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And if not done properly, it also can turn out to be very expensive for payors such as insurers, third-party administrators and employers.

Since the inception of the Medicare Part D drug benefit in 2006, workers' compensation payors attempting to settle a case have been required to set aside funds to protect Medicare from future liability regarding drug costs stemming from the workplace injury. The amount of the set-aside is determined on a case-by-case basis and, in cases that make it to settlement and meet certain dollar thresholds, will be reviewed by Centers for Medicare & Medicaid Services (CMS), which protects Medicare's interests. It sounds pretty simple, but it's not.

For example, Reason says the latest regulations, released in April 2009, make it harder for insurers to settle workers' compensation claims specifically because of the difficulty in determining medical set-asides for prescription costs.

"What they are asking for the pharmacy allocation goes way above what a patient realistically is going to use," he says. "They have taken conservative stance that is not borne out by reality."

Yet, despite that challenging landscape, CompPartners has found a solution to offer clients Medicare Set-Aside Analyses (MSAs) and other medical cost projection services to determine appropriate future medical costs over a claimant's lifetime. To do that, CompPartners works with Progressive Medical, the Westerville, Ohio-based company that, through a national network, offers cost containment services and products to the workers' compensation and auto no-fault insurance industries.

Specifically, Progressive Medical offers pharmaceutical cost projection analyses, including in-depth drug utilization review, for workers' comp Medicare set-asides. The incorporation of quality drug utilization reviews will become ever more important in light of the April 2009 Medicare memo clearly spelling out what will, and will not, be allowed in submitting cost projections to CMS. From 2006 until now, vague guidance had led to "creative" attempts to submit artificially low cost projections, not necessarily representing Medicare's true potential liability for drug costs.

According to Jason Winters, the pharmacist who manages Progressive Medical's Medicare prescription drug cost projection team, if an insurer or employer is settling a workers' comp claim encompassing at least $3,000 to $5,000 of annual prescription costs, Progressive Medical's expert pharmacists will prepare a pharmaceutical drug review. As a result, vendors such as CompPartners, and, in turn, their clients, can receive valuable information and potentially save settlement dollars.

"We employ full-time, highly credentialed pharmacists," Winters says. "Our pharmacists also are pain management specialists with experiences in retail, home delivery, home infusion, hospital and managed care pharmacy."

Winters explains that, since January 2006, regulations say that Medicare must account for protecting its interests on the prescription drug side in the case of a settlement for someone with, or within 30 months of Medicare eligibility. The reason? Because on the workers' compensation cases, a growing percentage of settlement costs are prescription-drug related. Prescription drug costs can constitute up to 30+ percent of medical costs in many workers' compensation settlements. Medicare became concerned that a significant part of its financial interest that would not be protected unless it mandated these set-asides for prescription drugs as well.

In 2009, Medicare upped the ante by issuing the memo that said CMS will begin independently pricing the set-aside future drug cost projections that are submitted. In doing so, it also set the stage for exactly what pricing source should be used, what determines which drugs should be included and how the projection will be recalculated by CMS if not accepted as-is.

"In the past, it's been largely overlooked," Winter says. "CMS hasn't put much rigor around it. But clearly, they now are recognizing it needs to be done.

"If not done right, there could be some fairly stiff financial consequences for payors," Winters adds. For example, if a payor neglects to account for a specific medicine, Medicare is going to price it forward at the average wholesale price of the more expensive brand-name version, which could cost employers and insurers dearly in a settlement.

"With this new standard, everything has to be priced out ahead of time. The bar has been raised," he says. "And the burden of proof is a lot higher for insurers and employers."

Lower medical cost set-aside amounts tend to encourage settlements. Even before the April 2009 memo, only a fraction of cases where pharmacy set-asides are calculated is actually sent to CMS as a result of a settlement agreement. However, there are now even stricter requirements on payers who are submitting cost projections that represent less expensive drug therapy in the future. While CMS will consider recommendations from a drug utilization review, they give more weight to changes in therapy that are actually enacted ahead of settlement. Winters says payers need to partner with a strong clinical team who will work to get that accomplished.

Of course, Winters says, no carrier is going to settle a claim unless to do so is in its best interest, so an accurate way to estimate those set-aside projects, one that is acceptable to Medicare and the claimant, is critical.

"The biggest resonating factor is that out of total workers' compensation Medical costs, pharmacy is now up to 17 percent to 19 percent," he says. "

A Progressive Medical comprehensive Pharmaceutical Cost Projection report is completed based upon review of prescription drug history and medical records. The clinical pharmaceutical team ensures that only diagnosis and age appropriate treatment recommendations are included in the review. Also:

Evaluations are performed by clinical pharmacists to project reasonable and necessary treatment regimens for the allowed conditions

Cost projections are based on current treatment program and best practice guidelines (evidence-based medicine)

Clinical pharmacists are available to collaborate with physicians to make appropriate treatment changes, if indicated, which may prove to be more cost effective.

By using the Progressive Medical Pharma Cost Projection report process, client benefits include:

-- Maintain compliance with federal MSP statute

-- Clinical experts review records to ensure medication treatment is appropriate

-- Clinical pharmacists current with new treatment protocols

-- Cost-effective care recommendations--only pay for appropriate medications

"Our projections are not only generally less expensive, but also rooted in sound, evidence-based medicine and hold up under scrutiny during a settlement process," Winters says.

Also, Progressive Medical experts and pharmacists are also proactive in getting the medical provider buy-in on less costly, but just as effective, drug therapy changes.

For his part, CompPartners' Reason says the Progressive Medical process is "working brilliantly," and helping his company, and its clients, do its best possible in meeting Medicare set-aside projections.

"One of the nice things about Progressive Medical is they understand the Medicare process. They understand that there are limitations, and it's not a cut-and-dried way of doing things," he says. "They have specific, deep knowledge of this process, which makes communicating far easier, so we do not have to explain again it to our clients."

(The above piece is part of our continuing Insights series designed to highlight key products and services to our readers. This paid-for Insights was written and edited by Risk & Insurance® on behalf of our marketing partner. Additional Insights can be found on our Web site at www.riskandinsurance.com/.)

June 29, 2009

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