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).

However, in an April 2009 memorandum, CMS made good on earlier promises that it would begin independently pricing future prescription drug costs utilizing AWP pricing on June 1, 2009. It should be noted that this "independent pricing" has procedurally only meant that CMS takes a snapshot of the medications that the claimant is currently prescribed as of the date of the most recent medical record or pay history provided within the CMS submission. It then allocates for those medications at the same dosage and frequency for the remainder of the claimant's life expectancy.

This philosophy is problematic as it does not account for several things — most notably, reality. It is improbable that an individual will treat the same exact way for the duration of his life.

Medications Go Generic

Legally, patents expire after a published amount of time. If a claimant is currently taking a prescription medication that does not have a generic alternative, it is not realistic to think that he will continue to treat with that same name-brand prescription for life. Name-brand medications are far more costly than their generic counterparts. It is inequitable for CMS to require that an individual who is currently prescribed name-brand medication set aside funds for this pricey medication for the remainder of his life, especially since Medicare requires the substitution of generic medication when available.

Furthermore, there are a host of health issues involved with keeping an individual on the same prescription regime for life. Many medications can cause serious stomach or liver damage if taken for an extended period.

Also, many medications that CMS is allocating for life are meant for as-needed usage or only as a post-surgery treatment; it would be inappropriate to take them for life. More importantly, many claimants in the workers' compensation arena are treating pain with medication, and long-term use can lead to addiction.

For these and other reasons, medications usually will be reduced in dosage through time. Additionally, often times CMS requires the inclusion of a recommended procedure (for example, a morphine pump), that would necessitate a reduction — or at minimum a change — in the prescribed medication.

Impact of June 2009 Memo

Industry reaction to the April 2009 memorandum and the resulting CMS counter-higher decisions was strong. Carriers and claimants alike started to defer settlement because of the sudden outrageous fees associated with MSAs. Compliance with the Medicare regulation seemed to leave the insurers and insured feeling that keeping the claim open was the only option.

In response to the drop in settlement activity, Medicare issued a memorandum in May 2010 that directly correlates to a reduction in overall MSA costs. This memorandum indicates that medications prescribed for "off-label" usage should not be included within the MSA. (An example is Actiq, a costly FDA-approved medication for cancer pain that is often prescribed for off-label usages such as migraines or low back pain.)

Importantly, the memorandum also provided a mechanism for relief on some of the high-priced MSAs that were issued throughout the prior year. CMS indicated that it would revisit and remove costs associated with off-label usage from CMS decisions issued post-June 2009 and not yet settled. CMS' offer to revisit these files directly implies that it understands that the result of the June 2009 memo was that it thwarted settlements and reduced funds going into the Medicare Trust Fund.

How Can Carriers and Claimants Move Forward?

Carriers and claimants can take several steps to ensure both compliance with CMS and to obtain the most favorable outcomes.

  • Case Management – It is essential that medical documents do not reflect inflated treatment, and that questionable costs are rationalized. Additionally, if a physician makes a recommendation for a treatment or medication that the claimant never receives, it is important that he notes in the file that it is no longer recommended or a part of the treatment.
  • Reallocate Old Files – If you have already received an MSA and it is over six months old, it should be reviewed by the allocator. There have been so many policy changes at CMS that it is worthwhile for the allocation to be reviewed and refreshed prior to submission.
  • Do not submit non-threshold files – Where previously CMS would issue a "Declined to Review" letter on files that were below the work-load review thresholds, more often it is now reviewing these MSAs and responding back with large counter-higher decisions.
  • Incorporate the physician – As indicated above, ask often about the plan for treatment. The opinions of treating physicians are appropriately held in high regard by CMS, so it is important that they are very clear about the plan for future treatment.
  • Ensure that the prescription provider you work with will provide a prescription pay history. Medicare will almost always require these to process CMS submissions.
  • Be clear about any denied conditions and do not make any payments relative to anything unrelated to the compensable injury. CMS views payment as acceptance of that condition.
  • Work with an MSA vendor that utilizes both attorneys and a medical staff to ensure that your MSA is sound both legally and medically.
  • If your preference is to settle prior to a CMS decision, do not do so without clear settlement language regarding who will be covering any overage that results from a CMS counter-higher decision.

Finally, while there is no formal appeals process for CMS decisions, it is important to know that in many situations CMS will re-review decisions and issue a revised decision where appropriate. It is imperative that carriers partner with an MSA provider that understands the impact CMS decisions have on the settlement process. A qualified MSA provider will be able to review CMS decisions to make certain that every possible step is taken to ensure that the appropriate amount of funds are set aside.

Maureen G. Burnham, Esq. is vice president of operations for Crowe Paradis Services Corp., the nation's leading Medicare compliance firm. CPSC is headquartered in North Reading, Mass., with offices throughout North America. Company information is available at www.cpscmsa.com or 866-630-2772.

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