icy for liability MSAs was in place at this time, this lack of review
policy did not provide a “safe harbor” to liability settlements.
Finally, during the March 2009 call, CMS officials did confirm
that the regional offices would make independent decisions to
review liability MSA proposals based on the workload of each
office. 10 It is unknown when the regional offices will begin
reviewing liability MSA proposals, but it is believed that at least
one regional office began to do so in mid-2009, and all such
offices will be reviewing at least some third-party MSA submissions by the end 2009.
Finally, due to the fact that CMS does not always agree to
review MSA proposals submitted on non-workers’ compensation
claims, it is important that all parties in a third-party claim communicate as openly as possible regarding the MSA issue to ensure
each side feels the MSA, if established, adequately protects their
client’s interests.
The Medicare Lien
The MSP states Medicare has a right to recover its conditional
payment11 amount in all third-party settlements involving a
Medicare beneficiary. The conditional payment amount is
Medicare’s subrogation interest in the settlement and consists of
all payments Medicare has made related to the injury or illness
involved in the pending settlement prior to the date the settlement paperwork is finalized. The Medicare lien search is required
in all third-party settlements even if no MSA is established from
the settlement proceeds. Furthermore, the lien search must be
done even if CMS approval of the MSA is not obtained.
Failure to pay the conditional payment amount within 60 days
after notice of the final lien amount may result in Medicare accru-
ing interest or adding on other late-payment penalties to the con-
ditional payment amount. 12
The lien search process can be very time-consuming, typically
taking two to four months to obtain the lien amount. If the parties choose to dispute the asserted Medicare lien, the lien-reduc-tion negotiation process can take upwards of six months to complete. Therefore, the parties to settlement should plan accordingly when settling claims that may result in a Medicare lien.
Settlement language should be included in every agreement clearly outlining which party will obtain the Medicare lien and how
payment of the lien, should one be found, will be accommodated
by the parties to settlement.
Practice Tips
EVALUATING AN MSA REPORT
When evaluating an MSA report, it can be challenging to deter-
mine if it is an accurate representation of the injured person’s rea-
sonably foreseeable future medical needs. At a minimum, an ade-
quate MSA report should contain the following:
1. Reference to the specific fee schedule(s) used in calculating
the MSA, such as state workers’ compensation fee schedule
rates, federal longshore and harbor workers’ compensation
fee schedule rates, private pay rates, or wholesale prices.
2. The precise data used to calculate the MSA, such as the
claimant’s medical payment history, life care plans, doctor’s
treatment statements or deposition testimony.
3. The life expectancy used in the MSA calculation.
4. A detailed explanation of both the annual Medicare covered
and non-covered expenses anticipated for the injured worker
or party.
5. A recommendation for MSA funding, usually either as a
lump-sum allocation or a structured approach utilizing an
annuity.
6. A recommendation for administration of the MSA, usually by
the claimant/injured party directly or by a third-party profes-
sional administration company.
7. A description of any additional data required for submission
of the proposed MSA to CMS for approval.
An effective MSA analysis should highlight any potential issues
that could cause CMS approval to be delayed or withheld. Although
CMS approval of a proposed MSA is always optional in every settlement situation, should approval be sought it is in the interests of all
parties to the settlement for a speedy analysis by CMS.
Surgical recommendations comprise the most common source
of problems during the approval process. If a claimant has been
recommended for surgery by a medical practitioner, even if that
recommendation was given more than two years prior to CMS
submission and not by the claimant’s primary treating physician,
CMS has the right to request an increase in the MSA to account
for the potential future surgery. Therefore, the MSA report
should outline this issue and explain how the MSA vendor dealt
with it. If the vendor elected not to include the costs for surgery,
a clear explanation as to the justification behind the decision
should be provided along with a warning that CMS could disagree and demand an increase to the MSA. Vendor-provided
instruction on ways to neutralize or mitigate the threat of CMS
increases to the MSA also can be potentially helpful, though not
necessarily successful.
CMS approval is only binding if it is a valid approval. Validity
is gained only after full disclosure of all reasonably foreseeable
future medical needs and complications necessitated by the work
injury. An MSA vendor cannot manipulate the medical data or
withhold key reports (such as a report from the primary treating
physician recommending a spinal fusion) in its CMS submission.
If that occurs, the CMS approval is not valid because CMS did
not have the benefit of reviewing and analyzing those key medical
reports prior to issuing their approval letter. A subsequent audit
of the claim by CMS could lead to discovery that information was
intentionally excluded; that could result in a withdrawal of
approval on the basis of fraud by the submitter.
CMS APPROVAL GUIDELINES
In July 2005 and April 2006, CMS issued memorandums outlin-
