New Workers' Compensation Medicare Set-Aside (WCMSA) Reference Guide (Version 3.5) Takes aim at Non-submit and EBMSAs

The Centers for Medicare and Medicaid Services (CMS) has released an updated Workers’ Compensation Medicare Set-Aside (WCMSA) Reference Guide (Version 3.5, January 10, 2022).

CMS describes its updates in Chapter 1.1 of the new WCMSA Reference Guide as follows: “Clarification has been provided regarding the use of non-CMS-approved products to address future medical care (“Section 4.3”).”

As part of these updates, CMS added a new section to the Reference Guide relating to what is commonly referred to as “WCMSA non-submits” or “evidenced-based” MSA (“EBMSA/Non-Submit”) allocations. In general, these allocations are WCMSA medical allocations have not been reviewed or approved as part of the agency’s voluntary WCMSA submission process. For a variety of reasons, interest and use of these arrangements have grown over the past several years. 

Significantly, as discussed more fully below, the new Reference Guide focuses on EBMSAs/Non-Submit allocations. Regarding these allocations, CMS notes that they view these arrangements as “a potential attempt to shift financial burden by improperly giving reasonable recognition to both medical expenses and income replacement.”[1]  In addition, CMS states that they will deny medical services to the full amount of the settlement, minus procurement costs, if these arrangements are used.[2]  Overall, these new changes may cause insurers to re-evaluate their use of EBMSAs/Non-Submit allocations going forward.

The authors provide the following overview of these new updates and potential claims impact as follows:

Overview of CMS’s new updates

CMS added a new section, Section 4.3, to its WCMSA Reference entitled “The Use of Non-CMS-Approved Products to Address Future Medical Care.”

Section 4.3 states as follows:

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. Although not inclusive of all products covered under this section, these products are most commonly termed “evidence-based” or “non-submit.” 42 C.F.R. 411.46 specifically allows CMS to deny payment for treatment of work-related conditions if a settlement does not adequately protect the Medicare program’s interest.

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. 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.

As a matter of policy and practice, CMS will deny payment for medical services related to the WC injuries or illness requiring attestation of appropriate exhaustion equal to the total settlement less procurement costs before CMS will resume primary payment obligation for settled injuries or illnesses. This will result in the claimant needing to demonstrate complete exhaustion of the net settlement amount, rather than a CMS-approved WCMSA amount.

Assessing the updates

From a practical claim standpoint, CMS’s updates are significant in the sense that CMS has for the first time seemingly taken a position on the use of EBMSAs/Non-Submit practices, and as noted above, has indicated that from its view these allocations may “potentially” be viewed as an improper shift of the claimant’s future medical treatment to Medicare in contravention of 42 C.F.R. 411.46.  Further, and significantly, CMS seems to be indicating that that they will deny medical services to the full amount of the settlement, minus procurement costs, if these arrangements are used.

While the wording of Section 4.3 does not prohibit or ban the use of non-submit or evidenced based allocations, it appears that CMS is aggressively placing the industry on notice by stating that “as a matter of policy and practice” a claimant will need to show that the entire settlement is exhausted, minus procurement costs, before CMS will pay for claim related treatment if the settlement does not include a CMS-approved WCMSA. CMS’s new updates raise questions on several fronts, including the agency’s ability to presume or declare EBMSAs/Non-Submit allocations as reflecting an attempt by the parties to shift the burden of medical treatment to Medicare under current statutes and regulations.  In the big picture, it would appear that this new update is designed to discourage the continued use of EBMSAs/Non-Submit, or to limit their application.

Consequently, the new language presents several potential logic gaps, questions, and contradictions which may need to be clarified. For example, CMS continues to state that submission of a WCMSA is voluntary, even though the new changes may call this into question. Also, CMS’s application of its WCMSA work review thresholds, which exclude certain WCMSAs from review, means that some claims are ineligible to obtain a CMS-approved WCMSA amount and nothing in Section 4.3 (or any other section in the revised WCMSA reference guide 3.5) addresses that particular issue. Finally, it is unclear whether CMS intends to apply this new policy and practice prospectively or if it will also apply retroactively to settlements that pre-dated the release of Section 4.3. 

By Mark Popolizio and Sid Wong

Courtesy of Verisk

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