Is CMS Pre-Approval Required for MSAs? No, But Workers’ Comp Pros Should Still Tread Carefully
Are non-CMS approved MSAs still an option for settling parties? The legal answer to this question is affirmatively yes.
However, there are judges, claimant attorneys, Medicare beneficiaries, vendors, carriers, TPAs and consultants that all have different opinions on this issue, which has left settling parties at best confused and at worst stalled.
Settlements have stalled, negotiations have stalled, and frustrations are at their highest levels. Is this a practical reaction to an updated WCMSA reference guide and CMS webinar discussion of CMS’s position on non-submit MSAs?
Realistically, CMS has not changed its policy on this issue; it simply announced it in writing and via CMS’s most recent Town Hall webinar. CMS also listened to the industry’s concerns after the first iteration of the amended WCMSA User Guide was published on January 10, 2022.
Since then, CMS has clarified and communicated its overall policy on this issue. Parties to a settlement can use non-approved MSAs. Post-settlement, the analysis of non-submit MSAs and submitted MSAs remains the same:
- Was the MSA funded appropriately?
- Did the beneficiary exhaust the funds appropriately?
CMS explained that it is expected all WCMSAs be funded per the WCMSA Reference Guide standards.
Further, CMS made clear that any MSA should be administered pursuant to the WCMSA Self-Administration Toolkit.
As such, whether or not you submit the MSA to CMS for review and approval prior to settlement or not, the same analysis will be done post-settlement.
Hence, it stands to reason that the real question is whether or not the parties want CMS to confirm that the MSA is funded appropriately pre-settlement or whether the beneficiary is willing to trust that it was prepared and funded appropriately and prove this if and when the funds exhaust.
In practice, beneficiaries and their attorneys appear to prefer pre-settlement submission and approval. Further, there are several jurisdictions nationwide in which judges are refusing to approve settlements without CMS approval of the MSA.
Taking this all one step further, another question is whether or not the parties should notify Medicare of the amount of the non-submit MSA. CMS has indicated it is currently looking into a system to track non-submit MSAs regardless of notification by the parties, but it is not currently active.
In essence, CMS is relying on the parties to notify them of the MSA value. If they are not notified, CMS has indicated this may cause them to make post-settlement conditional payments. Therefore, the decision on whether or not to notify CMS of the non-submit MSA has to be very carefully considered.
CMS is sending correspondence to beneficiaries and their counsel regarding non-submit MSAs. These letters in pertinent part point out the following:
- “Because you did not seek prior review and approval by CMS of the amount set-aside in your settlement for your future medical care, Medicare will not pay for the treatment of your work-related condition until you have demonstrated the appropriate exhaustion of your ‘net’ settlement proceeds.”
- “Please review the enclosed package for information about the submission of annual attestations. Once you have shown that the settlement proceeds (total settlement amount minus procurement costs such as attorney fees, and minus funds repaid to Medicare for care prior to the date of settlement) have been exhausted, Medicare will make payment again.”
It should be noted, in the most recent update to the WCMSA Reference Guide published on March 21, 2022, CMS includes additional language that is not present in the correspondence being sent to beneficiaries.
Specifically, CMS indicates the beneficiary will have an opportunity to prove that the initial funding of the MSA was sufficient and that the utilization of the MSA funds was appropriate. It is not clear at this time exactly how the post-settlement review of the MSA will be performed.
The updated reference guide has eased the concern nationwide on this issue; however, it remains that although MSAs are not legally required, avoiding CMS submission may not be easy. Prior to CMS outlining its policy on denying payments, it also stated the following:
- “CMS treats the use of non-CMS-approved products as a potential attempt to shift financial burden by improperly giving reasonable recognition to both medical expenses and income replacement.”
Settling parties need to weigh their options at the time of settlement and if a non-submit MSA is the way the parties decide to go, the way the MSA is prepared, and the administration of the monies post-settlement are of the utmost importance.
Finally, it would be short sighted not to seriously consider the first iteration of CMS’s WCMSA Reference Guide update published on January 10, 2022, in which CMS specifically pointed out that “[a] number of industry products exist with the intent of indemnifying insurance carriers and CMS beneficiaries against future recovery for conditional payments made by CMS for settled injuries.”
CMS is very aware of the insurance products that are sold to settling parties that provide varying levels of indemnification post-settlement for parties that choose to not submit MSAs for review and approval.
These products are not all created equal, and parties should request specific policy documentation, confirmation that these policies have been utilized and paid covered claims in the past, and clear coverage guidelines when/if they choose to purchase these types of policies.
Additionally, it should be noted that not all of these products are occurrence-based policies that are properly insured. &