Another Indication that a CMS Policy for LMSA Reviews is Imminent
Heather Sanderson
March 2, 2017

CMS recently issued documentation signaling that Liability Medicare Set-Asides (LMSAs) and No-Fault Medicare Set-Asides (NFMSAs) will be notated fields in CMS’ Common Working File (CWF). Effective October 1, 2017, Medicare Administrative Contractors (MACs) will begin denying payment for services associated with an open LMSA or NFMSA record. The CMS Manual Update can be found here, and the MLN Matters alert can be found here.

This update follows closely to other recent indications in the past year from CMS that it was working toward creating a voluntary LMSA/NFMSA review process. On June 9, 2016, CMS issued an Alert that it was considering expanding its voluntary MSA review process to include the review of LMSAs and NFMSAs. CMS stated that it planned to work closely with the stakeholder community to identify how best to implement this potential expansion and that it would schedule town hall conference calls later on in the year.

While CMS never did host a public town hall call on the topic of LMSAs, CMS continued to take other steps to follow through on the LMSA review proposal. Within the recent Workers’ Compensation Review Contractor (WCRC) Request for Proposal (RFP), CMS indicated that the newly awarded contractor would not only review Workers’ Compensation Medicare Set-Asides (WCMSAs) as it traditionally would, but also review LMSAs and NFMSAs. Within the WCRC RFP, there were clear indications that the newly awarded contractor would optionally begin reviewing LMSAs and NFMSAs July 1, 2018. The WCRC RFP further indicated that the new LMSA/NFMSA review process would have two categories: either a full review or a cursory review of the proposed LMSA/NFMSA, based upon settlement amounts. For our prior blog on the WCRC RFP, click here.

These recent steps are not exhaustive of all CMS attempts to create an LMSA review process. Recall that back in 2012, CMS published an Advance Notice of Proposed Rulemaking (ANPRM) which sought to formalize several options for Medicare beneficiaries and primary payers to protect Medicare’s future interests. One of the options would have been a formal CMS LMSA review process. This rulemaking was withdrawn in 2014 and no further legislative attempts to formalize a LMSA process via legislation has been attempted to date.

Currently, some Regional Offices of CMS will review proposed LMSA amounts based upon its workload. However, there has never been a formal review policy to date for LMSAs, and how CMS would take liability unique issues into account when reviewing an LMSA, such as comparative negligence and apportionment, is unknown. It is also interesting to note that a NFMSA was not mentioned in CMS’ proposed rulemaking back in 2012, and it seems that a notion of a NFMSA was mentioned for the first time ever in CMS’ recent June 2016 alert.  How NFMSAs would be calculated is also an unknown at this juncture, as generally most “no-fault plans” (as categorized by CMS) have limited policy funds available to pay future treatment.

Where are we at now? Franco Signor Commentary:

CMS adding fields to its CWF for LMSAs and NFMSAs certainly signals that CMS is serious this time about taking steps toward a formal LMSA/NFMSA review process in the near future. With regard to timeframes, the Alerts from CMS indicate that the LMSA/NFMSA fields will be added as of October 1, 2017, and that providers are not to bill Medicare where the beneficiary has an LMSA/NFMSA to pay for the services. Additionally, we know there is a possibility that the new WCRC will begin reviewing proposed LMSA/NFMSA amounts come July 1, 2018.

What we don’t know, and what isn’t clear from the recent CMS guidance is what will incentivize Medicare beneficiaries and primary plans to incorporate and/or submit LMSAs and NFMSAs at the time of settlement. Will Medicare deny coverage if no LMSA/NFMSA is established?

The MLN Matters Alert provides an interesting statement: Medicare does not make claims payment for future medical expenses associated with a settlement, judgment, award, or other payment because payment “has been made” for such items or services through use of LMSA or NFMSA funds. However, Liability and NoFault MSP claims that do not have a Medicare Set-Aside Arrangement (MSA) will continue to be processed under current MSP claims processing instructions.”

The question then is, what are the current MSP claims processing instructions for providers? In other words, if the parties do not an incorporate into their settlement or have CMS review a LMSA or NFMSA, will Medicare pay for the treatment or will the beneficiary be denied coverage? Current MSP claims instructions seem to indicate that Medicare would only be a secondary payer where the liability or no-fault plan has reported ongoing responsibility for medical. The instructions do not seem to indicate that providers should deny payment once they have received a liability or no-fault settlement. For CMS guidance on current MSP claims instructions for providers, click here and here.

As such, the current MSP claims instructions to providers does not seem to provide any teeth to enforcement of LMSAs and NFMSAs. If the current MSP claims instructions for providers indicated that MACs would use Total Payment Obligation to Claimant (TPOC) information to deny a beneficiary’s treatment for all items related to the injury until the entire TPOC has been exhausted on items related to the injury, then Medicare beneficiaries would certainly be incentivized to establish or have CMS review an LMSA or NFMSA. Arguably, Medicare may have the legal right under the MSP to deny payment for services that the primary payer is responsible or had responsibility to pay for. However, in practice, it does not seem apparent that CMS will deny future treatment where a TPOC is reported and no LMSA/NFMSA is established or reviewed by CMS.

We will continue to follow this issue and are hopeful that CMS engages stakeholders as it continues to craft its LMSA/NFMSA review process.


Heather Schwartz Sanderson, Esq., MSCC, CHPE, CLMP, CMSP
Chief Legal Officer, Franco Signor LLC