Medicare set-aside reporting rule signals major change for comp

Employers, insurers and claimants should start planning for changes to how Medicare’s liabilities are accounted for in workers compensation settlements, experts say.

The changes, which will remove the reporting threshold in settlements that include Medicare set-asides and define penalty amounts, could increase the likelihood of significant fines for noncompliance and prolong settlement negotiations, they say.

The Centers for Medicare & Medicaid Services announced in late April reporting requirement revisions to Medicare set-asides that are part of workers comp settlements involving injured workers who are also on Medicare or are Medicare-eligible.

An MSA is an agreement with Medicare under which a portion of a workers comp settlement will help fund an injured worker’s future treatment rather than Medicare paying the whole cost.

The revisions mandate that responsible reporting parties – employers, workers comp insurers or self-insureds – report all MSAs to CMS regardless of the settlement amount. Currently, parties only have to submit MSAs in cases where settlements are $25,000 or higher.

“This is going to have a major impact on the workers compensation industry,” said Jason Beans, CEO of Chicago-based Rising Medical Solutions, a medical bill review and cost containment company.

Another significant change is a new maximum $365,000 fine for reporting parties that fail to report MSAs within a year of a work injury. Currently, there is no maximum, but Medicare rarely imposes penalties for failing to report.

The revisions were initially slated to take effect in October, but CMS recently announced that it moved the effective date to April 2025.

“It’s a big deal, and not enough folks understand really what this means,” said Shawn Deane, general counsel and vice president of claims solutions for J29 Solutions Inc., a Millersville, Maryland-based health care management consulting company. “CMS is going to have unprecedented insight and visibility into all these Medicare set-asides.”

Once the changes go into effect, CMS would have a mechanism to deny future medical coverage for injured workers who are also Medicare beneficiaries who use proceeds for non-health-related expenses, Mr. Deane said.

“It really puts into focus this post-settlement period that a lot of folks don’t think about because once they settle a case, it’s kind of like, ‘OK, we’re all done. Have a nice life,’” he said.

Mr. Beans said the MSA information reported to CMS determines who pays first for claims submitted because Medicare wants to know if it is solely responsible or a secondary payer.

Currently, CMS doesn’t define penalties for noncompliance and “they aren’t really penalizing,” Mr. Beans said.

The $365,000 maximum fine for failing to report MSAs in comp settlements is a “huge” change from the current system, as it means CMS will start issuing fines for noncompliance, he said.

Kaitlin Files, a Levittown, Pennsylvania-based claimants attorney, said the change could slow down settlements.

“It’s definitely a change in practice,” she said.

Insurers may have to fund more MSAs, “and the claims will probably take longer to settle,” Ms. Files said.

One reason for the revisions is that when parties don’t submit an MSA, Medicare has no way of knowing how to coordinate benefits or potentially deny payment if it receives a bill for injured worker care, said Dan Anders, chief compliance officer for Delray Beach, Florida-based Tower MSA Partners LLC.

Under the revisions, reporting parties will have to report the MSA amount, coverage years or life expectancy of the claimant, and whether the MSA was funded through a lump sum payment or structured annuity.

This article was first published in Business Insurance.

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