Effective management of the costs associated with liability and workers’ compensation claims in the U.S. must include assuring compliance with the requirements of Medicare. It’s a tricky system to navigate and a bit of a moving target, but our team of experts is closely monitoring the landscape and here to help. Outlined below are three recent and significant developments in the Medicare compliance arena.
Withdrawal of proposed liability MSA regulation
Several years ago, the Centers for Medicare and Medicaid Services (CMS) issued a proposed regulation about Medicare set asides (MSAs) as they relate to liability cases. (By way of background, an MSA arrangement allocates a portion of an injury victim’s settlement to pay for future medical expenses covered by Medicare in order to preserve their benefits.) Sedgwick and many others across the industry voiced serious practical and legal concerns about the proposal, as well as the appropriateness of MSAs for liability cases. Despite these misgivings, CMS pressed on and submitted the proposal to the Office of Information and Regulatory Affairs (OIRA) for approval. As of March 2022, the proposal had been finalized, and the industry awaited issuance of the final rules by OIRA following a regulatory review process.
Much to our surprise, CMS withdrew the proposed regulation in October 2022 — leading many to breathe a collective sigh of relief. For the time being, the specter of MSAs no longer hangs over liability settlements, which alleviates some of the financial pressures our clients are feeling. We are pleased with this outcome and believe CMS made the right move in this case.
Delayed implementation of reporting penalties
In 2020, CMS proposed a new rule specifying how and when financial penalties would be calculated and imposed on responsible reporting entities (RREs) failing to meet their reporting obligations under the Medicare, Medicaid, and SCHIP Extension Act (MMSEA). These identified fines can be quite severe — as high as $1,000 per day for each noncomplying claim. The penalties relate only to Medicare reporting and not to Medicare liens.
Though the rule was due to expire in February 2023, CMS extended the timeline until February 2024, on account of pursuing additional research based on concerns raised by industry stakeholders. We would have preferred to see CMS withdraw the rule but opting instead for a delay seems to indicate that CMS intends to move forward with the future implementation of reporting penalties.
The final rule has yet to be issued, and it’s difficult to predict what changes CMS will make during this additional review period. Come what may, our Medicare compliance team will be prepared to support clients in ensuring compliance with the reporting requirements and minimizing fines wherever possible.
WC review contractor transition and the impact on MSAs
Any day now, CMS is expected to announce its new workers’ compensation review contractor (WCRC). The role of the WCRC is to review and approve workers’ compensation MSAs. The current WCRC, Capitol Bridge LLC, has been in place since 2017, and CMS issues a request for new contractor proposals approximately every five years.
Each time CMS transitions to a different WCRC, there are significant disruptions to the flow of MSAs and wide fluctuations in approvals. Regrettably, employers should expect approval delays and higher-than-usual MSA amounts for about a year from the start of the transition process.
Sedgwick is committed to helping our clients mitigate the impact as much as possible:
- To promote timely and accurate MSA approvals, we work to resolve any issues and obtain all necessary medical records prior to submission.
- In addition to providing the requested MSA reports, we also include recommendations on how to get approval for the lowest possible MSA — including when to delay submission in order to obtain missing records or clarify medical issues so that CMS does not over-allocate for any ambiguity.
In cases where CMS approves a higher-than-expected MSA that hinders a settlement, we generally follow this course of action:
1. First, we appeal or challenge the MSA. This entails one of our lead nurses crafting a detailed, customized response to the WCRC to explain why we disagree with its conclusion regarding the higher MSA. The appeal process can be an uphill battle because the WCRC, rather than an independent third party, reviews the challenges; as you can imagine, the WCRC is inclined to approve its own work. Nevertheless, Sedgwick has had a good amount of success with this approach, so it’s always our first response to a higher MSA.
2. Next, we explore the option of an amended review, which is allowed once between one and six years from the date of original approval. Although an amended review delays settlement, it allows all parties to work together on the cost drivers of the MSA and potentially paves the way for approval of a lower MSA.
As always, we are closely watching the Medicare compliance space and will keep you apprised of any significant developments that may affect your claims program. Our in-house team of experts stands ready to assist you with Medicare set asides, liens, reporting or other related needs.