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CLASSIC LIST

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14/Jul/2021

On May 12, 2021, the Court of Appeals of Iowa published its opinion number 20-1250 in Forbes v. Benton County Agricultural Society and reminded everyone that in order to avoid surprises that lead to bad settlement results, plaintiffs in liability cases or employers in Workers’ Compensation cases, should always  perform a lien investigation into the existence of any lien holders, entities, or plans that could assert a claim for reimbursement of paid claim charges (for this article, all simply referred to as liens).  The next steps upon identifying any such liens would be to follow up with lien resolution audit, analysis, and negotiation.   While the negotiation of the lien is often finalized after settlement, it is a form of malpractice for an attorney to move to settlement without first inquiring as to whether liens exist.

In August of 2017, Larry Forbes sustained an injury while on the premises of the Benton County Iowa fairgrounds, and hired an attorney to file a negligence action.  After initial discovery, counsel for the Benton County Agricultural Society (Ag. Society), made an offer to Forbes’s counsel to settle for $10,000.

The letter referenced TRICARE but not Medicare and stated: “Based on information you have provided to date, Mr. Forbes had an excellent recovery, and his actual medical bills totaled $2,732, for which TRICARE apparently had a subrogation interest.” Burris added: “There is no indication that Mr. Forbes had to pay anything out-of-pocket, or that the medical providers are actually charging anything beyond the $2,732 paid.”

After negotiating, Forbes agreed to settle his suit with the Ag. Society for $12,500. In return, Forbes would dismiss the suit with prejudice.  Counsel for the Ag. Society then informed Forbes’ counsel that if Forbes was Medicare eligible, her client would require “final CMS letter, showing the amount owed, if any, in reimbursement to Medicare.”  However, after reaching the agreement, Forbes’ attorney learned that Medicare was pursuing a Medicare lien in the amount of $25,482 for reimbursement of  conditional payments it made toward Forbes injury related medical expenses. Forbes’ attorney attempted to renegotiate the settlement once the existing Medicare conditional payments came to light. However, the Ag. Society pushed back, insisting Forbes accepted the agreed upon terms of the settlement and was aware of his obligations to Medicare.  The Ag. Society moved to enforce the settlement by filing a motion for summary judgment.

When the case went to court, Forbes argued the agreement was unenforceable and claimed there was a “mutual mistake” because the parties failed to reach a “meeting of the minds.” The Iowa District Court for Benton County disagreed with Forbes and ruled in favor of the Ag. Society granting it summary judgment, based on its position that the settlement contract was enforceable.  The Court of Appeals of Iowa affirmed the District Court’s ruling, reaching its affirmation under the theory that settlement agreements are essentially contracts and because the District Court properly applied contract law. The Court of Appeals confirmed that  the lower court record showed a “meeting of the minds,” and that Forbes therefore, bore the risk of the mistake.

The Court of Appeals provided a detailed analysis on how a party may be considered to bear  the risk of a mistake such as when:

“(a) the risk is allocated to him by agreement of the parties, or

(b) he is aware, at the time the contract is made, that he has only limited knowledge with respect to the facts to which the mistake relates but treats his limited knowledge as sufficient, or

(c) the risk is allocated to him by the court on the ground that it is reasonable in the circumstances to do so.”

The court decided that Forbes bears the risk of mistake in two of these exceptions:

“The first of those two exceptions is called “conscious ignorance.” See id. cmt. c. Under that exception, even if Forbes did not agree to bear the risk of mistake, he was aware when he agreed to the settlement that he had limited knowledge about potential Medicare payments. And despite that uncertainty, he “undertook to perform” the bargain. See id. In doing so, he assumed the risk of the mistake. See id. We agree with the district court that Forbes had exclusive access to his medical records and the ability to investigate whether Medicare would seek a recovery claim.

On the second exception, even if Forbes were not consciously ignorant about the possibility of a Medicare recovery claim, the district court was still reasonable in assigning the risk of mistake to him. See Pathology Consultants v. Gratton, 343 N.W.2d 428, 438 (Iowa 1984); see Restatement (Second) of Contracts § 154 cmt. a. As the court noted, Forbes’s fall occurred nearly two years before he sued. In that time, he had the opportunity and the burden to inquire thoroughly into the payment of his medical bills. It made sense for the court to allocate the risk of any mistake to Forbes.

The full opinion and summary of the case can be read here: https://www.iowacourts.gov/courtcases/12533/embed/CourtAppealsOpinion.

 

Takeaways

Lien Investigation should be addressed during the pendency of any liability claims to determine who is paying for the injured party to recover from their injury and whether they will be asserting any subrogation/reimbursement right lien.  This is especially important  for those who are eligible/enrolled in any type of government issued medical insurance plan such as Medicare, Medicaid, VA/TRICARE/CHAMPVA, or who works/worked for a government entity (Such as FELA or FEHBA), or whose health plan is governed by federal law (such as an ERISA plan).

Patience is a virtue, especially in Lien Resolution and Lien Investigation. CMS’ guidelines allow for up to a 45-day response per inquiry. VA/TRICARE/CHAMPVA often take longer.  Parties should take this into consideration and be proactive and inquire as to liens early in the case, so that if a settlement opportunity arises, they are able to have an accurate picture of all outstanding liens at the right time.  Otherwise, they may be settling prematurely and as Mr. Forbes learned, at their peril.

Neglecting to address liens at the start of settlement is taking an unnecessary risk.  Working with an experienced lien resolution group will often produce faster response times and outstanding resolution results.  This is due in part to familiarity with the various lien processes, having lien holder contacts on file, use of electronic portals and secure email systems of recovery agents, use of proprietary diagnosis review software, and knowing which remedies may be available when, and how to best use the facts of cases in favor of the injured party when applicable.

Medivest can help you navigate through the complexities of lien resolution while you work toward a desired settlement outcome. Call us to today to speak to one of our highly trained settlement consultants for a free lien case consultation. For more information about Medivest or to refer a case, please call 877.725.2467 | Monday – Friday 8 am to 5 pm EST.


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01/Sep/2020

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On Friday August 21, 2020, the U.S. Attorney’s Office for the Middle District of Pennsylvania announced a $53,295 settlement of Medicare Secondary Payer Act, 42 U.S.C. §1395y(b)(2) (“MSP”) debt.  The settlement described in the press release demonstrates the U.S. Government’s continued interest and intent in enforcing the recovery provisions of the MSP.

Headlines on MSP recovery often focus on plaintiff attorneys who fail to adequately address Medicare conditional payment reimbursement claims, often called Medicare liens by attorneys and Medicare beneficiaries.  However, at fault parties and their insurance carriers need to pay close attention to these MSP recovery actions.  That is because the MSP provides for joint and several liability of primary plans such as liability carriers and self-insureds, including the potential for double damages, even after settlement proceeds have been paid and a release has been signed.

While the plaintiff attorney is the focus of the headline “Harrisburg Law Firm Pays $53,295 To Reimburse Medicare Program” the press release indicates that one of the defendants in the underlying improper drug dispensing case, paid $33,750 of the $53,295 to the U.S. for settlement of the MSP debt.  Insurance carriers or self-insureds sometimes insist on forwarding the lien payment to Medicare because they don’t want to pay a settlement to the plaintiff, only to later be asked to pay the Medicare portion (or more) again, if the plaintiff’s attorney has not timely paid the lien.

There is no information about why the plaintiff’s firm did not pay the amount demanded, but ultimately paid $19,545.15 toward the debt in this settlement with the U.S. Government.  The conditional payments were described in the press release as being $84,353 with the ultimate settlement amount being $53,295.  This seems to indicate that a 36.82% procurement cost reduction was allowed.  The settlement did not include a double damages request or even include any additional interest.

It is not clear from the press release whether there were any appeals over the amount of Medicare’s demand “determination” that led to the delayed payment of the lien and whether the release agreement contemplated the defendant/primary plan agreeing to pay the Medicare debt from withheld settlement funds.   Did the parties do their due diligence in investigating the debt?  Did they coordinate with each other over whether any Conditional Payment Letters contained amounts not related to the claimed/released injuries?  Did they coordinate their respective settlement notification/reporting to make sure that the ICD codes reported from the plaintiff and defense were aligned, and to help prevent an overreach in the future by Medicare in potentially flagging more than just injury related claims.

Could it have been similar to the recent Osterbye case in which the parties seemed to rely on Conditional Payment Letters as opposed to the official Medicare demand at the time of settlement? See JOSEPH C. OSTERBYE, as Administrator of the ESTATE OF…, Slip Copy (2020) 2020 WL 3546869, June 30, 2020.  In Osterbye, the Administrator of an estate of a deceased Medicare beneficiary sued the U.S. Government and the primary plan defendant alleging that there was a mistake of fact as to the amount owed to Medicare when the plaintiff failed to recognize that two files had been opened for the same case.  The plaintiff alleged that the defendant had “initiated” a separate conditional payment claim with Medicare without disclosing to plaintiff the amount of the separate conditional payment amount and arguing that plaintiff would not have settled the case if he had known that Medicare had a lien for over $100,000.00.  At the time of settlement, the Conditional Payment Letter that the plaintiff was in possession of only indicated about $13,000.00 in conditional payments.  In Osterbye, the NJ U.S. District Court denied the defendant’s motion to dismiss on the basis that the settlement may have been entered into based on mistake of fact indicating that the facts of the settlement will have to be investigated.   A similar issue was also addressed in the Langone state court case referenced in a prior blog article where parties mistakenly relied on Conditional Payment Letters instead of a demand letter.

Take Aways:

While some insist MSP recovery obligations are solely a plaintiff’s concern, defendants should pay close attention to make sure the debt is satisfied or otherwise resolved – Medicare will issue a case closed letter once the debt is satisfied even when a compromise is reached for an amount lower than the demand

Not all courts will be as accommodating to the plaintiff’s attorney as in the Osterbye Court.  Instead of a second bite at the settlement apple, the plaintiff’s attorney in Osterbye could have just as easily been accused of legal malpractice by the injured party, if there was a lack of disclosure or lack of competence by the attorney in verifying the proper amount of Medicare’s demand

Plaintiff and defense should cooperate with each other over what steps are being taken to confirm conditional payment resolution, including whether either party has hired a third party to investigate, audit, and/or negotiate the demand balance

Both parties should know that it is imperative to obtain a demand letter as opposed to a Conditional Payment Letter prior to settling a case unless the correct procedures have been taken via the Medicare Secondary Payer Recovery Portal to provide the 120 day anticipation of settlement notification and to request the Final Conditional Payment Calculation within 3 days of a settlement the details of which need to be timely reported

Plaintiff attorneys should be proactive in addressing Medicare’s past interests in a settlement by auditing payment summary forms to dispute non-injury related items, should timely notify Medicare of the settlement details to obtain procurement cost reductions, and should also consider whether lien resolution via waiver or compromise of the procurement cost reduced demand may be a suitable option to help the injured party retain more of the settlement proceeds.

 


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02/Jun/2020

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In March 2020, the U.S. Attorney’s Office, as an enforcement arm of the U.S. Department of Justice, filed a lawsuit on behalf of the Department of HHS and its sub agency, CMS, against an attorney in Texas alleging failure of the attorney representing a party injured in a motor vehicle collision to properly reimburse Medicare for conditional payments.  The case is U.S. v. Carrigan & Anderson, Case 4:20-cv-00991, Filed 03/18/2020 in U.S. District Court for the Southern District of Texas, Houston Division.

That would not really seem like big news as we have written about several conditional payment enforcement actions by the U.S. Attorney’s Office/Department of Justice over the past few years against plaintiff attorneys for a failure to properly inquire with CMS’s Beneficiary Coordination & Recovery Center (BCRC) contractor and address amounts to be reimbursed to CMS.[1]

However, unlike some of the other cases, the plaintiff attorney in this case took proactive steps attempting to address Medicare’s past interests in the liability settlement.  Unfortunately, the steps taken were misguided.  Had the attorney requested a compromise or waiver and/or appealed the demand amount by CMS, he would have likely fared better.

Prior to settlement, the attorney properly provided notification of the claim to the BCRC triggering the search by the BCRC for claim related conditional payments.  The case settled for $70,000.00 and the plaintiff attorney provided notification of the settlement to the BCRC.  Presumably, the plaintiff and attorney had received a copy of an earlier Conditional Payment Letter.  Within a few weeks after the settlement notification was provided, the BCRC delivered a demand letter in the amount of $46,244.74, demanding payment within the standard 60 day time period  from the date of the demand and informing of the right to appeal its demand amount.

Let Medivest Handle Your Lien Resolution Matters

The attorney creatively filed a motion with a state court in Texas challenging the amount demanded by Medicare and provided notice of same to the BCRC.  He called the motion, Motion To Determine Portion of Plaintiff’s Settlement That Constitute Reimbursement of Medical Payments Made in and Regarding Settlement.  The court reviewed submitted evidence including an affidavit signed by plaintiff counsel suggesting the claim settled at 1/10th its full case value, and issued an order reducing the amount to be paid to Medicare by 90% to a figure of $4,700.00.  Plaintiff counsel submitted a copy of the order to the BCRC.  The full demand amount went unpaid and began accruing interest at nearly 10% APR on the 61st day post-demand (for current demands, the annual interest percentage rate is now over 10%).

As of March 18th, 2020, when the U.S. filed its recovery action in U.S. District Court, the alleged reimbursement amount had increased to $53,445.93 including interest. The U.S. requested recovery of its fees and costs but interestingly did not request double damages.

The U.S. Attorney’s position is that state courts lack authority to make determinations of federal law including amounts owned to Medicare under the Medicare Secondary Payer Act, 42 U.S.C. Section 1395y(b)(2) (MSP).   Furthermore the complaint asserts that because there is an administrative procedure in place under the current MSP regulations, if the plaintiff and attorney disagreed with the demand amount, the administrative appeals process should have been followed, i.e. that there was a failure to exhaust administrative remedies, an express condition precedent to seek redress in U.S. District Court for appeal of Medicare Initial Determinations such as the amount of a demand or a denial of a waiver.

Take Aways

Dispute and Appeal
  • Review each conditional payment letter to verify each reimbursement claimed is injury related
  • Dispute all non-injury related claims in a timely manner before the matter settles or before CMS issues its final demand
  • If unhappy with a CMS reimbursement of conditional payment demand, consider appealing through CMS’s administrative appeals process
  • You have 120 days to request a first level appeal in writing

In the meantime, consider one of the other post demand dispute processes allowed that may offer your client relief from what you consider to be an unreasonable demand.  Depending on the outcome, the appeal may not be necessary.

Compromise Requests 
  • Requesting a compromise to the BCRC offering a sum certain to resolve the claim laying out arguments based in equity similar to the ones made to the state court judge in the case above and/or according to regulations governing compromises by the U.S. Government existing in the CFR
  • Compromise requests are forwarded by the BCRC to the applicable CMS Regional Office (RO) and a response is provided within 45 days of the BCRC’s receipt of the request
  • Responses will either be accepted, countered, or rejected
Waivers
  • If not happy with the response to the compromise request and if the financial condition of the plaintiff is such that they have a hard time meeting their day to day living expenses, a waiver request could be an alternative option
  • Waiver requests entail filling out a detailed Social Security Administration financial form called the SSA 632-BK
  • To make its decision, CMS will evaluate resources of the plaintiff, income, the amount of the settlement, outgoing expenses, and hardship factors and may take up to 120 days from start to finish so you need to be mindful of the appeal deadline for the original demand.

 

[1] January 2020 DOJ US Attorney https://www.medivest.com/philadelphia-based-personal-injury-law-firm-agrees-to-resolve-allegations-of-unpaid-medicare-debts/ Philadelphia plaintiff firm settles for $6,604.59,

Nov 2019  US Attorney General – Baltimore plaintiff firm settles with Medicare for $91,406.98

March 2019 DOJ US Attorney  – Maryland plaintiff firm settles with Medicare for $250k

June 2018 DOJ US Attorney – Philadelphia plaintiff firm settles with Medicare for $28k

 


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30/Jan/2020

A state appellate court in Colorado just held that hospitals in Colorado may forego billing Medicare or Medicaid even when an injured party is a Medicare or Medicaid beneficiary, and may proceed against the injured party as long as the hospital follows certain procedures. See Harvey v. Centura Health Corporation and Catholic Health Initiatives, — P.3d —- (2020) Court of Appeals No. 19CA0091 January 30, 2020*.

Those procedures are that the hospital must first submit charges to the “property and casualty insurer and primary medical payer of benefits available” to the injured person when that person is injured as a result of negligence or wrongful acts of another person, before filing a lien. The state appellate court clarified that neither Medicare nor Medicare are primary payers of medical benefits and because of this, held that Hospitals in Colorado do not need to bill Medicare and/or Medicaid before filing a lien.

Therefore, Colorado hospitals interested in collecting larger amounts of money than Medicare and/or Medicaid will pay will likely forego billing Medicare and/or Medicaid, and will put the at fault party on notice of its charges, will bill the liability carrier for the at fault party, and then proceed to file a lien against the injured party likely to receive a third party liability settlement.

Of course the charges must be related to the underlying third party liability injury and must be reasonable and necessary. So even if a Colorado hospital lien is perfected, the injured party has a right to dispute whether the charges are injury-related and to contest the reasonableness or necessity of the charges.

Call Medivest when your injured client is facing a hospital lien to allow our specialists to first determine if all of the requested charges are related to the underlying injury, and to negotiate with the lien holder or its recovery agent regarding the amount of reasonable and necessary charges. Don’t let your client pay unreasonable or unnecessary hospital bills even when a lien is filed!

*While this case has not been released for publication in permanent law reports and could be subject to a petition for rehearing in the Court of Appeals or for Certiori in the Supreme Court of Colorado, it is important to be aware of hospital practices in this regard.

 


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12/Nov/2019

A. How and When Medicare Liens Arise

Under the Medicare Secondary Payer Act, found at 42 U.S.C. §1395y(b) (MSP), Medicare has a right to be reimbursed for payments it has made for a Medicare beneficiary’s medical treatment when the Medicare beneficiary is compensated for the treated injury by a third-party source. While Medicare’s rights to recovery under the MSP are so strong that they have been described as a super lien, that does not mean that your client has to always pay the full amount requested by Medicare.

The MSP right to reimbursement includes both a direct statutory right and a subrogation right, with a variety of recovery remedies available to the U.S. Government. In some jurisdictions, similar MSP recovery rights extend to privately administered Medicare benefits under Part C (Medicare Advantage Organizations or MAO’s) and Part D Prescription Drug Plans via the MSP’s private cause of action provision. The recovery rights described exist without regard to the date of service for the medical items, services, or expenses (medicals). Most attorneys know that they should check to see if traditional Medicare or a MAO has paid for medicals related to a compensated injury and address paying the amount or negotiating payment for same from the settlement proceeds. This article will explore ways to secure satisfactory lien resolution, focusing on traditional Medicare liens.

It should be noted that if a Medicare beneficiary begins billing Medicare or a MAO for injury related medicals after the settlement date/date compensated for the tort claim, recovery rights associated with those post settlement medicals exist in the same way that recovery rights exist for pre-settlement injury related Medicare covered medicals. Under such a post settlement scenario, the need for a Medicare lien investigation and resolution could essentially start all again.

B. Medicare Secondary Payer statute, 42 U.S.C. § 1395y(b) (MSP)

1. History of the Medicare Act and the Medicare Secondary Payer Act.

a. Background and Scope – Both arise from the Social Security Act of 1935. Medicare is a federally funded single payer national healthcare insurance administered by the U.S. federal government, through the Department of Health & Human Services (HHS) under authority of the Social Security Act of 1935. Medicare is funded by a payroll tax, premiums and surtaxes from beneficiaries, and general revenue. HHS delegates running the Medicare program and interpreting Medicare law and implementing regulations to the law to the Centers for Medicare & Medicaid Services (CMS). Medicare covers medical expenses not on the list of exclusions found in 42 U.S.C. §1395y(a)(1) typically for U.S. Citizens (although exceptions exist allowing eligibility for some non-US Citizens as well), who are 65 and older, or younger than 65 with disability status determined by the Social Security Administration as well as people with end stage renal disease (ESRD) and amyotrophic lateral sclerosis (ALS or Lou Gehrig’s Disease). It is made up of parts such as Part A (mainly inpatient hospital insurance and skilled nursing care) and Part B (doctor visits, durable medical equipment, outpatient hospital care and some physical and occupational therapy and some home health care), the two together are known as traditional Medicare; Part C, covering Part A and B services but administered by private insurers; and Part D, covering Prescription Drug Plans (PDPs) that are also administered by private insurers.

b. SSDI is for people who qualify under the Social Security Administration’s definition of disability. SSDI payments start about 5-6 months after SSDI eligibility is determined depending on the date eligibility is first established. Individuals approved for SSDI also become eligible and qualify for Medicare two years after they begin receiving the SSDI payments. Both SSDI and Medicare are entitlement-based in contrast with Medicaid and SSI, that are largely needs-based.

c. Since the Medicare law’s inception in 1965, Medicare has been secondary to Workers’ Compensation. Therefore, if an injury occurred while at work, the Workers’ Compensation carrier would take responsibility for payment of those injury related medicals in accordance with the applicable state statutory rates and procedures. However, in 1965, there was no provision in the law pertaining to payment of medical bills related to liability claims for injured Medicare beneficiaries. Therefore, Medicare would (most often) pay for all medical treatment within its scope, leaving private insurers (other insurance) to work out who would cover non-Medicare covered services.

2. The Medicare Secondary Payer Act (MSP) was Enacted in 1980.

a. In 1980, the Medicare Secondary Payer Statute (MSP) was enacted. 42 U.S.C. §1395y(b) et seq. is commonly called the MSP Act or MSP Statute and is also referred to as the Medicare Secondary Payer provisions of the Social Security Act (SSA). While it has different statutory references, it is the same law and has parallel sequences of each number and letter after the section 1395y or 1862 as follows: 42 U.S.C. § 1395y(b) = 42 U.S.C. §1862(b) of the SSA.

b. The MSP mandates Medicare to be a secondary payer to other forms of health insurance such as group health plans (GHPs), as well as other payment sources such as non-group health plans (NGHPs) when these primary plans are responsible for payment.

c. A “primary plan” is defined in 42 U.S.C. §1395y(b)(2)(A) to mean “a group health plan or large group health plan to the extent that clause (i) applies, and – a workers’ compensation law or plan, – an automobile or liability insurance policy or plan (including a self-insured plan) – or no fault insurance, to the extent that clause (ii) applies. An entity that engages in a business, trade or profession shall be deemed to have a self-insured plan if it carries its own risk (whether by a failure to obtain insurance, or otherwise) in whole or in part. 42 U.S.C. 1395y(b)(2)(A)(ii).”

d. All plans other than the group health or large group health plans are categorized by the Centers for Medicare & Medicaid Services (CMS) as Non Group Health Plans (NGHPs). While the MSP applies to Group Health matters, it is in the NGHP area that the MSP compliance industry focuses its attention. NGHPs are those entities that demonstrate obligations of payment as primary payers by either statute (think workers’ compensation or no fault insurance) or by virtue of resolution of claims through settlement, judgment, award or other payment (think liability matters), regardless of whether liability is admitted. Most liability releases specifically deny liability for alleged liability claims. The payment obligation that triggers the MSP arises in the tort scenario when payment is made. There are no defenses listed in the MSP associated with how the demonstration of the obligation arises; when a party begins to make payments under a statute or contract for insurance such as workers’ compensation or under the state’s no fault law under terms of an insurance contract, or when a party settles a liability case, the payment obligation is “demonstrated” and the party responsible for payment is by the MSP, primary to Medicare.

e. The MSP was enacted to curb the rising costs of Medicare and designed to make insurers responsible for payment of injury related treatment primary payers and Medicare, the secondary payer. See Humana Medical Plan, Inc. v. Western Heritage Insurance Company, 832 F.3d 1229, 1234 (11th Cir. 2016). Regulations interpreting the MSP are found at 42 C.F.R. §411 et. seq.

f. To accomplish the goal of curbing Medicare costs, the MSP general rule – 42 U.S.C. §1395y(b)(2)(A) – prohibits Medicare from making payment when a primary plan should make the payment. Specifically, a Medicare payment may not be made
“to the extent that –
(i) payment has been made, or can reasonably be expected to be made, with respect to the item or service as required under paragraph (1) [pertaining to GHPs], or
(ii) payment has been made or can reasonably be expected to be made under a workmen’s compensation law or plan of the United States or a State or under an automobile or liability insurance policy or plan (including a self-insured plan) or under no-fault insurance.”

g. There is only one exception to the prohibition of Medicare making payment when there is a primary payer that should make the payment. The exception authorizes Medicare to make payments called conditional payments if a primary plan “has not made or cannot reasonably be expected to make payment with respect to such item or service promptly.” 42 U.S.C. §1395y(b)(2)(B)(i).

  • Prompt or promptly, when used in connection with primary payments, except as provided in § 411.50, for payments by liability insurers, means payment within 120 days after receipt of the claim. 42 C.F.R. § 411.21.
  • Under 42 C.F.R. §411.50, prompt or promptly, when used in connection with payment by a liability insurer means payment within 120 days after the earlier of the following:
    (1) The date a claim is filed with an insurer or a lien is filed against a potential liability settlement.
    (2) The date the service was furnished or, in the case of inpatient hospital services, the date of discharge. 42 C.F.R. § 411.50

The payments allowed to be made by Medicare are considered “conditioned on reimbursement” to Medicare by the primary plan. These payments could occur either before a settlement or after a settlement so settling parties should always address and make sure to resolve conditional payments a/k/a Medicare liens that arose prior to settlement from the settlement proceeds (even if negotiated to a compromised/reduced number) and additionally, due to the MSP, settling parties should also consider how to avoid conditional Medicare payments after a settlement.

h. Congress enacted the MSP provisions to address enforcement of Medicare as a secondary payer to WC and included the various other types of insurance as primary plans at that time.

i. Between 1980 and 2001, there was very little enforcement of the MSP.

j. CMS Memos of note. In July 2001, CMS issued the Patel memo which mentioned Medicare Set-Asides (MSAs) for the first time. In 2011 – the Stalcup Memo from the Dallas CMS Regional Office was the first time liability MSAs (LMSA’s) were mentioned in a CMS memo with the most detailed guidance on CMS’s position of a need to consider and protect Medicare’s interests for liability as well as Workers’ Compensation settlements to protect the Medicare Trust Funds in a manner consistent with the MSP.

k. The MSP gives Medicare both direct “lien rights” (42 U.S.C. §1395y(b)(2)(B)(iii)) to be able to collect its conditional payments as well as subrogation rights whereby the MSP subrogates the United States to “any right under this subsection of an individual or any other entity to payment with respect to such item or service under a primary plan.” 42 U.S.C. §1395y(b)(2)(B)(iv). This can be an important distinction when it comes to how CMS and courts interpret whether and to what extent an apportionment calculation may be performed to the outstanding conditional payment amount by discounting procurement costs including attorney’s fees and costs in securing the settlement, judgment or award. Actions by the U.S. on behalf of HHS/CMS via the MSP’s direct right of recovery (through the Department of Treasury or potentially the Department of Justice) against entities responsible for payment or those that have received some of the settlement proceeds is separate from its right of subrogation to recover reimbursement of Medicare conditional payments. The MSP’s direct right of recovery has in some cases been interpreted to not be limited by the equitable principle of apportionment stemming from the subrogation right. See Social Security Act, § 1862(b)(1), (b)(2)(B)(ii), as amended, 42 U.S.C.A. § 1395y(b)(1), (b)(2)(B)(ii); 42 C.F.R. § 411.24(c). Zinman v. Shalala, 67 F.3d 841 C.A.9 (Cal.1995).

l. Considering Medicare’s future interests. Without a plan for future care, CMS’s policy regarding settlements has been to presume that the entire settlement amount is designed to compensate the injured party for future medical expenses. While CMS has not yet promulgated regulations regarding how Medicare beneficiaries should ideally protect Medicare’s future interests, because the MSP liability extends to the primary payer as well as any entity or person that receives payment from a primary payer, it is common for settling parties to discuss and consider and sometimes estimate Medicare’s potential future exposure (and therefore the potential recovery that could result from said exposure) on a case prior to settlement. This analysis may involve the use of a MSA allocation report.

m. Having an injured party agree to use other insurance or to agree not to bill Medicare is not adequate according to CMS’s Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA) Reference Guide. This Reference Guide focuses on the voluntary submission process for MSA’s in the Workers’ Compensation realm that meet certain workload review threshold dollar/time frame criteria. In the absence of a corollary guide for liability settlements, the WCMSA Reference Guide stands as the current CMS policy for all NGHP matters such as liability (including self-insurance), automobile, Workers’ Compensation, and No Fault settlements. With respect to any matter or settlement inside or outside the WCMSA Reference Guide workload review thresholds, CMS has indicated that without a plan for future care, CMS could deny injury related medicals up to the entire amount of the settlement. (See discussion on pages 8-9, under Section 8.1, titled Review Thresholds).

n. Keep in mind that there is no reference to a MSA in the MSP or any of its corresponding regulations. While Liability MSA allocation reports (LMSA’s) are not currently being reviewed by CMS Regional Offices or the Workers Compensation Review Contractor (WCRC), the current contract that started in 2018 that the WCRC operates under, contemplated some level of review for LMSAs. While regulations or at least notification of regulations, are expected as early as October 2019 regarding protection of future interests for liability settlements, parties in the liability field (and Workers’ Compensation settlements outside of workload review threshold time periods/amounts) have generally been left to “read between the lines” as to what is an adequate consideration and protection of Medicare’s future interests. For those Medicare beneficiaries that are more risk adverse, an option exists to request the respective Regional Office (RO) to update the common working file of any Section 111 reported settlement with an agreed LMSA amount in an effort to help provide a ceiling to the amount of money that would need to be exhausted before Medicare should begin paying for the injured plaintiff’s injury related Medicare covered medicals. Attorneys should counsel their clients to explain these sensitive issues and document their files in a way that will help show how Medicare’s interests were considered in the settlement.

o. In conjunction with considering a Life Care Plan and possible consultation with an economist, plaintiffs’ counsel may also choose to obtain a LMSA to learn of potential future medical expenses (whether Medicare allowable and reimbursable or not) as an aid to understanding and articulating some of these important economic damages for his or her injured client. Defense counsel will typically want to do their own calculations according to the standards set by CMS policy to get a grasp on the Medicare exposure issue regarding future medicals. This article will not address the protection of Medicare’s future interests further, or the intricacies of equitable apportionment, as it relates to LMSA’s. However, evaluating a plan for future care such as setting aside a reasonable amount of funds for Medicare allowable and reimbursable future medicals, and restricting the spending of those funds to injury related Medicare allowable medicals, can often be a wise MSP compliance procedure. The balance of this article will focus on protecting Medicare’s past interests by investigating and addressing a variety of Medicare based conditional payment reimbursement claims (commonly referred to as liens) at or near the time of settlement.


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07/Nov/2019

Once again, a law firm was alleged to have failed to properly reimburse Medicare for conditional payments made by Medicare for injuries that were compensated in at least one settlement on behalf of an injured client. The press release, which can be found here involves a fact pattern a little different from a few other recent recovery actions by the U.S. Government related to alleged MSP violations. Often attorneys will refer liability cases to other attorneys or firms that handle personal injury, premises liability, and medical malpractice claims. The attorney that refers the case is typically allowed to share in the attorney’s fees obtained upon successful resolution. The fees obtained by the referring lawyer/firm are supposed to approximate and reflect a reasonable amount for the amount of work they do. Some attorneys do a thorough intake procedure and maintain contact with the client throughout the representation, are copied on all correspondence, and may provide input on strategy and procedure. After all, they have a responsibility to the injured party that originally contacted them in the first place. This matter involved six cases the U.S. Attorney’s office was investigating and of the six, four had been referred by the investigated firm to co-counsel. The firm was held responsible for the alleged failures to reimburse Medicare, regardless of whether they were a referring firm for a case handled by another firm or whether they were the handling the claim from start to finish.

We have provided other instances over the past few years where settlements were made with the Department of Justice including here and here.

However, Plaintiff attorneys in particular should be on high alert because the most recent enforcement actions have been focused on attorneys that disbursed funds to their clients after case finalization but failed to ensure that Medicare’s conditional payments were paid or otherwise resolved.

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 and confirm all injury-related Medicare expenditures for past medicals at the time of settlement.
  • Even if you “only” refer an injury case to another attorney who may do a majority of the work on the case, you should take an interest in verifying the existence of any liens that need to be addressed.
  • Due diligence is required for both the defense and plaintiff side to avoid unnecessary MSP legal exposure.
  • In addition to checking and verifying the correct demand amounts from CMS contractors, prior to settlement, steps should be taken by all parties to expand lien search inquiries beyond traditional Medicare (and Medicaid) to determine whether a Medicare Advantage Plan/Organization (MAP/MAO) or Prescription Drug Plan (PDP) made any conditional payments that could be recovered under the MSP. This is because the MSP private cause of action provision has been held in at least two federal circuits to apply to MAO’s and would likely be held to apply to PDP’s too.
  • There is value in evaluating Conditional Payment Summary forms that accompany the conditional payment correspondence from Medicare to confirm all entries on the form are injury-related and/or determine whether some entries should be disputed.
  • During the lien investigation process, parties should analyze whether a compromise (reduction) of a lien or potentially a waiver may be appropriate.

It is crucial for prospective settling parties to investigate conditional payment reimbursement amounts or work with an entity familiar with lien investigation procedures.
Medivest provides lien resolution services to help parties satisfactorily negotiate outstanding public and private health care matters including Medicare liens, Medicaid liens, Veterans Administration/TriCare liens, hospital liens, and doctors’ bills. Our lien resolution team works hard to dispute non-claim related bills, resolve and reduce outstanding bills/liens, and will seek refunds for amounts already paid when appropriate. Please reach out to discuss lien resolution today.

 


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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.

 


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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.

 


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