Medical Cost Projections and Medicare Set-Asides: Two sides of the Same Coin

By Guest Author Rasa Fumagalli, J.D., MSCC, CMSP-F – Director of MSP Compliance Services

The Differences Between an MCP & LMSA

A Medical Cost Projection (“MCP”) report helps a personal injury attorney quantify an injury victim’s future medical expenses. The report is generally prepared by a nurse allocator and will include projections for treatment that might occur as a result of the initial injuries. For example, an individual who has undergone a spinal fusion has a 36% chance of developing adjacent segment degeneration within 10 years after their initial fusion surgery.[1] In light of this, the MCP report is likely to include projections for spinal fusion extension surgeries and the associated care. Although there is a degree of uncertainty when it comes to predicting the course of an injury victim’s future care, the personal injury attorney can rely on the MCP in seeking to demand that his/her client receives sufficient compensation to cover any possible future injury related care and medical bills.

A Liability Medicare Set-Aside (“LMSA”), on the other hand, is a settlement tool whereby a portion of an injury victim’s net settlement is earmarked for future injury related Medicare covered treatment. Once the portion that is “set-aside” is properly spent on such post settlement injury related care, Medicare will step in and become the primary payer for any additional injury related services.

So how do you reconcile the future medical projections in an MCP with a desire to limit the size of the LMSA? We begin the analysis with an overview of the MSP compliance framework. The MSP Act and regulations prohibit Medicare from making payment for services to the extent that “payment has been made or can reasonably be expected to be made under a workmen’s compensation law or plan of the United States or a State or under an automobile or liability insurance policy or plan (Including a self-insured plan) or under no-fault insurance.”[2] A primary payer’s reimbursement obligation to Medicare may be demonstrated by “a judgment, a payment conditioned upon the recipient’s compromise, waiver or release (whether or not there is a determination or admission of liability) of payment for items included in a claim against the primary payer or by other means.”[3] Section 111’s Mandatory Insurer Reporting requirement ensures that Medicare is placed on notice of the settlement and injuries alleged in the underlying matter. The reporting is intended to help Medicare recover conditional payments and avoid making improper future payments.

While parties must address Medicare’s conditional payments in connection with a settlement, there is less clarity when it comes to the best way to consider Medicare’s future interests in a liability settlement. A failure to consider the interest may result in Medicare’s denial of post settlement injury related treatment that was claimed as a part of the personal injury case. Depending upon the settlement amount, an injury victim may elect to remove this risk by setting aside some of the settlement funds in an LMSA.

Although the MCP report and LMSA both deal with the projection of future injury related care, they each address this issue in different ways. They are two sides of the same coin. The MCP will always be higher than an LMSA since the MCP projections reflect future treatment that may possibly occur, while the MSA reflects future injury related treatment that is reasonably likely to occur. For example, in the situation where an injury victim might develop adjacent segment degeneration after fusion surgery, an MCP may include spinal extension surgery, while an LMSA would not. Another difference is that the MCP report includes projections of services that are not covered by Medicare, while an LMSA only includes Medicare covered services. Examples of non-Medicare covered injury related services that you may find in an MCP include long term custodial care, massage therapy and transportation expenses. Since these injury related services are not covered by Medicare, they would not be included in an MSA.

The life expectancy used in an MCP may also vary from the life expectancy in an MSA. The MCP may use an individual’s standard life expectancy without any consideration of co-morbid conditions. The LMSA however will usually be based on a rated age that factors in an individual’s co-morbidities in assessing their life expectancy. Current Procedural Terminology (CPT) codes also impact the pricing of the treatment projections. While an MCP projection may use the most comprehensive CPT code for a service, the LMSA projection will use one that is more limited in scope. While both the MCP and LMSA price the CPT codes for the services based on the usual and customary charges for the area where the injury victim resides, the MCP will often use a higher reimbursement rate than the LMSA in the projections.

In addition to the above differences between the MCP and the LMSA, the goal of each report is different. An MCP is used to demand 100% of the future injury related medical damages in a case, while an LMSA will look at the parameters of the settlement in determining an appropriate amount to “set-aside” for future injury related Medicare covered treatment. Unlike a workers’ compensation settlement where the workers’ compensation insurance carrier may fully fund all the future injury related medical in an accepted case, a liability settlement is usually a compromise with a limited recovery on a greater range of damages. In light of this, it is reasonable to consider the relative value of the total damages suffered and the injury victim’s net settlement when assessing the amount of the LMSA that should be carved out from the settlement.

There are several ways to address Medicare’s future interests in a settlement and any given approach will depend on the facts of the case and the injury victim’s risk tolerance. Although an LMSA may be appropriate at times, there are other situations where a set-aside is uncalled for. This may occur when an injury victim’s treatment has concluded, and he is able to obtain a written treating physician certification that all injury related treatment has concluded and no further injury related care is indicated. Charlotte Benson’s September 20, 2011 Medicare memo specifically states that when a treating physician makes such a certification, Medicare considers its interest, with respect to future medicals, for that particular settlement satisfied. Similarly, a set-aside may be uncalled for when a settlement with significant objective economic damages is limited by inadequate policy limits. This settlement may be viewed as one that is insufficient to fund any future injury-related medical care. The support for this position comes from CMS’ May 25, 2011 Stalcup memo which provides that “Each attorney is going to have to decide, based on the specific facts of each of their cases, whether or not there is funding for future medicals and if so, a need to protect the Trust Funds.”

Conclusion

Both MCP reports and LMSAs have their place in the resolution of a liability settlement.  MCPs bring value to any personal injury matter regardless of the injury victim’s Medicare status. By quantifying the future injury related medical in a case, the personal injury attorney is able to provide support for the initial demand or use the MCP report to bridge the gap between the settlement offer and the settlement demand. When a settlement involves a Medicare beneficiary, it is important for the personal injury attorney to make sure that the injury victim is advised of the potential impact of the MSP Act on the settlement and that proper documentation is obtained for the attorney’s files.

Synergy Settlement Services is here to help you with both MCPs and Medicare Secondary Payer consulting.  Our team of experts can provide expert support whether it is quantification of future damages or compliance with the MSP.

[1] https://regenerativespineandjoint.com/2023/06/27/adjacent-segment-degeneration-after-spine-fusion-surgery/#:~:text=One%20study%20found%20that%20the,initial%20fusion%20surgery%20(2)

[2] 42 U.S.C.§1395 Y(b)(2)(a).

[3] 42 C.F.R.§411.22.