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Medicare set-aside rejections cost employers and injured workers

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Medicare set-aside rejections cost employers and injured workers

Medicare too frequently rejects the monetary amount that workers compensation payers propose setting aside in trust for injured workers' future medical costs, employers, insurers and claimant representatives say.

The rejections force claims to remain open driving up employer costs as workers comp settlement agreements reached between payers and claimants, with the blessing of state adjudicators, end up having to be scuttled.

The practice has a tremendous cost effect on employers, said Douglas J. Holmes, president of the Washington-based UWC-Strategic Services on Unemployment & Workers Compensation. But it also harms injured, out-of-work claimants who may be desperately waiting for a settlement payment.

“They may be losing their house,” Mr. Holmes said. “A $50,000 or $60,000 or $70,000 settlement is important to an injured worker.”

At issue are Medicare set-aside arrangements. They are amounts of money that employers or workers comp insurers, along with claimants, calculate will be needed to cover the future medical care for work-related injuries or illnesses suffered by claimants who are Medicare-eligible or will be eligible within 30 months of settling a workers comp claim.

The federal Centers for Medicare and Medicaid Services reviews set-aside amounts proposed by parties to a workers comp settlement. But, often, CMS essentially rejects the proposed amounts and asks for additional money to be set aside in trust.

“You submit your MSA and oftentimes CMS comes back and says 'no, you need to add money for this, this and this,'” said Melissa Shelk, vice president, federal affairs in Washington for the American Insurance Association.

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For example, the parties to a workers comp settlement may agree that a claimant eventually will need a hip replacement due to the original work injury, Ms. Shelk said. But CMS may come back and say it thinks funding for two hip replacements should be set aside.

Such scenarios occur even though the parties to a settlement have calculated future medical needs and costs based on what state workers comp laws determine should or should not be covered, sources said.

“They either don't understand state comp law or they say we are ignoring it and you should pay something else,” Ms. Shelk said.

Still, workers comp payers should not seek for CMS to accept all of their set-aside proposals, said Michael Merlino, vice president of Medicare compliance for Sedgwick Claims Management Services Inc. in Atlanta.

A 100% CMS approval rate would indicate the payer consistently proposed over-funding the set asides, Mr. Merlino said.

Medicare set-aside agreements involving future pharmaceutical expenses often receive more pushback from CMS than do proposed set-aside amounts for non-pharmaceutical medical treatments, said Rita Ayers, CEO for Tower MSA Partners L.L.C. in Delray Beach, Fla.

That is because medical treatment costs are often determined by specific diagnostic codes and treatment guidelines, Ms. Ayers said. That is not so for medications such as those for pain management, she said.

In such cases, CMS values the recommendation of a claimant's treating physician over additional data, such as that uncovered during a utilization review, Ms. Ayers said.

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The overall process is costly for employers because before submitting a proposal to CMS they have already spent time and resources, such as legal fees, to reach a settlement agreement with the injured worker and the worker's representatives, sources said.

Then when CMS disagrees with a proposed set-aside amount, the original workers comp claim settlement terms may no longer be satisfactory for the settlement parties. Meanwhile, the claim remains open and the employer or its insurer must continue paying medical and indemnity benefits.

“It can basically blow up the settlement” reached between the payers and claimants, Ms. Shelk said. “If you don't get CMS approval of the MSA, often the settlement just goes bye-bye and it remains open.”

A larger-than-anticipated Medicare set-aside agreement may complicate settlements or eliminate their possibility altogether, said Greg McKenna, counsel and head of compliance at Gallagher Bassett Services Inc., in Itasca, Ill.

A payer may decide settling the workers comp claim with a larger set-aside agreement is no longer cost effective, Mr. McKenna said. A case also may have to return to a backlogged state adjudication system for new hearings or require new mediation efforts when additional set-aside requirements create a settlement scenario no longer acceptable to the settlement parties.

“The parties that were attempting to reach a good faith settlement in what was believed to be a fair and equitable (MSA) number, now the circumstances are changed,” Mr. McKenna said.

In some cases, employers may opt for a partial settlement, leaving the medical portion of the claim to remain open, although not all states allow that, Mr. McKenna said.

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Employers, insurers, and claimant attorneys have met multiple times with CMS in attempt to resolve the situation, Ms. Shelk said. Still lacking a satisfactory resolution, workers comp payers and claimants' representatives are trying for a remedy through proposed federal reform legislation.

Among other measures, the H.R. 5284: Medicare Secondary Payer and Workers' Compensation Settlement Agreement Act of 2012, would establish an appeals process, which experts say is lacking. It also would require CMS to look to state workers comp laws and regulations regarding payable benefits.

CMS declined to comment for this article.