Medicare Update: CMS Withdraws Proposed MSA Rules for Liability Settlements
We recently learned that the Centers for Medicare and Medicaid Services (“CMS”) withdrew a set of proposed rules which were meant to establish guidelines for liability Medicare Set-Aside considerations. This may not have been so much a function of CMS deciding not to pursue liability MSA rules, but perhaps more a preemptive move by CMS to avoid the Office of Management and Budget (“OMB”) rejecting the rules as submitted.
By way of background, CMS originally published formal Advance Notice of Proposed Rulemaking (“ANPRM”) in the Federal Register on June 15, 2012. CMS requested comments on various options under consideration for meeting obligations to protect Medicare’s interests with respect to future medicals in liability settlements.[1] CMS acknowledged there was currently only a formal review process for workers’ compensation settlements, although that submission process was still completely voluntary. There was no similar process in liability insurance. The question posed by CMS was whether Medicare should provide a similar process in liability insurance and, if so, how should it be implemented? CMS was interested in the feasibility and usability of several outlined options and whether it would provide sufficient guidance.
As published by the Federal Register, under Unified Agenda 0938-AR43, we know the ANPRM Comment Period ended on August 14, 2012. We had anticipated that CMS would either issue a Notice of Proposed Rulemaking (“NPRM”), or perhaps even an Interim Final Rule. According to the Federal Register, CMS did, in fact, release an NPRM in May 2014, although it was apparently not published. “Medicare Secondary Payer and ‘Future Medicals’ (CMS-60470P)” was apparently reviewed by the Office of Management and Budget (OMB), but was withdrawn by CMS and concluded as of October 8, 2014.[2] No explanation for why the proposed rules were withdrawn has been provided.
What Was In the Proposed Liability Rules?
The set of rules that was ultimately submitted by CMS was never formally published, so we do not know exactly what CMS proposed. However, we do know from studying the ANPRM the types of concepts that were at least being considered by CMS.
In the ANPRM, CMS had introduced several new proposed definitions for terms including: Chronic Illness/Condition,[3] Date of Care Completion,[4] Future Medical Care (“future medicals”),[5] Physical Trauma,[6] and Major Trauma.[7]
But perhaps more importantly, CMS proposed seven different options for Future Medicals. Options 1 through 4 were available to Medicare beneficiaries and individuals not yet beneficiaries, while Options 5 through 7 were available to beneficiaries only.
Option 1. The individual/beneficiary pays for all related future medical care until his/her settlement is exhausted and documents it accordingly.
Under this option, the beneficiary may choose to govern his/her use of his/her settlement proceeds himself/herself. Under this option, he/she would be required to pay for all related care out of his/her settlement proceeds, until those proceeds are appropriately exhausted. As a routine matter, Medicare would not review documentation in conjunction with this option, but may occasionally request documentation from beneficiaries selected at random as part of Medicare’s program integrity efforts.
Option 2. Medicare would not pursue “future medicals” if the individual/beneficiary’s case fits all of the conditions under either of the following headings:
- The amount of liability insurance (including self-insurance) “settlement” is a defined amount or less and the following criteria are met:
- The accident, incident, illness, or injury occurred one year or more before the date of “settlement;”
- The underlying claim did not involve a chronic illness/condition or major trauma;
- The beneficiary does not receive additional “settlements;” and
- There is no corresponding workers’ compensation or no-fault insurance claim.
- The amount of liability insurance (including self-insurance) “settlement” is a defined amount or less and all of the following criteria are met:
- The individual is not a beneficiary as of the date of “settlement;”
- The individual does not expect to become a beneficiary within 30 months of the date of “settlement;”
- The underlying claim did not involve a chronic illness/condition or major trauma;
- The beneficiary does not receive additional “settlements;” and
- There is no corresponding workers’ compensation or no-fault insurance claim.
Comment was requested on appropriate defined amounts for Options 2a and 2b.
Option 3. The individual/beneficiary acquires/provides an attestation regarding the Date of Care Completion from his/her treating physician.
- Before Settlement
When the individual/beneficiary obtains a physician attestation regarding the Date of Care Completion from his or her treating physician, and the Date of Care Completion is before the “settlement,” Medicare’s recovery claim would be limited to conditional payments it made for Medicare covered and otherwise reimbursable items and services provided from the Date of Incident through and including the Date of Care Completion. As a result, Medicare’s interest with respect to “future medicals” would be satisfied. The physician must attest to the Date of Care Completion and attest that the individual/beneficiary would not require additional care related to his/her “settlement.”
- After Settlement
When the individual/beneficiary obtains a physician attestation from his or her treating physician after settlement regarding the Date of Care Completion, Medicare would pursue recovery for related conditional payments it made from the date of incident through and including the date of “settlement.” Further, Medicare’s interest with respect to future medical care would be limited to Medicare covered and otherwise reimbursable items and/or services provided from the date of “settlement” through and including the Date of Care Completion. The physician must attest to the Date of Care Completion and attest that the individual/beneficiary would not require additional care related to his/her “settlement.”
Option 4. The Individual/Beneficiary Submits Proposed Medicare Set-Aside Arrangement (MSA) Amounts for CMS’ Review and Obtains Approval.
CMS had recently received a high volume of requests for official review of proposed liability insurance (including self-insurance) MSA amounts. This prompted CMS to consider whether to implement a formal review process for proposed liability insurance (including self-insurance) MSA amounts. CMS specifically solicited comment on how a liability MSA amount review process could be structured, including whether it should be the same as or similar to the process used in the workers’ compensation arena, whether review thresholds should be imposed, etc.
Option 5. Expansion of current Medicare’s recovery options.
(1) $300 Threshold. If a beneficiary alleges a physical trauma-based injury, obtains a liability insurance (including self-insurance) “settlement” of $300 or less, and does not receive or expect to receive additional “settlements” related to the incident, Medicare will not pursue recovery against that particular “settlement.”[8]
(2) Fixed Payment Option. When a beneficiary alleges a physical trauma-based injury, obtains a liability insurance (including self-insurance) “settlement” of $5,000 or less, and does not receive or expect to receive additional “settlements” related to the incident, the beneficiary may elect to resolve Medicare’s recovery claim by paying 25 percent of the gross “settlement” amount.
(3) Self-Calculated Conditional Payment Option. When a beneficiary alleges a physical trauma-based injury that occurred at least 6 months prior to electing the option, anticipates obtaining a liability insurance (including self-insurance) “settlement” of $25,000 or less, demonstrates that care has been completed, and has not received nor expects to receive additional “settlements” related to the incident, the beneficiary may self-calculate Medicare’s recovery claim. Medicare would review the beneficiary’s self-calculated amount and provide confirmation of Medicare’s final conditional payment amount.
Option 6. The Beneficiary Makes an Upfront Payment – 2 variations being considered.
Variation 1: If Ongoing Responsibility For Medicals was imposed, demonstrated or accepted and medicals are calculated through the life of the beneficiary or the life of the injury. Review and approve a proposed amount to be paid as an upfront lump sum payment for the full amount of the calculated cost for all related future medical care.
This option would generally apply in workers’ compensation, no-fault insurance situations or when life-time medicals are imposed by law.
Variation 2: If Ongoing Responsibility For Medicals was NOT imposed, demonstrated or accepted and medicals are calculated through the life of the beneficiary or the life of the injury. Beneficiary may elect to make an upfront payment to Medicare in the amount of a specified percentage of “beneficiary proceeds.”
This option would most often apply in liability insurance (including self-insurance situations, primarily due to policy caps.
Option 7. The Beneficiary Obtains a Compromise or Waiver of Recovery.
If the beneficiary obtains either a compromise or a waiver of recovery, Medicare would have the discretion to not pursue future medicals related to the specific “settlement” where the compromise or waiver of recovery was granted. If the beneficiary obtains additional “settlements,” Medicare would review the conditional payments it made and adjust its claim for past and future medicals accordingly. We specifically solicit comment on whether this approach is practical and usable, as it relates to “future medicals.”
Medicare has warned that if this option has been elected, there is no right to appeal the fixed payment amount or request a waiver of recovery for the fixed payment amount.
Practice Pointers
At least for now, we are left with no formal guidelines for submitting liability MSA’s to CMS for review. We can anticipate the submission process, if and when formally established, will still be voluntary.
Importantly, just because there are no formal procedures or rules in place for CMS to review a liability MSA, the requirement that settling parties consider Medicare’s interests pursuant to the Medicare Secondary Payer Act remains in place. Contact Teague Campbell’s Medicare Settlement Solutions team to discuss options available for considering and protecting Medicare’s interests.
[1] 77 F.R. 35917; http://www.gpo.gov/fdsys/pkg/FR-2012-06-15/pdf/2012-14678.pdf
[2] Under Executive Order 12866, the Office of Information and Regulatory Affairs discloses such information to the public about its regulatory reviews. RIN 0938-AR43 shows the NPRM was issued in November 2013.
[3] The illness/condition persists over a long period of time. The term is generally applied when the course of a disease or condition lasts for more than 3 months. If the individual/beneficiary alleges an injury that is a chronic illness/condition, it is presumed that future medical care will be required. Examples of chronic diseases include, but are not limited to: Chronic airflow limitation, including asthma and chronic bronchitis; cancer, diabetes; quadriplegia; and nephrogenic systemic fibrosis.
[4] The date the individual/beneficiary completed treatment related to his or her “settlement.” The individual/beneficiary’s treating physician must be able to attest that the individual/beneficiary has completed treatment and that no further medical care related to the “settlement” will be required.
[5] Medicare covered and otherwise reimbursable items and services that the individual/beneficiary received after the Date of “Settlement.” This definition specifically applies to items and services related to the individual/beneficiary’s settlement, judgment, award, or other payment.
[6] An injury (as a wound) to living tissue caused by an extrinsic agent. This also includes blunt trauma, which refers to injury caused by a blunt object or collision with a blunt surface (as in a vehicle accident or fall from a building).
[7] Serious injury to two or more Injury Severity Score (ISS) body regions or an ISS greater than 15. The ISS body regions include the following: Head or neck, Face, Chest, Abdomen, Extremities, External.
[8] By CMS memorandum issued on February 28, 2014, the $300.00 minimum threshold was raised to $1,000.00.