CMS clarifies seed calculations for WCMSAs at NAMSAP Annual Conference

During the recent National Alliance of Medicare Set-Aside Professionals (NAMSAP), now known as the National Medicare Secondary Payer Network, annual conference, John Jenkins, Health Insurance Specialist, Division of Medicare Secondary Payer Program Operations, Office of Financial Management for the Centers for Medicare and Medicaid Services (CMS) provided information on the appropriate method for calculating seed money for annuities involving a Workers’ Compensation Medicare Set-Aside (WCMSA) within the total settlement amount. 

Current language in the WCMSA Reference Guide

The WCMSA Reference Guide, version 3.1, states that the annuity breakdown should be as follows: 

“In a structured WCMSA, an initial deposit is required to cover the first surgical procedure or replacement and two years of annual payments. The initial deposit (“seed money”) is followed by subsequent annual deposits”  “The seed includes the cost of the first surgery, including all costs such as prescription drugs, physician fees, anesthesia fees, and facility fees. If the surgery is preceded by an associated trial, i.e., trial Spinal Cord Stimulator (SCS) or trial intrathecal (IT) pump, the cost of the trial is also included since it is considered part of the same procedure. If there are no surgeries, the first procedure (if any, such as injections) is included. Series of spinal injections are not included but a series of knee viscosupplementation is included if three are anticipated to be accomplished as a series of three weekly injections.” “The first replacement of Durable Medical Equipment (DME), prosthesis, or orthotics is included in the seed funds if the cost of such items exceeds $500.” 

John Jenkins advised that, per the above Reference Guide, the term “first surgery” actually refers to the first surgery, procedure or replacement for each body part included in the WCMSA. Therefore, if there are surgeries, procedures or replacements for multiple body parts in the WCMSA, the surgery amount allocated and approved for each body part should to be included in the initial seed money deposited into the WCMSA account.

Jenkins clarification appeared to be new information to the industry. However, CMS indicated that this has been the expectation even with the previous workers’ compensation review contractor (WCRC). 

Jenkins indicated that CMS will look to update the language in the Reference Guide to clarify what should be included in the initial seed money for first surgical procedure or replacement involving multiple body parts. 

Impact to the industry

By placing more of the total settlement amount into the upfront seed money to fund the WCMSA, less funds will remain to pay for related medical expenses allocated over life. This diminishes an employer’s cost savings when choosing a structured annuity rather than a lump sum and will cost carriers and TPAs more to settle claims.       

Ongoing support

Optum Workers’ Comp and Auto No-fault Settlement Solutions will continue to keep you updated on all aspects of Medicare Secondary Payer (MSP) compliance, including issues pertaining to WCMSAs.