December 02, 2011

Understanding the Backlog: Why are WCMSA reviews taking so long?

December 02, 2011

Our Medicare department recently attended a conference for the National Alliance of Medicare Set-Aside Professionals (NAMSAP).  At that conference, two representatives from CMS discussed issues with WCMSA submissions and explained why the review process is taking longer than ever.

As you may know, when a WCMSA proposal is submitted, CMS prioritizes its review in the order in which a proposal was received.  Generally, one month after the materials are submitted, the submitter will receive a letter acknowledging that CMS has received the proposal and indicating that most reviews can be completed within 60 days.  For quite some time, this timeline was more or less correct and we expected approval within 90 days of sending the appropriate materials to CMS.

Over the past year, CMS has become backlogged with WCMSA submissions.  It is now taking up to 6 months to receive review/approval of submitted proposals.  Coupled with the 30 days it takes to have the case prioritized, some WCMSA proposals are not reviewed for 7 months from the day that the materials are sent to CMS.  In cases in which weekly indemnity benefits are ongoing, this backlog has resulted in the loss of thousands of dollars for employers.  Furthermore, the backlog has resulted in settlements in which the claimant’s medical rights are left open pending the WCMSA review process, adding a great deal of time and medical expenses to the lives of countless files.

According to representatives from CMS, the current WCMSA review contractor’s contract allowed for staffing to review 1,400 cases a month.  On average, 2,400 WCMSAs are being submitted, which resulted in a backlog of 1,000 cases per month.

In addition to the Workers’ Compensation Review Contractor’s (WCRC) staffing issues, the submission of WCMSAs in cases where the settlement does not meet the threshold for review by Medicare have contributed to the backlog.  In fact, representatives from CMS indicated that 30% of the backlogged cases do not meet the threshold criteria for review.  The representatives indicated that many insurance carriers and attorneys opt to submit WCMSAs in cases that do not meet the threshold.

Some parties have taken the position that the letter automatically generated by CMS, indicating that Medicare will not review the WCMSA, affords them some degree of protection from future inquiry by CMS.  Medicare has made it quite clear that there is no safe harbor in cases that do not meet the threshold criteria for review, and that the aforementioned letter provides no protection.

Regardless of the reasons for the WCMSA review backlog, it is clear that there is a dire need for change.  CMS representatives explained some of the measures taken to solve the backlog problem and avoid additional problems going forward.

CMS noted that it had authorized WCRC employees to work overtime from September through December solely to address backlogged cases.  The new WCRC contract allows staffing for the submission of 2,000 – 2,500 WCMSA submissions per month.  The contract also mandates periodic contract reviews to determine the current number of submissions so that the WCRC is adequately staffed.  Furthermore, there are performance indicators in the new contract that should encourage the efficient review and approval of WCMSA proposals.

CMS representatives also noted that they met with the Medicare Advocacy Recovery Coalition, a legislative advocacy group, to discuss the backlog issues.  The meeting resulted in CMS issuing the May 14, 2011 memorandum, which reiterated that submitting WCMSA proposals to CMS is voluntary and not required by law.

As discussed later in this Newsletter, CMS is also hopeful that its new web-based submission portal will ease the burdens on the parties to litigation.

The CMS backlog continues to frustrate the parties to litigation.  CMS finally appears to be coming forward with some proposed solutions.  At Wiedner & McAuliffe, we will continue to monitor trends and implement solutions in the WCMSA process to ensure that our proposals are reviewed in the most timely fashion. Additional Signs of a Trend toward Non-Submission

Previous Newsletters have highlighted the CMS May 11, 2011 memorandum.  In that memorandum, CMS reiterated that submission of MSA proposals for review – even those meeting CMS thresholds – is a voluntary process.  There is no federal law or regulation requiring submission.  At that time we noted that CMS’ issuance of the May 11, 2011 memorandum appeared to signal that the parties to settlement may be free to “self-police” themselves.  In other words, so long as the parties to litigation reasonably consider Medicare’s future interests in good faith, submission to the onerous CMS review process is not required.

Recently, the Maryland Workers’ Compensation Commission revised its regulations to confirm that settlements meeting CMS’ review thresholds may be approved by the State of Maryland even if the parties have chosen not to submit an MSA proposal for CMS review.  This can occur contingent upon the parties acknowledging in writing that the settlement meets the published CMS review thresholds, that they have voluntarily chosen not to submit the matter to CMS, and that they are aware of the risk that CMS may refuse to pay for future medical services.   COMAR 14.09.19.

We view this new regulation by the State of Maryland to be further evidence of a potential trend towards non-submission of MSA proposals for CMS review.  While a CMS-approved Medicare Set-Aside can be an effective tool in consideration of Medicare’s interests, it is not the only mechanism with which the parties to settlement can obtain compliance with federal law.  In many cases, rather than submit to the onerous submission process, the parties may achieve the same goal – adequate consideration of Medicare’s interests – through a reasonable, good faith non-submitted Medicare Set-Aside proposal. Sixth Circuit Upholds Medicare’s Statutory Right to Conditional Payment Reimbursement

The United States Court of Appeals for the Sixth Circuit recently issued its long-awaited opinion in Vernon Hadden vs. United States.  While many in the Medicare compliance industry had hoped the decision would apply the rules of equity and apportionment to conditional payment claims, the decision instead reinforces Medicare’s statutory right to reimbursement of conditional payments made prior to settlement.

Vernon Hadden brought suit for negligence after being struck by a vehicle owned by Pennyrile Rural Electric.  The owner of the vehicle settled Mr. Hadden’s claim for $125,000.00.  Prior to settlement, Medicare had conditionally paid $62,338.07.  Following settlement, Medicare demanded reimbursement.

Hadden reimbursed Medicare under protest, and brought suit claiming that Medicare should have only been entitled to reimbursement of 10% of the claimed conditional payments.  Hadden’s theory was that the $125,000.00 paid by Pennyrile only represented 10% of his claim’s value.  This was the case, argued Hadden, as an unidentified motorist held 90% fault for the accident.  Hadden also argued that approximately $117,000.00 of the settlement was allocated to pain and suffering, i.e., not medical expenses, and therefore should not be available to reimburse Medicare.  The Administrative Law Judge, District Court, and Sixth Circuit Court of Appeals all disagreed with Mr. Hadden.

On appeal, Hadden raised a wide array of arguments, based on statutory interpretation, policy and equity.  The Sixth Circuit, however, felt no need to go beyond the plain language of the statute.  Under the applicable provisions of the Medicare Secondary Payer Act, the court noted that CMS is entitled to pursue full reimbursement of conditional payments from a primary plan, or from any entity that has received payment from a primary plan.  Based on the language of the statute, the court found Mr. Hadden’s claim that he had settled his negligence action for a 90% discount on total exposure to be without any legal effect.

There is speculation in the Medicare compliance industry that Hadden may seek relief in the United States Supreme Court.  Various legislative proposals are also under consideration to lessen the burden on the parties to litigation to reimburse conditional payments in full, regardless of disputes between the parties.  Conventional wisdom would dictate that if the parties to litigation resolve a case at a discount on exposure to reflect the disputes between the parties, Medicare too should discount its interest.  For now, however, the law is rather clear.  Medicare has a statutory right to reimbursement of all related conditional payments made prior to settlement.  It is recommended the parties investigate and resolve such claims for reimbursement prior to finalizing settlement. CMS Opens Web Submission Registration

As discussed in prior W&M newsletters, the Centers for Medicare and Medicaid Services (CMS) established a Workers’ Compensation Medicare Set-Aside Portal (WCMSAP) for electronic submission of Workers’ Compensation Medicare Set-Asides (WCMSA).  We are pleased to announce that the registration process has finally begun.

CMS anticipates that the WCMSAP will significantly reduce the current timeframe for approval of submitted Workers’ Compensation Medicare Set-Asides by streamlining the submission process.  The WCMSAP will allow registered users to create a work-in-progress case, submit WCMSA cases, perform case lookups, append documentation to a case, and receive alerts regarding case activity.  The WCMSAP will further allow a user to track the status of a case and determine the current stage of review.  If an entity elects to continue using the non-electronic submission process, the above referenced activities must be completed via regular mail resulting in significant delay.

Due to the numerous benefits and significant time savings, the Wiedner & McAuliffe Medicare Department has already begun the registration process and will begin submitting Medicare Set-Asides through the WCMSAP as soon as the site becomes available.  We look forward to providing our clients with the most progressive and cost-effective Medicare related services available.