The Time Has Come! When and How to Prepare a Liability Medicare Set Aside (LMSA)
The Medicare Set Aside (MSA) program began in 1980, years before the July 23, 2001 “Patel” memo which described the criteria for Workers Compensation Medicare Set Asides (WCMSAs). Since that time, the Centers for Medicare and Medicaid Services (CMS) has infrequently and inconsistently discussed Liability Medicare Set Asides (LMSAs) and No-Fault Medicare Set Asides (NFMSAs) but has delayed setting forth any guidance for Liability claims payers. The reason is because the obligation for future medical care arises by statute in a workers’ compensation claims, but in general, auto, no fault liability or 3rd party cases, the duty arises from the release. For instance, the typical liability case is concluded with a release between the parties setting out the terms of the settlement and the amount to be paid.
Various statements have been made by CMS Central Office managers about the obligation to consider and protect Medicare’s interests in Town Hall meetings over the years. Here are some examples:
- Although there is no formal process for reviewing LMSAs, the statutory duty is the same as in workers’ compensation cases
- When future medicals are a consideration in arriving at the settlement, appropriate arrangements should be made to exhaust the funds before Medicare pays
- The MSP Act, which requires the protection of Medicare, is the exact same in liability cases as workers’ compensation cases.
On September 30, 2011, CMS issued a memo which, for the first time, mentioned LMSAs. The memo basically states that when the treating physician certifies in writing that no future treatment is necessary from the underlying injury, there is no need to submit a proposed LMSA for review. Over the years, LMSAs have been produced infrequently and voluntarily, usually at the request of the lawyer representing the injured party.
However, this year CMS has set a target date for reviewing LMSAs. Some members of the National Association of Medicare Set Aside Professionals (NAMSAP) met with CMS central office in April 2018, and, based on their interpretation of that meeting, CMS intends to begin the review and approval process of Liability MSAs in the fall of 2019. Below is the substance of the meeting as bullet-pointed by one of the NAMSAP members:
- CMS stated they have an 18-month time-frame (from April 2018) before it rolls out a LMSA review program
- The program would be voluntary
- CMS has indicated that their enforcement mechanism is the denial of services
- CMS felt strongly that the injured party must receive something (free and clear) through settlement.
- CMS would not review an LMSA until settlement has been reached.
- CMS feels a LMSA is exclusively the responsibility of the plaintiff
- Regarding LMSAs, CMS made it clear that the defendant(s), and their insurers, are not a target
- Medicare pricing of services was discussed.
- CMS does not feel it can mandate professional administration.
- CMS would publish a LMSA Reference Guide
- Eligibility remains the same as the current WCMSA system- Medicare beneficiaries or injured parties who have a reasonable expectation of Medicare eligibility within 30 months. Per statute, Medicare’s interest must be considered in every claim.
- A workload threshold of $250,000 is anticipated – “NO SAFE HARBOR”. The level mirrors the $25,000 workload threshold for WCMSAs.
- For settlements between $250,000 and $750,000 threshold, CMS approval is available and encouraged by CMS. CMS would apply “a formula” to determine the LMSA amount. Starting with the total settlement amount, CMS would subtract certain expenses and apply the discount factor to total settlement.
- Above $750,000 level is full commutation. A traditional MSA would be prepared and, if submitted to CMS< evaluated by CMS for adequacy.
Again, this is not a CMS document and there are several specifics to be worked out in the coming 18- months. However, it does provide a potential blueprint for CMS review of LMSAs which will place the burden squarely on the shoulders of the plaintiff. This is a departure from what we have experienced with WCMSAs, where the primary payer accepted the role of ensuring MSP compliance.
Proper planning by plaintiff’s law firms is recommended as we await the new reference guide for LMSAs and NFMSAs with updated information that is forthcoming. However, at this point, based upon what we know, here are suggested best practices:
- Segregate the future medicals from other claimed damages, such as economic, pain and suffering, loss of consortium, etc.
- Always secure a professional cost projection or Medicare Set Aside for complex, catastrophic injuries such as spinal cord injury, traumatic brain injury, limb amputations, complex 3 or 4th degree burn injuries, multiple trauma or chronic and progressive environmental exposure claims that includes treatment, pharmacy and durable medical equipment.
- Use professional administration of the LMSA funds. These funds should be protected against levy and cost containment is advised.
- For standard or nuisance value claims, leverage data driven technology-based medical forecasts that can be calculated in minutes using machine learning algorithms of injury claims, such as the SaaS technology available through Care Bridge International. Paired with post settlement account administration or support, a claim may be settled the same day.
- If a case is tried, submit special interrogatories to the jury to establish the value of the future medicals.
- If a general verdict is reached, request a decision that parcels out the future medical costs from the court.
We will continue to update the plaintiff’s bar and other interested parties as these events unfold.
Questions, thoughts and comments are always welcome!
Bennett L. Pugh, JD
Chief Executive Officer
Fidelity Fiduciary Company, LLC
P.O. Box 43613
Birmingham, AL 35243-0613
Chief Executive Officer
Care Bridge International, Inc.
MSP Compliance Bridge, LLC
9040 Town Center Parkway
Lakewood Ranch, FL 34202