Medicare Set Aside Allocations Looking At The Mystery

04/13/2304/13/23 DV Consulting Co. L.L.C. 985-876-7801DV Consulting Co. L.L.C. 985-876-7801 11

Medicare Set-Aside Medicare Set-Aside Allocations: Looking at Allocations: Looking at the mystery behind the the mystery behind the

MSAMSA

Dawn Vincent RN CRRN LNCC Dawn Vincent RN CRRN LNCC MSCCMSCC

DV Consulting Co. L.L.C. 985-876-7801DV Consulting Co. L.L.C. 985-876-7801 2204/13/2304/13/23

What is a MSA and why do I What is a MSA and why do I need one?need one?

In 1981, a federal statute was put into In 1981, a federal statute was put into effect stating that any workers’ effect stating that any workers’ compensation settlement must take compensation settlement must take Medicare’s interests into consideration. Medicare’s interests into consideration. (Federal Reg. 42 CFR 411.46)(Federal Reg. 42 CFR 411.46)

In approximately 2002, Medicare realized In approximately 2002, Medicare realized how much money they have been how much money they have been spending on workers’ comp injuries and spending on workers’ comp injuries and decided to enforce the statute, which decided to enforce the statute, which brought about the Medicare Set-Aside.brought about the Medicare Set-Aside.


PurposePurpose

The purpose of a WCMSA is to pay for The purpose of a WCMSA is to pay for all services relate to the claimants all services relate to the claimants work related injury or Medicare will work related injury or Medicare will not make any payments (not as not make any payments (not as primary, secondary or tertiary) for primary, secondary or tertiary) for services related to the work services related to the work injury/disease until nothing remains injury/disease until nothing remains in the WCMSA.in the WCMSA.


The MSA…what is it?The MSA…what is it?

The MSA is a detailed accounting of The MSA is a detailed accounting of projected anticipated costs as related projected anticipated costs as related to the work injury. to the work injury.

Computation of settlement amount Computation of settlement amount includes, but is not limited to fees, includes, but is not limited to fees, wages, all future medical, payout wages, all future medical, payout totals for all annuities and repayment totals for all annuities and repayment of any Medicare conditional of any Medicare conditional paymentspayments..


Medicare PenaltiesMedicare Penalties

If Medicare audits the carrier/self-If Medicare audits the carrier/self-insured employer and finds that their insured employer and finds that their interest was not properly considered, interest was not properly considered, the penalty can be double the the penalty can be double the damages incurred by Medicare AND damages incurred by Medicare AND the injured party could lose their the injured party could lose their future Medicare benefits.future Medicare benefits.


When to consider a MSA…When to consider a MSA…

If the injured party is already a Medicare If the injured party is already a Medicare Beneficiary at time of settlement and the Beneficiary at time of settlement and the settlement is $25K or greater (per settlement is $25K or greater (per 04/25/06 memorandum by CMS)04/25/06 memorandum by CMS)

OROR

the settlement will reach $250,000.000 or the settlement will reach $250,000.000 or more and the injured party is either a more and the injured party is either a Medicare beneficiary or there is Medicare beneficiary or there is reasonable expectation to believe they will reasonable expectation to believe they will be receiving Medicare within 30 months be receiving Medicare within 30 months


Support documents for Support documents for submission:submission:

Rated age-all of them (3); on broker’s letterhead Rated age-all of them (3); on broker’s letterhead stationarystationary

Rated age referral letterRated age referral letter Life tableLife table Treating MD’s records from the last 2 years-ALL Treating MD’s records from the last 2 years-ALL

treating MD’streating MD’s MMI documentation-if availableMMI documentation-if available Claim Pay history for past 2 years (from insurance Claim Pay history for past 2 years (from insurance

adjuster)adjuster) Published standards of care, if referencedPublished standards of care, if referenced Court ordered stipulations if anyCourt ordered stipulations if any


Submission tips:Submission tips:

A settlement that does not specifically A settlement that does not specifically account for past vs. future costs will be account for past vs. future costs will be considered entirely for future medical considered entirely for future medical expenses once Medicare recovered any expenses once Medicare recovered any conditional payments it made.conditional payments it made.

When it includes compensation for future When it includes compensation for future medical, it is referred to as a commutation medical, it is referred to as a commutation case. When a settlement includes case. When a settlement includes compensation for medical that was compensation for medical that was incurred prior to settlement date, it is a incurred prior to settlement date, it is a WC compromise case. There can be both WC compromise case. There can be both in a settlement/MSA.in a settlement/MSA.


How MSA’s are figuredHow MSA’s are figured

MSA’s are computed using WC fee MSA’s are computed using WC fee schedules (for states that have such schedules (for states that have such schedules-LA is such a state), otherwise it schedules-LA is such a state), otherwise it is computed using full actual charges.is computed using full actual charges.

No consideration is taken for inflation. No consideration is taken for inflation. Pricing is at present day cost.Pricing is at present day cost.

As of January1, 2006, medications are As of January1, 2006, medications are added to MSA, regardless of whether added to MSA, regardless of whether claimant has chosen Part D. (per July 24, claimant has chosen Part D. (per July 24, 2006 CMS memorandum)2006 CMS memorandum)


Medicare Secondary Payer Medicare Secondary Payer StatuteStatute

The intent of the Medicare Secondary Payer The intent of the Medicare Secondary Payer Statute is relatively simple. Section 1862(b)Statute is relatively simple. Section 1862(b)(2) of the Social Security Act (enacted in (2) of the Social Security Act (enacted in 1980) ( 1980) ( 42 USC 1395y(b)(2) 42 USC 1395y(b)(2) ) provides that ) provides that Medicare is not required to pay for any item Medicare is not required to pay for any item or service to the extent that payment has or service to the extent that payment has been made, or can reasonably be expected been made, or can reasonably be expected to be made promptly (as determined in to be made promptly (as determined in accordance with regulations) under a accordance with regulations) under a workmen's compensation law or plan. workmen's compensation law or plan.


Closing out future medical…Closing out future medical…

Most settlements of workers' Most settlements of workers' compensation claims are coupled with a compensation claims are coupled with a waiver of claimant's rights to future waiver of claimant's rights to future medical payments from the workers' medical payments from the workers' compensation carrier. This is precisely the compensation carrier. This is precisely the type of settlement that concerns CMS type of settlement that concerns CMS because such a settlement might result in because such a settlement might result in CMS paying bills that would otherwise be CMS paying bills that would otherwise be the responsibility of the workers' the responsibility of the workers' compensation insurance carrier, which compensation insurance carrier, which would then result in conditional payments.would then result in conditional payments.


If medical remains open…If medical remains open…

If the settlement does not close the If the settlement does not close the workers' compensation carriers' workers' compensation carriers' obligation to pay for future medical obligation to pay for future medical bills related to the work injury, bills related to the work injury, approval of the settlement by CMS is approval of the settlement by CMS is not required. See the not required. See the October 15, 2004 CMS memoOctober 15, 2004 CMS memo, Q&A 6. , Q&A 6.


Medicare EligibilityMedicare Eligibility

A claimant is eligible for Medicare when A claimant is eligible for Medicare when any of the following criteria are met: any of the following criteria are met:

Claimant is 65 years of age or older; Claimant is 65 years of age or older; Claimant has been on Social Security Claimant has been on Social Security

Disability for 24 months or longer; or Disability for 24 months or longer; or Claimant is suffering from an end stage Claimant is suffering from an end stage

renal disorder. renal disorder. Additional information about Medicare Additional information about Medicare

eligibility can be found at: eligibility can be found at: www.medicare.govwww.medicare.gov


Prescription MedicationsPrescription Medications

On December 30, 2005, CMS released a On December 30, 2005, CMS released a formal policy memorandum regarding formal policy memorandum regarding prescription drugs and the Medicare prescription drugs and the Medicare Secondary Payer Statute. It now requires that Secondary Payer Statute. It now requires that all workers' compensation settlements that all workers' compensation settlements that occur on or after January 1, 2006, must occur on or after January 1, 2006, must consider and protect Medicare’s interests consider and protect Medicare’s interests when future treatment includes prescription when future treatment includes prescription drugs along with the future medical services drugs along with the future medical services that would otherwise be reimbursable by that would otherwise be reimbursable by Medicare. Medicare.


Cover letter detailsCover letter details

For set-aside proposals received by For set-aside proposals received by CMS on or after January 1, 2006, the CMS on or after January 1, 2006, the cover letter must include separate cover letter must include separate amounts for: (1) future medical amounts for: (1) future medical treatment, and (2) future prescription treatment, and (2) future prescription drug treatment. In addition, the drug treatment. In addition, the cover letter must include an cover letter must include an explanation as to how the submitter explanation as to how the submitter calculated the future prescription calculated the future prescription drug treatment amount (i.e., actual drug treatment amount (i.e., actual costs, average wholesale price, etc.).costs, average wholesale price, etc.).


Cover letter cont.Cover letter cont.

If the cover letter does not include an If the cover letter does not include an amount for future prescription drug amount for future prescription drug treatment, and the current treatment treatment, and the current treatment records indicate that the claimant has records indicate that the claimant has been prescribed drugs and/or may need been prescribed drugs and/or may need prescription drugs related to the WC injury prescription drugs related to the WC injury in the future, the submitter did not in the future, the submitter did not adequately consider Medicare’s interests. adequately consider Medicare’s interests. In such a case, CMS will advise the In such a case, CMS will advise the submitter in its written opinion that the submitter in its written opinion that the parties to the WC settlement may not parties to the WC settlement may not have protected Medicare’s interests. have protected Medicare’s interests. See the CMS memo of December 30, 2005See the CMS memo of December 30, 2005


LCP or no LCP…do I need LCP or no LCP…do I need one?one?

Dependent on injury & level of experience Dependent on injury & level of experience of LNC doing MSAof LNC doing MSA Catastrophic – recommend LCP-Catastrophic – recommend LCP- Not recommended that you have the same Not recommended that you have the same

person that does LCP do the MSAperson that does LCP do the MSA

Unlike the LCP-we want the MSA to come in as Unlike the LCP-we want the MSA to come in as low cost as possible. LCP’s tend to be as high low cost as possible. LCP’s tend to be as high cost as possible. A good LNC will be able to cost as possible. A good LNC will be able to hopefully reach a medium.hopefully reach a medium.


Medicare InformationMedicare InformationAll Workers' Compensation (WC) All Workers' Compensation (WC)

occurrences that involve a Medicare occurrences that involve a Medicare beneficiary should be reported to the beneficiary should be reported to the Coordination of Benefits (COB) Coordination of Benefits (COB) Contractor. If you would like to report Contractor. If you would like to report a WC case, obtain conditional a WC case, obtain conditional payment information, or have a payment information, or have a general WC question, please contact general WC question, please contact the COB Contractor by phone or mail. the COB Contractor by phone or mail. The COB Contractor's toll free The COB Contractor's toll free number is 1 (800) 999-1118number is 1 (800) 999-1118


Medicare cont.Medicare cont.

For written reports of WC occurrences, send For written reports of WC occurrences, send to:to:

CMSCMSMedicare—Coordination of BenefitsMedicare—Coordination of BenefitsP.O. Box 5041P.O. Box 5041New York, NY 10274-5041New York, NY 10274-5041NOTE:NOTE: This mailing address is for This mailing address is for reporting a WC occurrence, reporting a WC occurrence, notnot for the for the submission of Workers' Compensation submission of Workers' Compensation Medicare Set-aside Arrangement Medicare Set-aside Arrangement (WCMSA) proposals.(WCMSA) proposals.


Collaborative EffortCollaborative Effort

2) Broker to provide rated age x 3

3) Rated age & Medicals to LNC to perform MSA

1) Adj. or attorney requestRated age


Step by StepStep by Step

Report injury to COB to request the Report injury to COB to request the conditional payments if any.conditional payments if any.

Cl. Adj. or attorney needs to request Cl. Adj. or attorney needs to request rated age from brokers (get 3) use rated age from brokers (get 3) use median age. Rated age needs to be median age. Rated age needs to be on brokers letterhead stationary.on brokers letterhead stationary.

Broker needs to be supplied with the Broker needs to be supplied with the medical information to base their medical information to base their rated age on.rated age on.


Step 2Step 2

Claims adjuster or attorney ensures Claims adjuster or attorney ensures they have last 2 years medical they have last 2 years medical records and assigns to LNC to records and assigns to LNC to perform MSA. (May send to LCP for perform MSA. (May send to LCP for Life Care Plan first if one is needed).Life Care Plan first if one is needed).

LNC reviews the last 2 years of LNC reviews the last 2 years of medical records, writes a summary of medical records, writes a summary of injury and treatment and ICD9 codes injury and treatment and ICD9 codes and begins estimation of anticipated and begins estimation of anticipated costs for future tx based on injury.costs for future tx based on injury.


Step 3Step 3

Once all anticipated costs are Once all anticipated costs are figured, both annual and non-annual; figured, both annual and non-annual; covered and non-covered costs are covered and non-covered costs are outlined then the cover letter is outlined then the cover letter is written. As stated before, the cover written. As stated before, the cover letter has to include specific items.letter has to include specific items.


Cover Letter Check list:Cover Letter Check list: Submitter letter or other summary documentationSubmitter letter or other summary documentation Consent formConsent form Rated Age Information or Life ExpectancyRated Age Information or Life Expectancy Life Care PlanLife Care Plan Settlement agreement or proposed court orderSettlement agreement or proposed court order Set-Aside Administrator or Copy of AgreementSet-Aside Administrator or Copy of Agreement Medical RecordsMedical Records Payment History x 2 yearsPayment History x 2 years Future Treatment PlanFuture Treatment Plan Supplemental or Additional InformationSupplemental or Additional Information


Now to start the MSANow to start the MSA

The first page of the MSA contains the The first page of the MSA contains the demographics, the diagnosis and ICD 9 demographics, the diagnosis and ICD 9 codes, the Social Security information, codes, the Social Security information, rated age and life expectancy, WC info, rated age and life expectancy, WC info, Attorney information, employer, etc.Attorney information, employer, etc.

Next, is the summary of the injury, with a Next, is the summary of the injury, with a chronological timeline depicting the chronological timeline depicting the highlights of the injury-surgeries, highlights of the injury-surgeries, hospitalizations, major illnesses or hospitalizations, major illnesses or changes in the course of treatment.changes in the course of treatment.


Covered items include but are Covered items include but are not limited to:not limited to:

Physician visits as related to the WC Physician visits as related to the WC injuryinjury

Diagnostic tests as related to the injuryDiagnostic tests as related to the injuryMedicationsMedicationsSpecific Durable Medical Equipment i.e. Specific Durable Medical Equipment i.e.

specialty mattresses, power specialty mattresses, power wheelchairs, catheters and tubing. DME wheelchairs, catheters and tubing. DME needs to be looked up individually to needs to be looked up individually to determine if it is a covered item.determine if it is a covered item.


Excluded items need to be listed Excluded items need to be listed but not added into MSAbut not added into MSA

These items include but are not These items include but are not limited to:limited to:

Bedside commodes, shower chairs, Bedside commodes, shower chairs, specialty shoes, lifts, transfer boards, specialty shoes, lifts, transfer boards, ramps, repairs for equipment, ramps, repairs for equipment, disposable items (diapers, depends, disposable items (diapers, depends, gloves, bandages, gauze, underpads gloves, bandages, gauze, underpads for pad, alcohol, alcohol wipes, hand for pad, alcohol, alcohol wipes, hand sanitizer, lotions, etc)sanitizer, lotions, etc)


Once the amount is figuredOnce the amount is figured

And the math is all done……..then And the math is all done……..then you have to determine if it will be a you have to determine if it will be a structured settlement or a lump sum structured settlement or a lump sum payment.payment.

If it’s a structured settlement, the If it’s a structured settlement, the allocator needs to determine the allocator needs to determine the amount of “seed” money needed to amount of “seed” money needed to initially fund the account.initially fund the account.


Seed money is calculated by:Seed money is calculated by: Step 1 – Total estimated future medical services covered by Medicare Step 1 – Total estimated future medical services covered by Medicare

$301,826.90$301,826.90 Step 2 - Identify cost of first surgery and first procedure/replacement $10,191.40 Step 2 - Identify cost of first surgery and first procedure/replacement $10,191.40 Step 3 – Subtract Step 2 from Step 1 $291.635.50 Step 3 – Subtract Step 2 from Step 1 $291.635.50 Step 4 - Divide above by life expectancy (28) to get annual Step 4 - Divide above by life expectancy (28) to get annual medical costs and multiply the amount by two. ($291,635.50/28) medical costs and multiply the amount by two. ($291,635.50/28) = $10415.55 x 2 = $20831.10 = $10415.55 x 2 = $20831.10 Step 5 – Seed money to be deposited upon settlement is equal to $31022.50 Step 5 – Seed money to be deposited upon settlement is equal to $31022.50 the sum of the amounts calculated in Steps 2 and 4 above. the sum of the amounts calculated in Steps 2 and 4 above. ($10,191.40 + $20831.10) ($10,191.40 + $20831.10) Step 6 – Subtract seed money from total WCMSA (Step 1) and divide Step 6 – Subtract seed money from total WCMSA (Step 1) and divide

by life expectancy minus one (28-1) to calculate minimum annual by life expectancy minus one (28-1) to calculate minimum annual deposit for the balance of claimant’s life. Deposit must be made deposit for the balance of claimant’s life. Deposit must be made no later than one (1) year from date of settlement. (301826.90- no later than one (1) year from date of settlement. (301826.90- 31022.50/27) 31022.50/27) Minimum Annual Deposit for balance of Claimants Life:Minimum Annual Deposit for balance of Claimants Life: $10,029.79$10,029.79


MSA’sMSA’s

Allocate monies only for the Allocate monies only for the probabilities-NOT the possibilities!probabilities-NOT the possibilities!

Everything has to be double checked Everything has to be double checked for validity and accuracy-all for validity and accuracy-all recommendations, etc. THERE IS NO recommendations, etc. THERE IS NO APPEAL.APPEAL.


VocabularyVocabulary

Glossary of termsGlossary of termsCOB-Coordinator of benefitsCOB-Coordinator of benefitsRO-Regional OfficeRO-Regional OfficeMSA-Medicare Set-AsideMSA-Medicare Set-AsideWCMSA-Work Comp Medicare Set-WCMSA-Work Comp Medicare Set-

AsideAsideSeed Money-initial deposit moneySeed Money-initial deposit moneyCPT & ICD 9-medical codes used to CPT & ICD 9-medical codes used to

distinguish procedures and diagnosisdistinguish procedures and diagnosis


SummarySummary

MSA’s are here to stay. They change MSA’s are here to stay. They change and evolve as Medicare changes.and evolve as Medicare changes.

Keeping up with the ever changing Keeping up with the ever changing policy changes, DME changes, etc. is policy changes, DME changes, etc. is almost a full time job. Recommend almost a full time job. Recommend frequenting the CMS pages to stay frequenting the CMS pages to stay up to date.up to date.

Any questions, feel free to contact Any questions, feel free to contact me at DV Consulting 985-876-7801.me at DV Consulting 985-876-7801.


Where to Get More Where to Get More InformationInformation

CMS website CMS website http://www.cms.hhs.gov/default.asp?http://www.cms.hhs.gov/default.asp?

Medicare Set Aside Allocations Looking At The Mystery

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