Medicare Set-Asides (MSA) play a key role in successful workers’ compensation settlements, but their complex terminology and involvement of federal regulations can be daunting for even longtime practitioners.
What is a MSA?
Think of a MSA as Uncle Sam’s way of saying: “If you’re settling your workers’ comp claim for a lump sum, don’t expect Medicare to pick up the tab for your work-injury treatment.”
In plain English, a MSA is a portion of a workers’ compensation settlement carved out to pay for future medical treatment and prescription drugs related to the work injury that Medicare would otherwise cover. The funds are maintained in a separate, interest-bearing account and may be used only for those qualifying expenses. Once the funds are properly exhausted and the required accounting has been completed, Medicare may begin paying for otherwise covered, work-injury-related treatment.
If the injured worker is already on Medicare (or close to it—such as receiving SSDI or approaching age 65) and wants to settle the medical portion of the claim via a Compromise & Release (C&R), Uncle Sam requires that Medicare’s interests be protected. Skip this step, and Medicare will happily refuse to cover injury-related treatment down the line.
“Do I Need a Doctor?”
When your health is at stake, most of us understand the value of a physician. However, when dealing with the Centers for Medicare & Medicaid Services (CMS) and developing an MSA, the financial interests of everyone signing the Compromise and Release are best protected by an experienced MSA professional, such as a Medicare-compliance consultant or an MSA allocator.
Interestingly, a physician does not have to personally participate in preparing or signing an MSA. Ordinarily, the MSA allocator reviews existing medical evidence such as medical reports, treatment records, prescription histories, and payment records; and calculates the allocation from that information. But if you want an MSA allocation that doesn’t get tossed out by CMS or stall a settlement for six months, you need clear, line-item precision from the Primary Treating Physician (PTP) or the Agreed/Qualified Medical Evaluator (AME/QME).
Pick Your Doctor Carefully
There are several types of physicians from which to choose, some more effective when dealing with CMS:
- AME (Agreed Medical Evaluator)
- QME (Qualified Medical Evaluator)
- PTP (Primary Treating Physician)
- Employer-Directed Examiner (Labor Code § 4050)
1. AME: The Gold Standard
Although this author strongly recommends against utilizing an AME in most situations (see “The AME Trap aka Why Agreed Medical Examiners Make Me Disagreeable”,) I must reverse course when it comes to an MSA. Why? Because both parties mutually selected the evaluator, the WCAB and CMS give an AME report maximum deference on all issues. Of those issues, perhaps the most important for purposes of this article, is the necessity of future medical care.
Impact on MSA: If an AME clearly states that a specific treatment or surgery is not medically necessary or that a medication should be discontinued, CMS is far more likely to accept that determination—provided the opinion is well-reasoned, supported by evidence, and consistent with the overall medical documentation.
2. QME: Silver Medal
In represented cases where no AME is used, or in unrepresented cases, the QME’s opinion supersedes that of the PTP on disputed disability and treatment needs, provided the report constitutes substantial medical evidence.
QME reports can impact a MSA as follows – CMS will respect a QME’s findings to limit or exclude future care, though CMS scrutinizes QME opinions closely if they directly contradict active, ongoing treatment prescribed by the PTP.
3. PTP: Bronze Medal
Regardless of what an AME or QME recommends in theory, CMS and Workers’ Compensation Review Contractor (WCRC) pricing algorithms look heavily at actual treatment history and active prescriptions from the last 12 to 24 months
PTP reports can have the following impact on a MSA – if the PTP has the applicant on daily opioids or high-cost brand-name drugs, CMS will allocate those medications for life unless there is a clear, documented weaning protocol or an explicit, well-reasoned AME or QME report explaining why the treatment is no longer indicated or related to the industrial injury.
4. Employer-Directed Examination: Participation Trophy
Labor Code § 4050 provides for a fourth type of medical report: those created as part of an Employer-Directed Examination. While these reports have limited utility when assessing a case’s overall settlement value, they do provide valuable assistance during discovery.
An LC § 4050 exam is a defense-sponsored tool. While it gives the defense insight into the applicant’s actual condition, it cannot be submitted directly to CMS as the basis for a Medicare Set-Aside allocation.
Keep in mind that CMS demands “official” medical records, meaning that LC § 4050 reports do not qualify. CMS evaluates MSAs based on actual treatment history and authorized medical-legal evaluations.
LC § 4050 reports cannot even be provided to QMEs to influence their opinion unless a judge rules it admissible. If a QME or AME cannot automatically rely on it, CMS certainly won’t.
However, LC § 4050 Can Still Be Your Superpower
Although we can’t hand a § 4050 report to an MSA vendor or CMS and say “price it based on this,” it remains a potent strategic weapon behind the scenes.
Because an LC § 4050 doctor is a privately-retained defense expert rather than an AME or QME, ex-parte communication is fully permitted. You can have the physician review the medical record, examine the applicant, and generate a report pointing out clinical red flags, unsupported subjective complaints, or biomechanical impossibilities.
Equally helpful are off-the-record consultations with the LC § 4050 doctor to draft razor-sharp cross-examination questions for the applicant’s PTP, Panel QME, or AME.
In Conclusion
A MSA is a designated portion of a workers’ compensation settlement allocated to cover future injury-related medical expenses that Medicare would otherwise pay. Obtaining clear medical documentation from evaluators is essential to prevent CMS from rejecting the MSA or stalling settlement negotiations.
Speaking of stalling, let’s expedite the end of this article with a recap of our 15-second MSA Physician Survival Guide:
- AME: The Gold Standard. CMS actually trusts them to cut future care.
- QME: Silver Medal. Useful, but CMS will scrutinize every word.
- PTP: Bronze Medal. Their 24-month drug printout overrides almost everything.
- LC § 4050: Participation Medal. CMS ignores it, but it’s your best secret weapon for deposition prep.
- The Bottom Line: The PTP treats you, the QME confuses you, the AME compromises you, the 4050 doctor exposes you, and CMS delays you until everyone has forgotten why the case was filed
Don R. Barthel is one of the founding partners of Bradford and Barthel, and is based in the firm’s Sacramento office. He has taken dozens of doctor depositions and analyzed thousands of medical-legal reports in order to correct innumerable errors, including misapplications of the AMA Guides, statutory misunderstandings, and other errors making the underlying medical reporting entirely speculative and unreliable. If you have any questions about workers’ compensation defense issues, please feel free to contact him at 916.569.0790 or via email at dbarthel@bradfordbarthel.com.
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