WC Experts Dread the Day CMS Imposes Liability MSAs

Sarasota, FL (WorkersCompensation.com) – The centers for Medicare and Medicaid Services, the folks that brought us Medicare set-asides in the workers’ compensation system, want to do the same for liability settlements. They’ve set their sights on next month to roll out a proposed rule, although that may be delayed until at least October, as Jean S. Goldstein explained in a recent blog post.

Even if CMS’ self-imposed deadline is delayed even further, it appears it will happen eventually. The idea is not sitting well with many in the workers’ compensation system.

“The anticipated LMSA program is likely to exponentially multiply many of the problems that currently exist with Worker’s Compensation Medicare Set Asides,” wrote Nathaniel F. Wienecke, senior vice president for federal government Relations for the American Property Casualty Insurance Association, in a recent opinion piece. “Not only would the creation of an LMSA approval process go far beyond CMS’s statutory authority, it is also bad policy. That is why virtually all MSP stakeholders, including beneficiaries, plaintiffs’ lawyers, defense lawyers, insurers, claims adjusters, and self-insured entities like large retailers, oppose the anticipated LMSA rule.”

Why LMSAs

The Medicare Secondary Payer system was created by Congress to ensure Medicare does not pay for medical expenses that are the responsibility of another party. While Medicare may pay the initial health care costs, it is ultimately reimbursed after a claim settles. Medicare set-asides are accounts intended to cover the future medical costs of the particular injury, to prevent Medicare from having to pay unnecessarily.

Workers’ compensation settlements often include MSAs, and often have been submitted to and approved by CMS. The idea is to make sure the injured worker has the money he needs for future medical care of his occupational injury without putting the financial burden on Medicare.

Unintended Consequences

For several years, CMS has toyed with creating a similar system for liability and no-fault insurance claims. The problem, according to experts, is that liability is just not the same as workers’ compensation.

“In concept, saving taxpayers money by ensuring liability settlements account for future medicals is a good thing,” said Dan Anders, chief Compliance Officer for Tower MSA partners. “In application, it’s a very difficult thing to do.”

As he explains, there’s a statutory scheme laid out as to how a workers’ compensation injury is accepted, a fee schedule in place, and various regulations. The payer funds the injured worker’s medical costs for the injury. A settlement typically involves money for an indemnity portion as well as future medical costs for the occupational injury, which is often financed through an MSA.

“Take that over to liability,” Anders said. “You effectively have an allegation of an injury against a certain party or multiple parties as being responsible for that injury. The claim may or may not include a demand for payment of medicals … in most of these there’s no acceptance of medicals. The payer isn’t saying ‘I’m responsible for these.’ Rather, you’ve got an allegation, a demand for settlement, and parties negotiating over liability, ultimately reaching a compromise dollar amount.”

The final settlement amount is often the policy limit, of which the injured person gets a portion. One-third goes for attorney fees, and there may be liens such as group health as well as other expenses. For a $100,000 settlement, the injured person would typically get about $40,000.

“If Medicare now wants future medicals, that’s going to take away from monies that would otherwise go to that claimant,” Anders said.

“I get it. If a settlement is hundreds of thousands or millions of dollars, I certainly understand where Medicare is coming from,” Anders continued.  “But for run-of-the-mill cases of several thousand or even tens of thousands of dollars, it’s difficult to see how that would amount to anything for Medicare … as opposed to the person who was injured. It will mean a lot more to them and their livelihood.”

Anders also points out that LMSAs may end up hurting Medicare if the injured parties opt not to seek settlements. “Medicare has to keep the incentive for settlement,” he said. “In liability Medicare doesn’t get reimbursed for past medicals until that case settles. It’s different from workers’ compensation, where Medicare can seek recovery. Medicare needs these settlements to get these past medicals. So they have to create that incentive for that claimant to pursue that case.”

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