Recent changes to Center for Medicare and Medicaid Services (CMS) policy relative to prescription medication have impacted workers' compensation settlements. Specifically, the CMS position on prescription medication review has led to higher Medicare Set-aside Arrangements (MSAs), which have proven to be disadvantageous to carriers and claimants alike. Some insurers are opting not to settle; they feel the prescription costs of the MSA make it fiscally preferable to keep the claim open. Additionally, some claimants are unwilling to settle, believing that the overall settlement is skewed toward prescription medication that they will never utilize.

The Problem

On December 30, 2005, CMS issued a memorandum indicating that MSAs submitted after Jan. 1, 2006, must include separate amounts for 1) future medical treatment and 2) prescription drug treatment. Following this memo, set asides were inclusive of prescription medication. However, although CMS continued to indicate it would eventually begin to independently price for prescription drug treatment, it regularly approved allocations with appropriate cost reduction methods applied (examples: donut hole reduction for co-pays and deductibles, generic pricing, and titration when appropriate).