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Medicare Set-Aside Bill Introduced in House and Senate

On June 4, 2015, Senators Rob Portman (sponsor, R-OH) and Bill Nelson (co-sponsor, D-FL) introduced Senate Bill 1514 into the U.S. Senate to amend the Medicare Secondary Payer Statute. An identical bill, HR 2649, was also introduced in the House the same day by Representatives Dave Reichert (sponsor, R-WA) and Mike Thompson (co-sponsor, D-CA). These bills are identical to S 2731, introduced in 2014, which did pass. It is also very similar to House Bill 1982, which was introduced in 2013 and also did not pass.

S 1514 and HR 2649 primarily limit the application of the Medicare Secondary Payer (MSP) statute and provide for a “Qualified Medicare Set-Aside” as a way to comply with the statute, as follows:

Threshold for MSP Treatment
These identical bills amend the Medicare Secondary Payer (MSP) statute to provide an exemption for workers’ compensation settlements for any of the following:

  • The total settlement is $25,000 or less
  • The claimant is not eligible for Medicare at settlement date and is unlikely to become eligible for within 30 months
  • The claimant is not eligible for post-settlement payment of medical expenses by a workers’ compensation plan
  • The settlement agreement does not limit or extinguish the right of the claimant to have his medical bills paid by the workers’ compensation insurance plan.

Qualified Medicare Set-Aside
They amend the MSP Statute to provide that if a workers’ compensation settlement includes a “qualified Medicare set-aside” (QMSA) then that settlement will satisfy any obligation, with respect to future payment reimbursement obligations under Section 1395y(b)(2) of the MSP statute. MSA submissions to CMS would remain optional, however there would be new approval deadlines and appeals options added.

Requirements of a Qualified Medicare Set-Aside:

  • Reasonably takes into account the full payment obligation for present and future medical payments.
  • It must be determined based on the Illness or injury giving rise to the workers’ compensation claim involved, The age and life expectancy, reasonableness of and necessity for future medical expenses, duration of and limitations on benefits payable under the workers’ compensation law or plan, regulations and case law relevant to the state workers’ compensation law or plan
  • It must include payment for items and services that are covered by the workers’ compensation law or plan
  • It must be based on the applicable workers’ compensation state fee schedule
  • In the case of a compromise settlement, a QMSA can be calculated using a proportional adjustment that reduces the QMSA by the same proportion that the total settlement was reduced.

Approval of a QMSA
The two new proposed bills maintain the current optional submission and CMS review process, however they give the submitter some new and significant appeals rights. They give CMS 60 days to review the QMSA. If CMS fails to meet that deadline, the submitter has 30 days to appeal to CMS or to an administrative law judge. If CMS meets the deadline, the submitter can still appeal CMS’ decision within 30 days to CMS, an administrative law judge or a judicial review. CMS again has 30 days to respond to this appeal. If CMS responds to the appeal with a decision within 30 days, the submitter can appeal that decision, within 30 days to an administrative law judge. If CMS does not respond within 30 days, the submitter can appeal to an administrative law judge. If the administrative law judge does not respond within 90 days, the submitter can request a judicial review.

Optional Direct Payment of Medicare Set-Aside
A claimant or payer of a workers’ compensation settlement agreement may elect, upon written consent of both parties, to transfer to the Secretary a direct payment of the QMSA. This election will satisfy any payment obligations under Section 1395y(b)(2) of the MSP Statute.

Protection from Certain Liabilities
No one shall be liable for any payment amount established under a Medicare set-aside for an item or service provided to the claimant that is greater than the related workers’ compensation fee schedule amount. In addition, a provider may not bill a Medicare set-aside more than the payment rate used in the Medicare set-aside or the Secretary may apply sanctions.

Election of Professional or Beneficiary Self-Administration of an MSA
Nothing in these amendments prevents an individual from electing to utilize professional administration services or to self-administer payments of their MSA.

Treatment of State Workers’ Compensation Law
If a workers’ compensation settlement agreement is accepted in accordance with the workers’ compensation law of a jurisdiction, then that acceptance shall be deemed conclusive. That includes determination of reasonableness of the settlement value, any allocation of funds, the projection of future indemnity or medical benefits that may be payable under state workers’ compensation law.

Commentary

There are many positives with this bill, but one major concern. On the positive side, I think most agree that a $25,000 threshold, time limits for CMS approval and appeals rights are much needed in the MSA process.

However, the most controversial provision is the Direct Payment Option, where with the written consent of both settling parties, the MSA can be paid directly to Medicare to satisfy the payment provisions of the Medicare Secondary Payer provisions. This apparently would mean that, if that option is chosen, any conditional payments would not have to be repaid to Medicare and no MSA account would need to be set up. Many concerns have been voiced about this option, because the current system of funding an MSA has many benefits over paying that money to the federal government. Some of those concerns include:

    • Structured settlements would not be available if parties pay the full MSA amount to Medicare and therefore the present value discounts, tax benefits and conservation of principle benefits of structures would also be lost.
    • Future inheritance of any remaining MSA funds of the claimant, upon the death, would not be available because all the MSA funds were paid to the federal government.
    • Medicare deductibles and co-pays may have to be paid sooner by the claimant, because Medicare would start paying injury related medical bills right away. This would cost the claimant more money.
    • Professional administration, a vehicle that has worked very well for many years to save Medicare money and help the claimant conserve his MSA money, would not be available on these cases.
    • Medicare may not have the resources and systems in place to pay injury related medical bills because currently they only pay Medicare allowable medical bills.

Medivest will continue to monitor the progress of these bills and will keep you informed as news develops.

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