Rafael Gonzalez, Esq. President, Flagship Services Group
On February 8, 2018, the National Council on Compensation Insurance (NCCI) published its MEDICARE SET-ASIDES AND WORKERS COMPENSATION— 2018 UPDATE (study), written by Nedžad Arnautović. The study can be found at https://www.ncci.com/Articles/Documents/II_MSA-WC-Study.pdf What follows is a verbatim rendition of the facts, analysis, findings and conclusions found in the report.
“In September 2014, NCCI published a study on Medicare Set-Asides (MSAs) in workers compensation. Using the sample of MSAs submitted to the Centers for Medicare & Medicaid Services (CMS) between September 2009 and November 2013 and completed between January 2010 and November 2013, the study examined several aspects related to Medicare Set Asides (MSAs), such as the distribution of amounts of MSAs and total settlements that include MSAs, claimants’ age distribution, the duration of time from submission to CMS approval, and the relation between submitted and CMS-approved MSA amounts. This paper provides an update and expansion of the previous MSA study using the larger data sample as well as additional experience from 2014 and 2015.”
“The Medicare Set-Aside data, which was the basis of this study, was provided by ExamWorks Clinical Solutions and PMSI Settlement Solutions, LLC, an entity of Optum. The sample data is based on approximately 11,500 MSAs submitted to CMS between September 2009 and December 2015 and completed between January 2010 and December 2015. Data for each submission to CMS includes the submitted total settlement, the submitted MSA amount, and the final MSA amount.”
In 2011 and 2012, the average processing time for a submitted MSA was over 200 days; in 2015 it was about 70 days.
The study shows that “except for 2nd Quarter 2014, the average and median processing times have been declining since 2012. In 2015, the average processing time was about 70 days, which is the lowest average processing time between 2010 and 2015. Such processing times are in stark contrast with processing times in 2011 and 2012, where the average processing time was 202 and 240 days, respectively.”
On average, about 40% of submitted MSAs are approved as submitted to CMS.
Excluding the 1st Quarter of 2010, 4th Quarter of 2012, and 2nd Quarter of 2014, the study shows that “the average share of MSAs approved as submitted is slightly above 40%. On the other hand, about 90% of MSAs were approved as submitted during December 2012 and May 2014.”
The median processing time for submitted MSAs less then $200,000 is 18 days, but 28 days for MSAs greater than $200,000.
The study also shows “the median processing times do not show much variation for submitted MSAs less than $200,000. The median processing time for such claims is approximately 18 days. However, the median processing time increases to 28 days for submitted MSAs that are greater than $200,000. A possible explanation for this difference would be that more claims processing effort is needed by CMS to examine most expensive claims, which have a significant share of serious injuries such as limb amputations, spinal cord injuries, or head trauma.”
The average processing time for submitted MSAs under $25,000 is about 60 days, 50 days for MSAs between $25,000 and $100,00, 42 days for MSAs between $100,000 and $200,000, and 47 days for MSAs over $200,000.
The average processing time shows more variation across different submitted MSA sizes than the median. The study reveals that “average processing time is largest—about 60 days—when the submitted MSA size is under $25,000. It then gradually decreases to about 50 days for MSA submissions between $25,000 and $100,000 and 42 days for submissions between $100,000 and $200,000. The average processing time increases to 47 days for the MSA submissions larger than $200,000. A possible explanation for this variation would be that more requests for additional information or documentation are made by CMS for MSA submissions less than $100,000. Approximately 30% of CMS submissions for MSAs less than $100,000 are required to provide additional claim documentation, while 25% of submissions for MSAs greater than $100,000 are asked to do the same.”
On average, CMS requests 51% increase on MSAS under $25,000 but only 6% on MSAs over $200,000.
In percentage terms, the study also reveals that “CMS generally requires larger increases on the smaller MSA submissions. For example, CMS has requested an average 51% increase when the submitted MSA is under $25,000, while only an average 6% increase is required when a submitted MSA exceeds $200,000. Across all sizes of submitted MSAs, estimates of future drug costs are the main reason for the increases.”
AVERAGE VS. SUBMITTED
The average CMS approved MSA amount has been greater than the average submitted MSA amount.
While many MSAs are approved by CMS as submitted, almost 60% of the time, CMS requires that the MSA be increased. The study shows that “the average CMS-approved amount has been greater than the average submitted amount. However, the gap between average submitted and approved MSA amounts has been shrinking and, since 2013, appears steady.”
There has been an upward trend in the average submitted MSA since 2011.
The study suggests that “there is no significant trend in the average value of approved MSAs. On the other hand, there has been an upward trend in the average submitted MSA since 2011. A possible explanation for this is that vendors and carriers may now understand CMS procedures better and, as a result, submitted values may be more in line with what CMS is likely to require. In addition, CMS has published improved guidelines and appears to have become more consistent in its valuation of MSAs.” The result is that “the ratio of approved to submitted MSA has dropped from 1.58 to 1.10 for submissions completed between 2010 and 2013. Since 2013, this ratio has increased slightly, as in 2015, the ratio of average approved to submitted MSA is 1.16.”
The average approved MSA is about 10% higher than the submitted amount.
The gap between approved and submitted MSAs for Parts A and B has been stable. The study shows that “the average approved amounts have been approximately 10% higher than the submitted amounts.” The gap between average submitted and approved MSA amounts for prescription drugs, which are covered under Medicare Part D, “declined between 2010 and 2013. Since 2013, the gap between average submitted and approved MSA amounts for prescription drugs appears to be increasing slightly. However, such increases are small when compared to the period 2010 to 2012.”
PRESCRIPTION DRUGS IN MSA
For about 33% of MSA submissions, less than 10% of proposed MSA amount was for prescription drugs, but in about 33% of MSA submissions, prescription drugs accounts for more than 50% of MSA.
The study shows a histogram of MSA submissions by the ratio of the submitted prescription drug settlement to the total MSA settlement. “For example, the 40–50% point on the graph indicates that for 7% of all MSA submissions, the submitted prescription drug share is between 40% and 50% of the total MSA settlement.” The study however also shows that “for more than one-third of MSA submissions, this ratio is under 10%. There are slightly higher shares of submissions with drug ratios between 60% and 70% and between 70% and 80% than for other ranges 20% to 30% or higher.”
The majority of costs in large MSAs are for prescription drugs.
The study shows the submitted prescription drug share of MSAs by different layers of submitted MSA settlement. This indicates that “the prescription drug share increases as the submitted MSA settlement gets larger. MSA settlements larger than 100K are often associated with more serious injuries such as back injuries, limb or finger amputations, burns, or head trauma. For such settlements, the average age at the time of the injury is approximately 40 years and the average age at the time of CMS submission is about 53 years. Study data also shows that many of them are experiencing chronic pain or depression. Therefore, it is not surprising that the majority of costs for large MSA settlements are for prescription drugs.”
CMS more likely to increase drug prescriptions in submitted and approved MSAs over $100,000 than in MSAs under $100,000.
The study reveals that “the CMS review process is more likely to increase the drug share of larger MSAs than smaller MSAs. The study shows “higher drug ratios for approved MSAs over $100K than for submitted MSAs over $100K, but it shows similar drug ratios for submitted and approved MSAs under $100K.”
The largest share of MSAs are submitted about 4 years after the injury. Very small number of MSAs are submitted the same year of injury.
The study shows the distribution of MSA submissions by number of years since the year of injury. As the study indicates, “the largest share of MSAs are submitted about four years after the injury. The number of submissions gradually decreases after that, but it is not uncommon to have a submission 20 or 25 years from the accident.” The study also shows that, “on average, a very small number of MSAs are submitted in the same year as the year of injury.”
The approved MSA amount increases as the time from injury to submission increases.
The study also indicates that “the approved MSA amount increases as the time from the injury to the submission increases. Approved MSA amounts tend to increase until 13 or 14 years after the year of injury, at which time they seem to level off.”
95% of MSA submissions are for individuals who are Medicare beneficiaries. The majority are under age 65.
The study shows the distribution of submissions by claimant Medicare eligibility at the time the MSA is submitted to CMS for review. “Almost 95% of submissions are for claimants who are Medicare-eligible. In turn, the majority of these submissions are for claimants under 65 years of age. In comparison, according to the CMS Chronic Condition Data Warehouse (CCW), for the general Medicare population, fewer than 20% of Calendar Year 2014’s enrollments were for individuals under 65 years of age.”
The average age at submission is 58, median age is 59.
The study displays the distribution of claimant age at the time of submission to CMS. It shows that “more than half of the claimants are younger than 60, that the majority of MSAs reviewed by CMS are for claimants between ages 50 and 70. The average age at submission is 58 years. The median age is 59 years. About 64% of claimants are eligible for Medicare, not because of age but because they have been on Social Security Disability for at least two years. Another 29% of claimants are eligible due to age, and about 7% are likely to become eligible within 30 months.”
About 65% of submitted settlements are greater than $100,000. Average settlement is $208,000, median settlement is $135,000.
The study examines the distribution of values of submitted total settlements. The submitted total settlement includes the MSA as well as indemnity costs, other medical costs not covered by Medicare, and attorney fees, when applicable. “Approximately 65% of these settlements are greater than $100K. The average total settlement size is approximately $208K, while the median settlement size is approximately $135K. MSAs are often associated with large claim settlements.”
About 35% of submitted cases have MSAs less than $25,000.
The study shows the distribution of submissions by MSA size. “While more than 65% of the submissions reviewed by CMS are for total submitted settlements that are more than $100K, about 35% of the MSA submissions reviewed by CMS have submitted MSA amounts less than $25K. In some cases, the submitted total settlement can be quite large, while the MSA component of the total settlement is relatively small.”
On average, MSAs represent about 45% of settlement amount.
The study gives the distribution of settlement costs for MSAs submitted to CMS. This shows that “MSAs represent about 45% of submitted total settlement costs. More than half of submitted MSA amounts are for prescription drugs (Medicare Part D), while the rest of the submitted MSA cost is attributed to other medical services (Medicare Parts A and B). Overall, MSAs represent more than 40% of total submitted workers compensation settlement costs. On average, 22% of the total settlement is for the portion of the MSA covering Medicare Part D (prescription drugs) and 20% is for the portion of the MSA covering Medicare Parts A and B (hospital stays, office visits, and related services). About 58% of the submitted total workers compensation settlement is for costs other than MSAs, typically including indemnity coverage, medical costs not covered by Medicare, and other expenses such as attorney fees.”
More than half of MSAs submitted show claimant attorney involvement.
The study also indicates that “54% of MSA claimants have an attorney when proposing and establishing MSA arrangements.”
Only 2% of MSAs are professionally administered, 98% are self-administered.
The study breaks down the distribution of MSA claims by type of account administration. The study shows that almost all MSA settlements are self-administered. Larger MSAs are more likely to be professionally administered than smaller MSAs.”
For many years, MSAs have been a significant share of workers compensation claim costs. After a period of dramatic lengthening, CMS’s processing time for MSAs has recently declined. “Average processing time in 2015 was about 70 days and is the shortest in recent history. Average approved MSA has also recently declined. Average approved MSA in 2015 was approximately $103,000 and is the lowest in recent history. For submitted MSA settlements greater than $100,000, the prescription drug share is about 60%. Maximum number of MSA submissions occurs four years from the year of injury. Most MSAs are for claimants under the age of 65 who are Social Security Disability beneficiaries, and more than half of MSA amounts are for prescription drugs. More than half of MSA submissions involve an attorney, while almost all MSAs are self- administered.”
About Rafael Gonzalez
Rafael Gonzalez, Esq. Ex-President of Flagship Services Group, has over 30 years of experience in the auto, liability, no-fault, and work comp industries. He He is one of the country’s top experts on Medicare and Medicaid compliance, serving insurers, self-insureds, and third party administrators. He speaks and writes on mandatory insurer reporting, conditional payment resolution, set aside allocations, and professional administration, as well as the interplay and effect of these processes and systems and the Affordable Care Act throughout the country. Rafael blogs on these topics at Medicare Compliance for P&C Insurers at www.flagshipservicesgroup.com/blog.
About Medicare Conditional Payments
42 CFR Section 411.21 indicates that Medicare conditional payments are payments made by Medicare for medical treatment where a primary payer (insurer or self-insurer) has or may have an obligation to make such payment. Primary payers must reimburse Medicare for conditional payments it has made. 42 USC Section 1395y indicates that primary payers include group health providers, workers’ compensation, liability and no-fault insurers and self-insured entities, as well as physicians, attorneys, hospitals, or clinics that receive payment from a primary payer must make reimbursement.
42 USC Section 1395y also indicates responsibility as a primary payer arises even if liability for the medical expense is contested. Such a responsibility can be demonstrated by entry of a judgment or by payment conditioned on a release or waiver of payment, even if liability is denied. 42 CFR Section 411.24 indicates Medicare has a direct right of action against all primary payers responsible for making payment. And, Medicare has a direct right of action against any person or entity that received a primary payment, including the Medicare beneficiary, medical provider, physician, attorney, state agency or private insurer.
About Medicare Advantage and Prescription Drug Plans Reimbursement
42 CFR Section 422.108(f) provides MAPs with the same rights of recovery that the Secretary of HHS has under the MSP regulations in subparts B through D of part 411 of 42 CFR. Additionally, the same MSP regulations at 42 CFR Section 422.108 are extended to PDPs at 42 CFR Section 423.462. Therefore, PDPs have the same MSP recovery rights as MAPs, which have the same recovery rights as HHS. This includes, as recent federal appellate and district court decisions have indicated, the ability to pursue double damages through MSP private cause of action pursuant to 42 USC Section 1395y(b)(3) should the primary payer deny the MAP or PDP reimbursement of any due conditional payments.
About Medicaid Third Party Liability Liens
42 USC Section 1396a mandates that all reasonable measures to ascertain legal liability for Medicaid payments and reimbursement of same be taken. The state or agency administering a Medicaid plan must take all reasonable measures to ascertain the legal liability of third parties to pay for care and services paid by Medicaid. Federal law also provides that in any case where such a legal liability is found to exist after medical assistance has been made available on behalf of the individual, the state or local agency must seek reimbursement for such assistance to the extent of such legal liability. 42 U.S.C. Section 1396a(a)(25).
The 2013 Strengthening Medicaid Third Party Liability Act, effective October 1, 2017, allows state Medicaid agencies or the insurers/managed care organizations contracted with to provide such benefits to seek reimbursement from any responsible third party of all payments made from the entirety of settlement, judgment, award funds, not just a portion thereof.
About Flagship Services Group
Flagship Services Group is the premier Medicare and Medicaid compliance services provider to the property & casualty insurance industry. Our focus and expertise has been the Medicare and Medicaid compliance needs of P&C self-insureds, insurance companies, and third party administrators. We specialize in P&C mandatory reporting, conditional payment resolution, and set aside allocations. Whether auto, liability, no-fault, or work comp claims, we have assembled the expertise, experience and resources to deliver unparalleled MSP compliance and cost savings results to the P&C industry. To find out more about Flagship, our folks, and our customized solutions, please visit us at www.flagshipservicesgroup.com. To speak with us about any of our P&C MSP compliance products and services, you may also contact us at 888.444.4125 or email@example.com.