Bill Aims to Fix Problems with Medicare Set-Asides for Workers Compensation

The insurance industry is among the business and legal interests applauding legislation to resolve delays and inconsistencies in Medicare’s approval process for set-aside funds for injured workers’ claims.

Medicare requires that funds be set aside in trust for future medical expenses for injured workers who will become eligible for Medicare during their claim period. The Centers for Medicare and Medicaid Services (CMS) must approve these set-asides for trusts exceeding $25,000 before a claim can be closed.

But CMS has come in for criticism for taking too long to review and approve these trusts. Even if the injured worker has approved the settlement, a claim can remain open and benefits continue to be paid sometimes for months until CMS signs off.

Critics say that CMS not only takes too long to review proposed set-asides but also fails to provide consistent standards for determining amounts to be set-aside. The agency also provides no avenue to appeal CMS decisions.

Rep. Dave Reichert, R-Wash., and Rep. Mike Thompson, D-Calif., have filed The Medicare Secondary Payer and Workers’ Compensation Settlement Agreement Act of 2012 (H.R. 5284), which aims to resolve the delays and introduce consistent standards into the review of set-asides by CMS. The bill has been referred to the Ways & Means Committee for consideration.

“This is a much-needed ‘common sense’ reform to ensure that Medicare claims are handled in a way that is more efficient so that the parties involved can move forward swiftly and with certainty to protect injured workers,” said Reichert. “Our bill gives injured workers the confidence that their health care claims will be processed in a fair and timely way.”

There have been previous legislative attempts to fix the problems dating back to 2006 but all have faltered.

The coalition for Medicare Secondary Payer (MSP) reform, which includes representatives of injured workers, employers and insurance carriers, has been working a number of years for reform and supports the bipartisan Reichert-Thompson legislation. Members of the coalition include the American Insurance Association (AIA), National Council of Self Insurers (NCSI), Property Casualty Insurers Association of America (PCI), UWC – Strategic Services on Unemployment & Workers’ Compensation (UWC), Washington Self-Insurers Association (WSIA), American Association for Justice (AAJ), American Bar Association (ABA) and Workers Injury Law and Advocacy Group (WILG).

“CMS takes too long to review proposed set-asides, fails to provide appropriate and consistent standards for determining amounts to be set aside, and provides no avenue to appeal CMS determinations. The process results in injured workers not receiving funds, additional costs for states and workers’ compensation payers, and additional liability for employers, insurance carriers, and attorneys. A legislative solution to this problem is needed,” said Douglas Holmes, president of UWC and coordinator of the MSP coalition.

Lawyers for injured workers are also on board.

“Too often, injured workers bear the brunt of the delays caused by the current system and reforms are needed now. This bill is about process improvement and fair treatment of all parties,” said J.R. Boyd, president of the WILG, a national association of attorneys representing injured workers in workers’ compensation cases. “In case after case we hear of delays in approval, uncertainty of the amount to be reimbursed by injured workers, and changes in amounts to be set-aside after settlements have already been approved.”

The current CMS set-aside review process is “cumbersome and confusing,” according to Melissa Shelk, AIA vice president for federal affairs. “This legislation will provide clear and consistent standards for the CMS administrative process,” the insurance industry lobbyist said. She also said the legislation would also compel CMS to “make timely coverage decisions and enable appeals when necessary.”

The government has been aware of the problems with Medicare set-asides, according to a March report by the Government Accountability Office.

According to the GAO, the average processing time for workers’ compensation set-aside proposals increased from 22 days in April 2010 to 95 days in September, 2011, resulting in delays in the resolution of cases. CMS officials said they would like to be able to complete reviews within 45 days.

The report said that a number of factors, including increased workload, could have contributed to the review process taking longer. From 2008 to 2011, there was a 42 percent increase in submissions. In fiscal year 2011 the reviewers anticipated handling 1,700 proposals each month, but they received an average of about 2,400 per month and were only able to review an average of about 2,100 per month. As a result, a backlog grew.

Also, GAO reported that a change made to the data system used in the process slowed system performance and added to the backlog.

According to government data, over the past several years, there has also been an increase in the number of ineligible proposals being submitted for review. Ineligible submissions increased by about 148 percent from 2008 through 2011, from about 4,500 in 2008 to about 11,200 in 2011, the GAO found. CMS officials told GAO that the companies may be submitting more proposals that are not eligible for review because they want documentation that a set-aside did not meet CMS’s review thresholds.