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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:

 
 
“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.
 
CMS’ 5/14/2010 memo on prescription drugs and rated age.
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.

 
Applicant attorneys should make sure that this cost is factored into the Non-Medicare Medical expense portion of any settlement.
 
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.

 
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.
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.
 
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.

But CMS realized their error and a month later issued a new clarifying memo
 
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.

 
These two memos further illustrate the need for change in the CMS approval process… not much thought goes into their policy decisions.
 
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
 
 
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