In the history of the DEF Journal, there have been many articles about the many aspects of Medicare Set-Aside Trusts (“MSAs”).
In the history of the DEF Journal, there have been many articles about the many aspects of Medicare Set-Aside Trusts (“MSAs”). But in the last year, we have seen more changes to MSAs by the Centers for Medicaid and Medicare Services (“CMS”) than ever before, and it seems more and more impossible to settle cases.
Before we discuss the changes, we need to refresh the basics, such as when an MSA is needed, since this is often misunderstood. Keep in mind that if CMS had its way, every single Workers’ Compensation settlement would include an MSA. This is because CMS assumes that eventually, every single Claimant who may someday become Medicare eligible will need medical treatment, and that Medicare may pay for treatment that should be covered under workers’ compensation. Naturally, Medicare wants to know that we will reimburse it, if it ever pays for such treatment.
Of course, we know this is not always the case. Certainly, if you have a relatively young claimant, with a relatively minor injury, like a broken leg, chances are that the claimant will NOT need medical care after a few years.
The more “iffy” situation is a relatively young claimant (40 years old), but one who has a more complex injury, requiring treatment like a spinal cord stimulator. Chances are, that the stimulator will need replacements, re-programming, and constant monitoring. And even though the claimant is young, he may very well end up still treating for his injury well into his Medicare-eligible years. Most of our MSA vendors advise that in such cases, we obtain MSAs.
Requirements for CMS Approval
Contrary to popular belief, the $25,000.00 and $250,000.00 thresholds are NOT the standards for whether we need to obtain an MSA. As aforementioned, the real standard is whether it is foreseeable that the claimant will eventually use Medicare to treat his or her work-related injuries. If so, then CMS recommends an MSA.
Where the $25,000.00 and $250,000.00 thresholds come into play is when we are deciding whether CMS needs to approve the MSA. If the claimant is already a Medicare recipient, and if the total amount of settlement (including the amount of any MSA) exceeds $25,000.00, then the MSA must be submitted to CMS for approval.
If the claimant is not yet entitled to Medicare, but has a reasonable expectation of becoming Medicare-entitled in thirty (30) months, then if the total settlement, including the MSA, exceeds $250,000.00, then CMS must approve the MSA.
Again, these are just the standards for determining whether CMS approval is needed, NOT whether an MSA is needed. And of course, just to cover its bases, CMS adds that while these guidelines are recommended, we cannot use these standards as a safe harbor. In other words, if you have a claimant that is close to qualifying for Medicare, and/or if you are approaching the threshold, it is better to be safe and submit the MSA for approval.
June 1, 2009 changes
It would be simple if the guidelines ended there. But as many of you have already experienced, on June 1, 2009, the guidelines changed to mandate that in pricing drugs, we must account for the average wholesale price (AWP). This, in turn, has skyrocketed the cost of many MSAs to the point of making some claims impossible to settle. Particularly if claimants are on narcotic or opiate pain medications, some of which do not have generics available yet, MSA costs have nearly tripled, and even annuitizing cannot reduce enough of the cost.
Some of the solutions the we have used include approaching the authorized treating physician (often in conjunction with opposing counsel, to present a unified front), and asking the physician whether any medications can be substituted for less expensive or lower-dose medications. If the physician is agreeable, then CMS needs to see a pattern of tapering or reducing medications to allow those drugs to be successfully removed from the MSA projection.
Another approach is to use a pharmacy review, which some of our MSA vendors are knowledgeable about, and can order through their resources. The pharmacy review looks at the claimant’s current medications, calculates whether it is even possible for a claimant to be on said medications for life (some medications have to be discontinued after a few years due to potential harm), and also considers lower-cost generics, or other viable substitutions.
Regardless of which method is used, CMS must see a pattern of reduction in medications before those drugs can be successfully excluded from an MSA cost projection.
May 14, 2010 changes
As if the June 1, 2009 changes were not enough, CMS did offer a little respite earlier this year by stating that any drugs that are prescribed for off-label use can be excluded from the MSA. The advantage to this is a slight decrease to the MSA, although most narcotics and opiates are prescribed for their intended label-use, and are not excluded. However, the trade-off is that the drugs that are removed from the MSA, need to be accounted for as part of the non-Medicare covered medical costs. It is still somewhat of an advantage because it means we are not beholden to the average wholesale pricing of those drugs, and can consider lower-cost options.
September 1, 2010 SITF Changes
Finally, as there are still some cases that are being handled by the Subsequent Injury Trust Fund, it is important to consider the Fund’s thresholds. As of September 1, 2010, the Fund has capped its contribution toward MSAs at $150,000.00, regardless of whether it is used to purchase an annuity or fund a lump-sum MSA. If the MSA exceeds $150,000.00, and the parties still want to settle with an MSA, then the Fund requires that the Employer/Insurer fund the difference over and above $150,000.00. If the Employer/Insurer cannot feasibly fund the difference, then the Fund recommends settling the indemnity portion and leaving medical treatment open. Whether either of these options are a good idea depends on the facts of the claim, and how much interest the Employer/Insurer have in settling it.
Although CMS presents what appears to be a never-ending set of moving targets, settlement is not impossible, but can be accomplished with a few creative approaches and a little more effort.