We believe from reliable sources, that the House Ways and Means Committee intends to look at the Workers’ Compensation Medicare Set Aside Legislation that is currently pending. The legislation, Senate Bill #1514 and HR#2649 was introduced a little less than two years ago and a recent congressional briefing by the House Ways & Means Committee on June 16th is a strong indicator that the committee is willing to review it. Keep in mind, Medicare jurisdiction in the House is shared by two committees – Ways & Means and Energy and Commerce. Therefore it is important to monitor Energy & Commerce to determine if they agree with Ways & Means or will block it.
Aside from watching Energy & Commerce, it is important to monitor for a Congressional Budget Office (CBO) score. Our sources indicate this may be in the works starting July 29th. If it does not score, the chances increase for passage. However, the bill as presently drafted would more than likely score unless it is redrafted. The cost driver as we understand it is the $25,000 exemption from Medicare Set Asides. Additionally, the bill is not clear that this would only apply to MSAs. Clearly, if this threshold also applied to conditional payments, this would be an additional cost to the Medicare Trust Fund. While today CMS does not offer approval for Medicare Set Asides with regard to workers’ compensation cases that settle for $25,000 or less, it still expects its rights to be protected in some fashion. That protection in the current version of the legislation would be eliminated which would lead to a score, unless lowered. The reason is that the Medicare Trust Fund today can expect such settlements to pay for future Medicare related treatment, but would not have that protection under this version of the legislation. Because of this, we could expect a redraft by legislative counsel to include CMS commentary on the legislation to likely occur.
For those of you that have not had an opportunity to review the legislation, the following is our summary of the key elements of the legislation and our commentary with regard to how we believe it could work. Click here to see the current legislative text.
The bill will amend the Medicare Secondary Payer Act. It will be limited to workers’ compensation settlements and can be referenced as the Medicare Secondary Payer and Workers’ Compensation Settlement Agreements Act of 2015.
A workers’ compensation law or plan will not be treated as a primary plan for protecting Medicare’s interest in the following situations:
- Settlement amount does not exceed $25,000;
- Claimant is unlikely to become eligible for Medicare benefits within 30 months of the settlement agreement date;
- Workers’ compensation law or plan is not eligible for payment of medical expenses after the date of the settlement agreement; and
- Settlement agreement does not extinguish future medical benefits.
Franco Signor Commentary: As mentioned above, a potential CBO scoring issue is the removal of all workers’ compensation settlements from requirement to protect Medicare’s interest that resolve at or below $25,000. As mentioned previously, if this threshold applies to conditional payments, it will certainly cause a major scoring issue. To reduce a potential score this number may need to be revised; Currently the threshold for liability settlements is $1,000. Also, the third point may need to be clarified that a QMSA would need to be in place, otherwise it could potentially be read to exclude all workers’ compensation settlement agreements, as the operation of such agreements does typically extinguish payment of future medical benefits.
The proposed legislation codifies certain key CMS policies and will no longer be subject to change without legislative amendment. They are:
- Method to calculate the settlement amount;
- Determination of Medicare eligibility within 30 months;
- Defines compromise as a workers’ compensation claim that is denied or contested in whole or part that does not provide for full benefits
- Defines commutation as a workers’ compensation claim that is not disputed and to include all future workers’ compensation benefits payable
- Defines a workers’ compensation claimant to mean a worker who is covered under a workers’ compensation law or plan and submits a claim or accepts benefits;
- Defines a workers’ compensation law or plan means a law or program administered within a state; Longshore and Harbor Workers’ Compensation Act and non-subscriber plans;
- Defines a workers’ compensation payer to mean the entity liable to make the payment of the benefits, such as a carrier or a self-insured; and
- Defines a workers’ compensation settlement agreement to mean an agreement that compromises or commutates workers’ compensation benefits.
Franco Signor Commentary: The definitions are helpful to manage the current challenges Parties in resolving a workers’ compensation claim involving a Medicare beneficiary or reasonably expected Medicare beneficiary. It would be beneficial to add a cooperation requirement by the Workers’ Compensation Claimant to provide the necessary government forms that will help in the determination of the reasonable expectation requirement. This process today can take months, but if done on-line with the claimant’s cooperation in minutes at www.ssa.gov.
The legislation codifies a Medicare Set Aside and labels it as a Qualified Medicare Set Aside (QMSA). The QMSA if completed in accordance with the provisions of this section discharges a Workers’ Compensation Law or Plan’s obligation to protect Medicare’s interest. To be effective, it would not require submission to CMS for any approval. The legislation defines it to include a provision in a settlement agreement that provides for a payment of the lump sum, annuity or a combination of the two that provides for future probable Medicare treatment related to the claim. It also defines the amount the actual dollar amount.
The requirements of a QMSA must take into consideration the full payment obligation for medical benefits and determined in the following way:
- Based on the illness or injury giving rise to the claim;
- The age and life expectancy of the claimant involved;
- The reasonableness of and necessity for future medical expenses related to the illness or injury;
- The duration of and limitation on benefits payable within the jurisdiction; and
- The regulations and case law relevant to State workers’ compensation law or plan
The legislation codifies what items or services should be included and excluded in the QMSA which are:
- Items and services that are covered and otherwise payable under Medicare; and
- Excludes items not covered by the workers’ compensation law or plan;
The legislation requires the following in calculating the QMSA:
- Workers’ Compensation Fee Schedule effective in the jurisdiction; and
- Adjustment for compromise agreements based on the percentage of reduced benefits.
While the legislation does not require CMS approval, it does allow for optional CMS approval. However, CMS must approve within 60 days after submission. Should CMS disapprove any portion of the QMSA, the Secretary is required to provide written reasons for it. The Parties would also have a right of appeal directly to the Administrative Law Judge that could lead to review by a court. The Parties could request, but are not required to ask for a reconsideration before going to an Administrative Law Judge. Deadlines are established for the appeals process, typically 30 day periods are established.
The legislation also provides for professional administration or direct payment to CMS of the QMSA amount to discharge the responsibility. Finally, the legislation codifies the regulations that limit exposure to the Workers’ Compensation Law or Plan to the settlement amount, and liability from Providers are limited to what would be paid under the applicable fee schedule. Even more importantly it emphasizes that state law will control the level of benefits provided and the value of those benefits.
Franco Signor Commentary: The critical piece of the legislation is the application for state law for both the level and value of the benefits. CMS currently recognizes state law, but only after a hearing on the merits. The legislation could benefit from establishing a burden of proof during the administrative appeals process to outline how statutes, case law and law of the case would be handled before the burden shifts to CMS to disprove. Otherwise, only determination on the merits would be looked at which do not typically occur until Parties finalize the settlement. Also, while most states have fee schedules applicable for the provision of medical services, the same does not exist for prescriptions. Having reference to a schedule outside of AWP or a reduction percentage that could be applicable would make sense.
Roy A. Franco
Chief Legal Officer
Franco Signor LLC