Medicare Secondary
Payer Update
Timothy K. Michels, Esq. Chief Operations Officer
Jennifer C. Jordan, Esq. General Counsel
A National Look at WCMSAs
• Many procedural improvements at CMS during past 12 months (New WCRC and MSPRC contractors & web portals)
• Supreme Court clarification on recovery rights forthcoming? (Hadden cert. petition scheduled for discussion on Sept. 24th)
• Official Regulations regarding future medicals proposed after 11 years of administration by memo (CMS-6047-ANPRM)
• 2 bills sitting before Congress attempting to resolve MSP issues (HR1063/SB1718 and HR5284)
• Widespread confusion continues as to MSP obligations v. CMS recommendations
A National Look at WCMSAs
MSAs Approved by CMS: Year # MSAs Total Approved
2008 20,255 $905,202,448 2009 24,203 $1,125,261,415 2010 26,296 $1,443,739,397 2011 28,847 $1,102,662,414
• Impossible to track WCMSAs funded but not submitted to CMS
• CMS approval is voluntary, so cases not submitted cannot be assumed to be non-threshold
• MEDVAL submitted only 22.8% of cases evaluated in 2011
• CMS likely reviews less than half WCMSAs funded annually, meaning $2.5-$3 billion annually could be funded in WCMSAs alone
• New contractor effective 7/2/12
• Cases submitted after 7/2/12 have average turn around of 28 days
• Estimated that backlog exceeds 10,000 cases
• Average turn around time for backlog cases exceeds 180 days
• New contract did not include responsibility for the “backlog”
• CMS blames backlog on MD emergency regs and 2010 computer system problem – so long as no similar influx of cases or inhibited productivity, there is little reason to believe problem will be repeated Note: WCMSAP (web portal) can also be attributed to improved TAT
WCMSAs Approved by CMS
• Represents essentially a WC carrier’s lifetime exposure under state law of the worse possible medical scenario
• Drugs are unrealistically projected based upon regime at time of
settlement projected over life expectancy and priced at AWP without consideration of anticipated patent expirations
• No considerations for evidence of malingering or fraud
• No refund for post-settlement miracles
• Essentially tendering reserves to close the claim (if even adequately reserved to cover the unreasonable MSAs “recommended” by CMS)
Cost Considerations of CMS Approval:
• MSA Vendor Fees (update information/submission fee)
• Approval Time (9 month average in 2011)
• Ongoing Indemnity & Medical Expenses During Wait
• Additional Defense Costs (particularly if bifurcated)
• Opportunity for Claimant to Back Out of Settlement
Injured Workers’ Insurance Fund
• Leading writer of WC in Maryland / 23% market share
• $190M in annual premium / 20,257 in force policy count
Settled: Year # Cases Total Settlement Amount
2008 2873 $64,789,446
2009 2678 $71,801,195 [no CMS submissions after 6/1]
2012 1270 $48,930,226 [MD emergency regs instituted]
2011 1296 $62,794,511
IWIF Sample MSA Set Evaluated
135 randomly selected cases settled with MSAs between 1/1/11 and 6/1/12 and funded with structured settlements. Of the sample:
• 64 cases were not submitted (47%)
• 29 cases were approved as submitted (41%)
• 28 cases were countered higher (40%)
• 9 cases were countered lower (12%)
MSA Figures
• $17,084,795.00 total proposed MSAs
[$6,316,977.00 medical / $10,767,817.37 Rx]
• $15,070,481.25 in corresponding annuity premium (inclusive of any indemnity & custodial fees – 11.75% savings from just lump sum funding of corresponding MSAs)
• Of the $12,437,499.47 approved by CMS: – counter higher = $1,552,767.85 [low: $3,426.21 (8%) – from $41,204 to $44,631] [high: $237,425.30 (56%) – from $409,795 to $647,221] – counter lower = $44,575.58 [low: $12,941 (9%) – from $137,995 to $125,054] [high: $106,160 (56%) – from $190,415 to $84,265 ]
Note: CMS tolerance is 5% so no counter if proposed MSA is +/- 5% of WCRC independent review. Counters primarily due to Rx addition or AWP changing between submission and CMS review.
Turn Around Time
• Of the 66 cases reviewed by CMS, turn around time ranged from 4* to 390 days (179 days on average)
• Once approved by CMS, days to MD WCC approval ranged from 13 to 352 days (98 days on average)
• $1,016,475.44 paid in ongoing WC benefits between date MSA submitted to CMS and approved by the MD WCC
– $394,600.21 medical / $621,875.23 indemnity
Rx Pricing Considerations
• Evaluated 200 IWIF MSAs calculated between 8/1/10 and 8/11/11
• Compared Rx cost at AWP v. mail-order pharmacy program
Total MSAs AWP Total MEDVAL Rx
$50,089,412.96 $39,799,341.64 $29,190,096.97
_______________________ Difference = $10,609,244.67 Conclusions:
1) Rx expense made up 79% of total MSA spend
2) CMS approved WCMSAs average 27% more than a
reasonable/defensible future medical cost projection using pharmacy program available to the public
Professional Administration
• Of 135 IWIF cases evaluated, 19 are professionally administered (14%)
• Cost ranged from: $10,278 ($500/19yrs) - $33,749 ($1750/25yrs)
• 6 claimants have never submitted a bill
• 1 account was arranged for and paid by claimant
• 1 account ordered by the Maryland WCC due to mismanagement
• IWIF maintains a reversionary interest in unused funds
• Examples of Post-settlement treatment changes:
{ $142K/27yrs of OxyContin => now using Methadone at $8.46/mo. (overfunded by $139K) { $13K/40yrs of Morphine Sulf. ER => Exalgo 8mg at $651.77/mo. (underfunded by $300K)
0 5 10 15 20 25 30 35 40 45
MEDVAL Administered MSA Account Trends
2003 - 2012
Have Never Submitted a Claim
Exhaust Every Year
Treat In Accordance with MSA Projections Average 25% Surplus Every Year
Funding MSAs with Annuities
• CMS approved method of funding MSAs at present value
• If self-administered, a protection from unrelated total dissipation
• As life expectancy increases, savings increases due to longer payout period, but so does exposure to medical cost inflation
• Annuity can be used to maintain a reversionary interest MSA funds projected beyond death of claimant
• Savings of funding with annuity v. lump sum averages 34%
Total MSA Total Cost Savings % Annual Deposit LE $89,097.35 $56,792.08 $32,305.27 36% $3,556.94 18
Conclusions about CMS Approval
You are paying between 25% and 35% in additional MSA expense to obtain CMS’ opinion, frequently in
Does Funding an MSA End Your MSP Exposure?
CMS states it will cover treatment beyond the amount of an approved MSA, but what if:• CMS approval was not available?
• Claimant used the funds for other “needs”?
• Medicare gets billed anyway & makes payment?
• Medicare coverage changes?
• Physicians refuse to bill at calculated rate?
Purpose of an MSA
To
avoid
post
‐
settlement
recovery
actions
by
the
federal
government
for
reimbursement
of
Medicare
overpayments
made
for
excluded
treatment
related
to
the
insurance
settlement.
This is a Risk Management Issue, Not Compliance
What happens if you:• Fund MSA & Claimant never treats again
• Elect self-administration & Claimant goes shopping
• Fund MSA not approved by CMS but professionally administer
• Fund MSA w/life only annuity & Claimant dies next day
• Don’t/can’t get CMS approval & Claimant’s condition worsens
• Promise to pay whatever CMS says & it counters higher
5 things that are NOT true about MSAs:
• The MSP expressly obligates parties to an insurance settlement to “protect Medicare’s interests.”
• MSAs are only necessary when established thresholds are met
• CMS approval of MSAs is required if certain thresholds are met
• CMS approval of a WCMSA is binding
• A claim exists under federal law for failing to protect Medicare’s interests with an MSA in an insurance settlement.
Medicare May:
• Seek reimbursement for related Medicare payments
• Deny benefits/payments for related treatment
• Suggest an amount that protects its future interests
• Demand a certain settlement allocation for future medicals
• Demand funding of a debt not actually incurred
• Demand medical reimbursements in excess of state law and/or contractual obligations
Actual Obligations Under the MSP
•
That
Medicare
not
make
payment
when
an
insurance
payment
has
been,
or
should
be,
made
(statute
silent
to
timing
in
relation
to
settlement
so
applicable
post
‐
settlement?)
•
If
Medicare
makes
a
conditional
payment
&
there
is
insurance
coverage
or
a
settlement,
judgment
or
award
inclusive
of
medical
damages,
then
Medicare
must
be
reimbursed
by
the
primary
payer
or
anyone
in
receipt
of
the
insurance
payment
Settlement Goal
Take measures to reasonably provide for future medical expenses so that Medicare will not make any related post-settlement
payments that would require reimbursement. Options to Avoid Medicare Exposure:
– Seek CMS approval of & fully fund a WCMSA
– Allocate a reasonable portion of settlement funds and use the same to pay for future medicals
– Create alternative means of providing for medical payments as they occur (custodial admin, trust, captive, etc.)
Remember…
• There is no legal claim for failing to fund an MSA
[MSA represents unliquidated, inchoate damages – Frazer v. Transcontinental Insur., 374 F. Supp. 2d 1067 (N.D. Al. 2004)].
• No debt exists until related treatment has been obtained and paid by Medicare
• Don’t put too much faith in CMS’ overreaching tendencies
[An administrative agency’s interpretations such as those in opinion letters, like interpretations contained in policy statements, agency manuals and enforcement guidelines, do not warrant deference under Chevron, but instead are only entitled to respect under Skidmore (Christiansen v. Harris Co., 529 U.S. 576 (2000))].
Federal Claim for Double Damages…
• MSA must exhaust (preferably on related treatment)
• Related conditional payments must be made by Medicare
• Reimbursement demands must be made and not paid
• Medicare appeal process must be exhausted (4 steps)
• Judicial review of the Medicare appeal is available (through to the Supreme Court if necessary)
• The debt must still remain unpaid and the DOJ must file suit for the double damages to attach, and then potentially
navigate the entire federal court system
Some Parting MSP Thoughts…
• Treat MSP with a holistic approach / incorporate into the entire claims process from acceptance to settlement
• Conquer the fear / make informed MSP decisions
• Evaluate potential future exposures from a financial & risk management perspective
• Consider alternative solutions & case by case considerations
• Avoid “buying” assurances from CMS that are not commensurate with your risk