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Are You and Your Clients Compliant?

This month CMS published Matter # MM9893, dated February 3, 2017 with an effective date of October 1, 2017, relating to the implementation of Liability MSAs (“LMSA”) and No Fault MSAs (NFMSA”).

The Notice states that in order to comply with the Government Accountability Office ("GAO") final report on the Medicare Secondary Payer (MSP”) Program to improve program effectiveness for Non-Group Health Plans, CMS will establish two (2) new set-aside processes: a Liability Insurance Medicare Set-Aside Arrangement (LMSA), and a No-Fault Insurance Medicare Set-Aside Arrangement (NFMSA). The report was published in 2012 and included commentary that a set aside program for both liability and no-fault recoveries was needed. An LMSA or an NFMSA is an allocation of funds from a liability or an auto/no-fault related settlement, judgment, award, or other payment that is used to pay for an individual’s future medical and/or future prescription drug treatment expenses that would otherwise be reimbursable by Medicare.

CMS has stated the two new set-aside processes, LMSA and NFMSA, will address the policies, procedures, and system updates required to create and utilize an LMSA and an NFMSA MSP record, similar to a Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA) MSP record. CMS has also instructed the Medicare Administrative Contractors (MACs) to deny payment for items or services that should be paid from an LMSA or an NFMSA fund.

As we have previously noted, CMS has been signaling this change for some time. In publically posted solicitations for those services, CMS has mentioned the need for administrators to be able to handle LMSAs, as seen with the draft RFP and Statement of Work found online and publicly available for viewing at: f5b2a96b9298&_cview=0.

Parties should note the provision that the contractor would review other non-group health plan set-asides, which would be reviews of MSAs on liability cases. The LMSA review would be broken down into full reviews (similar to what is currently done on workers' compensation MSAs) and a cursory review which would only require that all required documents were provided for an amount determination to be made.

This was just one of a series of indications from CMS that they are once again considering LMSAs. The first was in May 2016 when CMS released the RFP-CMS-2016-8A-0008 PRE- SOLICITATION notice, which amended the Statement of Work to include the processing of other Non-Group Health Plan Medicare Set Asides Arrangements. This was followed in June wheCMS updated its website with a notice titled: "Consideration for Expansion of Medicare Set- Aside Arrangements." The notice states that "the Centers for Medicare and Medicaid Services is considering expanding its voluntary Medicare Set-Aside Arrangements amount review process to include the review of proposed liability insurance (including self-insurance) and no- fault insurance MSA amounts. CMS plans to work closely with the stakeholder community to identify how best to implement this potential expansion. CMS will provide future announcements of the proposal and expects to schedule town hall meetings later this year. Please continue to monitor this website for additional updates."

Insurers and attorneys should note that CMS does not need new law to implement LMSAs or NFMSAs. Under 42 U.S.C. Sections 1395y(b)(2) and 1862(b)(2)(A)(ii) of the Social Security Act, Medicare is precluded from making payment when payment has been made or can reasonably be expected to be made under a workers’ compensation plan, an automobile or liability insurance policy or plan (including a self-insured plan), or under no-fault insurance. MSAs have been used in workers' compensation settlements for nearly 15 years, and will soon be a regular consideration in liability and no fault settlements.

The Notice states that Medicare will not pay for those services associated with a LMSA or NFMSA record when the claim’s date of service is on or after the MSP effective date and on or before the MSP termination date. The Notice further instructs the MAC's to deny such claims.

Analyst's Note: We have discussed these coming changes since last year and have been preparing our clients accordingly.  While others may advocate using the workers' compensation methodology for a LMSA, this is both inappropriate and costly and is the legal equivalent of shoving a square peg into a round hole. LMSAs and NFMSAs should be approached in a fashion that takes into account the substantial differences between workers' compensation, liability and no fault settlements, and established by an administrator with extensive experience in liability and no fault cases. CMS has announced a target date of October 1st, 2017. If you would like assistance in setting up a LMSA or NFMSA compliance program, please contact us and we would be pleased to assist you.  We can be reached at (734) 433-1670 or


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