Medicare in Personal Injury Claim Settlements: …media.straffordpub.com › products › medicare-in-personal...2015/03/26 · Medicare in Personal Injury Claim Settlements: Complying

Medicare in Personal Injury Claim Settlements: Complying With Reporting Requirements and Satisfying Liens

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THURSDAY, MARCH 26, 2015

Presenting a live 90-minute webinar with interactive Q&A

Jeremy T. Burton, Partner, Lipe Lyons Murphy Nahrstadt & Pontikis, Chicago

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Jeremy Burton

Lipe Lyons Murphy Nahrstadt & Pontikis Ltd.

230 West Monroe Street, Suite 2260

Chicago, IL 606006 (312) 448-6231

[email protected]

Medicare

Trial and Settlement Considerations

Trial and Settlement Considerations

Introduction

Considerations for Plaintiff’s counsel

Considerations for Defense counsel

Settlement language

Negotiating Settlement with the CMS

6

Introduction

Medicare is a government program providing health care. Under Medicare, the government reimburses health care providers for covered care provided.

Until 1980, Medicare was the primary payer of all medical costs except in workers’ compensation cases.

After 1980, Medicare is always a secondary payer to liability insurance, self-insurance, no-fault insurance, and workers’ compensation insurance. Medicare is also a secondary payer to group health plan coverage in certain situations.

7

Introduction

Insurers are not allowed to

write policies secondary to

Medicare. Such policies

would supersede federal

law.

8

Introduction

Since 1980, Medicare beneficiaries, attorneys,

insurers, self-insured entities, third party

administrators and their agents have been

responsible for

(1) Understanding when there is coverage primary to

Medicare,

(2) Notifying Medicare when applicable,

(3) Paying appropriately.

9

Introduction

The new law, Section 111 of the Medicare, Medicaid

and SCHIP Extension Act of 2007 (MMSEA Section)

“Adds mandatory reporting requirements with respect to

Medicare beneficiaries who have coverage under group

health plan arrangements as well as for Medicare

beneficiaries who receive settlements, judgments,

awards or other payment from liability insurance, no-

fault insurance, or workers’ compensation.”

10

Introduction

Implementation dates for the new law were originally January 1, 2009 for group health plans to register and July 1, 2009 for liability insurers to register.

Insurers must report claims with settlement dates on or

after October 1, 2011.*

In certain cases where an insurer has ongoing responsibility for medical claims, claims arising after January 1, 2010 must be reported.

11

Introduction

*Reporting Thresholds

Not repayment thresholds

January 1, 2012 >$100,000

July 1, 2012 >$50,000

October 1, 2012 >$25,000

January 1, 2013 >$5,000

January 1, 2014 >$2,000

January 1, 2015 >$1,000

12

Introduction

The new law is designed to enforce the statutes

passed in 1980.

It does not substantively change the pre-existing

Medicare law and statutes.

It adds new reporting rules.

It includes penalties for noncompliance.

13

Considerations for Plaintiff’s Counsel

Intake Considerations

Is the client 65 or older?

Receiving Social Security Disability?

Suffering from end-stage renal disease?

Obtain your client’s Medicare identification card

Advise Defense counsel

14


Pleading Considerations

Any operative amended complaint must occur prior

to the date of settlement, judgment, award or other

payment and must not have the effect of improperly

shifting the burden to Medicare by amending the

prior complaint to remove any claim for medical

damages.

Section 111 NGHP User Guide, Chapter III, 1-1. Version 4.5.

15


Lien Concerns

Explain to your client that a substantial portion of

their settlement will be payable to Medicare.

Inform your client that Medicare costs may have a

significant impact on your chances to favorably

resolve the case.

16


Future Medicals

Advise your client that Medicare has a right to

recover any amount they expend on future medical

care. You may want to consider the availability of a

special needs trust or other ways to escrow money

for future medical costs.

17


Future Medicals

“You should also be aware that if you do not repay

Medicare in full, it may decide to recover any

amounts you owe (including accrued interest) from

any Social Security or Railroad Retirement benefits

to which you might otherwise be entitled, or from

future Medicare payments.”

18


Penalty Provisions

42 C.F.R. Sect. 411.24(g)

Recovery from parties that receive primary payments. CMS has a right of action to recover its payments from any entity, including a beneficiary provider, supplier, physician, attorney, State agency or private insurer that has received a primary payment.

19


Penalty Provisions

U.S. v. Harris, 2009 WL 891931 (N.D.W.Va)

The CMS calculated the amount it was owed, after subtracting amounts for attorney’s fees and costs. The CMS made its demand by letter, and after the statutory time elapsed without appeal the government filed suit. The court granted summary judgment to the government and ordered the Plaintiff’s counsel to pay the judgment plus interest.

20

Considerations for Defense Counsel

Discovery

Is the plaintiff a beneficiary?

Has the plaintiff received benefits?

What has the plaintiff done with respect to the lien?

21


Discovery

Form A-1

Allows an insurer to determine whether the plaintiff is a Medicare beneficiary. Obtain with interrogatories.

Full name, Medicare claim number (HICN), date of birth, social security number and sex.

22


A completed A-1 form allows an insurer to query the

Benefits Coordination & Recovery Center (BCRC)

to determine whether an injured party is a Medicare

beneficiary.

23


Reporting

Make certain your client – insurer or self-insured entity

is registered to report.

http://www.Section111.cms.hhs.gov

If a complaint or discovery lists the date of a plaintiff’s

injury or exposure after December 5, 1980, Medicare

will require a report.

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http://www.section111.cms.hhs.gov/

http://www.section111.cms.hhs.gov/


Reporting

When a case involves continued exposure, Medicare

focuses on the date of last exposure to determine

whether the exposure continued after 12/5/80. The

application of the 12/5/80 date is specific to a particular

defendants.

Medicare will assert a recovery claim against exposure

after 12/5/80 if liability is claimed, released or effectively

released.

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Reporting

When the following requirements are met, Medicare will not assert a recovery claim and reporting is not required.

• All exposure ended before 12/5/80

• Exposure has not been claimed in the most recently amended complaint and/or specifically released.

• There is no release for exposure after 12/5/80 or whether there is a release it is a broad general release which effectively releases exposure.

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Reporting

The RRE does not make a determination of what

portion of any settlement is for medicals and what

portion is not.

If medicals are claimed and/or released the

settlement, judgment, award or other payment bust be

reported regardless of any allocation made by the

parties or a determination by the court.

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Reporting

The CMS is not bound by any allocation made by the parties even where a court has approved such an allocations. The CMS does normally defer to an allocation made through a jury verdict or after a hearing on the merits.

This issue is relevant to whether the CMS has a recovery claim and does not affect the RRE’s obligation to report.

Section 111 NGHP User Guide, Chapter III, 6-22, Version 4.5.

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NGHP RRE BCRC Primary

Payer/Debtor

29


Third Party Administrators

The new Medicare reporting requirements are

complicated enough that the CMS has anticipated

that RREs will hire Third-Party Administrators

(TPAs) to handle reporting and payment

obligations.

42 U.S.C. 1396y(b)(7)&(8)

30


Medicare Penalties

Medicare beneficiaries are required to reimburse

Medicare within 60 days of receipt of settlement.

If Medicare is not reimbursed by the beneficiary,

payment becomes the responsibility of the primary

payer.

31

Why Report

The CMS has a right of action to recover its payments

from any entity, including a beneficiary, provider,

supplier, physician, attorney, State agency or private

insurer that has received a primary payment.

42 CFR Sec. 411.24(g)

32

Why Report

If Medicare is not reimbursed as required by

paragraph (h) of this section, the primary payer must

reimburse Medicare even though it has already

reimbursed the beneficiary or other party.

42 CFR Sec. 411.24(i)

33

Why Report

The United States can collect double damages and attorneys fees against any entity not paying under the new statute.

Furthermore,

An applicable plan that fails to comply with the Medicare reporting requirements is subject to a civil money penalty of $1,000 for each day of noncompliance with respect to each claimant. 42 USC Sec. 1395y(b)(8)(E)(i)

34


New Process

(1) Determine the Medicare status of all

claimants

(2) RRE must report settlements

(3) RRE must resolve liens

(4) RRE must give consideration to Medicare’s

interest in future payments

35


ORM/TPOC and Date of Settlement

It may be but not always is the check date or payment date, it is the date the obligation is signed, if there’s a written agreement, unless court approval is required. If court approval is required it is the later of the date the obligation is signed or the date of court approval. If there is no written agreement it is the date the payment, or the first payment if there will be multiple payments is issued.

See http://www.cms.gov/MandatoryInsRep/Downloads/March11NGHPTranscript.pdf, pg. 15.

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http://www.cms.gov/MandatoryInsRep/Downloads/March11NGHPTranscript.pdf












Medicare Set Asides

1. Medical damages from

the date of injury through

the date of settlement.

2. Future medical damages

from the date of

settlement forward.

37

Medicare Set Asides

In non-workers’ compensation cases, you are not required to set aside money for future damages to pay for plaintiff’s future medical expenses. There is some disagreement on this topic. Many defense firms are advising clients to set aside funds for future medical expenses. The CMS has confirmed that set asides are not required in liability cases, though they have also noted that they “reserve their right” to both challenge agreements which do not adequately cover Medicare costs and the future right to require set asides in liability cases.

You should consider something like a Medicare Set Aside (MSA) for future medical damages. This set aside is used in workers’ compensation cases to “reasonably protect Medicare’s future interests.”

If the CMS approves the proposed set-aside all parties will receive “safe harbor” protection from future government collection action.

38

Medicare Set Asides

Unfortunately, CMS is not

in a position to review set

asides at this time.

As an alternative you can

make a Claims Settlement

Allocation (CSA).

39

Medicare Set Asides

The following standards apply to MSAs in workers’ compensation cases and should be taken into account in other liability cases.

A MSA is available where the claimant is currently a Medicare beneficiary and the TPOC is greater than $25,000.

Or where the plaintiff will soon be a Medicare beneficiary and the TPOC amount for future medical expenses, disability and lost wages is expected to be greater than $250,000.

40

Medicare Set Asides A MSA is not necessary where:

1. The facts of the case demonstrate that the injured individual is only being compensated for past medical expenses; and

2. There is no evidence that the individual is attempting to maximize the other aspects of settlement to Medicare’s detriment; and

3. The individual’s treating physicians conclude in writing that, to a reasonable degree of medical certainty, the individual will no longer require any Medicare-covered treatments related to the workers’ compensation injury.

41

Medicare Set Asides

A MSA/CSA must show a good-faith consideration of future medical expenses.

Remember that expenses must be related to the injury and in the appropriate case, you may want to consider a second review of medical records to eliminate overpaying for unrelated medical conditions.

Is there a need for a trust?

Can a Third Party administer the trust?

42

Medicare Set Asides

“We have continued to say with respect to set-

asides or liability situations that set-asides are not

required in terms of CMS being involved in any type

of determination of how much the set-asides should

be. We have also said that our regional offices

have the ability to evaluate proposed set-aside

amounts for liability if their workload permits them

to do so.”

43

Medicare Set Asides

“This is not the same thing as a blanket statement that liability set asides are simply not required or not appropriate. Regardless of the mechanism, Medicare’s interests need to be protected. The statute says that we don’t make payment where payment has already been made. Whether or not this is protected through setting up a formal set-aside, setting up a formal trust, simply keeping the money and insuring that it’s being [paid] in a priority manner to Medicare until the appropriate funds are exhausted; those are all choices, but we need to make it clear that’s not the same thing as saying – and that we are not in fact saying that liability set-asides aren’t appropriate.”

http://www.cms.gov/MandatoryInsRep/Downloads/Jan2810NGHPTranscript.pdf, pg. 17.

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http://www.cms.gov/MandatoryInsRep/Downloads/Jan2810NGHPTranscript.pdf












Medicare Set Asides

The CMS has noted their “standard expectation is that they

will be pursuing recoveries against settlements received by

individual beneficiaries.” However the CMS further notes

that “there are limited instances where CMS has gone back

to an insurer or to an attorney particularly if, for instance, an

attorney for a beneficiary who ignores CMS’s demand,

technically, there are some risks under the regulation. Is it

any type of standard practice for us to routinely go back to an

insurer or attorney or other entity when we’ve issued the

demand to the beneficiary? No.”

See http://www.cms.gov/MandatoryInsRep/Downloads/Feb2510NGHPTranscript.pdf, pg. 37.

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http://www.cms.gov/MandatoryInsRep/Downloads/Feb2510NGHPTranscript.pdf











Creating Medicare Set Asides

If both sides have obtained medical records in written

discovery, you likely have a blue print to create a

successful MSA.

If both sides have testimony from medical experts

regarding permanency and anticipated future medical

damages you are in an even better position.

If one or both sides have hired an economist to analyze

future medical needs, your work is almost complete.

46


As a general rule in creating a set aside, your Medicare Allocation Report should include the following.

The beneficiary’s name

The beneficiary’s address

The beneficiary’s social security number

The beneficiary’s current age

The beneficiary’s life expectancy

The date of the injury

The state of jurisdiction

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The related diagnoses and ICD-9 Diagnosis Codes

An introduction and description of the injury

A medical history including relevant doctors’ visits,

examinations, and surgeries

Summaries of the relevant doctors’ visits,

examinations, and surgeries

Physician diagnoses, prognoses, recommended

course of treatment and if available opinions on

possible future surgeries and all future costs.

A list of pre-existing and unrelated conditions

48


A summary of the plaintiff’s current functional states and

ability to perform activities of daily living.

A summary of the future treatment plan including doctors’

visits, future surgery, and anticipated prescription costs.

A bottom line MSA number.

Your report should also contain the methodology utilized to

explain how you calculated the final number, e.g. adjusted

life expectancy and discount rate. The more you rely on

verifiable medical information, the more protected you and

your client will be.

49

Settlement Language

Madison County, Illinois has entered an order in Asbestos cases

with helpful suggested settlement language.

As part of settlement, Plaintiff’s counsel must complete Medicare

Form B in order to finalize any settlement agreement.

Medicare Form B requires all of the same information contained in

the A-1 form as well as information that Medicare requires such as

the diagnosis code for the plaintiff’s illness, the name of the settling

defendant, the date of the settlement, the amount of settlement and

information on the funding of settlement.

50

Settlement Language

Releases should be tailored to discuss Medicare obligations. If

there are no future medical damages, that should be stated in the

release. If possible, obtain indemnification, defense and hold

harmless language from the plaintiff’s firm ensuring that a paying

RRE will be protected from double paying and double damages.

At the very least, all settlement agreements should state who is

responsible for investigating Medicare liens, and who is responsible

for satisfying any Medicare liens.

51

Settlement Language

The language of the Madison County order notes that

(1) Defendant will not include Medicare on the settlement

check.

(2) PLAINTIFF'S FIRM agrees to hold in its trust account

sufficient funds to pay all Medicare claims or liens relating to

such settlement …or has in fact satisfied all Medicare claims or

liens in full. PLAINTIFF'S FIRM will notify ... CMS, of any

settlement which this Agreement governs and will work to

satisfy or otherwise obtain discharge or release of any

Medicare claim or lien including "set asides," if any.

52

Settlement Language

(3) If defendant receives a claim for any unsatisfied Medicare claim … defendant will notify PLAINTIFF'S FIRM … and request from them any evidence that the claim or lien has been satisfied in full … If such evidence is not forthcoming or fails to resolve the claim in full without payment by defendant, defendant may by regular mail notify PLAINTIFF'S FIRM to undertake the principal response to the matter or to arrange payment or other resolution. If the U.S. government or its designee including CMS brings suit, PLAINTIFF'S FIRM will undertake the principal defense of such matter … PLAINTIFF'S FIRM will be liable to defendant for the amount owed or paid by such defendant to the United States Government … for the allegedly unsatisfied Medicare claim or lien plus all attorney fees and out of pocket expenses reasonably necessary …

53

Settlement Language

But consider

Many plaintiff’s firms will refuse an indemnification provision. Some

states have ruled finding that a plaintiff’s attorney cannot agree to

indemnify an opposing party for unpaid liens.

Illinois Adv. Op. 06-10 (2006).

54

Other settlement options

Medicare has acknowledged that it can be a joint payee on

settlement checks. The main issue with such a solution is that it

puts the burden on the plaintiff to contest non-suit related charges

and it will inevitably delay payment to the plaintiff, especially in

cases where significant future medical costs are anticipated.

Moreover, drafting a check in such a manner does not absolve a

RRE from further following up to ensure that Medicare is

reimbursed.

55

Other settlement options

Tomlinson v. Landers, 2009 WL 1117399 (M.D.Fla.)

In Tomlinson the defendant included Medicare on the settlement

check. The plaintiff returned the check and requested that

Medicare not be included on the check, promising instead that it

would hold the defendant carrier harmless for any Medicare liens.

The court found that including Medicare on the settlement check

was not required under the rules, and further held that due to the

disagreement between the parties that the settlement was invalid

as the parties never had a meeting of the minds. Tomlinson does

not stand for the proposition that Medicare cannot be included on

the check when both parties are in agreement.

56

Settlement Considerations

In the case of a joint and several settlement, where

each defendant technically is responsible for the

whole settlement, each entity must report the entire

settlement, judgment, award or other payment.

If each defendant enters into a separate settlement,

they are each responsible for reporting the separate

settlement, judgment, award or other payment.

See http://www.cms.gov/MandatoryInsRep/Downloads/Jan2810NGHPTranscript.pdf, pg. 20

57












Settlement Considerations

What about cases wherein a discounted settlement does not allow for reimbursement of Medicare due to questionable liability?

“Waiver of Rights. The Secretary may waive (in whole or in part) the provisions of this subparagraph in the case of an individual claim if the Secretary determines that the waiver is in the best interests of the program established under this title.” 42 USC Secs. 1395 et seq.

58

Conditional Payment Estimate

We are writing to advise you that Medicare has identified a claim or number of claims for which you have primary payment responsibility and Medicare has made primary payment. The Medicare Secondary Payer provisions of the statute, 42 CFR 1395y(b)(2), precludes Medicare from paying for a beneficiary’s medical expenses when payment “has been made or can reasonably be expected to be made … under no-fault insurance”.


59

However, Medicare may pay for a beneficiary’s

covered medical expenses conditioned on

reimbursement to Medicare from proceeds received

pursuant to a third party liability settlement, award,

judgment, recovery or from any entity responsible

for making primary payment. Medicare must

recover these payments from the entity responsible

for payment or when payment has been made from

the entity/individual who has received payment for

these claims.


60

Enclosed is an itemization of conditional payments

made by Medicare on behalf of the Medicare

beneficiary referenced above. Currently, Medicare

has paid _______ in conditional payments related

to your claim.


61


Final Demand Letter

We are writing to you because we recently learned that you have made a liability claim relating to an illness, injury, or incident occurring on or about _____ and obtained a recovery. We have determined that you are required to repay the Medicare program _______ for the cost of medical care it paid relating to your liability recovery. (The term “recovery” includes a settlement, judgment, award or any other type of recovery.

62

Right to Request a Waiver - you have the right to

request that the Medicare program waive

recovery of the amount you owe in full or in part.

Your right to request a waiver is separate from

your right to appeal our determination, and you

may request both a waiver and an appeal at the

same time. The Medicare program may waive

recovery of the amount you owe if you can show

that you meet both of the following conditions:


63

Negotiating Settlement with the CMS 1. This overpayment (for purposes of requesting waiver of recovery, the amount you owe is considered an overpayment) was not your fault, because the information you gave us with your claims for Medicare benefits was correct and complete as far as you knew; and when the Medicare payment was made, you thought that it was the right payment; AND

2. Paying back this money would cause financial hardship or would be unfair for some other reason.

64


Right to Appeal - You also have the right to appeal our determination if you disagree that you owe Medicare as explained in Part I of this letter, of if you disagree with the amount that you owe Medicare ______ as explained in Part II of this letter. To file an appeal, you should send us a letter explaining why you think the amount you owe Medicare is incorrect and/or any reason(s) why you disagree with our determination.

120 days from receipt of letter.

65

Counsel should be familiar with whether their request

is for a complete waiver, a compromise allocation or a

full commutation before contacting any Medicare

representative. In the case of a compromise request,

counsel should be familiar with 42 CFR § 411.47 which

governs compromise settlements in workers’

compensation cases and is currently the best tool

available for an argument reducing a Medicare

payment in a liability case. That section states:


66

42 CFR § 411.47 proposes a ratio analysis.

If a settlement does not apportion the sum granted, the portion to be considered as payment for medical expenses is computed as follows:

Determine the ratio of the amount awarded to the total amount that would have been payable … if the claim had not been compromised.

Multiply that ratio by the total medical expenses incurred as a result of the injury or disease up to the date of the settlement.


67


But see Hadden v. United States,

In Hadden the plaintiff’s medical bills totaled over $82,000. The defendant settled the case for $125,000. After deducting attorneys’ fees, Medicare demanded over $62,000.

Hadden paid under protest noting that the settling defendant was only 10% at fault, and therefore arguing was only responsible for about $8,000 of his medical expenses.

68


The court applied the Chevron standard in

analyzing the Medicare related statutes. Chevron

U.S.A., Inc. v. National Resources Defense

Counsel, Inc., 467 U.S. 837, 842-43 (1984).

IF Congress “has directly spoken to the precise

question at issue” in the text of the statute, the

court gives effect to Congress’s answer without

regard to any divergent answers offered by the

agency or anyone else.

69

But, IF “the statute is silent or ambiguous with

respect to the specific issue, the question for the

court is whether the agency’s answer is based on a

permissible construction of the statute.”


70

The CMS has interpreted the statute finding that

Medicare is “entitled to a full reimbursement of

conditional Medicare payments when a beneficiary

receives a discounted settlement from a third party.

Zinman v. Shalala, 67 F.3d 841, 845 (9th Cir. 1995).


71

The scope of a payer’s responsibility for a beneficiary’s

medical expenses – is defined by the scope of the claim

against the payer, regardless of whether a compromise

has been reached or if the payer never admits liability.

“And thus a beneficiary cannot tell a third party that it is

responsible for all of his medical expenses, on the one

hand, and later tell Medicare that the same party was

responsible for only 10% of them, on the other.”


72

Similar language governs the plaintiff’s counsel’s

recovery under 42 C.F.R. Sec. 411.37(c)

Determine the ratio of the procurement costs to the

total judgment or settlement payment.

Apply the ratio to the Medicare payment. The product

is the Medicare share of procurement costs.


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