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Prescription Drugs and Rated Ages:
New Guidance from CMS for Medicare
Set-Asides
By Steve Chapman and Gregg Chapman, Esq.
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Steve Chapman and Gregg Chapman,
Esq. specialize in structured settlements of workers’ compensation
cases. In this article they discuss CMS’s rules for Prescription
Drugs and Rated Ages.
For more information on structured settlements and the structure
broker’s role, see:
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“Off Label” Prescriptions
Drugs
The Centers for Medicare & Medicaid Services (CMS) provided
new guidance regarding the inclusion of off-label prescription
drugs in Medicare Set-Asides (MSAs) in their procedure memorandum
dated May 14, 2010. They have determined that only those drugs
that are prescribed for an outpatient use that is approved under
the Federal Food, Drug, and Cosmetic Act or supported by one of
the approved compendia should be included in MSAs. This means,
for example, that a pain medication like Actiq which was approved
by the FDA for use by non-cancer patients who were already taking
another type of pain medication but still experienced sharp spikes
of pain, should not be included in a MSA if it was prescribed for
a non-cancer patient. That would be considered an off-label use.
While physicians may prescribe drugs for off-label uses, CMS had
typically taken the position that Medicare would not pay for off-label
medications. What made no sense was the CMS position that even though
Medicare would not pay for the off-label drug, they were still requiring
that these be included in MSAs. With the release of this Memo, CMS
has now corrected itself and takes the consistent position that off-label
drugs may not be included in MSAs.
To address the impact of this change, CMS provided the following
information:
- Any workers’ compensation claim that settled
prior to June 1, 2010 where the settlement included off-label
or non-covered Part D drugs in the MSA will not be affected by
this change. Thus, the Applicant can use the MSA funds to pay
for the non-covered Part D drugs in the MSA.
- If a workers’ compensation
claim that included non-covered Part D drugs in the MSA had not
settled prior to June 1, 2010, then the MSA should be resubmitted
to CMS for re-pricing where they will presumably remove the cost
of these drugs from the MSA. Thus, if you received one of those
outrageously high CMS approval letters in the past year and were
not able to settle the case as a result, have the MSA vendor
review the allocation to see if any of these off-label drugs
are included and if they are, have the MSA re-submitted to CMS.
The new lower approved amount might allow the case to settle.
- For workers’ compensation
settlements resolved on or after June 1, 2010 where the MSA does
not include non-covered Part D drugs, the Applicant may not use
the MSA funds to pay for any non-covered Part D drug.
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While this change will have the impact
of lowering the amount of certain MSAs since the cost of off-label
prescription drugs have been removed, these will now have to be paid
for directly by the Applicant. Thus, it is important for every applicant
attorney to make sure that this cost is factored into the Non-Medicare
Medical expense portion of any settlement. Your structured settlement
broker can assist you with these calculations.
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Applicant
attorneys should make sure that this cost is factored into the
Non-Medicare Medical expense portion of any settlement.
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Rated Age
The other issue addressed
in the May 14th Memo was Rated Age. CMS has always allowed the use
of rated age in Medicare Set-Asides. A rated age in a MSA has the
effect of reducing the applicant’s life expectancy which in
turn lowers the amount of the MSA. With the ever increasing MSA totals,
rated age has been a regularly used and important tool to help keep
the MSA amounts down.
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A rated age in a MSA has the
effect of reducing the applicant’s life expectancy which in
turn lowers the amount of the MSA.
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Typically, the MSA submitter obtains
more than one rated age. When several rated ages are acquired, CMS
requires that all the rated ages obtained be submitted with the MSA
and that the median rated age be used for calculating the life expectancy.
CMS has long been concerned that the submitter will not submit all
the rated ages obtained but instead only include the highest rated
age. In an effort to prevent this occurrence, CMS provided specific
language in this Memo requiring the MSA submitter to certify that “…all
rated ages obtained on the claimant, at any time during that individual
claimant’s lifetime, have been included as part of this submission
to the Centers for Medicare & Medicaid Services.”
Unfortunately,
the language chosen by CMS was not well thought out. It is ridiculous
and impossible for a MSA vendor to certify that every rated age obtained
on the claimant over their lifetime is being included in the MSA
submission. For example, if the Applicant was involved in a totally
unrelated auto accident case ten years before their work related
injury, the MSA vendor would have to certify that they have obtained
and submitted any and all rated ages associated with the automobile
accident.
The good news is that it only took CMS about a month to
realize their mistake and correct it. In the CMS memorandum dated
June 8, 2010, they modified the language that the MSA vendor must
include in the submission. The new language requires the MSA vendor
to certify that only those rated ages obtained after the Date of
Incident of the workers’ compensation case have been included
with the MSA submission. Thus, rated age will continue to be an important
tool in keeping MSA costs down. Rated ages are typically obtained
from your structured settlement broker.
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The issues addressed in these two
memos further illustrate the need for change in the CMS approval
process. In the first case you had CMS erroneously requiring that
off-label prescription drugs be included in MSAs for eleven months
before they corrected this mistake. How many potential settlements
were prevented due to the artificially inflated MSA amounts that
included the off-label drugs? In the second case, the ridiculous
rated age language initially required by CMS shows that not much
thought goes into their policy decisions. Legislation has been introduced
several times in the past nine years that would streamline the program
and institute a formal appeals process, but no progress has been
made.
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These two memos further illustrate
the need for change in the CMS approval process… not much
thought goes into their policy decisions.
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Steve Chapman has been a structured settlement specialist
for more than 24 years. For the past 17 years, he has specialized
in workers’ compensation structured settlements. He has appeared
at every Appeals Board throughout California.
During the past 5 years,
he has participated in settlements totaling over $1 billion. Mr.
Chapman strives to remain current on all issues affecting the settlement
of the case, including Medicare set-aside allocations, life care
plans, medical cost trends, Long Term Disability, and Social Security
issues.
To contact
Steve Chapman:
Steven F. Chapman
National Settlement Consultants
12039
Jefferson Blvd.
Culver City, CA 90230
Phone: 800-845-2969
Fax:
310-450-3132
Cell: 310-480-5742
Email: SettleMan@aol.com
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Gregg Chapman has been a member
of the State Bar of California for twenty years. Over the last
eight years, he has worked for two of the largest national MSA
vendors in various positions including General Counsel, National
Sales Manager and Director of MSA Education. He has provided hundreds
of presentations on all topics regarding Medicare Set-Asides to
the insurance industry and attorney associations across the country.
To contact Gregg Chapman:
Gregg Chapman
National Settlement Consultants
12039 Jefferson Blvd.
Culver City, CA 90230
Phone: 800-845-2969
Fax: 310-450-3132
Email: greggchap@aol.com |
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