The Centers for Medicare & Medicaid Services (CMS) has been deliberate and methodical in actions taken. Program change takes time and more often than not is incremental. We regularly remind clients that it is unwise to draw conclusions from CMS updates without consideration of all its existing and related policies. When evaluated in a vacuum the results can have potentially disastrous consequences.
Take for example CMS recent update to the WCMSA Reference Guide on June 3, 2014. A new section, 4.1.4 was added captioned “Hearings on the Merits of the Case”. Based solely on the section, some MSP attorneys have suggested that CMS is supporting an alternative to its recommended WCMSA approval process. Purportedly CMS would accept a Board’s decision, if heard on the merits, as to the set-aside amount necessary to adequately protect Medicare’s interest. Obviously, this would be a significant retreat from a long established CMS policy that recommends a clinical review of this exposure, making it purely a legal determination. These entities promote the idea that the settlement value comes first and the allocation must live within that value. Reviewed against the historical development of CMS policy, it is difficult, if not downright absurd, to arrive at such a conclusion.
42 C.F.R. §411.46(b) vests CMS with the authority to disregard a workers’ compensation settlement if it appears to represent an attempt to shift to Medicare the responsibility for payment of medical expenses that should have been paid by the claim. Parties seeking protection from this regulation have sought out the recommended CMS approval process for the WCMSA. Parties may also use alternatives, but remain at risk, if CMS later determines the medical portion was insufficient to protect its interest.
The language of the updated Section 4.1.4 does not run contrary to this long established policy. CMS is clear in the language offered that when a WC judge approves a WC settlement after a hearing on the merits, Medicare will generally accept the terms of the settlement, “unless the settlement does not adequately address Medicare’s interests”. CMS also mentions that when funds are specifically designated to non-medical, it will accept that designation. However, CMS does not state that what is left over is then “adequate” to protect Medicare’s interest. Quite the contrary, CMS reserves its rights under the regulation and MSP law to be adequately protected and to recover the entire settlement and/or disregard it entirely. If anything could be taken from 4.1.4, the Medicare beneficiary claimant is guaranteed a floor of benefits that are protected from recovery by Medicare, if the medical allocation is adequate. That is all.
The primary plan, who in this case would be the self-insured employer or the employer’s insurance carrier, would be wise to follow long established processes. The best protection remains securing CMS approval. If such option is not viable, as the particular case does not meet the review threshold, or the case is litigated, then a hearing on the merits which reviews and discusses the medicals would be important to defending future CMS claims. A board rubber stamp determination would offer no benefit.
Companies that suggest that Section 4.1.4 of the User Guide somehow changes the world as we know it are certainly attempting to make a splash with an interpretation the industry “dreams” of as they lay their heads down at night. Unfortunately, this interpretation is nothing more than a future nightmare for the insurer, long after the vendor has made their profit from proliferating such unsubstantiated ideas.