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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. Furthermore, 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. 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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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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Protecting Medicare’s interests in a settlement is a legal requirement. In 1980 Congress enacted the Medicare Secondary Payer Statute (42 U.S.C. 1395y(b) or MSP), giving Medicare rights as a “Secondary Payer”. While the MSP does not specifically state how a party should protect Medicare’s future interests, the MSP law prohibits Medicare from making a payment where there is a primary payer involved but provides one exception for what is known as conditional payments. Medicare may make a payment under certain circumstances when a primary payer is involved such as a liability carrier or self-insured, and the primary payer has not yet demonstrated its payment obligation by settling a case or paying a judgment. These payments are called conditional payments because the Medicare payment is conditioned upon being reimbursed by the primary payer. The right to reimbursement is a direct statutory right of the U.S. for recovery of conditional payments, that carries steep interest assessments over 10% for demands not paid within 60 days and when left unpaid, can lead to recovery of double damages in litigation. The MSP also provides a right of subrogation where the U.S. is subrogated to the rights that Medicare beneficiaries have. It is important to know that along with the rights of the U.S. under traditional Medicare, which encompasses Medicare Part A and Part B, Medicare Advantage Plans also known as Medicare Advantage Organizations (Medicare Part C), and Medicare Part D Prescription Drug Plans, may assert a private cause of action under the MSP against primary payers and in some cases, those who receive payment from primary payers.

The MSP outlines what plans are deemed primary to Medicare. These plans or types of insurance are auto insurance, liability insurance including self-insured plans, workers’ compensation and no-fault insurance. Collectively, these are referred to as Non-Group Health Plans or NGHP. Medicare’s interests in a settlement applies not only to past payments (think Medicare liens) but to future medicals as well. When describing conditional payments and the right of the government to reimbursement, the MSP does not distinguish between pre-settlement conditional payments and post-settlement conditional payments. Therefore, Medicare’s rights to recovery may apply to post-settlement conditional payments anytime Medicare is prematurely billed for injury related medicals after settlement. In the Workers’ Compensation context, the policy of the Centers for Medicare & Medicaid Services (CMS), as the agency that runs Medicare, traditionally has looked to the employer or insurance carrier for the employer as the debtor for reimbursement of conditional payments arising prior to settlement. In the liability context, the Medicare beneficiary is considered the debtor for conditional payments. Because the MSP allows recovery from both the primary payer and any person or entity that receives payment from a primary payer such as the contingency fee of an attorney being paid from settlement proceeds, attorneys need to be aware of how to protect not only their clients but themselves from collection actions under the MSP.

Completing a Medicare lien investigation and reimbursing Medicare for past payments related to a claim is what most parties will do to consider Medicare’s past interests in a case. However, the most frequently overlooked piece when settling a liability claim is determining how much of the settlement money is being paid to compensate for future medicals and of that amount, how much of that would ordinarily be covered by Medicare. In other words, some trial attorneys may look at all the available damages when proceeding with a case but may not realize that they should also demonstrate a consideration of Medicare’s future interests regarding the future medicals. The repercussions of not addressing Medicare’s future interests in a case could result in Medicare denying payments for case related medical items, services, and/or expenses. This is Medicare’s primary enforcement mechanism post settlement. If done properly, actions taken during the representation of the injured plaintiff (whether enrolled in Medicare at the time of the representation or not) will help ensure that the injured Medicare beneficiary will have funds available to get the treatment they need and future Medicare entitlement for case-related body parts. Protecting Medicare, and the Medicare beneficiary, is a long-term play.

There are several options regarding how to consider Medicare in a settlement. The options will largely depend on the details of the case and there is not a single method that can be applied across the board. The Medicare Set-Aside (MSA) allocation is used frequently on workers’ compensation claims as a method to estimate Medicare’s future interests in a case. Medicare has offered guidance and put in place a voluntary submission process by which they will review MSA allocations that meet certain workload review threshold categories and will issue an approval (or counter approval) on the proposed amount. CMS, as the sub agency under DHHS that runs the Medicare program, publishes a WCMSA Reference Guide that outlines the format for MSA allocation reports and what information should be provided to have the MSA reviewed. Even though there is a well-established process for review of WCMSAs, there is no law requiring the completion of a MSA allocation on a WC case or any case.

As of July 2019, Medicare has avoided setting up a formalized process for review of liability MSAs and has not issued formal guidance or regulations regarding liability MSAs. It is this lack of guidance or a formalized process (like there is in WC) that has led many to believe they do not need to be concerned with Medicare’s future interests in a case. The general approach is to determine whether Medicare made conditional payments pre-settlement and if so, pay the pre-settlement Medicare lien (or negotiate it to satisfactory resolution), and close out the case. This approach is only the first step in adequately addressing and protecting Medicare’s interests. If you only consider Medicare’s past interests, you are placing you and your clients at risk.

Medicare will actually be aware of the case and the associated injuries. They are tracking this information via the MSP’s Mandatory Insurer Reporting (MIR) provision that comes out of Public Law Section 111 and is most commonly known as Section 111 reporting. Section 111 reporting is codified in the MSP under 42 U.S.C. §1395y(b)(8) and establishes MIR for either ongoing payment obligations or total payment obligations demonstrated by payments made by auto insurance, liability insurance including self-insureds, workers’ compensation plans or insurance, or no-fault insurance. If payment of over $750 is made regarding a claim of an individual who is a Medicare beneficiary, the primary payer (source of funds) is required to electronically report the amount of the payment, the date of the payment, the name of the Medicare beneficiary, date of the incident, and all the medical codes associated with the claimed injury (sometimes referred to as the Big 5), and a huge number of other data fields to Medicare. The information becomes integrated into what is known as the common working file for that Medicare claimant. Medicare places electronic markers for the claimant and for the medical codes (ICDs and CPTs) associated with the claimed injury. This information is ultimately used to “track the case” to ensure that Medicare is reimbursed for past payments (liens) and to help Medicare avoid making payments for future medical care related to the case for which it is not the primary payer. Medicare uses this information to monitor the file, check for unpaid liens, and notify parties of discrepancies. The MSP initially described penalties of $1000 per day per claim but was later amended in 2012 with the SMART Act and now describes financial penalties of “up to $1,000 per day per claimant” for noncompliance of any primary payer. CMS has not yet promulgated regulations regarding exactly how civil money penalties will be assessed and whether there will be safe-harbors for bona fide errors associated with the reporting process.

The Office of Management and Budget (OMB) provided indications in December of last year that CMS will be providing two Notices of Proposed Rulemakings (NPRMs) related to the enforcement of the MSP. Each are scheduled to be issued no later than September 2019. While the first could relate to any NGHP cases, because WC already has both regulations in the Code of Federal Regulations addressing Workers’ Compensation cases as well as a Reference Guide concerning WCMSAs, and no-fault claims don’t typically have future obligations, many in the industry have surmised that this first rulemaking will address protecting Medicare’s future interests in liability cases and putting back on the table the adoption of regulations or at least guidance (like a LMSA Reference Guide) on a possible review and approval process with workload review thresholds for CMS review of Liability Medicare Set-Asides (LMSAs). The second NPRM that is scheduled for the same time period will relate to the civil monetary penalties associated with non-compliance with Section 111 reporting. Once these two NPRMs are released, the best practice compliance behaviors for parties on both sides of liability cases should become even more clear.

Medicare’s primary enforcement mechanism regarding protection of Medicare’s future interests and the Medicare Trust Funds is denial of payments for medicals related to compensated third party injuries. However, what happens when Medicare’s computer system doesn’t catch a body part or claim previously compensated in a third-party settlement? Anytime and every time Medicare pays for those injury related medicals when it should not have, those conditional payments accrue as a growing collection action on behalf of Medicare. Our company has seen demands for payment that have included requests for reimbursement of post settlement medicals. We have also seen an uptick in recovery actions by the Department of Justice concerning collection of conditional payments. In March of 2019, a law firm in Maryland agreed to pay $250,000 to resolve a Medicare conditional payment demand on a case where the firm had already disbursed net settlement proceeds to its client. Last June, it was a law firm in Philadelphia that reached settlement with the Department of Justice to reimburse Medicare for conditional payments that were not paid out of trust and had already been disbursed to the client. Just because a plaintiff’s medicals might have been paid for by Medicare after a settlement in the past, does not mean that Medicare won’t deny those items or services in the future, or that it won’t demand repayment when it determines it made conditional payments. Imagine what could happen if Medicare began searching every single payment it makes and brushing that payment up against every settlement over $750 reported by insurance carriers. This is the future and could lead to some eye-popping dollar figures related to parties and legal representatives that failed to pay past Medicare liens and regularly fail to prevent future Medicare liens.

We should also not lose sight of the fact that if an injured individual does not set aside funds for injury related Medicare covered medicals and settlement funds are no longer available, that individual may not be able to get the treatment they need. Sadly, we often see that the MSA funds are the only funds remaining after about five years following a settlement. On a positive note, if MSA funds are exhausted and exhausted properly with the attestations and accounting that CMS likes to see, Medicare will typically step in and become the primary payer for those case related items going forward. Even though there is no law requiring the preparation of a MSA allocation, it is the safest and most conservative approach that can be taken. The injured party will obtain a detailed report outlining anticipated future medical care costs that are normally covered by Medicare. Along with a non-qualified report that typically comes along with a MSA allocation, you will have a better economic picture of all items, services and expenses reasonably expected in the injured plaintiff’s future. Obviously there will often be cases with such significant injuries and accommodations to living and transportation that could also benefit from an evaluation by an economist to take inflation into consideration and Life Care Plans that examines case management costs and some other costs that may not be evaluated in a MSA to help round out the best evidence to build your client’s case.

With a healthy respect for the extraordinary reach of the MSP, if the MSA funds administered are the total amount of funds projected in a LMSA and CMS is notified of the settlement and the amount of the MSA (different from asking CMS to review a LMSA), chances are less likely that there will either be a denial of the payment of post settlement injury related Medicare covered medicals after proper exhaustion or that post-settlement conditional payments would ever arise. Of course, when LMSAs are apportioned, questions abound whether Medicare may ever demand exhaustion of a full projected MSA versus an apportioned dollar amount that takes various factors into consideration of why a liability case may settle for less than full value. We could receive some indication of answers once regulations are promulgated regarding liability futures. However, in the meantime, a MSA allocation offers valuable protections regardless of whether an apportionment is calculated, because the MSA helps limit the extent of Medicare’s reach into a settlement. Without it, the default position taken by CMS for liability cases is that without a plan for future care, the entire settlement will be treated as the amount compensated for as future Medicals. Therefore, CMS would look for the entire value of the settlement to be exhausted in payment of future Medicals before Medicare would pick up coverage for that injury. Contemplating the MSA allocation in the settlement and making sure MSA funds are spent according to Medicare guidelines via professional administration is the safest and most conservative approach that can be taken to not only protect Medicare’s interests in a case, but to protect an attorney and their client from collection actions by CMS, helping to provide peace of mind for your injured clients.

 


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