4/21/2016

Obtaining Optimal Outcomes in Workers’ Compensation Medicare Set-Asides

Knowing the right strategies is imperative for achieving optimal cost-savings outcomes.

By Heather Sanderson

The Workers’ Compensation Medicare Set-Aside (WCMSA) is a tool recommended by the Centers for Medicare and Medicaid Services (CMS) to evidence the protection of Medicare’s interests for workers’ compensation settlements. A fully accepted claim with undisputed treatment or injuries is rather simple from a submission and CMS review standpoint. However, where an employer or insurer has disputed injuries or limited specific treatment based on a state workers’ compensation law or a court order, WCMSAs can become more complex should the parties wish to submit one and have CMS align its WCMSA determination in accordance with that state law or court order to effectively obtain a reduced allocation. Knowing the right strategies in these types of settlements is imperative for achieving optimal cost-savings outcomes.

First, let’s delve into what CMS guidance, Medicare Secondary Payer (MSP) regulations, and case law say about CMS’ deference to state laws and court orders. With regard to state laws, CMS has stated in its policy memorandum that it will recognize and honor any noncompensable medical services, provided that a copy of the applicable state law or statute is forwarded to the coordination of benefits contractor (COBC).

Regarding court orders, CMS states in WCMSA Reference Guide version 2.4 (section 4.1.4) that, if a workers’ compensation judge approves a settlement after a hearing on the merits, then Medicare generally will accept the terms of the settlement, unless it does not adequately protect Medicare’s interests. It is important to note that CMS requires the court order to be issued “after a hearing on the merits.” In other words, a stipulation by the parties that liability is fully disputed is not binding on CMS.

With regard to regulations, 42 U.S.C. Section 1395y(b)(2)(B)(ii) states that the employer’s responsibility under the Medicare Secondary Payer Act must be demonstrated. That is, the employer must have or have had the responsibility to make payment with respect to the item or service (e.g., medical services). As for case law, the recent decision in Caldera v. The Insurance Company of the State of Pennsylvania determined that Medicare cannot force the employer’s insurer to be responsible for payment regarding injuries or treatment that the insurer would not be responsible for under state law.

With that background in place, let’s now look at the practical application of state law and WCMSAs. It is important to recognize that the workers’ compensation review contractor (WCRC), who reviews WCMSAs, does have attorneys on staff to assess legal issues. However, WCMSA submitters should not expect CMS to figure out their legal arguments. The submitter must not only provide a copy of the relevant state law or court order in the submission package, but also argue the binding nature of the state law or the court order to CMS in the WCMSA proposal (putting it front and center is always best). Legal advocacy and persistence in driving the insurer’s legal position with regard to the workers’ compensation claim is imperative when preparing WCMSA submissions for CMS approval.

As for practical application, legal advocacy with state laws and court orders can be extremely helpful to an employer or insurer when submitting WCMSAs to CMS.

First, SB 863 launched independent medical review (IMR) for California workers’ compensation claims. This important shift in how medical treatment is managed in a workers’ compensation claim has inevitably led to adjustments for WCMSAs. SB 863 provides that IMR decisions are final and binding. Therefore, Medicare must defer to these IMR decisions, even where CMS policy and guidance typically defers to the treating physician’s opinion.

Recent WCMSA submissions arguing the binding nature of IMR opinions in California claims have proven successful with CMS, and CMS has been abiding by these IMR determinations. In a recent California WCMSA submission, an IMR issued an opinion that a spinal cord stimulator (SCS) was not reasonable or necessary for the claimant, despite the treating physician’s indication that one might be needed in the future. CMS abided by the IMR decision in its WCMSA determination, saving the insurer a great deal of cost in the WCMSA because the SCS was not included in the allocation.

California is just one example where state law advocacy can provide for a great deal of cost savings in WCMSA submissions. Other states that limit the length of medical treatment, such as Georgia’s limitation of noncatastrophic claims to 400 weeks and Wisconsin’s treatment limitation to 12 years, should be taken into consideration when submitting WCMSAs in these jurisdictions as well.

Second, CMS has recognized that it is bound by court orders issued after a hearing on the merits, and recently there has been a trend of CMS abiding by court orders even if they are dated after CMS’ determination. CMS historically has not taken into account any documentation, whether medical or legal, that postdates the CMS determination date upon additional review of the WCMSA. However, this appears to be changing, and CMS appears to be recognizing that it is bound by court orders issued after a hearing on the merits despite the timing of the issuance of the court order.

State workers’ compensation laws and court orders can be extremely beneficial in obtaining optimal outcomes when submitting a WCMSA to CMS. However, because CMS review practices can vary depending upon each reviewer, results may differ from case to case. Therefore, it’s always important to recognize that submission of a WCMSA to CMS, even if the settlement meets the review threshold, is a voluntary process. Settling parties do have the option of protecting Medicare’s interests in their settlements without undergoing the voluntary submission process. Each settlement should be assessed based upon the specific facts, legal and clinical issues, and the parties’ appetite for risk.



Heather Sanderson is chief legal officer for Franco Signor, where she provides compliance counseling. She has been a CLM Fellow since 2011 and can be reached at heather.sanderson@francosignor.com, www.francosignor.com.

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