Medivest Blog - Company Updates, Industry News, and Insights

26/Mar/2019

The following is a press release from the U.S. Attorney’s Office for the District of Maryland on behalf of the U.S. Department of Justice (DOJ) announcing a Medicare Secondary Payer Act (MSP)[1] MSP non-compliance settlement with the U.S. by a plaintiff law firm from Maryland that failed to properly address or make Medicare conditional payment reimbursement (i.e. pay a Medicare lien) from the proceeds of a medical malpractice settlement secured for a firm client in 2015. This MSP non-compliance settlement is similar to the one we wrote about from June of 2018 regarding a plaintiff law firm in Pennsylvania.

“Department of Justice
U.S. Attorney’s Office
District of Maryland
FOR IMMEDIATE RELEASE
Monday, March 18, 2019

Maryland Law Firm Meyers, Rodbell & Rosenbaum, P.A., Agrees to Pay the United States $250,000 to Settle Claims that it Did Not Reimburse Medicare for Payments Made on Behalf of a Firm Client

Baltimore, Maryland – United States Attorney for the District of Maryland Robert K. Hur announced that Meyers, Rodbell & Rosenbaum, P.A., a law firm with offices in Riverdale Park and Gaithersburg, has entered into a settlement agreement with the United States to resolve allegations that it failed to reimburse the United States for certain Medicare payments made to medical providers on behalf of a firm client.

“Attorneys typically receive settlement proceeds for and disburse settlement proceeds to their clients, so they are often in the best position to ensure that Medicare’s conditional payments are repaid,” said U.S. Attorney Robert K. Hur. “We intend to hold attorneys accountable for failing to make good on their obligations to repay Medicare for its conditional payments.”

According to the settlement agreement, in and prior to 2012, Medicare made conditional payments to healthcare providers to satisfy medical bills for a client of the firm. Under the Medicare statute and regulations, Medicare is authorized to make conditional payments for medical items or services under certain circumstances, with the requirement that when an injured person receives a tort settlement or judgment, those receiving the proceeds of the settlement or judgment, including the injured person’s attorney, are required to repay Medicare for the conditional payments.

In December 2015, with the firm’s assistance and representation, the client received a $1,150,000 settlement in a medical malpractice action stemming from the client’s injuries. After Medicare was notified of the settlement, Medicare demanded repayment of the Medicare debts incurred from those conditional payments, but the firm refused to pay the debt in full, even when the debt became administratively final.

Under the terms of the settlement agreement, the firm agreed to pay the United States $250,000 to resolve the Government’s claims. The firm also agreed to (1) designate a person at the firm responsible for paying Medicare secondary payer debts; (2) train the designated employee to ensure that the firm pays these debts on a timely basis; and (3) review any outstanding debts with the designated employee at least every six months to ensure compliance.

This settlement reminds attorneys of their obligation to reimburse Medicare for conditional payments after receiving settlement or judgment proceeds for their clients. This settlement should also remind attorneys not to disburse settlement proceeds until receipt of a final demand from Medicare to pay the outstanding debt.

U.S. Attorney Robert K. Hur commended Eric Wolfish, Assistant Regional Counsel, United States Department of Health and Human Services, Office of the General Counsel, Region III, for his work in the investigation. Mr. Hur thanked Assistant United States Attorney Alan C. Lazerow, who handled the case.

# # #

Take Aways:

Because the MSP grants both a direct lien right and a subrogation right to the U.S. to collect Medicare’s conditional payments, parties to a settlement should inquire, evaluate, confirm, and address all injury related Medicare expenditures for past medicals prior to, or at a minimum, at the time of settlement.
Because the MSP grants a private cause of action (MSP PCOA)[2] and Medicare Advantage Plans that privately administer traditional Medicare coverage for enrolled Medicare beneficiaries (MAO’s) have successfully availed themselves of this MSP PCOA against primary plans[3], parties should also inquire, evaluate, confirm, and address all injury related MAO payments for past medicals as described above.
While the Eleventh Circuit recently ruled that MSP private cause of action double damages could only be brought against primary plans[4], case law is not fully settled throughout the U.S. as to whether those other than primary plans like attorneys for Medicare beneficiaries would be liable for double damages under the MSP PCOA[5]. However, there is no doubt the double damages remedy clearly listed in the MSP’s direct cause of action provision applies in recovery actions by the U.S. Government against those who receive payments from primary plans, including Medicare beneficiaries and their attorneys[6].
When representing an injured party, doesn’t it make sense to address the issue at the time of representation instead of waiting to see whether the issue results in legal liability or a legal malpractice claim stemming from MSP non-compliance?
Due diligence is required for both the defense and plaintiff side to avoid unnecessary MSP non-compliance settlements/legal exposure.

[1] 42 U.S.C. 1395y(b)(2) et seq.

[2] “There is established a private cause of action for damages (which shall be in an amount double the amount otherwise provided) in the case of a primary plan which fails to provide for primary payment (or appropriate reimbursement) in accordance with paragraphs (1) and (2)(A).” 42 U.S.C. § 1395y(b)(3)(A).

[3] See e.g. In re Avandia Mktg., Sales Practices & Prods. Liab. Litig., 685 F.3d 353 (3d Cir. 2012); Humana Med. Plan, Inc. v. W. Heritage Ins. Co., 832 F.3d 1229 (11th Cir. 2016).

[4] MSPA Claims 1, LLC v. Tenet Florida, Inc. — F.3d —- 2019 WL 1233207 18-11816 (11th Cir. March 18, 2019).

[5] In Aetna Life Ins. Co., v. Nellina Guerrera et al., No. 3:17-CV-621 (JCH), 2018 WL 1320666, (D. Conn. Mar. 13, 2018), grocery store Big Y’s motion to dismiss was denied after Big Y, the alleged tortfeasor in the liability action and thus, a primary plan, settled and paid a Medicare beneficiary. Aetna, a MAO, was allowed to proceed with a MSP private cause of action for double damages against Big Y. However, the court granted motions to dismiss by the Medicare beneficiary and the Medicare beneficiary’s attorney, because under the MSP PCOA scenario, they were not primary plans.

[6] MSPA Claims 1, LLC v. Tenet Florida, Inc. — F.3d —- 2019 WL 1233207 18-11816 at 6 (11th Cir. March 18, 2019) (“[u]nlike the private cause of action, the government’s cause of action broadly permits lawsuits against ‘any entity that has received a payment from a primary plan’ – a grant that includes medical providers.” citing 42 U.S.C. § 1395y(b)(2)(B)(iii)(the MSP direct cause of action by the U.S.); Haro v. Sebelius, 747 F. 3d 1099, 1116 and U.S. v. Stricker, 524 F. App’x 500, 504 (11th Circ. 2013)(unpublished)).

Natt Reifler, Esq., CMSP, VP of MSP Compliance

22/Mar/2019

Medicare Advantage Plan MSP Private Cause of Action Lawsuit Update

1. MSPA Claims 1, LLC v. Tenet Florida, Inc. — F.3d —- 2019 WL 1233207 18-11816 (11th Cir. March 18, 2019).

On March 18, 2019, in MSPA Claims 1, LLC v. Tenet Florida, Inc., the 11th Circuit Court of Appeals made it clear that while Medicare law as a whole and the Medicare Secondary Payer Act (MSP)[1] provisions in particular may be confusing, the MSP’s private cause of action provision [2] is clear[3]. MSPA Claims 1 (MSPA) appealed its dismissal by Defendant Tenet at the district court level in the Southern District of Florida. Because some changes had taken place since the dismissal, the appellate court indicated that MSPA was on solid legal footing if it had sued a primary plan instead of a medical provider. The take away of the Tenet case is that Medicare beneficiaries or entities such as Medicare Advantage Plans/Medicare Advantage Organizations (MAOs) that wish to bring private cause of action claims under the MSP may not bring those claims against medical providers and must only bring those MSP private cause of action double damages (MSP PCOA) claims against primary plans that fail to timely pay or reimburse the aggrieved party.

As a reminder, the MSP makes Medicare secondary to all primary plans including both Group Health Plans and Non Group Health Plans. Non Group Health Plan primary plans include Automobile Insurers, Liability Insurance (including Self Insurance),Workers’ Compensation (WC) Plans or Insurance, and No Fault Insurance.

In many other MSP PCOA MAO cases that have been reported, MAO’s have typically sued primary plans that failed to pay. Most courts that have evaluated the issue of the right of the MAO’s to bring MSP PCOA claims have acknowledged the right of MAO’s or their assigns to bring MSP PCOA claims against primary plans. By contrast, the Tenet case involved an assignee of a MAO that sued a medical provider. The dismissal of MSPA at the district court level for this case focused on deficiencies in MSPA’s assignment chain and not on which entity could be sued under the MSP private cause of action. The key MSP PCOA language that was analyzed in the Tenet case is as follows:

There is established a private cause of action for damages (which shall be in an amount double the amount otherwise provided) in the case of a primary plan which fails to provide for primary payment (or appropriate reimbursement) in accordance with paragraphs (1) and (2)(A).

42 U.S.C. § 1395y(b)(3)(A).

Comparing the limitations associated with the private cause of action with the public cause of action granted by the U.S. government in the MSP, the Eleventh Circuit clarified in Tenet that “[u]nlike the private cause of action, the government’s cause of action broadly permits lawsuits against ‘any entity that has received a payment from a primary plan’ – a grant that includes medical providers.” Id. (citing 42 U.S.C. § 1395y(b)(2)(B)(iii)(the MSP direct cause of action by the U.S.); Haro v. Sebelius, 747 F. 3d 1099, 1116 and U.S. v. Stricker, 524 F. App’x 500, 504 (11th Circ. 2013)(unpublished)). This means that while providers, attorneys, Medicare beneficiaries, or other entities that receive payment from a primary plan can be sued by the U.S. under the MSP for double damages, only primary plans themselves can be sued under the MSP PCOA.

Before reaching its decision, the Tenet court went through an analysis to confirm subject matter jurisdiction by determining whether MSPA had standing to pursue the claim. To that end, MSPA would need to show that it suffered an injury-in-fact, that was fairly traceable to the defendant’s conduct, and which was redressable by a favorable judicial decision. Id. at 2. The underlying federal claim revolved around the failure of the provider, Tenet, to pay a $286 medical bill on time. The bill was eventually paid approximately seven months late. Interestingly, the Eleventh Circuit explained that late payment was enough to show a concrete “injury-in-fact”. The Tenet court also explained why the assignment hurdles that had stopped MSPA at the district court level had been overcome at the time of the court’s decision. The district court evaluated the two-level assignment chain when the assignment chain was weak because the assignor, Florida Healthcare Plus (FHCP), had entered receivership proceedings and previously repudiated its assignment to La Ley, the entity that assigned the MSP PCOA claim to MSPA. The Eleventh Circuit in Tenet explained that just one week before its decision, FHCP entered into a settlement agreement with La Ley and MSPA that confirmed La Ley’s assignment of FHCP’s claim to MSPA and fully resolved the MSP Act assignment. Id. at 4. The court also dispelled Defendant/Appellee Tenet’s notion that an anti-assignment clause in a Hospital Services Agreement with assignee FHCP concerning the prohibition to assign hospital services would apply to the right of FHCP to assign its right (it received from the MAO) to La Ley that in turn assigned to MSPA the right to bring the MSP PCOA claim.

The Eleventh Circuit used established statutory interpretation rules to reach its final decision. MSPA argued that because paragraph (2)(A) that the private cause of action references makes a cross-reference to paragraph (2)(B), which establishes MSP conditional payment reimbursement and recovery (see MSP recovery actions by the U.S. and information on Medicare lien resolution and the new electronic payment functionality of the Medicare Secondary Payer Recovery Portal) rights, those recovery right concepts from paragraph (2)(B) should be incorporated back into the private cause of action. Essentially, MSPA was arguing that because other entities that receive payments from primary plans had obligations to reimburse Medicare for conditional payments and (2)(B) applies those recovery rights to this larger number of entities (“any entity that receives payment from a primary plan”), that the MSP PCOA could also be brought against any such entity that received a payment from a primary plan. This cross reference within a cross reference argument was shot down by the Tenet court as a “stretch.” Id. at 6. Alternatively, MSPA asked the court to rule in its favor based on authority from CMS promulgated regulations that afford MAOs the same MSP recovery rights as Medicare including the right to sue medical providers. Id. at 6 (citing 42 C.F.R.§§411.24(g), 422.108(f)). However, the Tenet court found the MSP statute to be clear and unambiguous and therefore, determined it unnecessary to look to the less authoritative CMS regulations for help with its interpretation of the MSP. Id. at 6. Because neither defendant was a primary plan, MSPA’s claim was dismissed.

2. MSPA Claims 1, LLC v. Infinity Property & Casualty Group, 2019 WL 1238852 (N.D. Al. March 18, 2019).

This second case was decided on the same day as the Tenet case but was heard at the federal trial level in the U.S. District Court in the Northern District of Alabama. This court falls within the same appellate jurisdiction (Eleventh Circuit) that decided the Tenet case. The same MSPA plaintiff discussed in the Tenet case above filed suit as an assignee of two different MAO’s on behalf of Medicare beneficiaries identified with their initials as representative examples (exemplars) for each of the two MAO’s. The asserted claims were MSP PCOA claims against insurance company, Infinity Property & Casualty Group, an undisputed primary payer. If the facts in this Infinity case were the same as those in the Tenet case except that the Defendant in this Infinity case was a primary payer instead of a medical provider, the case would have not been dismissed. However, the facts in this case were distinguishable from those of the Tenet case beyond who was sued. In the first claim of the Infinity case, MSPA was found by the court to have failed to show that Florida Healthcare Plus (FHCP – the same entity that was involved in a chain of assignments in the Tenet case), a MAO, had paid any medical bill connected to a claim of the exemplar Medicare beneficiary identified as D.W. The court seemed perturbed in announcing that Plaintiff MSPA knew what the court required but “due to a lack of either diligence or ability” failed to produce it. MSPA Claims 1, LLC v. Infinity Property & Casualty Group, 2019 WL 1238852 at 7 (N.D. Al. March 18, 2019). Without the connection to show that the MAO made a payment on behalf of the Medicare beneficiary, the Infinity court declared MSPA lacked standing to bring the claim.

The second claim of the Infinity case involved a MAO named Simply Healthcare Plans, Inc., its Management Service Organization (MSO) named InterAmerican Medical Center Group, LLC, and an exemplar Medicare beneficiary identified as B.G. The Infinity court pointed out that while the Eleventh Circuit in Western Heritage ruled that MAO’s accrue MSP PCOA recovery rights at the time they make conditional payments, the appellate court had not yet decided if the MSP statute also provides a private cause of action to MSO’s. Id. at 7 (citing Humana Medical Plan Inc. v. Western Heritage Ins., 832 F.3d 1229 (11th Cir. 2016). The Infinity court noted that district courts in the Eleventh Circuit and elsewhere overwhelmingly ruled that it does not. Id. (citing MSPA Claims I, LLC v. Liberty Mut. Fire Ins., 322 F. Supp. 3d 1273, 1283 (S.D. Fla. 2018); MAO-MSO Recovery II, LLC et al. v. State Farm Mut. Auto. Ins., 1:17-CV-1541-JBM-JEH, 2018 WL 2392827, at *7 (C.D. Ill. May 25, 2018). The Infinity court cited one case in which a district court did not rule out the possibility of MSO’s having MSP PCOA rights, citing MAO-MSO Recovery II, LLC v. Mercury General, 17-2525-AB and 17-2557-AB, 2018 WL 3357493, at *7 (C.D. Cal. May 23, 2018). The Infinity court followed the Eleventh Circuit’s Western Heritage reasoning that because the MSP does not provide conditional payment reimbursement authority to MSO’s and does not obligate MSO’s to make secondary payments to be reimbursed, the obligations of a MSO would be contractual as opposed to statutory. Id. at 8. Therefore, the court declined to expand the scope of potential plaintiffs under the MSP PCOA beyond those listed in Western Heritage (a MAO when the MAO makes a conditional payment for healthcare services, by a Medicare beneficiary when the Medicare beneficiary had healthcare services paid by Medicare (or a MAO), or a healthcare provider when that healthcare provider has not been fully paid for services provided to a Medicare beneficiary).

The Infinity court also pointed out some potential flaws in the assignment chain to the MSO from another entity called IMC which by contract, needed to approve the assignment of any purported MSP rights from the MSO to MSPA unless it was “ministerial in nature.” Because the evidence presented that the assignment was ministerial in nature failed to explain how it met the definition of that term in the contract, it failed the preponderance of the evidence standard, and the Infinity court found MSPA failed to show a valid assignment under its potential MSO claim.

Take Aways:

In the Eleventh Circuit (covering Florida, Georgia and Alabama), it is now clear that the following can sue a primary plan (only) under the MSP’s private cause of action:
• (1) a MAO when the MAO makes a conditional payment for healthcare services,
• (2) a Medicare beneficiary when the Medicare beneficiary had healthcare services paid by Medicare (or a MAO), or
• (3) a healthcare provider when that healthcare provider has not been fully paid for services provided to a Medicare beneficiary
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[1] 42 U.S.C. 1395y(b)(2) et seq.

[2] 42 U.S.C. § 1395y(b)(3)(A).

[3] MSPA Claims 1, LLC v. Tenet Florida, Inc. — F.3d —- 2019 WL 1233207 18-11816 (11th Cir. March 18, 2019) (citing The Federalist No. 62, at 421 (James Madison) (Jacob E. Cook ed., 1961) and MSP Recovery, LLC v. Allstate Ins. Co., 835 F. 3d 1351, 1358 (11th Cir. 2016).

Natt Reifler, Esq., CMSP, VP of MSP Compliance

13/Mar/2019

During the 21 years between 1980 and 2001, it is no secret that the Centers for Medicare & Medicaid Services (CMS) did very little to enforce the Medicare Secondary Payer statute (a series of provisions beginning at 42 U.S.C. §1395y(b) commonly referred to as the MSP). This is surprising because the MSP prohibits Medicare from making payment when a primary payer should pay but makes only one exception for Medicare to be able to make payments conditionally provided it gets paid back. Therefore, in those 21 years, protecting Medicare’s past interests would seem to have been on the minds of all settling parties on either side of Non Group Health Plan (NGHP) claims – Automobile, Liability (including self-insurance), Workers’ Compensation, or No Fault cases involving Medicare beneficiaries.

With enforcement actions by the U.S. becoming a reality, most parties to settlement have come to learn the importance of identifying conditional payments made by Medicare prior to judgments, settlements, awards or other payments. However, early on, many plaintiffs and their attorneys ignored their obligations to consider and protect both Medicare’s past and future interests, most often without consequences. Regarding Medicare’s past interests, they were hoping to never hear from Medicare again. Regarding Medicare’s future interests, they hoped that Medicare would not deny injured Medicare beneficiaries’ injury related treatment. While there still seems to be some clarification on the horizon coming from CMS with respect to the legal obligations to protect Medicare’s future interests, there is no longer doubt regarding parties’ obligations to address Medicare’s past interests and satisfy conditional payments. However, negotiating the amount that CMS will accept as full payment, often through a process called the Medicare compromise process, may actually help protect the Medicare Trust Funds that the MSP was originally designed to protect[1].

Medicare has two Trust Funds. One for Part A that covers hospital insurance for the aged and disabled and one for both Part B that mainly covers doctors’ visits and Part D that covers prescription medications, for the same population of Medicare enrollees. It was announced in June 2018 that the Part A Hospital Insurance (HI) Trust Fund is projected to be depleted in 2026, three years earlier than predicted just a year ago. The Part B and D Trust Fund is not as bad off due to a financing system with yearly resets for premium and general revenue income and is projected to have adequate funding for the next ten years and beyond.

Total Medicare expenditures were reported to be $710 billion in 2017. Medicare expenditures were projected to increase at a faster pace than either aggregate workers’ earnings or the economy, and to increase from approximately 3.7 percent in 2017 to between 6.2 percent and 8.9 percent as a percentage of Gross Domestic Product (GDP) by 2029, causing substantial strain on our nation’s workers, the economy, Medicare beneficiaries, and the Federal budget.

A 2018 Annual Report of the Boards of Trustees of the two Medicare Trust Funds recommended a legislative response [2] to help protect the Part A Trust Fund. However, instead of waiting years for Congress to act, if parties to third party or workers’ compensation settlements involving Medicare beneficiaries [3], proactively address both past and future interests of Medicare, that could help slow Medicare Trust Fund depletion, in line with the above-described intent of the MSP.

With good reason, many MSP compliance discussions focus on considering and protecting the future interests of Medicare and the allocation and administration tools designed to protect Medicare’s future interests. Equally, if not more important due to the enforcement mechanisms currently in place, parties should address and protect Medicare’s past interests through Medicare lien resolution. Because we know the obligation to address Medicare’s past interests exists, doesn’t it make sense to be proactive and seek opportunities to reduce/compromise the amount CMS will accept to fully resolve reimbursement of its conditional payment demands/Medicare liens? While it might seem that CMS would frown upon compromise requests, doesn’t it make more sense for CMS to encourage an open line of communication with settling parties and grant discounts to those who take the time to comply with the law as opposed to those settling parties that shirk their respective MSP responsibilities and ignore Medicare’s past interests?

CMS held a webinar today regarding an April 2019 upgrade to the Medicare Secondary Payer Recovery Portal (MSPRP) scheduled to allow for electronic payment of conditional payments for all NGHP matters. The portal’s payment functionality should speed up the payment of known non-disputed conditional payment amounts. For parties interested in reducing exposure to high interest rates (close to 10% currently) associated with late payment of conditional payment demands, this new electronic payment functionality of the MSPRP should be welcome news. Ideally, there will be an opportunity to reduce the requested conditional payment amounts by the procurement costs associated with obtaining the settlements. However, Medicare lien resolution often involves more than just reducing the injured party’s conditional payment obligation by the procurement costs. As even better news, the compromise and waiver processes will not be affected by the electronic payments process. Therefore, even when conditional payment/Medicare lien amounts are paid electronically via this new MSPRP process, CMS will still consider compromise or waiver requests, and issue refunds to the party providing payment (or as directed and authorized in writing by the paying party).

[1] The MSP is a series of statutory amendments to the Medicare law from 1965 which in turn amends the Social Security Act of 1935.

[2] Because this is the second consecutive finding that the difference between Medicare’s outlays and its financing sources will exceed 45 percent of Medicare’s outlays within 7 years, a Medicare funding warning was issued, requiring the President to submit proposed legislation to Congress within 15 days after the submission of the Fiscal Year 2020 Budget. Congress would then be required by law to consider the legislation on an expedited basis.

[3] The future interests of Medicare should be considered for any settlement regardless of claim type or Medicare enrollment status because the MSP does not make distinctions regarding Medicare’s payment status as a secondary payer for different claim types or about workload review threshold standards that currently exist in the Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA) Reference Guide published by CMS. Those workload review thresholds allowing review by CMS are triggered for WCMSAs involving Medicare beneficiaries for judgments, settlements, awards, or other payments (“Settlements”) over $25,000, and injured parties with a reasonable expectation of becoming enrolled in Medicare within 30 months of Settlement for Settlements over $250,000. Section 8.1 of the new WCMSA Reference Guide makes it clear that even for WC cases where the workload review thresholds are not met, Medicare’s future interests should be considered via a future care plan (using “plan for future care” to allow the reader to determine the method by which the plan for the future care of the injured party should be prepared – even if not recommending, certainly implying a method such as commonly seen in Medicare Set-Aside allocation reports), or else the settling parties will be placed “at risk for recovery from care related to the WC injury up to the full value of the settlement.” The industry is still waiting for regulations in the Code of Federal Regulations by CMS clarifying this issue for liability cases. This coming fall, there may be further clarification regarding consideration and protection of Medicare’s future interests via new Advanced Notice of Proposed Rulemaking in the NGHP area, with the hope that any resulting regulations will address comparative/contributory negligence, causation, policy limits, non-economic damages, and other factors unique to liability cases.

Aaron Winnell

26/Feb/2019

It is perhaps cliché to say that life is made up of the decisions you make. But, overused maxims tend to communicate common truths, hence their ubiquity. Decision-making is mainly about choosing one of two or more options to achieve the most desirable outcome. Some decisions are straightforward and obvious. Many are not. Still more are tied up in the tension between what we want to do and what we should do. Values, discernment, and even willpower all factor into the process.

Decisions about money are among the most consequential. It therefore reasons that decisions involving large sums of money are highly consequential. Injury settlements are a prime example of how poor decision-making can produce unfortunate, even disastrous outcomes for both the injured and their families. Really no different than the lottery winner whose sudden wealth turns into debt and insolvency within a brief period, so the injured person who receives a cash settlement of any size is often just as unprepared and soon makes decisions that cannot be undone. Money, once spent, cannot be unspent.

“Where There Is No Vision, the People Perish”

Many people have very good intentions from the outset, but good intentions are not enough. General goals without specific plans to reach those goals will usually fall short. So, what are the missing plans that can cause settlement funds mismanagement?

a plan to get the most value out of every dollar spent
a plan to use the money for what it was intended
a plan to ensure the funds are insulated from poor decision-making

This type of planning helps set priorities and leads to the details needed to help the plan succeed. It is really no different than the priorities considered in good personal finance planning. Some settlement beneficiaries get this, but many do not. That’s because this is a problem common to almost all of us. Most of us do not fund our retirements as we should, do not save as we should, and often do not limit our spending as we should. Any bonuses we receive evaporate quickly. We live up to our means and, some how, when we receive a raise, we then live up to that new limit again. And for individuals with injuries who may not be able to work or whose treatment costs exceed expected costs over their lifetime, mismanagement of a fixed settlement amount will likely result in considerable hardship for the injured and their family.

The Advantages of a Professional Custodian

Once one considers how important it is to have a detailed plan for competent management of settlement funds, the use of a professional custodian begins to make a lot of sense. Vesting a professional custodian with the responsibility for settlement funds decisions addresses the major problems created by the introduction of a large sum of money into an injured person’s finances.

We’ll look at the advantages of a professional custodian, but first, let’s consider the major factors that often negatively affect the decision-making process for a beneficiary handling their own funds:

Lack of Expertise – Inability to seek or negotiate for the best price on products and services due to a lack of knowledge about fee schedules, rates, coordination of benefits, medical billing department practices and policies, and negotiation.
Dependence on Willpower – Decisions are at the mercy of the beneficiary’s self-control.
Outside Influences – Life circumstances, or the needs or even manipulation of family members or friends creates pressure to spend imprudently.

Again, these are pitfalls relatively common to all of us. It is easy for emotion and even rationalization to play into spending decisions. This is why there is certainly wisdom in building a wall around all or at least portions of a settlement to protect the funds and beneficiary alike.

Consider how a professional custodian’s decision-making process addresses the issues we’ve discussed:

Professional Expertise – Knowledge and experience in reviewing and repricing claims down to applicable fee schedules, and negotiating reductions in claims where possible.
Limited by Agreement – Discretion in spending decisions is limited by agreement. The custodian is not permitted to use the funds in any fashion not explicitly contemplated by the contract. Emotionality is factored out of the decision-making process.
Contingency Planning – In the event of specific circumstances, special exceptions can be planned for and facilitated.

Custodial Arrangements: Not just for Medicare Set-Asides

Medicare set-aside accounts, which are created as mechanisms to comply with federal law by protecting Medicare from paying when it should not, and which contain funds specifically limited to the Medicare allowable and injury-related expenses, are commonly administered by a professional custodian (or “professional administrator”). But, other settlement funds should be placed with a professional custodian as well. It’s also worth mentioning that the best way to ensure that settlement funds are used according to the dictates of a settlement is to place those funds with a third party that is bound to comply with the terms that establish their custodianship.

At Medivest, we frequently receive calls from beneficiaries who are interested in seeking some flexibility in how their professionally administered funds are spent. The most common reason for this request is that they have already spent their remaining settlement funds and the monies under our company’s charge are all that remain. It is not difficult in those circumstances to surmise what would have happened with those custodial funds had we not been “in the picture.”

As example has shown time and again, managing large sums of money is not a simple task, and requires proper planning ahead of time to prevent problems down the road. In each settlement, it makes sense to consider using a professional custodian if concerns about fund mismanagement are warranted. Medivest has been providing custodial services to injured beneficiaries for over twenty years. We’ve helped thousands of individuals spend their settlement funds in a strategic and prudent manner in order to help stretch those funds to their benefit and the benefit of their families. If you have questions about how to integrate a custodial arrangement into a settlement, please do not hesitate to contact us.

Medivest

12/Feb/2019

Administering Medicare Set-Aside (MSA) funds properly is a daunting task for most. Nuance in the Medicare formulary, ignorance about MSAs in the provider’s billing department, and complexity in medical coding all conspire to frustrate even the most diligent and well-meaning of beneficiaries. Truly, the successful MSA custodian has to be part educator, part negotiator, part coding wizard, and part accountant.

Conflated Ideas

In this area of compliance, it is not surprising that misunderstandings abound. One common misconception involves what can actually be paid for from a MSA account. This mistake sometimes has its origin in the failure to understand the MSA allocation report’s actual purpose. It probably does not help that the term “MSA” is sometimes used to describe both the funds in a MSA account and a MSA allocation report (“MSA allocation” or “MSA report”).

The properly prepared MSA report’s value lies in its final dollar amount. Medicare is given consideration through the establishment of an amount of money to be used to treat the injury, thereby shielding Medicare from premature payments on behalf of the beneficiary. This is necessitated by the fact that, by law[1], Medicare is secondary to workers’ compensation and liability injuries, pre and post-settlement. The amount established in the MSA allocation is intended to be spent prior to Medicare becoming primary. But also, the settlement is able to establish a limit to how much of the settlement proceeds must be isolated for the sole purpose of stepping in front of Medicare. According to the latest version of the Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA) Reference Guide, where no arrangement is made for how future medicals shall be paid, Medicare may consider the entire settlement as primary[2].

An Estimate, not a Formulary

The mistake is in a literal application, not of the MSA report’s final dollar amount, but of the itemized detail of medical services and medications. It is common for a beneficiary, those counseling them, or those settling with them, to believe that only the specific items listed in the MSA report are covered by the MSA funds. It’s imagined that the beneficiary, when paying their bills, will reference the MSA allocation to determine whether a given medical expense is listed there, and if not, arrange to have it paid by other means. But, the MSA allocation is not an injury-specific formulary of allowed items any more than it is a prescription for care.

In actuality, anyone who has written a MSA allocation or administered MSA funds for a relatively short period of time knows that, at its best, the MSA allocation report is an educated guess. Moreover, the stock MSA allocation, if written to the government’s review standards, may project treatments in frequencies that would not ordinarily be expected, ballooning its amount, or completely ignore the inflationary nature of healthcare costs over time, deflating the final amount below reality’s expectation of the future. (That back x-ray costs $65 today. Do you imagine it will cost that in 10 or 15 years?) In the end, the final number is recognized as an adequate consideration of Medicare’s interests, but a supposition unlikely to hit future costs with absolute accuracy.

Consider all of the ways that actual injury expenses could differ from those in the MSA allocation report. Take prescription drugs as an example. A drug priced into a MSA report references a single NDC (National Drug Code), but that particular drug may have dozens of codes, representing different manufacturers, doses, forms, etc. It’s very likely your corner store pharmacy is going to fill your drug under a different code, and different price. The other corner store pharmacy right across from your corner store pharmacy may use still another code and price. A drug prescribed to treat a condition may become ineffective or create side effects undesired by the beneficiary and/or the prescribing physician. It is not uncommon for a physician to drop one medication in favor of another, or add or remove medications. This all changes the spend.

Also, the Medicare formulary changes annually. Something covered by Medicare today may not be covered in the future, and just because an expense was contemplated in a MSA report, it does not mean that the MSA funds should continue to cover it if that particular expense is no longer covered by Medicare. In summary, a beneficiary’s needs may change over time and the MSA allocation report is not designed to and cannot contemplate all of those changes at the time it is prepared.

What to Pay

So, what is actually to be paid from MSA funds? The answer is any and all Medicare allowable, injury-related expenses incurred on or after the date of settlement until the MSA funds are properly exhausted. Administration is all about stepping in front of Medicare to prevent any payment by it for injury-related expenses until MSA funds are gone. This is not accomplished by checking expenses against the list in the MSA allocation report. It is about identifying injury related expenses that Medicare would otherwise pay for and paying them at rates consistent with or below the applicable fee schedule. It is inaccurate to say that Medicare is responsible for any injury-related expenses not specifically contemplated by the MSA allocation. Such an assumption (though made more frequently than you may expect), if resulting in payments by Medicare for the injury while MSA funds still exist, represents an unlawful shift of burden to Medicare that may prompt a request for reimbursement if discovered.

In the event that real life is more expensive than the MSA report expected, what then? Medicare will assume primary responsibility for the injury’s Medicare allowable expenses once the MSA funds have been spent, provided those funds are spent properly. They will do this annually, in the case of temporary exhaustions, or from the point of permanent exhaustion onward. The key is the ability to demonstrate that the funds were spent according to the Centers for Medicare & Medicaid Service’s (CMS) guidelines. And what if the MSA report seems to have expected more expense than is actually realized? CMS wants those funds to remain in the MSA account in the event one of those unforeseen complications, hospitalizations, or changes in treatment comes along.

In conclusion, a MSA allocation is a valuable resource to any administrator of MSA funds to understand at a glance the nature of the injury and any co-morbid conditions that are specifically excluded. However, it should be used for what it was intended, namely, to arrive at an amount. Understanding the proper use of the MSA funds is critical to administering the funds correctly. A beneficiary who uses their MSA allocation report as a litmus test for what the MSA account can and cannot pay for may end up draining other settlement funds unnecessarily or end up shifting the burden to Medicare prematurely. Ultimately, improper administration places the beneficiary’s Medicare benefits at risk, as Medicare has the right to suspend benefits until it has recovered payments that should have been made by other primary funds.

[1] Medicare Secondary Payer Statute, 42 U.S.C. §1395y(b) a/k/a the MSP.

[2] See Section 8.1 titled Review Thresholds, Example 2 –“Not establishing some plan for future care places settling parties at risk for recovery from care related to the WC injury up to the full value of the settlement.”

Natt Reifler, Esq., CMSP, VP of MSP Compliance

15/Jan/2019

CMS published the latest version of the WCMSA Reference Guide as Version 2.9 (Reference Guide or Guide) on January 4, 2019. In addition to changes announced in Section 1.1 of the Reference Guide titled Changes in This Version of the Guide, there are several other changes made that were not announced. The announced changes were as follows:

Version 2.9 of the guide includes the following changes:

• To eliminate issues around Development Letter and Alert templates auto populating with individual Regional Office (RO) reviewer names and direct phone numbers, these will now display the generic “Workers’ Compensation Review Contractor (WCRC)” and the WCRC customer service number “(833) 295-3773” (Appendix 5).
• Per CMS’ request, certain references to memoranda on cms.gov have been removed.
• The CDC Life Table has been updated for 2015 (Section 10.3).
• Updates have been provided for spinal cord stimulators and Lyrica (Sections 9.4.5 and 9.4.6.2)

Below, in numerical order, please find some of the main changes made by CMS, many of which were not announced in Section 1.1 quoted above. Sections, titles and additions have been bolded for emphasis and ease of reading.

A change in Section 4.1.1, titled Commutation and Compromise, on page 4, was one of the announced changes, and omits the previous Reference Guide’s reference to the July 2001 WC Regional Office (RO) Memorandum known in the industry as the Patel Memo. This is consistent with the statement in Section 1.0 that the Reference Guide “. . . reflects information compiled from all WCMSA Regional Office (RO) Memoranda issued by CMS, from information provided on the CMS website, from information provided by the Workers Compensation Review Contractor (WCRC), and from the CMS WCMSA Operating Rules. The intent of this reference guide is to consolidate and supplant all historical memoranda in a single point of reference. Please discontinue the reference of prior documents.” The concept is that the Reference Guide is the policy of CMS and prior documents or Memos it has issued should not be referred to or otherwise used to support a party’s position regarding matters addressed in the Reference Guide unless it continues to be referenced in the Reference Guide.

Section 4.2, titled Indications That Medicare’s Interests are Protected, has a new unannounced on page 5 bullet stating:

• CMS’ voluntary, yet recommended, WCMSA amount review process is the only process that offers both Medicare beneficiaries and Workers’ Compensation entities finality, with respect to obligations for medical care required after a settlement, judgment, award, or other payment occurs. When CMS reviews and approves a proposed WCMSA amount, CMS stands behind that amount. Without CMS’ approval, Medicare may deny related medical claims, or pursue recovery for related medical claims that Medicare paid up to the full amount of the settlement, judgment, award, or other payment.

Medivest’s take on the subject: CMS makes it sound enticing for Workers’ Compensation entities by using the word “finality.” Many parties have used the voluntary process to obtain approvals but have felt there has been a lack of consistency in review standards, especially from one contractor to another. Blogs and websites of many other companies that prepare Medicare Set-Aside (MSA) allocations indicate that they have experienced an increase in surprise counter highers over expenses like off-label prescription drug use as well as some other medical services when submitting WCMSAs to CMS for approval. As a result of what may have been perceived as a lack of consistency or perhaps a lack of confidence that the counter highers reflect real-world evidence-based needs of injured parties, many settling parties have seemed less inclined to choose submission as a regular practice, even when WC settlements fall within the CMS workload review thresholds, opting instead to follow the Medicare Secondary Payer Act, 42 U.S.C. § 1395y(b) et. seq. (MSP), and its corresponding regulations, instead of the voluntary policies of CMS.

On pages 8-9, under Section 8.1, titled Review Thresholds, two new unannounced examples have been included as follows:

Example 1: A recent retiree aged 67 and eligible for Medicare benefits under Parts A, B, and D files a WC claim against their former employer for the back injury sustained shortly before retirement that requires future medical care. The claim is offered settlement for a total of $17,000.00. However, this retiree will require the use of an anti-inflammatory drug for the balance of their life. The settling parties must consider CMS’ future interests even though the case would not be eligible for review. Failure to do so could leave settling parties subject to future recoveries for payments related to the injury up to the total value of the settlement
($17,000.00).

Example 2: A 47 year old steelworker breaks their ankle in such a manner that leaves the individual permanently disabled. As a result, the worker should become eligible for Medicare benefits in the next 30 months based upon eligibility for Social Security Disability benefits. The steelworker is offered a total settlement of $225,000.00, inclusive of future care. Again, the steelworker [typo fixed] is offered a total settlement of $225,000.00, inclusive of future care. Again, there is a likely need for no less than pain management for this future beneficiary. The case would be ineligible for review under the non-CMS-beneficiary standard requiring a case total settlement to be greater than $250,000.00 for review. Not establishing some plan for future care places settling parties at risk for recovery from care related to the WC injury up to the full value of the
settlement.

Medivest’s take on the subject: These examples illustrate CMS’s position that Medicare’s future interests need to be considered even if the dollar amount of the judgment, settlement, award or other payment does not meet the CMS workload review thresholds. The examples emphasize that CMS considers the establishment of a plan for future care to be a priority and that CMS is serious about protecting Medicare’s future interests. These examples further spell out that CMS reserves the right to request an injured party to fully exhaust the amount of money equal to the entire settlement (not mentioning anything about allowing for a reduction of procurement costs such as attorney’s fees and costs expended to obtain the settlement typically allowed to be deducted under MSP regulations when parties timely request to resolve conditional payment/Medicare liens) when an injured party who is compensated for future medicals, fails to establish a plan for future care.

On page 9 under Section 9.0, titled WCMSA Submission Process Overview, CMS allows for a WCMSA proposal to be submitted either by paper or CD to the Benefits Coordination & Recovery Center or online via the WCMSA Portal (WCMSAP) and clarifies that these are the only acceptable submission delivery methods to be used.

In Section 9.4.5, titled Medical Review Guidelines, under the subsection heading Spinal Cord Stimulators on page 22, the following language was added to change the former policy of not including lead implantation in revision surgeries to the newly adopted policy whereby “Routine replacement of the neurostimulator pulse generator includes the lead implantation up to the number of leads related to the associated code. Revision surgeries should only be used where a historical pattern of a need to relocate leads exists.”

In Section 9.4.5, titled Medical Review Guidelines, under the subsection Pricing for Spinal Cord Stimulator (SCS) Surgery on page 22, the following text was inserted “SCS pricing is based on identification of: 1.) Rechargeable vs. Non-rechargeable and 2.) Single vs. Multiple Arrays (leads). If unknown, CMS will default to non-rechargeable single array.”

In Section 9.4.5, titled Medical Review Guidelines, under the subsection Pricing for Spinal Cord Stimulator (SCS) Surgery on page 22, the following language was deleted: “Preadmission Testing will be included where appropriate.”

In Section 9.4.5, titled Medical Review Guidelines, under the subsection Pricing for Spinal Cord Stimulator (SCS) Surgery, a table titled Table 9-3: Spinal Cord Stimulator Surgery CPT Codes on page 24, was expanded from three procedure (CPT) codes previously listed for Post Placement System Testing to a total of 12 including the same Post Placement System Testing as well as a series of CPT codes for Pre-Placement Psychological Testing, Anesthesia, and various other codes for the implantation procedures, etc. along with detailed descriptions of each.

In Section 9.4.6.2, titled Pharmacy Guidelines and Conditions, under the subsection Medically Accepted Indications and Off-Label Use, on page 28, there are now two detailed examples of off-label use instead of only one off-label use example in the prior version. The additional language appears in bold as follows:

Example 1: Lyrica (Pregabalin) is cited in MicroMedEx for an off-label medication use related to neuropathic pain from spinal cord injury, and a number of scientific studies indicate that Pregabalin shows statistically significant positive results for the treatment of radicular pain (a type of neuropathic pain). Spinal cord neuropathy includes injuries directly to the spinal cord or its supporting structures causing nerve impingement that results in neuropathic pain. Lyrica is considered acceptable for pricing as a treatment for WCMSAs that include diagnoses related to radiculopathy because radiculopathy is a type of neuropathy related to peripheral nerve impingement caused by injury to the supporting structures of the spinal cord.

Example 2: Trazodone” – which was previously described as – “Trazodone is approved by the FDA for the treatment of major depressive disorder,
but is commonly given off-label to treat insomnia. So the WCRC would include trazodone in a WCMSA if used to treat insomnia, if it is related to the workers’ compensation injury.”

Medivest’s take on the subject: This seems to be a situation where the new WCRC has been including more off-label drugs in its counter highers than the prior contractor, with the expensive drug Lyrica, gaining the most industry attention. Entities submitting WCMSAs for approval should be aware of the language referred to on page 28 of the Reference Guide that cites the Medicare IOM (Internet Only Manual) rules concerning Medicare covered off-label usage. The standard is as follows, “FDA approved drugs used for indications other than what is indicated on the official label may be covered under Medicare if the carrier determines the use to be medically accepted, taking into consideration the major drug compendia, authoritative medical literature and/or accepted standards of medical practice accepted, taking into consideration the major drug compendia, authoritative medical literature and/or accepted standards of medical practice.” Because this standard is so broad and the CMS and its WCRC seems to be taking an expansive approach to what types of off-label use is determined to be includable, parties seeking to control costs but still interested in CMS submission should consider professional consultations with treating physicians as to whether there are less costly medications and/or alternate treatment/prescription doses that can be utilized, implemented, and confirmed as equally effective, prior to submission.

Under Section 10.4 Section 20 – Life Care / Future Treatment Plan, page 43, a new statement “A Future Treatment Plan is required in the absence of a Life-Care Plan” makes it clear that there is a minimum requirement for future treatment to be listed in a submitted allocation in absence of a Life-Care Plan.

Medivest’s take on the subject: This is not really news because the term Future Treatment Plan existed in the prior Reference Guide’s title for this section. This seems to be a way to bring some consistency to the idea and to tie the term Future Treatment Plan together with the terms Future Treatment and Future Treatment Summary that also appear (and previously appeared) in the section.

In Section 10.5.2, titled Use of WC Fee Schedule vs. Actual Charges for WCMSA, on page 43, the state of Virginia was removed from the list of states that do not have a state Workers’ Compensation (WC) Fee Schedule. The states that do not have a WC fee schedule currently are Indiana, Iowa, Missouri, New Hampshire, New Jersey, and Wisconsin. The Reference Guide instructs, “Do not use a fee schedule in a state that does not have a fee schedule.”

Under Section 16, titled Re-Review, there are three subheadings describing circumstances under which a party may request a Re-Review. Under the subheadings of Mathematical Error and Missing Documentation on page 55, the following unannounced Note was inserted:

Notes:
• Disagreement surrounding the inclusion or exclusion of specific
treatments or medications does not meet the definition of a mathematical error.

• Re-Review requests based upon failure to properly review already submitted records must include only the specific documentation referenced as a basis for the request.

Under the third subheading titled Amended Review, the criteria and information remained the same, but the information was reformatted as follows with a phrase added to last note bullet in bold:

• CMS has issued a conditional approval/approved amount at least 12 but no more than 48 months prior.

• The case has not yet settled as of the date of the request for re-review.

• Projected care has changed so much that the submitter’s new proposed amount would result in a 10% or $10,000 change (whichever is greater) in CMS’ previously approved amount.

• Where a re-review request is reviewed and approved by CMS, the new approved amount will take effect on the date of settlement, regardless of whether the amount increased or decreased.

• This new submission may be delivered in both paper and portal formats. Please see the WCMSAP User Guide for more information.

In order to justify that the projected care would result in a 10% or $10,000 change (whichever is greater), the submitter must return CMS’ Recommendation Sheet that was included in CMS’ conditional approval letter and identify the following:

• Line items that were included in the approved amount, but are for care that has already been provided to the beneficiary. Please identify where references to records indicating that the care has already been provided can be found in the updated proposal.

• Line items for care that is no longer required. Please identify where references to replacement treatment can be found in the updated proposal.

• If additional care is required that was not otherwise included in CMS’ conditional approved amount, please add line items.

Notes:
• In the event that treatment has changed due to a state-specific requirement, a life-care plan showing replacement treatment for denied treatments will be required if medical records do not indicate a change.

• The approval of a new generic version of a medication by the Food and Drug Administration does not constitute a reason to request an amended review for supposed changes in projected pricing.

• CMS will deny the request for re-review if submitters fail to provide the above-referenced justifications with the request for re-review.

• Submitters will not be permitted to supplement the request for re-review, nor will they be developed.

Under Section 17.3 Use of the Account on Page 57, the bolded language replaced prior language on the subject:

“Please note: If payments from the WCMSA account are used to pay for services other than Medicare-allowable medical expenses related to medically necessary services and prescription drug expenses for the WC settled injury or illness, Medicare will deny all WC-injury-related claims until the WCMSA administrator can demonstrate appropriate use equal to the full amount of the WCMSA.”

Medivest’s take on the subject: CMS is indicating that Administrators have the burden to show appropriate use of MSA funds and therefore, must keep accurate records to prevent mistaken denial of injury related Medicare covered claims by Medicare after MSA funds are exhausted.

Under Chapter 18 titled CMS Submission, after the sentence, “Additionally, the contractor must ensure that Medicare makes no payments related to the WC injury until the WCMSA has been used up”, the following language was added on page 60:

This is accomplished by placing an electronic marker in CMS’ systems used to pay or deny claims. That marker is removed once the beneficiary can demonstrate the appropriate exhaustion of an amount equal to the WCMSA plus any accrued interest from the account. For those with structured settlements, the marker is removed in any period where the beneficiary exhausts their available funds; however, it is replaced once the anniversary fund deposit occurs until the entire value of the WCMSA is demonstrated as entirely exhausted.

Medivest’s take on the subject: This is the first indication of an “electronic marker” and gives an idea of how the CMS computer system will be flagging those injury related medicals submitted for payment by Medicare, but that Medicare may deny.

In Appendix 4, WCRC Proposal Review Reference Tools on page 69, the link to CMS Memos and written references to CMS Memos going back to 2001 were removed.

All references in Appendix 5. Sample Letters to Sherri McQueen, as Acting Director, were changed to Sherri McQueen, Director, Financial Services Group Office of Financial Management.

In the Development Letter Sample, the CMS Regional Office Contact reference and contact phone numbers were removed and replaced with “the Workers’ Compensation Review Contractor (WCRC) at (833) 295-3773” on pages 81 and 85.

Medivest’s take on the subject: The WCRC now has the responsibility to field calls regarding submission of WCMSAs instead of the CMS Regional Offices.

Medivest will continue to follow changes in policy at CMS and in the actions of its Workers’ Compensation Review Contractor, Capitol Bridge, LLC, and will keep our readers up to date on developing trends.

Natt Reifler, Esq., CMSP, VP of MSP Compliance

08/Jan/2019

Planning to protect Medicare’s future interests should be part of any diligent Medicare Secondary Payer Act[1] (MSP) compliance analysis. However, because enforcement actions by the U.S. under the MSP have focused on reimbursement of Medicare for payments occurring prior to settlement, Medicare lien resolution (i.e. investigating and negotiating satisfactory payment of Medicare conditional payment reimbursement demands), should be placed at the top of the MSP compliance list by primary payers and those representing injured parties. We recently wrote about conditional payment correspondence from the Centers for Medicare & Medicaid Services (CMS) through its BCRC and CRC contractors, the updated functionality of the Medicare Secondary Payer Recovery Portal (MSPRP), and the importance of obtaining correct conditional payment amounts so settlements can move forward while protecting Medicare’s past interests. When the U.S. government’s conditional payment reimbursement amount (Medicare lien amount) is larger than a potential settlement amount or the payment of the full lien amount will take up a good portion of a Medicare beneficiary’s net settlement, a beneficiary will be less interested in settling. Enter Medicare lien resolution.

Medicare Lien Resolution Road Map

When we perform Medicare lien resolution, our goal is to get CMS to evaluate the Medicare lien amount compared to the net amount to be received by injured party after fees and costs are deducted. Additionally, we sometimes ask CMS to evaluate the Medicare lien amount compared to the weakened financial position/physical condition of the Medicare beneficiary after an accident. When the net settlement is unfairly low compared to the Medicare lien amount, CMS will often reduce the lien prior to settlement. There are several federal statutes and accompanying regulations that provide authority for CMS to reduce (compromise) or sometimes waive Medicare liens. The statutes and regulations outline standards and factors that may be considered for full or partial reductions of Medicare lien amounts. These factors often focus on the ability of the injured party to pay the lien, costs the government would incur to pursue collecting the lien, as well as the injured party’s financial/physical circumstances.

Medicare Lien Waiver Process

The Medicare lien waiver process is a more involved process than the compromise process. Waiver requests typically focus on the financial position of the injured Medicare beneficiary, who may have higher expenses and/or lower income after sustaining an injury. After settlement occurs and funds are transferred, while the MSP technically still allows the U.S. to pursue the primary payer (entity responsible for payment) when a Medicare beneficiary fails to satisfy a Medicare lien, the Medicare beneficiary is most often considered the debtor and pursued by CMS initially through the Benefits Coordination and Recovery Center (BCRC). Attorneys for Medicare beneficiaries can also be caught in the MSP cross hairs. Waiver requests for a Medicare beneficiary are sent to the BCRC. In turn, the BCRC typically asks for a SSA-632 form to be filled out with a variety of financial information about the beneficiary. Waiver determinations may be made by BCRC staff and are usually based on financial hardship.

To speed up the process and increase the likelihood of a positive outcome, it is a best practice when requesting a waiver to provide a full financial picture of the beneficiary, including either a completed SSA-632 form or as much of the information requested by that form as can be obtained, so BCRC staff will have adequate information to reach a fair determination. A waiver may be granted when continuing the collection would be against “equity and good conscience.” The process takes about 120 days from start to finish for a waiver determination to be made. If a conditional payment demand has been paid, a waiver or compromise request may still be made, and a refund will be considered. If the BCRC makes a determination to refund all or part of the prior payment, the refund will typically take an additional 3-4 weeks, depending on whether payment had been made to the BCRC directly or whether it was made to the Department of Treasury after a referral of the debt to Treasury by the BCRC.

Medicare Lien Compromise Process

If there is not a significant financial or physical hardship to the Medicare beneficiary, but the dollar amount of the projected settlement is low compared with the likely settlement value and/or the Medicare lien amount, an alternative to a waiver request is a Medicare lien compromise request. To request a compromise, a third-party representative may offer to pay a specific dollar amount on behalf of the beneficiary to fully compromise the outstanding Medicare debt/lien amount. The requester must include the settlement amount (or settlement offer), the amount they are asking CMS to accept as full payment, and the actual or projected attorney fees and costs associated with procuring the settlement. Attorney fees and costs are omitted when the beneficiary is not represented by counsel. CMS, through the BCRC, either responds by accepting the offer or presenting an alternate proposed amount. At that point, the beneficiary must pay the countered amount or if accepted, pay the accepted amount within 60 days of the BCRC response, or else the offer is no longer valid.

Letting a representative act on your client’s behalf in communicating and negotiating with CMS has helped lawyers save time and put more money in the pockets of their clients, while helping parties to the settlement comply with the MSP with respect to Medicare’s past interests. Count on Medivest to help you with your Medicare lien resolution needs.

[1] 42 U.S.C. § 1395y(b)(2) et seq.

Natt Reifler, Esq., CMSP, VP of MSP Compliance

31/May/2018

The two Congressmen that worked together to introduce the bill that became the SMART Act of 2012, amending the Medicare Secondary Payer statute (MSP)[1], have teamed up again, this time on May 18, 2018, to introduce the PAID Act, which stands for Provide Accurate Information Directly Act. The PAID Act, introduced as House Bill 5881, is aimed at helping Medicare beneficiaries and parties that settle injury cases with beneficiaries get more complete injury-related medical payment reimbursement information than they get now. The PAID Act would require the Centers for Medicare & Medicaid Services (CMS), the sub agency under the Department of Health and Human Services (HHS) charged with the responsibility of running Medicare and creating regulations implementing the MSP, to provide insurance carriers and injured Medicare beneficiaries information about how much money has been spent toward injury-related Medicare covered medical items, services, and expenses (“Medicals”) by not only traditional Medicare (Parts A & B) as it does now, but privately administered Medicare Advantage (Part C) and Medicare Prescription Drug (Part D) Plans, and the federally funded, predominantly state administered needs-based Medicaid plans, too.

As it exists, CMS provides various updates on mounting or finalized Medicals paid by traditional Medicare after being notified of upcoming settlements or receiving confirmation of settlements. The updates are provided through the CMS web portal to parties that submit proof of authorization (Authorized Parties) to access the information. The MSP provides direct statutory lien rights to the U.S. as well as equitable subrogation rights to the U.S. to arm Medicare with enforcement tools allowing it to be reimbursed for amounts conditionally paid that should be or should have been paid by Workers’ Compensation, Automobile Insurance, Liability Insurance including Self-Insurance, or No Fault Insurance (Primary Plans). CMS provides the running total of the Medicare lien amount to help parties that want to settle know the amount to be paid to Medicare to satisfy its lien. The SMART Act amendments to the MSP added a three year statute of limitations for the U.S. to bring recovery lawsuits enforcing Medicare’s conditional payment recovery rights and outlined demand amount update procedures and enabled regulations to be created by CMS, further defining procedures for Authorized Parties to obtain updated and reliable information from the CMS portal on conditional payments by Medicare.

However, neither the MSP nor its SMART Act amendments contemplated the difficulties that Primary Plans, injured beneficiaries, and other Authorized Parties have experienced in getting updated information on prior injury-related medical payments made by Medicaid entities and/or the privately administered Medicare plans referenced above. If CMS provided the payment information contemplated by the PAID Act in addition to the past payment of Medicals made by traditional Medicare, settling parties and their representatives would have a more efficient mechanism to determine proposed payment obligations toward a larger portion of past Medicals (collectively referred to in this article as Total Government Reimbursement Amounts). When Workers’ Compensation Medicare Set-Asides (WCMSAs) are submitted to CMS for review or when any MSA allocation report is prepared, the standard is to project future costs for both medical services as well as prescription drug expenses. However, CMS does not currently provide information about amounts paid for prescription drug expenses when parties or their authorized representatives request payment information through its web portal as those expenses are administered privately. Therefore, the payment information available from CMS only provides part of the picture.

Primary Plans almost always condition payment of settlement funds on the agreement of beneficiaries to reimburse past conditional payments made by Medicare and often reference any applicable payment obligations to Medicaid[2] along with an acknowledgment by beneficiaries of their obligations to not prematurely bill Medicare for future Medicals pursuant to the MSP. Payments for past Medicals by Part C, Part D and Medicaid Plans regarding settled injuries have not gotten the same attention that traditional Medicare conditional payments have because CMS is charged with the responsibility by the Secretary of HHS pursuant to the Federal Claims Collection Act[3] to focus on the recovery rights of the U.S. under the MSP for conditional payments made through traditional Medicare.

The PAID Act sounds great in principle. However, because the text of the bill will not be available until June 18, 2018, it is hard to say whether it will gain traction as written. Because traditional Medicare’s lien rights are enforced by the U.S. pursuant to the MSP, the PAID Act will not likely need to reference prioritization of lien rights. A wrinkle that has arisen is that private cause of action claims by Part C Plans or their assigns under the MSP are regularly being filed and it seems that MSP private cause of action claims could be filed by Part D plans too[4]. Sometimes, beneficiaries transfer between traditional Medicare coverage and Part C Plans from year to year. Therefore, settling parties interested in addressing potential Medicare recovery rights should pay attention to the rights of Part C and Part D Plans for recovery of payment of past Medicals. State legislatures, state Medicaid agencies, and courts asked to enforce Medicaid liens also need to consider the federal anti-lien statute[5] when addressing Medicaid lien matters alone or when Medicare has outstanding lien interests.

Putting the priority of Medicare liens over other liens to the side for a moment, the PAID Act would seem extremely helpful in providing a big picture look at the Total Government Reimbursement Amounts. Congressman Gus Bilirakis (R-FL) stated that “this legislation will ensure that beneficiaries, Medicare and Medicaid have a clear and quick way to identify whether or not a participant has an MSP obligation, and provide information about how that obligation can be resolved.” He further stated that “the PAID Act represents a ‘win-win-win’ for beneficiaries, plans, and the federal taxpayer.” Congressman Ron Kind (D-WI) added that “Congress can save significant money for taxpayers and drive a better coordination of benefits if it mandates the sharing of certain information between CMS and settling parties.”

Medivest will continue to monitor the progress of this legislation and encourages readers to consider supporting it once the text of the PAID Act becomes available. The language of the bill will be available here next month. Information about how to reach your local Congressional representative regarding the PAID Act may be found here.

[1] 42 U.S.C. §1395y(b) et. seq. The MSP, a series of provisions that amend the Social Security Act and address both the order of payments for injury-related Medicare covered and otherwise reimbursable medical items, services and expenses like prescription drug expenses (Medicals) as well as the right of the U.S. Government to be reimbursed for any payments it makes for Medicals.

[2] Medicaid has lien rights derived from state law allowing it to reach portions of settlements that compensated medical bills paid by the respective state’s Medicaid agency as described under the U.S. Supreme Court’s decision in the Ahlborn case, cited in footnote four below, and as legislatively reinstated by the Bipartisan Budget Act (BBA) of 2018’s repeal of corresponding provisions of the BBA of 2013.

[3] 31 U.S.C. §3711, also known as the FCCA – requires the heads of legislative agencies to attempt to collect claims of the U.S. (and authorizes waivers and compromises of claims valued at up to $100,000 when a liable person does not have present/prospective ability to pay significant amount of claim or cost of collecting claim is likely to be more than amount recovered).

[4] The same MSP regulations in 42 C.F.R. § 422.108 are extended to Medicare Part D Plans via 42 C.F.R. § 423.462. Therefore, Part D Plans would likely be held to have the same MSP recovery rights as MAOs including the possibility of seeking double damages under the MSP private cause of action should a primary payer deny the Part D Plan reimbursement of due conditional payments.

[5] 42 U.S.C. § 1396p(a)(1). See also, Wos v. E.M.A. ex rel. Johnson, 568 U.S. 627, 630, 133 S. Ct. 1391, 1395, 185 L. Ed. 2d 471 (2013)(“The anti-lien provision pre-empts a State’s effort to take any portion of a Medicaid beneficiary’s tort judgment or settlement not ‘designated as payments for medical care.’” citing Arkansas Dept. of Health and Human Servs. v. Ahlborn, 547 U.S. 268, 284, 126 S.Ct. 1752, 164 L.Ed.2d 459 (2006)).

Natt Reifler, Esq., CMSP, VP of MSP Compliance

18/Apr/2018

Injured Medicare beneficiaries or those with a reasonable expectation of becoming enrolled in Medicare within 30 months of settlement (claimants) have a legal responsibility under the Medicare Secondary Payer statute enacted in 1980 (MSP)[1], to not prematurely bill Medicare for injury-related otherwise Medicare allowable, medical expenses (future medicals). Because many claimants and even their attorneys still don’t know the MSP law exists or how to comply with it, many settlements for claimants don’t properly consider and protect Medicare’s interests as a secondary payer for future medicals. Medicare Set-Aside (MSA) compliance programs consider Medicare’s MSP interests and implement actions to protect those interests. MSP compliance companies rely heavily on two valuable tools that work best in conjunction to achieve MSP compliance goals; a MSA allocation report (also known as a Set-Aside arrangement) estimating future medicals, and administration of MSA funds, with spending restricted to applicable future medicals. If administration of MSA settlement funds is handled by the injured claimant, it is referred to as self-administration and when performed by a company like Medivest Benefit Advisors, Inc., it is known as professional administration.

With a federal law on the books prohibiting premature billing of future medicals to Medicare and the potential for those not complying with the MSP being denied Medicare benefits for the claimed/released injury, is it wise to allow injured parties to manage and administer post settlement future medicals? The National Council on Compensation Insurance, Inc. (NCCI) recently published a research brief updating its 2014 study on Workers’ Compensation MSAs (WCMSAs) and WCMSA reviews and reported that between 2010 and 2015, approximately 98% of all WCMSAs from the study’s 11,000 MSA data sample were self-administered. That seems outrageous when injured parties are notorious for quickly spending money received from lump-sum settlements. Statistics in a personal injury practice guide by The Rutter Group indicate that somewhere between 25 and 30% of accident victims spend all settlement money within two months of receiving the funds and that up to 90% of accident victims use all settlement proceeds within five years.[3] Spending sprees seem common with lottery winners, some professional athletes, and most likely other people that come into money quickly. Congress considered the poor spending habits of settlement recipients when it enacted the Periodic Payment Settlement Act of 1982 (PPSA)[4],[5], and in subsequent related legislation.[5] Because annuity payments paid under the PPSA are paid tax-free and injured parties can often be irresponsible with their spending when they receive lump-sum settlements, structured settlements are often a wise choice to help injured parties preserve settlement funds for their needs.

Irresponsible spending of settlement funds by injured parties is sad, but when settlement funds are misspent by people other than the injured parties, it can be tragic. A Wall Street Journal article recently highlighted this risk.[7] In 1980, Nicole Herivaux lost the use of one of her arms due to alleged medical malpractice at the time of her birth in New York. In 1983, the minor’s family settled a malpractice lawsuit in exchange for a structured settlement that paid monthly annuity payments and a few hundred thousand dollars in lump sum money that could be used for Nicole’s education, among other things. The company that started making settlement payments initially deposited the annuity checks in Nicole’s mother’s name, “as guardian” of Nicole directly into a bank account. That company later transferred the responsibility for making those payments to a different insurance company in 1995, when Nicole was 15 and still a minor. Nicole Herivaux is now an adult with student loan debt and alleged in a 2018 lawsuit that the new company sent the annuity payments directly to her mother without any payment restriction or oversight and that her mother misused and inappropriately exhausted Nicole’s settlement funds. If the settlement had included professional administration of a custodial account, money intended for the minor could have paid off Nicole’s education expenses and provided her a better chance to live with peace of mind, dignity and security.

The Centers for Medicare & Medicaid Services (CMS), the regulatory body running the Medicare program and charged with the responsibility of interpreting the MSP has promulgated regulations and issued memos helpful to determining reasonable and appropriate measures to comply with the MSP. A 2011 memo from CMS’s Regional Office in Dallas from Sally Stalcup, as MSP Regional Coordinator, announced that Medicare Set-Aside is CMS’s “method of choice and the agency feels it provides the best protection for the program and the Medicare beneficiary.”[8] From the context of the Stalcup memo, it is clear the use of the term “Set-aside” included a MSA arrangement described above, and that Set-asides (MSAs) would apply in both workers’ compensation and liability cases. The Stalcup Memo also announced that “each attorney is going to have to decide, based on the specific facts of each of their cases, whether or not there is funding for future medicals and if so, a need to protect the Trust Funds.”

However, it is one thing to set money aside for the intended purpose and quite another to properly administer the money. Even when an injured claimant hires an attorney to represent them to obtain a settlement, judgment or award (“settlement”), settlement funds reserved for future medicals can be misspent. For example, attorney misconduct was found in a South Carolina Bar disciplinary case where an attorney representing a claimant failed to properly administer funds set aside to protect Medicare’s interests (MSA funds) as a secondary payer for future medicals.[9] In another bar disciplinary case, an Illinois licensed attorney used trust funds for improper purposes when the trust funds were to be maintained in trust until it was determined whether they belonged to the attorney’s client or Medicare.[10]

Did the attorneys in these matters know how to report settlements to CMS’ Benefits Coordination & Recovery Center (BCRC) contractor, how to request Medicare conditional payment amounts, perform bill review and potentially dispute and finalize conditional payment lien amounts? Did they consider whether their client’s injury and/or financial condition might lend itself to a conditional payment lien compromise or waiver request? Furthermore, did the attorneys know how to properly administer the MSA funds that were set aside for their clients’ future medicals? If the attorneys had sought the advice of a competent company that performs these functions regularly, they would have been in a better position to protect their clients, protect the Medicare Trust Funds and protect their professional standing.

Allowing incompetent, injured claimants to self-administer their own MSA accounts cannot be a prudent way to protect Medicare’s interests in preserving the nation’s Medicare Trust Funds. Even competent claimants likely experience difficulties attempting to self-administer MSA funds. While CMS makes resources available to individuals intending to self-administer an MSA account including a WCMSA Reference Guide and a Self-Administration Tool Kit, but what percentage of injured claimants will read and follow the protocol of the 127-page WCMSA Reference Guide and the 31-page Self-Administration Tool Kit?

Self-administration is surely harder than filing a standard federal income tax return. Plenty of people find it helpful to use professional assistance or digital software to help them file their tax return. [11] A self-administering claimant needs to evaluate bills for medical items and expenses, including prescription drug expenses, to verify that they are both injury-related, Medicare allowable and otherwise reimbursable. Once bills are reviewed, a decision still needs to be made as to how much should be paid. Is the provider a Medicare-approved provider? Should the amount be the Medicare allowable rate, the provider’s bill rate or the usual and customary rate? Is there a Group Health Insurance plan involved? Does it matter if the case stems from a liability case versus a workers’ compensation claim? Does the Code of Federal Regulations say anything about these distinctions? Does CMS provide guidance in this area via its website, its Medicare Learning Network, or WCMSA Reference Guide? Have there been any cases evaluating these issues and was the claimant’s injury in a jurisdiction where case law might affect the amount of money to be set aside for those future medicals? Will a claimant be able to keep records on their own sufficient to withstand CMS scrutiny to determine whether MSA account spending is MSP compliant? Will the claimant remember to prepare and transmit required annual attestations of MSP accounting compliance? Because the answer to these questions is only part of the MSP compliance puzzle, it is little surprise that CMS announced professional administration as recommended for MSA fund administration. In addition to providing a full array of Professional Administration services, Medivest also offers a Self-Administration Kit service that provides customer service and claims support as well as discounts on durable medical equipment and prescription medication to help competent claimants take on self-administration.

[1] 42 U.S.C. § 1395y(b).

[2] The Rutter Group, “California Practice Guide: Personal Injury” Chapter 4.

[3] Re: Section 130 Qualified Assignments, 2003 WL 22662008, at *3 (legislative history to the PPSA detailed that additions to the law helped provide certainty that periodic payments of personal injury damages are excluded from the gross income of the recipient. S. Rep. No. 97-646, 97^th Cong., 2d Sess. 4 (1982)).

[4] Periodic Payment Settlement Act of 1982 (PL 97–473 (HR 5470), PL 97–473, January 14, 1983, 96 Stat 2605) (through tax benefits, the PPSA encourages use of structured settlements to resolve personal physical injury and physical sickness cases).

[5] Re: Section 130 Qualified Assignments, 2003 WL 22662008, at *18 (The public policy encouraging use of structured settlements by providing a tax subsidy was affirmed in JCX-15-99, the Joint Committee on Taxation, Tax Treatment of Structured Settlement Arrangements from March 16, 1999 (pointing out perils of lump sum settlements when “. . . the individual may, by design or poor luck, mismanage his or her funds so that future medical expenses are not met.” JCX 15-99 accompanied H.R. 263, “The Structured Settlement Protection Act,” 106^th Cong., 1^st Sess. Section 5891 of the Code enacted by a subsequent version of that bill, H.R. 2884, on January 23, 2002).

[6] Under Section 104(a) of the Internal Revenue Code (I.R.C.), personal injury settlement proceeds are tax-free, but when paid in a lump sum, any investment earnings or interest paid on those funds as they grow over time is taxable. Pursuant to Section 104(a)(2) of the I.R.C., each structured settlement payment over the entire period of payment of the annuity stream is tax-free to the victim. The details of taxable consequences associated with interest gained after receipt of each annuity should be evaluated with a licensed tax professional in conjunction with a structured settlement advisor.

[7] Leslie Scism, Lawsuit Alleges MetLife Mistake Helped a Woman Keep Settlement Money From Her Daughter Insurer faces lawsuit over structured-settlement annuity related to old business, WALL STREET JOURNAL., February 21, 2018.

[8] Sally Stalcup, MSP Regional Coordinator, Region VI (May 25, 2011, Handout).

[9] In the Matter of Morris, 343 S.C. 651, 653-54, 541 S.E.2d 844, 845 (2001).

[10] In the Matter of: Charles Augustus Boyle, Attorney-Respondent, No. 268739, 2014 WL 10505032, at *2. (Attorney voluntarily relinquished his license to practice law after an investigation revealed among other misconduct, that he failed to pay his client’s medical bills from settlement proceeds in one case, failed to deposit settlement proceeds into a guardianship account established on behalf of a minor in another case, failed to notify Medicare that four other cases settled and failed to pay the Medicare conditional payment liens for those four cases).

[11] Excluding those individuals who responded “none of the above” to the question of how they file their taxes, gobankingrates.com reports from an internet poll that of just over 5,000 people, 36.8% said they use either an accountant (28.5%) or a brick and mortar tax company like H&R Block (8.3%) and 34.5% responded that they use tax filing software.

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Take Aways:

Protecting Medicare’s Past Interests (How Securing Medicare Lien Resolution Will Help Protect Dwindling Medicare Trust Funds)

The Road to Settlement Funds Mismanagement is Paved with Good Intentions

“Where There Is No Vision, the People Perish”

The Advantages of a Professional Custodian

Custodial Arrangements: Not just for Medicare Set-Asides

How to Use a Medicare Set-Aside Allocation (and, how NOT to)

Conflated Ideas

An Estimate, not a Formulary

What to Pay

Announced and Unannounced Changes in the New WCMSA Reference Guide Now in Version 2.9 – A Peak Behind the CMS Curtain

How to Secure Medicare Lien Resolution (While Protecting Medicare’s Past Interests)

Medicare Lien Resolution Road Map

Medicare Lien Waiver Process

Medicare Lien Compromise Process

The PAID Act Has a Nice Ring to It, Doesn’t It?

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