Beyond Structured Settlements

NAMSAP 2015 Annual Conference

Although some of the 143 attendees at the 2015 Annual Conference of the National Alliance of Medicare Set-Aside Professionals (NAMSAP), held September 30 - October 2 in New Orleans, (including S2KM) may have been confused by the conference theme ("Back to the Future") , the take away conference message was clear:

The Medicare Set-Aside (MSA) market continues to grow in size and complexity and NAMSAP remains "the only non-profit association exclusively addressing the issues and challenges of the Medicare Secondary Payer [MSP] Statute and its impact on workers’ compensation and liability settlements". NAMSAP also seeks and welcomes opportunities to help improve MSA and settlement planning industry standards for documentation, work product and business practices.

MSAS AND STRUCTURED SETTLEMENTS

An MSA is an administrative and funding mechanism utilized in certain categories of settlements to protect Medicare's interests as "secondary payer" under the MSP statute. Although Federal law does not define MSAs, or mandate specific types of MSA funding mechanisms, CMS (the responsible federal agency) has established certain basic guidelines for workers compensation MSAs (WCMSAs).

Following a series of policy memoranda, CMS published a WCMSA Reference Guide (WCRG) on March 29, 2013 plus a WCRG Version 2.0 on November 7, 2013. The WCRG explains WCMSAs as follows: "A WCMSA allocates a portion of the WC settlement for all future work-injury-related medical expenses that are covered and otherwise reimbursable by Medicare. When a proposed WCMSA amount is submitted to CMS for review and the individual or beneficiary obtains CMS’approval, the CMS-approved WCMSA amount must be appropriately exhausted before Medicare will begin to pay for care related to the beneficiary’s settlement, judgment, award, or other payment."

Both the CMS policy memoranda and the WCRG address structured settlement issues and provide guidelines for their utilization in funding WCMSAs. Significantly, these guidelines create an inherent cost advantage for structured settlements compared with lump sum alternatives because of the method CMS requires for calculating WCMSA present values. As a result, WCMSAs represent one of the few submarkets where structured settlements sales have increased since 2008.

Unlike WCMSAs, almost no regulatory authority exists for MSAs in third party liability settlements. In 2012, CMS published an Advanced Notice of Proposed Rule Making (ANPRM) for liability MSAs in the Federal Register - which it subsequently withdrew following negative public comments and rejection by the Office of Management and Budget (OMB). Nevertheless, according to one professional MSA administrator, liability MSAs now represent 30% of his company's cases and the percent is growing. No one, he adds, currently submits liability MSA cases for CMS approval.

NAMSAP ACCOMPLISHMENTS AND POLITICAL ADVOCACY

Under the leadership of current president, Kimberly Wiswell, and its Board of Directors, NAMSAP's 2015 accomplishments and enhanced membership values have included: expanding membership; regional conferences; educational webinars; a recurring "legal roundtable"; an active website listserv; improved communications with CMS; a new strategic plan; sponsorship of NAMSAP's first "Take the Hill" Day in Washington D.C.; plus a new association management team.

In addition to tracking Medicare compliance developments generally, NAMSAP's 2015 political agenda has sought to address perceived CMS WCMSA approval deficiencies such as:

• Thresholds result in incomplete protection.
• No direct right of appeal exists.
• Review time-lines are uncertain.
• CMS rules ignore state workers compensation laws.
• CMS assumes all settlements are “commutations”.

Based upon the success of its first "Take the Hill Day", NAMSAP is planning a two-day "policy focus" for its 2016 Regional Meeting - which will take place in Washington, D.C. sometime during March or April and include one day of lobbying and one day of education. Two WCMSA bills (H.R. 1982 and S. 2731) are currently being considered by Congress. Each contains a "direct payment" provision which could have negative consequences for structured settlements as well as professional MSA administrators.

NAMSAP 2015 ANNUAL CONFERENCE

NAMSAP's membership is the most professionally diverse of any U.S. settlement planning association. It includes a mix of attorneys, MSA allocators, MSP compliance consultants, CPAs, claims professionals, structured settlement consultants, guardians, nurses, pharmacists, rehabilitation professionals, and life care planners.

The combination of membership diversity, subject matter complexity, legislative and regulatory developments plus an expanding MSA market create extraordinary challenges for NAMSAP in planning and organizing its educational programs. NAMSAP Conference Chairperson Tom Matson, Education Committee Chairman Thomas Spratt, Executive Director Brian Bailey and Meeting Planner Sarah Zenna, therefore, deserve congratulations for an outstanding program.

The NAMSAP conference itself was preceded by a three-day "Certified Medicare Secondary Payer Professional" (CMSP) certification program created and administered by the Louisiana Association of Self-Insured Employers (LASIE). Although "designed to give advanced knowledge and practical skills required to acquire certification in Medicare Secondary Payer Compliance", this educational program appears to offer a valuable and comprehensive MSP and MSA introductory curriculum appropriate for any settlement planning or structured settlement professional.

To supplement it primary program, NAMSAP offered its own MSP introduction - a half-day of "Pre-Conference Sessions" addressing: 1) MSA Submitter Errors; 2) MSP Industry Ethics; and 3) an MSP Compliance Situational Case Study.

These two optional preliminary programs allowed the NAMSAP conference organizers to focus its primary educational conference on its largest membership constituencies (MSA allocators and MSP attorneys) which created its own set of challenges. Because of their different backgrounds and roles, a predictable knowledge gap exists between MSP attorneys and MSA allocators - with MSA administrators, insurance professionals, structured settlement brokers and other MSP/MSA professional stakeholders falling somewhere in between.

The following S2KM listing of topics ( with speakers) attempts to communicate both the range of NAMSAP's 2015 Annual Conference educational offerings as well as NAMSAP's efforts to maintain and expand the MSP/MSA community of professional practice:

Directed Toward All MSP/MSA Professionals

• MSP Compliance - Kathleen Wyeth and Steve Pratt
• How the ACA Impacts Medicare, Medicare Compliance and MSAs - Patrick Hindert and Ann Koerner
• Case Study - Liability MSAs - David Cherry and Wayne Fontana
• Common MSP Questions - Christine Melancon
• Networking Lunch - New Orleans History and Culture - Carolyn Kolb

Directed Primarily Toward MSA Allocators

• Applying Evidence Based Medicine Guidelines to Fusions for Injured Workers - Dr. Marjorie Eskay-Auerbach
• Long-Term Narcotic Use in MSAs - Meredith Warner and Steve Miller
• Re-Review/Reconsideration - Michelle Letter; James Raines; Jeff Knipper
• Data and Development Committee Update - Debbe Marciko and Sandra Mackler
• Limited Medical Records and the MSA - Denise Wrenn
• Weaning and Detox Strategies in the MSA - Jill Breard; Jennifer Doherty; Dr. Steven Moskowitz
• Pharmacy Formularies and MSAs - Mark Pew; Dr. Matthew Foster; Dr. Steve Feinberg

Directed Primarily Toward MSP Attorneys

• Legal Update - Heather Schwartz Sanderson; Michelle Ready; Annie Davidson
• Private Cause of Action - Amy Bilton and Heather Hatch
• State Workers Compensation Laws and CMS - Jennifer Jordan and Danielle Marone

Among NAMSAP's most impressive conference offerings for attendees was a beta test mobile app. The app featured a comprehensive event guide (including speaker bios, notes and handouts) and social networking tools. It also offered a Google map centered on the conference hotel plus a simple, but effective search feature. Assuming NAMSAP offers similar mobile apps at future conferences, this dynamic resource deserves even greater promotion including an introductory demonstration.

For S2KM's reporting of prior NAMSAP conferences, see:

• NAMSAP 2015 Winter Regional Conference
• NAMSAP 2014 Annual Conference
• NAMSAP 2014 Regional Conference
  • Part 1
  • Part 2

For previews of additional upcoming settlement planning conferences, see: 2015-2016 Educational Conferences

NAMSAP 2015 Winter Regional Conference

Medicare compliance continues to create "confusion, misinformation and disagreement" among defendants, their insurers and advisors according to speakers at the 2015 Winter Regional Conference hosted by the National Alliance of Medicare Set-Aside Professionals (NAMSAP) January 29 in Orlando.

NAMSAP is "the only non-profit association exclusively addressing the issues and challenges of the Medicare Secondary Payer Statute and its impact on workers’ compensation and liability settlements".

NAMSAP's membership is the most professionally diverse of any U.S. settlement planning association and includes a mix of attorneys, Medicare Secondary Payer (MSP) consultants, CPAs, claims adjustors, structured settlement consultants, guardians, nurses, pharmacists, rehabilitation professionals, and life care planners.

The claims environment has changed dramatically and become much more complex, according to multiple NAMSAP speakers who focused their presentations on issues that arise when Medicare is involved in a case.

Medicare issues are complicated for defendants by adjustor turnover, the need for Medicare education and the comprehensive liability defendants face if Medicare is not protected. Medicare compliance, therefore, is not just about preparing a good Medicare set-aside (MSA). It is about complying with the Medicare Secondary Payer (MSP) statute.

The MSP statute, as amended by the SMART Act in 2013, has three compliance components (past reimbursement; present reporting; and future protecting) which one of the NAMSAP panels succinctly summarized. The greatest confusion for plaintiffs and defendants relates to protecting Medicare's interest in the future. One speaker compared the current situation to the "wild west" and several speakers emphasized "it is all about the data".

Focusing most of its compact program on MSP compliance, NAMSAP's Educational Committee successfully presented multiple complex topics and developments effectively utilizing a case study methodology to advise attendees on issues they can expect to confront in their own case files.

WCMSAs - Structured Settlements

For workers compensation (WC) cases, CMS (the responsible administrative agency) has published both a WCMSA Reference Guide and a WCMSA Self-Administration Toolkit - each of which features extensive rules for structured settlements.

WCMSAs have become an increasingly important submarket for structured settlements. S2KM has previously estimated that as much as eight (8%) percent of recent structured settlement premium and 24 percent of recent structured settlement annuities are attributable to WCMSAs.

In the WCMSA context, structured settlements have one primary advantage (lower cost), which (from a defense perspective) outweighs their one primary disadvantage (administrative complexity), compared with cash. The cost advantage results from one CMS policy memorandum (dated: October 15, 2004) which sets forth the CMS "set-off" approach for calculating present value.

The CMS "set-off" approach ignores inflation and discount rates. Annuities, however, incorporate their own discount rates and therefore produce an inherently lower comparable cost for funding future periodic payments. The CMS WCMSA Reference Guide specifically "follows all" of CMS' previously published memoranda and thereby (apparently) maintains the WCMSA pricing advantage for structured settlements.

Following NAMSAP's previous "Take the Hill" Washington D.C. lobbying success, NAMSAP's 2015 political agenda seeks federal legislation to address perceived CMS WCMSA deficiencies:

• Thresholds result in incomplete protection.
• No direct right of appeal exists.
• Review time-lines are uncertain.
• CMS rules ignore state workers compensation laws.
• CMS assumes all settlements are “commutations”.

NAMSAP anticipates two alternative MSP legislative proposals will be re-introduced in the U.S. House of Representatives (H.R. 1982) and Senate (S. 2731) in 2015

Liability MSAs - CMS-6047-ANPRM

Unlike WCMSAs, almost no regulatory authority exists for MSAs in third party liability settlements. In 2012, pursuant to the Administrative Procedures Act, CMS sent to the Office of Management and Budget (OMB) and published in the Federal Register seeking public comment an Advanced Notice of Proposed Rule Making (ANPRM) for liability MSAs.

In CMS-6047-ANPRM (titled: "Medicare Program; Medicare Secondary Payer and "Future Medicals"), CMS offered seven options for dealing with future medicals in liability cases. NAMSAP conference speaker Douglas Shaw reviewed the CMS options and summarized the 107 comments submitted by interested parties.

Virtually all of the comments, according to Shaw, opposed the ANPRM in whole of in part. The primary objections concerned CMS' concept of "equitable apportionment" and the CMS failure to recognize differences between liability and workers compensation cases.

CMS followed up its ANPRM by sending a Notice of Proposed Rule Making (NPRM) to OMB on August 1, 2013, then withdrew the NPRM without explanation on August 8, 2014. Shaw stated that OMB (which reviews NPRM for cost and benefits, duplications, economic impact, effect on stakeholders) rejected the CMS NPRM and no one knows why except OMB and OMB is prohibited from providing explanations.

Shaw cautioned against groups (such as the AAJ) claiming a regulatory victory. He expects CMS to resubmit another NPRM for liability MSAs in the near future. Multiple NAMSAP speakers pointed out the obvious - since the enactment of MMSEA in 2007, CMS has been collecting data for all claims involving Medicare beneficiaries. This Medicare-related claims data is creating a potential tax-free source of revenue for the U.S. government - billions of Medicare dollars not yet collected to fund Medicare.

As for current liability cases and liability MSAs, Shaw advised that "nothing has changed so we should stay the course and do whatever we thought best before this ANPRN/NPRM."

ICD-10

Adding to claim management and settlement planning complexity in 2015, the United States compliance date for the 10th revision of the International Statistical Classification of Diseases and Related Health Problems (ICD-10) is October 15, 2015.

Although most of the NAMSAP audience appeared ICD-10 conversant, Marci Moorehead provided an informative overview of this World Health Organization (WHO) medical classification coding system which many other countries have already implemented. Moorehead predicted the migration to ICD-10 will have a significant impact on business intelligence tools which means life care plans, MSAs and settlement plans likely will be affected.

NAMSAP's 2015 Annual Meeting will take place September 29-October 2 at the Royal Sonesta Hotel in New Orleans.

NAMSAP 2015 Winter Conference - Topics and Speakers

• 3 Parts of Compliance and the SMART Act in 2015
  • Moderator - Katie Fox
  • Monika Boswein
  • Brian Chance
  • Roy Franco
• ANPRM Update - Doug Shaw
• ICD-10 - Marci Moorehead
• Advocacy - Take the Hill and Other Issues
  • Katie Fox
  • Roy Franco
  • Doug Shaw
• Private Cause of Action and False Claims
  • Rasa Fumagalli
  • William Delaney
  • Mark Poplizio
• Working Lunch with Case Studies - Moderator - Thomas Spratt
• Protecting the Client
  • Daniel Hayes - Moderator
  • Ray Alverez
  • Anita Hunt
  • Tracey Jones

Structured Settlements 2013 - Settlement Planning

Despite an abundance of related professional associations, participants and conferences, as well as legislative and regulatory developments, personal injury settlement planning (settlement planning) remains an evolving concept with competing definitions, standards and business models and many unanswered questions.

Professional associations whose members engage in settlement planning include: NSSTA, SSP, NAELA, ASNP, SNA, NAMSAP, AANLCP - and NASP assuming the definition of settlement planning includes adjustments during an injury victim's lifetime.

Settlement planners consist, or represent a blend, of several professionals in addition to traditional personal injury litigation participants. These professionals include: tax attorneys, special needs attorneys, trustees, financial planners, structured settlement specialists, life care planners, economists, Medicare set-aside (MSA) specialists and damage allocators.

Settlement planning topics are featured not only at national conferences sponsored by professional associations but also at conferences entirely focused on specific settlement planning products and issues (e.g. Qualified Settlement Funds [QSFs]; MSAs; special needs trusts [SNTs]; structured settlement annuities; structured settlement transfers).

Described alternatively by advocates as 1) a profession, 2) a process, 3) a community of practice and/or 4) a market, fundamental settlement planning issues exist which industry leaders have not yet adequately addressed:

• How large is the U.S. personal injury settlement planning market and its various sub-markets?
• What laws define and which regulators oversee personal injury settlement planning?
• What generally accepted settlement planning industry standards exist - and what is their source:
  • Definitions?
  • Documents?
  • Processes?
  • Product suitability?
  • Educational resources?
  • Certification programs?
  • Licensing requirements?
• What is a settlement plan?
• Have any professional associations attempted to define or develop a "standard" settlement plan?
• If such a standard settlement plan exists, what general and/or case specific reports and documents are required?

Settlement Planning 2013 Legislative and Regulatory Developments

• Affordable Care Act - Consisting of two laws enacted in March of 2010 (the Patient Protection and Affordable Care Act and the Health Care Education and Reconciliation Act of 2010), the Affordable Care Act (ACA) promises to have a profound, though still uncertain, impact on settlement planning once its primary features (including the individual mandate and protections against pre-existing conditions) become effective January 1, 2014. S2KM published four blog reviews during 2013 examining various ACA-related settlement planning issues:
  • Part 1 - The ACA's impact on future medical damages in personal injury cases.
  • Part 2 - The ACA's impact on the collateral source rule.
  • Part 3 - The ACA's Medicare cost-saving components.
  • Part 4 - Reactions to the California Exchange report announcing premium rates.
• CMS WCMSA Reference Guide - Workers compensation MSAs (WCMSAs) represent a strategic and growing settlement planning sub-market in which structured settlement annuities have been granted an inherent cost advantage over lump sum funding alternatives as a result of a 2004 CMS policy memorandum. During 2013, CMS first published, then subsequently updated, a WCMSA Reference Guide. S2KM's published two blog posts summarizing the initial 88 page WCMSA Reference Guide:
  • Part 1 - Non-structured settlement issues.
  • Part 2 - Structured settlement issues.
  • For highlights of the CMS WCMSA Reference Guide Version 2.0, see this blog post written by Douglas Shaw.
• SMART Act - Signed into law on January 10, 2013, the “Strengthening Medicare and Repaying Taxpayers Act” (SMART Act) is intended to improve the efficiency of the Medicare Secondary Payer (MSP) system by requiring CMS to simplify its review process and to eliminate uncertainty and delays. CMS published related regulations in September thereby committing to:
  • Implement a web portal by January 1, 2016 to enable beneficiaries, their attorneys, other representatives or applicable plans to obtain important MSA information; and
  • Enhance the functionality of the MSA web portal to insure disputes and discrepancies are addressed within 11 business days following receipt of dispute documentation.
• Defense of Marriage Act - The United States v. Windsor case, decided June 26, 2013 by the United States Supreme Court, held Section 3 of the Defense of Marriage Act (DOMA) to be unconstitutional under the Due Process Clause and the Fifth Amendment. Among its many consequences, the Windsor decision will impact settlement planning for cases involving same-gender couples. For additional analysis, see this S2KM blog post.
• Dodd-Frank Uniform Fiduciary Standard - Among many other provisions, the "Dodd-Frank Wall Street Reform and Consumer Protection Act" (Dodd-Frank) directed the SEC to study the need for a new, uniform fiduciary standard of care for broker-dealers and investment advisers and to apply such a uniform standard if it deemed necessary. This study is potentially important for settlement planning because the market currently lacks a uniform product suitability standard. Although the SEC published a fiduciary standard study in January 2011, it has not yet published any related regulations. S2KM reviewed settlement planning product suitability standards in a four-part 2012 blog series.
• Bipartisan Budget Act of 2013 (added January 7, 2014) - Section 202(b) of this statute, which will take effect October 1, 2014, modifies the federal Medicaid Secondary Payer statute and permits recovery for “any payments by such third party.” It overturns two prior Supreme Court decisions (Arkansas v. Ahlborn and Wos v. E.M.A.) and, according to some experts, will significantly complicate personal injury settlements involving Medicaid recipients and make them more expensive.
• Potentially important for settlement planning:
  • New federal legislative proposals:
    • H.R. 1982 - “Medicare Secondary Payer and Workers’ Compensation Settlement Agreements Act of 2013″.
    • S.B. 1672 - "Special Needs Trust Fairness Act".
  • FASB Topic 834 - proposed new accounting standards for insurance contracts.
  • Global Insurance Capital Standard - IAIS has committed to develop and implement the first-ever risk based global insurance capital standard.

For additional S2KM annual reporting of structured settlement industry developments during 2013 and for prior years, see the structured settlement wiki.