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This terminology and acronym has become the latest “buzz-word” in the
insurance/legal industry and is fast becoming a key ingredient to
bringing a claim to settlement and conclusion. This process is currently
common practice in the Worker’s Compensation and Liability arenas, and
could move into other areas of insurance coverage as it is assimilated
into each carrier’s routine.
What is a Medicare Set Aside Allocation?
A MSA as a simple concept, is an accurate projection of the lifetime
future medical costs associated with a claim, that are anticipated to be
Medicare covered services. It is a cost projection that goes the
additional step to include a separate description and “allocation” of
those services that would traditionally be covered by Medicare if there
was not another funding source available. Those costs are “set side”
from the “allocation” for the reimbursement of qualifying future medical
expenditures in an effort to protect Medicare’s interest.
How did this concept evolve?
In an effort to conserve Federal dollars and protect the Social Security
and Medicare funds, the concept of the Medicare Secondary Payer (MSP)
legislation was introduced around 1980, although it did not come to the
forefront until 1995. The core concept of this legislation proposed that
Medicare would always remain the “secondary payer” if a “primary payer”
existed, regardless of the status of the claim with the primary payer.
This statute was adopted to protect Medicare’s interests by curtailing
the common practice of shifting the burden of the cost of future care to
Medicare, in the event of a claims settlement. The statute applies to
liability cases and benefits available under the Federal Black Lung and
LongShore programs, but the majority of the focus lies with Worker’s
Compensation benefits, as they represent the largest percentage of
claims. In May 2001, after a lengthy study, a report was submitted to
Congress to confirm the potential loss of billions of dollars if the
statute was not enforced. At that point the Center for Medicare and
Medicaid Services (CMS) was created within the HCFA structure, to focus
on coordination of benefits from primary payer sources. According to the
Policy enacted 7/11/01, CMS requires that Worker’s Compensation carriers
proposing settlements that include dollars allocated for future medical
expenses obtain prior approval of the MSA from their regional CMS
office.
Who is involved?
Medicare Set Aside Allocations require input from the providers, injured
worker, plaintiff and defense councils and the carrier, to provide the
most accurate and up to date information to compile the MSA. Provision
of current data allows the consultant to offer the most valid future
care projections and the most accurate representation of an appropriate
set aside allocation to protect Medicare’s interests. Once an allocation
is complete, it is submitted to CMS for approval.
How do you determine if a claim requires an MSA?
In the CMS policy memorandum of 2001, and subsequent revisions, there
are two categories of settlements that require MSA consideration:
Class 1 – the settlement involves an injured party that is already a
Medicare recipient, regardless of the dollar amount of the settlement.
This would include the older injured worker who is Medicare eligible
based on age, as well as the younger Medicare recipient based on SSDI
eligibility.
Class 2 – this designation is a “two-pronged” test:
the injured party must have reasonable expectation of becoming a
Medicare recipient within the next 30 months i.e.: they have applied for
SSDI or they have been denied and are appealing the decision or they are
62 ½ years old or they have end stage renal disease, but are not yet on
Medicare
AND - the TOTAL settlement value (indemnity, medical and attorney fees)
is greater than $250,000.
What if the injured worker doesn’t want to “set-aside” part of their
settlement?
This process and policy is based on legislation that is now being
enforced through the efforts of the regional CMS offices. It is no
longer a voluntary process, it is mandated, if the claims’ settlement
falls into one of the categories noted above. All the parties involved
can be held liable if the set aside allocation does not adequately cover
Medicare allowable future medical expenses and can be fined or held
responsible to provide additional funding. The lack of a proper MSA can
also jeopardize the recipient’s future Medicare eligibility, should CMS
determine that appropriate allocation arrangements were not included in
the original settlement. Therefore, it is no longer negotiable to
eliminate the need for a MSA; it must be included in the settlement. The
approval process through CMS currently takes five to nine months,
depending on the Region of submission. As a result, some carriers have
elected to proceed with the settlement without prior of approval of the
MSA by CMS, with the understanding that additional funds will be
allocated, should the original MSA not meet CMS approval. Proper and
accurate documentation is crucial!!!!!!! If then, complete information
is available to formulate and submit an appropriate MSA it is unusual
for CMS to reject the proposed MSA after the fact.
Richard Hess Jr RN CCM, CNLCP and Lynn Karfomenos RN CCM CNLCP are the
managing partners of Hess, Karfomenos & Associates LLC, an Indiana based
firm providing a continuum of highly refined specialty services to the
Worker’s Compensation and Group Health Insurance Markets as well as to
Plaintiff and Defense Law Firms not only in Indiana, but also
nationwide. The firm’s services package includes; Life Care Planning,
Medicare Set Aside Allocations, Medical Case Management and
Medical-Legal Review and Analysis. Nationally recognized in the fields
of Medical Case Management and Life Care Planning, Ms. Karfomenos and
Mr. Hess are currently serving nominated terms of office on the
Certification Board of the American Association of Nurse Life Care
Planners
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