Am I Allocating Enough for a Medicare Set-Aside? Take These Pointers from a Pro to Find Out
With everything employers have on their plates, why should they care about Medicare Set-Asides, or MSAs? The main reason is: MSAs facilitate workers’ compensation settlements.
Closing claims reduces administrative burden, allows for a reduction in claim reserves and eliminates ongoing medical treatment and pharmacy costs. The uncertainty of an injured employee’s future medical care combined with the expected continual increase in medical costs present quite a risk for a payer with an open claim.
The Centers for Medicare and Medicaid Services does not require inflation to be factored into an MSA. Its allocation is locked in at current medical rates at the time CMS approves it. Settling the claim with an MSA that is approved by CMS brings finality to claim closure.
The MSA is a financial agreement that reserves a portion of a settlement to cover future treatment and prescription costs of a work-related injury, illness or disease. MSAs were designed to protect Medicare from paying for post-settlement treatment of a workers’ compensation injury.
Used when the injured employee is or will soon be a Medicare beneficiary, the MSA projects future injury-related medical costs over the person’s life expectancy. This information helps employers decide if the claim should be settled now, later or not at all.
If the employee’s condition is stable and the MSA amount is fair, now is the time to start settlement negotiations.
Cost Drivers and When MSAs Are Appropriate
There are two reasons to postpone a settlement in which an MSA is necessary. One is that the injured employee has upcoming surgeries, other procedures, or is tapering off opioids or other medications. For an accurate forecast of future medical costs, wait until the condition stabilizes and ongoing monthly treatment costs are predictable. In other words, an injured worker who is at maximum medical improvement (MMI) is the best candidate for an MSA.
The second reason to wait is that the MSA is too high, even if they are at MMI. In this case, examine medical records for cost drivers and take steps to reduce the allocation.
Some claims head to settlement with vague treatment notes. A statement along the lines of “if this does not resolve, a spinal cord stimulator may be considered” means the MSA must include the cost of that device. Conditions change over time and the physician may no longer believe a surgery will be necessary. If the MSA provider obtains a physician statement to this effect and it is worded correctly and properly documented, the procedure’s cost can be removed from the allocation.
The lifetime cost of injury-related prescriptions can pose a huge barrier to settlement. Even a couple of brand-name drugs can push an allocation to over $1 million. Asking physicians to prescribe generics instead of brands is an obvious solution, but it takes more than just a promise to switch. The patient needs to be stabilized on the new pharmacy regimen before CMS can approve the MSA.
Less obvious cost drivers are discontinued drugs. A physician may change a medication without recording the fact that the previous drug is no longer being prescribed. A careful analysis of the fill history will detect this.
It’s not enough to just say a drug isn’t being used, though. The MSA preparer must obtain the physician’s statement that it was discontinued, and this statement must be properly documented in the medical records for CMS to be able to approve the MSA without that medication’s cost.
While tracking down physicians and securing these agreements can be onerous, these tactics deliver tremendous savings. Depending on the claim, they can reduce MSAs by thousands, even hundreds of thousands of dollars.
Some MSA preparers will reach out to the treating physician to clarify treatment and medication. Because CMS requires specific verbiage in these statements, it’s best to have vendors with this expertise prepare the statements for doctors’ signatures.
Once the unnecessary expenses are removed and the allocation is acceptable, the optimized MSA can be presented to the injured employee and any attorney representing them. When they understand what an MSA is and how it was calculated, the employee can see that there is enough money to cover future treatment of their injury. Removing their fear of running out of funds goes a long way toward settlement.
Education Is Key
It’s also important to educate the employee on how they spend these funds and report their expenses after settlement. Injured employees are accustomed to the comp system covering all their prescription and treatment costs; after settlement they will need to pay for these from their MSA funds.
And that’s not as simple as it sounds. The MSA only covers treatment that Medicare covers, and this may differ from some care they received under workers’ compensation. For example, home health care, some durable medical equipment, and the off-label use of some medications are not covered by Medicare and cannot be paid through the MSA. If needed, their costs should be allocated in a separate fund.
And then the injured employee needs to pay for care at fee schedule rates in fee schedule states. They need to capture the costs of each doctor’s visit and prescription and provide an annual attestation of these expenses to CMS. If their MSA is funded with an annuity, they need to inform CMS of any temporary exhaustion of funds so that Medicare will step in and pay until the next annuity installment.
That’s a lot for an injured person or their family to manage.
Providing Resources and Settlement Partners
There are professional administration companies that help injured people manage their medical funds and reporting after they settle workers’ compensation. Some also offer pharmacy and medical treatment discounts and care guidance. Providing professional administration is a way for employers to extend patient advocacy post-settlement.
Professional administrators can also help employers settle claims by educating the employee about the MSA and the assistance available to them after the claim closes. Once the worker understands that utilization review and IMEs can be things of the past and they are free to pursue any Medicare-covered medical treatment, they are usually more open to settlement with an MSA. Replacing their claims representative with a care advocate at the professional administration firm to navigate the health care system helps make the process seamless for the injured employee.
Structured brokers, which create annuity type financial vehicles that distribute MSA funds over time, are other good settlement partners. As independent third parties, these professionals can allay fears regarding the settlement and its ability to provide for the employee’s needs.
A discussion about MSAs would be incomplete without touching on whether to submit an MSA for CMS review and approval. CMS MSA approval guarantees that the injured employee/Medicare beneficiary can access Medicare benefits if the MSA funds ever run out. If an MSA is not approved, CMS states it may demand that the entire settlement (minus certain costs) — not just the MSA — be used for injury-related medical.
Advocates for non-submit MSAs argue that the risk of exhausting the funds is minimal. Nonetheless, there is a risk. Some self-insurers guarantee that they will step in and pay for injury care up to the settlement amount if non-submit MSA funds are depleted and CMS refuses to pay. Similarly, some MSA vendors offer a guarantee or a form of “insurance” against the MSA funds prematurely exhausting. The ultimate question is do you want to keep the risk on the self-insurer or transfer it to an MSA vendor, the injured employee or CMS?
A submitted MSA may yield a higher MSA allocation than a non-submitted MSA. CMS sets the bar high as its goal is to avoid the potential for shifting injury-related costs to Medicare. However, compare the cost of a CMS-approved MSA, even a high one, to an open claim file.
Going forward, employers should take a hard look at their settlement practices. Is a non-submit MSA the way to go? If so, how do they educate injured workers about their risks and responsibilities? Should they stress or even demand the use of structured settlements and professional administration? If an injured employee has to dig into their net settlement amount to pay for medical, the self-insurer’s reputation for credibly settling cases would certainly be damaged.
If the self-insurer decides — as many have — to submit MSAs for CMS approval, they should engage an MSA partner to proactively identify and address cost drivers. There are numerous ways to reduce costs and produce an MSA that closes medicals, complies with CMS requirements, and protects the injured employee’s ability to access Medicare benefits for injury treatment if necessary.
MSAs give employers the facts and process they need to close claims with finality. More importantly, they ensure that a valued team member will have the money needed to pay for future medical costs arising from their workplace injury or illness. When prepared properly, the MSA balances care, cost and compliance to provide a fair and reasonable allocation for the employer and the injured employee. &