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Medicare Set Aside Myths
By Steve Chapman and
Gregg Chapman, Esq.
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Myth #1: Medicare
Set-Asides are complicated and a barrier to settling workers’ compensation
claims
Reality: MSAs are a useful tool that provide protection and valuable
future medical cost information to all parties
Medicare Set-Asides
(MSAs) are the method recommended by the Centers for Medicare & Medicaid
Services (CMS) for protecting the Medicare trust fund in certain
situations. The Medicare Secondary Payer (MSP) statute requires that
primary payers such as workers’ compensation insurers pay for
medical expenses related to an industrial injury so that this burden
is not shifted onto Medicare. Incorporating the MSA into a Compromise
and Release is both a safe and beneficial practice that allows claims
to settle while protecting all parties.
The legitimacy of MSAs was
a hotly debated topic when CMS first adopted their use in 2001. However,
in the last nine years they have become commonplace and generally
accepted as a necessary tool for settling claims involving an applicant
who is already or will soon become a Medicare beneficiary. The MSA
provides a set dollar amount agreed to by CMS (via their approval
letter when applicable) that adequately considers Medicare’s
interests, thus limiting a reimbursement claim the federal government
may seek for future medical expenses. Without a MSA, the entire settlement
amount is considered reimbursable. Thus, the MSA provides a safe
limit to the applicant and protection to the applicant’s attorney.
The use of the MSA and corresponding approval from CMS gives the
applicant and their counsel the assurance that medical care will
be provided to the applicant. CMS approval outlines the cost of future
medical care that the applicant will be responsible for, as it relates
to items that Medicare covers. Applicant and their counsel along
with qualified advisors can calculate the non-Medicare medical components,
such as prescription co-pays and the donut hole, home care, transportation
and any home modifications. The use of the MSA allows the applicant
to, in essence, buy their freedom from the workers’ comp carrier
and direct their own future medical care with the knowledge that
they will not be bankrupted if the medical care they face in the
future exceeds what is anticipated in the snapshot known as the MSA. |
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Myth #2: A MSA is not
valid if it does not include every possible procedure and medication
that the applicant might need some day
Reality: A valid MSA is a reasonable
estimation of the future medical/drug needs based on the current
documentation available when prepared
The MSA is not invalid if the allocation does not include every
potential procedure or every prescription medication that you
think the applicant might need some day. CMS expects the MSA
to be a reasonable estimation of the Medicare related future
medical/drug expenses related to the industrial injury. The MSA
amount is calculated based upon medical records for the last
two years of treatment and payment histories from all carriers,
TPAs and prescription drug suppliers.
MSA determination is not a science since there are many variables
including the fact that you are projecting medical treatment
that might be needed in the future (which in some cases might
be 30 or more years from the date of settlement). Using an experienced
MSA vendor that has submitted thousands of allocations to CMS
can be helpful. This vendor knows from experience what CMS expects
and what is not necessary, thus eliminating many of the unknowns
and providing an accurate MSA the first time around. It is important
to note that CMS is constantly changing their approach to pricing
many of the items involved in a MSA. Most recently we have seen
the affects of their prescription drug pricing with substantially
higher set-aside approval figures.
Ultimately, it is important to keep in mind that for those MSAs
submitted to CMS for approval, the same medical reports and payment
histories that the MSA vendor used to calculate the allocation
are sent to CMS for review with the completed MSA. So regardless
of whether you or the MSA vendor think a specific procedure or
medication should be included in the allocation, Medicare will
make the final determination and that is the only opinion that
matters.
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The
MSA amount is calculated based upon medical records for the last
two years of treatment and payment histories from all carriers,
TPAs and prescription drug suppliers.
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Myth #3: If
a specific procedure or drug is not included in the MSA report
then the applicant can’t pay for it out of their MSA account
Reality:
As long as the treatment is related to the industrial injury,
it can be paid for out of the MSA account
It is not true that an applicant won’t be able to pay for a specific
procedure and/or medication out of their MSA account if it was not specifically
included in the MSA allocation. Simple logic dictates that predictions
of future needs will be less than perfect. For example, it would be impossible
for a MSA that was created in 2010 to include a drug or procedure that
didn’t currently exist. Thus, if a new drug that provides a cure
for an applicant’s condition is released in 2015, the applicant would
not be prevented for paying for it from their MSA account because it wasn’t
included in the allocation that was produced before the drug existed. CMS
takes the position that it will accept bona fide payments made from the
MSA account.
Bona fide payments taken out of the MSA account that
don’t exactly
match the MSA report can also be made when situations change. For example,
a MSA based on the last two years of medical reports and payment histories
included psychiatric visits twice a month for 10 years. Then, two years
after settlement, the applicant’s condition worsens and the treating
physician now orders psychiatric visits twice a week. This increased expense
for mental health care can be paid for out of the MSA account even though
it is more than originally allocated. The important point to remember is
that the MSA is a reasonable estimation of future Medicare related medical
expenses based on medical reports currently available. Since predicting
medical needs years in the future is not an exact science, the fact that
a certain procedure, medication or quantity of same is not included in
the MSA does not mean it cannot be paid for out of the MSA account when
it is later determined that it is needed.
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The important point to remember
is that the MSA is a reasonable estimation of future Medicare related
medical expenses based on medical reports currently available.
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Myth #4: The
MSA amount should not be considered when determining the attorney’s
fee
Reality: The MSA amount is
part of the future medical portion of the total settlement and
thus included in the fee calculation
No rule exists stating that the MSA amount must not be considered when calculating
attorney fees. This attorney fee misconception arose out of a memo CMS released
on May 7, 2004. In that memo, CMS stated that attorney costs and administrative
fees “…must come from some other payment source that is completely
separate from the Medicare set-aside arrangement funds.” While it is clear
that attorney fees cannot be paid out of the MSA funds, this is completely unrelated
to the calculation of attorney fees which are based on the total settlement,
which includes the MSA. For example, a $300,000 settlement that includes a $100,000
MSA should calculate the attorney fees based on the $300,000 total settlement
amount and not on just $200,000 which is the total settlement minus the MSA amount.
Your structured settlement broker can arrange the settlement so that the attorney
will receive their entire fee while at the same time making sure the MSA amount
is paid out to the applicant in its entirety.
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While it is clear that attorney
fees cannot be paid out of the MSA funds, this is completely unrelated
to the calculation of attorney fees which are based on the total
settlement, which includes the MSA
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Myth #5: CMS
takes so long to approve a MSA that it makes settlement nearly
impossible
Reality: The majority
of MSAs are approved by CMS within
1 to 2 months
CMS has substantially reduced their turnaround time for approving
MSAs. The typical range currently runs from 3 weeks to 3 months from
submission of the MSA to receiving the approval from CMS. This is
a far cry from the 6 months to 1 year plus range that CMS was operating
on just a few short years ago. Thus, with this improved process,
there is little reason to avoid a C&R for fear of an extended
delay by CMS. Everyone has heard the stories where supposedly Medicare
took nine months to a year to approve a MSA. In researching many
of these stories we have come to learn that the delay occurred due
to the MSA vendor not submitting the information to CMS on a timely
basis. In order to avoid this from occurring on your cases, it is
essential to work with the defense attorney and/or examiner to obtain,
in writing, the date the MSA was submitted to CMS. It is through
this process all parties can learn of any missing documents or anything
else that could result in an incomplete submission. Incomplete or
non-submissions are the cause of extensive delays in obtaining CMS
approval. Once CMS has received the information necessary for their
approval process, the timeframe for approval is relatively short.
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CMS has substantially reduced
their turnaround time for approving MSAs.
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Myth #6: The
Compromise & Release is a required document that must be submitted
with the MSA before CMS will begin its review
Reality: CMS will review
a MSA as long as the settlement amount is provided in lieu
of the C&R
A final signed or even a draft Compromise and Release is not required
in order to submit a MSA to CMS. CMS is very clear on its website
that the C&R and any WCAB documents are optional upon submission
of the MSA. CMS only requires a copy of the final settlement agreement
after the MSA is approved. Holding up submission of the MSA to CMS
until the C&R is complete is a needless waste of time.
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A final signed or even
a draft Compromise and Release is not required in order to submit
a MSA to CMS
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Steve Chapman has been a structured settlement
specialist for more than 24 years. For the past 17 years, he has
specialized in workers’ compensation structured settlements.
He has appeared at every Appeals Board throughout California .
During
the past 5 years, he has participated in settlements totaling over
$1 billion. Mr. Chapman strives to remain current on all issues affecting
the settlement of the case, including Medicare set-aside allocations,
life care plans, medical cost trends, Long Term Disability, and Social
Security issues.
To contact
Steve Chapman:
Steven F. Chapman
National Settlement Consultants
12039
Jefferson Blvd.
Culver City, CA 90230
Phone: 800-845-2969
Fax:
310-450-3132
Cell: 310-480-5742
Email: SettleMan@aol.com
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Gregg Chapman has been a
member of the State Bar of California for twenty years. Over the
last eight years, he has worked for two of the largest national MSA
vendors in various positions including General Counsel, National
Sales Manager and Director of MSA Education. He has provided hundreds
of presentations on all topics regarding Medicare Set-Asides to the
insurance industry and attorney associations across the country.
To contact Gregg Chapman:
Gregg Chapman
National Settlement Consultants
12039 Jefferson Blvd.
Culver City, CA 90230
Phone: 800-845-2969
Fax: 310-450-3132
Cell: 310-480-5742
Email: greggchap@aol.com
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