B Josh Pettingill
Evidence Based MSAs (EBMSAs) have taken the workers’ compensation industry by storm the past several years. It is imperative for workers’ compensation attorneys to understand how EBMSAs can impact both the settlement value, as well as your clients’ benefits post-resolution. EBMSAs can be a cost savings mechanism in resolving a workers’ compensation claim. However, using an EBMSA to resolve a claim is not without risks.
EMBSAs are prepared based upon clinical guidelines and trends in medical research to project future Medicare covered expenses. This is a logical approach one would think. However, The Centers for Medicare and Medicaid Services (CMS) takes a different position as it relates to their approved methodology for preparing an MSA with a future cost projection.
Three Key Components of Evidence Based MSAs
There are numerous MSA practitioners and companies who offer EBMSAs for workers’ compensation cases. There are three key components to an EBMSA that should be noted:
- The EBMSA utilizes a pricing strategy that does match up to the CMS approved pricing guidelines when pricing a WCMSA[1].
- The EBMSA mandates professional administration for the claimant for a specified term[2].
- The EBMSA assumes the settlement parties will not seek CMS approval of the WCMSA.
Real World Pricing Strategy
There are two components of a Medicare set aside: prescription drugs and medical items/services[3]. The largest part of an MSA is usually prescription drugs. On average, prescription drugs make up 65% of the total MSA amount from a dollar standpoint. EBMSAs tend to be priced the CMS approved way as it relates to medical items and services. However, as it relates to prescription drugs, there is massive dichotomy in the approach for pricing. Specifically, CMS requires that any recommended drugs be allocated for the life of the claimant/applicant[4]. Whereas, EBMSA uses period certain durations (shorter timeframes) based on supporting medical evidence.
The Pros & Cons of an EBMSA
The cost of prescription drugs and their inclusion in an MSA can be one of the primary barriers to settlement of a workers’ compensation case. Since EBMSAs do not use full life expectancy to calculate future prescription drug costs, there can be a massive cost differential when compared with a non-evidence based MSA. One could argue that Medicare is being purposely being defrauded by a substantial amount by not using the appropriate pricing strategy for medications. However, an argument could also be made that pricing the MSA this way is more consistent with the “real world” approach; more importantly, the medical evidence supports this approach. It is not realistic to price medications for the lifetime of an injured worker. In fact, extended use of certain medications can contribute to a reduced life expectancy.
EBMSAs frequently have mandatory professional administration as a requirement to use them. The argument for the EBMSA is that the MSA funds will always be spent appropriately with a professional administrator. But the caveat is that the claimant/applicant must agree to use that company’s professional administration service. Unfortunately, that particular company may not always be the best solution for the injured party’s needs.
EBMSAs are not submitted to CMS which clearly is a pro but it has risks associated with non-submission. CMS approval of a WCMSA is always voluntary but recommended in order to have final closure. In other words, CMS approval provides the guarantee that CMS cannot come back years down the road and argue not enough money was originally set aside to consider their future interests. CMS approval is still the only way to have definitive peace of mind that your client is protected. One could even argue that there are malpractice risks for the claimant’s attorney if they rely solely on the carrier’s expert in determining the MSA amount using the evidence based method, while at the same time not getting CMS approval as part of the settlement process.
There are certainly benefits to an EBMSA such as reduced exposure to the employer/carrier which frees up other dollars to be used to resolve the claim. These companies claim that if CMS ever disagrees with the amount or denies something post-settlement that the claimant/applicant, as well their attorney, will be indemnified and held harmless. Also, the MSA company will either pay back Medicare if this were to happen or fight the claim that not enough funds were earmarked for the Medicare set aside.
Conclusion
As an attorney for injured workers, if you are presented with an EBMSA by the employer/carrier, you must consider the implications. We recommend obtaining an independent MSA analysis or medical cost projection to ensure that the EBMSA is an accurate reflection of the future medical costs. CMS has stated that the MSA is a claimant issue, not a carrier issue. If one chooses to accept the EBMSA, keep in mind that you are also relinquishing your ability to control the MSA process. As such, you are at the mercy of the employer/carrier’s expert for determining your client’s future needs.
An EBMSA is only one way to resolve a workers’ compensation claim. Synergy can help the injured worker and their attorney to not only save money but also maximize the recovery of the case. The last thing you want to happen is for CMS to return years later and disagree with the EBMSA amount because there was no CMS approval. Your client could find themselves in a situation whereby Medicare is denying coverage for accident related care. Such a situation could result in a legal malpractice case. Having a trusted partner to help take control of the MSA process, as well as guide you through the complex settlement issues, is imperative. To learn more about Synergy’s services for workers’ compensation settlements, visit our website by clicking HERE
[1] According to the WCMSA Reference Guide
[2] The duration depends on the product
[3] Durable equipment, medical services, items, etc.
[4] According to the WCMSA Reference Guide, “Reviewers (CMS) use the evidence in the records to determine if the proposal accounts for the reasonably probable future prescription drug needs. This includes the prescription drug history, the treatment notes, provider medication lists, and physician dispensing records.”
