Currently, CMS focuses its post-settlement, MSP enforcement on the proper calculation of the Workers Compensation Medicare Set-Aside (WCMSA) amounts by paying about $5 Million per year to a contractor to review about 29,000 WCMSA arrangements. That contract is currently being sent out for competitive bids. But, as we mentioned in our previous blog, we think there is a better way to achieve the goals of MSP compliance.
First, it’s important to understand that the primary objective of the Medicare Secondary Payer (MSP) statute is to prevent Medicare from paying medical bills that insurance settlement money is supposed to pay for. Medicare Set-Aside (MSA) accounts are commonly used to protect Medicare from paying certain post-settlement medical bills by setting aside future medical treatment settlement monies in a separate bank account to be used later to pay those related medical bills.
However, about 95% of MSA money is “self-administered” by the injured person and the sad truth is that the majority of that money is being misspent, leaving Medicare to pick up the tab. The bottom line is that is does not matter how much cost, effort, expertise or scientific precision is poured into the MSA cost projection calculations. In the end, if a competent, accountable, neutral third party does not administer that money, MSP compliance fails.
For that reason, it seems to me that there is a much better, more common sense approach, to MSP compliance that would help the MSA industry and save billions of dollars for the Medicare Trust Funds:
1. MSA Professional Administration should be encouraged – If CMS were to recommend professional administration, require a self-administering claimant to attest to his/her competence and allow the professional administration fees to be paid from the MSA funds, professional administration would expand and Medicare would save billions of dollars.
2. Limit CMS MSA reviews – Most laws in the U.S. are not enforced by a comprehensive pre-audit, because it’s too expensive. CMS should adopt a more IRS-like model to reviewing WCMSAs, by publishing more detailed MSA compliance rules and then greatly reducing the number of WCMSAs that are reviewed to a fraction of what they are reviewing today. This would free up resources and would not affect accuracy of the calculations because the MSA compliance industry would comply with CMS’ published rules.
3. Encourage Structured Settlements – Currently, CMS allows MSAs to be funded by either structured settlement annuity payments or a lump sum payment, or a combination of both. However, structured settlements save more money for Medicare because the MSA account is funded by future periodic payments that make it much more difficult for an injured, self-administering, claimant to misspend. In addition, structured settlements are tax-free to the claimant and save money for the payer. CMS and the structured settlement industry should work together to find a way to increase the use of structured settlements with MSAs because it benefits them both.