CMS Issues Advanced Notice of Proposed Rulemaking on Future Medical (“LMSA’s”).
Jeff Signor
June 15, 2012

In a recent blog we highlighted a reference by CMS to an “Advanced Notice of Proposed Rulemaking” on the issue of “Liability Medicare Set Asides.” The final document has been sent to the Federal Register, where it will be published in a few days, and here is an advanced copy: CMS-6047-ANPRM.

In the document, the Agency proposes seven different options for treating future medicals in NGHP settlements. We have 60 days to provide our comments or this proposed rulemaking will take its next steps toward a regulation. This is your opportunity to be heard. We are willing to aggregate your comments for submission, and we have already received several thought-provoking comments. Please submit your comments to:

Let’s start with the exceptions. We are very pleased to see that CMS is proposing a position that we have taken with our clients on the issue of when Medicare’s interests do not need to be protected:

  • $300 Exemption. (See Option 5).
  • Fixed Payment Option in cases settling for $5,000 or less. (See Option 5).
  • Self Calculated Conditional Payment Option in cases settling for $25,000 or less. (See Option 5).
  • Existence of another primary payer, like Workers’ Compensation or No-Fault.
    (See Option 2).

We encourage you to read each of the seven options. Here are our high level thoughts of the effect that this proposed rule could have to the liability industry.

  • Pay careful attention to the proposed definitions section, at pages 8 and 9. How terms are defined can lead to significant confusion in the liability industry where liability and relatedness of injury to tort are not as precise and CMS is envisioning;
  • Option 1 really is not an option. A Medicare beneficiary will not settle the claim, and agree to pay for all future-related care and treatment from the settlement, until all settlement funds are exhausted. This option has the effect of a claimant commencing suit to achieve exactly what the beneficiary already has: Medicare benefits, or some entity to pay for treatment. We commonly refer to this option as the Poor Man’s MSA;
  • Option 2 includes the language “expectation of a Medicare beneficiary within 30 months.” This language does not fit the liability claim. The most glaring reason concerns the fact that there is no reporting requirement, under Section 111 or under the existing Medicare regulations, for the “almost Medicare beneficiary.” It is already difficult to obtain Social Security Numbers from someone who already is a Medicare beneficiary — It will be next to impossible to obtain SSN’s from someone who is “almost a Medicare beneficiary;”
  • Option 6 a, Up Front Payment to Medicare, appears to bring Workers’ Compensation plans into the scope of this proposed rulemaking;
  • This proposed rulemaking document is using the term “conditional payments” to mean past and future incident-related payments made by Medicare. This statement needs further clarification to define who is responsible for such payments. The Medicare beneficiary may be responsible for this, but primary plans are statutorily obligated for conditional payments, so if Medicare is taking an official position that post-settlement payments made by Medicare, related to the loss, are also “conditional” then primary plans would also be obligated to manage the future component;
  • There are no timelines offered for submission, review and appeal.

Overall, the document is attempting to offer a level of precision on a topic that is not precise. For example, the severity of injury formula’s and concepts do not translate in a liability claim atmosphere where fault is usually at least somewhat in dispute. We like to say that CMS is using a scalpel to arrive at MSP solutions when the liability industry is using a chainsaw. Such precision is nearly impossible to reach consensus amongst traditionally adverse parties.

This is where success of the Hadden appeal is critical. Recall that Hadden (now on a writ before the US Supreme Court seeking certiorari) deals with the concept that if a claimant takes less in a settlement, based upon factors of fault, then Medicare should also take less. This will be an important case to monitor. Without a fault-based analysis, Medicare will continue to take full value.

We encourage you to email us your comments!