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The Centers for Medicare and Medicaid Services (CMS) has released an updated Workers’ Compensation Medicare Set-Aside (WCMSA) Reference Guide (Version 3.5, January 10, 2022), and has explicitly targeted [in Section 4.3 of the memo] the usage of non-submit, non-CMS approved Medicare Set Aside [MSA] products which have gained popularity in recent years. Practitioners have utilized these MSA products to provide for allocation for future medical expenses in workers' compensation settlements. However, the new memo causes pause for many, who now fear that CMS may view these allocations as “potentially” improperly shifting the claimant’s future medical treatment to Medicare in contravention of 42 C.F.R. 411.46.
Section 4.3 states as follows:
"A number of industry products exist with the intent of indemnifying insurance carriers and CMS beneficiaries against future recovery for conditional payments made by CMS for settled injuries. Although not inclusive of all products covered under this section, these products are most commonly termed “evidence-based” or “non-submit.” 42 C.F.R. 411.46 specifically allows CMS to deny payment for treatment of work-related conditions if a settlement does not adequately protect the Medicare program’s interest.
Unless a proposed amount is submitted, reviewed, and approved using the process described in this reference guide prior to settlement, CMS cannot be certain that the Medicare program’s interests are adequately protected. As such, CMS treats the use of non-CMS-approved products as a potential attempt to shift financial burden by improperly giving reasonable recognition to both medical expenses and income replacement.
As a matter of policy and practice, CMS will deny payment for medical services related to the WC injuries or illness requiring attestation of appropriate exhaustion equal to the total settlement less procurement costs before CMS will resume primary payment obligation for settled injuries or illnesses. This will result in the claimant needing to demonstrate complete exhaustion of the net settlement amount, rather than a CMS-approved WCMSA amount."
While the wording of Section 4.3 does not prohibit or ban the use of non-submit or evidenced based allocations, it appears that CMS is aggressively placing the industry on notice by stating that “as a matter of policy and practice” a claimant will need to show that the entire settlement is exhausted, minus procurement costs, before CMS will pay for claim related treatment if the settlement does not include a CMS-approved WCMSA. Therefore, it is clear that the memo is designed to discourage usage of these non-submit MSA's.
However, there are instances where non-submit MSA's may be necessary, depending on the facts of the case, including lack of recent medical treatment, threshold issues, etc. This means that some claims are ineligible to obtain a CMS-approved WCMSA amount and nothing in Section 4.3 (or any other section in the revised WCMSA reference guide 3.5) addresses that particular issue.
The practitioner should still be free to consider the non-submit option if that works. However, they should be aware that CMS has the non-submit MSA in their crosshairs, and must work with their clients and vendors in crafting detailed and creative settlements which make sure a full accounting is done on the allocated MSA treatment when spent, and that the parties are showing that Medicare's interests are adequately being taken into consideration.