CMS Plans to Change Requirements for Approval of Zero Allocations; CMS MSA Review is Intended Only for Commutation Cases

The MSA industry has been abuzz, and Franco Signor has confirmed with the Workers’ Compensation Review Contractor (WCRC), that changes are being made to the requirements for CMS to approve zero allocations based upon denial of the workers’ compensation claim. We have been informed that these corrections will be outlined in a policy memo soon, but that some of the changes may have been shared as Parties submit requests for zero MSA allocations. The change in requirements for approval of zero allocations was the result of a recent internal quality review which revealed that review standards in place by the Contractor had not always been consistently followed. The WCRC has stated that CMS will now be requiring these guidelines to be published and the following will be necessary to approve a zero allocation:

1.       All draft or final settlement documents or a statement from the carrier or their attorney stating that there are none, if in fact none exist.

2.       All court rulings related to the claim, including but not limited to, issues of compensability.

3.       If no court rulings exist for the claim regarding compensability we will need to provide treatment records that demonstrate no further treatment for the industrial injury is required or we will need to provide a statement from the treating physician which specifies the last date of treatment, if any medications were prescribed, and states any future care recommendations.

The WCRC release date for this policy is unknown, but it appears these practices are currently being implemented.

Commentary: Our recommendation has always been where the workers’ compensation claim is completely denied, no medicals have been paid, and the claim is settling on a compromise basis CMS approval is not recommended. The CMS approval process has always been intended for commutation cases, where the workers’ compensation carrier/plan is funding future medical care.

CMS stated when they introduced their MSA review process in 2001 in the Patel memo that (see top of page 2, Patel Memo, July 23, 2001): “Set-aside arrangements are used in WC commutation cases, where an injured individual is disabled by the event for which WC is making payment."

Beyond CMS memoranda supporting that the CMS review process is only intended for commutation case, this best practice is also supported in the regulations, specifically, 42 CFR § 411.46(d) which states:

(d) Lump-sum compromise settlement: Effect on payment for services furnished after the date of settlement -

(1) Basic rule. Except as specified in paragraph (d)(2) of this section, if a lump-sum compromise settlement forecloses the possibility of future payment of workers' compensation benefits, medical expenses incurred after the date of the settlement are payable under Medicare.

(2) Exception. If the settlement agreement allocates certain amounts for specific future medical services, Medicare does not pay for those services until medical expenses related to the injury or disease equal the amount of the lump-sum settlement allocated to future medical expenses.

In summary, if no funds are allocated for future medical care in a compromise settlement, CMS is primary for all care post-settlement. The flawed practice of seeking CMS approval on fully denied compromise settlements using zero dollar MSAs was promulgated by many MSA vendors over the years.

In conclusion, our best practice and recommendation remains that compromise settlements in which nothing is being allocated for future medical should not be submitted to CMS.  It is our position that in fully compromised claims, that settlement language which addresses that Medicare’s future interest has been considered, but due to the fact that the claim is fully denied and Medicare has always remained primary, there will be no allocation for future medical care.

Those who continue submitting zero dollar MSAs to CMS will be advised of the more stringent requirements and must consider the risk of a counter-higher response from the review contractor.  With these new guidelines, it makes little sense to seek CMS approval of a zero allocation if they will only approve such when a) the court has ruled the claim is not compensable, thus there no need to allocate for future medical on the non-compensable injury in the first place; and b) when the treating physician has provided a statement indicating no future care, noting this has already been provided by CMS as a valid reason to not produce an allocation on a claim. 

In short, based on the MSP law, CMS Memorandum, and the review policy of the WCRC, the suggested Best Practice is to not submit fully denied compromise settlements to CMS for review and approval.

About the Author

Heather Schwartz Sanderson, Esq., MSCC, CHPE, CLMP, CMSP

Heather is Chief Legal Officer for Franco Signor LLC, the nation's compliance authority for Medicare Secondary Payer (MSP) matters. She has lectured on MSP compliance to the workers' compensation and liability insurance communities at conferences, associations, and individual offices nationwide. She is a regularly published author on court decisions and legislative reforms involving Medicare Set-Asides, conditional payments, and Mandatory Insurer Reporting issues. Understanding that compliance with the Medicare Secondary Payer Act can be at times complex and frustrating for those that handle claims with Medicare beneficiaries, Heather's goal is to speak and write with the primary goal being simple and understandable solutions to compliance. 

Heather can be reached at Heather.Sanderson@francosignor.com
Franco Signor's Blog can be found at: http://www.francosignor.com/msp-blog/

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