Snyder: CMS' New Approach to MSAs

Wednesday, March 9, 2022 | 0

Ten years ago, the LexisNexis Legal Newsroom for Workers' Compensation Law published my article “Four Reasons to Avoid the CMS Approval Process for MSAs.” You can find an abstract of that article on my blog.

Teddy Snyder

In the following years, I heard through the grapevine that various organizations of which I was not a part were using my article to persuade parties to forgo the CMS approval process.

In the last few years, the Medicare set-aside industry formalized this approach by creating products known as “non-submit” or “evidence-based” MSAs. Since approval has never been required of any MSA, the purpose of this new version seemed to be to lowball the MSA. The Centers for Medicare and Medicaid Services took notice.

While much of what I wrote in 2012 remains true, a choice to forgo CMS submission just got a lot riskier. On Jan. 11, CMS published Version 3.5 of its Workers’ Compensation Medicare Set Aside (WCMSA) Reference Guide. New section 4.3 starts by laying out CMS’ express intention to target non-submit and evidence-based MSAs. Then comes the new policy, paraphrased here:

Unless an MSA is submitted and approved, CMS cannot be certain that Medicare’s interests are adequately protected. Therefore, CMS will treat any non-CMS-approved product as a potential attempt to improperly shift financial burden by denying payment for medical services related to the WC injuries or illness until the claimant demonstrates complete exhaustion of the entire settlement amount, less fees and costs, rather than a CMS-approved WCMSA amount.

If your MSA was priced correctly, they say, it will be adequate to cover the injured worker’s medical expenses, and this will never be an issue. Note: The new but supposedly not-new policy does not apply to past settlements.

One problem with this approach is that injured workers do routinely exhaust their approved MSAs. Since MSA allocations do not account for inflation, they are likely to be depleted early; the younger the injured worker, the more likely the fund will be depleted.

What is really scary is that, even if the MSA was priced correctly, if it was structured, Medicare won’t pay a dime until every structured payment has been made. If the structure was set to pay for the life of the injured worker, that will never happen. There are ways to manage this, but it calls for an outlay by the injured worker to be reimbursed by later structure payments.

Many, if not most, injured workers are not financially able to pay these bills. The wait for reimbursement of surgery could take years. Dire consequences are predictable.

Structures are tremendously helpful in workers' comp settlements with MSAs. Unlike a lump-sum fund, structures make sure the injured worker won’t spend all the money upon receipt.

Because the cost of the structure is based on the present value of the MSA, it costs less to fund a structured MSA than to fund a lump sum. Some structures include an inflation rider, which reduces any potential shortfall, but apparently, CMS would rather take the financial hit.

CMS says there is nothing new here. To the contrary, nobody outside the agency expected this new approach. This happened because the industry made it look like non-submit MSAs were a way to cheat the system.

Attorney Teddy Snyder mediates workers' compensation cases throughout California. She can be contacted through snydermediations.com.