Insurers that are inclined to skip a government review of proposed workers’ compensation settlements may think twice about that strategy because of an updated policy guideline issued by the Centers for Medicare and Medicaid Services on Jan. 11.
For the first time, CMS’ reference guide for workers’ compensation Medicare set-asides states that the agency will presume that insurers and employers who don’t submit proposed workers’ compensation settlements for review are attempting to shift costs to taxpayers by reserving insufficient money for the claimant’s future medical care.
“Unless a proposed amount is submitted, reviewed, and approved using the process described in this reference guide prior to settlement, CMS cannot be certain that the Medicare program’s interests are adequately protected,” the reference guide says. “As such, 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.”
What’s more, Section 4.3 of the updated guide says that CMS may refuse to pay for any medical treatment for a workers’ compensation claimant whose settlement was not reviewed by the agency’s contractor until the claimant spends the entire amount of the settlement on medical care. That includes money that was paid to cover indemnity benefits in addition to the amount allocated for future medical care.
In a blog post published Friday, the Goldberg Segalla law firm said claimants’ attorneys likely will begin insisting on CMS-approved settlements because of CMS threat that will require claimants to spend down their entire settlement.
“This will likely have a chilling effect on many settlements, as CMS approval adds both time and expense to the process, while often overvaluing future medical expenses.”
The Medicare Secondary Payer Act requires employers and insurers that settle workers’ compensation claims to set aside sufficient monies to cover the cost of all care that the claimant will need to treat the work injury for the rest of his or her life. Parties that do not face a future lawsuit by CMS that will seek to recover double the amount of damages if Medicare is required to pay for treatment that should have been covered by the workers’ compensation insurer or employer.
Employers and insurers may submit proposed settlements to a CMS contractor to ensure that the amount set aside for future medical care is sufficient. The process is voluntary, but provides protection from future lawsuits—or for the claimant, from CMS denying payment for medical care.
Many settlements never go through a CMS review. A number of Medicare set-aside consulting firms and law firms provide “evidence-based” estimates that are designed to ensure reserves are adequate, without setting aside the perceived exorbitant amounts that CMS would require in its review.
S. Phillip Unwin, a partner in the Goldberg Segalla’s Rochester, New York office, said during a telephone interview that because of CMS’ latest guidance, claimants’ attorneys will be very reluctant to settle any claims that hasn’t been reviewed by CMS’s contractor. He said that may discourage settlements because CMS will likely require payers to set aside far more money that the private “evidence-based” estimates.
Unwin says he already advises his clients not to submit proposed future-medical settlements to CMS’ contractor for review until after the claimant’s condition has stabilized and the frequency of treatment slows. He said because of the update to the reference guide, more of his clients may seek “indemnity-only” settlements or avoid settling claims that require future medical care altogether.
Unwin said “there is a very strong likelihood” that claimants’ attorneys will advise clients not to accept any settlement without CMS review because of the updated language in the reference guide.
“Their clients are looking at a situation where if they settle without CMS approval they may have to spend the entire settlement” on medical care, he said. “In most cases that is a lot more than the set-aside itself.”
Shawn Deane, general counsel for Ametros, said in the past few years he has seen more and more settlement agreements that bypass the CMS review process. Ametros administers medical set-asides that have been established for workers’ compensation claimants, ensuring that the money is spent on appropriate care.
Deane said so called “non-submit” settlements are becoming more common because CMS assumes that the amount of medical treatment that the claimant is currently receiving will continue at the same pace throughout the claimant’s life. MSA consulting firms that provide “evidence-based” estimates of future medical care factor in more usual patterns. For example, they may assume the claimant will eventually be weaned off of pain medications.
That isn’t the case when CMS reviews a proposed future-medical settlement, he said.
“It’s almost a worst-case scenario,” Deane said. “They fear there are some people who never get better, but most people, they do improve somewhat.”
Deane said in a blog post that some Mediare set-aside consulting firms offer to indemnify their clients and the claimant if CMS sues to recover its treatment costs because the medical allocation falls short.
Deane said CMS has always strongly encouraged workers’ compensation payers to submit proposed settlements to its contractor for review and to use professional administators, such as his own firm, to ensure that the money is properly spent. The review process remains voluntary, but now CMS is on record stating that it is skeptical about “non-submit” settlements and spelled out the severe penalties that can be levied if the set-aside turns out not to be enough.
“Now it is clear,” Deane said. “Now it is in writing.”
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