The Code of Federal Regulation (42 CFR Sections 411.46 and 411.47) provides that payment for injury related medical expenses and prescription drug expenses should not be shifted to Medicare from the primary or “responsible” party.  In order to accomplish this goal, a portion of a claimant’s settlement or award can be set aside to pay for future accident related medical services and prescription drug expenses that would otherwise be reimbursable by Medicare.  The bottom line is: Medicare will not pay for any medical expenses or prescription drug expenses for the accident related illness or disease after a settlement or award is received, until the amount allocated (or “set-aside”) for future medical expenses and future prescription drug expenses, that would otherwise be reimbursable by Medicare, are “properly” exhausted.

Medicare Set-Aside Administration Requirements

The key word, of course, is properly. The question becomes: “Is this is being done?”  The complexities surrounding this task can be astonishing.  The following are the basic requirements for ensuring that settlement funds are properly exhausted:

1. Medicare Set-Aside Account – The MSA funds shall be placed in an interest bearing account, which is separate from any personal checking or savings account.  A copy of the documents establishing the MSA account should be sent to CMS at Coordination of Benefits Contractor within 30 days of disbursal of the settlement.

2. Distribution of funds from the Medicare Set-Aside Account – The funds in the MSA account shall be used solely for expenses related to medically necessary services or supplies or prescription drug expenses incurred for those medical needs related to or resulting from the related injury, which would otherwise be reimbursable or paid for by Medicare.  Funds in the MSA account shall not be used to pay for medical services or prescription drug expenses not covered by Medicare.

3. Set-Aside Account Interest – All interest earned on the Medicare Set-Aside account will be allowed to accrue in the account and will be used solely for medical expenses and prescription drug expenses that would otherwise be covered by Medicare and for taxes, banking fees, mailing fees, or document-copying charges related to the account.

4. Reimbursement to Medicare – In the event CMS determines that Medicare has erroneously paid benefits, CMS (or its designated Contractor) shall have the right to seek and receive reimbursement of any such conditional payments or overpayments.

5. Accounting Records – The administrator, whether the claimant or a professional custodian, shall maintain accurate records of the distributions and expenditures from the MSA account.  The records should indicate:

• the date of service;
• the name of the medical provider, supplier or pharmacy;
• the medical diagnosis, procedure, service, or item received;
• the amount paid for the medical expense or prescription drug expense;
• and the date of the payment.

The administrator shall also retain a receipt or other evidence of each and every payment made from the MSA account.

6. Annual & Final Accounting and Delivery of Notices – The administrator shall submit all required annual accounting of the MSA and notices to MSPRC.  The annual accounting shall be submitted no later than 30 days after the close of the annual accounting period (which is the anniversary of the funding of the MSA from the award or settlement).  The administrator shall submit a final accounting within 60 days of the funds being depleted.  The annual and final accounting will include the information set forth in paragraph 5 above.

7. Distributions Following Death of Beneficiary – In the event that the Medicare beneficiary dies before the funds in the MSA are depleted, the account will continue to exist for payments of any outstanding bills for accident related medical expenses and prescription drug expenses. Any remaining monies shall be paid to the beneficiary’s estate or subject to state law.

8. Inappropriate Set-aside Account Expenditures – If, after the MSA account is depleted, the final accounting reveals that funds in the account were used to pay for items other than Medicare allowable expenses related to necessary services, supplies, or prescription drug expenses resulting from the accident related injury, Medicare will not pay for any future injury related medical expenses or prescription drug expenses until the funds have been restored to the account and properly exhausted.

Post-settlement administration programs are designed to accomplish two main goals: provide claimants with support from either an advisement role or an administrative role, and to protect Medicare’s interests. Management of post-settlement funds is crucial to both sides of the equation and, if not properly monitored and allocated, can lead to severe consequences. With the proper attention, both parties’ interests can be protected and further action can be avoided.

About the Author: Christie Britt is the Vice President of Operations overseeing the extensive operations of Gould & Lamb.   She has vast knowledge of Medicare Set Asides and Post-Settlement Administration from an insurance claims perspective. Christie is MSCC certified and has her Green Belt Certification in Six Sigma.  She is also a member of the National Association of Medicare Set Aside Professionals (NAMSAP) and the Workers’ Compensation Claims Professionals (WCCP).

Gould & Lamb is a global leader of MSA/MSP Compliance Services in the country, serving domestic and international insurance companies, third-party administrators and self-insured entities.

According to the latest Social Security Old Age, Survivors, Disability Insurance and Medicare and Medicaid Trustees Report, despite the most recent legislative reforms, Medicare is still in both short term and long term financial distress. As a result, the Centers for Medicare and Medicaid Services (CMS), the federal agency which oversees the day-to-day administration of the Medicare system, has stepped up its enforcement of the Medicare Secondary Payer (MSP) Act. Resulting from amendments to the Act in 2003 and 2007, parties settling no-fault, workers’ compensation and liability cases must consider Medicare’s interests. Consequently, in-house corporate counsel and outside defense counsel have had to learn MSP basics.

MSP Education is Essential

However, in order to appropriately represent the insured and insurer’s interests, it is no longer sufficient just to know the basics of the MSP Act. It is time that all in-house corporate and outside defense counsel become significantly aware of mandatory insurer reporting requirements, the conditional payment reimbursement process, and learn how to determine whether a Medicare Set-Aside is appropriate. In order to assist with this endeavor, Gould & Lamb, the country’s premiere and most trusted corporate MSP compliance partner, has put together a 2-day comprehensive program focusing on mandatory insurer reporting, resolution of conditional payments, and Medicare Set-Aside allocations, approval, and administration.

2-Day MSP Conference

The program will:

Introduce those in attendance to the purpose of the mandatory insurer reporting process and will also discuss in great detail Responsible Reporting Entities (RRE) requirements when submitting information on a quarterly basis to CMS. Gould & Lamb experts will share their knowledge and experience in assisting RREs to submit information electronically on liability insurance (including self-insurance), no-fault insurance, and workers’ compensation claims where the injured party is a Medicare beneficiary.

Offer in-depth analysis of Medicare conditional payments, payments made by Medicare for medical treatment where a primary payer (insurer or self-insurer) has or may have an obligation to make such payment. Because primary payers include group health providers, workers’ compensation, liability and no-fault insurers and self-insured entities, Gould & Lamb experts will share their years of expertise in dealing with Medicare’s direct right of action against all primary payers responsible for making such payments, including the Medicare beneficiary, medical provider, physician, attorney, state agency or private insurer.

Explore the intricate details of Medicare Set Asides (MSA). From situations where claimant is a current Medicare beneficiary at   the time of settlement, to instances where the claimant is not yet a Medicare beneficiary, but can reasonably be expected to become Medicare-eligible within 30 months of the settlement, Gould & Lamb experts will discuss when and how Medicare expects its interests will be taken into account. The program will include specific presentations on how to arrive at a reasonable allowance for the future projected costs, and what may happen if such an allowance is not made in the form of an allocation or set-aside arrangement for future medicals.

Provide great insight on MSA administration and Special Needs Trusts (SNT) administration. Gould & Lamb experts will share their years of experience administering MSA accounts, making sure such funds are in fact only used to pay for claim related medical care, that Medicare would otherwise approve or cover, at the correct fee schedule. The program will also offer valuable information when dealing with Medicaid recipients, and the necessity for establishing and administering a SNT to protect claimant’s future Medicaid eligibility and thereby reduce insured and insurer’s potential liability exposure.

For more information on the Medicare Secondary Payer Educational Conference hosted by Gould & Lamb , visit the Event Homepage.

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About the Author: Rafael Gonzalez is Director of Medicare Compliance & Post-Settlement Administration. He brings over 20 years of experience in the Workers’ Compensation and Liability insurance industries with a specific focus on Medicare Compliance. Rafael has been responsible for all areas of Medicare Set Aside Allocations (MSAs) including the preparation of MSAs and their approval by the Center for Medicare & Medicaid Services.  At Gould & Lamb, Rafael’s duties include assisting clients with Medicare Compliance issues, specifically on Post-Settlement Administration and client education.

According to the 2011 Annual Report of the Boards of Trustees released in May, 47.5 million people were covered by Medicare in 2010, 17% were disabled, and only 25% had chosen to enroll in Part C private health care plans.  Trust fund income was $486 billion and total expenditures were $523 billion.  While there was some improvement from prior years, there is still work to be done.

The Medicare Secondary Payer (MSP) Statute was passed in 1980 to provide protection to the Medicare Trust Fund by giving the Center for Medicare and Medicaid Services (CMS) authority to recover payments made by Medicare where a primary payer exists and to avoid payment for future care related to an injury or accident.  This protection offered to the Medicare Trust Fund is a crucial part of ensuring the future solvency of the Medicare program.

Education of MSA Administration is Important

As the MSA industry continues to grow and transform, the education of everyone involved throughout the process – from the MSA creation and submission to the funding and administration of the MSA funds – becomes more important.  Post settlement administration of MSA allocations is a very complicated part of the entire process and can be confusing, especially for claimants.

According to the recent contract award (Workers’ Compensation Review Contractor), an estimated 24,000-30,000 reviews of MSAs will be completed in the coming year.  Yet, only a small fraction of those reviews are submitted as Professionally Administered, while the remaining are submitted as ‘allegedly’ Self Administered.  Historically, there has been a high level of suspicion as to the level of compliance of those self administering which is often attributed to laziness or lack of understanding due to the complexity of administration.

Post Settlement Process Considerations

As with any business, there are costs associated with the process.  However, there are cost-efficient and smart alternatives that exist and should be considered as part of the settlement process.  The key is to find a long term solution that meets the individual needs of the claimant over his or her lifetime (while ensuring MSP compliance and solvency of the Trust Fund).  The alternatives range from Self Administration Support Services which includes physician contact, bill review, and annual reporting to full Professional Administration.  Long gone are the days of little choice in this regard and contingencies of the case must dictate the level of support.

There are several complexities and intricacies surrounding post settlement administration of funds including:

• Knowledge of state fee schedules and/or usual and customary rates
• Knowledge of Medicare coverage guidelines (medical care and prescription drugs)
• Understanding when to pay from the MSA funds and when to notify Medicare to pay; depending on the funding arrangement of the MSA
• Handling of the account if it is depleted (temporary or permanent)
• Notifying CMS throughout the life of the claimant
• Handling of interest income and taxes

It is important to consider the details of each case and its post settlement activity on a case by case basis.  While some cases require less attention, it cannot be assumed that this will be the norm.  Beneficiaries have the option to enroll in private health insurance plans that contract with Medicare to provide Part A and B medical services which affect the beneficiary’s access to care post settlement.  The type of service (e.g., inpatient hospital care and physician visits) and other applicable statutory provisions must always be considered when managing funds.

Cost vs. Benefit

When managing claim files, it is reasonable for a claims professional to expect affordable and cost-effective alternatives for post settlement MSA administration products.  Finding innovative new methods of delivering alternatives and achieving better cost efficiencies is imperative, but it is also essential to provide claimant’s with a viable solution that ensures MSP compliance in the long term without compromising quality.

About the Author: Christie Britt is the Vice President of Operations overseeing the extensive operations of Gould & Lamb.   She has vast knowledge of Medicare Set Asides and Post-Settlement Administration from an insurance claims perspective. Christie is MSCC certified and has her Green Belt Certification in Six Sigma.  She is also a member of the National Association of Medicare Set Aside Professionals (NAMSAP) and the Workers’ Compensation Claims Professionals (WCCP).

Post Settlement Administration of MSA

A MSA, created as part of the claims settlement, is designed to “reasonably consider Medicare’s future interest” as a Medicare Secondary Payer to workers’ compensation (WC) insurance (or other insurance) regarding a claimant’s post settlement injury-related medical expenses.  This is only part of ensuring a claimant’s Medicare benefits are protected.

The MSA industry has continued to expand, and the education of all involved has included the MSA creation and submission as well as the funding and administration of the funds.   Post settlement administration of MSA allocations is a very intricate part of the entire process and requires adherence to the Center for Medicare and Medicaid Services’ (CMS) rules and regulations, state and federal tax laws, and trust and fiduciary laws.

Pooling Assets Strategy

One strategy used by some throughout the industry is the ‘pooling of assets’ of various MSA accounts.  The sub-accounts are pooled into one account managed by professional money managers allowing for a higher rate of return than would be possible if funds were invested separately.  Overall, it appears to be a great scenario.  It is a benefit from an investment perspective and provides cost savings on the account management side.  This strategy has been used by banks and regulated trust companies for years.   In essence they are creating a “common trust fund”, which again, allows for more profitable investments with less risk.  And, unless the MSA Administrator is a bank, they are placing an enormous amount of risk upon themselves as well as the MSA accounts they manage.

SSI/Medicaid

There is another side to Special Needs Trusts involving means-tested public benefits, where income related benefits, SSI/Medicaid, may be involved.  These individuals are entitled to Medicare Part A and/or Part B and are eligible for some form of Medicaid benefits.  They have a limited income and if eligible, may receive assistance with their out-of-pocket medical expenses from their state Medicaid program.  For those who are eligible for full Medicaid coverage, the Medicaid program supplements their Medicare coverage by providing services that are available under their states Medicaid program. Services that are covered by both will be paid first by Medicare and the difference by Medicaid.  Therefore, in order for beneficiaries with “dual eligibility” to maintain their SSI/Medicaid benefits the MSA must be set up appropriately.

Pooling assets for purposes of investment or operational cost savings seems like an alluring option.   However, there are dangers of administrating MSA accounts in this fashion by non-banking professionals. Non-banking professionals are exposed to financial loss and claimants are exposed to potential loss of their Medicare benefits.

About the Author: Christie Britt, nee Luke, is the Vice President of Operations overseeing the extensive operations of Gould & Lamb.   She has vast knowledge of Medicare Set Asides and Post-Settlement Administration from an insurance claims perspective. Christie is MSCC certified and has her Green Belt Certification in Six Sigma.  She is also a member of the National Association of Medicare Set Aside Professionals (NAMSAP) and the Workers’ Compensation Claims Professionals (WCCP).

Gould & Lamb is a global leader of MSA/MSP Compliance Services in the country, serving domestic and international insurance companies, third-party administrators and self-insured entities.