MSAs: What are they and when do you need THEM?
By: Sarah Luna
Settlement can often be an efficient and effective way to reach closure within workers’ compensation claims. Most often, you are considering variations of three components: income benefits, permanent partial disability benefits and medical benefits. These components are largely a function of the nature and extent of the claimant’s injuries versus the claimant’s job responsibilities, current work restrictions, employment status, future employment prospects, the availability of suitable light duty work and the parties’ motivation. However, under Federal law, the parties to all workers’ compensation settlements involving the closure of medical benefits are required to consider Medicare’s future interests when settling the claim.
For many claims, it is clear Medicare has little to no interest despite the closure of medical. However, for Medicare beneficiaries (typically at least age 65 or who have been receiving Social Security Disability for at least two years) or individuals with a “reasonable expectation” of becoming Medicare eligible within the next 30 months (age 62.5 or an application for Social Security Disability), the consideration of Medicare’s interests requires consideration of additional steps to ensure the parties document their efforts to consider this interest and set aside a portion of the settlement to fund future medical treatment otherwise covered by Medicare.
MSAs
One of the most common ways to document the consideration of Medicare’s future interests and the method recommended by CMS is the preparation of a Medicare Set Aside (MSA). An MSA consists of an allocation report which considers the last two years of medical treatment and projects future Medicare-reimbursable medical expenses related to the work-related injury. This projection includes estimated costs for future visits to treatment providers, diagnostic testing and prescription medications. These costs and their frequency are typically extrapolated over the claimant’s estimated life expectancy or rated age. Under some circumstances, the projection period can be limited to caps on the treatment period under state law. Regardless, once this projection amount is determined, any settlement involving closure of medical would involve the separate funding of the MSA. The claimant would then be required to deplete these funds before Medicare pays for treatment related to the workers’ compensation injury after the settlement.
It is important to note there is no legal requirement to prepare an MSA, although it can serve as the most comprehensive means of documenting the parties’ consideration of Medicare’s interests.
These days, outside vendors usually prepare the MSA reports and handle submission to CMS where appropriate. Although this adds costs when settling a claim, mitigating the risk of complex, post-settlement issues arising when Medicare questions the extent to which the parties considered Medicare’s interests and seeks additional funds is worthwhile.
Once an MSA report is prepared, the parties must then determine whether to submit the MSA to CMS for review. The first prong of this determination is whether CMS will even review the MSA based on the applicable review thresholds. The second prong is whether submission is the best course if CMS review is available.
Like the decision to secure an MSA, the submission of an MSA to CMS for review is not legally required, but only “recommended” if the case meets the thresholds defined by CMS Guidelines. CMS review thresholds are a function of the claimant’s Medicare status and the total settlement amount, i.e., lump sum amount plus the MSA. Where the claimant is a current Medicare beneficiary and the total settlement amount is over $25,000.00, CMS will review the MSA. When the claimant has a “reasonable expectation” of becoming a Medicare beneficiary within the next 30 months and the total settlement is over $250,000.00, then CMS will review the MSA.
If a case satisfies the review thresholds, submission of the MSA to CMS for review is generally a worthwhile consideration. Once CMS reviews the MSA, it will issue a “Determination Letter” indicating the amount they consider appropriate to fund the MSA. Unfortunately, there are limited review options if the amount differs from the amount of the submitted MSA.
Regardless of the amount CMS ultimately determines appropriate, the funding of the MSA using this amount provides the parties with certainty CMS will not seek future recovery of payments, which can involve amounts up to the entire value of the settlement. This level of certainty and closure makes submission of MSAs to CMS for review an attractive option for the parties.
In cases where CMS review is not available, the parties must still determine whether securing an MSA is appropriate. Regardless of whether the parties ultimately decide to secure an MSA, documenting the steps taken to consider Medicare’s interests, to the extent such interests even exist, should be included in the terms of any settlement agreement involving closure of medical benefits.
Attorney Contact Info
Sarah Luna
sarah.luna@swiftcurrie.com
404.888.6232