As I blogged about in and CMS has been hinting about liability and no-fault set asides for a while. In February of 2017, they dropped another clue that they are getting ready for liability and no-fault Medicare set-asides.
Pursuant to 42 U.S.C. §1395y(b)(2) and §1862(b)(2)(A)(ii) of the Social Security Act, Medicare is precluded from making payment when payment “has been made or can reasonably be expected to be made under a workers’ compensation plan, an automobile or liability insurance policy or plan (including a self-insured plan), or under no-fault insurance.” In other words, Medicare does not make claims payment for medical expenses related to the claim that gave rise to such expenditures, if there is a primary payer responsible for such expenses, including if a settlement, judgment, award, or other payment has taken place. For more than 15 years, Medicare has had a voluntary process in place in which if an injured worker and his/her employer/carrier settle entitlement to future medical care associated with the work comp claim, and such parties set aside a specific amount from the settlement, judgment, award, or payment intended for future medical expenses related to the work comp claim, it does not make claim payments for future medical expenses until such allocated funds have been spent on medical care and prescriptions associated with the work comp claim. Despite the fact that the statute seems to require the same results in liability and no-fault claims, no such process has ever been created or put in place with liability and no-fault claims. That is, until recently, when a number of steps were announced hinting at a liability and no-fault set aside allocation program to be forthcoming.
Prior Attempts Regarding Liability and No-Fault Medicare Set Asides
The 2012 GAO Report, Findings, and Recommendations
Within the process for Medicare Secondary Payer (MSP) situations involving Non-Group Health Plans (NGHPs), in 2012, the Government Accountability Office (GAO) published a study entitled “MSP Additional Steps are Needed to Improve Program Effectiveness for Non Group Health Plans,” (GAO-12-333), identifying key challenges related to MSP contractor performance, demand amounts, aspects of mandatory reporting, and CMS guidance and communication. Among them, key challenges were identified related to CMS guidance on Medicare set-aside arrangements (MSAs).
The GAO-12-333 report indicated that “while guidance exists for workers compensation Medicare set asides (WCMSAs), the Center for Medicare and Medicaid Services (CMS) has issued very little guidance related to liability MSAs. Non-group health plan (NGHP) stakeholders reported inconsistent handling of liability MSAs. CMS issued its first formal memorandum related to MSA for liability situations on September 29, 2011, detailing when it would consider Medicare’s interests satisfied with respect to future medical expenses in liability settlements. But this is the only formal memorandum related to liability MSAs that CMS has provided. And unlike for WCMSAs, CMS does not have a formal review and approval process for liability or no-fault MSA arrangements. Upon request, some CMS regional offices will review liability or no-fault MSAs, but this is at the regional office’s discretion. NGHP stakeholders report variation in regional office response, including which regional offices will review liability MSAs, policies (such as setting thresholds for review), and regional office responsiveness.”
As a result, the GAO-12-333 Report made five recommendations to CMSto improve the effectiveness of the MSP program and process for NGHPs. Among them, to improve the agency’s communication regarding the MSP process for situations involving NGHPs, GAO recommend that “the Acting Administrator of CMS develop guidance regarding liability and no-fault set-aside arrangements.”
The 2012 ANPR Solicitation for Public Comments
CMS had clearly been thinking and working on such issues, as in June 2012, it published an Advanced Notice of Proposed Rulemaking (ANPR) that solicited public comments on proposed options to protect Medicare’s interests for situations involving NGHPs where future medical expenses may be an issue (including set-aside arrangements). Although several comments were received, the ANPR was later voluntarily dismissed by CMS. After three years of silence, forcing NGHP stakeholders to go to federal courts to seek guidance on when and how to take Medicare’s future interests into consideration, in July 2015, CMS reported that it would publish sub-regulatory guidance on when and how to address liability insurance and no-fault insurance cases involving future medical expenses. However, thru present, CMS has still not published any such sub-regulatory guidance.
The 2016 Announcement Expanding the Voluntary MSA Review Process
Almost a year later, on June 8, 2016, CMS published an announcement on its website indicating that it would be “considering the expansion of its voluntary MSA amount review process to include the review of proposed liability insurance (including self-insurance) and no-fault insurance amounts.” The announcement also indicated that CMS planned to “work closely with the stakeholder community to identify how best to implement this potential expansion.” However, thru date, CMS has not provided any announcements or scheduled any town hall meetings regarding same.
The 2016 Request for Proposal for WCRC to Include LMSAs and NFMSAs
Instead, what stakeholders were provided on November 23, 2016, was CMS’ release of a Draft Request for Proposal for the Workers Compensation Review Contractor (WCRC). Among other items, CMS announced that “the contract would be awarded on a Firm Fixed Price (FFP) basis and would include a 12 month base period starting in 2017 plus four (4) one (1) year options.” The Draft Request for Proposal also indicated CMS “will evaluate proposed technical approach for developing recommended amounts not only for WCMSAs, but also for Liability Medicare Set-asides (LMSA) and No-fault Insurance Medicare Set-asides (NFMSA).” Consistent with all previous failed efforts, communications, and promises, thru present, CMS has not announced any final decisions regarding the contractor, its review of proposed LMSAs and NFMSAs, or the process the contractor will be using to perform such reviews.
Latest Announcements Regarding Liability and No-Fault Medicare Set Asides
The 2017 CMS Change Request to Medicare Contractors
On February 3, 2017, CMS published Publication 100-20, a one-time notification for a change request (CR 9893) regarding Medicare Secondary Payer LMSAs and NFMSAs. The notice identified “the roles the Medicare Parts A/B Administrative Contractors (A/B MACs), Durable Medical Equipment MACs (DME MACs), shared systems, and Common Working File (CWF) will have on situations with LMSAs or NFMSAs.” CR 9893 indicated “analysis and design changes are effective on July 1, 2017. Coding and testing changes are effective October 1, 2017. Analysis and design implementation date is July 3, 2017. Coding and testing implementation date is October 2, 2017.” https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/2017Downloads/R1787OTN.pdf.
To comply with GAO-12-333, CR 9893 indicated CMS “will establish two new set-aide processes, one for LMSAs and another for NFMSAs. An LMSA or NFMSA is an allocation of funds from a liability or an auto/no-fault related settlement, judgment, award, or other payment that is used to pay for an individual’s future medical and/or future prescription drug treatment expenses that would otherwise be reimbursable by Medicare.” The 2/3/17 CMS change request addresses the “policies, procedures, and system updates required to create and utilize an LMSA and NFMSA MSP record, similar to a WCMSA MSP record, and instructs the A/B MACs and shared systems when to deny payment for items or services that should be paid from an LMSA or NFMSA fund.” https://www.cms.gov/Regulations-and- Guidance/Guidance/Transmittals/2017Downloads/R1787OTN.pdf.
The 2017 Medicare Learning Network Matters to Medical Providers, and Suppliers
After informing contractors of this latest change, in February 2017, CMS also published its latest Medicare Learning Network Matters 9893 (MM 9893). MM 9893 is intended for physicians, providers and suppliers submitting claims to A/B and DME MACs for services to Medicare beneficiaries. The article is based on CR 9893, making it clear that “to comply with the GAO 12-333, CMS will establish two new set-aide processes: a LMSA, and a NFMSA process.” MM 9893 reminds physicians, providers, and suppliers that “CR 9893 provides policies, procedures, and system updates required to create and utilize an LMSA and an NFMSA MSP record, similar to a WCMSA MSP record, and instructs the MACs and shared systems when to deny payment for items or services that should be paid from an LMSA or an NFMSA.” https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/Downloads/MM9893.pdf
MM 9893 explains that “based on CR 9893, Medicare will not pay for those services related to the diagnosis code (or related within the family of diagnosis codes) associated with an open LMSA or NFMSA MSP record when the claim’s date of service is on or after the MSP effective date and on or before the MSP termination date.” The physician, provider, or supplier’s “MAC will deny such claims using Claim Adjustment Reason Code (CARC) 201 and Group Code PR based on the open LMSA or NFMSA MSP auxiliary record.” https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/Downloads/MM9893.pdf
“In addition to CARC 201 and Group Code PR, when denying a claim based upon the existence of an open LMSA or NFMSA MSP record, the MAC will include the following Remittance Advice Remark Codes (RARCs) as appropriate to the situation:
- N723—Patient must use Liability Set Aside (LSA) funds to pay for the medical service or item.
- N724—Patient must use No-Fault Set-Aside (NFSA) funds to pay for the medical service or item.
Where appropriate, MACs may override and make payment for claim lines or claims on which:
- Auto/no-fault insurance set-asides diagnosis codes do not apply, or
- Liability insurance set-asides diagnosis codes do not apply, or are not related, or
- When the LMSA and NFMSA benefits are exhausted/terminated per CARC or RARC.” https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/Downloads/MM9893.pdf
These latest announcements are yet another clue that CMS is definitely getting closer and closer to producing a system and a process for LMSAs and NFMSAs. However, the existence of a claims adjustment and group code, as well as a remittance advice remark code for LMSAs and NFMSAs does not make a process. If in fact CMS is serious about creating such a system, it needs to make sure the new contractor understands the difference between work comp claims and liability/no-fault claims.
An understanding of such claims will necessarily lead CMS and its contractor to develop a different methodology for reviewing liability and no-fault MSAs. This new process must meet head on the difficult issues of policy limits, contributory negligence, and statutory caps, just to name a few. In other words, how will liability and no-fault parties be able to take Medicare’s future interests into account when the settlement, judgment, award, or payment may not be anywhere near the projected future medical needs associated with the claim?
If in such situations, CMS intends to take all settlement funds, as it has with reimbursement of conditional payments, then I predict both plaintiffs and defendants will declare war on CMS. Medicare beneficiaries and their attorneys, as well as corporate defendants, their insurers, and their attorneys will challenge CMS on every case. Instead, I hope CMS will be interested in creating a system in which it will allow the parties to introduce evidence of all potential economic and non-economic damages in the claim, the limited settlement, judgment, award, or payment based on state law, policy limits, facts of the claim, judicial finding, or jury conclusions, and after taking such factors into consideration, allow for a fair and reasonable Medicare set aside allocation amount that protects Medicare’s future interests, and is also appropriate considering the facts and coverage available in such liability and no-fault claims.
For those of us who have been involved in MSP compliance since the 1980s, who assisted CMS understand work comp claims in the 1990s, and who provided different ideas on how to make certain Medicare’s future interests were appropriately considered when a work comp settlement, judgment, award, or payment took place in the 2000s, we are hoping that CMS will once again be open to learning about liability and no-fault claims, how they differ from work comp claims, and be willing to entertain different methodologies on how to protect Medicare’s future interests when a liability or no-fault settlement, judgment, award, or payment takes place.
About Flagship Services Group
Flagship Services Group is the premier Medicare compliance services provider to property & casualty insurers. Although Flagship provides Medicare compliance services for state, regional, and national workers comp employers and carriers, our primary focus and expertise has been the Medicare 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, or no-fault 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.
About Rafael Gonzalez
Rafael Gonzalez, Esq. is President of Flagship Services Group, the only national Medicare Secondary Payer services provider focusing on and offering comprehensive mandatory reporting, conditional payments, and set aside allocation compliance services to the property and casualty insurance industry. He speaks and writes on mandatory insurer reporting, conditional payment resolution, set aside allocations, CMS approval, and MSA and SNT 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. He is very active on LinkedIn, Twitter, Instagram, and Facebook. He can be reached at firstname.lastname@example.org or 813.967.7598.