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Some Medicare secondary payer experts say they are forgoing government approval of Medicare set-asides in workers compensation settlements to prevent delays and reduce costs for claims.
Parties often send proposed settlement agreements of workers comp claims involving Medicare-eligible workers to the Centers for Medicare and Medicaid Services, which recommends how much money should be set aside in an account for a person's future medical care.
Sources note that government authorization for Medicare set-asides is a voluntary process that often results in set-asides that are higher than what insurers or employers had hoped to pay.
By skipping the approval process, some payers have been able to avoid those higher costs, said Michael Merlino, vp of Medicare compliance for third-party administrator Sedgwick Claims Management Services Inc. in Atlanta.
“Instead of asking for the government's approval of these MSAs, we're just saying, 'We think this is reasonable. This complies with the law and, therefore, we're going to go ahead and settle our case this way,'” Mr. Merlino said. “Since (the) approval process is merely voluntary, there's no reason for us to participate in it.”
CMS issued a May 2011 memorandum noting that Medicare set-aside review and approval is a “recommended process.” The memo, which reiterated previous CMS statements, noted that “there are no statutory or regulatory provisions requiring” CMS approval for set-asides.
Jennifer Jordan, general counsel with Medicare secondary payer compliance company MEDVAL L.L.C. in Columbia, Md., said that memo prompted many in the workers comp arena to rethink their approach to set-aside approval.
She estimates that CMS projections of future medical costs are about 20% higher on average than what most insurers expect to pay for an injured worker's future care. By opting out of government approval, Ms. Jordan said insurers have been able to keep costs down and move forward with workers comp settlements, rather than waiting for CMS to respond on set-aside approvals.
CMS “cannot review every claim,” Ms. Jordan said. “They cannot afford to review any more than they're reviewing currently, and it is, in fact, voluntary.”
Although experts agree that CMS approval is optional, there are reasons why companies follow the review and approval process.
For instance, many companies and insurers want assurance that their claim liability has ended once they have paid a settlement with a CMS-approved set-aside, Ms. Jordan said.
“It's really the clients that are driving the CMS process," Ms. Jordan said.
Additionally, some states or judges in workers comp cases require CMS approval before allowing claims to be settled, even though CMS doesn't consider it mandatory, said Martin Cassavoy, vp of strategic services for North Reading, Mass.-based Crowe Paradis Services Corp., a Medicare secondary payer compliance company.
“You're seeing an almost overabundance of caution,” Mr. Cassavoy said of companies or entities that insist on going through the voluntary set-aside approval process.
Russell Whittle, senior staff counsel and vp of Medicare secondary payer compliance for consultant Gould & Lamb L.L.C. in Bradenton, Fla., said there also are potential legal and financial pitfalls involved with not receiving MSA approval.
For instance, Mr. Whittle said set-asides that are funded at a lower amount than CMS projections could run out of money. He said Medicare could require claimants to use the rest of their settlement for medical care before it would begin paying for such coverage.
Though he has not seen that scenario play out, Mr. Whittle said it could create financial problems for claimants. In turn, he said they could blame insurers or their attorneys for devising a settlement that was not in their best interests.
“How that ends up is a potential errors-and-omissions problem for lawyers,” said Mr. Whittle, who noted that most of his clients opt to go through the CMS approval process for set-asides.
Mr. Cassavoy recommends that companies perform a cost analysis to decide whether the assurance of CMS approval of Medicare set-asides outweighs the higher costs associated with the process.
“Everyone would like to be able to have this go quickly, but one of the things that can delay the process is this evaluation process of whether or not you need to do one aspect of Medicare compliance or the other,” Mr. Cassavoy said.