What does CMS' “one-time notification” on Liability Medicare Set-aside compliance issues mean for the settlement community?

Client Alert
Medicare Begins System Preparation for Liability MSAs: Only a Matter of Time

The Centers for Medicare and Medicaid Services (“CMS”) has published a “One-Time Notification” that addresses, among other things, compliance issues in respect of Liability Medicare Set-aside Arrangements (“LMSAs”). The Publication informs Medicare’s contractors of the need to update their systems to track MSAs for both Liability and No-Fault settlements. These otherwise highly technical instructions, however, are the first official communication from CMS specific to Liability and No-Fault MSAs.

Medicare has not issued any guidance, rules, or regulations on how to consider Medicare’s future interest in Liability and No-Fault settlements, i.e., nothing has changed (yet). Accordingly, the settlement community may continue current practices when addressing future costs of care in all settlements, judgments or other payments to ensure Medicare remains a secondary payer post-settlement.

On February 3, 2017, Medicare updated its “Internet-Only Manuals” listing to include “Publication #100-20 One-Time Notification” (the “Publication”). The Publication identifies changes that will be necessary for Medicare contractors and other parties to create records and process claims for Liability and No-Fault MSAs (“LMSAs”). The Publication primarily lists internal business requirements and assigns responsibilities for certain computer programming/testing obligations to CMS’ contractors; however, there are key sections that suggest the direction CMS may take on these issues.

  • Citing to a 2012 Government Accountability Office report dealing with Medicare Secondary Payer program effectiveness1, CMS will establish two new set aside processes.
  • The Publication defines Liability and No Fault MSAs as: “an allocation of funds from a liability or an auto/no-fault related settlement, judgment, award, or other payment that is used to pay for an individual’s future medical and/or future prescription drug treatment expenses that would otherwise be reimbursable by Medicare.2
  • The Publication cites the “has been made” language of current law3 to support the position that Medicare does not make claims payment for future medical expenses associated with a settlement, judgment, award, or other payment because “payment ‘has been made’ for such items or services through use of [LMSA] funds. However, Liability and No-Fault MSP claims that do not have a MSA will continue to be processed under current MSP claims processing instructions.”

In sum, the Publication indicates the need for processing capabilities at scale in two scenarios:

  1. Review and potential rejection of medical expenses related to injury underlying an existing LMSA (of which Medicare is aware); and
  2. Continued coverage of medical expenses that may be injury-related when Medicare has no record of an existing LMSA.

Again, this Publication is guidance for Medicare’s contractors—not proposed regulations. CMS has not moved on any guidance or rulemaking for LMSAs since withdrawing previously proposed regulations in 2014. Accordingly, there are four noteworthy takeaways in light of the Publication:

  • First, because there is no new guidance, the previous best practices we have identified remain standing: settlement parties should consider the question of future costs of care, but not every settlement will require an MSA.
  • The Publication may herald things to come. On its face, the publication of technical requirements is a public statement of attention to LMSA issues. These requirements will become effective over the second half of 2017. In addition, a recent Medicare RFP—which also includes language in respect of handling LMSAs—will result in a new MSA contract effective July 1, 2018.
  • This Publication does not require that MSAs must be established in every case. The Publication, states the Medicare policy is to not make payment for injury-related care post-settlement where an MSA is available to pay; however, it also confirms that “Liability and No-Fault MSP claims that do not have a MSA will continue to be processed under current MSP claims processing instructions” (emphasis added). This is a key statement because it contemplates situations where both of the following are true: (1) medical expenses are incurred post-settlement, and (2) Medicare would still have the responsibility to pay for them. The Publication does not define what circumstances warrant such coverage, but this important policy note reflects that Medicare does not require an MSA in every liability settlement.
  • The Publication does not provide any mechanism for reviewing an LMSA or insight into how settling parties should determine (1) the appropriateness of establishing an LMSA, and (2) if applicable, the appropriate funding amount. The Publication outlines tracking requirements for LMSAs as part of a Medicare beneficiary’s common working file (including, but not limited to, whether an MSA is exhausted, and what diagnosis codes should be associated with the MSA). But, it does not indicate whether or to what extent Medicare will review LMSAs that are submitted (as Medicare does, in certain circumstances, for WCMSAs).

More may come as 2017 unfolds. As Medicare Secondary Payer compliance experts, we closely monitor developments in respect of LMSA and related issues and keep our clients and colleagues informed. If you need more information on GRG’s Medicare Secondary Payer compliance services, including case reviews to determine how to consider Medicare’s future interests now, please visit www.garretsongroup.com or call us at 704.559.4300.


(1) Medicare Secondary Payer: Additional Steps Are Needed to Improve Program Effectiveness for Non-Group Health Plans, GAO 12-333 Report to the Ranking Member, Subcommittee on Health, Committee on Ways and Means, House of Representatives, March 2012, publ. April 3, 2012; http://www.gao.gov/products/GAO-12-333, (last visited March 1, 2017).

(2) https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/2017-Transmittals-Items/R1787OTN.html?DLPage=1&DLEntries=10&DLFilter=medicare%20set%20aside&DLSort=1&DLSortDir=ascending (last visited March 1, 2017).

(3) Quoting from 42 U.S.C. §1395y(b)(2) that Medicare is precluded from making payment when payment, “has been made or can reasonably be expected to be made under a workers’ compensation plan, an automobile or liability insurance policy or plan (including a self-insured plan), or under no-fault insurance.”