Professional administration involves the use of a professional third-party to manage the portion of an injured individual’s settlement funds attributed to future (post-settlement) medical expenses, inclusive of a Medicare Set Aside (MSA). Specifically, in the Medicare and MSA realm, professional administrators are defined as, “corporate entities administering [MSA] funds after settlement who are responsible for reporting to Medicare.”1
When resolving a claim which includes a future medical component, there are potentially many parties at the table. There are also numerous benefits to having a post-settlement medical fund professionally administered. Part one of this series will outline the perspectives and benefits to the claimant / injured individual, their attorney, and Medicare.
Claimant / Injured Individual
The claims and settlement process – whether workers’ compensation or liability – can be a draining and burdensome experience for a claimant / injured individual. Difficulties are compounded when a settlement occurs that involves future medical care, and complexities increase when Medicare or other public benefits are implicated.
Following resolution of a claim, the injured individual is typically left without the support and resources which may have been available during the pendency of their claim. This is especially the case in workers’ compensation. The injured individual more than likely also doesn’t have the ongoing guidance from their attorney after resolution. They are often left alone to manage their future medical expenses. Professional administration provides critical benefits to an individual.
Medicare-Specific Considerations
An MSA allocates a portion of the settlement for future (post-settlement) medical expenses that are the subject of the underlying claim / treatment and which are covered and otherwise reimbursable by Medicare.2 When an MSA is incorporated, Medicare will not pay for Medicare-covered charges until the MSA is exhausted and accurately accounted for to the Centers for Medicare and Medicaid Services (CMS).
When an injured individual settles a claim with an MSA, there exists a whole host of obligations, outlined by CMS, with respect to administering the funds. These include:
- Establishing a separate interest-bearing account at an FDIC-insured institution;
- Expending funds only on Medicare-covered items casually connected to treatment related to the underlying workers’ compensation or bodily injury claim;
- Coordinating with providers to transmit invoices to be properly billed against the MSA funds;
- Maintaining proper records and accounting of the MSA;
- For every transaction with the account, the following needs to be tracked:
- Transaction date;
- Check number;
- Payable to or health care provider name;
- Date of service;
- Description (procedure, service, or item received; deposit; interest; other allowable expense);
- Amount paid;
- Any deposit amount;
- Account balance.
- Submitting annual reporting and attestation with proper documentation and receipts; and/or when the funds are exhausted (either permanently or temporarily).3
Also, CMS now accepts electronic attestation submissions from injured individuals, their representatives and professional administrators. While there are numerous benefits to this process, it adds technical complexity for the injured individual.
Moreover, if the MSA is improperly managed or administered, it could adversely affect the injured individual’s Medicare benefits and severely interrupt and complicate ongoing treatment. While current Medicare guidelines allow for an injured individual to administer an MSA, due to the complexities and risk involved, it is clear why CMS “highly recommend[s] that settlement recipients consider the use of a professional administrator for their funds.”4
In version 3.0 of the WCMSA Reference Guide, CMS also announced, for the first time, a specific use case where they highly recommend professional administration:
- CMS highly recommends professional administration where a claimant is taking controlled substances that CMS determines are ‘frequently abused drugs’ according to CMS’ Part D Drug Utilization Review (DUR) policy.5
CMS has identified opioids and benzodiazepines as frequently abused drugs. These medications are common in MSAs and it is critical a claimant’s attorney takes CMS’s guidance into consideration when deciding how the MSA will be administered. With these new guidelines, CMS is placing a greater emphasis on claimant safety.
Moreover, “CMS expects that WCMSA funds be competently administered in accordance with all Medicare coverage guidelines, including but not limited to CMS’ Part D Drug Utilization Review (DUR) policy. All professional administration programs should institute Drug Management Programs (DMPs) for claimants at risk for abuse or misuse of frequently abused drugs.” Sec. 17.3.
Savings
A professional administrator can typically provide significant savings to an injured individual on their treatment, prescription drugs and durable medical equipment through provider, pharmacy and equipment networks. These savings can be dramatic and drastically extend the life of the medical fund, greatly reducing the chance that it will prematurely deplete. Especially in the instance of administering an MSA, the additional savings will also help ensure that the injured individual’s out of pocket costs are mitigated.
Support
Up until the settlement, the injured individual likely had resources to rely upon during the pendency of their claim. This is especially the case in the instance of a workers’ compensation claim, where a regulated system provided for medical treatment, rehabilitation and other collateral support services. Following a settlement, that support is largely unavailable since there are no dedicated professionals to advocate on behalf of the injured individual. Professional administration can offer the necessary support, education and guidance to the injured individual relative to their post-settlement treatment and care.
Claimant’s Attorney
When an attorney settles a claim with their client involving funds for post-settlement medical expenses, they are concerned with many different questions, including:
- Will their client spend the monies appropriately?
- Will they remain in compliance to protect any public benefits?
- Will the money last throughout the length of required treatment?
- Could they themselves face exposure for any mishandling of the funds?
Professional administration provides solutions to these questions and adds a layer of security, protection and peace of mind for a claimant’s attorney.
Ensuring Their Client Spends Appropriately
A settlement event often provides sums of money to an injured individual at levels they’re not accustomed to and may create a situation which poses financial issues. When funds are earmarked specifically for post-settlement medical expenses, there is a risk these funds may be mismanaged or misspent. Following the settlement, even if their client was well educated regarding their obligations around utilizing those funds for related treatment, a claimant’s attorney may be left with a sense of uncertainty. The adage in the MSA industry is the concern that an injured individual may “buy a boat” with their funds specifically designated for injury-related medical expenses.
The claimant’s attorney’s concerns can be allayed by the utilization of a professional administrator. Professional administration ensures funds reserved specifically for post-settlement medical expenses are only expended on treatment in connection with the underlying injury. Professional administration ensures monies are spent in a targeted way to maximize the fund and also ensures adherence with any applicable compliance obligations (i.e. MSA administration requirements).
Improved Post-Settlement Dynamic with Their Client
The claimant’s attorney is on the front lines of educating their client on post-settlement administration, especially as it relates to MSAs. “If you are an injured worker who will need future medical treatment, an attorney may be able to explain this process and provide legal help. An attorney can also help you consider whether you should have a separate administrator for your WCMSA.” See WCMSA Reference Guide v.3.0, Sec. 6.0. The claimant’s attorney, absent an administrator, is likely the first person an injured individual will engage with if there are questions or issues arise regarding administering post-settlement funds. This puts an attorney in a difficult position post-settlement and creates a dynamic where the attorney could be at odds with their client.
Utilizing a professional administrator distances the claimant’s attorney from exposure around the potential for their client to mishandle their funds. The professional administrator has an independent fiduciary duty to the injured individual to educate and guide them through every step of the post-settlement administration process, so the claimant’s attorney does not have to, relieving the claimant’s attorney of those burdens and the potential for exposure.
It is important to note that, in the most recent WCMSA Reference Guide, CMS announced that as of April 1, 2020:
- “…all consent-to-release notes must include language indicating that the beneficiary reviewed the submission package and understands the WCMSA intent, submission process, and associated administration. This section of the consent form must include at least the beneficiary’s initials to indicate their validation”.6
These requirements are a significant change to the existing Consent to Release (CTR). They now require that the claimant attest to their review and understanding of critical documents and processes relating to the MSA, submission and administration.
Historically, for the most part, claimants have been a relatively passive participant in the preparation and, if applicable, submission of an MSA. However, with these new changes, it’s possible the claimant may play a more active role in the process – especially if the MSA is submitted. Claimant’s attorneys will undoubtedly be on the frontlines in guiding and counseling their clients with respect to the new consent form and related aspects.
This creates an increased responsibility on the part of a claimant’s attorney to the extent they’ll need to potentially review and explain the following to their client:
Submission Package
- See WCMSA Reference Guide, v3.0, sec. 10
- This includes, but is not limited to, such documents as a copy of the MSA, medical records and payment history
Intent of the MSA
- See, in particular, WCMSA Reference Guide, v.3.0, sections. 2.0 – 3.0
Submission Process
- See WCMSA Reference Guide, v3.0, sections 9.0 – 9.6
Associated administration
- See WCMSA Reference Guide, v.3.0, sections 17 – 19
- See also Self-Administration Toolkit for WCMSAs, v.1.3
Medicare
When a workers’ compensation claim is settled that includes payment for post-settlement medical expenses, Medicare indicates that “[a]ll parties in a… case have significant responsibilities under the Medicare Secondary Payer (MSP) laws to protect Medicare’s interests… [and that] [t]he recommended method to protect Medicare’s interests is [an MSA].”7
Protecting Medicare’s Interests
Medicare, in their own words, highly recommends professional administration. “Although beneficiaries may act as their own administrators, it is highly recommended that settlement recipients consider the use of a professional administrator for their funds.” See WCMSA Reference Guide, v.3.0, Sec. 17.1. This recommendation is for good reason. Professionally administering a post-settlement medical fund provides the highest levels of assurances that only treatment which is related to the underlying injury, and that is otherwise covered by Medicare (in the case of an MSA), is paid for.
The parties can have a sufficiently funded MSA, as well as approval from CMS, but if the funds are improperly administered, misspent, or if there is a lack of accounting and attestation, then all of these efforts are in vain. CMS’s goal behind the MSA program is to prevent a cost-shift back to the Medicare program for items and services covered by Medicare that were related to the underlying claim / settlement. Administration of the MSA is the key to ensuring that a cost-shift doesn’t occur.
Post-Settlement Coordination of Benefits
Medicare will not make any payments for the claimant’s medical expenses (related to the underlying injuries) until all funds from the MSA have been completely and properly exhausted. See WCMSA Reference Guide, v.3.0, Sec. 5.1. “Once the CMS-approved set-aside amount is exhausted and accurately accounted for to CMS, Medicare will pay primary for future Medicare-covered expenses related to the injury that exceed the approved set-aside amount.” Id. at Sec. 3.0.
For Medicare to be informed of the accounting and exhaustion associated with the MSA, they must be notified via the attestation process. This involves the submission of information to Medicare with respect to8:
- Total spent for medical services;
- Total spent for prescription drugs;
- Grand total of expenditures;
- Total of interest income the account earned, if any;
- Balance of WCMSA account at the end of the calendar year.
Any temporary depletion or permanent exhaustion of the funds must also be reported. If attestation reporting does not occur and there was depletion or exhaustion of the MSA, it is possible that Medicare may deny coverage.
Having a professional administrator conduct the attestation reporting will mitigate against the occurrence of Medicare not knowing if it is primary or secondary with respect to the status of depletion or exhaustion and facilitate coordination of benefits between the MSA funds and Medicare.
Conclusion
All parties and stakeholders to a settlement can leverage and reap the benefits of having a future medical account professionally administered. Part II will explore professional administration from the perspective of primary payers (insurance carriers / self-insureds), structured settlement brokers, and MSA vendors.
Notes
1 See Workers’ Compensation Medicare Set Aside Portal (WCMSAP) User Guide, v6.0, Chapter 2.2. (PDF).
2 See WCMSA Reference Guide, v.3.0, sec. 3.0 (PDF).
3See Self-Administration Toolkit for Workers’ Compensation Medicare Set-Aside Arrangements, v1.3, sec. 7 (PDF).
4See WCMSA Reference Guide, v.3.0, Sec. 17.1.
5See WCMSA Reference Guide, v.3.0, sec. 17.1.
6See WCMSA Reference Guide, v3.0, sec. 10.2 and Figures 10-1 and 10-2.
7See CMS.gov, Workers’ Compensation Medicare Set Aside Arrangements.
8See Self-Administration Toolkit for Workers’ Compensation Medicare Set-Aside Arrangements, v1.3, sec. 8.
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