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

NSSTA 2009 Fall Educational Conference

Meeting at the Mandalay Bay Hotel in Las Vegas on October 15 and 16, the NSSTA 2009 Fall Educational Conference provided a potpourri of perspectives on the central topic of structured settlements.

Although lacking a unifying theme and failing to provide noteworthy handout materials, the conference did offer a general industry overview and did address several important industry developments without encouraging or generating meaningful discussion or detailed inquiry.

The general overview featured structured settlement perspectives from selected industry stakeholders:

• Plaintiff attorneys - Neil Galatz and Jeffrey Mitchell;
• Defense attorney - Steve Jaffe;
• Special needs attorney - James O'Reilly (with NSSTA member Thomas Spratt);
• Life company executive - Joseph Barnet;
• Annuity agents (discussing mediation) - Tony Robinson; Alice Frisbee; Kathleen Osler; and Traci Kaas;
• Attorney and annuity agent (discussing history, myths and opportunities) - Karen Meyers;
• Congresswoman Shelley Berkley.

Industry developments featured:

• NSSTA General Counsel Craig Ulman;
• NSSTA lobbyist Eric Vaughn;
• NSSTA Legal Committee representatives - Peter Vodola; Ilana Hanau; Michael Miller; and Mark Alpert.

The most important industry developments discussed in Las Vegas:

• Warnings from Vaughn and Congresswoman Berkley about anticipated federal tax reform in 2010;
• Vaughn's report that some federal health care reform proposals include tort reform and periodic payment of judgments;
• Ulman's update about the increasingly precarious financial condition of Executive Life of New York;
• Alpert's summary of PLR 121876-08 permitting a tax-free "restructuring" of periodic payments;
• Hanau's summary of the Henderson v. Sioteco case where a California appellate court reversed earlier Fresno County trial court decisions and declared that public policy now supports state court approved factoring transactions.
• Vodola's summary of California's new structured settlement protection statute (SB 510) which includes a detailed definition for "best interest".

From a critical perspective, NSSTA's 2009 Fall Educational Conference represented a series of "missed opportunities".

Missed opportunity #1 - Karen Meyers, who co-developed and annually presents NSSTA's "Certified Structured Settlement Consultant" (CSSC) program, addressed a NSSTA educational program for the first time in several years - and didn't talk about the CSSC program.

Missed opportunity #2 - Meyers spoke instead about structured settlement myths - yet failed to address the most fundamental and controversial NSSTA myths including "squandering injury victims" (see: "Dissipation Studies") and "how structured settlements enable injury victims to live free of reliance on government assistance" (see: "Structured Settlement Credo")

Missed opportunity #3 - NSSTA's educational program failed to acknowledge, respond to, or apparently understand, two recent strategic challenges which question the focus and scope of NSSTA education:

• Internal challenge - Joseph DiGangi's "Settlement Consulting" presentation at the NSSTA 2009 Winter Meeting;
• External challenge - The Society of Settlement Planners (SSP) Registered Settlement Planner Certification Program.

Missed opportunity #4 - related to missed opportunity #3: NSSTA's educational programs continue to ignore the strategic relationship among structured settlements, financial planning and life care planning.

Missed opportunity #5 - although NSSTA's legal committee has successfully expanded the scope of NSSTA's structured settlement legal education (from "Tax Posse" to "All Things Considered"), their programs tend to be repetitive (e.g. "Contracts 101") and fail to translate current legal developments into broader topical presentations.

Suggested future legal committee educational topics:

• What NSSTA members need to know (and tell their clients) about IRC 5891, state protection statutes and structured settlement factoring transactions;
• What NSSTA members need to know (and tell their clients) about IRC 468B qualified settlement funds;
• Comparative business standards and practices for various structured settlement stakeholders and "competitors" - insurance agents; financial securities salespersons; attorneys; trustees.
• Transactional analysis - what does a structured settlement look like in the context of 468B qualified settlement funds; special needs trusts; Medicare set-aside arrangements; and secondary market transfers?
• Integrating annuities with settlement trusts - how do integrated products impact traditional structured settlement planning, documentation and education?

Many structured settlement leaders no longer attend NSSTA educational conferences - especially those leaders who are defining the future of the structured settlement industry. When those industry leaders do attend NSSTA conferences, they attend primarily for networking opportunities or committee meetings - not for the educational programs.

With some exceptions, NSSTA's educational programs are no longer educational. They are mundane, repetitive and suitable primarily for persons new to the industry. Controversial subjects do not appear on the program - or they are circumscribed to avoid controversy. Debate is discouraged. Speakers rarely face tough questions - or provide handout materials.

Perhaps it is time for NSSTA to re-think structured settlements and structured settlement education. What will it take to attract a new generation of structured settlement leaders to join and participate in NSSTA? What will it take to re-engage the industry's best and brightest professionals in NSSTA's educational programs? The NSSTA Fall 2009 educational conference in Las Vegas highlighted those issues without providing any answers.

For prior S2KM reports about NSSTA educational programs, see S2KM's structured settlement wiki.

MSA Update - 3C: Structured Settlement Annuities

This S2KM blog post is the sixth in a series of S2KM blog posts in 2008 updating Medicare set-aside (MSA) developments that impact the growth of structured settlements.

S2KM's previous posts about MSAs include:

• Medicare, Medicaid and SCHIP Extension Act of 2007 (MMSEA)
• MSA Update - 1: Historical Background and Recent Developments
• MSA Update - 2: CMS Rules for Structured Settlements
• MSA Update - 3A: Interview with Thomas Spratt A
• MSA Update - 3B: Interview with Thomas Spratt B

John Campbell and other NAMSAP members have thoughtfully pointed out to S2KM that CMS has distributed a new policy memo dated August 20, 2008 that appears to conflict with its earlier May 20, 2008 policy memo related to life expectancy. As of today's date, CMS has not yet posted online the August 20, 2008 policy memo with its earlier WCMSA policy memos which are available for download on this CMS website.

The May 20, 2008 CMS policy memo is addressed to "Consortium Administrator for Financial Management and Fee-for-Service Operations". It states, in part:

"Effective with WCMSA submissions received by CMS' Coordination of Benefits Contract on or after July 1, 2008, CMS will only accept life expectancies obtained from the CDC [Centers for Disease Control] Table 1, Life table for the total population. The CMS will only use the CDC Table 1 in its WCMSA review process."

The May 20, 2008 CMS policy memo does not mention annuities or structured settlements or rated ages.

The August 20, 2008 CMS policy memo is addressed to the same "Consortium Administrator". It states, in part:

"To protect the Medicare Trust Fund, a set-aside relationship should be funded based upon the life expectancy of the individual unless the State law specifically limits the length of time that WC covers work-related conditions. Unless a submitter furnishes acceptable proof of a Rated Age for a claimant, CMS will estimate the claimant's remaining life expectancy using Actual Age. Acceptable proof of Rated Ages includes independent rated ages on the letterhead of an insurance carrier or settlement broker and a statement from the submitter that all rated ages obtained on the claimant have been included."

Industry issues:

• How will CMS regional offices and contractors interpret these two recent policy memos?
• How do these two policy memos impact the growth of structured settlements?
• How do the developing CMS rules for structured settlements impact industry growth?

Learning resources:

• Release 44 of "Structured Settlements and Periodic Payment Judgments" (S2P2J) features an update for MSAs and the Medicare Secondary Payer (MSP) rules.
• MSA Update-2 summarizes existing CMS rules for structured settlements and WCMSAs.
• Thomas Spratt's Interview B highlights challenges and advantages for the structured settlement industry specific to MSAs and rated ages.
• NAMSAP will host its 2008 Annual Meeting October 2 in Washington, D.C.

S2KM will continue to report MSA developments that impact the growth of structured settlements in S2KM's blog and structured settlement wiki.

MSA Update - 3B: Structured Settlement Annuities

Introduction (added September 9, 2008): The CMS rules for structured settlements and MSAs are dynamic and subject to change and conflicting interpretations. Since S2KM published this post, S2KM and Thomas Spratt became aware of an additional and more recent CMS policy memorandum dated August 20, 2008. Please see S2KM's subsequent blog post titled "MSA Update - 3C" for more current information about the CMS rules for life expectancy and rated ages.  This new CMS policy memo makes Tom's comments below about past CMS changes and inconsistencies with age ratings all the more relevant and valuable.

A prior S2KM blog post (MSA Update - 3A: Structured Settlement Annuities) introduced Thomas Spratt as a Medicare set-aside (MSA) expert. This post continues that conversation and looks more closely at MSA cases involving structured settlement annuities. S2KM's interview with Thomas Spratt is part of two related S2KM series:

• Growing the Structured Settlement Market
• Medicare Set-Aside Update

S2KM is also capturing and featuring the "Growing the Market" series in S2KM's Structured Settlement Wiki.

S2KM: S2KM's earlier blog post (Medicare Set-Aside Update - 2) summarizes current CMS rules for structured settlements and MSAs. What about these existing CMS structured settlement rules strikes you as most significant?

TOM SPRATT: Two requirements jump out at me as significant. First, although CMS requires two years of seed money, the annuity must begin funding within one year. Despite this CMS "over-funding" requirement, annuities still may cost less than lump sum alternatives because of the set-off method CMS uses to calculate present value. Second, the CMS payout rules for structured settlements favor temporary life annuities - the shorter of actual life and a fixed term estimating life expectancy. Beginning July 1, 2008, CMS calculates life expectancies based upon a life table for the total population (Table 1) developed by the Centers for Disease Control (CDC). If an MSA beneficiary lives beyond the projected life expectancy, a potential shortfall could arise that would unfairly burden either Medicare or the MSA beneficiary.

S2KM: Is CMS enforcing its MSA structured settlement rules consistently?

TOM SPRATT: In my experience, yes. Prior to July 1, 2008, there was some confusion and inconsistency with rated ages supplied by annuity providers which CMS utilized to determine life expectancy. CMS initially used the "mean" when several rated ages were submitted, then changed to the "median". CMS also rejected rated ages for determining life expectancies from annuity providers affiliated with casualty insurers without restricting the purchase of an annuity from these companies. In its May 20, 2008 policy memorandum, however, CMS announced it would only accept life expectancies obtained from CDC Table 1. S2KM note: the May 20, 2008 policy memorandum is available for download on this CMS website.

S2KM: Besides structured settlement annuities, what are the most common MSA funding products?

TOM SPRATT: CMS does not mandate any specific type of MSA funding mechanism. Even with annuities, however, CMS does require MSA assets to be retained in an interest-bearing account.

S2KM: Under the current CMS MSA rules, what are the advantages and disadvantages of structured settlements?

TOM SPRATT: Despite having to "over-fund" MSAs with two years of seed money when annuities are utilized, annuities still result in a lower settlement cost in many cases. In addition, the great majority of MSAs are self-administered. The CMS administrative requirements for MSAs are the same for self-administrators and professional administrators. Annuities help prevent premature dissipation of MSAs - especially self-administered MSAs. If an MSA is dissipated prematurely, a beneficiary risks losing Medicare payments. If premature MSA dissipation occurs, workers compensation settlements might be further reduced. Not all states permit workers compensation settlements. Some states preclude the settlement of future medical expenses.

S2KM: In the context of "growing the structured settlement industry", what should the structured settlement industry be doing to improve MSAs?

TOM SPRATT: The most significant issue for the MSA industry, including structured settlements, is the problem of "changing numbers". To reduce delays in its MSA approval process, CMS has encouraged workers compensation insurers and self-insurers to obtain state approval for a settlement before submitting the case to CMS for its approval. Unfortunately CMS often changes the numbers including the seed money, the annuity start date, annual payouts, life expectancy, etc. Of course, this creates havoc for annuity providers and consultants. CMS needs to address this problem of changing numbers.

S2KM: Tom, thank you for the informative interview.

This concludes S2KM's interview with Thomas Spratt about Medicare set-aside arrangements and structured settlements.

MSA Update - 3A: Structured Settlement Annuities

This S2KM blog post begins an Interview with Thomas Spratt about structured settlement annuities and Medicare set-aside arrangements (MSA). This S2KM interview continues two related S2KM series:

• Growing the Structured Settlement Market; and
• Medicare Set-Aside Update.

Thomas Spratt is Senior Vice President of Technical Operations at Protocols. Based in Denver, Colorado, Protocols is a leading MSA specialty company. Tom lives in Manchester, N.H. Prior to joining Protocols, Tom worked as a Manager for Liberty Mutual Insurance Company where he developed and managed Liberty's MSA compliance program. Tom is a national and state-specific jurisdiction expert on employers' liability and workers' compensation. Tom is a member of NSSTA and NAMSAP.

S2KM: Greetings, Tom. Thank you for participating in this S2KM interview.

TOM SPRATT: Thank you. I am glad to have the opportunity to discuss these important issues.

S2KM: What were your MSA responsibilities with Liberty Mutual Insurance Company?

TOM SPRATT: As Manager of Liberty's Home Office Workers' Compensation Department, I was responsible for ensuring Liberty Mutual compliance with the Medicare Secondary Payer (MSP) regulations.

S2KM: In how many MSA cases have you participated? How many of these MSAs were funded with structured settlement annuities?

TOM SPRATT: At Liberty, I was personally involved with hundreds of MSAs over nine years. The first MSA I personally engineered occurred in 1999, well before CMS published their first policy memorandum in July 2001. As for structured settlements, virtually all MSAs in the Liberty program utilized annuities based upon funding criteria I established as Manager. Whenever the MSA funding was $20,000 or more, exclusive of the seed money CMS requires, Liberty utilized a structured settlement annuity.

S2KM: What are your responsibilities at Protocols? Who are your clients and what professional services do you personally provide?

TOM SPRATT: At Protocols, my duties are comprised of assisting clients with establishing, documenting and maintaining Medicare compliance programs. These compliance programs include training for claim and legal staffs as well as involvement in specific cases. Protocols offers a complimentary workshop which covers key Medicare developments since Medicare's inception including MSAs. In addition to Medicare, I also provide workshops about catastrophic claim management which has been my broader specialty for over 30 years. Protocols clients are mainly insurance carriers, self-insured employers and TPA’s.

S2KM: The Centers for Medicare and Medicaid Services (CMS) has stated it receives, on average, 1550 workers' compensation (WC) MSAs per month. In your best estimate, how many of those submissions, on average, involve structured settlement annuities?

TOM SPRATT: I don’t know the total number of structured settlement annuities. It appears to me there are many fewer annuities used than should be. This result may be caused, in part, by the deluge of “rated age” requests received by annuity providers with a limited overall increase in annuity premium.

S2KM: Who tracks information about MSAs and structured settlement annuities - CMS? NSSTA? NAMSAP? Annuity providers?

TOM SPRATT: I am unaware of anyone who is tracking or reporting the overall number of MSAs funded with structured settlement annuities. CMS has reported that 94% of MSA's submitted to them are “self administered”. This statistic underscores the need for structured settlement annuities to avoid premature exhaustion of the MSA funds.

S2KM: Who are the leading structured settlement annuity providers for MSAs?

TOM SPRATT: Except for Liberty Mutual, I don’t know which structured settlement annuity providers have the greatest MSA market share. Fortunately, several are very active and competitive in the MSA market.

This concludes Part A of S2KM's interview with Thomas Spratt about MSAs and structured settlement annuities.