Update: Settling Cases with MSAs

Readers of the Court’s blog are no doubt familiar with our ever-popular classic, Settling Cases with Medicare Set-Aside Agreements, where we made it clear that the Court won’t review or approve MSAs entered into by parties seeking to close future medical benefits.

That hasn’t changed – we’re still not going to do it, and the Court will continue to require the parties to include only the template language concerning Medicare (as well as the language set out in the blog post above).

Then why bring it up now? Well, the Centers for Medicare and Medicaid Services (CMS) issued an updated Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA) Reference Guide – Version 3.5, on January 10, 2022. You can read it here. Specifically, CMS has now advised:

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. (Emphasis added).

In other words, unless CMS has previously approved a settlement amount, it will ignore the MSA, and the employee will be required to show that they’ve exhausted the entire settlement, not just the medical closure amount, on medical treatment before Medicare will pay for treatment of the work injury or illness.

The problem with this new policy lies in the Court’s duty to determine that a settlement provides substantially the benefits provided by the statute. Is an employee receiving “substantially the benefits” when she risks her entire settlement in order to close future medicals? The answer is no if she eventually loses her disability benefits to pay for medical treatment that could have been provided by the employer.

So the question is, which closed-med settlements are too risky to approve without CMS approval? We’re certainly not going to deny them all, as that would contravene the intent of Tennessee Code Annotated section 240(d). Besides, some injuries require little, if any, additional treatment. And even if we wanted to require CMS approval for every settlement (which we don’t), CMS won’t review cases that don’t meet its thresholds.

After considering these questions, the Court has determined that we must require CMS approval for closed-med settlements involving employees who meet the CMS review thresholds. As most of you know, these include the following:

• The claimant is a Medicare beneficiary, and the total settlement amount is greater than $25,000.00; or
• The claimant has a reasonable expectation of Medicare enrollment within 30 months of the settlement date, and the anticipated total settlement amount for future medical expenses and disability or lost wages over the life or duration of the settlement agreement is expected to be greater than $250,000.00. A claimant has a reasonable expectation of Medicare enrollment within 30 months if any of the following apply:
  • The claimant has applied for Social Security Disability Benefits
  • The claimant has been denied Social Security Disability Benefits but anticipates appealing that decision
  • The claimant is in the process of appealing and/or re-filing for Social Security Disability benefits
  • The claimant is 62 years and 6 months old
  • The claimant has an End Stage Renal Disease (ESRD) condition but does not yet qualify for Medicare based upon ESRD

Further, because CMS has raised the stakes on errors in the process, the Court may require professional administration in some cases where the medical treatment is particularly extensive or complex, or there are questions about the employee’s ability to attest to appropriate exhaustion of the funds to CMS.

We recognize this is a change that will take some getting used to. But there is some good news. First, CMS approval is much faster than it used to be, often around ten business days. Further, unlike the previous, somewhat nebulous CMS memos, the current guidelines specifically state, “When CMS reviews and approves a proposed WCMSA amount, CMS stands behind that amount.”

So, we hope this clarifies the whole CMS question.

We also hope this blog post becomes just as viral as the last one tackling this topic. We can dream, anyway.

By Judge Dale Tipps

Courtesy of the Tennessee Court of Workers' Compensation Claims

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