Medicare Set-Asides and Workers Compensation · In FY 2011, CMS approved $1.1 billion of workers...

© Copyright 2014 NCCI Holdings, Inc. All Rights Reserved.

2014 Annual Issues Symposium

Medicare Set-Asides and Workers Compensation

Barry Lipton, FCAS, MAAAPractice Leader and Senior ActuaryNCCI Holdings, Inc.

May 9, 2014Orlando, Florida


Background

Medicare is a secondary payer for medical services for work-related injuries

A Medicare Set-Aside (MSA) is a fund established to pay medical costs to treat a work-related injury that might otherwise be paid by Medicare

For settlements meeting certain thresholds, the Centers for Medicare & Medicaid Services (CMS) will review the proposed MSA

An MSA can be self-administered or professionally administered

In FY 2011, CMS approved $1.1 billion of workers compensation (WC) MSAs*

2

*US Government Accountability Office (GAO), Medicare Secondary Payer—Additional Steps Are Needed to Improve Program Effectiveness for Non-Group Health Plans, GAO-12-333, March 2012, Table 4, p. 20


Medicare Is Secondary Payer to Workers Compensation

Inception of Medicare program (Medicare Secondary Payer applies only to WC)

Congress enacts Medicare Secondary Payer Act

GAO AuditThe Patel Memorandum circulated by the CMSEnforcement begins

Part D Prescription Drug Memorandum

3

2001

1965

2005

1980


CMS’s MSA Process Changes

Increased dollar threshold for Medicare beneficiaries from $10K to $25K

CMS prescription drug update and pricing methodology

New provider to review and approve MSAsMedicare Advantage Plans can recover

The SMART Act*

4

The substantive memoranda issued by CMS arebest classified as interpretive rule-making efforts.With an interpretive rule, there is no requirement tocomply with the public notice and commentprocedures outlined in the AdministrativeProcedures Act. 2012

2013

2009

2006

*The Strengthening Medicare and Repaying Taxpayers (SMART) Act simplifies processes for reimbursing CMS for conditional payments made by Medicare


Illustrative MSA Process Scenarios

Carrier contemplates settlement

Makes offer, including future medical (may use a vendor to help develop

offer)

Claimant tentatively accepts settlement amount• Includes state court approval, when applicable

Contract with vendor to complete MSA

MSA submission to CMS• Includes provision for reimbursement of any conditional payments

• Carrier or representative (vendor, attorney) submits to CMS

CMS response

Some possible outcomes• Acceptance of CMS MSA amount might result in settlement

• CMS’s demand for greater medical might result in medical not being settled

• Initial settlement agreement may expire due to delays

5


CMS Workers Compensation Review Thresholds

Currently Medicare Eligible (Class I)

WC Settlement> $25,000

65 or older

Social Security Disability for more than 2 years

End Stage Renal Disease

Likely Medicare RecipientWithin 30 Months

(Class II)

WC Settlement> $250,000

62.5 or older

Applied for Social Security Disability or Renal Disease not in

the end stage

6


Most States Allow Settlement of WC Medical

7

WA

OR

CA

NV

ID

MT

WY

COUT

NMAZ

TX

OK

KS

NE

SD

NDMN

WI

IL

IA

MO

AR

LA

AL

TN

MI

PA

NY

VT

GA

FL

MS

KY

SC

NC

MD

OH DEIN WV

NJCT

MA

ME

RI

VA

NH MI

AK

HI

DC

Yellow = Under certain conditions

Green = Yes

Blue= No


Medicare Set-Aside Sample Data Provided by Gould & Lamb

Gould & Lamb is an MSA service provider The sample provided to NCCI contains approximately 2,200

completed MSAs between January 2010 and November 2013 For CMS submissions between September 2009 and

November 2013 Sample includes Proposed Total Settlement Proposed MSA Final MSA

Proposed and Final MSAs include Medicare Parts A and B—hospital, office visits, and related

services Medicare Part D—prescription drugs

8


NCCI Medical Data Call

The NCCI Medical Data Call (MDC) captures transaction-level detail on medical bills processed on or after July 1, 2010, including dates of service, charges, payments, procedure codes, and diagnosis codes

Carriers are not required to report transactions for services provided more than 30 years after the date of the injury

NCCI collects the MDC for the 35 jurisdictions for which NCCI provides ratemaking services and for 8 additional states on behalf of the independent state rating organizations*

9

*The 35 jurisdictions for which NCCI provides ratemaking services are AK, AL, AR, AZ, CO, CT, DC, FL, GA, HI, IA, ID, IL, KS, KY, LA, MD, ME, MO, MS, MT, NE, NH, NM, NV, OK, OR, RI, SC, SD, TN, UT, VA, VT, and WV; the 8 independent bureau states for which NCCI collects the Medical Data Call are IN, MA, MI, MN, NC, NJ, NY, and WI


Key Findings Most MSAs are for claimants who are Medicare entitled at the

time of settlement

Most of these claimants are Medicare entitled because they have been on Social Security Disability for at least two years

MSAs make up about 40% of the share of total proposed settlement

Half of this 40% is due to prescription drugs

After a period of dramatic lengthening, CMS’s MSA processing time has recently declined

The ratio of CMS-approved MSA amounts to submitted MSA amounts has declined over time

The differences between proposed and approved MSA settlements are largely due to prescription drugs

10



MSA Demographics


Almost All MSAs Are for Claimants Who Are Medicare Entitled at the Time of Settlement

Currently Eligible Due to

Age

29%Currently

Eligible, Not Due to Age

65%

Likely Eligible Within 30 Months

Distribution of MSA Submissions by Medicare Status

6%

12

Source: Gould & Lamb’s Medicare Set-Aside Sample Data—MSAs completed between January 2010 and November 2013 for submissions to CMS between September 2009 and November 2013


The Majority of MSAs Reviewed by CMS Are for Claimants Between Ages 50 and 70

1%

4%

15%

34%

37%

8%

0%

5%

10%

15%

20%

25%

30%

35%

40%

Under 30 30-39 40-49 50-59 60-69 70+

Shar

e of

MSA

Sub

mis

sion

s

Claimant Age at Submission

Distribution of Claimant Age at CMS Submission

13

Source: Gould & Lamb’s Medicare Set-Aside Sample Data—MSAs completed between January 2010 and November 2013 for submissions to CMS between September 2009 and November 2013


More Than Half of MSAs Reviewed by CMS Are for Settlements Over $100K

16%

25%

17%

13%

29%

0%

5%

10%

15%

20%

25%

30%

35%

25K-50K 50K-100K 100K-150K 150K-200K Over 200K

Shar

e of

MSA

Sub

mis

sion

s

Total Proposed Settlement

Distribution of Submissions by Total Proposed Settlement Size

14

Source: Gould & Lamb’s Medicare Set-Aside Sample Data―MSAs completed between January 2010 and November 2013 for submissions to CMS between September 2009 and November 2013


Almost Half of MSAs Reviewed by CMS Have MSA Amounts Under $25K

45%

16%18%

8%

4%

8%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Under 25K 25K-50K 50K-100K 100K-150K 150K-200K Over 200K

Shar

e of

MSA

Sub

mis

sion

s

Proposed MSA

Distribution of Submissions by Proposed MSA Settlement Size

15



MSAs Are About 40% of Proposed Total Settlement Costs

Half of Proposed MSA Costs Are for Prescription Drugs

Other than MSA*62%

MSA Parts A and B

19%

MSA Part D19%

16

*“Other than MSA” includes indemnity, medical not covered by Medicare, and other expenses such as attorney feesSource: Gould & Lamb’s Medicare Set-Aside Sample Data―MSAs completed between January 2010 and November 2013 for submissions to CMS between September 2009 and November 2013


Prescription Drugs Are Half of MSAsAcross Most Proposed Settlement Sizes

2%7% 8% 8%

36%

0.8%

2% 2% 2%

12%

0.3% 1% 2% 2%

14%

3%

10% 12% 12%

62%

0%

10%

20%

30%

40%

50%

60%

70%

25K-50K 50K-100K 100K-150K 150K-200K Over 200K

Shar

e of

Tot

al P

ropo

sed

Settl

emen

t Cos

ts

Total Proposed Settlement

Total Proposed Settlement Cost DistributionOther than MSA MSA Parts A and B MSA Part D

17



Half of MSAs Reviewed by CMS Involve Musculoskeletal Impairments

54%

18%

11%

1%

16%

34%

17%

4%

11%

34%

0%

10%

20%

30%

40%

50%

60%

Disease of theMusculoskeletal

System andConnective Tissue

Sprains and Strains ofJoints and Adjacent

Muscles

Fractures Open Wound All Others

Injury—Based on Primary ICD9 Diagnosis Code

Distributions of MSAs and Countrywide Workers Compensation Claims by Injury*

MSAs

Countrywide WC Claims

18

*Comparison restricted to states in common between NCCI’s Medical Call Data and the MSA sample Sources: NCCI Medical Data Call and Gould & Lamb’s Medicare Set-Aside Sample Data―MSAs completed between January 2010 and November 2013 for submissions to CMS between September 2009 and November 2013


Most MSA Settlements Are Paid as a Lump Sum

Annuity*44%Lump Sum

56%

Distribution of MSA Submissions by Funding Mechanism

19

*Settlement includes at least one annuity, in addition to any lump sum paymentsSource: Gould & Lamb’s Medicare Set-Aside Sample Data―MSAs completed between January 2010 and November 2013 for submissions to CMS between September 2009 and November 2013



Recent MSA Trends


CMS Letters of Determination Surged in December 2012

2%

14%

2%

4% 4% 4%

6% 7%7%

9%

6%7%

3%

16%

11%

7% 7%

2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Shar

e of

MSA

s in

Dat

a Sa

mpl

e

Quarter in Which Determination Letter Was Received

Share of MSAs by Quarter in Which Determination Letter Was Received

Determination Letter Received in December 2012

21



More Than 90% of MSAs Completed During December 2012 Were Approved as Submitted

21%

43%50%

46% 49% 46%41%

44%39%

50%

20% 19%

92%

30% 30%

40%34%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Shar

e of

MSA

s A

ppro

ved

as S

ubm

itted


Share of MSAs Approved as Submitted

22

*Excluding December 2012; 4Q2012 approved as submitted share including December 2012 is 84%Source: Gould & Lamb’s Medicare Set-Aside Sample Data―MSAs completed between January 2010 and November 2013 for submissions to CMS between September 2009 and November 2013


After a Period of Dramatic Lengthening, CMS’s MSA Processing Time Has Recently Dropped

64 6991

110

143

172191

225 229

256

39

274

90

41 46 41

68 75

99115

142

181

204

236245

272

97

261

148

105 110 104

0

50

100

150

200

250

300

Day

s


MSA Processing Time

Median Processing Time

Average Processing Time

23

Processing time is days from submission of MSA to CMS to receipt of determination letterSource: Gould & Lamb’s Medicare Set-Aside Sample Data―MSAs completed between January 2010 and November 2013 for submissions to CMS between September 2009 and November 2013


Median MSA Approved Amounts Have Been Stable Since 2010

$38,983$43,918

$42,285

$46,821$41,625

$34,692

$32,349$40,151

$43,040

$42,965$48,634

$28,602

$46,744

$43,645

$45,746

$44,542

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

$160,000


Median MSA Approved Amounts

24



There Is No Apparent Trend in Average Approved MSAs

$38,983$43,918

$42,285

$46,821$41,625

$34,692

$32,349$40,151

$43,040

$42,965$48,634

$28,602

$46,744

$43,645

$45,746

$44,542

$98,334

$89,330

$130,773

$105,888

$98,141 $80,827

$95,568

$75,759

$86,612 $94,112

$66,683 $69,053

$88,000

$74,669

$88,112

$113,090

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

$160,000


MSA Approved Amounts

Median Approved MSA Average Approved MSA

25



Gap Between Submitted and Approved MSAsIs Shrinking

$107,082

$86,760$77,554

$86,397

$66,801 $61,875 $65,232

$78,776

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

$160,000

2010 2011 2012 2013Year Determination Letter Was Received

Average Approved MSA Average Submitted MSA

26



Gap Between Submitted and Approved MSAs Is Shrinking

Excluding December 2012

$107,082

$86,760

$95,177

$86,397

$66,801 $61,875

$75,584 $78,776

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

$160,000


Average Approved MSA Average Submitted MSA

27



The Gap Between Approved and SubmittedMSAs for Parts A and B Has Been Fairly Stable

$41,454

$36,594 $34,439$38,859

$38,013 $34,606

$30,888 $35,133

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000


Average Approved Parts A and B Average Submitted Parts A and B

28



The Gap Between Approved and SubmittedMSAs for Parts A and B Has Been Fairly Stable


$41,454

$36,594

$40,637$38,859

$38,013 $34,606 $34,878 $35,133

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000


Average Approved Parts A and B Average Submitted Parts A and B

29



The Gap Between Approved and Submitted MSAs for Drugs Has Declined Significantly

$66,092

$50,211

$42,917$47,371

$28,787 $27,269

$34,345

$43,642

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

$90,000


Average Approved Part D Average Submitted Part D

30



The Gap Between Approved and Submitted MSAs for Drugs Has Declined Significantly


$66,092

$50,211

$54,528

$47,371

$28,787 $27,269

$40,705 $43,642

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

$90,000


Average Approved Part D Average Submitted Part D

31



The Ratio of Overall Approved to Submitted MSAs Has Declined Over Time

1.60

1.40

1.19 1.10

1.26

0.50

0.70

0.90

1.10

1.30

1.50

1.70

1.90

2.10

2.30

2.50

2010 2011 2012 2013

Ove

rall

App

rove

d to

Sub

mitt

ed R

atio

Year Determination Letter Was Received

MSA Overall Approved to Submitted RatioMSA Overall Approved to Submitted Ratio—Excluding December 2012

32



Ratio of Overall Approved to Submitted MSAsfor Parts A and B Has Been Fairly Stable

1.09 1.06 1.11 1.11

1.17

0.50

0.70

0.90

1.10

1.30

1.50

1.70

1.90

2.10

2.30

2.50

2010 2011 2012 2013

Part

s A

&B

Ove

rall

App

rove

d to

Sub

mitt

ed R

atio


Parts A and B Overall Approved to Submitted RatioParts A and B Overall Approved to Submitted Ratio—Excluding December 2012

33



Ratio of Overall Approved to Submitted MSAsfor Drugs Has Declined Sharply

2.30

1.84

1.25

1.09

1.34

0.50

0.70

0.90

1.10

1.30

1.50

1.70

1.90

2.10

2.30

2.50

2010 2011 2012 2013

Part

D O

vera

ll A

ppro

ved

to S

ubm

itted

Rat

io


Part D Overall Approved to Submitted RatioPart D Overall Approved to Submitted Ratio—Excluding December 2012

34



The Spread of MSA Approved to Submitted Ratios Has Been Consistent

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

2010 2011 2012 2012* 2013

App

rove

d to

Sub

mitt

ed R

atio


35

5th Percentile

95th Percentile

25th Percentile75th Percentile

*Excluding December 2012Source: Gould & Lamb’s Medicare Set-Aside Sample Data―MSAs completed between January 2010 and November 2013 for submissions to CMS between September 2009 and November 2013

Median is 1.00 for all years


The Spread of Approved to Submitted Ratios for Parts A and B Has Grown

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

2010 2011 2012 2012* 2013

Part

s A

&B

App

rove

d to

Sub

mitt

ed R

atio


36


Median is 1.00 for all years except 2013, for which it is 1.07

5th Percentile

95th Percentile



Most of the Spread of MSA Approved to Submitted Ratios Is Due to Drugs

0

5

10

15

20

25

30

2010 2011 2012 2012* 2013

Part

D A

ppro

ved

to S

ubm

itted

Rat

io


37



5th Percentile

95th Percentile



Closing Remarks

The majority of MSAs are for claimants who are Medicare entitled due to disability

MSAs are a large share of total proposed settlements

Prescription drugs are a large share of MSAs

CMS’s MSA processing time has recently declined

The differences between proposed and approved MSAs have declined over time

Most differences between proposed and approved MSAs have been due to prescription drugs

38



Thank You



Appendix


Top Ten MSA Volume States in Sample

22%

16%

9%

7%6%

5%4% 4%

3% 2%

0%

5%

10%

15%

20%

25%

CA NY IL FL GA NC MI PA SC AL

Shar

e of

MSA

s

State

Distribution of MSAs by State

41



Most of the Spread of MSA Approved to Submitted Ratios Is Due to Drugs

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

2010 2011 2012 2012* 2013

Part

D A

ppro

ved

to S

ubm

itted

Rat

io


42



5th Percentile

95th Percentile



Bibliography

R. Chadarevian, “Workers Compensation and Medicare Set-Asides—Webinar on Demand,” NCCI, October 2013

D. Bellusci, “Impact of Medicare Requirements on Workers Compensation Claims,” NCCI Actuarial Committee, ACT-11-08, March 2011

A. Swedlow, “Medicare Set-Aside Arrangements & the California Workers Compensation System,” NCCI Annual Issues Symposium, May 2009

G. Levine, “Medicare, Workers Compensation, and Liability Insurance,” CAS Study Note, October 2012

US Government Accountability Office, “Medicare Secondary Payer,” GAO, March 2012

Centers for Medicare & Medicaid Services, “Proposed Expansion of the Workers’ Compensation Medicare Set-aside Re-Review Process,” CMS, February 2014

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