What is a WCMSA?

A WCMSA (also called a MSA) is a separate account established at the time a workers' compensation (WC) claim is settled. This amount is "set-aside" from the other proceeds of the settlement to protect Medicare's interests. As of January 1, 2006, all MSAs must include the cost of prescription drugs. (See below for more information about prescription drugs)

The person in control of this account (usually the employee) is responsible for using the funds from this account only to pay for medical expenses associated with the employee's workers' compensation injury and only those expenses covered by Medicare. Once this account is exhausted, the medical bills can be submitted to Medicare as usual.

Both the employee and the employer have an interest in creating this set-aside account because failure to do so could result in Medicare filing a lawsuit against the employee and/or the employer for up to double the amount Medicare paid out on behalf of the employee for his WC related injury.

Coming up with the correct amount of a WCMSA is not an exact science. It is very similar to creating a life care plan. One must project into the future (based on current medical records) how much Medicare is likely to spend on an employee's WC related injury. This amount should be set-aside at the time of settlement.

Once that projection is complete, under certain circumstances, the parties to the WC matter can get the set-aside amount approved by the Centers for Medicare & Medicaid Services (CMS). Approval can take anywhere from 75 days up to 6 months or longer depending on the complexity of the medical records and CMS' workload. However, once CMS has approved a WCMSA, all parties to the WC settlement are absolved of further liability. When possible, it is better for the parties to secure approval from CMS.

If you want to see a sample WCMSA submission click here, or if you want to read more about the process click here.

UPDATE - Prescription Drugs

CMS does not currently have an independent mechanism for pricing prescription drugs, nor has it published any guidelines regarding the pricing for future prescription drug expenses in WCMSAs. Although CMS had earlier indicated that it was going to begin independently pricing for prescription drugs on January 1, 2007, it changed its position. According to a policy memorandum that was released in April 2006, it will not begin doing so until further notice.

If CMS does change its policy, we would expect it to specify some guidelines or criteria by which it would price prescription drugs. Such a change could have a drastic affect on the pricing of WCMSAs because we anticipate it would benefit Medicare by increasing the prescription drug expenses allocated in an WCMSA. This is a situation that needs to be monitored because if CMS does change the policy many WCMSAs that were completed, but not approved by CMS, may have to be re-evaluated and re-calculated.

General Information - Prescription Drugs

On December 30, 2005, the Centers for Medicare & Medicare Services (CMS) issued a Policy Memorandum addressing the impact of Medicare's comprehensive prescription drug plan on workers' compensation settlements and WCMSA proposals.

According to the Policy Memo: "all WC settlements that occur on or after January 1, 2006 must consider and protect Medicare's interests when future treatment includes prescription drugs along with future medical services that would otherwise be reimbursable by Medicare."

Accordingly, a WCMSA proposal submitted to CMS for approval must contain separate amounts for future medical treatment and future prescription drug treatment, as well as an explanation as to how the submitter calculated the future prescription drug amount.

This new provision has dramatically impacted WCMSA nationwide because prescription drugs can be one of the most costly categories of future medical care. It has not only increased the average WCMSA proposal, but has also added another layer of complexity to creating a cost-effective WCMSA proposal while still protecting Medicare's interests.

To further complicate matters, Medicare has not established a specific set of guidelines to follow when preparing the prescription drug portion of the WCMSA. The CMS Policy Memo states that the submission "must include an explanation as to how the submitter calculated the future prescription drug treatment amount (i.e. actual costs, average wholesale price, etc.)." CMS has promised that more comprehensive guidelines will be prepared and can be expected in the future.