Statutes v. Regulations v. Memos/Reference Guides: Which Contains the Force of Law as it Pertains to MSAs and MSP Obligations?


Sanderson Firm has been receiving numerous questions lately as to the recent WCMSA Reference Guide update which included a new Section 4.3. The workers’ compensation industry has numerous questions as to what the update means, and how it might translate over to the potential need to maintain or change current MSA (submit v. non-submit) practices considering the Reference Guide update. Our recent blog on the recent WCMSA Reference Guide update discusses this Update and our position on the Update in greater detail.

As a further update to our last blog, we thought it would be helpful to examine the Medicare Secondary Payer Act (MSP Act), and how we determine what is law versus what is the government/administrative agency’s interpretation or application of the law. Let’s explore in layman’s terms what statutes v. regulations v. policy memoranda all means, and then apply it to the MSP and MSA concerns.  This should help alleviate some questions for workers’ compensation payers as to the weight/force of law/lack of force of law from this WCMSA Reference Guide update.

Primary v. Secondary Authority

In the U.S. legal system, the weight of any source of material may be categorized as either a “primary” authority or “secondary” authority. Primary authorities carry the force of law. The United States Constitution, for example, is a primary authority. Similarly, statutes, regulations, and case law (court decisions) may all be categorized as primary authorities. Secondary authorities, on the other hand, may help explain or comment on the law, but they do not carry the force of law. The WCMSA Reference Guide, for example, is a secondary authority. Other examples of secondary authorities include legal encyclopedias, law review journal articles, and treatises.

In short, primary authorities are the law; secondary authorities are not the law.

Statutes: Laws Passed by a Legislature, Usually by Congress (Primary Authority)

Statutes are binding law and can create new rights or obligations. The MSP Act is a statute. Statutes may be challenged in court if they are unconstitutional, either as written or as applied by the government.

Regulations: Rules Setting Forth How the Government Will Apply Relevant Statutes (Primary Authority)

Regulations have the force of law. The government must follow the Administrative Procedure Act (APA) when making regulations. When a regulation is implemented, it is published in the Federal Register and given a section in the Code of Federal Regulations (CFR). Each federal agency is covered in a different chapter of the CFR. Most Medicare Secondary Payer regulations are found in Title 42 as it pertains to Public Health. Regulations may be challenged if the government does not follow the APA. Regulations also may be challenged if they go beyond the scope of the statute (ultra vires), or if they are unconstitutional, either as written or as applied by the government.

Policy Memos/Reference Guides/User Guides, etc.: Announcements from a Government Agency that Set Its Policies and Provide Guidance as to How the Agency Will Apply Relevant Statutes and Regulations (Secondary Authority)

Policy memos, reference guides and the like are issued by a governmental agency as to how it intends to apply relevant statutes and regulations. Statutes and regulations are boundaries for the government’s policies, and the government cannot make new laws or create new rights or obligations through policy memos. While memos do not have the force of law, generally a court will provide the agency wide deference in setting its policies. Policy memos may be challenged if they go beyond the scope of the relevant statutes and regulations (ultra vires) or if they are unconstitutional, either as written or as applied by the government.

The Million Dollar Question: As it pertains to Medicare Secondary Payer, do Policy Memos and Reference Guides Hold the Force of Law?

The short answer is no; however, it is not that simple. As mentioned previously, generally if challenged in court, deference to the Health & Human Services (HHS)/Centers for Medicare & Medicaid Services (CMS) will be provided. However, government agencies/CMS cannot create new rights or obligations.

As mentioned in our prior blog, 42 CFR 411.46 (d)(2) allows for parties to carve out a portion of the settlement for a beneficiary’s future medical needs, and if this occurs, the regulation states that CMS is to only “coordinate benefits” up to that future medical amount, not the full settlement amount.  This regulation justifies Non-Submit MSAs/EBMSAs that are defensible, based upon the individual’s life expectancy, and provides enough funds for the beneficiary’s lifetime as it pertains to Medicare covered items and services that were otherwise related to the workers’ compensation injury. This regulation has not been eliminated, thus is still stands and Non-Submit MSAs are a permissible method to settle workers’ compensation claims without jeopardizing the beneficiary’s future medical benefits.

Of course, on the other hand, 42 CFR 411.46(b)(2) is also still established law. Thus if there is a clear burden shift to Medicare and the future medical amount is not defensible and/or arbitrary, then certainly Medicare can recover/coordinate benefits up to the net total settlement amount. We need to understand the difference between the two scenarios- Reasonable/defensible Non-Submit MSAs versus MSAs that are an arbitrary number and not calculated based upon the beneficiary’s future care needs.

Lastly, because policy memos do not have the force of law, CMS cannot make submission of an MSA mandatory without amending the regulations to require it. Workers’ compensation payers should determine their risk tolerance and understand the above different scenarios.

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