit payments, etc.), an appointed guardian or conservator, special needs trust or a professional administrator. All administrators of a MSA regardless of designation are required to follow the same rules and guidelines as established by CMS.

Where the MSA is administered by a conservator or guardian oversight of the MSA by Probate or other proper court will most likely be required.

When the beneficiary designates a representative payee, appointed guardian or conservator or has otherwise opted not to self-administer the MSA, the practitioner should include that information as part of any MSA submission to CMS and include any official stand-alone agreement that provides the name, address, telephone and fax numbers of the administrator of the MSA.

Administration of a MSA by other than a professional administrator knowledgeable in CMS rules and guidelines is the most risky administration type since most beneficiaries (or their spouse, guardian, conservator or representative payee) have little if any (a) knowledge of Medicare coverage provisions that allow the administrator the ability to identify what "otherwise payable or reimbursable by Medicare" means, (b) experience with state medical fee schedules,

(c) understanding of what Medicare deductibles, co-pays and coinsurance provisions are and how they are applied, (d) ability to negotiate fees submitted by medical vendors to confirm with the terms of the MSA, and (e) formal education necessary to properly account for the disbursement of MSA funds.

Use of a self-administered MSA should only be had after discussion with the client as to his or her abilities to comply with the process. If there is any doubt as to the designated administrator's ability to properly administer the MSA self-help vendors are available by investigating the internet. Fees vary but normally range annually from $375 to $2000 depending on the period of time the administrator needs assistance, the scope of services requested and the dollar amount of the MSA.

Q38. What are the MSA administrator's responsibilities?

A38. It is the administrator's responsibility to:

1. inform the various medical service providers or the pharmacy(s) that the MSA has been established

advise the medical service provider(s) and pharmacy(s) not to bill Medicare or other credible health insurance that should not be primary to the MSA for any work or accident related charges (see Q & A 62 for a discussion regarding disputes)

3. advise the medical service provider as to the fee that may be payable from the MSA and to have this fee accepted for payment. If necessary the administrator must negotiate with the medical service provider(s) to accept payment according to the state fee schedule established in the MSA (unless the WCMSA has been calculated based upon full actual charges) (see Q & A 60 for a discussion on vendor payments from the MSA)

4. when the MSA is structured the administrator must advise (should the annual amount available in the MSA be depleted) to again start billing Medicare (at current Medicare rates), advise as to when the MSA again becomes primary and therefore again to stop billing Medicare (see Q & A 65 for a discussion on "temporary depletion")

5. every year, beginning no later than 30 days after the 1 year after the establishment of the WCMSA or the 1 year anniversary of settlement, whichever is earlier, the administrator must sign and send an accounting statement identifying each payment from the WCMSA which was made for Medicare payable reimbursable medical services or prescription drug charges related to the workers' compensation settlement. The annual accounting continues through proper depletion of the WCMSA funds. A blank attestation form with the appropriate beneficiary identification numbers are included in the CMS approval letter sent by CMS. If the MSA was not submitted to CMS the annual accounting should be retained by the administrator for as long as there are funds remaining in the MSA and then for three years thereafter.

For example, if the total MSA amount in CMS' written opinion is $10,000 ($7,000 identified for future prescription drug treatment and $3,000 identified for future medical expenses) then the administrator must forward an annual accounting that separately identifies how much of the $10,000 was spent for medical expenses and prescription drugs.

However, depletion of the total MSA amount is not limited to the separate amounts set-aside for future medical services and future prescription drug costs. As long as the annual accounting shows bona fide payments were made from the total MSA amount, CMS will consider the account properly depleted e.g., final actual expenditures may be $6000 for future prescription drug treatment and $4000 for the future medical services that may properly exhaust the $10,000 MSA.

Q39. May administrative fees for the administration of the MSA and/or attorney fees or costs specifically associated with establishing the MSA be charged to and paid from the MSA?

A39. Initially, CMS answered this question in the affirmative if all of the following were found to be true: the fee or costs were related only to the MSA itself; the fee or costs were reasonable in amount, and the fee or costs were included in the proposed MSA amount submitted to CMS and incorporated into the MSA approved by CMS.

However, as of May 7, 2004 administrative fees for the administration of the MSA and/or attorney fees and costs specifically associated with establishing the MSA cannot be included in the MSA amount, charged to or paid from the MSA. CMS no longer evaluates the reasonableness of any of these fees or costs because (a) CMS considers those a separate issue for the settling parties to negotiate and (b) the payment of these fees and costs must come from some other payment source that is completely separate from the MSA funds.

While there are no allowable fees for the establishment of the MSA which are payable from the MSA or fees payable to the administrator for services rendered certain administrative "costs" are allowed to be paid from the MSA. These include photocopying charges, postage and banking fees that are directly related to the administration of the MSA, as well as, any proportional tax owed due to the interest earned from the MSA paid from the MSA (see Q & A 36 for a discussion on tax implications.

CMS Review Criteria and Procedures

Q40. Who is the Workers' Compensation Review Contractor (WCRC)?

A40. Initially a function of the CMS Regional Office where there was no uniform established guidelines for CMS review of a MSA the concept of a "review contractor" began on November 10, 2003 when CMS contracted with a "joint venture" contractor ( The Workers' Compensation Review Center - Joint Venture of 10830 Guilford Road, Ste. 307, Annapolis Junction, MD 20701) who had the initial responsibility to review pre-October 1, 2003, cases (which CMS referred to as "the backlog"). The cases were sent by the joint contractor to the CMS Regional Offices with a recommendation or additional information requested. Once this joint venture contractor had provided a recommendation to the CMS Regional Office, acknowledgment of the receipt of the WCMSA proposal was sent to the submitter, usually within a 2 - 3 day period, or additional information was requested from the submitter. This role then was expanded to include review of all WCMSA proposals regardless of the date of submission to CMS. The purpose of the joint venture contractor was to assist the CMS Regional offices in their WCMSA review process, insure adequacy of the WCMSA funds to insure Medicare's interests were properly considered, maintain national consistency in review procedures, streamline the WCMSA review process and to complete the review process in a more timely fashion.

Effective July 1, 2012 the current workers' compensation review contractor (WCRC) is Provider Resources, Inc., 2005 West 8th Street, Ste. 208, Erie, PA 16505 (1-855-280-3550, 1-814-480-8732, www.provider-resourcews.com) which acts as the sole reviewer of WCMSA proposals. This is an initial one year contract ($5,124,084) with four subsequent 12 months option periods which can be exercised at CMS' discretion.

The WCRC acts as the sole reviewer of WCMSA proposals and independently projects the future medical costs, including prescription drugs and durable medical equipment, related to the workers' compensation injury, illness or disease that would otherwise be reimbursable by Medicare. The WCRC utilizes the CMS developed "Workers Compensation Case Control System" (WCCCS) which is an electronic case and correspondence database system. The WCRC upon reviewing each WCMSA proposal recommends a WCMSA funding amount which is then reviewed by CMS Regional Office for a final determination as to the recommended WCMSA amount.

Comment: According to CMS the WCRCs is not actually making determinations as to the acceptability of the WCMSA. Rather, according to CMS the WCRC is merely giving the CMS Regional Office recommendations (including suggestions for "more adequate" allocations). CMS suggests that the CMS Regional Office continues to be responsible for making any formal determinations. Many practitioners believed this to be "a nice legal distinction", since the CMS Regional Office seldom acts contrary to the WCRC recommendation.

Q41. Is establishment of a MSA always necessary?

A41. It depends. It is unnecessary for the beneficiary to establish a MSA as a result of the settlement if all of the following are true:

a) The facts of the case demonstrate that the beneficiary is only being compensated for past medical expenses (i.e., for medical services or prescription drug charges furnished prior to the settlement);

b) There is no evidence that the beneficiary is attempting to maximize the other aspects of the settlement (e.g., the lost wages and disability portions of the settlement) to Medicare's detriment;

c) The beneficiary's treating physician(s) certifies in writing that to a reasonable degree of medical probability the beneficiary will no longer require any Medicare payable or reimbursable medical services or prescription drug charges due to the work or accident related injury or illness. Note: a similar opinion only by an independent medical evaluator will not satisfy the requirement that the written opinion be that of a treating physician.

c. the beneficiary signs an Informed Consent memorializing the advise given by their counsel as to the purpose of a MSA, options for use of a MSA and the risk which the beneficiary may face should a MSA not be utilized.

Q42. Does CMS require use of or referral of a WCMSA?

A42. No. The practitioner will not find any statute or regulation that mandates use of a MSA in any particular format or mandate prior approval by CMS of the MSA. Contrary to some defense counsel assertions the MMSEA(Q & A 4) contains absolutely no reference to or regulations for the use, creation, or administration of a MSA whether it be in workers' compensation or liability claims.

Comment: Having said that the utilization of a MSA to protect a client's current or future Medicare coverage is a separate and distinct issue to resolve independent of whether a MSA meets current CMS review thresholds. Not referring a MSA is not the same as not necessarily needing a MSA.

What is true, however, is that a use of a WCMSA is the best tool available to memorialize and document that Medicare has been given due consideration in a settlement. Additionally, approval of a submitted WCMSA is the only method to achieve certainty as to what Medicare's position will be as to when Medicare will pay for work or accident related medical services and prescription drug costs.

Comment: While there is no such authority for the use of or referral of a WCMSA the practical reality is that it will be the client who suffers when a WCMSA is not utilized when the facts indicate there will be future work related medical services and/or prescription drug costs since Medicare may well deny coverage and payment for future work related medical services and prescription drug bills leaving the client with the long arduous process of appealing a Medicare payment denial to the ALJ.

Q43. Is a MSA analysis prepared by a commercial vendor absolutely necessary for submission of a MSA to CMS?

A43. No. However, the referral must include an analysis of the future work or accident related medical services and prescription drug charges and provide an explanation as to how the MSA was calculated (see Q & A 51). Note, that CMS does not necessarily consider the MSA as conclusive. CMS may not credit the analysis if there is information that calls the analysis into question for some reason, such as contrary medical evidence, apparent internal conflicts of interest , or if the analysis is not credible on its face.

A MSA analysis is prepared based upon published standards of practice, contains a comprehensive assessment of future medical services and prescription drug costs, incorporates data analysis and research, and provides an organized, concise analysis of current and future work or accident related medical service needs and prescription drug charges otherwise payable or reimbursable by Medicare. There are numerous commercial vendors, in-house insurance industry individuals and attorneys who provide MSA analysis services. The quality and costs of these entities varies greatly.

Comment: Unless the practitioner is knowledgeable in the preparation of these type documents utilization of a certified Medicare Set-aside consultant in the preparation of a MSA analysis who is familiar with CMS requirements is a prudent investment.

Q44. Can the parties proceed with the settlement of the medical portion of a workers' compensation claim before CMS actually reviews the proposed WCMSA and before CMS renders its written opinion?

A44. Yes, but this is not recommended. The parties may proceed with the settlement but the proposed amount of the WCMSA is not binding upon CMS.

If CMS does not subsequently provide approval of the proposed WCMSA amount as specified in the settlement and proof is not provided CMS that the CMS approved WCMSA amount has been fully funded (by submitting a copy of the final, signed settlement documents indicating the WCMSA amount is the same amount as that recommended by CMS) CMS will deny payment for medical services and prescription drug charges related to the workers' compensation claim up to the full amount of the settlement. Only the approval of the WCMSA by CMS and the submission of proof that the WCMSA has been funded with the approved amount limits the denial by Medicare of related medical and prescription drug claims to the amount in the WCMSA.

Comment: The following options have been developed by Attorney Angelo Paul Sevarino for consideration in those workers' compensation cases where the parties do not wish to wait for CMS approval. These are recommendations only and are not authorized options recognized by CMS.

Option 1: Post-settlement approval by CMS - beneficiary funded excess. With the consent of all signatories to the settlement the parties proceed to obtain settlement approval by the workers' compensation adjudicatory body with a fixed gross settlement amount and proposed WCMSA amount before receipt of CMS approval of the WCMSA. The beneficiary's counsel may then disburse the settlement funds so long as the beneficiary's counsel holds twice (or some other agreed to percentage) the proposed WCMSA amount plus hold in escrow the proposed attorney fees and costs in a client's fund account until CMS approval is obtained. Should CMS then require a higher WCMSA (counter-higher) amount than the funds held in the client fund account the beneficiary's counsel must then require the beneficiary promptly fund the difference. If insufficient funds have been kept in the client's fund account the beneficiary must fund the difference. This option requires that the beneficiary provide the insurance carrier a hold harmless for any liability should the beneficiary fail to properly fund the WCMSA amount approved by CMS. In the event CMS should approve a WCMSA less than the proposed WCMSA the excess is refunded to the beneficiary.

Option 2: Post-settlement approval by CMS - respondent funded excess. With the consent of all signatories to the settlement the parties proceed to obtain settlement approval by the workers' compensation adjudicatory body with a fixed gross settlement amount and proposed WCMSA amount before receipt of CMS approval of the WCMSA. The beneficiary's counsel may then disburse the settlement funds to the client and disburse the attorney fee and costs. Should CMS then require a higher WCMSA (counter-higher) amount the workers' compensation carrier or self-insured employer solely funds the difference. In the event CMS should approve a WCMSA less than the proposed WCMSA the excess is deemed a "credit" in favor of the workers' compensation carrier or self-insured employer which is deducted from the original gross settlement amount.

Option 3: Post-settlement approval by CMS - shared funded excess. This option is the same as Option 1, except the full proposed WCMSA amount as indicated in the settlement document is held in the client fund account and the parties agree that should CMS comes back with a requirement that the WCMSA amount be greater than the proposed WCMSA amount (counter-higher) in the settlement documents the beneficiary agrees to fund an agreed to additional amount from the settlement proceeds which additional sum has been held in the beneficiary's attorney's client fund account. However, if the WCMSA amount required by CMS exceeds the original proposed WCMSA amount plus this additional sum held in the client's fund account then the workers' compensation insurance carrier or self-insured employer agrees to fund the excess (amount of WCMSA required by CMS less the amount of the original proposed WCMSA amount plus additional sum committed to by beneficiary). In the event CMS should approve a WCMSA less than the proposed WCMSA the excess is refunded to the beneficiary.

Option 4: Reversionary provision. With this option the parties can proceed to have the settlement document approved by the adjudicatory body with a provision in the settlement document that provides for a reversionary provision. In this option the WCMSA is established in two distinct accounts. The first is funded in the amount of the proposed WCMSA and is in the beneficiary's name only. The second is funded in the amount representing the difference between the originally proposed WCMSA and counter-higher proposed WCMSA amount. This account is established in a jointly held bank/checking account (using the beneficiary's SSN) with the workers' compensation carrier or self-insured employer and the WCMSA administrator (self-administrator or professional administrator) as joint owners. Should the amount in this second account not be fully depleted upon the death of the beneficiary the remainder of the second account reverts to the payor Respondent and not the beneficiary or the beneficiary's estate. In addition to the normal annual CMS reporting requirements the WCMSA administrator would also have to provide a copy of the CMS required annual reconciliation WCMSA report to the workers' compensation carrier or self-insured employer. The WCMSA administrator would indemnify the workers' compensation carrier or self-insured employer for any negligence in administering the MSA or failing to return any rightfully due excess to the workers' compensation carrier or self-insured employer.

Comment: Should CMS approve a WCMSA higher or lower than the proposed WCMSA the contingency attorney fee may have to be recalculated. The practitioner should insure the client retainer agreement allows for such recalculation.

Q45. Does CMS review the sufficiency of a MSA even if the beneficiary is not as yet entitled to Medicare?

A45. Yes. CMS established case voluntary review thresholds (currently only with workers' compensation settlements) and will review a proposed WCMSA and provide a written opinion on which the parties may rely regarding whether the settlement has adequately considered Medicare's interests pursuant to 42 C.F.R. 411.46. These proposed settlements are handled on a case-by-case basis, as each situation is different. (see Q & A 48)

Comment: Certain CMS Regional Offices are reviewing LMSA proposals. Until such time as CMS promulgates review thresholds for LMSAs the referral of a proposed liability settlement to CMS would suggest an unnecessary exercise given CMS' current absence of any due process appeal rights to their analysis.

Q46. If the workers' compensation settlement does not meet current review thresholds will CMS provide the settling parties a "verification letter" confirming that approval of a WCMSA is unnecessary?

A46.No. CMS will not give an advisory opinion or what CMS refers to as "verification" letters on either (1) the sufficiency of an WCMSA or (2) confirming that approval of an WCMSA is unnecessary where the claim does not meet review thresholds. Written submission of the WCMSA is necessary in order to obtain this opinion.

Q47. What are the review thresholds set by CMS?

A47. The thresholds for review of a WCMSA are only CMS workload review thresholds, not substantive dollar or "safe harbor" thresholds for complying with MSP provisions. Under the MSP provisions, Medicare is always secondary to workers' compensation and other insurance such as no fault and liability insurance. Accordingly, all injured parties, whether resolving a workers' compensation or liability claim must consider Medicare's interest when settling the claim. The current review thresholds are subject to adjustment and CMS reserves the right to modify these guidelines.

For liability claims:

Currently there are no established CMS review thresholds for liability settlements. There are some CMS Regional Offices that will review a LMSA but as with all submissions this would be entirely voluntary on the part of the submitter.

For workers' compensation claims:

According to CMS, when the Patel Ju1y 23, 2001 memorandum was released, it established review thresholds for workers' compensation cases settled by injured workers who were not yet Medicare beneficiaries. This was done in order to organize and prioritize workloads for the CMS Regional Offices and to convey to those offices that it is not in Medicare's best interests to review workers' compensation settlements that do not meet these review thresholds.

CMS will review a proposed settlement including a WCMSA that meets these thresholds and will give a written opinion on which the beneficiary and parties may rely, regarding whether the workers' compensation settlement has adequately considered Medicare's interests pursuant to 42 C.F.R. 411.46.

Once threshold review criteria are met and approval of an WCMSA obtained this will be prima facie evidence that Medicare's interests have been adequately considered. The beneficiary will then have assurance that the beneficiary's future entitlement or continued entitlement to Medicare coverage will not be jeopardized. Finally, from a practitioner's viewpoint, adherence to CMS' threshold review criteria will avoid potential malpractice missteps.

Comment: While CMS is fond of using the term "protect" when discussing the WCMSA process, e.g., Medicare's interests must be "protected", in the opinion of the Author there is no requirement for attorneys to protect the interests of Medicare. Rather, the practitioner's obligation is to give Medicare's interests due consideration and in so doing protect the interests of his or her client. All too often in the workers' compensation arena the fact that a particular claim meets or does not meet the published CMS review criteria is believed to answer a collateral yet independent analysis as to whether a WCMSA is needed or not. This is a falsehood since all settlements must give due consideration to Medicare's future interests. Presently the best tool available to do this is to consider using, and if appropriate submitting, a WCMSA prepared by an independent objective specialist in the area.

Approval of a WCMSA may be sought from CMS under the following conditions:

1. For Current Medicare Beneficiaries:

If the beneficiary is a current Medicare beneficiary and the "total settlement amount" is greater than $25,000 referral is indicated. Between 7-11-05 and 4-25-06 this threshold was $10,000. There was no minimum threshold prior to 7-11-05.

"Total settlement amount" includes, but is not limited to (a) all future indemnity benefits e.g., temporary total, temporary partial, permanent partial, etc..., (b) attorney fees and costs, (c) all future work or accident related medical service or prescription drug charges covered by Medicare (d) all future work or accident related medical service or prescription drug charges not covered by Medicare, (e) any repayment of any Medicare conditional payments or other liens, (f) any amounts forgiven by the carrier, and (g) the value of any previously settled portion of the claim.

Comment: It is the Author's opinion that "previously settled portion of the workers' compensation claim" can be problematic. In those cases where the indemnity portion of the workers' compensation claim is settled leaving the medical component "open" and this medical component later settles the indemnity settlement value would apply to the threshold in addition to the medical component settlement. However many aspects of a workers' compensation claim may be "settled" or "compromised" during the life of a claim. To include the value of any previously settled portion of a workers' compensation claim is unworkable. What does this mean? In the opinion of the Author it would be appropriate to include a previously settled portion of the workers' compensation claim if it was contemporaneous to the full and final settlement e.g., the workers' compensation carrier will resolve outstanding medical liens over and above the amount it will pay in settlement. Otherwise, only those amounts paid as gross settlement proceeds should properly be included.

Where an annuity is utilized to fund the settlement is the total payout over the annuity period utilized to fund the settlement and not the cost or present cash value necessary to purchase the annuity that is considered in the total settlement amount. For example, if an annuity purchased for $195,000 but paid out $290,000 over the term of the annuity this would meet the $250,000 threshold even though the insurance carrier only had to pay $195,000 in settlement proceeds.

If the WCMSA is to be structured by use of an annuity provide the WCRC with the following information: (a) name of the carrier, (b) initial seed amount plus cost of annuity, (c) proposed initial deposit (seed), (d) minimum annual deposit for the balance of the Beneficiary's life, (e) annuity starting date, (f) length of annuity, (g) annual payout of annuity, and (h) annual funding date (feeds). The initial feed amount must be made no later than one year from the date of settlement.

2. For Prospective Medicare Beneficiaries:

To the extent a workers' compensation settlement meets both of the following criteria a referral to CMS is indicated:

1. the "total settlement amount" payable over the duration of the settlement agreement (not the discounted present cash value of the settlement) is greater than $250,000, and

2. there is a "reasonable expectation" that the beneficiary will become a Medicare beneficiary within 30 months of the settlement date.

A "reasonable expectation" of Medicare enrollment is not an extreme, immoderate, or excessive chance that the beneficiary will become a Medicare beneficiary. Rather a reasonable expectation of Medicare entitlement can be anticipated where one of the following fact patterns has been established:

a. the beneficiary has actually applied for SSDIB

b. the beneficiary has applied for SSDIB but has been denied and the beneficiary anticipates or intends to appeal the denial

c. the beneficiary is in the process of appealing and/or refiling a new application for SSDIB

d. the beneficiary is 62½ years of age. A beneficiary who has reached the age of 62½ will automatically meet this component of the threshold regardless of the beneficiary's disability status as there are 30 months before the beneficiary reaches age 65 which is the automatic age one is entitled to Medicare coverage.

e. the beneficiary has End Stage Renal Disease (ESRD) but does not yet qualify for Medicare based on ESRD (3month waiting period after dialysis or kidney transplant)

f. the beneficiary has Lou Gehrig's disease (Amyotrophic Lateral Sclerosis or "ALS") which has no waiting period

As to items a-c the practitioner must be knowledgeable in Social Security disability eligibility criteria in order to make a determination as to whether the work or accident related injury or illness, coupled with any other disability or impairment the beneficiary may have, meets or equal one of the "Listings" necessary to qualify for SSDIB benefits or whether the Beneficiary would be found disabled under the "Grid".

Note that CMS has an internal guideline that provides that if the beneficiary will be Medicare eligible within 120 days of the submission date or 60 days of the MSA pricing date then CMS will consider the beneficiary "Medicare eligible" and impose the $25,000 threshold rather than the $250,000 threshold.

Comment: Since everything else is black and white in CMS's eyes this "guideline" makes no equitable sense. This should be a light switch....not a dimmer switch...either the beneficiary is Medicare eligible on the date of settlement or there is a reasonable likelihood that s/he will be Medicare entitled within 30 months of settlement. There should be no 60-120 day fudge factor!

Q48. Assuming a beneficiary is not a Medicare beneficiary at the time of settlement; if in the future the beneficiary requests Medicare benefits will Medicare provide benefits?

Caution: This answer came from the Patel July 23, 2001 Regional Administrators Memorandum (Question 1c). It was "clarified" in the Walters July 11, 2005 Regional Administrators Memorandum (Q1). This is an example of why the CMS Referral process is so confusing and why proper federal regulation is necessary.

A48. Version 7-23-01 When an beneficiary who is not a Medicare entitled individual and does not have a reasonable expectation of becoming a Medicare entitled individual within 30 months of a settlement and the settlement does not meet both thresholds ($250,000/reasonable expectation) Medicare will make payment for work related medical or prescription drug charges that are otherwise payable or reimbursable under Medicare once the beneficiary enrolls in Medicare. CMS assumes that when a non-Medicare eligible beneficiary's workers' compensation settlement does not meet the 30-month and $250,000 thresholds, typically that beneficiary will completely exhaust the settlement by the time Medicare e1igibility is reached.

Version 7-11-05: The thresholds for review of a WCMSA proposal are only CMS workload review thresholds, not substantive dollar or "safe harbor" thresholds for complying with the Medicare Secondary Payer law. Under the Medicare Secondary Payer provisions, Medicare is always secondary to workers' compensation and other insurance such as no-fault and liability insurance. Accordingly, all beneficiaries must consider and protect Medicare's interest when settling any workers' compensation case; even if review thresholds are not met, Medicare's interests must always be considered.

Q49. Will CMS treat workers' compensation cases that were settled prior to the issuance of the July 23, 2001 Patel memorandum in the same manner as those settled after the review threshold guidelines were established?

Caution: This answer is from the 5-23-03 Grissom Regional Administrators Memorandum(Q4) and must be read in context with the Q & A 48 discussion above and particularly the Walters 7-11-05 Memorandum

A49. Yes. For workers' compensation settlements that do not meet the thresholds, Medicare will make payments for workers' compensation related medical services and prescription drug charges that are otherwise reimbursable under Medicare, once the beneficiary becomes enrolled in Medicare. This will be done regardless of when the sett1ement actually occurred. However, a reopening of claims (see 42 C.F.R. 405.750 and 405.841) that Medicare previously denied for the beneficiary will not be granted, nor will CMS change any decisions already made with respect to settlements which pre-date July 23, 2001. According to CMS, when the Patel Ju1y 23, 2001 memorandum was released, it established review thresholds for workers' compensation cases settled by a beneficiary who was not yet a Medicare beneficiary. This was done in order to organize and prioritize workloads for CMS and to convey to its Regional Offices that it is not in Medicare's best interests to review workers' compensation settlements that do not meet the review thresholds.

Q50. What is the referral process for submission of a WCMSA to CMS?

A50. When CMS first started the WCMSA review process the submission process went something like this:

The settlement proposal with the proposed WCMSA was sent to the CMS Coordination of Benefits Contractor (COBC). The proposal would be directed to the attention of the Regional Office Medicare Secondary Payer Coordinator, who then would forward the inquiry to the appropriate CMS Regional Office. WCMSA responsibilities were generally, but not always, assigned based upon CMS Regional Office responsibility for contractor oversight over the lead fiscal intermediary for workers' compensation recoveries for a particular state. This could or could not have been the same CMS Regional Office as the one with general responsibilities for a particular state.

Starting in 2004, instead of direct submission to the CMS Regional Office, WCMSAs are submitted to the Coordination of Benefits Contractor (COBC). Initially this was a New York address. As of August 27, 2007 the referral is sent to Detroit. If a practitioner sends a referral directly to a CMS Regional Office it is forwarded to the COBC in Detroit.

The COBC manually prepares, sorts and scans all eligible WCMSA proposals including all documentation received and inputs it into CMS' computerized system and checks it for completeness. At that point the WCMSA is ready to be reviewed by the WCRC. Note: WCMSAs submitted online via the WCMSAP go directly to the WCRC for review.

The COBC's role in this process is limited to preparing and developing the case. Once the case is ready the WCRC performs the initial review of the WCMSA. Either the COBC or the WCRC may request additional information from the submitter as necessary. The WCRC applies CMS' criteria in reviewing WCMSAs and forwards the WCMSA along with a recommendation on the appropriate funding amount to the assigned CMS Regional Office for a final determination.

Once the WCRC has completed its review it will (1) advise the submitting party that the referral does not meet review thresholds, (2) request additional information from the submitting party, (3) respond with a counter proposal representing a different MSA amount (higher or lower) than proposed (4) approve the WCMSA as submitted, or (5) reject the WCMSA.

A. Referring the WCMSA to CMS by Hard Copy or CD

If the CMS referral is made by hard copy or CD it is sent to:

  • The Centers for Medicare & Medicaid Services
  • Coordination of Benefits Contractor (COBC)
  • P.O. Box 33849
  • Detroit, Michigan 48232-5849
  • att: WCMSA Proposal

COBC will acknowledge the receipt of the WCMSA referral by letter.

By Hard Copy:

When a WCMSA proposal is submitted via hard copy the submitter must provide all the information outlined in Q & A 51. Hard copy submission is not recommended as CMS has explained it is very time consuming to complete the review process. If submission is not possible using the WCMSAP, CD submission is the next best method.

By CD:

When a WCMSA proposal is submitted via CD copy the submitter must provide all the information outlined in Q & A 51 and the additional requirements outlined herein.

1. The file extension must be pdf.

2. Categorize the files based on the following codes and use the associated code as the prefix in the file naming convention and arrange the files in the order below:

  1. 05 - Submitter cover letter including the WCMSA analysis
  2. 10 - Consent to Release Form
  3. 15 - Rated age documentation (if applicable) and life expectancy 20 - WCMSA analysis (if not provided in the 05 cover letter)
  4. 25 - Settlement agreement or proposed Court order (optional but settlement amount must be stated in 05 cover letter)
  5. 30 - WCMSA administration agreement (if not self-administered) 35 - Medical records
  6. 40 - Payment history
  7. 45 - Future medical treatment plan
  8. 50 - Supplemental or additional information (thought necessary for explanation)

3. Medical records must be in order by first report of injury, then chronologically through the most recent medical treatment.

4. All documents on the CD must be identified on an index by page number

5. Place files directly on the CD so that they can be viewed immediately once the CD is opened. Do not save the file in a folder.

Upon receipt, the documentation is electronically transmitted by the COBC into the CMS system and, provided all required information is included, it is then sent to the WCRC for review.

B. Referring the WCMSA to CMS via the Web Portal (WCMSAP)

Recognizing the significant delays inherent in a manual processing of thousands of WCMSAs through the mail via the COBC CMS has implemented the Workers Compensation Medicare Set-Aside Portal or "WCMSAP"

Use of the portal requires the user to be registered as a valid user and there are three levels of registrant:

Corporate: this account type indicates that the submitter is registering as a entity with an Employer Identification Number (EIN) and will regularly submit WCMSAs. Note, solo practitioners who may have an EIN should register as "Representative" since registering as Corporate will prevent the solo practitioner from utilizing the WCMSAP for his or her own files.

Representative: this account type is for non-corporate WCMSAP users but will submit multiple cases. Note: if a non-corporate user has an EIN number it is suggested that this registration be utilized since as a result of how the WCMSAP was set up the registrant will not be able to submit WCMSAs under his or her name.

Self-submitter: this is a Medicare beneficiary or individual with a reasonable expectation of becoming a Medicare beneficiary within 30 months who submit cases for themselves.

Registration information can be found at:

https://www.cms.gov/Medicare/Coordination-of-Benefits/WorkersCompAgencyServices/Downloads/WCMSAPCBTInformation.pdf

Registered users may access this Web portal at:

https://www.cob.cms.hhs.gov/WCMSA/login.

The WCMSAP allows the registered user to:

1. create a work-in progress case file by directly entering and uploading case information to allow on-line submission of the WCMSA

2. upload documents and any additional information that may be requested by CMS

3. perform case look-ups and receive case status information as to where the WCMSA submission resides in the review process (COBC, WCRC or CMS Regional Office) and determine what the current status of the file is

4. provide the user access to the submission online and email alert notifying submitters when a development, request for additional information or approval letter has been issued.

There are also other functions available depending on the type of user that was registered. The WCMSAP is relatively new and its effectiveness has yet to be determined. Certainly users who will submit hundreds of WCMSA will find this automation useful.

Once the WCMSA is submitted via the WCMSAP a e-mail alert will be sent acknowledging the receipt of the submission.

Comment: WCMSAP submissions are prioritized by the COBC in the order in which they are received and this prioritization applies whether the submission is sent in by hard copy, CD or by WCMSAP.

Q51. Information needed for the WCMSA submission to CMS?

A51. Regardless of whether the referral is made by hard copy, CD or by WCMSAP the required information is the same. Note that while LMSAs have no established threshold review levels established it is anticipated a LMSA referral would require similar information.

The following documentation must be submitted to CMS prior to the approval of any WCMSA.

1. Beneficiary's full name as it appears on the Social Security or Medicare card

2. Beneficiary's date of birth

3. Date of Medicare entitlement. Include the Medicare Health Insurance

Claim Number (HICN) or Social Security(SSN) number if the beneficiary is not yet entitled to Medicare. If the beneficiary has a Medicare card a copy should be attached

4. Beneficiary's address and telephone number. The address is used primarily for mailing copies to the beneficiary of all correspondence to the attorney(s), insurance carrier or submitter

5. Beneficiary's signed CMS Consent to Release authorization

6. Beneficiary's attorney's name, address and telephone number

7. Workers' compensation carrier' attorney's name, address and telephone number (in liability cases this would provide similar information for each liability carrier)

8. Basis for Medicare entitlement (disability, ESRD, ALS or age). Indicate if the beneficiary is currently enrolled in Parts A, B, C or D. If the Clamant is not currently enrolled in Medicare Part A, B, D or a Medicare Advantage Part C plan indicate if there is a reasonable expectation that the beneficiary will become Medicare entitled within 30 months of the date of settlement (see Q & A 47)

9. Employer's name, address and telephone number (in liability cases this would provide similar information but for each defendant)

10. Workers' compensation carrier's name, address, telephone number and claim number (in liability cases this would provide similar information for each liability carrier)

11. State of jurisdictional venue for the claim

12. Date of injury or onset of illness. There may be more than one injury date with more than one injury type and this should be explained fully. List the oldest date of injury/illness first. Show the first and last dates of any cumulative traumas. For claims involving cumulative injury, CMS' definition of date of injury is the earlier of the date that treatment for any manifestation of the cumulative injury began, when such treatment preceded formal diagnosis; or the first date that formal diagnosis was made by any medical practitioner.

CMS' preference is to work all settlements as one case with the date of injury being the earliest injury date. One recommended MSA amount will be provided by CMS encompassing all the injuries.

13. Type and severity of the work or accident related injury/illness. A detailed description of the work or accident related injury(s) or illness(es) sustained including the ICD-9 diagnosis codes, if available. The medical evidence submitted to CMS should specifically describe the injury(s) or illness(es) so that related medical services and prescription drug expenses can be identified. By example and not by way of limitation consider (a) is the beneficiary's condition stable or is there a reasonable medical probability as evident in the medical records of medical deterioration, (b) is full or partial recovery expected, (c) what is the projected time frame if partial or full recovery is anticipated, (d) what is the anticipated date the beneficiary will achieved maximum medical improvement, if applicable, (e) as a result of the injury or illness is the beneficiary an amputee, paraplegic or quadriplegic, (f) what are the durable medical equipment needs of the beneficiary?

14. Gross settlement amount. Identify the gross settlement amount. Is the settlement by lump sum or structured? Annuity quotations regarding any structured proposal should be included. Obtain as much information as possible regarding the allocation between income replacement, loss of limb or function, and future medical benefits.

15. Future Medical/ Prescription Allocation Identify separately what the proposed MSA amounts for future (a) medical services and (b) prescription drug charges that would otherwise be payable or reimbursable by Medicare will be. Identify specific types of medical services or items, the frequency and duration of the medical services or items, and the projected costs of the medical services or items related to the work injury that are expected in the future in light of the beneficiary's condition. If the MSA is to be structured both the seed and annual feeds must be identified. Include a payout schedule for each year if a structured MSA is to be used. In workers' compensation cases identify the calculation method used to determine the WCMSA amount for future medical services e.g., state's fee schedule or full actual charges.

If the settlement does not specifically account for past versus future medical expenses, it will be considered to be entirely for future medical expenses once Medicare has recovered any conditional payments it made. This means that Medicare will not pay for medical expenses that are otherwise payable or reimbursable under Medicare and are related to the workers' compensation case until the entire settlement is exhausted.

16. Life Expectancy. The MSA is to be funded based on the life expectancy of the beneficiary unless state law specifically limits the length of time that workers' compensation benefits can be paid. Here, the practitioner may wish to educate CMS on the state law regarding how long workers' compensation is obligated to cover medical services or prescription drugs due to the work related accident or illness. Effective July 1, 2008 regardless of whether an actual or rated age (see item 17 below) of the beneficiary is used CMS will only accept use of the CDC National Vital Statistics Report, United States Life Tables, Table 1 to determine life expectancy.

17. Rated age. It may be possible to reduce the length and overall amount necessary to fund the MSA by use of a "rated age" which in turn decreases a projected life expectancy used in the calculation of the MSA. Rated age is a term used to describe a life expectancy which adjusts the beneficiary's actual age based on medical factors. A rated age is different from the actual age of the beneficiary and reflects a shorter life span due to an underlying medical injury or illness whether occupational or non-occupational.

The rated age will be normally be determined by a medical underwriter who works in conjunction with a structured settlement broker. Acceptable proof of the rated age includes independent rated age(s) on the letterhead of an insurance carrier or settlement broker and as of June 8, 2010 a statement from the party referring the MSA to CMS stating:

"Our organization certifies that all rated ages we have obtained and/or have knowledge of regarding this beneficiary, and generated at any time on or after the Date of Incident for the alleged accident/illness/injury/incident at issue, have been included as part of this submission of the proposed amount for a Workers' Compensation Mediae Set-Aside (WCMSA) to the Centers for Medicare & Medicaid Services."

Comment: This would suggest even "expired" rate age estimates or rated age estimates obtained from non-independent e.g. obtained from a life subsidiary of a P&C carrier sources be included.

A single rated age estimate is acceptable. In cases where multiple rated ages have been obtained CMS requires the "median" rated age be used.

18. Current medical/prescription payment recap history.

This is an itemization from the workers' compensation carrier of all prior medical and pharmaceutical expenses paid by the insurance carrier due to the work related injury or illness in the 2 year period after the beneficiary's medical condition has stabilized or, if not, the latest two years of medical payment history. This current payment history should contain a print date within the last six months prior to WCMSA submission to CMS even if the last payment date is more than two years old.

If there is no print date on the payment history a letter from the carrier or its attorney stating the date the carrier's payment history was generated.

If there is no printable history a letter from the carrier or its attorney explaining why there is no printable history will be required. CMS will only accept this explanation if the carrier made no payments of medical, indemnity or expenses and did not even set up settlement reserves for the claim.

If there are no medical records available for the last two years prior to the date the MSA is submitted to CMS it may be necessary to secure these records from the beneficiary's primary care physician.

If it is alleged that the beneficiary has not secured medical treatment from any physician for treatment for the work related injury or illness CMS will require (1) an affidavit from the claims adjuster attesting to the fact that there have been no payments made or submitted by the beneficiary within the two year period and (2) an affidavit from the beneficiary's primary care physician, if any, that the physician has not treated the beneficiary for any work related injury or illness during the last two years. These affidavits must conform to the medical payment recap history submitted with the MSA.

While less likely to be given credit compared to that of a treating physician an affidavit from the workers' compensation carrier's independent medical examiner may be submitted should the beneficiary not have a primary care physician. In that case an explanation must accompany the independent medical examiner's opinion indicating that the beneficiary has no primary care physician.

If the beneficiary's current treatment records contain no indication that prescription drugs will be needed in the future, CMS will accept that Medicare's interests have been adequately protected with a $0 projection for future prescription drug expenses, assuming the WCMSA provisions regarding other future work related medical expenses are reasonable.

19. Designation of disability classification, e.g., totally disabled, partially disabled, paraplegic, quadriplegic or traumatic brain injury. According to CMS this is one indicator of the duration of Medicare's future exposure, as well as, a benchmark by which to evaluate the severity of the injury or illness.

20. Beneficiary's living conditions. Provide a description of the beneficiary's current living conditions that may impact the medical benefits of the settlement. For example, whether the beneficiary utilizes mobility equipment to navigate around the personal residence, does the beneficiary reside in a home, apartment, nursing home, or an assisted living facility, have special nursing care costs been included in the MSA?

21. Current medical services: Described the current medical services being provided the beneficiary. The current medical services should give an indication that the work related medical condition is stable (or at least not getting worse). Identify the date or anticipated date at which the beneficiary may reach maximum medical improvement. Also note all relevant past medical treatment, such as surgery, that the beneficiary may have undergone.

Medical Records. Include the first report of injury, medical records of major surgeries and medical records for the last two years of treatment, no matter how long ago those last two years were or who paid for the medical services. Depositions of treating physicians can be provided but are not required. Ensure that any "last treatment date" mentioned in the WCMSA analysis or payment history or carrier letter is supported by a medical report that matches that date. Include medical records from all treating physicians for the last two years of treatment for the work related injury even if the workers' compensation carrier has not paid for the treatment and even if the treatment was more than 2 years prior to the WCMSA submission.

If the beneficiary has not treated with any physician for any reason within the last two calendar years, CMS generally needs a current or past treating physician to identify what the period of last two years of treatment was. Provide those medical records for that last two year period.

CMS will grant a preference for medical opinions offered by treating physicians over those from an independent medical respondent-employer or defense evaluator or by utilization review reports.

The following documents are deemed by CMS to be incomplete or insufficient medical records:

1. a letter from the beneficiary or his or her attorney indicating that the beneficiary has not received treatment for the work related injury in the last x years

2. a letter form the carrier or its attorney indicating that it has not paid for treatment for the last x years

3. a letter form the beneficiary or carrier or their respective attorney that no treatment is being provided and that the beneficiary is only receiving over the counter pain medications

4. a letter enclosing a recent independent medical evaluations which indicate that the Beneficiary has not treated for the work injury in x years

5. a letter from the carrier or its attorney that the beneficiary's last treatment date was x but the file shows (a) the beneficiary is moving and will receive further treatment in the new location (b) the beneficiary is currently in severe pain or is scheduled for surgery, (c) the beneficiary now treats with the Veterans' Administration, or (d) the last medical record received is dated before the last treatment date.

Current Prescription Drug Charges: CMS first began independently calculating future prescription drug treatment costs and expenses in WCMSA proposals beginning June 1, 2009 where the work related injury or illness warrants the need of prescription drugs for the ongoing treatment of the injury or illness. CMS' independent calculation of the prescription drug amount is priced using RedBook® average wholesale pricing (AWP). CMS will not use or recognize any other pricing, discounting, or calculation methods when determining the adequacy of the prescription drug amounts in the MSA proposal.

If the WCMSA referral to CMS does not include an amount for future prescription drug charges and the current medical treatment records indicate that the beneficiary has been prescribed drugs and/or indicates that the Beneficiary may need prescription drugs due to the work related injury or illness CMS will deem the submission as not adequately considering Medicare's interests and will either request additional information from the submitter or add prescription drugs to the WCMSA review calculation.

A current (within 60 days of submission) printout with the brand or generic name of the drug, frequency, strength and dosage prescribed by all treating physicians (those treating the work related as well as non-work related conditions) must be submitted with the MSA. If generic drug costs are submitted and there are is no generic drug available, CMS will add brand name drug costs price based upon RedBook® AWP.

The practitioner should request the beneficiary obtain the printout from all the pharmacy(s) where not only work related medication is obtained but also where non-work related medication is obtained. Submit explanations for those medications that the beneficiary is taking that are not associated with the work related injury.

a. If the injury or illness occurred less than 2 years from the date of the WCMSA referral, a history should include those prescription drugs obtained from the injury date through the date of the CMS referral

b. If the injury or illness occurred more than 2 years from the date of the CMS referral, a history should include the prescription record for the latest 2 years

If it is alleged that the beneficiary has not used any work related prescription medication within the last two years then an affidavit from the claims administrator attesting to the fact that (a) no requests for payments of prescription drug medications have been received from the beneficiary, and (b) that no payments for prescription drug medications have been made should be secured for submission to CMS.

The following documents are deemed by CMS to be incomplete or insufficient prescription proof of drugs, dosages and frequencies for the last two years of treatment:

1. a letter from the beneficiary or his or her attorney indicating that the no medications are currently being taken or that no medications have been taken in the last x years

a letter from the workers' compensation carrier or its attorney indicating no medications for the work injury are currently being taken or that no medications related to the work injury have been taken in the last x years

3. a letter from the workers' compensation carrier or its attorney that no payments were made for medications

4. inadequate or missing information regarding the name of the drug, dosage, strength or frequency

The referral to CMS should account for future prescription drug needs that are reasonably probable and predictable even if the recent medical records or claims payment histories do not demonstrate their current use. If this is not undertaken CMS will utilize a conservative pricing method for future probable prescription drug needs in evaluating the sufficiency of the prescription drug component of the WCMSA, as well as, reviewing current treatment patterns specific to the beneficiary and/or the injury after-effects while being treated.

Traditional Medicare Part D plans do not cover certain drugs regardless of whether they are associated with the work related injury or illness. For example, most formulary plans (Medicare's list of covered drugs) exclude over the counter drugs, cough & cold medications, vitamin & mineral products, and weight gain/loss medications. Some other Medicare Part D and some Medicare Part C plans (for obvious increased premiums) cover prescription drugs not covered under the traditional plans. While all work or accident related prescription drugs need to be disclosed in the MSA analysis drugs not payable or reimbursable by Medicare are not included in the calculation of the prescription drug component of the MSA.

As of January 1, 2013 Medicare Part D will begin covering barbiturates (used in the treatment of epilepsy, cancer, or a chronic mental health disorder) and benzodiazepines for all Medicare Part D medically accepted indications e.g., insomnia, anxiety, seizures, muscle spasms.

Off label drug usage needs to be included as part of the WCMSA analysis if the drug is prescribed for an outpatient use that is approved under the FDA or supported by one or more citations under the Compendia. As with medical opinions treating physicians recommendations for future prescription drug usage will be given preference over those of independent medical respondent-employer evaluators or by utilization review reports.

CMS will accept pricing of generic brands unless a treating physician opines that only brand named drugs are effective for the beneficiary. The default pricing by CMS will be the brand named prescription over that of the generic brand if the submitted does not indicate generic. If the prescription payment records indicate the beneficiary takes both the brand name and generic named medication CMS will price the WCMSA based upon the brand name pricing. If the prescription payment records indicate the beneficiary is taking only the generic brand name medication even though the treating physician prescribed the brand name version CMS will price based upon the generic brand pricing.

Where the treating physician believes "tapering" is possible and is in the best interests of the beneficiary, CMS will consider all evidence in making a MSA determination, including medical evidence of current actual tapering. Accordingly, prospective opinions as to the weaning off by the Beneficiary of certain prescription drugs will not suffice. CMS will look to see if such weaning has been documented over the last 6 months of treatment records. Therefore, unless clearly documented in the medical records from the treating physician CMS will not accept a "tapering" off of medications and will price the medications of the life expectancy of the beneficiary.

24. Submit a copy of the WCMSA analysis. The WCMSA is a concise medical services and prescription drug charges otherwise payable or reimbursable by Medicare which accurately projects and describes annual and lifetime costs for the beneficiary. While the WCMSA is not deemed conclusive of the issue of the value of future medical services and prescription drug charges it is persuasive evidence necessary for proper evaluation and is superior in most cases to physician's estimates of medical or prescription drug projected usage.

Future medical treatment and need for prescription drug charges must be based on the evaluations and recommendations of the beneficiary's treating physician(s), e.g., the primary care physician, orthopaedic surgeon or other specialist (if applicable). An independent medical examination may be sufficient under certain circumstances, e.g., the beneficiary has not received treatment in several years and there is no primary care physician.

If the WCMSA is based solely upon other than treating physician opinion such evaluations must be by a physician (a) who has actually examined the beneficiary, (b) has reviewed the beneficiary's medical records, (c) has contacted the beneficiary's treating physician(s), if applicable, (d) is available to answer CMS' questions, (e) prepares a report that summarizes (a) - (d) above, and (f) offers a written medical opinion as to all of the reasonably anticipated future medical services and prescription drug needs of the beneficiary related to the beneficiary's work injury.

The WCMSA must be supported by a comprehensive set of medical reports and records; a listing of applicable ICD-9 codes, a listing of attending physicians and their specialties; the types and frequency of physician visits; the name, dosage and frequency of use of all prescription and over the counter medication; and a summary of all medical treatment which is projected to continue into the future. It is helpful to summarize the medical evidence as part of the submission so as to assist the CMS file handler for prompt review of the submission. If it is alleged that the beneficiary has a pre-existing and/or non-related medical condition that is not the responsibility of the workers' compensation carrier the practitioner must include such adjudicatory finding and state statute or case law which supports that position.

If the practitioner is not comfortable in medical case analysis or cost projections the services of a certified Medicare Set-aside Consultant should be considered.

25. Administrator. MSAs may be administered by a competent beneficiary (self-administered), a competent spouse, a representative payee for Social Security purposes pursuant to 20 C.F.R. 404.2010 and 404.2015 such as a spouse or adult child (e.g., an individual appointed by the SSA to receive Social Security and/or SSI benefits for someone who cannot mange or direct someone else to manage his or her money because the individual is legally incompetent, mentally incapable of managing benefit payments, etc.), an appointed guardian or conservator, special needs trust or a professional administrator.

When the beneficiary designates a representative payee, appointed guardian or conservator or has otherwise opted not to self-administer the MSA, the practitioner should include that information as part of any MSA submission to CMS and include any official stand-alone agreement that provides the name, address, telephone and fax numbers of the administrator of the MSA.

Note that CMS will not evaluate administrative fees or expenses for the cost of the WCMSA analysis, set-up or administration of the WCMSA because CMS considers those a separate issue for the settling parties to negotiate. CMS does not allow any fees to establish the MSA or any fees charged by an administrator to be paid from the funds establishing the MSA or to allow the fees or costs to be included in the WCMSA amount.

26. Settlement Agreement or Proposed or Court Order. The parties can proceed with the settlement of the medical services and prescription drug portion of a workers' compensation claim before CMS actually reviews the proposed WCMSA and determines an amount that adequately considers Medicare's interests. However, approval of the WCMSA is not final until CMS receives an executed copy of the final settlement agreement that has been approved and signed by all parties. If CMS does not subsequently provide approval of the funded WCMSA amount as specified in the settlement or if proof is not provided to CMS that the CMS approved WCMSA amount has been fully funded, CMS may deny payment for medical services and prescription drug charges related to the workers' compensation claim up to the full amount of the settlement. Proof is demonstrated by submission of a copy of the final, signed settlement document indicating the WCMSA amount has been established in the same amount as the recommended by CMS. Only the approval of the WCMSA by CMS and the submission of proof that the WCMSA was funded with the approved amount, would limit the denial of work related claims to the amount of the WCMSA.

Q52. What criteria does Medicare use to determine whether the amount of a lump sum or

structured settlement has sufficiently considered Medicare's interests?

A52. The following criteria is used by CMS in evaluating the amount of a proposed WCMSA to determine whether there has been an attempt to shift liability for the cost of a work or accident related injury or illness to Medicare. Specifically, is the amount allocated for future medical services and prescription drug charges reasonable? If Medicare has already made conditional payments their repayment also has to be taken into account.

1. Date of entitlement to Medicare.

2. Basis for Medicare entitlement (disability, ESRD or age). If the beneficiary has entitlement based on disability and would also be eligible on the basis of ESRD, this should be noted since the future medical services and prescription drug usage would be higher. This would also be true for an beneficiary who is over 65 but had been entitled prior to attaining that age.

3. Type and severity of injury or illness. Obtain diagnosis codes (ICD-9/10) so injury or illness related expenses can be identified. Is full or partial recovery expected? What is the projected time frame if partial or full recovery is anticipated? As a result of the injury or illness is the beneficiary an amputee, paraplegic or quadriplegic? Is the beneficiary's condition stable or is there a possibility of medical deterioration?

4. Age of the beneficiary. Acquire an evaluation of whether the beneficiary's condition would shorten the life span e.g., "rated age" ( see Q & A 51 #17).

5. Workers' compensation carrier's classification of the beneficiary (e.g., temporary total disability, temporary partial disability, permanent partial impairment, permanent total disability).

6. Prior medical and prescription expenses paid by the workers' compensation carrier due to the injury or illness in the 2 year period after the condition has stabilized. If Medicare has paid any amounts e.g., conditional payments, they must be recovered. Also, this would indicate that the case may not purely be a commutation, but may also entail some compromise aspects, e.g., the workers' compensation carrier may have taken the position that the medical services or prescription drug charges were not covered by workers' compensation.

7. Gross Settlement. Amount of the gross settlement and how is it allocated. Obtain as much information as possible regarding the allocation between income replacement, loss of limb or function, and past and future medical or prescription drug benefits.

8. WCMSA Duration. Is the settlement for the beneficiary's lifetime or for a specific time period? If not for lifetime, what is the state or statutory basis allowing for other than lifetime payment? Medicare will insist that there is a reasonable relationship between the respective allocation for medical services and prescription drug charges covered by Medicare and medical services and prescription drug charges not payable or reimbursable by Medicare. For example, is it reasonable for the settlement agreement's allocation for medical services or prescription drug charges not payable or reimbursable by Medicare to be based on the beneficiary's life time while the agreement's allocation for medical services or prescription drug charges payable or reimbursable by Medicare is based on a lesser time period? Here, the practitioner may wish to educate CMS on the State law regarding how long workers' compensation is obligated to cover the items, medical services or prescription drug charges related to the accident or illness.

9. Living conditions. Is the beneficiary living at home, in a nursing home, or receiving assisted living care, etc.? If the beneficiary is living in a nursing home, or receiving assisted living care, it should be determined who is expected to pay for such care, e.g., (for life time or a specified period) from the medical benefits allocation within the lump sum settlement, e.g. , Medicaid, etc.

10. MSA Amount. Are the expected medical or prescription drug expenses for Medicare covered items and services appropriate in light of the beneficiary's medical condition? Although each case must be evaluated on its own merits, it may be helpful to ascertain for comparison purposes the average annual amounts of Part A, B and D spending for a disabled person in the appropriate State of residence. Keep in mind that these fee-for-service amounts are for all Medicare covered services, while CMS' focus here only deals with medical services or prescription drug charges related to the workers' compensation injury or illness. Therefore, CMS will use appropriate judgment and seek input from a medical consultant, of their own choosing, when determining whether the amount of the lump sum or structured settlement has sufficiently taken Medicare's interests into account. NOTE: Before evaluating whether the MSA reasonably considers Medicare's interests, CMS must know whether the MSA is based upon the workers' compensation fee schedule in a particular state or full actual charge amounts.

The amount of the lump sum is typically established by using a MSA analysis and actuarial methods to determine the beneficiary's life expectancy. If a MSA analysis is not used to project the beneficiary's future medical expenses, then the beneficiary or his/her representative must present other alternative competent medical evidence that sufficiently justifies the amounts Medicare Set-aside.

Q53. What happens after a WCMSA has been reviewed?

A53. CMS reports that it tries to review and decide on WCMSA submissions within a 45-60 day window from the time that all relevant documents are submitted.

Once the WCMSA is submitted an acknowledgment letter (if submission made by hard copy or CD) or email if submission made through the WCMSAP will be sent. If the acknowledgment is not received within 15 working days contact the COBC at 800-999-1118 to inquire. When CMS has reviewed the WCMSA it will respond in one of several ways:

1. ask for additional information. A reply must be received by the WCRC within 30 days (if hard copy or CD submission made) or 10 days if submission made by WCMSAP or the WCRC file will be "closed" and the submitter will be notified of its status. The file will automatically be reopened once the requested information is received, however, it will be treated as a new submission. The review process begins again and the practitioner should receive a response within 45-60 days from the WCRC's receipt of the requested information. It is, therefore, incumbent upon the practitioner to make a complete initial referral, including all the requisite information, in order to expedite the referral process.

2. approve the WCMSA as submitted

3. approval of the WCMSA with a different amount than originally proposed (counter-higher or counter-lower)

4. send notice that the submission was below the threshold necessary for WCRC review

5. send a rejection letter

Q54. Once the WCMSA has been approved by CMS what is CMS' subsequent role?

A54. When CMS approves a WCMSA CMS will check the National Medicare Enrollment database on a monthly basis in order to determine when an beneficiary actually becomes enrolled in Medicare. Once CMS verifies that the beneficiary has actually been enrolled in Medicare, CMS will assign a contractor (MSPRC), based on the beneficiary's State of residence, to be responsible for monitoring the beneficiary's case.

When the beneficiary has actually been enrolled in Medicare, CMS will provide the Coordination of Benefits Contractor (COBC) with identifying information to add a workers' compensation or liability record to their file known as a "Common Working File". Typical information provided includes (1) beneficiary's name, (2) beneficiary's HICN, (3) date of incident, (4) ICD code(s) or a description of the illness/injury, (5) whether the MSA is self-administered or third party administered, (6) whether the MSA is lump sum or structured, and

(7) beneficiary's attorney information.

The administrator of the WCMSA , whether it is self-administered or administered by a third party, is required to forward annual accounting summaries concerning the expenditures from the WCMSA to the MSPRC. The MSPRC is responsible for monitoring the beneficiary's case and insuring/verifying that the funds allocated to the WCMSA were expended on medical services or prescription drug charges for work related medical services and prescription drug charges payable or reimbursable by Medicare. Additionally, the MSPRC is responsible for monitoring the beneficiary's case and insuring that Medicare makes no payments for work related medical services or prescription drug charges until the WCMSA has been properly depleted (see Q & A 59 & 65 for a discussion of depletion.

CMS will not pay for any medical services or prescription drug charges related to the workers' compensation settlement until a self-attestation accounting (self-administration) or full accounting (third-party administration) for all funds expended from the WCMSA is sent to the MSPRC.

Q55. Does a "system of records" exist for non-Medicare entitled injured parties when a WCMSA has been established?

A55. CMS' Division of Benefit Coordination has established a "system of records" SOR #09-70-0537 (published in the Federal Register Vol. 70. No. 242 (12-19-05) which has as its primary purpose to maintain a file of individuals who were injured while employed, not currently Medicare beneficiaries, and who have a WCMSA (either approved or not approved) as part of a workers' compensation settlement.

This SOR provides the legal authority to maintain records on beneficiaries that are not yet enrolled in Medicare. It also allows CMS to disclose to "another Federal and/or state agency, agency of a state government, an agency established by state law, or its fiscal agent to disclose individual specific information contained in its "Common Working File". This file includes the following information:

a. Beneficiary's name and HICN number

b. Date of injury or illness

c. ISD code(s): If codes are not readily available the CMS Regional Office or WCMSA must include a description of the illness/ injury

d. An indication as to type of WCMSA administration e.g., self-administered or professionally administered

e. Beneficiary's attorney information

The CMS Regional Office will be responsible for maintaining or "housing" the records for every WCMSA on which the CMS Regional Office has provided a written opinion. According to CMS, these records will not subject to Freedom of Information Act requests and may not be disseminated to the public.

Q56. What is the expected time frame for CMS to review and make their decision regarding a proposed WCMSA?

A56. Historically CMS sought to review and make a decision regarding a proposed WCMSA within 60 days from the time that all necessary/required documentation had been submitted to CMS. Prior to the current review contractor Provider Resources, Inc. becoming the WCRC wait times could exceed 90-180 days or more.

Provider Resources, Inc. is contractually obligated to complete it review process within 20 business days of receipt of all required information and to advise the submitted within 5 days thereof if there is any missing information and then complete the review within 15 days of receipt of the missing information. It is estimated that between 2000- 2500 WCMSA proposals will be reviewed each month. In 2013 Provider Resources, Inc. reported that its standards are 22 days turnaround time for a "clean" submission (no additional information required) and an additional 17 days for cases that require development (additional information requested) when the submission is made through WCMSAP.

Interestingly, and not widely published, the WCRC can designate cases as "high priority" including those cases that are submitted for the beneficiary who has a documented severe financial hardship (house foreclosure, bankruptcy), catastrophic health condition and most notable those WCMSA submissions with "congressional interest". These supposedly will receive an expedited review and be processed in 2 days. Any request for expedited review of a WCMSA submission is made through the CMS Regional Office and not the WCRC directly.

In order to secure the quickest review time the practitioner must make the WCMSA with all required documentation provided so careful review of the WCMSA submission is required.

Q57. If the beneficiary or his/her representative disagrees with the amount that CMS has determined for the WCMSA is there any appeal process?

A57. No. If the WCRC does not believe the proposed WCMSA adequately considers Medicare's interests it will send the practitioner a counter-proposal along with its analysis in support of the counter-proposal. This counter-proposal can be higher or lower than the proposed WCMSA amount submitted. Most times the practitioner's first notice of the rejection of the recommended WCMSA is with the approval letter sent by CMS indicating the counter-proposed WCMSA amount.

While there is no direct right of appeal to a WCRC counter-proposal the practitioner has several available options. The beneficiary or their representative and submitters can either request "clarification" or "challenge" the counter-proposal. CMS will consider this re-review request in order of receipt as if it were a new WCMSA proposal submission.

Clarification. The practitioner may always contact the CMS Regional Office that issued the determination for a "clarification" e.g., pointing out simple mathematical errors in the calculation or WCRC's failure to recognize that the medical records confirm that a procedure or item the WCRC included as part of its counter proposal has already occurred or been purchased.

Challenge/Re-Review. It is possible to "challenge" or request a re-review of the counter-proposal with new documentation. To file a challenge (there is no formal pleading required) the CMS counter-proposal has to be reviewed by one of the attending physicians and specific rebuttal provided as to the reasonableness and necessity of the medical services or procedures or prescription drug charges contained in the counter-proposal.

The re-evaluation request should be clearly marked as such, and submitted to:

  • CMS c/o Coordination of Benefits Contractor
  • PO Box 660
  • New York, NY 10274-0660
  • Attn.: WCMSA Challenge Proposal

Note: Challenges or "re-reviews" can be submitted directly through the WCMSAP

CMS will consider this challenge as a new referral and will process it in order of receipt. The review process by CMS will most likely take 60-90 days once the new medical evidence is received by CMS.

The submitter is required to submit additional information in order to justify the original submitted WCMSA amount . If the additional information does not convince the CMS Regional Office to approve the originally submitted WCMSA amount and the parties proceed to settle the case despite the CMS Regional Office's objections, then Medicare will not recognize the settlement. Medicare will then exclude its payments for the medical services or prescription drug charges related to the injury or illness until the settlement funds expended for medical services or prescription drug charges otherwise payable or reimbursable by Medicare use up the entire settlement proceeds

Whether to challenge a CMS counterproposal will require comparing the variance between the WCMSA dollar amounts originally proposed and those counter-proposed and weighing that against the additional time necessary to file and await a decision from CMS, as well as, consider any additional attorney fees and medical report fees incurred in order to file the challenge. Presently there is no further "appeal" to an adverse CMS Regional Office response to a challenge or re-review.

Are there any other options? Yes but each carriers its own risks:

Renegotiation. The parties can attempt to renegotiate the original gross settlement figure to reflect the WCRC counter proposal.

Rejection. Under this option the parties reject the counter-proposal and settle the case using the original and unapproved submitted WCMSA amount. The theory behind this option stems from the voluntary nature of the CMS review process. Even though CMS has established review thresholds the referral process itself is considered voluntary. A party's obligation is to give Medicare reasonable consideration in the settlement of a workers' compensation.

This option poses the greatest risk to the beneficiary since CMS' file will be closed as indicating there is no approved WCMSA on file. Medicare will not recognize the settlement as giving Medicare's interest due consideration. Since the claim has been reported under the MMSEA and since a submission to CMS was made, medical and prescription bills submitted to Medicare would be subject to cross checking in the Medicare system for similar ICD-9 codes and there will be a high probability that Medicare will deny payment for the submitted bill. Medicare will have no record of what WCMSA, if any, was established and will most likely deny payment until the entire gross settlement proceeds have been expended.

Comment: This is coming from just one New Jersey district and has no precedence to other districts and is not an option adopted by CMS. It is the Author's experience that insurance carrier will seek to resolve claims for the least amount of payout. High dollar WCMSAs (as well as LMSAs) may cause the settlement to collapse. So insurance carriers push the "voluntary" nature of a MSA referral (which they are absolutely correct upon asserting) and suggest if the beneficiary wants CMS approval the beneficiary can attempt to secure it but whatever CMS does or does not do will not have any impact upon the insurance carrier's fixed offer to settle the case. The insurance carriers then insist that the beneficiary indemnify and hold them harmless for any claims CMS may bring against the insurance carrier. This places the beneficiary in an untenable situation as the entire risk of the CMS referral process is then placed upon the beneficiary in effect making the beneficiary self-insure the future work related medical services or prescription drug charges.

Open-Medical Stipulation. Settle the indemnity portion of the claim only and keep the medical component open. If this option is taken no WCMSA is required since the medical component of the claim remains open and the workers' compensation carrier remains primarily liability for work related medical services and prescription drug charges. CMS will have to be notified that the medical component of the case has not settled so that their data base reflects the open medical component of the case.

Although the beneficiary has no formal appeal rights with respect to the WCMSA review process the beneficiary does retain appeal rights with respect to specific denied Medicare claims. If Medicare denies a submitted claim for a medical service or prescription drug charges on the basis that the beneficiary failed to adequately consider Medicare's interest in the settlement of the claim the beneficiary may appeal that specific claim denial through the regular administrative appeal process.

Comment: This is one of the most egregious components of the entire CMS referral process. Significant sums of client's settlement proceeds are involved in funding MSAs and the lack of any published and effective right for the submitting party to appeal unilateral decisions made by the WCRC in calculating MSAs is a serious flaw in the process which has long gone uncorrected.

Payments from the WCMSA

Q58. May workers' compensation settlement funds attributable to future medical services and prescription drug charges be used prior to Medicare entitlement?

A58. Yes. As of July 11, 2005, for a beneficiary who is not yet a Medicare beneficiary and for whom CMS has approved a WCMSA, the WCMSA may be used prior to becoming a beneficiary. However, use of the WCMSA is limited to medical services (and as of January 1, 2006 prescription drug charges) that are related to the workers' compensation claim or settlement and that would be otherwise payable or reimbursable by Medicare if the beneficiary was a Medicare beneficiary. The same requirements that Medicare beneficiaries follow for reporting and administration are to be used in the above situations.

Even if there is no CMS approved MSA, any funds from a workers' compensation settlement attributable to future medical services and prescription drug charges that are remaining at the time a beneficiary becomes a Medicare beneficiary must be used for Medicare payable or reimbursable medical services and prescription drug charges related to the workers' compensation claim or settlement until such funds are exhausted. Only then will Medicare pay for Medicare covered services and drug charges related to the workers' compensation claim or settlement.

Prior to July 11, 2005 CMS' policy was until the beneficiary actually became entitled to Medicare, the MSA fund could not be used to pay the beneficiary's medical expenses. Once the beneficiary actually became entitled to Medicare the beneficiary (if a self-administered WCMSA or in the case of a third-party WCMSA the administrator) was permitted to make payments for the beneficiary's medical services and prescription drug charges from the MSA that would otherwise be payable or reimbursable by Medicare.

Q59. What types of measures will CMS take to ensure itself that Medicare makes no payments for work or accident related injury or illness medical services and prescription drug charges until the WCMSA has been properly depleted?

A59. If the MSPRC monitoring the Beneficiary's case discovers that payments from the WCMSA have been used to pay for medical services or prescription drug charges that are not payable or reimbursable by Medicare or for unauthorized expenses paid from the MSA which arose out of the administration of the WCMSA then CMS will not pay the Medicare claims. The MSPRC must provide the evidence of the unauthorized expenditures to the CMS Regional Office for investigation. If the CMS Regional Office determines that the expenditures were contrary to the CMS Regional Office's written opinion on the sufficiency of the WCMSA then the CMS Regional Office will notify the administrator of the WCMSA that CMS Regional Office's approval of the WCMSA is withdrawn until such time as the funds used for non-Medicare expenses or unauthorized administrative expenses are restored to the WCMSA.

Q60. How do providers and suppliers obtain payment for the medical services payable or reimbursable by the WCMSA and at what rate may they charge?

A60. There are two distinct methods for providers, physicians and other suppliers to obtain payment for workers' compensation covered medical services when funds are held in a WCMSA. Determining which distinct payment method applies depends on whether the WCMSA was calculated using either full actual charges or a workers' compensation State fee schedule. In no case is the payment based on Medicare approved rates.

If the WCMSA is based upon a State fee schedule physicians and other suppliers will be paid based on what would normally be payable under that State's workers' compensation fee schedule. Accordingly, providers, physicians and other suppliers would not be permitted to bill the medical services component of the WCMSA more than the State's workers' compensation fee schedule rate. For example, if a provider's full charge for a particular service is $100 and the workers' compensation carrier normally pays $65.00 for that particular service, then the WCMSA should only pay $65.00 and the provider can only bill $65.00.

However, when the WCMSA does not contain specific provisions ensuring that the WCMSA cannot be charged more than what would normally be payable under the State's workers' compensation fee schedule, then providers, physicians and other suppliers are permitted to be billed and to be paid the full actual charges.

Comment: Realistically, use of the State's workers' compensation fee schedule is improbable with a self-administered MSA since the beneficiary does not have ready access to these schedules and if they did would probably not properly interpret them. A beneficiary who intends to self-administer the WCMSA should contact existing commercial vendors who provide "self-help" services or in the alternative consider utilization of a professional administrator knowledgeable in Medicare coverage and coding, as well as, the State's workers' compensation fee schedules. Additionally, since the case has now been settled the State's workers' compensation adjudicatory body or the civil court no longer has jurisdiction over the matter, fee disputes would seem not to be readily resolvable short of an appeal to the ALJ.

Q61. How are prescription drug charges paid from the WCMSA?

A61. CMS requires WCMSA pharamacy charges to be calculated using RedBook® average wholesale prices (AWP). Many of the prescription drugs can be purchased at big box pharmacies at below AWP. CMS has not addressed either the contingency that a prescription drug cannot be purchased for at least the AWP used to calculate the WCMSA or addressed the issue of inflationary pressures on pharmacutical drugs and accordingly there is no mechanism in the WCMSA to address the contingency that a drug cannot be purchased for the price listed in the WCMSA.

Q62. What if there is a dispute as to whether the MSA pays?

A62. When providers, physicians and other suppliers submit claims to Medicare associated with the beneficiary's work or accident related injury or illness, Medicare claims processing contractors may deny those claims due to an existing reported workers' compensation or liability claim under the MMSEA or due to an established WCMSA or LMSA. and instruct the submitting party to seek payment from the MSA.

However, when a provider, physician or other supplier submits any claims that are for injuries or illnesses that are not work or accident related, then the MSPRC should process those claims like they would any other claim for Medicare payment.

On the other side of the isle, when the MSA administrator refuses to make payment on a provider's, physician's or other supplier's claim because the MSA administrator asserts the medical services or prescription drug charges are for injuries or illnesses that are not work or accident related (or for any other reason), and the provider, physician or other supplier, subsequent to the administrator's denial, submits the claim to Medicare, then the MSPRC contractor should consult CMS in order to determine whether Medicare should pay the claim. If a determination to deny the claim is made then Medicare's regular administrative appeals process for claim denials would apply to the claim.

Comment: The obvious bureaucracy created by the entire CMS referral process and the associated costs are not readily available for public scrutiny. The genesis of the CMS referral process was to save Medicare funding by insuring primary payers paid when appropriate. This is an admirable purpose and supported by all those injured workers and accident victims who are put in harm's way. However, the costs of this CMS referral process must be in the forefront of any political arena that wishes to engage in the debate on Medicare funding as an entitlement. Only then will the true costs of Medicare program be out there for all to see.

Duration, Depletion & Termination of the MSA

Q63. May the MSA contemplate only a finite period of time?

A63. No. To consider Medicare's interest, a MSA should be funded based on (a) the expected life expectancy of the beneficiary (actual or rated age) unless State law specifically limits the length of time the workers' compensation carrier covers work related medical services or prescription drug charges a lesser period of time or if there is specific medical evidence which limits Medicare's exposure other than over the life expectancy of the beneficiary e.g., terminal illness.

Q64. May the MSA amount be reduced due to changed circumstances?

A64. No. Effective August 25, 2008, once the MSA has been established the only method of termination is due to the (1) proper depletion of the MSA funds or (2) the death of the beneficiary. Prior to August 25, 2008 CMS did allow for modification if the treating physician concluded that the beneficiary's medical condition had substantially improved, then the beneficiary or his/her representative could submit a new MSA proposal covering future expected medical services and prescription drug expenses. Such proposals had to justify at least a 25% reduction in the outstanding MSA funds. In addition, such a request for a reduction or termination could not be made until at least five years after the initial approval of the MSA and was accompanied by all supporting documentation not previously submitted with the original MSA proposal. If CMS determined that a 25% or greater reduction was justified, CMS would issue a new approval letter. After CMS issued a new approval letter, any funds in the current MSA in excess of the newly calculated amount could be released to the beneficiary. As with the original decision, CMS' decision on the new proposal was final and not subject to administrative appeal.

Comment: If a substantial change in circumstances exists there should be no reason for this August 25, 2008 rule change given the purpose of the MSA is to "reasonably" consider Medicare's interest.

Q65. What is a "temporary depletion" of a structured MSA?

A65. MSAs that are funded by lump sum present less of a problem to administer than structured MSA arrangements. In both the lump sum and structured MSA Medicare does not make any payments for the beneficiary's Medicare payable or reimbursable medical services or prescription drug charges until the funds within the MSA have been properly depleted and an accounting confirming same is filed with the MSPRC.

However, unlike lump sum funding, structured MSAs fund the settlement monies on predetermined dates over the life of the beneficiary. This can create what is known as "temporary depletion". Let's look at an example.

Let's assume a CMS approved structured MSA is funded with $20,000 per year for Medicare payable or reimbursable medical services and prescription drug charges on every January 1st over the life of the Beneficiary. What happens if the $20,000 is depleted prior to the next's year's funding?

If the $20,000 allocated on January 1 for year one was properly spent as of August 31, Medicare would make payments for the medical services performed or prescription drugs purchased after August 31 and continue to pay up until December 31st (the period of temporary depletion) once the MSPRC had been advised that the funds for that year had been temporarily depleted and had verified that the entire $20,000 (plus interest) was depleted as of August 31st. When the structured arrangement then pays the next installment of $20,000.00 for the start of year two (i.e., on January 1) Medicare would not make any payments for medical services performed or prescription drugs purchased until year two's allocation was depleted.

During this period of temporary depletion the beneficiary may submit work or accident related medical service charges and prescription drug charges which would otherwise be payable or reimbursable by Medicare, however, (1) the beneficiary is required to have maintain Medicare coverage (Parts A, B, C and/or D), (2) there is no other valid and collectable health or prescription drug coverage which would be primary to Medicare, and (3) the beneficiary is responsible for applicable Medicare co-pays coinsurance and deductibles provisions during this temporary depletion period.

Besides notifying the MSPRC of temporary depletion the administrator must also now notify the medical provider(s) and pharmacy(s) that for the remainder of the year Medicare (and/or Part D plan, if applicable) will again assume the role of primary payer in lieu of the MSA. Once the next annuity feed is received the roles are again reversed and the MSA becomes primary and Medicare secondary.

Most clients lack this type of sophistication and failing to properly communicate this temporary depletion and shifting financial responsibility which accompanies it, can result in Medicare not picking up payments in a prompt fashion.

But what happens if the $20,000 is not depleted in any given year? If MSA funds are not depleted during a given period then the remaining funds must be carried forward to the next year. The threshold after which Medicare would begin to pay claims for the work or accident injury or illness would then be increased in any subsequent year by the amount of the carry-forward.

In our example, if in 2012 the beneficiary needed only $15,000 to cover all work or accident related medical and prescription drug expenses then $5,000 would need to be carried over into 2013. Therefore, in 2013 a total of $25,000 ($20,000 annuity payment + $5,000 carry forward) of Medicare payable or reimbursable work related medical service and prescription drug charges would need to be spent from the MSA before Medicare would again begin to cover work or accident related expenses for 2013. This carry-forward process continues until the accumulated carry-forward for any prior year plus the payment for a given year (and accrued interest for those years) is properly depleted.

Q66. Should the beneficiary die before the MSA is completely depleted, what happens to the remaining funds?

A66. Once CMS and the MSPRC responsible for monitoring the beneficiary's case confirm that all of the beneficiary's Medicare submitted claims have been paid, then any amount left over in the MSA may be disbursed pursuant the terms the MSA funding mechanism itself e.g. bank or checking account, in the case of a structured MSA the annuity agreement or Last Will and Testament of the beneficiary and if none then according to state succession law. This may involve holding the MSA open for some period after the date of death, as providers, physicians, and other suppliers are permitted to submit their initial bill to Medicare for a period of up to one year after the date of service. In certain cases, where a conservator has been established either as a MSA administrator or otherwise, or where there is a minor involved, probate court (or other appropriate jurisdiction court) approval may also have to be sought for disbursement of remaining MSA funds.

Q67. Is the beneficiary entitled to a release of the MSA funds if the beneficiary loses Medicare entitlement?

A67. No. However, the funds in the MSA may be expended for medical services or prescription drug charges specified in the MSA until Medicare entitlement is re-established or the MSA is properly depleted. Use of the MSA is limited to medical services and prescription drug charges that are due to the work or accident that would otherwise be covered by Medicare if the beneficiary were a Medicare beneficiary. CMS will not pay for any medical services or prescription drug charges related to the workers' compensation claim or settlement until a self-attestation document or a full accounting of all monies expended from the MSA are sent to the MSPRC responsible for monitoring the beneficiary's case. Upon the re-establishment of Medicare entitlement the MSPRC will adjust the beneficiary's common working file to reflect the expenses paid prior to re-establishment of Medicare entitlement.

Comment: If, in fact, the beneficiary's Medicare entitlement is lost, and there is no reasonable likelihood that it will be re-established then this should constitute a substantial change in circumstances justifying petitioning CMS to dissolve the MSA allowing release of the MSA funds.

Valuation, Calculation & Reduction of the MSA

Q68. What types of investment vehicles may be used to fund the MSA?

A68. The only guidance CMS provides here is that the financial investment vehicle used to fund the MSA must be "interest bearing".

Comment: As a general rule the MSA funds must be "liquid". MSA funds may not be placed in speculative investment products where the principal is not fully guaranteed. This means the MSA must be set up as a dedicated FDIC insured bank/credit union checking or savings account, FDIC insured money market account, FDIC insured CD or FDIC insured bank or U.S. Treasury bills or notes. MSA funds which expose the principal to risk will not be acceptable to CMS. Regardless of where the MSA funds are placed these MSA funds must be separate from any other personal funds available to the beneficiary.

Q69. Is the MSA indexed to account for inflation or reduced to present cash value?

A69. No. Initially CMS gave consideration to indexing for inflation as there was a requirement that the MSA be indexed consistent with how Medicare calculates its growth in spending. However, as of October 15, 2004, the MSA does not need to be indexed for inflation and in exchange the WCMSA may not be discounted to present cash value.

Q70. Should the settlement agreement provide for items and services that are not covered by Medicare but later become covered?

A70. No. CMS had at one time contemplated and ultimately rejected a suggestion that an additional allocation within the MSA be provided so that medical services and prescription drug charges that were not covered by Medicare at the time the MSA was submitted to CMS for review, but later become Medicare payable or reimbursable, be transferred from the amount specified for non-Medicare covered items and services to the MSA.

Comment: It is, however, a prudent course of action to have a separate medical allocation (not a MSA) for non-Medicare covered work or accident related items or for Medicare co-pays, deductibles and coinsurance provisions which may apply to work or accident related medical services and prescription drug charges which the beneficiary may incur in the future and which are related to the injury or illness. This certainly can assist in the calculation of any Social Security Disability offset since this separate medical allocation would still be deemed an excludable medical expense. These funds do not have to be transferred to the MSA or be included in the annual MSA accounting.

Q71. Can CMS be required to reduce the amount of the MSA due to the compromised nature of settlement?

A71. No. 42 C.F.R. 411.47 in pertinent parts states "[i]f a compromise settlement allocates a portion of the payment for medical expenses and also gives reasonable recognition to the income replacement element, that apportionment may be accepted as a basis for determining Medicare conditional payments". CMS' position is that no reduction in the amount of a MSA is allowed as the MSA calculates future work or accident related medical services and prescription drug charges and the compromise language in this regulation only addresses past Medicare conditional payments.

Comment: This is one of the most contentious positions argued by CMS. One can expect that if a civil matter is tried and comparative negligence found, or a statutory cap applied, which reduces the full value of damages that the apportioned percentage should equally apply to the LMSA. While comparative negligence is not a component of a workers' compensation case the statute itself may limit certain benefits either in amount or duration and this equally should be applied to the WCMSA. Where either a liability or workers' compensation case is settled for "nuisance value" the practitioner should be allowed the opportunity to provide CMS with a detailed explanation of the pros and cons of both sides of the issue and petition CMS to reduce any MSA accordingly.

Q72. Can a MSA be established as a structured arrangement, where payments are made to the MSA on a defined schedule to cover expenses projected for future years?

A72. Yes. The MSA may be structured whereby payments are made to the MSA account on a defined schedule (rather than in lump sum) to cover future work or accident related medical services and prescription drug costs. This may be calculated based upon the normal life expectancy of the beneficiary or by use of a rated age.

Q73. How do you calculate the funding of a structured MSA?

A73. If a structure is utilized to fund the MSA it will consist of both "seed' (initial funding) and "feed" (annual deposit) components.

The "seed" money for the MSA must include an amount equal to cost of the (1) the first surgery and (2) first cost of any durable medical equipment plus (3) the first two years of annual projected medical services and prescription drug charges.

The remainder of the MSA funds are calculated by formula and designated as "annual deposits" or feeds. These annual deposits into the MSA are payable upon a set "anniversary date" which cannot be more than one year after the initial funding of the MSA.

The formula to calculate the terms of the structure are as follows:

Step 1:Determine the total estimated dollar amount for future medical services and prescription drug charges payable or reimbursable by Medicare

Step 2: From the sum identified in Step 1 determine the cost of the first surgery and first cost of durable medical equipment

Step 3: Subtract Step 2 from Step 1

Step 4: Divide Step 3 amount by the beneficiary's life expectancy and then multiply by 2

Step 5: Seed money is the equal to the sum of Steps 2 and 4

Step 6: Subtract seed money in Step 5 from Step 1 and divide resultant by the beneficiary's life expectancy minus 1 to calculate the annual deposit for the balance of beneficiary's life expectancy

Example:

Assume the MSA has been calculated at a total value of $87,473.84 (Step 1). Further assume the costs of the first surgery is $45,000 and the initial cost of the durable medical equipment (excluding replacement costs) is $1,019.95 (Step 2 = $46,019.95). Also assume the beneficiary has a 29.2 year life expectancy.

Step 3: $87,473.84 - $46,019.95 or $41,453.89

Step 4: ($41,453.89 ÷ 29.2) x 2 = $2,839.31

Step 5: $46,019.95 + $2,839.31 = $48,859.26

Step 6: ($87,473.84 - $48,859.26 = $38,614.58) ÷ 28.2 = $1,369.31

In this example the seed money would be $48,859.26 and there would be 28.2 annual feeds of $1,369.31beginning one year after the initial funding of the MSA.

Q74. Are there special rules for pricing implantable devices?

A74. Yes. Effective October 1, 2008 if the MSA includes the pricing for any implantable device(s) and does not include enough information or if it is determined upon review by the WCRC that an implantable device is recommended for the beneficiary but has not been included in the MSA proposal, the WCRC will utilize its own pricing methodology. If an implantable device is being used or recommended the practitioner should consult with the appropriate physician and include the following information in the MSA analysis:

1. Device, electrodes, receiver manufacturer name

2. Device, electrodes, receiver model # or type

3. Device, electrodes, receiver cost including tax, freight and handling

4. Facility fee, whether inpatient or outpatient, procedure code and cost

5. Surgeon procedure code and cost

6. Anesthesiologist procedure code and cost

7. Programming services procedure code, frequency and cost

Other associated costs

Prescription Drugs & Medicare Part D

Note: Medicare's reference to prescription drugs is limited to those prescription drugs that are for the treatment of the workers' compensation or liability related injury(s) or illness(s), and those where Medicare provides coverage under any one of its formulary plans.

Q75. What is the definition of a covered Part D Drug?

A75. A "covered Part D drug" is a drug that may be dispensed only upon a prescription and that is described in subparagraph (A)(I), (A)(ii), or (A)(iii) of 42 U.S.C. §1396r-8(k)(2), 42 U.S.C.§ 1395w-102(e)(1)(A). For a Part D drug to be covered by Medicare, and thus included properly in a MSA, the drug should be prescribed for an outpatient use that is approved under the FDA, and Cosmetic Act (21 U.S.C.A. § 301 et seq), or supported by one or more citations included or approved for inclusion in any of the compendia described in subsection (g)(1)(B)(I) or 42 U.S.C. §1396r-8.

Effective 6-1-10, for those workers' compensation settlements effectuated prior to 6-1-10, and where the settlement included non-covered Part D drugs as part of the WCMSA, CMS will consider funds spent for those non-covered Part D drugs by beneficiaries as being an appropriate expenditure of funds from the WCMSA.

For those workers' compensation claims that were not settled prior to 6-1-10, and where the settlement includes non-covered Part D drugs as part of the WCMSA, CMS will consider a re-pricing of those cases that included non-covered Part D drugs. Once CMS performs a re-pricing of the WCMSA, Beneficiaries may not use funds from their WCMSA to pay for non-covered Part D drugs. Doing so constitutes an inappropriate expenditure of WCMSA funds.

For those workers' compensation settlements resolved on or after 6-1-10, and where the settlement does not include non-covered Part D drugs as part of the WCMSA, Beneficiaries may not use funds from their WCMSA to pay for those non-covered Part D drugs. Doing so constitutes an inappropriate expenditure of funds from the WCMSA.

Q76. What is CMS' policy regarding the inclusion of prescription drugs in a MSA with the implementation of the Medicare Modernization Act of 2003 (MMA)?

A76. All MSAs involving workers' compensation settlements that occur on or after January 1, 2006 must include separate pricing for prescription drugs and medical services. If the workers' compensation claim was settled prior to January 1, 2006, the MSA did not need to specify a separate amount for future prescription drug treatment but rather allowed for prescription drug and medical services to be lumped together.

CMS's policy regarding the pricing of prescription drugs did not change with the passage of this MMA. However, as of June 1, 2009 CMS now requires that prescription drugs be priced using the average wholesale price as listed in RedBook® Drug Reference and makes it a standard practice to utilize the most current version of this resource when evaluating the sufficiency of the prescription drug component of a given MSA.

The MSA must now include separate amounts for (a) future medical services, and (b) future prescription drug treatment. In addition, the MSA must include a payment history of the prescription drugs paid by the workers' compensation carrier, as follows:

1. If the injury occurred less than 2 years from the date of the submission, a payment history should include those prescription drugs paid from the injury date through the date of the submission

2. If the injury occurred more than 2 years from the date of the submission, a payment history should include the last 2 years of payments for prescription drugs

3. CMS will review the MSA based on the (a) required payment history, (c) anticipated future prescription drug treatment information, and (c) Medicare Part D data

4. If the MSA fails to provide a payment history or the payment history reflects that the workers' compensation carrier did not previously pay for prescription drugs but that these drugs were indicated for the beneficiary's future treatment, CMS will price the Medicare covered prescription drugs using CMS information available from current Medicare Part D data

Comment: Traditional Medicare Parts A and B do not provide coverage for prescription drugs not administered by a physician or administered in the hospital. Enrollment in a Medicare Part C may provide prescription drug coverage. If the beneficiary does not have prescription drug coverage under a Medicare Part C plan then Medicare Part D is required in order to secure prescription drug coverage when purchased in a pharmacy. The fact that enrollment in the drug benefit is optional complicates the future pricing of prescription drugs in the MSA because at the time of the settlement the beneficiary may not have made a decision regarding prescription coverage enrollment. In addition there are numerous Part D plans each of which cover different drugs and have different co-pays, deductibles and gaps or donut hole factors.

Q77. What do you do if the beneficiary has not been prescribed drugs for the work or accident related injury or illness or if the drugs prescribed are excludable under Medicare?

A77. The MSA will have to include documentation from the attending physician as to why no prescription drugs usage which is work or accident related is anticipated in the future. With workers' compensation claims a medical payment recap history from the workers' compensation carrier covering the last two years of treatment or in the case of a liability claim from the beneficiary's pharmacy supporting the proposition that no prescription drugs have been prescribed for the work or accident related injury or illness is required to be included as part of the MSA proposal. Additionally, CMS may require an affidavit from the workers' compensation carrier, if applicable, that no payments have been made for prescription drugs for the last two years of treatment.

Q78. Where a workers' compensation claim settled prior to January 1, 2006, can the beneficiary use an established MSA to pay for prescription drug expenses related to the workers' compensation injury?

A78. No. If the workers' compensation settlement included an allocation for non-Medicare covered medical and/or prescription drug expenses, the beneficiary must exhaust those funds prior to billing Medicare for prescription drugs assuming the beneficiary (a) has opted for Medicare Part D coverage or enrolled in a Medicare Part C plan that includes prescription drug coverage and (b) the beneficiary does not have any other coverage primary to Medicare.

Q79. What are CMS' prescription requirements if the workers' compensation claim did not settle prior to January 1, 2006?

A79. If the workers' compensation case did not settle prior to January 1, 2006 and the WCMSA proposal is received by CMS on or after January 1, 2006, then the submitter must include separate amounts for future medical treatment and future prescription drug treatment in the WCMSA proposal. For structured MSA proposals, the submitter must also indicate whether any portion of the future prescription drug treatment amount has been included in the initial deposit i.e., seed money.

Q80. What happens if the WCMSA proposal received after January 1, 2006 did not include

an amount for future prescription drug treatment?

A80. If the WCMSA proposal did not include an amount for future prescription drug treatment, and the current treatment records indicate that the beneficiary has been prescribed drugs and/or may need prescription drugs due to the work related injury or illness in the future, CMS will deem the submission as not adequately considering Medicare's interests.

If the WCMSA did not include an amount for future prescription drug treatment, and there is no indication in the current treatment records that the beneficiary will need future treatment with prescription drugs related to the workers' compensation injury, then CMS will accept that Medicare's interests have been adequately considered. Medicare will then pay primary for future prescription drugs if the beneficiary has enrolled in a Medicare Part D prescription drug plan or Medicare Part C plan with prescription drug coverage and the beneficiary does not have any other coverage that is primary to Medicare.

Q81. Should MSA submitters include an amount for future prescription drug expenses if the beneficiary has not enrolled in a Medicare Part D plan or Medicare Part C plan with prescription drug coverage?

A81. Yes. Beneficiaries who have not enrolled in either a Medicare Part D prescription plan or a Medicare Part C plan that includes prescription drug coverage need to include future prescription drug expenses in the WCMSA proposal if the current treatment records indicate that the Beneficiary has been prescribed drugs and/or may need future prescription drug treatment related to the work or accident related injury or illness.

Q82. Should funds for future prescription drug treatment be included in the calculation of the total settlement amount to determine if the MSA meets CMS review thresholds?

A82. Yes, the total settlement amount calculation should include an amount for prescription drugs if the future treatment indicates that the Beneficiary has been prescribed drugs and/or may need drugs in the future due to the work related injury. It is imperative that submitters furnish accurate, complete, legible, and current medical and prescription drug records (name, dosage, frequency and strength) for the last two years that the beneficiary has been receiving treatment in connection with the accident or illness.

According to CMS submitters need to account for future prescription drug needs that are reasonably probable and predictable even if recent medical records or claims payment histories do not demonstrate their current use e.g., a short course of antibiotics is usually required for recurrent urinary tract infections, commonly seen with neurogenic bladders; a course of narcotic pain medication is usually necessary for probable future surgery etc...

Q83. Will CMS allow for detoxification or a tapering of use with respect to prescription

drug medications?

A83. Yes. Where the treating physician believes tapering is possible and is in the best interests of the beneficiary, CMS will consider all evidence in making a MSA determination, including medical evidence of current actual tapering.

Q84. Does the beneficiary have to resubmit a WCMSA proposal after January 1, 2006 if CMS has already issued a written opinion as to the total WCMSA amount?

A84. No. A previously submitted WCMSA proposal does not have to be resubmitted (a) if CMS has already issued a written opinion as to the total WCMSA amount for settlements occurring prior to January 1, 2006. Note, if the workers' compensation settlement occurred prior to January 1, 2006, and the workers' compensation settlement included an allocation for future prescription drug treatment, then the beneficiary must exhaust those funds before Medicare can be billed for those future prescription drugs.

Q85. What is CMS' policy regarding brand vs. generic drugs?

A85. Where drugs are indicated and the submitter has not priced drugs, or where a submitter prices for a generic drug where there is none, CMS will compare the WCMSA proposal to average wholesale price for brand name drugs. If drugs are indicated, but the medical and other records are silent or unclear about whether a beneficiary is taking a brand or generic drug and both versions exist, then CMS will compare the WCMSA proposal to the generic drug where the submitter has proposed a generic drug, and CMS will compare the WCMSA proposal to the brand name drug where the submitter has proposed a brand name drug or has not proposed a drug at all.

Q86. What is CMS' policy regarding the expiration of drug patents?

A86. Patents for brand name medications do expire and less expensive generic equivalents do usually become available thereafter. On the other hand, new more expensive brand name drugs often replace drugs whose patents are expiring. Finally, beneficiaries or their treating physician may insist on brand name drugs even where generic is available. All of these, along with the evidence submitted in a particular case, will be considered by CMS in determining the sufficiency of a proposed WCMSA amount.

Q87. What is CMS' policy regarding "off-label" use?

A87. Off-label use of medications in the United States is both legal and common. Once a drug has been approved for sale by the FDA for one purpose, physicians are free to prescribe it for any other purpose that in their professional judgment is both safe and effective. Physicians are not limited to prescribing a drug only for official FDA approved indications.

Q88. What is CMS' policy regarding utilization review?

A88. Where submitters furnish utilization review reports indicating that a beneficiary should be taking none, fewer, different, or less frequent drugs, this evidence will be considered by CMS. Reports of actual drug use from treating physicians will be given more weight than utilization review reports.

Q89. What is CMS' policy regarding multiple drug manufacturers?

A89. Brand name drugs are only available from one manufacturer, whereas generic drugs are available from multiple manufacturers. In the absence of supporting documentation concerning prices from generic drug manufacturers within the WCMSA submission, CMS will compare generic drugs in the WCMSA proposal and use the lowest priced generic drug as listed in Red Book Drug Reference®.

Conflicts between State & Federal Laws

Q90. When a state workers' compensation Commissioner, Judge or Administrator approves a settlement will Medicare accept the terms of that settlement?

A90. Medicare will generally honor judicial decisions issued after a hearing on the merits of a case by a court of competent jurisdiction. If a court or other adjudicator of the merits specifically designates funds to a portion of a settlement that is not related to medical services or prescription drug charges (e.g., lost wages), then Medicare will accept that designation.

However, a distinction must be made where a court or other adjudicator is only approving a settlement that incorporates the parties' settlement agreements. Medicare will not accept the terms of the settlement as to an allocation of funds of any type if the settlement does not adequately consider Medicare's interests. If Medicare's interests are not adequately considered, Medicare will refuse to pay for medical services or prescription drug charges due to the work or accident related and otherwise payable or reimbursable by Medicare until such expenses have exhausted the amount of the entire settlement. Medicare will also assert a recovery claim, if appropriate.

Q91. Does CMS recognize or honor any State specific statutes that conflict with CMS policy?

A91. If a copy of the applicable statute is made part of the WCMSA submission to CMS then CMS will consider any statutorily defined non-compensable medical services or body parts/systems and evaluate any special situations. The practitioner is well advised to submit the applicable statute relied upon and present argument as to why the statute should be deciding on the issue.

Ethical Considerations

Q92. What are an attorney's ethical obligations to the client in the context of a WCMSA?

A92. Attorneys should consult their national, state, and local bar associations for information regarding their ethical and legal obligations. Additionally, attorneys should review applicable statutes and regulations, including, but not limited to 42 C.F.R. 411.24(e) and 42 C.F.R. 411.26.

At the very least the attorney must advise his or her client of the consequences of the client's obligations under a self-administered MSA; MSA funding (lump sum or structure) options, payment processes from the WCMSA, future medical services and prescription drug charges will be payable under the WCMSA, as well as, advising the client of any accounting obligations the client is assuming in the administration of the WCMSA, and what the client's obligations are under the Medicare Secondary Payer Act regarding repayment of any conditional Medicare payments.

CMS is fond of using the term "protect" Medicare's interests. An attorney's obligation is to the client to insure the client understands Medicare rules and regulations as they apply to Medicare Set-asides. It is not the attorney's obligation to "protect" Medicare, rather the attorney's obligation is to consider Medicare's interest and in so doing protect the client's interests.

Q93. What information should the attorney review with the client to insure the client understands his or her obligations under a settlement?

A93. There are a number of areas the attorney needs to discuss with the client and document in the client's file and these include:

1. Settlement documents. These are not boilerplate documents and each is tailored to the individual fact pattern of each case to include provisions dealing with social security offset, MSA (self-administered or professional administration), MSA terms and conditions including accounting responsibilities, and any repayment obligations to Medicare or other entities that may have recovery rights.

2. Informed Consent. The client must make an informed consent as to the implications the settlement will have on future entitlement to Medicare, Medicaid, group health insurance or other available health coverage, short/long term disability coverage or pension plans, etcY

3. Notice of Consequences of the Settlement. The client must understand the entire settlement as to past, current or future indemnity, as well as, medical benefits and any repayment obligations which must be paid from the settlement.

Other documents provided by CMS. CMS will provide a sample accounting form to be used by the beneficiary in a self-administered Medicare Set-aside, as well as, an instruction sheet for either a self-administered or professionally administered MSA. These should be reviewed with the client as they are important disclosure documents which memorize the client's obligations, expectations and responsibilities.

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