Cost drivers in Workers’ Compensation Medicare Set-Asides

A Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA) is a financial agreement that allocates a portion of a workers’ compensation settlement to pay for future medical services and prescription costs related to the workers’ compensation injury, illness, or disease. Used when the injured employee is or will soon be a Medicare beneficiary, they were designed to protect Medicare from paying for post-settlement treatment of a workers’ compensation injury. For stakeholders, they complicate workers’ compensation settlements.

In a recent article in Risk & Insurance, Daniel M. Anders, Esq., MSCC, CMSP the Chief Compliance Officer for Tower MSA Partners, discussed cost drivers and when MSAs are appropriate. While MSAs can be beneficial, employers should take proactive steps to determine if the claim should be settled, delayed, or not settled at all. The MSA projects future injury-related medical costs over the person’s life expectancy and the employee’s medical records and status are key to the projections.

For an accurate forecast of future medical costs, the employee’s condition should be stable and ongoing monthly treatment costs predictable. If an injured employee has upcoming surgeries, other procedures, or is tapering off opioids or other medications, then the settlement should be postponed. CMS will not factor in potential tapering of medication, even when recommended by a physician. Therefore, it is best to wait until the process is complete. Anders notes, “an injured worker who is at maximum medical improvement (MMI) is the best candidate for an MSA.”

But even if a worker has reached MMI the MSA may be too high. This requires a deep dive into medical records. If the records include non-work-related injuries, outdated prescriptions, and mention of possible treatments, such as a spinal cord stimulator, there’s a good chance these will be included in the settlement. If the MSA provider obtains a physician statement and it is worded correctly and properly documented, such costs can be removed from the allocation.

Not surprisingly, prescription drugs are often a major cost driver. Switching to a drug that is generic is an obvious cost reducer, but the prescribing physician is the decision-maker in the view of CMS and the patient needs to be stabilized on the new pharmacy regimen before CMS can approve the MSA. In jurisdictions where workers’ compensation insurers are permitted to contact treating providers a discussion about switching to a generic or changing dosage and formulation could save thousands of dollars. Securing the agreements can be time-consuming and because CMS requires specific verbiage in these statements, it’s best to have vendors with this expertise prepare the statements for doctors’ signatures.

Injured employees need to be educated about managing MSAs settlements. Third-party administrators can help employers settle claims by educating the employee about the MSA and the assistance available to them after the claim closes. Unlike workers comp, the MSA only covers treatment that Medicare covers. Home health care, some durable medical equipment, and the off-label use of some medications not covered by Medicare cannot be paid through the MSA. If needed, costs should be allocated in a separate fund.

Another cost concern was the proposed rule on Section 111 penalties. February 18, 2023 was the due date for CMS to issue final regulations on criteria for imposing Section 111 penalties for improper mandatory reporting. Many were surprised when CMS extended the deadline for one-year to February 18, 2024, to conduct additional analysis into the economic impact of the final rule. CMS indicated its rule would not have a significant economic impact; however proposed penalties of up to $1,000 per day per claim could lead to millions of dollars of penalties on even one claim. As required by law, CMS will eventually make its penalties rule final and issue penalties, so it’s important to use this additional time to ensure the accuracy and timeliness of your reporting.

This article does not address the more fundamental question of whether to submit an MSA for CMS review and approval. Employers should work with insurers and their MSA partners to take a hard look at their settlement practices to determine what is the best course of action.