The Optum recap of the February 17, 2022, CMS update on Non-approved MSA programs

February 21, 2022 · Medicare Insights Team

In response to the most recent Workers’ Compensation Medicare Set Aside (WCMSA) Reference Guide, on February 17, 2022, The Centers for Medicare and Medicaid Services (CMS) hosted a webinar to provide a much-anticipated update on non-CMS-approved Medicare Set-Aside (MSA) products. CMS’ John Jenkins, Health Insurance Specialist, reviewed topics including Evidence-Based MSAs, Non-Submit MSAs and Compromise MSA. For reference, the most recent update to the WCMSA Reference Guide included:

4.3 The Use of Non-CMS-Approved Products to Address Future Medical Care
A number of industry products exist with the intent of indemnifying insurance carriers and CMS beneficiaries against future recovery for conditional payments made by CMS for settled injuries. Although not inclusive of all products covered under this section, these products are most commonly termed “evidence-based” or “non-submit.” 42 C.F.R. 411.46 specifically allows CMS to deny payment for treatment of work-related conditions if a settlement does not adequately protect the Medicare program’s interest. 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 program’s 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.

As a matter of policy and practice, CMS will deny payment for medical services related to the WC injuries or illness requiring attestation of appropriate exhaustion equal to the total settlement less procurement costs before CMS will resume primary payment obligation for settled injuries or illnesses. This will result in the claimant needing to demonstrate complete exhaustion of the net settlement amount, rather than a CMS-approved WCMSA amount.

Since this update, there have been significant questions as to whether CMS overstepped their limits in regards to the federal regulation 42 CFR §411.46(d), which states the exception:

If the settlement agreement allocates certain amounts for specific future medical services, Medicare does not pay for those services until medical expenses related to the injury or disease equal the amount of the lump-sum settlement allocated to future medical expenses.

It is with federal regulation 42 CFR §411.46(d) that the WCMSA Reference Guide seems to be at odds.

The 42 CFR §411.46(d) language limits the spend-down CMS can require to the portion of the settlement allocated for future medical services.
The WCMSA Reference Guide removes that limit and indicates that CMS “will deny payment” for the beneficiary’s medicals associated with the work comp claim until the “total settlement less procurement costs” has been exhausted.

Given this contradiction, it was anticipated that CMS would use the webinar to clarify its position on this topic. What follows are the CMS updates from the webinar and the Optum interpretation on the impact to our clients.

CMS Update on Non-Approved MSA Products

CMS indicated the reason for the WCMSA Reference Guide clarification on non-approved MSA products was they had not previously taken a position in writing on non-CMS-approved MSAs.

Claims under the CMS Threshold for review

Per CMS, there have been concerns about how non-approved MSAs on claims that fall below the CMS threshold for review would be handled in light of the Section 4.3 update. CMS does not want to treat the below-threshold claims differently and will not review claims that fall outside the CMS threshold for review.

Claims that fall below the CMS threshold for review:

$25,000 or less for a Medicare beneficiary
$250,000 or less for a non-Medicare beneficiary that has a reasonable expectation of becoming Medicare eligible within 30 months.

CMS has never reviewed below-threshold claims and they do not want to change that stance. As such, CMS will publish a clarification on the fact that below-threshold claims are not impacted by Section 4.3.

CMS continues its position that it may require a spend-down of the net settlement value on settlements with a non-Approved MSA

Per CMS, settlements with a non-CMS-approved product could flag the claim and indicate funds should come from MSA. This means that the claimant may have to expend funds beyond the future medical allocation of the non-CMS-approved MSA. CMS said it can require a claimant to expend the net settlement value, which is the total settlement value less procurement costs. According to CMS, a non-CMS approved MSA product is not a structured settlement and they will only view settlements with a non-approved-MSA as a lump sum as opposed to a future medical allocation separate from the rest of the settlement.

Obtaining a non-approved MSA alone does not shift the burden by itself, but there is a burden shift if the non-CMS-approved allocation is deficient and Medicare is then billed for payment related to the workers’ compensation claim.

CMS clarified that a workers’ compensation MSA is strictly an agreement between CMS and the beneficiary. Obtaining a non-CMS-approved MSA does not shift the burden, but there is a burden shift if Medicare receives a bill related to the workers’ compensation claim. CMS reserves the right to collect up to the net settlement amount.

The Optum interpretation of CMS’ position on Non-CMS-Approved MSAs:

CMS clarified its position that they are going to take on non-CMS-approved MSAs and require up to a net settlement value spend-down. Yet, CMS did not explain the difference in language of 42 CFR §411.46(d) that would seem to limit a spend-down to the future medical allocation of the settlement. This likely means we could see this issue decided by the courts at some point. Non-CMS-approved MSAs have always carried associated risk and obtaining one will depend on the party’s appetite for this risk.

Yet, there is still no requirement to obtain a CMS-approved settlement. CMS noted that claims below the CMS threshold for reviews would not be impacted by Section 4.3. Section 4.3 also notes that for parties seeking a non-CMS-approved MSA, the risk is now clearly stated as CMS could require a spend-down of the net settlement value. As it was previously, the CMS-approved MSA is the lower-risk way to have the finality of future medical expenses in a settlement with regard to CMS.

Other topics addressed during the CMS webinar

Settlement documents must be submitted to CMS for verification of attestation, per the user guide. CMS encouraged electronic attestation submission as a quicker, more efficient process.
Specific treatment scenarios and how they are addressed for MSA allocations:
- If a claimant isn’t treated, even for years, CMS will still include treatment as it assumes a “worst case scenario.” The absence of treatment records does not imply if the claimant:
  - Is non-compliant with treatment
  - Will resume treatment
  - Does not require further care
- If surgery is recommended, but the claimant has not been medically cleared for surgery, CMS will still include the surgery in MSAs. CMS assumes the claimant will or could be cleared for surgery in the future.
- If a claimant has one treating provider for the life of the claim and then is released from care, the CMS’ position is that there is a difference between being “cured” of the injury and being “released from care.” If the claimant is not “cured,” there is an assumption that ongoing care will or could be needed.
A number of questions regarding state statutes, independent medical reviews (IMRs), utilization reviews (UR) and hearings on the merits were addressed:
- Some states allow denials where the denial is not contested. CMS recognizes a “legal” denial of a condition and still requires a decision based on a hearing on the merits. CMS:
  - Will require documentation to support the denial
  - Will require court documentation indicating the state authority has reviewed the facts and agrees with them in order to accept the denial.
- CMS will continue to require a court order indicating Georgia claims are non-catastrophic to support an allocation limited to 400 weeks and indicated that a written opinion from an attorney will not suffice.
- Treatment recommended by a provider and subsequently denied by IMR or UR does still not permit the exclusion of the treatment in question from an MSA. CMS noted that the treating doctor would need to recommend an alternative treatment for the denied treatment to be kept out of the MSA. The rationale for this position is that IMRs and URs are not definitive and can be appealed or approved at a later time by IMR/UR.
- If denied conditions are upheld by a hearing on the merits, CMS will give weight to those decisions. A hearing on the merits needs to be signed by legal authority, state the facts of case reviewed and have the decision made based on review of those facts.
CMS discussed the re-review process.
- It will re-review where there is a mathematical error
- It will not re-review if an MSA is disputed on the basis of a disagreement over whether treatment belongs in the MSA.
- Claims that fall outside the six-year amended review window will not have basis for appeal.
There was no update regarding the proposed rule-making for MSAs. This means there could be more changes in the future.

At Optum, we believe the additional topics covered by CMS were generally not new changes. They instead, reinforced current CMS policies and practices. In most CMS MSA submissions, CMS is going to continue assuming the worst case scenario to avoid the shifting of burden to Medicare. CMS also continued to be strict when it comes to denials. These tendencies influence why, in certain situations, some entities gravitate toward a non-submit MSA despite their associated risk.

Stay tuned to Optum for updates on non-CMS-approved MSAs and other Medicare Secondary Payer compliance topics. Please follow our Medicare Insights blog or visit our website at workcompauto.optum.com.