Insurers and self-insured employers who forgo government approval of Medicare set-aside agreements can limit their potential liability by being conscientious in how they structure set-aside accounts, experts say.

Medicare set-asides are accounts in workers compensation settlements that pay for a Medicare beneficiary's future medical costs connected with a work-related injury. The accounts are used to comply with the federal Medicare Secondary Payer Act, which requires insurers and self-insured employers to pay for a Medicare beneficiary's medical treatment related to workers comp or liability cases.

The Centers for Medicare and Medicaid Services has a formal, but optional approval process for Medicare set-aside agreements, in which CMS recommends how much money is needed to cover a beneficiary's future medical costs.

Sources said that government authorization for set-asides is a process that often results in set-aside amounts that are higher than what insurers or employers had hoped to pay. In some cases, some payers have opted to skip the voluntary approval process.

In such instances, insurers and self-insureds that decide not to seek CMS approval for Medicare set-asides can protect themselves from potential liability by following a diligent process to decide how much money should be placed into a set-aside account, said Michael Merlino, vice president of Medicare compliance for third-party administrator Sedgwick Claims Management Services Inc. in Atlanta.

“The structuring and the duties and responsibilities are identical, they're just taking out the sentence about… going to get CMS approval,” Mr. Merlino said about the wording of workers comp settlement agreements that leave out government approval for set-asides.

%%BREAK%%

The process includes carefully defining the medications and medical treatments that a claimant is expected to need in the future for his or her work-related injury, as well as the projected prices for that care, said Rita Ayers, CEO of Delray Beach, Fla.-based Medicare Secondary Payer compliance firm Tower MSA Partners LLC.

"If you appropriately protect Medicare's interests, then that means the patient will live out his or her life and the Medicare set-aside allocation will be sufficient to cover the cost of that care and Medicare will never be asked to pay a bill," Ms. Ayers said.

Ms. Ayers said she has seen an increase in insurers and self-insureds skipping the optional approval process for Medicare set-asides, including at least one major insurance company.

Part of the problem, she said, is that CMS often requires payers to include funding for a lifetime of costly prescription medications, such as opioids, that often aren't intended for long-term use. The cost for those prescriptions can cause CMS to ask for higher set-aside funding amounts than what insurers or employers expect to pay.

"The thought is, as the patient's condition improves, they should not need these very expensive pain management medications," Ms. Ayers said of why companies think CMS projections for certain medications are too high.

Delays in the review process prevented some insurers and employers from seeking approval in the past, but CMS has hastened the time it takes to evaluate such cases, said Cliff Connor, Itasca, Ill.-based vice president of Medicare compliance for Gallagher Bassett.

%%BREAK%%

Sources said the review time has dropped to about 30 business days in the past several months after Provider Resources Inc. of Erie, Pa. began reviewing Medicare set-aside agreements in July. Reviews under the previous contractor, Annapolis Junction, Md.-based Lifecare Management Partners L.L.C., could take several months to a year to process.

“We're seeing turnaround times (that are) very reasonable now and it's not the prohibitive factor in whether or not someone's going to decide whether to submit or not,” Mr. Connor said.

The risk for companies that don't seek approval is that a claimant's Medicare set-aside funding could run out in the future, experts say. Without an official sign-off from CMS, Medicare could potentially ask insurers and employers to pay additional money for a claimant's medical care after a claim is settled.

No matter whether they plan to seek approval, payers should meticulously plan for care that a claimant will need in the future and work to include sufficient funding for that claim, said Greg McKenna, counsel and head of compliance for Itasca, Ill.-based Gallagher Bassett Services Inc.

“You have to really look I think at the individual facts of the claim,” Mr. McKenna said.

In some cases, Mr. McKenna said, that might include settling a claimant's workers comp indemnity benefits, but continuing to pay for his or her medical benefits for another year. By doing that, insurers and employers can see whether a claimant's medications or treatments are expected to change and can craft a Medicare set-aside agreement that is based on additional medical data.

%%BREAK%%

“There is nothing that would preclude you from including (a Medicare set–aside) with one more year's worth of medical bills and medical treatments,” Mr. McKenna said.

Ms. Ayers said that payers should be realistic about the amount of money that a claimant will need to cover their future medical costs, regardless of whether they seek CMS approval for a Medicare set-aside.

"This is not a time to cut corners," Ms. Ayers said. "This is not a time to take (a) physician's recommendation to wean (medications) and include that in the Medicare set-aside. This is a time to be reasonable."