By Joe Paduda
CompPharma and Health Strategy Associates

A couple weeks ago I started a three-part series on what's going to affect workers comp in 2012. After a few diversions and current-events-driven-interruptions, we're finishing up today with the impact of Medicare set-asides.

Pharmacy costsand the Centers for Medicare and Medicaid Services' treatment of sameare causing many payers to delay or reconsider settling claims. While MSAs are not, (very) strictly speaking, required to close claims in most jurisdictions (Maryland being the exception), as a practical matter, payers are quite reluctant to settle claims without an approved MSA.

From conversations with several payers, MSA experts, and claims execs, it is becoming apparent that CMS' current 'policy' related to drugs has reached the point where it is severely affecting claims handling.

There are at least three major issues hereand likely a few others of just-slightly-less importance.

First, CMS is valuing drugs at the current AWP, regardless of the actual price paid, brand status, or likely future pricing. Many scripts are currently paid below AWP, due either to state fee schedules that are below AWP or PBM contracts that offer even more reductions. I'm not sure of the logic here, but it does appear counter-intuitive.

Second, a similar 'policy' appears based in the belief that the claimant's current treatment regimen will never change, that it is set in stone. The drugs dispensed to the claimant at the moment the MSA is developed are what the valuation is based upon. If there are brand drugs that are likely to go off-patent (a definite until the recent OxyContin re-branding), there's no change in estimates of future cost to account for that. If the meds are typically prescribed for a brief duration, no matter.

In the latter case, CMS has a pretty good case; there are far too many claimants taking drugs today that most reasonable practitioners would characterize as only appropriate for a limited durationSchedule II narcotics as perhaps the prime example. I'd suggest that in this instance, we've done it to ourselves.

Finally, CMS takes a rather dogmatic view of off-label prescribingit doesn't like it. This significantly complicates the picture as many claimants' drug treatment regimens include off-label use of meds. While off-label use can be completely inappropriate, in many instances it is not. Thus, the 'policy' can lead to confusion and difficulties in reaching agreement with CMS.

As a result of these and other MSA-related complications, most payers are not able to settle claims that they'd very much like to get off their books once and for all. Claim loads are increasing as a result, and reserves are as well.

Several industry stakeholders are working diligently to resolve these and other issues. What is clear is CMS is going to ensure they are protecting CMS' interests. While this is a generally good thing (we taxpayers are thereby protected as well), the current stalemate is not helping anyone.

Joe Paduda is co-owner of CompPharma, a consortium of pharmacy benefit managers, and owner of Health Strategy Associates, an employer consulting firm in Connecticut. This column was reprinted with his permission from his Managed Care Matters blog at http://www.joepaduda.com