CMS Targets Non-submit and Evidence-based MSAs

On January 10, 2022, CMS issued new revisions to the Worker’s Compensation Medicare Set-Aside arrangement (WCMSA) reference guide, which have significant impact on non-CMS approved Worker’s Compensation MSAs.

Previously, the longstanding position and guidance from CMS has been that CMS approval of the proposed WCMSA amount is not required. However, in section 4.3 of the new reference guide, CMS has made an addition in their published recommendations regarding non-submitted MSAs.

The new language on the guide states that “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’s programs 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.” (emphasis added). The guide goes on to state that CMS will deny payment for medical services related to the workers’ compensation injury up to the gross amount of the settlement, less procurement costs, before CMS will resume primary payment of obligation. The guide further states, “This will result in the Claimant needing to demonstrate a complete exhaustion of the net settlement amount, rather than a CMS approved WCMSA amount.”

The change in the reference guide indicates that CMS is shifting its voluntary submission language to compulsory. Often, the parties may have a proposed MSA and choose not to submit to CMS for approval. The language in the reference guide essentially will cause a chilling effect of this type of settlement, as it effectively requires the parties to submit an MSA for CMS approval. If the parties choose to forego submission of their MSA, CMS will deny medical services to the full amount of the settlement, minus procurement class, if there is no submission.

Certainly, the language in the new reference guide is contradictory to the additional information in the new version of the reference guide, which reiterates that CMS approval is currently voluntary. Further, it is unclear whether CMS intends to apply this new policy and practice prospectively or if they will retroactively review settlements prior to the date of release of the new reference guide on January 10, 2022.

Until there is additional clarification from CMS regarding non-submit MSAs, it is unlikely that Claimant’s attorneys will agree to utilize evidence-based MSA’s or non-submit MSA proposals moving forward. This raises particular concerns regarding valuation of a claim, since many CMS proposals require over inflation of future medical expenses, to include the utilization of opioids for the duration of the Claimant’s lifetime. Such extrapolation of treatment over a lifetime is neither medically responsible nor supported by the medical evidence for a claim, and yet it is required in MSA proposals. Certainly, such impractical and unreasonable methods for measuring a Claimant’s future lifetime Medicare-covered expenses have pushed parties who would like to settle to utilize indemnified or evidence-based MSA’s, and to decide not to submit Medicare set-aside proposals to CMS.

We will continue to monitor the dialogue between CMS and the Worker’s Compensation parties. However, these new changes will certainly require the parties to reevaluate their use of evidence-based MSAs, and non-submit MSAs moving forward, despite CMS’s conflicting guidance. Given the Commission’s mandatory indemnification language under such settlements, significant caution should be considered before proceeding with non-submit MSAs.

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