The Florida Bar Journal had a great article discussing Medicare liens and attorneys responsibility protecting Medicare’s interest. Some changes attributed to the MMSEA are completely inaccurate. For example, some insurers are insisting on putting Medicare on the settlement check, claiming the “new law” requires it. Another example is the insistence by some insurers that Medicare set asides (MSA) are now required in all liability cases. Neither is true. The simple fact is that the MMSEA imposes a mandatory insurer reporting requirement upon responsible reporting entities (RRE). The article explains the act and its requirements. It also focuses on what the act does not require in an attempt to clear up widespread misconceptions.
On December 29, 2007, President Bush signed into law the MMSEA. Part of this act, §111, extends the government’s ability to enforce the Medicare Secondary Payer Act. As of April 1, 2011, an RRE (liability insurer, self-insurer, no-fault insurer, and workers’ compensation carriers) shall determine whether a claimant is a Medicare beneficiary (“entitled”), and if so, shall provide certain information to the secretary of Health and Human Services when the claim is resolved.
Under MMSEA, the RREs/insurers described above must report the identity of the Medicare beneficiary to the secretary and other such information as the secretary deems appropriate to make a determination concerning coordination of benefits, including any applicable recovery of claim. Failure of an applicable plan to comply with these new requirements will incur a civil money penalty of $1,000 for each day of noncompliance on each claim. A single claimant can have more than one claim, but the penalty is per claim. These new reporting requirements will make it very easy for CMS to review settlements to determine whether Medicare’s interests were adequately addressed by the settling parties.
The stated intent of the new reporting requirements was to identify situations when Medicare should not be the primary payer and ultimately allow recovery of conditional payments. The Medicare Secondary Payer Act (MSP) prohibits Medicare from making payments if payment has been made or is reasonably expected to be made by a workers’ compensation plan, liability insurance, no-fault insurance, or a group health plan. However, Medicare may make a “conditional payment” if one of the aforementioned primary plans does not pay or cannot be expected to be paid promptly. These “conditional payments” are made subject to being repaid when the primary payer pays. When conditional payments are made by Medicare, the government has a right of recovery against the settlement proceeds.
Most trial lawyers understand their obligations under the MSP with regard to making sure conditional payments are repaid. The problem is the growing misconception among insurers that Medicare should be on the settlement check to ensure compliance with the MSP. Some insurers have even been told that the law requires Medicare be on the check. This is simply not so.
Although “Medicare on the check” is a very problematic issue, a larger issue is the alleged connection between MSA and the MMSEA. CMS has made it very clear in numerous conference calls that the MMSEA is totally unrelated to MSA. In one such MMSEA conference call, Barbara Wright, acting director of the Medicare debt management division at CMS, stated that §111 of the MMSEA “does not mandate or specify anything about liability set asides.” It can’t be made any clearer than that. There is no relationship between MMSEA and MSA in liability cases.
There are two issues that arise when dealing with the application of the MSP: 1) Medicare payments made prior to the date of settlement (conditional payments); and 2) future Medicare payments for covered services. Since Medicare is not supposed to pay for future medical expenses covered by a liability or workers’ compensation settlement, judgment, or award, CMS recommends that injury victims set aside a sufficient amount to cover future medical expenses that are Medicare covered.
The problem is that the MSA are not required by a federal statute even in workers’ compensation cases where they are commonplace. Instead, CMS has intricate “guidelines” and “FAQs” on its website for nearly every aspect of set asides, from submission to administration. There are no such guidelines for liability settlements involving Medicare beneficiaries. Without codification of set asides, there are no clear cut appellate procedures from arbitrary CMS decisions and no definitive rules one can count on as it relates to MSA. Although there is no legal requirement that an MSA be created, the failure to do so may result in Medicare refusing to pay for future medical expenses related to the injury until the entire settlement is exhausted. This creates a difficult situation for Medicare beneficiary-injury victims and contingent liability for legal practitioners, as well as other parties involved in litigation involving physical injuries to Medicare beneficiaries.
The question becomes what to do when faced with an insurer who insists on an MSA in a liability case. A trial lawyer could ask for the insurer’s legal basis for mandating an MSA or ask for a cite to the federal statutes, code of federal regulations, case law, or any rules/process regarding MSA for liability cases. There are currently none; no one will find any law that directly addresses the issue of MSA for liability cases. However, this article is not suggesting that parties should ignore Medicare’s interest under the Medicare Secondary Payer Act. To adequately protect counsel and a client who is a Medicare beneficiary — or reasonably expected62 to become a Medicare beneficiary within 30 months of settlement — an MSA evaluation may be in order. As described below, this is a voluntary process, and CMS may not review the proposed set aside.
A trial lawyer may want to take the position that the insurer should bear the costs of the MSA evaluation and the costs of the set aside (including professional administration of the account). In addition, there are many non-Medicare medical expenses that must be considered in arriving at a settlement for future medical costs (i.e., certain durable medical goods, custodial care, certain prescription medications, and the Part D donut hole, to name a few). If a set aside will be established, a thorough examination of non-Medicare expenses along with an allocation of future Medicare covered future services should be undertaken.
There are other options besides a formal set aside if a trial lawyer is faced with an insurer who requires addressing Medicare’s interest. One option is to estimate the future Medicare covered expenses the client will potentially incur and document that amount in the settlement agreement. The estimate can be created from doctors’ reports or life care plans. The client then sets aside this amount and is told to use it for future Medicare covered expenses. No submission to CMS is done if this option is exercised. However, the release provides evidence that Medicare’s interests were taken into account at settlement. Since CMS admits there is no formal review process for liability settlements, and submission is voluntary, an argument can be made that all the current law requires has been done and then some.
Another option is to do the formal allocation report and again document it as previously mentioned. Since CMS does not guarantee a review of a liability set aside, a formal allocation along with documenting it in the settlement agreement provides the necessary evidence that Medicare’s interests were adequately addressed. A formal allocation also gives the trial attorney a third, independent party to review the future medical expenses and determine what Medicare covers. This is an important piece of protection for the trial attorney as it provides an extra layer of error and omission protection.