CMS places workers comp industry on notice regarding zero WCMSAs and non-submit allocations

In 2021, CMS ramped up its scrutiny of requests for zero WCMSAs, including requiring additional documentation for its review, such as the breakdown of the settlement funds, Durable Medical Equipment (DME) invoices, medical records, and copies of settlement language. This was taken a step further with the recently released new Workers' Compensation Medicare Set-Aside (WCMSA) Reference Guide (Version 3.5, January 10, 2022), which includes a new section (Section 4.3) on "WCMSA non-submits" or "evidenced-based" MSA ("EBMSA/Non-Submit") allocations. These are WCMSA medical allocations that have not been reviewed or approved as part of the agency's voluntary WCMSA submission process. Significantly, CMS notes that they view these arrangements as "a potential attempt to shift financial burden by improperly giving reasonable recognition to both medical expenses and income replacement."

While the use of non-submit or evidenced-based allocations is not prohibited, CMS notes that the injured worker will need to show that the entire settlement is exhausted, minus procurement costs before CMS will pay for claim-related treatment if the settlement does not include a CMS-approved WCMSA. This appears to be a paradigm shift from CMS' long-standing position that WCMSAs are voluntary, however, there are unanswered questions. CMS continues to note that WCMSAs are voluntary and its work review thresholds ($25,000 for Medicare beneficiaries) exclude some WCMSAs. It's also unknown if this will be applied retroactively.

This revision clearly discourages the use of zero WCMSAs and non-submit allocations. It's critical that you have a sound medical basis for making such allocations. As a practical matter, expect more claimant attorneys to insist upon a formal MSA agreement, otherwise, their client bears the responsibility of proving the entire settlement amount was exhausted and used for the payment of related medical care before Medicare will resume payment obligations for medical expenses related to the work injury.

With the PAID Act compliance complete, CMS now is more focused on MSA policy updates and changes.