When settling cases with a Medicare Set Aside (MSA), often the ongoing compliance responsibility for the injured worker, including annual reporting to the Centers for Medicare and Medicaid Services (CMS), can be an afterthought. There is a common misunderstanding that CMS is not finding out about settlements and is not tracking how an individual spends those funds. However, many individuals that do not spend their funds properly find out the truth when they receive a denial letter in the mail – CMS is watching.
What’s Actually Happening After Settlement?
John was an injured individual who suffered a lumbar spine injury at his construction job. The insurance company offered him a ~$150,000 Medicare Set Aside (MSA) for his future medical treatment to settle out his case. John had been frustrated with utilization reviews and treatment denials, so with the advice of his attorney, he accepted the settlement to get out of the workers’ compensation system.
John was advised he was supposed to spend the money a certain way, and do some reporting, but was not aware of the specifics, and used some of his MSA money to purchase a new car. A few years later, his MSA account reached $0. The next time he went to his doctor, he showed his Medicare card. A few weeks after that, he got a letter from Medicare denying payment for his $150 physical therapy visit for his back. The letter said he should have settlement funds to pay for his treatment. Joe was not sure what to do, as he did not have funds left in his MSA. He called his attorney and asked him what to do.
While this example is simplified, it is a real situation that the injured worker and his attorney had to deal with; these issues are popping up after the settlement of workers’ compensation cases.
CMS is Denying Treatments
It’s been well over a decade since CMS implemented the capability “…to prevent Medicare from paying primarily for future medical expenses that should be covered by workers’ compensation Medicare set-aside arrangements (WCMSA).”
CMS explains in the WCMSA Reference Guide, v3.3, Sec. 18.0, “Medicare makes no payments related to the WC injury until the WCMSA has been used up. This is accomplished by placing an electronic marker in CMS’ systems used to pay or deny claims. That marker is removed once the beneficiary can demonstrate the appropriate exhaustion of an amount equal to the WCMSA plus any accrued interest from the account.”
In the instance where Medicare believes funds are available, they will issue a denial and a beneficiary will be alerted by way of a Medicare Summary Notice (MSN). An MSN is a statement Medicare issues to beneficiaries every three months indicating what they covered in the previous quarter. In the MSN, a specific code will be issued for denials and indicate, “[y]our claim is being denied by Medicare because you may have funds set aside from your settlement to pay for your future medical expenses and prescription drug treatment related to your injury (ies).” See sample redacted MSN with denial.
Moreover, “[i]f payments from the WCMSA account are used to pay for services other than Medicare-allowable medical expenses related to medically necessary services and prescription drug expenses for the [workers’ compensation] settled injury or illness, Medicare will deny all WC-injury-related claims until the WCMSA administrator can demonstrate appropriate use equal to the full amount of the WCMSA.” See WCMSA Reference Guide, v3.2, Sec. 17.3 (emphasis added).
Protecting Your Client – Professional Administration as a Solution
With denials being issued, it has become more pertinent than ever to ensure your client is protected after settlement. The majority of individuals settle and self-administer their MSA, meaning they manage all reporting, accounting, and fee negotiations on their own.
“I haven’t settled a case with a self-administered MSA in probably ten years simply because I find such a situation to be so concerning. I have tried to read CMS’s guide to a self-administered MSA several times. I am a lawyer and find the guide to be incredibly overwhelming and confusing,” says WILG President-Elect Mack Babcock. “I have no idea how a client would figure out all the complexities including, but not limited to, how to pay appropriate rates for their treatment, maintain appropriate records and comply with required reporting. I want my clients to be taken care of properly and I certainly don’t want to get a call when things go bad.”
If a client does not appropriately spend their funds in accordance with CMS guidelines, they jeopardize their future Medicare benefits, and risk denials.
“As former claimant counsel and now mediator, my primary concern about self-administration is whether the client will maintain integrity of the interest bearing MSA account and not utilize funds for non-compensable or unrelated injury purposes,” comments WILG Past President Chuck Davoli. “As a mediator, I’ve seen many claimant counsels often advise clients to use the MSA funds as they may see fit and underplay short or long term implications of MSA mis-management and potential effects on their future Medicare eligibility.”
Professional administrators manage all this complexity on behalf of the individual. Administrators ensure individuals are not overpaying on treatments and prescriptions by negotiating to state fee schedules and are ensuring proper depletion and reporting of the MSA account each year to CMS. Many attorneys are relying on professional administration to ensure that their client is protected from situations like these once they settle.
Catherine Tanaka Surbeck
“I always explain professional administration and the benefits to my clients when they have future medical care as part of their settlement,” says WILG Secretary Catherine Surbeck. “I want to be sure they understand the implications of mis-spending their funds, and that they know there is a resource out there to ensure they don’t have to manage it all on their own.”
Professional administration offers protection that the injured person’s future Medicare benefits will not be jeopardized due to improper spending of funds, and as such, should be a consideration in every settlement with future medical.