Articles | Cases

Employers reluctant to close claims with Medicare set-asides

Closure rates for older Workers’ Comp claims has been slowing nationwide and a contributing factor is Medicare-set asides. The frustrations of employers surrounding the implementation of the Medicare Secondary Payer program were aired in recent congressional hearings. Employers argued that the current system compels them to incur the additional cost of leaving Workers’ Compensation claims open rather than satisfy Medicare set-aside funding requirements for closing cases with prescription drug expenses.

While this approach contradicts the best practice of closing claims as quickly as possible to control costs, the reluctance is driven by the large monetary value of prescription drugs that the Centers for Medicare and Medicaid Services (CMS) calculates as needed for claimants' future medical expenses according to “Medicare rules spur rethink on some comp claims,” Business Insurance by Robert Ceniceros.

The law requires that employers or their insurers notify CMS when any Workers’ Compensation claim with a medical component involves Medicare-eligible beneficiaries. CMS then determines an amount that claims payers must set aside to ensure payment of the claimant's future medical expenses.

Paul Braun, managing director of casualty claims for Aon Global Risk Consulting in Los Angeles noted that clients are not finding it beneficial to settle cases that go to Medicare for approval because of the high costs of future pharmaceutical expenses.

According the article, Roy Franco, chief legal and compliance officer for Franco Signor L.L.C. in Kenmore, N.Y, notes that some employers are reaching agreements with the claimant to settle the indemnity portion of claims while continuing to manage the medical component, rather than meet CMS' “off-the-charts” cost projections.

Factors that contribute to the high cost projections include: CMS calculates the price of the brand name drug over the expected life of the claimant rather than recognizing that a lower-cost generic form may be available and CMS may fail to recognize that a prescription drug is needed only for a finite period, rather than the expected lifetime.

Employers can work to mitigate these issues by working with doctors in reviewing claims submission ensuring that the claims documents clearly specify when medication will be necessary only for a finite period.

The uncertainty of costs is not limited to Workers’ Comp cases but has caused delays in settlements of liability cases for employers as well. At recent congressional hearings Marc Salam, vice president of risk management for Publix Super Markets, speaking as a member of the Medicare Advocacy Recovery Coalition or MARC Coalition, which advocates for changes in the MSPS, expressed concerns that the current system prohibits CMS from revealing how much it has spent on medical coverage when a liability case is involved.

In her testimony Ilene Stein, federal policy director at the Medicare Rights Center, said because there is no timeframe for when Medicare must provide its costs in a liability case there is "uncertainty in the settlement process." She noted that there is also no time limit for Medicare to recoup its costs and there have been cases where Medicare "reaches out to a beneficiary years after a case is settled.”