Taming the Medicare Gorilla in Your Injury Cases · 2015. 12. 25. · Friday, March 23, 2012 9 a.m.–4 p.m. Oregon State Bar Center Tigard, Oregon 6.25 General CLE credits 6 CE credits

Friday, March 23, 2012 9 a.m.–4 p.m.

Oregon State Bar Center Tigard, Oregon

6.25 General CLE credits 6 CE credits for insurance professionals

Taming the Medicare Gorilla in Your Injury Cases

ii

TaMInG ThE MEdICarE GOrILLa In YOur InjurY CaSES

The materials and forms in this manual are published by the Oregon State Bar exclusively for the use of attorneys. Neither the Oregon State Bar nor the contributors make either express or implied warranties in regard to the use of the materials and/or forms. Each attorney must depend on his or her own knowledge of the law and expertise in the use or modification of these materials.

Copyright © 2012

OREGON STATE BAR16037 SW Upper Boones Ferry Road

P.O. Box 231935Tigard, OR 97281-1935

iii

TaBLE OF COnTEnTS

Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii

Faculty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix

I. Overview: “Protecting/Considering Medicare’s Interests” . . . . . . . . . . . . . . . . . . . 1A. Complaints . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1B. MSP Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1C. Legislative, Grassroots, and Judicial MSP Compliance Reform Efforts . . . . . . . . 1

II. The Three Components of MSP Compliance: Conditional Payment Recovery, Medicare Set-Asides, MMSEA Section 111 Reporting . . . . . . . . . . . . . . . . . . . . . . 4A. History of the MSP Statute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4B. Sources of MSP Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4C. Federal Enforcement Issues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6D. Why Are Medicare and MSP Compliance Suddenly Such a Big Deal? . . . . . . . . 6E. Section 1.04, Three Separate and Distinct Obligations Under MSP. . . . . . . . . . . 7F. MSP Compliance in Workers’ Compensation Cases . . . . . . . . . . . . . . . . . . . 8G. MSP Compliance in Liability, PIP, Med Pay, FELA, Longshore and

Harborworkers Compensation Act, and Jones Act Cases . . . . . . . . . . . . . . . . 9H. Problems Encountered in MSP Compliance . . . . . . . . . . . . . . . . . . . . . . .10

III. Minimizing Communication Choke Points Between Plaintiff, Defense, and CMS to Gain Better Control of MSP Compliance in Your Case. . . . . . . . . . . . . . . . . . . . . .11A. Is Your Client Medicare Eligible?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11B. Get Started Quickly . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11C. Become Familiar with and Use CMS’s Extremely Helpful Websites . . . . . . . . . .12D. Utilize the Recently Implemented CMS Communication Tools . . . . . . . . . . . .13E. Add to Your Library . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13F. CMS Correspondence Cover Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . .13G. Plaintiff/Defense Information-Sharing: Recent Case Law Trends . . . . . . . . . . .13

IV. Conditional Payment Recovery: Applies to All Cases: Workers’ Compensation, Liability, PIP, Med Pay, FELA, Longshore and Harborworkers’ Compensation Act, and Jones Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15A. Conditional Payments (Pre-Settlement Medicare Reimbursement) . . . . . . . . . .15B. Medicare’s Recovery Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16C. MSP Starting Point. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16D. Attorney Fees and Costs Reduction Rules . . . . . . . . . . . . . . . . . . . . . . . .16E. MSP Compliance Statute of Limitations. . . . . . . . . . . . . . . . . . . . . . . . . .16F. Conditional Payment Step by Step. . . . . . . . . . . . . . . . . . . . . . . . . . . . .17G. Allocation/Apportionment of Gross Proceeds . . . . . . . . . . . . . . . . . . . . . .17H. Administrative Remedies to Alter CMS 100% Conditional Payment

Recovery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17I. CMS Protocols and Performance History . . . . . . . . . . . . . . . . . . . . . . . . .18J. Noncompliance Exposure Issues: Plaintiffs, Defense, Carriers, Attorneys,

Fiduciaries, Life Care Planners, Jury Consultants, Settlement Planners, MSA Administrators, or Anyone Who Received Remuneration from the Proceeds of the Case . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19

K. Amending Conditional Payment Amounts: Initial CPL and Final Demand . . . . .19L. Recent CMS Low Threshold Guidance . . . . . . . . . . . . . . . . . . . . . . . . . .19

iv

TaBLE OF COnTEnTS (Continued)

V. Medicare Set-Aside Arrangements: Part One. . . . . . . . . . . . . . . . . . . . . . . . . . .20A. Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20B. MSAs in Workers’ Compensation Cases . . . . . . . . . . . . . . . . . . . . . . . . .21C. MSAs (LMSA) in Liability, PIP, Med Pay, FELA, LHCA, and Jones Act

Cases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21D. Risk Management Practice Considerations in Liability MSAs . . . . . . . . . . . . .22E. Client-Centered Philosophy of MSA Allocation Proposal . . . . . . . . . . . . . . . .22F. MSA Preparation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23G. Submission of an MSA to CMS for Approval . . . . . . . . . . . . . . . . . . . . . . .23

VI. Medicare Set-Asides: Part II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24A. Funding a CMS-Approved MSA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24B. Administration of the MSA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25C. Exhaustion of the MSA/Medicare Denial of Claims . . . . . . . . . . . . . . . . . . .26D. Utilizing MSP Compliance Contractors . . . . . . . . . . . . . . . . . . . . . . . . . .26E. Medicare/Medicaid Dual Eligibility: MSA/Special Needs Trusts . . . . . . . . . . .27

VII. MMSEA Section 111 Reporting: Past, Present, and Future . . . . . . . . . . . . . . . . . . .28A. Section 111 Goal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28B. SSDI Workers’ Compensation Offset . . . . . . . . . . . . . . . . . . . . . . . . . . .28C. Responsible Reporting Entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28D. When Reporting Is Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29E. Various Reporting Groups . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29F. No Authority for Monetary Penalties . . . . . . . . . . . . . . . . . . . . . . . . . . .30

VIII. Recent MSP Compliance Case Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30A. Apportionment of Proceeds Between Conditional Payment Recovery and

Claimant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30B. Medicare as Payee on the Settlement Check . . . . . . . . . . . . . . . . . . . . . . .31C. Judicial Determination of MSA Issues in Liability Cases . . . . . . . . . . . . . . . .31D. Medicare Advantage (Medicare M+C Plan) MSP Recovery. . . . . . . . . . . . . . .32E. Claimant Private Right of Action Against Insurers . . . . . . . . . . . . . . . . . . .33F. Insurer Payment Delay Pending Conditional Payment Resolution Not Bad

Faith . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34G. Settlement Document Release/Waiver/Indemnification Language . . . . . . . . . .34H. MSP Compliance vs. Family Law: Family Law 1, MSP Compliance 0 . . . . . . . . .36

IX. MSP Compliance Case Studies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36

AppendixesA. Town Hall Teleconference Transcript Excerpts . . . . . . . . . . . . . . . . . . . . . .39B. MSPRC E-News Bulletin: New Self-Service Information Feature . . . . . . . . . . .51C. Form SSA-3288, Consent for Release of Information. . . . . . . . . . . . . . . . . . .53D. Proof of Representation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55E. MyMSP Tutorial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57F. WCMSAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .59G. June 23, 2008, CMS Alert . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61H. August 24, 2009, CMS Alert. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .63I. April 6, 2010, CMS Alert . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65J. $300 Threshold for Some Liability Insurance Settlements . . . . . . . . . . . . . . . .67K. Fixed Percentage Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .71

v

TaBLE OF COnTEnTS (Continued)

L. Model Language for Fixed Percentage Option . . . . . . . . . . . . . . . . . . . . . .79M. Option to Self-Calculate Your Final Conditional Payment Amount Prior to

Settlement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .81N. Sample Self-Calculated Conditional Payment Amount . . . . . . . . . . . . . . . . .87O. Workers’ Compensation Medicare Set-Aside Arrangements . . . . . . . . . . . . . .91P. May 11, 2011, CMS Memorandum . . . . . . . . . . . . . . . . . . . . . . . . . . . . .95Q. September 30, 2011, CMS Memorandum . . . . . . . . . . . . . . . . . . . . . . . . .97R. Actual MSA Submitted to CMS for Approval . . . . . . . . . . . . . . . . . . . . . .99S. October 2010 NuQuest Bridge Pointe Settlement News . . . . . . . . . . . . . . . . 113T. Supreme Court of Ohio Opinion 2011-1 . . . . . . . . . . . . . . . . . . . . . . . . . 127U. Florida Bar Staff Opinion 30310 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133V. In re Marriage of Washkowiak . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137W. Presentation Slides . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157

vii

Presented by:F Tim nay, Law Offices of Nay & Friedenberg, PortlandF Mark Popolizio, Crowe Paradis Services Corporation, Miami, FLF jessica C. Smythe, Crowe Paradis Services Corporation, North Reading, MA

8:00 registration

9:00 Medicare Secondary Payer (MSP) Compliance Overview

F Why you need this CLE seminarF Effects of MSP compliance on resolution of injury casesF MSP reform efforts: past, present, and future

9:15 Three Components of MSP Compliance: Conditional Payment recovery, Medicare Set-aside arrangements, and Section 111 reporting

F History of the MSP statutes and sources of MSP authorityF Conditional payment recovery and federal enforcementF MSP compliance problems

9:45 Minimizing Communication Choke Points Between Plaintiff, defense, and the Centers for Medicare and Medicaid Services (CMS)

F CMS internet portals and resourcesF Tools and strategies for MSP complianceF Plaintiff and defense information sharingF Determining Medicare eligibility

10:30 Break

10:45 Conditional Payment recovery

F Workers’ compensation, liability, PIP, Med Pay, FELA, and Jones Act casesF Allocation of settlement proceeds between Medicare and injured partyF Attorney fees and costs reduction rulesF Noncompliance exposure concerns for the plaintiff, defense, and carrierF Administrative remedies and exhaustion doctrine

11:30 Medicare Set-aside arrangements: Part I

F Protocol and process of Medicare set-asidesF MSA practice in workers’ compensation, liability, FELA, and Jones Act casesF Utilizing MSP compliance contractors

12:15 Lunch

1:00 Medicare Set-asides: Part II

F Funding optionsF MSA and special needs trusts: Medicare/Medicaid dual eligibilityF CMS-approved “exhaustion “ of MSA fundingF Risk management considerations

SChEduLE

viii

SChEduLE (Continued)

2:00 Section 111 reporting: Past, Present, and FutureF Responsible reporting entitiesF $1,000 per day penalties: not applicable to attorneysF CMS reporting mandates and time tables

2:30 Break

2:45 MSP Compliance Case LawF Allocation and apportionment of gross proceedsF Administrative remedies to reduce conditional payment recoveryF Settlement document release, waiver, and indemnification languageF Statute of limitationsF Provider billing issues

3:30 MSP Case Study

4:00 adjourn

ix

Tim nay, Law Offices of Nay & Friedenberg, Portland. Mr. Nay has decades of clinical social work experi-ence in addition to his legal expertise. He holds an MSW degree and held professional clinical social work licensure in Texas, Idaho, and Oregon. He is licensed to practice law in Oregon and Washington. In 1997, Mr. Nay successfully sued the United States Attorney General, Janet Reno, nullifying the “Granny Goes to Jail Law.” He is the founding president of the National Academy of Elder Law Attorneys (NAELA), a Fellow of NAELA, and winner of the 2007 NAELA President’s Award. He is past chair of the NAELA Amicus Brief Committee, member of the NAELA Medicaid Task Force, founding member and past chair of the Oregon State Bar Elder Law Section, and past president of the Oregon Gerontological Association and the Alzheimer’s Association of Oregon. Mr. Nay was one of four founding members of the National Alliance of Medicare Set-Aside Professionals (NAMSAP) and served as NAMSAP’s first secretary. He is an Advisory Board member of the Academy of Special Needs Planners. Mr. Nay is a member and annual sponsor of the Oregon Trial Lawyers Association and a member of the ARC of Oregon Special Needs Trust Committee. He was recently appointed to the State Plan for Alzheimer’s Disease Oregon Task Force and serves as Legal Work Group Chair.

Mark Popolizio, Crowe Paradis Services Corporation, Miami, FL. Mr. Popolizio is a nationally recognized authority on Medicare secondary payer (MSP) compliance. He practiced insurance defense litigation for ten years, concentrating in the areas of workers’ compensation and general liability. During this time, he developed a national Medicare practice that included Medicare set-asides (MSAs) and general MSP compliance. While in private practice, Mr. Popolizio represented numerous carriers, third-party adminis-trators, and self-insureds. Since 2006, Mr. Popolizio has dedicated his practice exclusively to MSP compli-ance, working with carriers, self-insureds, third-party administrators, and other claims professionals in addressing MSP compliance issues. Mr. Popolizio is regularly a featured presenter on MSP issues at na-tional seminars and other industry events. He provides presentations and educational training on a wide array of MSP topics, including Medicare program basics, MSAs, Medicare conditional payments, Medi-care Part D (prescription drugs), and Section 111 of the Medicare, Medicaid, and SCHIP Extension Act. Mr. Popolizio has authored numerous articles addressing several topics related to MSP matters, including a chapter in the California Bar CLE publication, Special Needs Trusts: Planning, Drafting and Administra-tion. Mr. Popolizio served as Vice President of the National Alliance of Medicare Set-Aside Professionals (NAMSAP) from 2006 through 2008 and is currently a NAMSAP board member. Mr. Popolizio remains ac-tive with NAMSAP, concentrating on education and legislative matters. He was also a featured instructor on Medicare and Life Care Planning issues with the former University of Florida/Medipro LLC program. Mr. Popolizio is licensed to practice law in Florida and Connecticut.

jessica C. Smythe, Crowe Paradis Services Corporation, North Reading, MA. Ms. Smythe is National Sales Executive for Crowe Paradis Services Corporation. Prior to joining Crowe Paradis, Jessica had close to 13 years’ experience as a workers’ compensation and liability defense attorney. Her clients included large national and international employers, self-insured corporations, third-party administrators, and insur-ance carriers. In the course of the representation of her clients, Ms. Smythe faced the impact of Medicare compliance on claims handling and litigation on a daily basis and uses this practical knowledge in her Medicare compliance training. Ms. Smythe is a national speaker on Medicare compliance issues, includ-ing Medicare set-asides, the negotiation and settlement of conditional payments, and MMSEA reporting requirements. She also provides Medicare compliance training to the world’s largest insurance carrier and the nation’s largest carriers, third-party administrators, self-insureds, state funds, and guaranty as-sociations, as well as Medicare compliance instruction for the nation’s leading law firms. Ms. Smythe is a certified instructor for the CEU Institute and is a frequent lecturer at national conferences and on behalf of private and public entities. She was a 2010 faculty member on the advanced Medicare set-aside certifica-tion training program offered through the University of Florida, and she is an instructor for the Certified Medicare Secondary Payer Professional program. Ms. Smythe is an inductee to the Order of the Barristers and a member of the North Carolina Bar Association, the Wake County Bar Association, the North Caro-lina Association of Defense Attorneys, the Council on Litigation Management, and the National Associa-tion of Medicare Set-Aside Professionals.

FaCuLTY

xi

TaMInG ThE MEdICarE GOrILLa In YOur InjurY CaSES

Tim NayLaw Offices of Nay & Friedenberg

Portland, Oregon

mark PoPolizioCrowe Paradis Services Corporation

Miami, Florida

Jessica c. smyTheCrowe Paradis Services Corporation

North Reading, Massachusetts

xii


1


I. OvErvIEw: “PrOTECTInG/COnSIdErInG MEdICarE’S InTErESTS”

a. Complaints

“Medicare takes the joy out of practicing law.” “This is unconsti-tutional.” “I called MSPRC to get updated lien information and hung up after 90 minutes on hold.” “How can they ignore the probate court’s allocation of policy limits?” “Why is Medicare such a big deal now?” “This wasn’t such a pain in the butt ten years ago.” These comments from attorneys reflect universal frustration with Medicare Secondary Payer (MSP) compliance. Specific complaints in-clude delays by CMS (the Centers for Medicare and Medicaid Services), complexity, liability exposure, frequent MSP policy changes, arrogant “customer service,” and otherworldly demands by defense counsel.

B. MSP Compliance

MSP compliance has been an irritable 800-pound gorilla. But you can take steps to gain better control of MSP compliance. New MSP re-form bills are now in Congress, and recent case law has been somewhat favorable to the plaintiff side. But MSP compliance remains a compli-cated, time-consuming, labor-intensive facet of worker’s compensation and liability cases. Misunderstanding of reporting requirements and the process on the part of plaintiff and defense counsel as well as insurance carriers slows the process, leaving injured parties without needed funds to get on with their lives. MSP compliance is about “considering/protecting” Medicare’s interests by: (1) recovery of conditional (pre-settlement) Medicare pay-ments; (2) Medicare set-aside (MSA) arrangements reducing post-settle-ment Medicare payments; and (3) insurer reporting pursuant to Section 111 of the Medicare, Medicaid, SCHIP Extension Act, December 29, 2007 (MMSEA). Plaintiff’s counsel will rarely see Section 111 reporting issues. But Section 111 penalties have driven the frenzy surrounding (1) and (2). The goal of this CLE program is to increase your understanding of the process, enable you to effectively use available MSP compliance tools for better control of MSP compliance, reduce everyone’s exposure, and expedite completion of injury cases.

C. Legislative, Grassroots, and judicial MSP Compliance reform Efforts

Everyone involved in MSP compliance has horror stories to share regarding the process and the result. CMS delay and double-speak about MSAs in liability cases have prompted MSP reform efforts on three fronts.

1. Legislative

a. Medicare Secondary Payer and workers’ Compensation Settlement agreements act of 2009—house Bill 2641. The third bill of the 111th Congress attempted to limit Medicare’s recovery rights. This bill never advanced out of committee.

2


b. Medicare Secondary Payer Enhancement act of 2010—house Bill 4796. This bill of the 111th Congress also attempted to limit Medicare’s recovery rights. The bill never advanced out of committee.

c. SMarT act. New bills in the 112th Congress are current-ly being considered. On October 19, 2011, the Medicare Advocacy Re-covery Coalition (MARC) announced its support for the Strengthening Medicare and Repaying Taxpayers (SMART) Act, S. 1718, H.R. 1063. U.S. Senators Ron Wyden (D–Ore.) and Rob Portman (R–Ohio) are leading a bipartisan effort that includes U.S. Senators Ben Nelson (D–Neb.) and Richard Burr (R–N.C.) to make the Medicare Secondary Payer (MSP) program more efficient and cost-effective to taxpayers. The SMART Act could significantly improve the efficiency of the current MSP sys-tem and speed repayment of amounts owed from Medicare beneficiary claims directly to the Medicare Trust Funds.

d. hearing. In early 2011 the GAO began gathering informa-tion to report on the financial implications of various MSP reform bills. The report has yet to be issued. In July of 2011, the House Oversight and Investigations Subcommittee held a hearing to examine widespread complaints of delays, roadblocks, and a badly broken MSP program. The CMS CFO could not answer questions about the financial implications of MSP compliance efforts. The committee voiced its strong displeasure. e. Efforts unsuccessful. Thus, Congressional MSP reform efforts proposed by industry sources have been unsuccessful in making the process easier to carry out the intent of the MSP statute, 42 U.S.C. 1395y(b) et seq.

2. Grassroots

a. MarC. The Medicare Advocacy Recovery Coalition (MARC), www.marccoalition.com, was formed in September 2008 to advocate for the improvement of the MSP program for beneficiaries and all players in the MSP process. MARC was a major force behind the introduction of H.B. 4796, and the current SMART Act and has partici-pated in several direct meetings with CMS regarding MSP policies and practices. Its website has a useful list of MSP cases, most of which are also in this outline.

b. naMSaP. The National Alliance of Medicare Set-Aside Professionals (NAMSAP), www.namsap.org, was formed in 2004 to pro-vide information, education, and certification of entities working in the MSP compliance industry, primarily in the preparation and submission of MSA allocation proposals. NAMSAP has engaged CMS on a number of issues relating to the MSP compliance process. NAMSAP provides state-of-the-art multidisciplinary MSP compliance training opportuni-ties for professionals.

3. judicial: Haro et al. v. Sebelius.1 In this ongoing class ac-tion matter, the U.S. District Court for the District of Arizona held in

1 Haro et al. v. Sebelius, 2009 U.S. Dist. LEXIS 111053.

http://www.marccoalition.comhttp://www.www.namsap.org

3


2010 that the plaintiffs had sufficient standing to challenge CMS’s ad-ministration of the MSP program and dismissed HHS’s motion to dis-miss. Then on May 5, 2011, the U.S. District Court for Arizona issued a wide-ranging MSP opinion that, if upheld, could turn the 800-pound gorilla into a chimp in Haro et al. v. Sebelius, 2011 U.S. Dist. LEXIS 58036 (2011). This is the second Haro opinion but will not be the last. The first Haro opinion denied CMS’s motion to dismiss Haro et al. v. Sebelius, 2010 U.S. Dist. (2010). The most recent Haro opinion denied Chevron2 deference to all sources of CMS “authority” on several key MSP compliance issues, holding that: (a) CMS may not demand or collect repayment of conditional Medicare payments (with interest) until all possible waiver requests and appeals are resolved (currently this hap-pens 60 days after the issuance of the CMS final demand letter); (b) CMS may not preclude “. . . plaintiffs-attorneys from disbursing undisputed portions of settlement proceeds to their beneficiary clients . . .”; and (c) “There is no statutory authority, express or implied, to support a direct [MSP collection3] action against attorneys, except to the extent they are end-point recipients of settlement proceeds.” The court enjoined CMS on the first two issues. CMS is taking the latest Haro opinion seriously. In mid-June 2011, CMS announced on www.msprc.info a temporary suspension of issuing rights and responsibilities letters, conditional payment letters, and final demand letters. CMS then began issuing updated letters in late June 2011 conforming to the ruling in the second Haro opinion. The result means that until the 2011 Haro opinion is overturned, CMS collection practices will adhere to the opinion. CMS has appealed. The 2011 opin-ion also certified the class defined as “. . . persons who are or will be subject to MSP recovery, and from whom defendant has demanded or will demand payment of MSP claims before there have been determina-tions of the correct amounts through the waiver or appeal process.” The parties behind the Haro successes know every problem we face in MSP compliance. CMS has appealed to the Ninth Circuit Court of Appeals, with oral arguments scheduled for summer of 2012. In Bradley et al. v. Sebelius, 621 F.3d 1330 (11th Cir. 2010), the court overturned the district court and denied Chevron deference to CMS in a wrongful death case. Based on a thorough analysis of Florida probate law and the facts, including an extensive hearing on the merits and serving notice on CMS, the probate court of Alachua County, Florida, held that CMS was entitled to $787.50 of the $52,500 policy limits and the children of the decedent were entitled to the remainder. The court noted that CMS was served before the hearing but failed to participate. “We conclude that the deference given to the field manual . . . by the Secretary and the district court is misplaced.” Bradley’s counsel were awarded attorney fees and costs pursuant to 28 U.S.C. 2412(b) but were denied an enhanced fee for bad faith.

2 Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984).3 Author’s insert.

http://www.msprc.info

4


II. ThE ThrEE COMPOnEnTS OF MSP COMPLIanCE: COndITIOnaL PaYMEnT rECOvErY, MEdICarE

SET-aSIdES, MMSEa SECTIOn 111 rEPOrTInG

a. history of the MSP Statute

1. Medicare was established in 1965 as Title XVIII of the So-cial Security Act, 42 U.S.C. 1395 et seq., to provide certain medical ser-vices to individuals who are 65 or older, those who have received Social Security disability benefits for at least 24 months, and those with end-stage renal disease. Medicare initially was the primary payer of medical expenses for Medicare beneficiaries, despite the fact another plan of in-surance was truly “responsible” for the payment of expenses related to a claim. This practice continued until 1980, when Congress, in an attempt to preserve the fiscal integrity of the Medicare Trust Fund, enacted the MSPA (“MSP,” or Medicare Secondary Payer Act), 42 U.S.C. 1395y(b). 2. The MSP was designed to avoid cost shifting onto Medi-care of medical expenses properly born by a “primary” plan of insur-ance. The statute defines primary plans as workers’ comp, group health, automobile or other liability policies, or self-insureds. 42 U.S.C. 1395y(b)(2). The statute also specifically provides Medicare may not make pay-ment on behalf of a beneficiary if payment has been made or can rea-sonably be expected to be made by a primary plan. 42 U.S.C. 1395y(b)(2)(A). As a result, Medicare will look to one of these designated plans or policies as the primary payer for all injury- or illness-related medical expenses. 3. Medicare also has the authority under the MSP to recov-er its payments, called “conditional” payments, by bringing an action against any and all entities that were required or responsible to make payment with respect to the same item or service under a primary plan. The statute also gives Medicare the right of recovery against any entity (including attorneys) that has received payment from a primary plan. 42 U.S.C. 1395y(b)(2)(B)(iii). If litigation is required to recover, Medicare has the right to file an action for double damages, or twice the amount of its conditional payments. 42 C.F.R. 411.24(c)(2). 4. Medicare’s right to seek reimbursement does not require a finding of liability; rather, a primary plan’s responsibility may be dem-onstrated by: (1) a judgment, or (2) a payment conditioned upon com-promise, waiver, or release (whether or not there is a determination of liability). 42 U.S.C. 1395y(b)(2)(B)(ii), 42 C.F.R. 411.37(e)(2).

B. Sources of MSP authority

1. The MSP Statute: 42 u.S.C. 1395y(b) et seq. (1980)

42 U.S.C. 1395y(b)(2) Medicare secondary payer

(A) In general. Payment under this title [42 USCS §§ 1395 et seq.] may not be made, except as provided in sub-paragraph (B), with respect to any item or service to the extent that—

5


(i) payment has been made, or can reasonably be ex-pected to be made, with respect to the item or service as required under paragraph (1), or

(ii) payment has been made or can reasonably be ex-pected to be made under a workmen’s compensation law or plan of the United States or a State or under an automo-bile or liability insurance policy or plan (including a self-insured plan) or under no fault insurance. In this subsec-tion, the term “primary plan” means a group health plan or large group health plan, to the extent that clause (i) ap-plies, and a workmen’s compensation law or plan. An au-tomobile 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.4

2. Medicare Prescription drug, Improvement and Modern-ization act (MMa) of 2003, amending 42 u.S.C. 1395y(b). The MMA removed the word “prompt” from subsection (A)(ii) related to a prima-ry payer’s payment (or nonpayment) of a claim, clarified the term “self-insured plan,” substituted the term “primary payer” for “third party payer,” and added to the entities from which CMS may seek reimburse-ment and retroactively applying MMA Section 301(d) amendments to 1980.

3. Medicare, Medicaid and SChIP Extension act (MMSEa) of 2007, amending 42 u.S.C. 1395y(b). Most significantly, MMSEA Sec-tion 111 established settlement reporting requirements on all primary payers, including liability insurers, self-insurers, no-fault insurers, and workers’ compensation laws and plans. MMSEA also created the $1,000 per day per claimant penalty for noncompliance, the primary driver for the current MSP compliance frenzy. The “$1k per day” fines appear to have elevated MSP compliance to the top of every risk management program in the industry, just under preventing employee embezzlement and fraud.

4. 42 C.F.r. 411.20–411.54, Subparts B, C, d, M.

5. CMS Medicare Secondary Payer Manual and updates

6. CMS MMSEa Section 111 user Guide and updates

7. Internet CMS Memorandums

8. CMS “Town hall” Teleconferences

9. CMS.gov and MSPrC.info website “alerts,” “dos and don’ts”

4 The Complete Guide to Medicare Secondary Payer Compliance, Jennifer C. Jordan, Editor-in-Chief, LexisNexis Publication 01575, Edition 2011, P. STATS-16.

6


C. Federal Enforcement Issues

1. Conditional Payment recovery: 42 C.F.r. 411.24 a. If it is not necessary for CMS to take legal action to recover, CMS may recover the amount of the Medicare conditional payment; b. If it is necessary for CMS to take legal action, CMS may recover twice the amount of the Medicare conditional payment; c. If Medicare is not reimbursed within 60 days, the primary payer must reimburse Medicare even though it has already reimbursed the beneficiary or other party.

2. MSa noncompliance Enforcement

a. Claimant. Medicare probably would deny future injury-related reimbursement. But Medicare might pay erroneously, find out the payment was erroneous, and implement MSP recovery enforcement action against the injured party.

b. Carrier. If Medicare erroneously reimbursed a future inju-ry-related service and the injured party could not repay Medicare, CMS most likely would implement MSP recovery enforcement action against the carrier.

c. attorneys. Probably no MSP compliance penalties, but malpractice exposure for failure to advise a client of MSP penalties in-cluding denial of Medicare claims.

3. Section 111 reporting Penalties

a. Claimant. None.

b. responsible reporting Entities (rrEs). $1,000 per day per claimant.

c. attorneys. None.

d. why are Medicare and MSP Compliance Suddenly Such a Big deal?

1. Potential Fines. Although the MSP statute has been around since 1980, CMS has dramatically upped the ante in the last 11 years by implementing a series of potential fines for noncompliance, double damages when collection actions are required, reopening settled cases, requiring insurance carriers/self-insured entities to pay policy limits twice if Medicare’s interests were not adequately protected, and denying a claimant’s post-settlement injury-related Medicare claims of medical providers.

2. Section 111 of the Medicare/Medicaid State Children’s health Insurance Program SChIP Extension act of 2007 (MMSEa). Section 111 has ignited a huge reaction from liability insurers and work-ers’ compensation systems. Section 111 of MMSEA implemented serious, costly reporting requirements and penalties on insurers with potential $1,000-per-day penalties for failure to report injury-related medical ser-vices or charges to Medicare when the injured party is Medicare-eligible.

7


3. MSP Compliance. Compliance under the MSP requires cooperation between the parties in several important respects. As part of this coordinated approach, disclosure of certain personal information is often necessary as part of CMS’s processes and procedures. One ex-ample involves the Section 111 reporting law. Under Section 111, CMS has established an electronic query process system to assist Responsible Reporting Entities (RREs) to determine a claimant’s Medicare status. This system requires the RRE to provide CMS with the claimant’s Social Security or health identification number. Release of this information is causing concerns for a variety of reasons in claims circles.

E. Section 1.04, Three Separate and distinct Obligations under MSP5

[1] MMSEA Reporting

MMSEA enforces a reporting requirement on all primary payers, including liability insurance providers, self-insur-ers, no-fault insurers, and workers’ compensation laws and plans [see 42 U.S.C.S. § 1385y(b)(7), (8); 42 C.F.R. § 411.20,] which, generally speaking, comprises all bodily injury claims, including but not limited to malpractice, general casualty, auto liability, PIP, Med Pay, uninsured/underinsured, product liability, toxic tort, Federal Employ-ers’ Liability Act (FELA) claims, Longshore and Harbor Workers’ Compensation Act claims and Federal Employ-ees’ Compensation Act claims. Although federal regula-tions have long required the reporting of such settlements under certain circumstances, they failed to specify any ad-verse consequences for failing to do so.

Now, under MMSEA, failure to give timely notice of a set-tlement to Medicare results in “a civil money penalty of $1,000 for each day of noncompliance with respect to each claimant” [see 42 U.S.C.S. § 1385y(b)(8)(E)(i)].

[2] Conditional Payment Recovery

Medicare is entitled by statute to reimbursement for any payments made when it is demonstrated that another party is responsible for those payments. Once a secondary payer situation is identified, parties to a settlement must look to see if Medicare has provided any benefits related to the claimed injury and make reimbursement. Failure to repay Medicare may result in statutory interest accruing and double damages if the government must file suit to recover. Upon initiation of MMSEA reporting in first quar-ter 2011, it is anticipated that there will be a flurry of con-ditional payment demands from the MSPRC. Conditional payment practices are discussed fully in Ch. 3.5 The Complete Guide to Medicare Secondary Payer Compliance, 2011 Edition, pp.

1-26–1-27.

8


[3] Medicare Set-Aside Arrangements

In 2001, CMS released what is commonly referred to as the “Patel Memo” through which the agency introduced the Medicare Set Aside (MSA) arrangement as its recom-mended method to protect Medicare’s “future interests” in relation to workers’ compensation settlements. Since release of the Patel Memo, CMS has issued 18 additional policy memos governing several important components of the WC-MSA process including, review thresholds and non-threshold considerations, rated age calculation, pre-scription drug allocation methodologies, and MSA fund-ing and administration issues. While CMS has taken an ac-tive role in the workers’ compensation setting, the agency has provided little guidance for liability cases—with the agency finally issuing its first policy memo in September 2011. [See appendix Q.]

F. MSP Compliance in workers’ Compensation Cases

1. Conditional Payments (Pre-Settlement Medicare re-imbursement). MSP conditional payment recovery is uncommon in workers’ compensation cases because a workers’ compensation carrier usually pays pre-settlement injury-related medicals. Industry estimates indicate only 5% to 10% of conditional recovery actions involve work-ers’ compensation cases. But if Medicare makes a payment for which a primary “insurer” is liable, Medicare’s right to recover extends to the entire amount of the settlement.6

2. Medicare Set-aside (MSa) arrangements (Future Inju-ry-related Treatment after Settlement). An MSA is an amount of the settlement carved out of the total settlement to cover only future injury medical payments. In workers’ compensation cases, the amount of the MSA must be approved by CMS, then funded and spent only on post-settlement injury medicals, and finally accounted for also in accordance with CMS policy until the MSA funds are “exhausted.” Upon proper “exhaustion” of the MSA, Medicare will pay future injury medicals if needed. Medicare will pay noninjury medicals regardless of MSA status before and after settlement.7 However, if the final workers’ compensation settlement provides for all future injury related medical payments required by the client, an MSA is not “required.”8

3. “Birthplace” of MSa arrangements. Workers’ compen-sation cases represent the “birthplace” of MSA arrangements, starting in July 2001. The only authority supporting MSA arrangements in any case is 42 C.F.R. 411.46, of Subpart C: Limitations on Medicare Payment

6 Zinman et al. v. Shalala, 67 F.3rd 841 (9th Cir. 1995).7 CMS Memo, July 23, 2001, Q/A #12, p. CMS-18, The Complete Guide to Medi-

care Secondary Payer Compliance, 2011 Edition.8 CMS October 15, 2004 Memo, Question 6, The Complete Guide to Medicare Sec-

ondary Payer Compliance, 2011 Edition, pp. CMS-33, 34.

9


for Services Covered Under Workers’ Compensation. Virtually all other authority concerning MSA arrangements has been released as agency memos, alerts, the CMS MSP Manual, Dos and Don’ts, downloads, Town Hall Teleconferences, etc., none of which are subject to APA rule-making, notice, due process, or appeal.

4. “Patel Memo.” On July 23, 2001, CMS issued the now fa-mous “Patel Memo”—Workers’ Compensation: Commutation of Future Benefits to “All Associate Regional Administrators.”9 In a series of ques-tions and answers, which have been the hallmark of most of the CMS MSP memos, the Patel Memo established the parameters for MSAs in workers’ compensation cases. Subsequent CMS memos have supersed-ed many provisions of the initial Patel memo. Changes in CMS policy over time have been very common. The Patel Memo, named after CMS employee Parashar B. Patel, was the first of many policy memos, currently numbering 18, setting out MSA compliance procedures and methods in workers’ compensation cases.

G. MSP Compliance in Liability, PIP, Med Pay, FELa, Longshore and harborworkers Compensation act, and jones act Cases

1. Conditional payments are frequently seen when a claim-ant is age 65 or greater at the time of injury or turns 65 prior to settle-ment. If your client becomes eligible for Social Security Disability In-surance (SSDI) 24 months or more before settlement, Medicare may make conditional payments before settlement. Even if your client is not Medicare-eligible at the time of settlement, or if Medicare has made no conditional payments, defense carriers and insurers are increasingly de-manding proof that Medicare has made no payments. 2. The Medicare Secondary Payer Statute makes no distinc-tion between workers’ compensation, liability, FELA, LHCA, or Jones Act cases in regard to protecting Medicare’s interests. However, CMS currently has no policy or procedure in effect for reviewing or provid-ing an opinion regarding the adequacy of the future medical aspect of a non–workers’ compensation settlement. Big R Towing v. Benoit et al.,10 Finke v. Hunter’s View.11

3. CMS periodically conducts “Town Hall Teleconferences” to discuss MSP compliance issues with members of the MSP compliance community and transcribes the dialogue. In dialogue from teleconfer-ences dated January 28, 2010, March 16, 2010, and September 22, 2010 (see appendix a), Barbara Wright, Director of the Medicare Debt Man-agement Division at CMS, has stated that “. . . 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 aside

9 The Complete Guide to Medicare Secondary Payer Compliance, 2011 Edition, pp. .CMS-8–CMS-18.

10 Big R Towing, Inc. v. David Wayne Benoit et al., 2011 U.S. Dist. LEXIS 1392.11 Finke v. Hunter’s View, 2009 WL 6326944 (D.Minn.).

10


should be.”12 “As we’ve said on many calls, CMS has formalized the process to review proposals for workers’ compensation, Medicare set aside amounts. It does not have the same formalized process for liability Medicare set aside arrangements.”13 4. Although Town Hall Teleconferences don’t have the effect of statute, regulation, or case law, these comments clearly indicate that MSA arrangements are not “required” by CMS. But the same is also true of workers’ compensation MSAs. On the March 16, 2010, Town Hall transcript at page 41, Ms. Wright stated that “[t]he process for worker’s compensation is voluntary.”14

h. Problems Encountered in MSP Compliance

1. delay, delay, delay. The single biggest frustration en-countered by everyone (except CMS) is the time required to obtain in-formation and responses from CMS in all aspects of MSP compliance. Reporting your injury case to CMS immediately upon opening the file is your best strategy to reduce delay. Delay also occurs when phone com-munications are used to obtain information.

2. Misinformation from CMS. CMS has implemented a 24/7 “Self Service Information Feature,” http://www.msprc.info/newslet-ter/view_message.cfm?mid=35 (see appendix B), “. . . to get the most up-to-date Demand and Conditional Payment amounts as well as the dates those letters were issued without having to speak with a Custom-er Service Representative.” User experiences are mixed on all facets of performance. Information previously submitted and acknowledged by CMS might not be acknowledged using this feature. Conditional pay-ment information may differ from information on the initial Conditional Payment Letter (CPL). Wait times are usually lengthy as well.

3. Other Frustrations. In addition to CMS delays, injury liti-gators experience frustration over the complexity, liability exposure, dif-fering CMS regional policies and procedures, communication problems, frequent CMS policy and procedure changes, and autocratic, arrogant “customer service.” All add to the frustration of MSP compliance.

4. Case Law. MSP compliance case law grows steadily. Driv-ing MSP disputes is the huge disconnect between plaintiffs, defense counsel, and primary payers/carriers on bottom-line MSP guidelines. All parties have widely differing exposure to liability and knowledge of ever-changing guidelines in MSP compliance. A disconnect between the parties naturally follows. Section 111 “$1k per day” fine appears to have elevated MSA compliance to the top of every risk management program in the industry, just under preventing embezzlement. Examples include the following. a. Putting Medicare’s name as a payee on the check, with or without prior discussion and agreement

12 CMS Town Hall Teleconference 1-28-2010, page 17.13 CMS Town Hall Teleconference 3-16-2010, page 41.14 CMS Town Hall Teleconference 3-16-2010, page 41.

http://www.msprc.info/newsletter/view_message.cfm?mid=35http://www.msprc.info/newsletter/view_message.cfm?mid=35

11


b. Demanding production of your client’s SSAN. c. Asking you to personally indemnify the defendant on all MSP issues. This may be prohibited by OSB disciplinary rules due to a possible conflict of interest between the attorney and the client if indem-nification was actually required. d. Creating arbitrary dates for the following: (i) paying Medi-care; (ii) obtaining CMS approval of an MSA amount, and (iii) funding the MSA proposal. e. Prohibiting the release of any settlement funds to the cli-ent until CMS has signed off. f. Demanding MSA submission to CMS in all liability cases.

5. Thirty-Month Expectation. In a recent case, defense coun-sel could not be persuaded that a five-year-old accident victim was not on Medicare and would not “reasonably be expected to be Medicare eligible within 30 months” of the settlement date. The 30-month ex-pectation of Medicare eligibility only pertains to MSA arrangements in workers’ compensation, not pre-settlement conditional payment recov-ery. After sending defense counsel the language of 42 U.S.C. 1395c, the federal statute for Medicare eligibility, he remained unsatisfied. We sent an SSA-3288 form to a local Social Security office. The defense attorney was satisfied only after seeing that the child was not eligible for Medi-care or SSDI from the response we produced.

III. MInIMIzInG COMMunICaTIOn ChOkE POInTS BETwEEn PLaInTIFF, dEFEnSE, and CMS TO GaIn

BETTEr COnTrOL OF MSP COMPLIanCE In YOur CaSE

a. Is Your Client Medicare Eligible?15

1. Individuals 65 or older and eligible for federal retirement benefits including railroad retirement. 2. Individuals under age 65 who have received SSDI benefits for 24 months. 3. Individuals medically determined to have end-stage renal disease (ESRD).

B. Get Started Quickly

You can optimize your control over the lumbering MSP machin-ery by taking the following steps. 1. Obtain your client’s signature and submit Social Securi-ty Form SSA-3288 (see appendix C) to the nearest Social Security Of-fice, even if your client can tell you if s/he is or isn’t Medicare eligible. This form is available at http://www.ssa.gov/online/ssa-3288.pdf or Google “SSA-3288.” You will then receive Social Security’s response in-dicating your client’s eligibility for Social Security benefits, including SSDI and SSI, and Medicare and Medicaid benefits. If your client is a mi-nor or incapacitated adult, conservatorship will be required for the sub-missions above. If your client is not Medicare-eligible, this form should

15 42 U.S.C. 1395c.

http://www.ssa.gov/online/ssa-3288.pdf

12


satisfy the defense counsel as proof of ineligibility. Recently, some Social Security Offices have begun charging fees of $15 to $85 to furnish this information. 2. The author recommends the following immediate actions in every injury case, when an injury file is initially opened. a. Report your case to the CMS Coordination of Benefits Contractor (COBC). Go to www.msprc.info for complete details of the reporting process. Taking this action immediately upon execution of a fee agreement in every case is highly beneficial. If your client turns out not to be Medicare-eligible, you’ll have CMS-approved documentation of ineligibility to satisfy the defense. If your client is Medicare-eligible, injury-related conditional payments will be flagged by CMS early. This will expedite final conditional payment determination and reduce wild variations in the amounts reflected on the initial Conditional Payment Letter (CPL) and the final demand amount. b. Obtain the client’s signature and submit to MSPRC the Proof of Representation Model Form (see appendix d; see www.msprc.info). c. If your client’s Medicare eligibility is established, enable your client to establish a personal “mymedicare.gov” account at www.mymedicare.gov. With your client’s consent, be sure to establish your unrestricted access to the account. d. After completion of actions above, go through the CMS tu-torial at http://www.msprc.info/includes/MyMSP/myMSP.htm and access your client’s “My MSP” tab on your client’s “mymedicare.gov” account (see appendix E). 3. According to the tutorial, once you have notified COBC of your client’s case, all Medicare-reimbursed injury medical claims and Medicare payments will be updated on a weekly basis in order to pro-vide you accurate conditional payment information as your case moves forward. This means you are not in the dark about Medicare payments prior to receiving either the CPL, CDN, or final demand letter from CMS. 4. Once MSPRC generates conditional payment information, it is not uncommon for CMS to include noninjury related Medicare-covered services on the Conditional Payment Letter or Final Demand Letter. These charges are not subject to conditional payment recovery. Spotting and weeding out unrelated Medicare payments is difficult. The charges are described in ICD-9 codes and CPT codes. Figuring it out is time-consuming, is labor-intensive, and requires expertise. MSP compli-ance contractors have the skill sets and systems to distinguish unrelated charges. Should a CMS document contain unrelated Medicare charges, request an amended document from CMS.

C. Become Familiar with and use CMS’s Extremely helpful websites

1. http://www.msprc.info. Review home page tabs “Let-ters,” “FAQ’s,” and “Tool Kits.”

http://www.msprc.info/http://www.msprc.info/http://www.msprc.info/http://www.mymedicare.govhttp://www.mymedicare.govhttp://www.msprc.info/includes/MyMSP/myMSP.htmhttp://www.msprc.info/

13


2. http://www.cms.gov/WorkersCompAgencyServices. Review the following links on the left of the screen: a. Reporting a WC case and Obtaining Conditional Payment Information; b. Workers Compensation Medicare Set-aside Arrangements (WCMSAs); c. Submissions of WCMSAs; d. Administering WCMSAs; e. WCMSA-Related Topics; f. Workers’ Compensation Medicare Set-aside Portal (WCMSAP).

d. utilize the recently Implemented CMS Communication Tools

1. “MSPRC Self-Service Information Feature” (see ap-pendix B). a. 24/7 availability; b. “No wait time” according to MSPRC; c. Unlimited number of case inquiries on one call; d. So far, long waiting times, incomplete file information by MSPRC. 2. Workers’ Compensation Set-Aside Portal (see ap-pendix F). a. Requires user account registration and set-up; b. Requires free computer-based training to use; c. Incorrect use penalized by loss of access; d. Self-submitter accounts available for claimants to submit their own WCMSA. Priceless!

E. add to Your Library

The Complete Guide to Medicare Secondary Payer Compliance, Jen-nifer C. Jordan, Editor-in-Chief, LexisNexis Publication 01575, 2011 Edition.

F. CMS Correspondence Cover Sheet

Always use the CMS Correspondence Cover Sheet on the “Attor-ney Tool Kit” page at www.msprc.info when sending or faxing to CMS.

G. Plaintiff/defense Information-Sharing: recent Case Law Trends

“Number please, number please”: The battle for Social Security numbers in liability cases. This issue is rarely seen in workers’ compen-sation cases because the workers’ compensation carrier obtains the cov-ered party’s SSAN when the worker enrolls in the plan.

1. Starting Point: C.F.r. 411.23. “(a) If CMS takes action to recover conditional payments, the beneficiary must cooperate in the ac-tion” and “(b) if CMS’s recovery action is unsuccessful because the ben-eficiary does not cooperate, CMS may recover from the beneficiary.”

2. C.F.r. 411.24(a)

http://www.cms.gov/WorkersCompAgencyServices/http://www.msprc.info/

14


Filing a Medicare claim by or on behalf of the beneficiary constitutes an express authorization [emphasis added by au-thor] for any entity, including State Medicaid and worker’s compensation agencies, and data depositories, that pos-sess information pertinent to the Medicare claim to release that information to CMS. This information will be used only for Medicare claims processing and for coordination of benefits purposes.

It is unclear if the “express authorization” extends to defense counsel or only the carrier/insurer.

3. june 23, 2008, alert. CMS first raised the issue following the enactment of Section 111 in a June 23, 2008, “Alert” (see appendix G). Nowhere in the Alert does CMS mandate an injured party to provide her/his SSAN or Medicare Health Insurance Claim Number (HICN). In fact, this first Alert begins with the following sentence: “This ALERT is to advise that collection of SSNs, HICNs or EINs for purposes of compli-ance with the reporting requirements under Section 111 of Public Law 100-173 is appropriate.” (Emphasis added by author.) The same Alert did, however, mandate SSAN/HICN reporting by “group health plan insurers, third party administrators, and plan administrators or fiduciaries of self-insured/self-administered group health plans to report, as directed by the Secretary of the Department of Health and Human Services, information that the Secretary requires for purposes of coordination of benefits.”

4. august 24, 2009, alert. On August 24, 2009, CMS released its second Alert regarding HICN and/or SSAN compliance and also provided model language to assist reporting entities in obtaining this information in compliance with Section 111 (see appendix h). Submis-sion of SSAN or HICN by individuals was not mandated.

5. april 6, 2010, alert. On April 6, 2010, CMS issued its third Alert on the subject and again did not mandate submission by claimants (see appendix I).

6. Litigation. Under the MSP Act, Medicare may pursue multiple parties to ensure that its rights are protected. In a litigation con-text, MSP compliance can create conflicts between litigants, as plaintiffs’ counsel may be reluctant to release their client’s personal information needed for compliance in all three MSP obligations. In liability cases, re-fusal to release the SSAN to the defense slows the resolution of the case. Furthermore, defendants may attempt to include specific settle-ment language and place Medicare on the settlement check in an effort to protect against liability and to avoid bad faith actions. These practices have started to hit the courts, as there have been several recent deci-sions regarding the release of Social Security numbers, bad faith actions, and issues concerning including Medicare as a payee on the settlement check.

15


a. Hackley et al. v. Garofano et al.16 This case arose out of a Connecticut minor settlement for personal injury. The carrier refused to pay the settlement until the plaintiffs turned over their Social Security numbers (despite the fact the plaintiff was a minor and his father was his guardian). The court ordered the production of the Social Security numbers due in part to the carrier’s obligation to report the settlement pursuant to Section 111 of the MMSEA. b. Wilson v. State Farm.17 This case arose out of a motor vehicle accident. The plaintiff was a Medicare beneficiary, and Medicare paid a significant portion of the medical expenses. The plaintiff would not con-sent to the carrier investigating Medicare’s lien, so the carrier wouldn’t pay the settlement. The court held the carrier did not act in bad faith by refusing to pay the settlement because the carrier had a duty under the MSP to protect Medicare’s interests and to reimburse Medicare for its conditional payments. c. Zaleppa v. Seiwell.18 This case, which arose out of a motor vehicle accident, ultimately proceeded to trial in Pennsylvania. The jury awarded the plaintiff $15,000, which the defendant refused to pay unless Medicare was named on the settlement check or the verdict was paid into the court pending notification from Medicare that all outstanding Medicare liens were paid. The trial court denied the motion and ordered that the judgment be paid. This order was due in large part because the evidence of record showed Medicare had not made any payments. d. Seger v. Tank Connection, LLC.19 Plaintiff objected to pro-duction of Social Security number in discovery. The court found the re-quests for plaintiff’s Social Security and Medicare cards were reasonable based upon Section 111 reporting requirements, specifically the “query process.”

Iv. COndITIOnaL PaYMEnT rECOvErY: aPPLIES TO aLL CaSES: wOrkErS’ COMPEnSaTIOn, LIaBILITY, PIP, MEd PaY, FELa, LOnGShOrE and harBOrwOrkErS’

COMPEnSaTIOn aCT, and jOnES aCT

a. Conditional Payments (Pre-Settlement Medicare reimbursement)

MSP conditional payment recovery is uncommon in workers’ compensation cases because the workers’ compensation carrier usually pays pre-settlement injury related medicals. Industry estimates indicate only 5% to 10% of conditional recovery actions involve workers’ com-pensation cases. But if Medicare makes a payment for which a primary

16 2010 WL 3025597 (Conn.Super.).17 2011 U.S. Dist. LEXIS 63430 (W.D. Ky., June 15, 2011).18 9 A.3d 632 (2010).19 2010 WL 16652353 (D. NE., Apr 22, 2010).

16


“insurer/plan” is liable, Medicare’s right to recover extends to the entire amount of the settlement.20

B. Medicare’s recovery rights

Medicare’s recovery rights only come into existence “when pay-ment for medical expenses that Medicare has paid for conditionally has been made by a third party payer.” 42 U.S.C. 1395y(b)(2)(B)(ii).21

C. MSP Starting Point

Medicare is entitled to the entire settlement. 42 U.S.C. 1395y(b)(2)(B)(i)–(iii),22,23 Zinman et al. v. Shalala.24,25 “The only situation in which Medicare recognizes allocations of liability payments to nonmedical losses is when payment is based on a court order on the merits of the case.”26 A recent Eleventh Circuit Court of Appeals case limited Medi-care’s priority recovery right, Bradley et al. v. Sebelius.27 The Bradley court determined that the MSP Manual was not entitled to Chevron28 deference and upheld the adjudication of the rights of the children of the decedent and those of the estate by the Florida probate court. The probate court of Alachua County, Florida, adopted the plaintiffs’ proposed allocation of $787.50 to Medicare and the remaining $51,712.50 to the children of the decedent.

d. attorney Fees and Costs reduction rules

The only certain reduction of Medicare’s conditional payment recovery is for procurement costs (attorney fees and costs). 42 C.F.R. 411.37. See “Final Settlement Detail Document” on “Attorney Tool Kit” tab at www.msprc.info.

E. MSP Compliance Statute of Limitations

Six years: U.S. v. Stricker29 (see appendix S).20 Zinman et al. v. Shalala, 67 F.3rd 841 (9th Cir. 1995).21 The Complete Guide to Medicare Secondary Payer Compliance, 2011 Edition,

p. 3-7.22 Mixon v. U.S. Agencies Casualty Insurance Company, U.S. Dist. LEXIS 32039

(E.D. La. March 31, 2010).23 Farmers Insurance Exchange v. Leona Forkey et al., 2010 U.S. Dist. LEXIS 137716.24 Zinman v. Shalala, 67 F.3d 841(1995).25 42 C.F.R. 411.37(d).26 MSP Manual Chapter 7, Section 50.4.4; The Complete Guide to Medicare Second-

ary Payer Compliance, 2011 Edition.27 Bradley et al. v. Sebelius, 2010 WL 3769132 (C.A.11 (Fla.).28 Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837

(1984).29 No. CV-09-2433 (N.D. Ala. Aug 12, 2011).

http://www.msprc.info/

17


F. Conditional Payment Step by Step

“Attorney Tool Kit”—See each hyperlink starting with “Recov-ery Process Flowchart” at www.msprc.info.

G. allocation/apportionment of Gross Proceeds

1. CMS will not recognize allocation of policy limit settle-ment between multiple injured parties by: a. Agreement of the parties; b. Mediation or arbitration; or c. Probate court determination.30

2. CMS will not recognize apportionment of proceeds among damage categories unless a court makes such a determination “on the merits.”31

The most notable exception to this CMS position has been the Eleventh Circuit case of Bradley et al. v. Sebelius, above.32 The court’s analysis relied heavily on Florida’s wrongful death statute and probate law. The Bradley opinion has not been followed in any other Court of Appeals circuit.

h. administrative remedies to alter CMS 100% Conditional Payment recovery

1. request for redetermination. 42 C.F.R. 405.940.

2. request for reconsideration. 42 C.F.R. 405.960.

3. request for aLj hearing. 42 C.F.R. 405.1000.

4. Medicare appeals Counsel review. 42 C.F.R. 401.613(c)(2).

5. u.S. Court of appeals

6. MSP appeals Explained. https://www.cms.gov/manu-als/downloads/clm104c29.pdf.

7. hardship waiver a. Exhaustion of administrative remedies above required, US v. Harris,33 Roland v. Sebelius.34

b. Lusker v. HHS.35

c. Gray v. Doe et al.36

d. Braucher v. Swagat Group, LLC, No. 07-CV-3253, 2011 WL 832512 (C.D. Ill. Mar. 3. 2011). e. Black v. Doe, No. 11-25-DLB-JGW, 2011 WL 1205473 (D. N.J. Mar 28, 2011).

30 Bradley et al. v. Sebelius, see footnote 22.31 See footnote 21.32 Bradley et al. v. Sebelius, see footnote 22.33 U.S. v. Harris, 2009 U.S. Dist. LEXIS 23956 (N.D. W. Va. Mar. 26, 2009).34 Roland v. Sebelius, 2010 U.S. Dist. Lexis 1502 (N.D. Tex. 2010).35 Lusker v. HHS, 2010 U.S. Dist. LEXIS 1076.36 Gray v. Doe et al., 2010 U.S. Dist. LEXIS 83067.

http://www.msprc.infohttps://www.cms.gov/manuals/downloads/clm104c29.pdfhttps://www.cms.gov/manuals/downloads/clm104c29.pdf

18


f. Go to www.msprc.info, Attorney Tool Kit, “SSA 632 Re-quest for Waiver.” g. In Hadden v. USA,37 plaintiff Vernon Hadden requested a waiver of his conditional payment based on theories of equitable alloca-tion, citing Arkansas v. Ahlborn,38 equity and good conscience based upon Quinlivan v. Sullivan,39 and the “make whole doctrine” with no citation to authority. All were rejected by the court. This is also the established position of the Ninth Circuit when CMS exercises its direct right of ac-tion as opposed to subrogation.40

Hadden then appealed to the Sixth Circuit Court of Appeals. Af-ter 404 days of deliberation, the Sixth Circuit issued a five-page opinion upholding the lower court’s decision, reciting that CMS has an open-ended right to recover its full conditional payment amount.41 A petition for certiorari is currently pending.

8. Pre-Settlement Compromise. The author recently pre-sented at a Portland MSP compliance training for insurance industry employees. One of the co-presenters was Jonella Windell, CMS Region X MSP Compliance Coordinator from Seattle. Ms. Windell stated that she would directly review requests for pre-settlement compromise submit-ted by any party to reduce the conditional payment amount sought by CMS. If the conditional payment amount is over $100,000, the request is forwarded to CMS Central Office and then forwarded to the U.S. De-partment of Justice.42 Apparently a compromise of 60% or more is higher than CMS will likely recommend, regardless of the facts.

I. CMS Protocols and Performance history

1. The process is illustrated at www.msprc.info: Tool Kits, Attorney Tool Kit, Recovery Process Flow Chart. 2. When a case is reported early to COBC and conditional payment history compilation by CMS begins early in the case, expect 90 to 120 days to receive final demand amount; otherwise, expect 120 to 180 days or more to receive final demand amount.

37 Hadden v. USA, 2009 U.S. Dist. LEXIS 69383.38 Arkansas v. Ahlborn, 547 U.S. 268 (2006).39 Quinlivan v. Sullivan, 916 F. 2d 524 (9th Cir. 1990).40 Farmers v. Forkey, 764 F. Supp.2d, 1205 (D. Nev. 2010).41 Hadden v. USA, 11a0293 p.06; 2011 U.S. App. LEXIS 23289; 2011 FED App.

0293 P (6th Cir.).42 Part 7, page CMS-8, The Complete Guide to Medicare Secondary Payer Compli-

ance, 2011 Edition.

http://www.msprc.infohttp://www.msprc.info

19


j. noncompliance Exposure Issues: Plaintiffs, defense, Carriers, attorneys, Fiduciaries, Life Care Planners, jury Consultants, Settlement Planners, MSa administrators, or anyone who received remuneration from the Proceeds of the Case

All are potentially liable for the gross amount of the conditional payments. Double damages against primary payers apply if litigation is required for recovery.

k. amending Conditional Payment amounts: Initial CPL and Final demand

When Medicare pays for injury-related services as well as non–injury related services before settlement, the non–injury related charges may appear on the Conditional Payment Letter (CPL) or Final Demand erroneously. Using a Model Language Cover Letter, ask MSPRC to re-move the non-injury charges and demand an amended CPL or, better, an amended Final Demand. Discerning the non-injury charges from the injury-related charg-es is highly specific, coded in ICD-9 (soon to be ICD-10) and current CPT procedure codes. Unless your staff is trained accordingly, use of an MSP compliance contractor to weed out non-injury charges is recommended. Be sure to submit the Final Settlement Detail form from MSPRC.info to achieve the procurement cost reduction in 42 C.F.R. 411.37.

L. recent CMS Low Threshold Guidance

1. $300 Threshold for Some Liability Cases. Effective Sep-tember 6, 2011, CMS implemented a $300 threshold for certain liability settlements, judgments, awards, or other payments related to physical trauma based incidents (excluding ingestion, implantation, or expo-sure). When the claimant receives a lump sum of $300 or less, Medicare will not recover conditional payments from the settlement (see appen-dix j).

2. Fixed Percentage Option for Some Liability Cases. Effec-tive November 7, 2011, CMS implemented a “streamlined” method of calculating conditional payments for certain liability settlements, judg-ments, awards, or other payments of $5,000 or less. This option doesn’t apply to no-fault or workers’ compensation cases or ingestion, implan-tation, or exposure injuries (see appendix k; see www.msprc.info). The CMS Model Language for Fixed Percentage Option is reproduced in appendix L.

3. Self-Calculated Final Conditional Payment amount. Ef-fective February 21, 2012, CMS implemented its “Self-Calculated Final Conditional Payment Amount” option, in liability cases only, for gross settlement/judgment proceeds of $25,000 or less (see appendix M). As in the $300 threshold and fixed percentage options, above, this option applies only to cases resulting from physical trauma and excludes cases involving ingestion, implantation, or exposure. The Model Language Form is available at www.msprc.info: Tool Kits, Attorney Tool Kit, Self-

http://www.msprc.infohttp://www.msprc.info

20


Calculated Conditional Payment Amount Model Language (see exam-ple in appendix n). This option allows a claimant or representative to edit charges on the Conditional Payment Letter and remove non–injury related charges by marking each charge with a “Y” denoting the charge is related to the injury or “N” indicating the charge is unrelated to the injury. Each “N” charge must be explained as to why it is unrelated to the injury, and CMS may disagree by sending an Amended Final Condi-tional Payment Amount. This process is almost impossible without spe-cific knowledge of ICD-9 codes. It’s then take-it-or-leave-it, and settle-ment must occur within 60 days from the date of the letter.

NoTe: Attorney fees and costs are not deductible when us-ing this option.

v. MEdICarE SET-aSIdE arranGEMEnTS: ParT OnE

a. Overview

Generally, an MSA is the CMS “recommended” method to protect its future interests in workers’ compensation cases. A CMS-approved MSA, administered to “exhaustion” according to CMS protocols, is the only MSP “safe harbor” tool in worker’s compensation cases. See ap-pendix O. If the responsible party or “primary” payer won’t be liable for post-settlement injury-related medical costs, the MSA is an amount to be “carved out” of the proceeds to pay future injury-related charges in-stead of Medicare. In some cases, CMS requires the entire settlement to be used for future injury-related charges, minus attorney fees and costs. However, if the final workers’ compensation settlement provides for all future injury-related payments required by the claimant, an MSA is not necessary because Medicare will not be paying. Also, CMS ar-ticulated another non-MSA scenario in 4/21/03 Memo Q20, “When a Medicare Set-Aside Is Not Recommended,” if of all the following apply: 1. The facts of the case demonstrate that the injured indi-vidual is only being compensated for past medical expenses (i.e., for services furnished prior to the settlement); 2. There is no evidence that the individual is attempting to maximize the other aspects of the settlement (e.g., the lost wages and disability portions of the 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. The policy objective behind the MSA is to prevent the parties from shifting the burden of the plaintiff’s future accident-related medi-cal treatment to the Medicare program. The MSA allocation is typically prepared by a medical professional such as an MSA allocation specialist, life care planner, or registered nurse. Reacting to past litigation, in a May

21


11, 2011, Memorandum (see appendix P), CMS is careful to point out that an MSA isn’t “required” to consider/protect Medicare’s interests.

B. MSas in workers’ Compensation Cases

In workers’ compensation cases, CMS has established two “re-view” thresholds when it believes a CMS approved MSA is appropriate as follows: 1. The claimant is a Medicare beneficiary at the time of the settle-ment and the total settlement amount is greater than $25,000; or 2. The claimant is not a Medicare beneficiary at the time of set-tlement but has a reasonable expectation of Medicare enrollment within 30 months of the settlement date and the total settlement amount is greater than $250,000. See appendix P. 3. CMS has established a formal submission for review pro-cess for WCMSA proposals. Under this process, the proposed MSA al-location along with supporting documentation should be sent to CMS addressed as follows: Coordination of Benefits Contractor, Attention: WCMSA Proposal, P.O. Box 33489, Detroit, MI 48232. 4. As of November 16, 2011, CMS opened a workers’ com-pensation MSA portal allowing submitters to electronically submit their MSA proposals directly to CMS (see appendix F). The portal provides instant transmission of a WCMSA and confirmation that the file was received by CMS. Many practitioners prefer the new web portal sub-mission method, as it provides streamlined communication to facilitate the overall process. See the informative CMS.gov website above for the tutorial required for CMS registration to use the WCMSA portal.

C. MSas (LMSa) in Liability, PIP, Med Pay, FELa, LhCa, and jones act Cases

1. As discussed above, CMS’s policy of “considering/pro-tecting” Medicare’s future interests in these cases is inconsistent at best. 42 U.S.C. 1395y(b) makes no distinction between workers’ compensa-tion cases and non–workers’ compensation cases. The MSP statute’s in-clusion of every type of injury case with workers’ compensation actions is the only MSP authority suggesting an MSA should be submitted in non–workers’ compensation liability cases. 2. 42 C.F.R. 411.46 is the Congressional “fountain” of MSP authority from which all other MSA guidelines originate. Yet 42 C.F.R. 411.46 falls under “Subpart C Limitations on Medicare Payments for Services Covered Under Workers’ Compensation” of Title 42, Public Health, Subchapter B, Medicare Program, Part 411, Exclusions from Medicare and Limitations on Medicare Payment. 3. The only specific MSP authority related to “liability”43 MSA compliance was issued on September 30, 2011, as a CMS Memo-randum indicating when a liability case did not “need” a liability MSA (see appendix Q). In 2011, the ABA TIPS section at the 2011 ABA annual

43 Including PIP, Med Pay, FELA, Longshore and Harborworkers’ Compensa-tion Act, and Jones Act cases.

22


meeting took the position that MSAs are not necessary in liability cases. This is also the position of the AAJ.

d. risk Management Practice Considerations in Liability MSas

The uncertainty surrounding MSAs in liability cases can best be addressed by adopting a risk management approach to each case, de-pending on the facts of each case. 1. In every liability case, the injured present/future Medi-care recipient deserves to understand: a. The concept of considering/protecting Medicare’s future interests; b. The likelihood that s/he may require future injury-related medical procedures; c. That if s/he uses a Medicare card at the time of service, Medicare may deny payment, resulting in collection by the medical provider; d. That if Medicare erroneously pays, Medicare will initiate collection action against him/her; e. That if Medicare resorts to litigation, the claimant may be exposed to double damages; f. That, most likely, the claimant signed a settlement/release agreement holding the primary payer harmless from CMS collection ac-tion; and g. That if the primary payer is forced by CMS to pay a future claim, the primary payer will initiate its own collection action against the claimant. 2. Discuss the option of setting aside an arbitrary amount of the net settlement of at least 25% to pay for future injury-related Medi-care-covered services. This is no guarantee that CMS will be satisfied with the amount, but it shows that Medicare’s interests were consid-ered. If the likelihood of very expensive future medical procedures is high, set aside a larger percentage. 3. Utilize an MSP compliance contractor to prepare a full MSA allocation proposal to determine the amount of settlement pro-ceeds to set aside, but don’t submit to CMS for approval. Use the funds to pay for future injury-related Medicare-covered services. 4. Same as 3, but submit the allocation proposal to the CMS regional office for review. The allocation proposal may not be reviewed or approved by CMS, but at least CMS had an opportunity to do so. Use the funds to pay for future injury-related Medicare-covered services. 5. Same as 4, adding annual MSA accounting to CMS as the funds are spent.

E. Client-Centered Philosophy of MSa allocation Proposal

1. The larger the total amount of the MSA allocation, the less likely CMS will counter the proposed amount. Some MSP compliance contractors boast that their proposal acceptance rate by CMS is 100%. This may mean that the amounts proposed are higher than they should

23


be. Although this makes CMS happy, it’s certainly not the best approach for the injured party. 2. The most reputable, experienced MSP compliance contrac-tors attempt to submit the lowest proposal amount they believe CMS will accept. The injured party is then able to use the proceeds of the inju-ry action for paying bills, living expenses, and quality-of-life purchases.

F. MSa Preparation

1. Preparation of an MSA “allocation proposal” is a complex projection of all post-settlement injury-related Medicare-covered ser-vices and goods. The skill set required to produce the proposal is high-ly specific, requires multidisciplinary medical knowledge, both acute care- and rehabilitation medicine–specific, and requires knowledge of ICD-9/CPT coding, current pricing parameters of required treatments, prescription medications, durable medical equipment, and medical supplies. Current knowledge of CMS coverage, pricing guidelines, and practices on the individual medical issues also is essential. 2. Although the largest MSP compliance contractors have developed algorithms to calculate costs, the process requires significant human analysis and judgment to produce the minimum proposed MSA amount acceptable to CMS. 3. Retrieval and review of all medical records, from the in-jury date to the preparation of the MSA allocation proposal, is required. Communications between the allocation proposal preparer and treating physicians, Medicare skilled therapists, etc., is often required. The re-sulting product must be written to be defensible when challenged by a CMS staffer having a similar skill set as well as challenges from defense MSP consultants. 4. A sample MSA submission is provided by CMS at http://www.cms.gov/WorkersCompAgencyServices/Downloads/sample-submission.pdf. A redacted, actual MSA submitted to CMS for approval is found in appendix r.

G. Submission of an MSa to CMS for approval

Once the MSA allocation proposal is completed, the proposed MSA allocation report is then forwarded to CMS for review, defense of the allocation amount, and possible increase in the amount CMS will approve. It is unlikely that CMS will reduce a proposed allocation amount. Throughout the MSP compliance industry, the submission pro-cess is a separate service and charge in addition to the allocation pro-posal preparation charges. CMS provides no formal appeal process to reduce the “approved” MSA amount, although a submitter may request a reconsideration. In a recent case of a self-insured employer, the proposed MSA Al-location Report total amount sent to CMS was $668,000. CMS countered with $998,000 primarily based upon increased prescription medication costs. In such a case, try the following: 1. Ask for reconsideration by the CMS regional office; 2. If denied, contact MSP central and ask for reconsideration;

http://www.cms.gov/WorkersCompAgencyServices/Downloads/samplesubmission.pdfhttp://www.cms.gov/WorkersCompAgencyServices/Downloads/samplesubmission.pdfhttp://www.cms.gov/WorkersCompAgencyServices/Downloads/samplesubmission.pdf

24


3. If denied, appeal to the Office of the General Counsel; 4. If denied, sue in federal courtThe larger MSA allocation contractors have the ability to contact the CMS staff to point out errors in assumptions. Sometimes CMS will amend the initial amount.

vI. MEdICarE SET-aSIdES: ParT II

a. Funding a CMS-approved MSa

1. The initial MSA allocation proposal must disclose the method of funding the MSA. The available choices are: (1) all cash; or (2) cash plus periodic payments from one or more structured settlement annuity products. The chosen method of funding must be disclosed and approved by Medicare. 2. If a structured settlement annuity product is used, CMS requires one-time initial “seed money” to be deposited into the segre-gated MSA account in addition to the periodic annuity payments, with the following parameters:

STruCTurEd SET-aSIdE arranGEMEnTS

(ref: 4/21/03 Memo Q10 & 10/15/04 Memo Q5)

A WC Medicare Set-aside Arrangement can be established as a structured arrangement, where payments are made to the arrangement on a defined schedule to cover expenses projected for future years. In a structured Medicare set-aside arrangement, monies are apportioned over fixed or definite periods of time. In such cases, Medicare will not agree to cover the beneficiary if there is no verification that the funds apportioned in the arrangement have been exhausted. Medicare does not make any payments until the contractor responsible for monitoring the individual’s case can verify that the funds apportioned to the period, including any carry-forward amount, have been com-pletely exhausted as set forth in the Medicare set-aside arrangement.

However, CMS will approve a payout amount for services that would otherwise be reimbursable by Medicare from the WC Medicare Set-aside Arrangement in the following manner:

(1) The seed money for the WC Medicare Set-aside Ar-rangement must include an amount equal to the amount of monies calculated to cover the first surgery procedure and/or replacement and two years of annual payments.

(2) The remainder of the approved amount should be divided by the remainder of the claimant’s life expectancy (or a shorter defined period of time if CMS has agreed to a shorter time period).

25


(3) Subsequent annual deposits into the WC Medicare Set-aside Arrangement are to be based upon a set “anni-versary date” which cannot be more than one year after the settlement date.

In a structured Medicare set-aside arrangement, if funds are not exhausted during a given period, then the excess funds must be carried forward to the next period. The threshold after which Medicare could begin to pay claims related to the injury would then be increased in any subse-quent period by the amount of the carry-forward.

Example: A structured set-aside is designed to pay $20,000 per year over the next 10 years for an individual’s Medicare covered services. Medicare would begin paying covered expenses in any given year after this $20,000 is exhaust-ed. However, in 2003 the injured individual needs only $15,000 to cover all related expenses. The administrator would need to carry-forward the excess $5,000 into 2004. Therefore, in 2004 a total of $25,000 of Medicare covered expenses would need to be spent for services otherwise reimbursable by Medicare before Medicare would begin to cover WC related expenses, but only for the balance of 2004. This carry-forward process continues until the accu-mulated carry-forward plus the payment for a given year is exhausted.

3. Using a structured annuity product has advantages over all cash. The purchase price of the annuity product is less than the guar-anteed payments funding the approved MSA amount. This means the injured party may use the difference for other needs. 4. Additionally, if the initial “seed money” and an annual an-nuity payment are used before the end of the calendar year, known as “temporary exhaustion,” Medicare pays for the injury-related charges for the remainder of the year. The following year, Medicare doesn’t pay until the annual annuity payment is again temporarily “exhausted.” Many problems have been reported with this “on/off” Medicare reim-bursement. Medicare payments have been denied even when the an-nual MSA exhaustion has been reached and reported to Medicare.

B. administration of the MSa

1. The central concept of the MSA is to consider/protect Medicare’s future interests after settlement by paying for injury-related Medicare services from the MSA, rather than Medicare paying. Once approved and funded, the MSA expenditures must be tracked and re-ported to CMS on an annual basis. This function can be done by the injured party with or without assistance, with a professional third-party administrator, or by the trustee of a Medicare set-aside trust. Costs of administration and attorney fees cannot be paid from the MSA funds.

26


2. Over 90% of all MSAs are self-administered by the claim-ant and are never properly exhausted. The name of many boats pur-chased by claimants with MSA funds is “MY MSA.” As a result, Medi-care will not pay for future injury-related Medicare-covered services, except by mistake. Once CMS discovers the erroneous payment, it will initiate recovery of the payment and potentially could subject a primary payer to double damages if litigation is required. 3. Using a trustee of an MSA trust, professional support, or third-party administration means annual MSA reporting to CMS will actually occur, enhancing the likelihood of proper exhaustion. Using a Medicare set-aside trust that complies with 42 U.S.C. 1396p(d)(4)(A) is the only way of preventing the MSA from disqualifying an injured party from means-tested benefits such as SSI, Medicaid, O

Documents

Taming the Medicare Gorilla in Your Injury Cases · 2015. 12. 25. · Friday, March 23, 2012 9 a.m.–4 p.m. Oregon State Bar Center Tigard, Oregon 6.25 General CLE credits 6 CE credits