CMS’s future medicals proposals are withdrawn

November 9, 2022 / 14 min read

As reported in our October update, the Centers for Medicare and Medicaid Services’ (CMS’s) future medicals proposals have been withdrawn. These proposals were anticipated to center largely on the issue of future medicals in liability settlements. Unlike in 2012 when CMS released future medicals proposals to the public for comment before ultimately withdrawing them in 2014, this time around CMS ended up withdrawing the proposals before ever actually releasing them to the public. Thus, exactly what CMS had drafted remains unclear.[1]

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With the proposals now withdrawn, it is back to the drawing board for CMS. For liability insurers (and other liability stakeholders), it is back to square one, or perhaps more accurately, everything remains at square one, regarding the vexing questions of whether CMS has the right to regulate future medicals as part of liability settlements and, if so, when a liability Medicare set-aside (LMSA) (or some other form of future medicals mechanism) should be included, and how this should be done. It is unclear whether CMS will revisit the future medicals (LMSA) issue at some future point. On the flip side this issue may continue to cause uncertainty and confusion for liability insurers, claimants, and attorneys going forward (as it has for years).

As we wait to see what, if anything, CMS does next, it may be a good time for a reset on the future medicals (LMSA) issue. Toward this goal, the below provides a general and historical overview of this continuing saga to date to help bring the issue current as follows:[2]

Town Hall statements (2009-2010)

Perhaps the logical starting point is to attempt to piece together how CMS views the future medicals (LMSA) issue. On this point, the industry forced CMS out of its silence during the early days of the Section 111 Town Hall calls over a decade ago. Although these calls were designated to only discuss Section 111 reporting (which is unrelated to the LMSA issue), CMS was barraged with questions regarding LMSAs.

These exchanges provided the first glimpses into CMS’s perspective on the issue. For example, in a September 2009 Town Hall, CMS expressed the view that the “underlying statutory obligation” was the “same” for liability and workers’ compensation cases when it came to protecting Medicare’s future medicals interests.[3] Further, CMS explained that while the agency did not have a formal LMSA review process — or the fact that a CMS regional office declined to review an LMSA proposal — did not provide “any type of safe harbor.”[4] CMS cautioned not to confuse the issue of “process” (that is, whether its MSA review process was or was not available for liability claims) with the underlying “obligation” to protect its interests.[5]

In a January 2010 Town Hall, CMS honed its position further stating: “set-asides [in] liability situations are not required in terms of CMS being involved in…determination of how much the set-aside should be…This is not the same thing as a blanket statement that liability set-asides are simply not required or not appropriate. Regardless of the mechanism, Medicare’s interests need to be protected. The statute says that we don’t make payment where payment has already been made.”[6]

Whether these types of agency statements should be considered authoritative, ushers in a whole litany of deeper issues and questions beyond the scope of this analysis. However, these statements, at face value at least, shed some light on CMS’ thinking (right or wrong).

LMSA memo (September 2011)

CMS’ Town Hall statements raised concerns on many levels, prompting calls for further clarification. CMS responded with its much-anticipated September 30, 2011 “LMSA memorandum.”[7] There was guarded optimism this memo would provide better clarity and guidance; however, this release fell far short of both goals. Specifically, CMS simply outlined when it viewed an LMSA as unnecessary— for example, situations where a claimant’s treating physician certifies in writing that treatment has concluded and no further treatment for the alleged injuries is required.[8] This memo, which remains in effect today, was widely criticized as too limited in scope and imposing a largely unrealistic evidentiary requirement.

Proposed regulations (2012-2014)

CMS then upped the ante in 2012 by releasing its Advanced Notice of Proposed Rulemaking (ANPRM).[9] This was an attempt to implement formal legal rules concerning future medicals for liability claims into the Code of Federal Regulations. In September 2013, CMS announced plans to release a Notice of Proposed Rulemaking (NPRM) as its next step regarding the ANPRM proposals.[10] To date, CMS’s 2012 ANPRM has been the agency’s most serious foray into the issue.

In support of its proposals, CMS proceeded from the position that Medicare was prohibited from making payment under the MSP when payment has been made via settlement and that Medicare remained the secondary payer until the settlement was exhausted.[11] Further, CMS stated it was entitled to recover conditional payments related to settlements “regardless of when the items and services are provided.”[12]

As for the actual proposals, the 2012 ANPRM was a complex set of proposed rules governing when and how CMS’ future medical interests were to be addressed as part of liability settlements, which included possible plans for a formal LMSA review process.[13] For unknown reasons, these proposals were withdrawn in the fall of 2014.

Future medicals proposals - renewed efforts (2018 to their withdrawal in October 2022)

Following CMS’s withdrawal of the ANPRM proposals in 2014, the issue then basically fell silent until late 2018 when a notice from the Office of Information and Regulatory Affairs (OIRA) indicated that CMS was aiming to release a notice of proposed rulemaking (NPRM) regarding future medicals by September 2019.[14] The expected NRPM release date was then pushed back several times to October 2019, February 2020, August 2020, March 2021, October 2021, and then February 2022.[15]

The last OIRA notice, which pushed back the projected release date to February 2022, stated as follows: “This proposed rule would clarify existing Medicare Secondary Payer (MSP) obligations associated with future medical items services related to liability insurance (including self-insurance), no fault insurance, and worker’s compensation settlements, judgments, awards, or other payments. This proposed rule would also remove obsolete regulations.”[16] This notice also classified the proposals as “economically significant.”[17] Under the rule-making progress, a regulatory action is deemed “economically significant” if, in part, “OIRA determines that it is likely to have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities.”¹⁸

In March 2022, an OIRA notice indicated that CMS had completed their future medicals proposals and sent them to OIRA for review.[18] However, in October 2022, these proposals were withdrawn without explanation – and without ever actually being released to the public.

Going forward – where does this leave LMSAs?

When the dust settles from the above, a natural question that likely pops into mind is: “So, where does this leave LMSAs?”

In considering this interesting question, several different points emerge, such as:

First, from the CMS side, it looks like it is back to the drawing board. Currently, it is unknown if/when CMS may attempt to revive their efforts toward establishing future medicals regulations for liability claims (and potentially other claims). We will need to see what happens.

Second, for liability insurers, in many ways, it is, as an old popular song states, “same as it ever was”[19] leaving insurers to determine how best to consider and address the issue given this unsettled (and unusual) landscape.

Third, looking ahead more globally, if CMS decides to revisit the future medicals issue, several critical (and nagging) questions remain the next go-around – just as they have since CMS began talking about regulating future medicals in liability settlements over a decade ago. One such question likely to be raised by many (which surfaced in many commentary responses to CMS’s 2012 proposals), involves the extent to which CMS has (or does not have) authority to regulate future medicals for liability claims in the first instance. While a deeper dive into this interesting question is outside this article’s scope, it is noted that there have been several recent case decisions calling into question whether the MSP or current federal regulations require LMSAs. See e.g., Silva v. Burwell, 2017 WL 5891753 (D. N.M. 2017); Sipler v. Trans Am Trucking, Inc., 881 F.Supp. 2d 635 (D. N.J. 2012); Bruton v. Carnival Corporation, 2012 WL 1627729 (S.D. Fla. 2012); Abate v. Wal-Mart Stores East, L.P., 2020 WL 7027481 (W.D. Pa. November 30, 2020); and Stillwell v. State Farm, et. al., 2021 WL 4427081 (M.D. Fla., September 27, 2021). Whether CMS will consider these cases and the various points raised by the courts therein going forward is unknown.

In addition, from a more practical perspective, several important questions remain. For example, which party should be responsible for complying with any implemented regulations? Which claims should be included (and excluded)? Should there be monetary thresholds? How will CMS account for specific liability claims realities – such as comparative fault, policy limits, caps, and discounted settlements? Will no-fault or med-pay claims be at play? Will there be penalties or other forms of potential liability for improper compliance? Other key questions regarding “how” it would all work also remain, such as whether there would be some form of review/approval process? Would CMS set rules around the calculation of future medical allocations? Would there be rules regarding funding and administration?

Like a dark cloud, these daunting questions, and likely others, will continue to hang over the issue if/when CMS decides to try again to erect rules to regulate future medicals as part of liability claims settlements. In the meantime, Verisk will continue to monitor developments on this front and provide future updates as warranted.

How we can help

Please do not hesitate to contact the author if you have any questions on this issue. Also, keep in mind Verisk has several Medicare secondary payer compliance services for liability insurers to help meet your MSP needs. We would certainly look forward to setting up a call to learn more about your challenges and to discuss how we can help!

[1] While CMS’s future medicals were largely expected to focus on liability settlements, it is noted that some of the notices from the Office of Information and Regulatory Affairs (OIRA) on this issue also referenced no-fault and workers’ compensation cases. OIRA’s last notice on this issue before CMS’s proposals were withdrawn stated as follows: “This proposed rule would clarify existing Medicare Secondary Payer (MSP) obligations associated with future medical items services related to liability insurance (including self-insurance), no fault insurance, and worker’s compensation settlements, judgments, awards, or other payments. This proposed rule would also remove obsolete regulations.” See, OIRA notice, Medicare Secondary Payer and Future Medicals (CMS-6047) (Fall 2021). https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=202110&RIN=0938-AT85 It remains unclear as to extent to which, if at all, CMS intended to also address no-fault and workers’ compensation as part of its now withdrawn proposals. Notwithstanding, given that the proposals were anticipated by the industry to focus on liability claims, and the significant industry interest regarding the LMSA question, this article focuses discussion on CMS’ future medicals proposals regarding liability claims.

[2] The author notes that some of the information presented in this article regarding CMS’s historical activity and as contained in the “Going Forward - claims considerations” section has been repurposed from the author’s prior piece, Liability MSAs – Bracing for the Storm, and has been reconstituted as part of this updated level-set review. On this point, the author’s new article as presented above serves to replace the author’s Liability MSAs – Bracing for the Storm piece which, accordingly, has now been retired and removed from circulation.

[3] CMS, Town Hall Teleconference Transcript, Section 111 of the Medicare, Medicaid & SCHIP Extension Act of 2017, Call Date: September 30, 2009, p. 25-26.

[4] Id.

[5] Id.

[6] CMS, Town Hall Teleconference Transcript, Section 111 of the Medicare, Medicaid & SCHIP Extension Act of 2017, Call Date: January 28, 2010, p. 17.

[7] CMS Memorandum (Charlotte Benson – Acting Director), Medicare Secondary Payer—Liability Insurance (Including Self-Insurance) Settlements, Judgments, Awards, or Other Payments and Future Medicals – INFORMATION, September 30, 2011.

[8] Id.

[9] Centers for Medicare and Medicaid Services, Medicare Secondary Payer and “Future Medicals,” CMS-6047-ANRPM, 77 F.R. 3917 (June 15, 2012).

[10] See, Office of Information and Regulatory Affairs, Medicare Secondary Payer and "Future Medicals" (CMS-6047-P), Spring 2013.

[11] Centers for Medicare and Medicaid Services, Medicare Secondary Payer and “Future Medicals,” CMS-6047-ANRPM, 77 F.R. at 3918.

[12] Id.

[13]Id. at p, 35919-35921.

[14]This notice was entitled Miscellaneous Secondary Payer Classifications and Updates (CMS-6047-P) (Fall 2018) and stated as follows: “This proposed rule would ensure that beneficiaries are making the best health care choices possible by providing them and their representatives with the opportunity to select an option for meeting future medical obligations that fits their individual circumstances, while also protecting the Medicare Trust Fund. Currently, Medicare does not provide its beneficiaries with guidance to help them make choices regarding their future medical care expenses when they receive automobile and liability insurance (including self-insurance), no fault insurance, and workers’ compensation settlements, judgments, awards, or payments, and need to satisfy their Medicare Secondary Payer (MSP) obligations.”

[15]Each of these OIRA notices, in pertinent part, state as follows:

Miscellaneous Secondary Payer Classifications and Updates (CMS-6047-P) (Spring 2019)

This notice pushed back the projected release date to October 2019. This notice stated: “This proposed rule would ensure that beneficiaries are making the best health care choices possible by providing them and their representatives with the opportunity to select an option for meeting future medical obligations that fits their individual circumstances, while also protecting the Medicare Trust Fund.”

Miscellaneous Medicare Secondary Payer Clarifications and Updates (CMS-6047) (Fall 2019)

This notice pushed back the release date to February 2020. This notice stated: This proposed rule would ensure that beneficiaries are making the best healthcare choices possible by providing them and their representatives with the opportunity to select an option for meeting future medical obligations that fits their individual circumstances, while also protecting the Medicare Trust Fund.

Miscellaneous Medicare Secondary Payer Clarifications and Updates (CMS-6047) (Spring 2020)

This notice pushed back the release date to August 2020. The notice stated as follows: This proposed rule would clarify existing Medicare Secondary Payer (MSP) obligations associated with future medical items services related to liability insurance (including self-insurance), no fault insurance, and worker’s compensation settlements, judgments, awards, or other payments. Specifically, this rule would clarify that an individual or Medicare beneficiary must satisfy Medicare’s interest with respect to future medical items and services related to such settlements, judgments, awards, or other payments. This proposed rule would also remove obsolete regulations.

Miscellaneous Medicare Secondary Payer Clarifications and Updates (CMS-6047) (Fall 2020)

This notice pushed back the release date to March 2021. This notice stated as follows: This proposed rule would clarify existing Medicare Secondary Payer (MSP) obligations associated with future medical items services related to liability insurance (including self-insurance), no fault insurance, and worker’s compensation settlements, judgments, awards, or other payments. Specifically, this rule would clarify that an individual or Medicare beneficiary must satisfy Medicare’s interest with respect to future medical items and services related to such settlements, judgments, awards, or other payments. This proposed rule would also remove obsolete regulation.

Medicare Secondary Payer and Future Medicals (CMS-6047) (Fall 2021)

This notice pushed back the projected release date to February 2022. This notice stated as follows: This proposed rule would clarify existing Medicare Secondary Payer (MSP) obligations associated with future medical items services related to liability insurance (including self-insurance), no fault insurance, and worker’s compensation settlements, judgments, awards, or other payments. This proposed rule would also remove obsolete regulations.

[16] See n. 15.

[17] See, Office of Information and Regulatory Affairs, Medicare Secondary Payer and Future Medicals (CMS-6047), (Fall 2021).

[18] See, https://www.reginfo.gov/public/jsp/Utilities/faq.myjsp

[19] See, Talking Heads, “Once in a Lifetime,” Album: Remain in the Light (1980).