Following an August Town Hall call that addressed workers’ compensation indemnity-only settlements, the Centers for Medicare & Medicaid Services (CMS) made significant policy updates to further clarify total payment obligation to the claimant (TPOC) calculations.  The changes complicate TPOC reporting in workers’ compensation claims and go further than the August announcement surrounding “indemnity-only” settlements. 

Key Policy Changes

CMS adjusted TPOC guidance to provide more specific information by inserting the following new paragraph into Chapter 3, Section 6.4:

“The computation of the TPOC amount includes, but is not limited to, all Medicare covered and non-covered medical expenses related to the claim(s), indemnity (lost wages, property damages, etc.), attorney fees, set-aside amount (if applicable), payout totals for all annuities rather than cost or present values, settlement advances, lien payments (including repayment of Medicare conditional payments), and amounts forgiven by the carrier/insurer.”

CMS also provided formal guidance for “indemnity-only” workers’ compensation settlements by adding a number of references to these settlements, including the following information into Chapter 3, Section 6.5.1:

“In situations where the applicable workers’ compensation or no-fault law or plan requires the RRE to make regularly scheduled periodic payments, pursuant to statute, for an obligation(s) other than medical expenses, or a one-time ‘indemnity-only’ payment or settlement for obligation(s) other than medical expenses is made to or on behalf of the claimant, the RRE does not report these periodic payments or one-time settlements as long as the RRE separately assumes/continues to assume Ongoing Responsibility for Medicals (ORM) and reports this ORM appropriately.”

Applying the “Amounts Forgiven” by the Carrier

These adjustments will impact workers’ compensation claims organizations in multiple ways. Until now, CMS policy described TPOC as “obligation(s)” payable by the responsible reporting entity “to or on behalf of” the injured party.  Payments to or on behalf of the injured party would include any direct or indirect payment associated with the settlement.  Some indirect payments (i.e. attorney fees) were specifically addressed in prior User Guides.  Other direct or indirect payments (i.e. Medicare Set Asides) were not specifically addressed but were very clearly and obviously considered as “TPOC.” 

The language above is virtually a carbon-copy of the language defining the review thresholds in Medicare Set Asides (See WCMSA Reference Guide at page 38).  The new policy introduces a new concept, however, not previously addressed or considered by CMS in Section 111 reporting.  CMS now suggests that non-payment to the claimant in the form of an “amount forgiven” by a carrier should be included as TPOC.  CMS provides no example of how and when an “amount forgiven” should be incorporated into a TPOC report.  While “amounts forgiven” have long been part of CMS’ Medicare Set Aside “review threshold policy,” they have never been included as part of a TPOC.

Practically speaking, including “amounts forgiven” will present a number of challenges for claims organizations.  First, few claims organizations report “amounts forgiven” as TPOC.  Indeed, many claims handlers are unaware that “amounts forgiven” should be included in the total settlement amount for MSA purposes.  Expecting claims organizations to immediately and accurately include these amounts as part of a TPOC report is perhaps unrealistic.  Second, with Section 111 civil monetary penalties looming, it is critical that claims data be accurately, completely, and timely reported.  Claims organizations should immediately review training material, confirm whether “amounts forgiven” would be applicable to their book of claims, and revise and update training as appropriate. Given that Section 111 reporting is now in its tenth year, re-training on this specific topic may present a number of challenges.

CMS’ policy around TPOC has always been quite simple.  The TPOC amount is the “dollar amount of the total payment obligation to the claimant.”  Throughout the User Guide, Medicare has always made clear that the TPOC amount included the full amount of the “obligation” created by the settlement.  CMS’ policy changes turn that idea on its head.  An “amount forgiven” by a carrier in the interest of settlement is not a “obligation,” nor does it result in any actual payment to the claimant. Requiring employers/carriers to report “amounts forgiven” will result in instances of artificially inflated TPOC amounts and possibly improper recovery by CMS.

Amounts forgiven” often represent an employer / carrier’s unexercised subrogation rights to a claimant’s prior third party settlement.  Lien waiver by an employer / carrier benefits the claimant, but it results in no additional settlement funds and in fact will mislead CMS into double counting the claimant’s settlement proceeds.  After all, “amounts forgiven” by a carrier often relate to prior liability settlements which must also be reported via Section 111. 

Apart from aligning policy with MSA review thresholds, there’s no clear reason why “amounts forgiven” should be added to TPOC.  “Amounts forgiven” create no additional recovery opportunity for Medicare (no money is paid for “amounts forgiven”), falsely depict the claimant’s settlement amount (the “amount forgiven” pads the settlement amount with amounts that are not paid to anyone), and improperly suggest double recovery by the claimant (“amounts forgiven” often relate to prior third party settlements received by the claimant and presumably reported to CMS).

Indemnity-Only Settlements

We wrote about the indemnity-only settlement clarification in August.  As we explained at that time, workers’ compensation RREs should heed the following guidance:

• For any indemnity-only settlement, where medical is not included in the settlement, and where medical will either remain open or unresolved after the indemnity settlement, the indemnity settlement is not reportable as a TPOC.
• If an indemnity-only settlement has occurred, and medical is subsequently settled, a TPOC must be reported. The TPOC date should be the date of the medical settlement.  The amount should be the amount of the medical settlement.  The prior indemnity settlement should not be pooled with the medical settlement for the TPOC amount.
• It’s important to emphasize that full and final settlements that involve both medical and indemnity should be reported with the full amount of medical and indemnity as the TPOC amount.

The updated guidance from CMS is that indemnity only settlements should not be reported provided that “the RRE separately assumes / continues to report ongoing responsibility for medicals (ORM).”  While this does not materially alter or adjust the prior guidance, it is an important reminder.

Conclusion

Workers’ compensation claims organizations should carefully analyze their training, policies, and procedures to align with these policies.  While the majority of RREs may have been not reporting “indemnity only” settlements as TPOC, few RREs are including “amounts forgiven” as TPOCs because they are not “obligations to the claimant.”  Indeed, “amounts forgiven” are almost precisely the opposite of “obligations to the claimant.”  CMS should reverse this guidance.

ECS has the largest and most experienced team of Section 111 reporting experts in the country. If you have any questions about the Town Hall call or looming civil monetary penalties, please reach out to our team to check on your existing Section 111 reporting process. If you have an obligation to report but have not yet registered – do not delay. Contact our Mandatory Insurer Reporting Team at MIRService.Support@examworkscompliance.com or 678-222-5454 to schedule an evaluation today.