professional administration - Solutions for Workers' Compensation and Liability Settlements

28/May/2021

Medivest will be joining the Ohio Association for Justice June 14 -18 for the biggest event in Ohio plaintiff’s law, the 2021 OAJ Annual Convention. This year’s Convention is designed with flexibility in mind, with a hybrid option to attend in-person and virtually as well as a virtual-only option. Virtual participants will receive links to all live streaming options and complimentary access to the Annual Convention streaming library through the end of September. Tune in for your favorite sessions and earn the rest of your CLEs where you want, when you want. Earn up to half of your biennial CLEs while networking and building connections with plaintiff’s attorneys from around the state and midwest.

Director of Sales, Scott Mattingly will be in attendance. Please visit him at the Medivest booth for information regarding Professional Administration, Lien Resolution, Medicare Set-Aside Reports, and all of Medivest’s settlement solutions for workers’ compensation and liability cases. For more information on the event please visit https://www.oajconvention.com/.

Sandy Simpson

20/Nov/2019

Are you self-administering your Medicare Set-Aside (MSA) funds or do you have a client doing so? If so, you are not alone. According to the National Council on Compensation Insurance, Inc. (NCCI) recently published a research brief updating its 2014 study on Workers’ Compensation MSAs (WCMSAs) and WCMSA reviews and reported that, between 2010 and 2015, approximately ninety-eight percent (98%) of the Workers’ Compensation cases included in the over 10,000 case sample, settled with the injured worker choosing to self-administer their MSA funds. Due to the large percentage of injured workers opting to self-administer, the Centers for Medicare & Medicaid Services (CMS) published a free downloadable, 31-page “Self-Administration Toolkit”, now in Version 1.3 which was updated on October 10, 2019.

If you’re a Claimant/Applicant/Petitioner’s attorney settling a WC case and your client is considering self-administration, below are a couple of blogs you may consider reading before deciding if self-administration is the best option.

CMS simply states that a competent administrator must be chosen to administer the MSA funds. The key word is competent, and it is the responsibility of the settling parties to deem whether the injured person is sufficiently competent to self-administer an MSA account. Below are a couple of scenarios regarding options for administration of MSA funds.

Injured Person Self-Administers his/her MSA Funds – The injured person handles his/her own MSA funds and assumes responsibility for handling the MSA funds per CMS’ guidelines for Medicare Secondary Payer (MSP) compliance.
Engage a Professional Administrator – Engage a third-party professional administration company to administer the MSA funds, coordinate all aspects of billing, complete annual reporting to Medicare as needed, maintain accounting records, etc. The Administrator assumes responsibility for handling the funds per CMS’s guidelines for compliance. Per CMS’s guidelines, fees for professional administration cannot be deducted out of the corpus of the MSA funds.
Engage A Trustee – Engage a person or professional entity (like a bank or trust company) who manages property or assets that have been placed in a Trust (i.e. a Special Needs Trust (SNT)). Per CMS’s guidelines, fees for a trustee cannot be deducted out of the corpus of the MSA funds.
Appointed Guardian or Conservator – An individual that has been determined to be mentally or physically incapacitated by a court of law, or when a minor is in need of an adult to manage his/her property, a guardian or conservator may be appointed.

Post Settlement Tips for Self-Administration

Per CMS’ guidelines, do not co-mingle MSA funds with personal funds. Place the MSA funds into a separate, interest bearing, FDIC insured account.
Keep pertinent documents regarding the settlement in a safe place. You may need to refer to these documents for paying claims, if applicable. Examples include: o Executed Settlement
o Power of Attorney
o Conservator or Guardianship appointment
o Trust documents
o MSA Allocation Report / Life Care Plan / Medical Cost Projection Report
or a report that was prepared and used in the settlement to determine
and allocate the total future Medicare Set-Aside (MSA) funds.
o CMS Approval Letter, applicable if the MSA was submitted to CMS for review
o Accurate annual accounting, post settlement
o Keep track of all post settlement expenses, receipts paid and copies of bills
o Annual attestation letters, post settlement (these can now be submitted electronically)
o Any correspondence from CMS, post settlement
Document Retention – How long should you keep settlement documents, CMS letters, etc? These documents you may want to keep for the life of your account. How long should you keep payments of medical bills, annual accounting, and yearly attestations? State laws generally govern how long medical records are to be retained. However, the Health Insurance Portability and Accountability Act of 1996’s (HIPAA) administrative simplification rules require a covered entity, such as a physician billing Medicare, to retain required documentation for six years from the date of its creation or the date when it last was in effect, whichever is later. https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/downloads/SE1022.pdf
What type of MSA funding arrangement was decided at the time of settlement? There are two types of MSA funding arrangements.
1. Lump Sum Funding – After settlement, a check for a one-time payment representing all future medical expenses that are injury related and Medicare allowable is issued.
2. Structured Annuity Funding – A combination of a check for the initial deposit or seed money used to fund the MSA. The amount of the seed deposit typically includes the first surgical procedure or replacement and the equivalent of two years of annual funds along with the yearly annuity payment beginning on the 1-year anniversary of settlement. Note: Medicare recognizes a structured settlement annuity as a viable method of funding MSAs. Medicare will become the primary payer of injury-related medical expenses, once documentation is provided showing the MSA funds were spent appropriately and there is no other available primary coverage to pay for injury-related Medicare covered medical expenses – until the next upcoming annuity payment has been deposited into the MSA account. For topics unique to Structured WCMSA Accounts, please refer to this link.
Before the injured person’s case settles, the WC claims adjuster typically will have paid for medical treatments and prescription medication that were related to the injury. After settlement occurs, the MSA funds should be used to pay injury-related and Medicare allowable expenses from the settlement date forward until exhausted.
If you are a Medicare beneficiary, you will need to continue to pay Medicare premiums, co-payments, and deductible amounts. Medicare updates its plans, premium costs, and coverage on a yearly basis. Each year, Medicare publishes a free downloadable handbook called “Medicare and You”.
If the injured person is Medicare eligible, he/she can add coverage to or change his/her plan during Medicare’s Open Enrollment period. The Open Enrollment period would not have an impact on their MSA Funds that they are currently self-administering. Every year, Medicare’s Open Enrollment period begins October 15th and ends December 7th for most Medicare plans. For Medicare Advantage plans, open enrollment runs from January 1st through February 14th. Medicare has designed a Medicare Plan Finder which it describes as a convenient way to compare coverage options, shop for plans, and feel confident about the coverage choices Medicare enrollees make. It also lets Medicare beneficiaries build and track their drug list to determine the best Part D (prescription drug) plan that meets their medical needs, including the display of lower-cost generic alternatives. Some details regarding Medicare Advantage Plans can be reviewed by clicking this link so you can compare covered benefits.
Medicare-Certified Providers – When choosing providers to receive care, consideration should be given whether the providers will be able to bill Medicare in the event MSA funds have either temporarily or permanently exhausted (depleted), or in the event a Medicare beneficiary may need Medicare covered treatment that is not injury related. If a provider cannot file claims to Medicare, the Medicare beneficiary may be billed for services in select circumstances. To locate providers that are Medicare-certified, please click here.
Reimbursement of Medicare Conditional Payments before and after settlement. If Medicare pays for care related to your injury, it may be doing so on the condition that Medicare will later be reimbursed for such payments. More information about Medicare’s right to recovery may be found here.
At the end of each year, interest earned on MSA funds will need to be identified as interest income generated from the MSA account for the prior tax year. Under CMS’ guidelines, the interest earned is to be deposited and remain in the MSA account to pay only for Medicare allowable expenses related to the injury, or used for other allowable purposes, such as to cover banking fees related to the account, mailing/postage fees related to the account, miscellaneous related document copying charges, and income tax on interest income from the MSA account.

Mismanaged MSA Funds

During the pre-settlement phase, the pricing of medical items and services for most MSA allocation reports are prepared using Workers’ Compensation state fee schedules for the state where the injury occurs. For liability cases, those medical items and services are priced at the Usual and Customary rate for the geographic region. For both WC and liability cases, prescription drug expenses are typically priced at Average Wholesale Pricing (AWP). Injured parties might not subscribe to or otherwise access the AWP pricing rates or state fee schedule rates and could end up paying for medical treatment or prescriptions drugs at amounts higher than they should.
When the injured person mistakenly pays for a non-Medicare allowable expense out of the MSA account, Medicare reserves the right to deny all injury-related Medicare covered claims until the MSA funds have been replenished or the injured worker can demonstrate appropriate usage equal to the full amount of the MSA.
If a provider mistakenly sends the bill to Medicare when it should have been paid out of a MSA account, the claim may be denied by Medicare and this could lead to CMS initiating an audit of the MSA funds.
Medicare may accidentally pay for an injury-related claim when it should have been paid out of the MSA account. The injured person may end up being billed or charged for the Medicare copay, coinsurance, or deductible amount, and later, still have to reimburse Medicare from the MSA funds.

When considering all the factors described above, doesn’t it make sense to strongly consider the use of a professional administrator? Also, The Centers for Medicare & Medicaid Services (CMS) published in the WCMSA Reference Guide, that professional administration is highly recommended.

Simply put, Professional Administration makes sense. If you are an attorney or an injured person who has questions regarding switching from self-administration to professional administration, Medivest is here to answer any questions you may have.

Aaron Winnell

26/Feb/2019

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

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

“Where There Is No Vision, the People Perish”

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

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

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

The Advantages of a Professional Custodian

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

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

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

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

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

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

Custodial Arrangements: Not just for Medicare Set-Asides

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

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

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

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

18/Apr/2018

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

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

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

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

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

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

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

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

[1] 42 U.S.C. § 1395y(b).

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

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

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

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

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

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

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

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

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

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

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