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Medicare set-aside rule changes could pose problems

Experts say change in Medicare set-aside rules would add time, costs

Medicare set-aside rule changes could pose problems

The Centers for Medicare and Medicaid Services is considering whether to issue new rules for Medicare set-asides in liability settlements—a move experts say could increase the time and costs needed to close liability claims.

It's not certain that CMS will implement such policies. But experts are watching closely to see whether CMS will change the procedures used to pay future medical costs for Medicare beneficiaries who receive liability settlements.

“This is a major issue for lawyers, insurers, retailers, Medicare beneficiaries and all other stakeholders in the (Medicare secondary payer) process,” said attorney David Farber, counsel for the Washington-based Medicare Advocacy Recovery Coalition.

Retailers, in particular, appear to be concerned about the possibility of new Medicare rules for liability claims, said Jennifer Jordan, general counsel with MEDVAL L.L.C., a Medicare secondary payer compliance vendor in Columbia, Md.

That's because many deal with low-dollar liability claims, such as in-store slips and falls, Ms. Jordan said. Increased Medicare requirements could increase the amount of money needed to settle those claims, she said, because retailers would be responsible for paying future medical costs related to the claimant's injury.

“They would be forced to fund these future medicals out of proportion with their settlement amounts,” she said.


Last month, CMS posted an advance notice of proposed rulemaking in the Federal Register. In the notice, the federal agency says it is considering an approval process for Medicare set-asides used to pay future medical costs in liability cases, similar to the “formal, yet voluntary” process that the agency already uses to approve set-asides in workers compensation settlements.

New rules are being considered for liability claims because CMS is looking for ways to collect and recoup funding for the Medicare insurance trust fund, said Martin Cassavoy, vp of strategic services for North Reading, Mass.-based Crowe Paradis Services Corp., a Medicare secondary payer compliance company.

“When Medicare beneficiaries are settling claims, Medicare wants to make sure that its interests potentially are protected,” he said.

Under the Medicare Secondary Payer system, self-insured employers, insurers and others must notify CMS of workers comp and liability settlements or payments that involve Medicare recipients.

Medicare can use settlement funds to recoup “conditional payments” that it previously has made on behalf of beneficiaries to medical providers. It also can require insurers, employers and other settlement parties to “set aside” funds to pay for future medical costs related to a beneficiary's injury.

In workers comp settlements, parties can ask CMS to review their proposed settlement agreements and determine how much money should be set aside for future medical costs. However, that approval process does not exist for liability settlements.


Dan Marshall, managing director for risk control and claims at Aon Global Risk Consulting in Charlotte, N.C., said that Medicare set-asides have resulted in $10 billion being placed in trust accounts to pay for medical costs related to 46,000 workers comp cases since 2001.

However, he said CMS has struggled to handle a high volume of workers comp set-aside reviews, which has resulted in delayed settlements for many claims.

A study released in March by the U.S. Government Accountability Office showed that Medicare took an average of 76 business days to respond to Medicare-related settlement notices in 2011.

Mr. Marshall expects a process to review and approve set-aside agreements for liability settlements would increase the backlog of claims processed by CMS and further bog down the claims resolution process.

“This is going to increase legal costs, litigation, and add further congestion to the court system,” Mr. Marshall said. “It has a negative net effect should this rule be instituted.”

Greg McKenna, counsel and head of compliance for Itasca, Ill.-based Gallagher Bassett Services Inc., agreed. While he said Medicare has a right to recoup costs that it has paid or would expect to pay on behalf of Medicare beneficiaries, he believes the addition of a set-aside approval process in liability settlements likely would add time and legal costs to liability cases.

“All of those things that make settlements more difficult tend to push cases toward litigation, which we know is a more expensive approach to claim resolution,” Mr. McKenna said.


CMS is seeking comments until Aug. 14 from stakeholders about the advance rulemaking notice. Mr. Farber said the Medicare advocacy coalition is encouraging insurers, employers, Medicare beneficiaries and other stakeholders to submit comments.

“It's the first opportunity to impact CMS regulations in decades and we ought to take advantage of the opportunity presented to us,” said Mr. Farber, who said the coalition plans to submit comments, but has not yet determined its stance on the advance notice.

Experts note that the advance notice does not mean that new rules are imminent for Medicare set-asides in liability settlements, but rather that CMS is collecting feedback for any potential rulemaking.

Still, sources say the memo is being eyed carefully by Medicare compliance professionals.

“Within the industry I think there (are) a lot of folks taking notice about what might possibly be coming down the pike,” said Cliff Connor, Itasca, Ill.-based vp of Medicare compliance for Gallagher Bassett.

MEDVAL's Ms. Jordan said the notice offers an opportunity for the insurance community to help guide new CMS rules based on their frustrations with the current set-aside approval process in workers comp.

“A lot of this process needs more compromise on both sides,” she said.