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02/Jun/2021

How Attorneys in Washington and Other States Should Prepare Their Clients and Themselves for Lump-Sum Settlements

Last month, Washington state governor Jay Inslee signed a bill into law that will allow injured workers to receive Workers’ Compensation (WC) settlements as lump-sum settlements for the first time.  Included in the bill, S.B. 5046 was an emergency clause that made it take effect immediately once it was signed.  Previously, injured workers in Washington state were required to receive WC settlements via structured settlement (annuitized) payments over time.  The COVID-19 Pandemic may have influenced this change and only time will tell if the decision will be good for the State of Washington.  Funding of WC settlements by structured settlements have always provided a sort of safety net so that if a WC claimant failed to preserve settlement funds in any one year, there would be another round of funding to help cover the medical needs of the claimant going forward.

 

Are There Risks with Lump-sum Settlements?

Lump-sum settlements offer the advantage of receiving money immediately, which can be helpful when large bills are looming overhead. However, injured workers who receive lump-sum settlements are naturally prone to misuse the medical portion of their settlement funds for several reasons. Disregarding any malicious intent, its not uncommon for misuse to occur due to:

  • 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, including needs and wants, or even manipulation by family members or friends creates pressure to spend imprudently.

 

Workers’ Compensation claimants may face sanctions from the Centers for Medicare & Medicaid Services (CMS), the agency charged with administering the Medicare program, which include denial of future medical care under Medicare for the WC related injury that was compensated, and obligation of repayment to Medicare for conditional payments made by Medicare, which can potentially be up to double the amount owed or otherwise carry high interest on unpaid Medicare Secondary Payer statute (MSP) debt. However, consequences of misuse of funds are not limited to just the claimants. Their attorneys may also share responsibility.

 

What Does This Mean for Attorneys in Washington State?

Attorneys in Washington, and any other state that allows lump-sum payments for Workers’ Compensation settlements, must make every effort to ensure that their clients are considering Medicare’s future interest in their settlement and have a plan for future care that will protect Medicare from being prematurely billed for any injury related and Medicare allowable future medical component of the WC settlement. CMS identifies the legal support providing why an attorney could be in its cross-hairs as a target of a MSP recovery penalty for a claimant’s misuse of funds in its April 22, 2003 memorandum.

  1. CMS may sue for repayment from all parties involved in the settlement, including the claimant’s attorneys. Double damages may also be sought against the “primary payer” under the authority of 42 CFR 411.24(c)(2), and if the government is unable to recover against the “primary payer,” against the “beneficiary.” 42 CFR 411.24(l)(1).
  2. CMS outlines the “ethical and legal obligations” of attorneys representing Workers’ Compensation claimants when their clients chose to “ignore Medicare’s interests in a Workers’ Compensation case,” citing to the CFR section that gives CMS a claim against the attorneys.

 

How to Protect Future Medicals and Your Own Future

For the protection of all parties involved, CMS highly recommends Professional Administration for a Medicare Set-Aside account.  It effectively eliminates or significantly reduces the likelihood of misuse of MSA funds, assuring the settling parties remain in compliance with the letter and spirit of the MSP thereby protecting both the claimant and attorney. Additionally, Medivest’s Professional Administration services can often stretch the medical portion of the settlement funds, helping to ensure that medical funds are available for a longer period of time than if self-administered.

Medivest can help you navigate through Medicare Secondary Payer compliance complexities 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 and MSP futures 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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08/Jul/2020

Click here for a downloadable copy of this blog

Once again, the Centers for Medicare & Medicaid Services has provided an indication that while regulations and/or guidance is on its way regarding the protection of Medicare’s future interests for liability and No Fault settlements, the proposed rule regarding these have been moved to August 1, 2020 or perhaps further into the future (again). Technically, the information indicates that the Notice of Proposed Rule Making would “clarify existing Medicare Secondary Payer (MSP) obligations associated with future medical items services related to liability insurance (including self-insurance), no fault insurance, and worker’s compensation settlements, judgments, awards, or other payments. Specifically, this rule would clarify that an individual or Medicare beneficiary must satisfy Medicare’s interest with respect to future medical items and services related to such settlements, judgments, awards, or other payments. This proposed rule would also remove obsolete regulations.” The information is also indicating that regulations CMS determines to be obsolete will be removed. See the disclosure published in the Spring 2020 Federal Register Unified Agenda here.

Many in the MSP compliance industry believe that while the regulations and guidance could be focused on clarifying both the need to protect Medicare’s future interests and the way to protect those interests for each of the Non Group Health Plan (NGHP) primary plan types (Liability, Self-Insurance, No Fault, and Workers’ Compensation), it seems more likely that this particular group of regulations and/or guidance will focus primarily on liability and No Fault settlements. This is because both regulations and guidance have already been published specific to protecting Medicare’s future interests in Workers’ Compensation settlements in both the Code of Federal Regulations and via the Workers’ Compensation Medicare Set-Aside Arrangement – WCMSA Reference Guide Version 3.1.

Medicare Set-Aside Report

Take Aways
  • Considering and protecting Medicare’s past interests has become the industry standard and quite honestly a “no brainer” for all NGHP settlement types – liability, self-insurance, No Fault, and Workers’ Compensation.
  • Whether the announced guidance comes this August or not, doesn’t it make sense to help ensure that Medicare’s future interests are protected in accordance with existing federal law, i.e. the MSP?
  • Helping to ensure that Medicare is not prematurely billed for injury related futures for any settlement type is the right thing to do and helps protect the Medicare Trust Funds.

Count on Medivest to help guide you through some of the complexities associated with MSP compliance.

 


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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.

 


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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.

 


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