Medicare Set Asides & Prescription Drugs

Saturday, January 14, 2006 | 0

On December 30th, 2005, the Centers for Medicare & Medicaid Services (CMS) released their internal policy addressing Medicare Part D benefits and its impact on Workers' Compensation Medicare Set-Aside Arrangements (WCMSAs).

As a result of the recent policy, CMS will require that submissions sent to the Coordination of Benefits Center (COBC), on or after 1/1/2006, include a prescription drug component. According to CMS, cases received by the COBC prior to 1/1/2006 will not need a prescription component included. This information does not come as a surprise to the industry as many have anticipated these changes since the signing of the Medicare Modernization Act (MMA) of 2003. What is notable is the method that will be used to determine the sufficiency of the prescription drug component over the next 12 months.

Cases received at the COBC between 1/1/2006 and 12/31/2006 must list separately on the submission cover letter the amount for (1) future medical treatment (Part A & B) and (2) future prescription drug treatment (Part D). An explanation as to how the submitter calculated the future prescription drug treatment amount will also be required. This requirement should discourage submitters from using overly aggressive and unreasonably discounted Rx reimbursement rates to severely under-value the prescription component of the MSA. The CMS memo mentions actual costs or Average Wholesale Price (AWP) as examples to demonstrate how future prescription drug treatment was calculated, but they remain silent on which reimbursement rate they will accept when CMS begins to review the Rx component in 2007.

Effective 1/1/2007, the Workers' Compensation Review Center (WCRC) will begin to independently review the adequacy of the prescription component provided in WCMSA submissions. Until 1/1/2007, insurers are advised to protect Medicare's interests by supplying a drug component in their WCMSA submissions to CMS, but are given latitude in determining what method will be used to price the prescription drug component of the WCMSA proposal. While CMS has given no guidance on the reimbursement methodology they will employ in 2007, history would suggest a program based either on actual charges, WC rates, or AWP. Whatever reimbursement method is chosen, insurers should select a reimbursement schedule that is both defensible to Medicare and specified in the settlement as the schedule the claimant agrees to utilize to pay for prescriptions from the MSA account.

Insurers should discuss with and advise their MSA vendors on the method they wish to utilize to determine the reimbursement rate for prescription drugs. Any WC fee schedule for prescription reimbursement rates would be a sound basis for pricing the Rx component of the WCMSA. Average Wholesale Price (AWP) is another defensible method for determining the Rx component reimbursement as CMS has cited this in their memo and represents the foundation for the Part D reimbursement schedule nationally. After 1/1/2007, CMS will require 2 years of prescription payment history to be provided with the submissions. Many insurers have national pharmacy providers to supply their claimants with prescription drugs. A medication listing from these suppliers is readily available and would be appropriate to obtain as a defensible method for Rx component pricing as well.

Article by Gould & Lamb. gouldandlamb.com, 866-672-3453.



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