Workers ' Compensation Claims and the Payer Actmedia.straffordpub.com/products/workers-compensation... · 2012. 1. 12. · Workers ' Compensation Claims and ... not to a defendant’s

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

Workers' Compensation Claims and Workers Compensation Claims and the Medicare Secondary Payer ActMeeting Reporting Requirements, Satisfying Liens, and Structuring Set‐Asides in Settlements

Today’s faculty features:

1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific

THURSDAY, JANUARY 19, 2012

Today s faculty features:

John Cattie, Head, Future Cost of Care Practice, Garretson Group, Charlotte, N.C.

The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10.

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November9,2011GRGClientAlert:CMSIssues12/5/1980ExposureScreeningException

RecentlyMedicare providedmuch‐needed guidance onwhen and how a December 5, 1980 policyexceptiontoreimbursementandreportingundertheMedicareSecondaryPayer(MSP)statuteistobeapplied. ThisClientAdvisoryanalyzesMedicare’smost recentAlertandprovideskey takeaways toassistcounsel forplaintiffsanddefendants toensureabsoluteMSPcompliancewhenresolving theircasesin2011andbeyond.On September 30, 2011, the Centers forMedicare &Medicaid Services (“CMS”) issued guidanceintended to assist parties to better define their Medicare Secondary Payer (“MSP”) obligationswhere settlements, judgments, awards, or other payments involve exposure, ingestion orimplant/explantations.1CMS begins the Alert by noting that it continues to follow a policy to not assert reimbursementrights where the Date of Incident (DOI) occurred before December 5, 1980, the date by whichCongressextended theMSPstatute, toapply to liability settlements, judgments, awards,orotherpayments. Where a case involves: (1) continuous exposure to a hazardous substance; (2)continuousingestionofasubstance;or(3)arupturedimplantthatallegedlyledtotoxicexposure,partiesaretousethelastdatethoseconditions(exposure2/ingestion/implantation)existedtodetermine whether the December 5, 1980 policy exception applies. The Alert provides threeseparateinstanceswherebothrecoveryandreportingunderSection111oftheMedicare,MedicaidandSCHIPExtensionActof2007(“MMSEA”)mustbeconsidered.Bothrepaymentandreportingmustbeconsideredwhere:

1. Exposure, ingestion, or the alleged effects of an implant on or afterDecember 5, 1980 isclaimed, released, or “effectively released”. A complaint alleging such exposure,ingestion,etc.meetsthiscondition.

2. Aconditionofsettlement,judgment,award,orotherpaymentexistssuchthattheclaimant

must have experienced a specified length of time for exposure, ingestion or implantedmedical device exposure, and that time frame, when added to the DOI (first date ofexposure, etc.) results in a date that is on or afterDecember 5, 1980. A settlementrequiringatleast10yearsofexposure,ingestion,etc.,wherethedateofincidentisJanuary1,1977meetsthiscondition.

1 The CMS Alert follows September 2010, working policy draft guidance and an April 2011, mass tort working group conference call to address these policy guidelines and ramifications. 2 Importantly, the Alert defines “exposure” in terms of the claimant’s actual exposure, not to a defendant’s legal exposure. Thus, the claims against the defendant are not as relevant as an exposure timeline – to determine whether any exposure crosses what appears to those unfamiliar with the MSP to be something akin to the Maginot Line (of December 5, 1980).

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3. Theclaimant’sexposure to,or ingestionofasubstanceonorafterDecember5,1980 isa

requiredelementofasettlement,judgment,orotherpayment.Thisrulealsoappliesifthesettlement,judgment,orotherpaymentdependsonanimplantthatwasneverremovedorwasremovedonorafterDecember5,1980.

CMS also provided a three‐part test to apply this policy exception.3 WhenALLof the followingcriteriaaremet,Medicarewillnotassertarecoveryclaimagainsta liability insurance(includingself‐insurance) settlement, judgment, award, or other payment; and Section 111 MMSEAreportingisnotrequired.4

1. Allexposureoringestionended,ortheimplantwasremovedbeforeDecember5,1980;and

2. Exposure,ingestion,oranimplantonorafterDecember5,1980hasnotbeenclaimedand/orspecificallyreleased;and,

3. Thereiseither(a)noreleasefortheexposure,ingestion,oranimplantonorafterDecember5,1980;or(b)wherethereissucharelease,itisabroadgeneralrelease(ratherthanaspecificrelease),which“effectivelyreleases”exposureoringestiononorafterDecember5,1980.Therulealsoappliesifthebroadgeneralreleaseinvolvesanimplant.

To ensure this policy exception is better understood, CMS provides six different examples ofsituationstoapplyitsDecember5,1980policytoensureproperimplementation.TakeawaysTheSeptember30,2011Alert,releasedonedaybeforeMandatoryInsurerReportingwastotakeeffect for certain liability settlements, provides a clear set of rules to follow whereby partiesinvolved in settling, paying a judgment or making some other payment to a Medicare enrolledbeneficiarymustaddresstheresolutionand/orreportingaspectsofMSPcompliance.The key to best understanding the Alert and employing its guidance as part of your formalizedapproachtoaddressingMSPissuesistorecognizethatthefirstsetofcriteriaonthebottomofpage1intheCMSAlertistobereadinthedisjunctive;witheachclausedescribingaseparatesituationwherereporting ismandatory.Whereas, for theexception tobemet, theconditions listedon thetop of page 2 of the CMS Alert are to be read in the conjunctive such that all three of thoseconditions must be met in each settlement, judgment, award, or other payment involving aMedicare enrolled beneficiary. For example, although CMS does not define the term “effectivelyreleased,”whenconsideringtheimplicationsofthethree‐parttest,ifasettlementoccurswhereallexposureoccurredoringestionendedbeforeDecember5,1980,andthesecondprongofthetesthasbeenmet(noclaimtopostDecember5,1980exposure),abroadgeneralreleasethatincludes

3Note that 42 C.F.R. § 411.50(a) is consistent with this policy exception to the extent that the regulation precludes CMS’s recovery for any “accident” occurring before December 5, 1980. 4 Note: Where multiple defendants are involved, the claimant must meet all of these criteria for each defendant as part of a settlement, judgment, award, or other payment (from that defendant) to be exempt from a potential MSP recovery claim and MMSEA Section 111 reporting.

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all claimsnowand in the futurewould technically also include claimsofpostDecember5, 1980exposurebyvirtueof itsbroad terms,but lackinganyspecificclaims, releasesorevidenceof theexistenceofsuchexposure,thebroadgeneralreleaseeffectivelyreleasessuchexposure,butdoesnotactuallyreleaseit(aswouldbethecasewithaspecificreleaseasdescribedintheAlert).Accordingly, theAlertdistinguishesbetweenactually releasingexposure, etc.whichoccursonorafter December 5, 1980, and including release language that releases the paying party from allclaims,includingpotentialpostDecember5,1980exposure,ingestion,oranimplantthatwasnotremovedbeforetheobligationtriggerdateoftheMSPstatuteasappliedtoliabilitycases. Wherethere is no post December 5, 1980 exposure, there has been no claims made including suchexposure,andthereisabroadgeneralreleasewhichhastheeffectofreleasingallexposures,eventhosethatarenon‐existent,butnevertheless,technicallyreleasedduetothebroadlanguageused,theAlertclarifiesthatsuchacaseisneitherreimbursablenorreportableundertheMSP.ActionStepsforthePartiesConsistentwithourpriorMSPcomplianceClientAdvisories,whenfacedwithhowbesttousethisAlerttoensureabsoluteMSPCompliance,thepartiesshouldconsidereachmatterseparately(casebycase),properlydocumentingtheirfilesthatthey:

1. Validatedallexposure,ingestion,etc.endedbeforeDecember5,1980.2. ValidatednopostDecember5,1980exposurewas claimed/alleged, and/or thatorno

postDecember5,1980employmentyearswereusedtoqualifyforpaymentinasettlementprogramorotherwise.

3. If(1)and(2)abovearetrue,thepartiesshoulduseabroad,generalrelease.Donotuseanyspecific release language that includesanexposure timeline that crosses theDecember5,1980thresholdbecausethatexposureisnonexistent.5

ForattorneyswhorepresentMedicareenrolledbeneficiaries,thismeansensuringthatifthereisnoevidence of exposure, ingestion, or implantation/explanation on or afterDecember 5, 1980, thatanycomplaintfilednotinadvertentlyincludeanysuchallegations.Thepartiesshouldidentifywhatinformationwaspledintheoriginalcomplaint,butalsotakeintoaccountamendedcomplaints,ascircumstance change and facts develop.6 If after filing a complaint, evidence is adduced thatincludessuchanincidenttimeline,thenreimbursementwillfollowundertheMSPstatute.ForattorneyswhorepresentthepartiesmakingpaymentstoMedicareenrolledbeneficiariesand/or their attorneys, the key to compliance is to review your and your clients’ files to ensure thatthere exists no evidence that contradicts any statements made by counsel that the last date ofincident(exposure,ingestion,implant/explant,etc.)occursonorafterDecember5,1980.TheCMShasgiventheindustryanimportanttoolthatisintendedtohelpthepartiescopewiththeintricaciesinvolvedincertainsettlementsandlitigations,respectingthefactthatCMShasnorightofrecoverywherethelastdateofincidentoccursbeforethedatetheMSPstatutewasextendedtoliability‐typesettlements, judgments, awards,orotherpayments. Under the right circumstances, 5 CMS officials confirmed on the October 19, 2011 town hall conference that if post December 5, 1980 exposure is alleged anytime during the case, even if it is later proved that for was no post December 5, 1980 exposure, that the defense has a reporting obligation under Section 111 and the plaintiff has a responsibility to report. 6 CMS officials on the October 19, 2011 town hall conference also suggested a willingness to review the impact of amended complaints on this policy.

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with the files properly documented, we now have a much better idea when and how MSPreimbursementandreportingissuesneedbeaddressed.GarretsonResolutionGroupisavailabletoansweryourquestionsabouttheprovisionsofthisAlert.Please contact us if youwould like us to review or help develop your internal processes and toprovidetrainingforallpartiesthatareinvolvedinyourhealthcarecomplianceprocesses.



October21,2011

GRGClientAlert:MedicareOffersNewFixedPercentageProgramforCertainLiabilitySettlements

FollowingitsSeptember30,2011Alerts,earliertodaytheCentersforMedicare&MedicaidServices(CMS),issuedanAlertonitswebsitethatintroducesastreamlined25%(gross)paymentoptiontoresolveMedicare’sreimbursementrights.TheoptionwillbeavailableforcertainMedicareenrolledbeneficiarieswhosettle,receivejudgmentsfor,orreceiveotherpaymentsrelatedtoliabilitycasesbeginningNovember7,2011asfollows:

1. Theunderlyinginjuriesmustbephysical,trauma‐based(ratherthanexposureoringestion‐based);2. Thetotalamountofasettlement,judgmentorotherpaymentdoesnotexceed$5,000;3. Theoptioniselectedwithinaspecifiedtimeframe(tobeprovidedonNovember7,2011onMedicare’s

website);4. Medicarehasnotissuedafinaldemandletterormadeanyrequestsforreimbursementpriortotheelection

beingmade;and5. Thebeneficiaryhasnotreceived,anddoesnotexpecttoreceiveanyfurtherpaymentsorjudgmentsrelated

tothetrauma‐basedincident.

Ifalloftheaboveconditionsaremet,abeneficiarywillbeabletoresolveandsatisfyMedicare'sreimbursementclaimbypayingMedicare25%ofhis/hertotalliabilityinsurancesettlementorotherpayment,ratherthanusingthetraditionalrecoveryprocess.Advantagesofthe25%FixedPaymentOptionTheprimaryadvantagesoftheFixedPercentageOptionwillbethatinliabilitycaseswith$5,000orlessinpaymentsmadearisingfromphysicaltrauma‐basedinjuries,settlingpartieswillknowtheexactamounttorepayMedicare,andwillhaveaquickerpathtowardsresolution.Forexample,inliabilitycasesinvolvingunrepresentedclaimantswherethetotalamountofpaymentstobemadearewithinthisthreshold,knowingtheexactamounttopayMedicarewillpermitamoreefficientsettlementprocess.ThepartieswillstillhavetoverifyMedicareenrollment,notingthattheMedicarepaymentfora$5,000settlementwillbe$1,250exactly.But,theprocessofopeningatortrecoveryrecord,requestingconditionalpayments,auditingthosepayments,andthenworkingforafinaldemandletterwillnolongerbenecessary.Disadvantagesofthe25%FixedPaymentOptionPriortoelecting,theMedicareenrolledbeneficiaryneedstocarefullybalancespeedandcertaintywithpayingtherightamount.Thatisbecauseonceelected,thebeneficiarywillgiveuptherighttoappealthefixedpaymentamountorrequestawaiverofrecoveryforthefixedpaymentamount.Sobeforegivingupthatright,beneficiarieswillwanttoensurethatthefixedpaymentoption,whencomparedtothoseknownmedicalexpensespaid,makeseconomicsense.Afullexplanation,includinginstructionsonhowandwhentoelectthisoption,willbeavailableonMedicare’swebsiteonNovember7,2011intheFixedPercentageOptionsectionofboththeAttorneyandBeneficiaryToolkits.GarretsonResolutionGroupisavailabletoansweryourquestionsabouttheprovisionsofthisAlert.Pleasecontactusifyouwouldlikeustorevieworhelpdevelopyourinternalprocessesandtoprovidetrainingforallpartiesthatareinvolvedinyourhealthcarecomplianceprocess.



April 12, 2011

GRG Client Advisory H.R. 1063: The SMART Act

Recently, Congressmen Tim Murphy (R-PA) and Ronald Kind (D-WI) introduced HR 1063, a bill titled the “Strengthening Medicare And Repaying Taxpayers Act of 2011” (a/k/a the SMART Act). This piece of legislation proposes a more streamlined approach to obtaining conditional payment amounts from Medicare under the Medicare Secondary Payer (“MSP”) Act (42 U.S.C. §1395y(b)).i Additionally, this bill offers Medicare discretion in imposing penalties on non-complying entities under the recently enacted Medicare, Medicaid and SCHIP Extension Act of 2007 (“MMSEA”). If passed by Congress and signed into law, the SMART Act would provide the following additional MSP compliance rules:

Request for Conditional Payment Statement. Claimants and applicable plans would be able to notify Medicare beginning 120 days before the reasonably expected date of settlement/judgment/award/other payment, that a payment is reasonably expected, and ask Medicare for a statement of the conditional payment reimbursement amount (the “Document”). A claimant or applicable plan would be able to make this request for the Document only once with respect to such settlement/judgment/award/other payment.

Medicare’s Response. Medicare would provide the Document no later than sixty-five (65) days after date of receipt of the request for the Document. If Medicare fails to provide the Document, the claimant or applicable plan would provide an additional notice to Medicare. If Medicare then does not provide the Document within thirty (30) days after receipt of the additional notice, the claimant, applicable plan and / or an entity that receives payment from an applicable plan would not be liable to make payment to Medicare for conditional payment reimbursement unless Medicare could show exceptional circumstances (defined so that not more than one percent (1%) of the repayment obligations would qualify as exceptional circumstances).

Notice to Medicare of Failure to Settle. If a settlement/judgment/award/other payment did not occur within 120 days as anticipated by the parties, the claimant or applicable plan shall timely notify Medicare, thus exempting Medicare from any obligations imposed above.

Right of Appeal. Medicare would establish a right of appeal and appeals process for the payment procedures set forth above, including review through an Administrative Law Judge and access to the US District Court.

Threshold. There would be no conditional payment reimbursement obligation and no reporting obligation under Section 111 of the Medicare Medicaid SCHIP Extension Act of 2007 (MMSEA) when a settlement/judgment/award/other payment fails to reach a certain threshold as determined by Medicare on an annual basis.

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Reporting Requirement Safe Harbors. Section 111 of the MMSEA would be amended to allow Medicare the discretion to not apply the statutory $1,000 penalty for each day of noncompliance with respect to a responsible reporting entity’s reporting obligation. The severity of each penalty would be based on the knowing, willful and repeated nature of the violation. This section would also allow for the creation of safe harbors from penalties asserted under Section 111 of the MMSEA.

Use of Social Security Numbers and Other Identifying Information in Reporting. Section 111 of the MMSEA would be amended so that responsible reporting entities would not be required to access or report Social Security Numbers or health identification claim numbers (e.g., Medicare numbers) of claimants.

Statute of Limitations. A three (3) year statute of limitation would be established within which time the Federal government must bring any action associated with compliance under the MSP. Additionally, penalties asserted under the MMSEA would not be permitted unless service of notice was provided no later than three (3) years after the date by which the information was required to be submitted.

We will continue to follow the progress of this legislation. Please check www.garretsongroup.com often for updates as well as new client advisories and practice tips. A copy of HR 1063 may be found by clicking this link: http://www.govtrack.us/congress/bill.xpd?bill=h112-1063. For further information regarding GRG’s compliance programs please contact Tate Johnson ([email protected]). He can assist you and your colleagues with establishing standard operating procedures for addressing Medicare conditional payments and/or MMSEA Section 111 reporting obligations. (See also www.garretsongroup.com for more information).

iThis new bill (HR 1063) is a follow up to HR 4796, the MSP Enhancement Act (a/k/a MSPEA) introduced last

year, which was intended to provide certain reforms to the MSP rules.

http://www.garretsongroup.com/

http://www.govtrack.us/congress/bill.xpd?bill=h112-1063

mailto:[email protected]




December 22, 2011

CMS Introduces Conditional Payment Reimbursement Option

Medicare expands resolution options to include a new Medicare repayment program for small settlements or judgments. This program will be available starting in February 2012 and applies to cases settling for $25,000 or less. Under this program, Medicare will provide final conditional payment amounts before settlement under certain circumstances. This program has the potential to revolutionize the settlement process for many Medicare beneficiaries, their counsel, and settling parties. The foundation of that process is to start the verification process early. Recently, the Centers for Medicare and Medicaid Services (“Medicare”) released guidance (the “Alert”) relevant to conditional payment reimbursement under the Medicare Secondary Payer (“MSP”) Act (42 U.S.C. §1395y(b)(2)). This guidance permits certain Medicare beneficiaries to receive a final conditional payment amount from Medicare prior to date of settlement. Historically, Medicare’s conditional payment reimbursement process has not allowed a Medicare beneficiary or settling parties from obtaining such information from Medicare or its recovery contractors. Under this small settlement option, for a Medicare beneficiary to obtain a final conditional payment amount prior to settlement, the fact pattern must meet all of the following criteria:

1. The liability insurance (including self-insurance) settlement will be for a physical trauma based injury (the settlement does not relate to ingestion, exposure, or medical implant);

2. The total liability settlement, judgment, award, or other payment will be $25,000 or less;

3. The Date of Incident occurred at least six months before the beneficiary or representative submits the proposed conditional payment amount to Medicare; and

4. The beneficiary demonstrates that treatment has been completed and no further treatment is expected either through a written physician attestation or by certifying in writing that no medical treatment related to the case has occurred for at least 90 days prior to submitting the proposed conditional payment amount to Medicare.

If the case meets all of these qualifying criteria, then Medicare, through its recovery contractor, the Medicare Secondary Payer Recovery Contractor (“MSPRC”), will provide a final conditional payment amount prior to settlement. This final conditional payment amount provided by the MSPRC will only be valid if the Medicare beneficiary settles a claim

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within sixty (60) days of the date of Medicare’s response. According to MSPRC, this option will be available to Medicare beneficiaries starting in February 2012, and will effectively allow Medicare’s related claims to be identified pre-settlement. While the process has not been fully defined, it is likely that once settlement is finalized, the process of requesting a final demand amount from Medicare (by providing gross settlement amount, fees, costs and expenses) will remain the same, regardless of whether this small settlement resolution program has been utilized. GRG has always stressed that starting the Medicare repayment process early provides the best opportunity to comply with all Medicare Secondary Payer obligations while expediting the case. Medicare’s 2012 small settlement resolution program reinforces the need to START EARLY! To take advantage of this program in a $25,000 or less case means needing to know if an individual is Medicare enrolled, and if so, how much in medical expenses has Medicare paid conditionally. Having a formalized settlement process that integrates these core concepts will achieve efficiencies and enhance the effectiveness in settlement proceedings. Such a formalized settlement process should include an analysis of the applicability of this small settlement resolution program. Thus, screening a case up front to verify entitlement, establishing a tort recovery record with Medicare early in the process and obtaining the first conditional payment letter from Medicare (all as part of a formalized settlement process) and resolution path is the proper path to take advantage of this small settlement resolution program. Although Medicare currently does not intend to include exposure, ingestion or implantation cases in this program, the Alert identifies that this will be a work in progress. As a result, if this program creates the intended results that benefit the settling parties, taxpayers and the Medicare program, an extension of this program in 2013 may not be out of the question. Medicare intends to issue additional guidance on how to participate in this program in January 2012. Garretson Resolution Group will provide further program details once they have been released. Until then, we continue to stress the importance of verifying Medicare enrollment as early in the settlement process as possible, as that information will better define the scope of the settlement continuum; from reimbursement to reporting to potential future cost of care issues. If you have any questions about this new option or any other Medicare Secondary Payer issues, please call us at (866) 694-4446.



Protecting Medicare’s Future Interest When CMS Declines to Review MSA

Proposal:

Schexnayder and Smith Two recent orders from the United States District Court provide new guidance on how settling parties may achieve absolute Medicare compliance when the Centers for Medicare and Medicaid Services (“CMS”) chooses not to review a Medicare Set-aside Arrangement (“MSA”) proposal. In both cases, the Court approved the parties’ settlement absent CMS approval of the MSA (a condition precedent to final settlement of each) and ordered the MSA be funded for the amount of the MSA proposal submitted to CMS for review and approval. This Practice Tip 1) provides a brief synopsis of Schexnayder v. Scottsdale Insurance Company1 and Smith v. Marine Terminals of Arkansas2, 2) describes the potential impact these decisions likely will have on the submission of MSA proposals to CMS going forward and 3) demonstrates how these orders fit with CMS’ stated policy about submitting MSA proposals to CMS for review and approval. Schexnayder Procedural History Robert Schexnayder was injured in the course and scope of his employment on June 17, 2009. Mr. Schexnayder sustained significant back injuries while driving a truck owned by his employer. Past medical expenses totaled $377,308.80. Of that amount, $151,797.20 was paid by the workers’ compensation insurance carrier, which also agreed to pay an additional $43,464.04 based on the terms of the settlement agreement. The balance was privately funded, and Medicare made no conditional payments. The parties agreed to a settlement during mediation on March 22, 2011. Part of the consideration of the settlement was that Mr. Schexnayder would be solely responsible for protecting Medicare’s interests under the Medicare Secondary Payer statute.3 Additionally, Mr. Schexnayder agreed to settle the workers’ compensation (“WC”) claim, which was approved by the Louisiana Office of Workers’ Compensation. Under the terms of that agreement, the WC insurer and the employer were given a full release. At the time of settlement, Mr. Schexnayder was not a current Medicare beneficiary. Further, Mr. Schexnayder did not possess a “reasonable expectation” of Medicare enrollment within thirty (30) months of settlement.4 When settling the WC claim, the parties concluded that no MSA was needed since Mr. Schexnayder lacked the requisite Medicare enrollment status warranting an MSA to be

1 Schexnayder v. Scottsdale Insurance Company, 2011 U.S. Dist. LEXIS 83687 (July 29, 2011). 2 Smith v. Marine Terminals of Arkansas, 2011 U.S. Dist. LEXIS 90428 (August 9, 2011). 3 42 U.S.C. §1395y(b)(2). 4 According to CMS, a claimant lacks a “reasonable expectation” of Medicare enrollment within thirty (30) months of settlement if a claimant has not yet applied for Social Security Disability Income (“SSDI”) benefits, is younger than age 62 ½ years old and does not possess End Stage Renal Disease.

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established. As a condition of settling the liability claim, Mr. Schexnayder agreed to set funds aside to protect Medicare’s interest under the MSP statute. An MSA vendor created an MSA proposal totaling $239,253.84 to address the MSA issue as part of the liability settlement. As an additional condition to settlement, this MSA proposal was to be submitted to CMS for review and approval, and final settlement was conditioned upon CMS approving the MSA proposal. Ultimately, CMS did not review the MSA proposal and provided no feedback to the parties, leading the parties to file the joint motion seeking settlement approval from the Court. Smith Procedural History Billy Smith settled claims brought under the Longshore and Harbor Workers’ Compensation Act for injuries sustained while working as a truck driver aboard a floating barge on April 14, 2006. Prior to settlement, the defendant has engaged an MSA vendor to prepare an MSA Allocation. That allocation totaled $313,095.54 and was to be used solely for future injury-related care otherwise covered by Medicare. Mr. Smith, displeased with the amount of that MSA Allocation, wanted to engage another MSA vendor to review his case. As a condition of settlement, Mr. Smith agreed to engage the Garretson Resolution Group (“GRG”) to review the MSA issues, prepare an MSA Evaluation and then submit that MSA Evaluation to CMS for review and approval. The GRG MSA Evaluation concluded that an MSA totaling $14,647 was the appropriate amount to protect Medicare’s future interest. The GRG MSA Evaluation was submitted to CMS for review and approval. Ultimately, CMS decided not to review the proposal, citing its workload review threshold for its reason not to review the MSA Evaluation. The parties sought settlement approval from the Court absent CMS review and approval of the MSA Evaluation. Case Synopses. In both Schexnayder and Smith, CMS review and approval of the MSA proposal was a settlement condition. CMS declined to review the MSA proposal in either case. Each Court, upon reviewing the MSA proposals in light of the evidence presented, agreed that Medicare’s future interest would be protected by funding the MSA in the amount set forth in each MSA proposal. In Schexnayder, the Court found that CMS does not currently require or approve MSAs when settling a personal injury action. It also found that Mr. Schexnayder had become an “entity who received payment from a primary plan,” and, as a result, was responsible as a primary payer for future medical expenses which were injury-related and otherwise covered by Medicare. Thus, the Court approved the liability MSA totaling $239,253.84. In Smith, the Court reviewed the “comprehensive and detailed analysis by the Garretson Resolution Group supporting its determination of this MSA.” It also found that it was reasonable for Mr. Smith to engage GRG to provide “a professional analysis and determination of the projected Medicare Set Aside allocation. The court finds that the Garretson Resolution Group’s determination of the MSA of $14,647.00 and the supporting rational are reasonable.” Potential Impact Schexnayder and Smith support the fact settling parties may fund an MSA and adequately protect Medicare’s interest without obtaining CMS approval of the MSA proposal. The cases also reinforce the fact that submission of an MSA to CMS for review and approval, both in the WC context as well as the liability context, is voluntary and not mandatory, following CMS’ guidance from its policy memorandum dated May 11, 2011. Further, both cases remind us to take notice of the well-

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established precedent that the judiciary is hesitant to disturb a settlement agreed upon by the parties unless required to do so. However, these cases should also serve as cautionary tales to the settlement community. Parties should understand that having CMS approval of an MSA as a settlement condition is likely to lead to settlement delays (at best) and failure to meet a condition to settlement (at worst). While obtaining CMS approval of an MSA proposal remains the only guaranteed method by which to ensure CMS agrees with the MSA evaluation, Schexnayder and Smith remind us that asking for, but not receiving such approval, will further complicate the settlement process. What should not be lost in these case analyses is the role a third party can play to ensure absolute Medicare compliance. Schexnayder and Smith provide excellent litmus tests for how involving neutral third parties to assess and lend guidance on the MSA issues can ensure such compliance. Each court’s ratification of the MSA evaluations proves the point – CMS and even court approval may not be needed if the settling parties adopt a formalized process to address Medicare compliance issues, including MSAs. At the same time, seeking court approval of a settlement where CMS does not review an MSA allocation has the potential to further clog judicial dockets. Unless the settling parties have a contingency plan in effect to take into account the possibility (or perhaps even the likelihood) that CMS will not review an MSA proposal in their settlement, the parties may find themselves in the same precarious position as did the parties in Schexnayder and Smith. MSA Takeaway Following court decisions in the Fall of 2010, this year we continue to see the judiciary adding its input to the MSA debate. In both state5 and federal6 courts, we have seen the judiciary taking a more active role where MSA questions are involved because the parties cannot seem to agree, in some cases, on what is required of them to achieve MSP compliance. While seeking judicial guidance on liability issues provides a measure of certainty to the parties, it also represents an untenable solution going forward for all cases, as federal and state court dockets across the country may not have the bandwidth to address these Medicare compliance issues. So what should the settling parties do? In settlements (or litigations leading to judgments) a key question for all parties to ask is the following: Is an MSA needed to protect the Medicare beneficiary’s card under the case specific facts? Typically, when a claim is resolved, whether through jury verdict or settlement agreement, if the plaintiff will incur future medical expenses as a result of the injuries pled or claimed in the case, the parties should determine whether an MSA would be appropriate. It is important that the parties complete a good faith analysis of this issue. By making this determination and then documenting the file accordingly, three things result:

i. Medicare’s future interest is considered and protected appropriately; ii. The parties are compliant with the MSP and all associated regulations; and

iii. The beneficiary’s Medicare benefits are protected going forward.

5 Hinsinger v. Showboat Atlantic City, 2011 N.J. LEXIS 96 (January 21, 2011). 6 See Schexnayder and Smith. See also Big R. Towing v. Benoit, Civ. Action No. 10-538, 2011 WL 43219 (W.D. La. Jan. 5, 2011) and Finke v. Hunter’s View, Ltd., 2009 WL 6326944 (D. Minn. Aug. 25, 2009).

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Every case (liability, workers’ compensation or no-fault) needs to be screened to identify which Medicare interests need to be resolved. Following screening, for those cases that qualify, the parties should evaluate damages to identify whether there is a future cost of care component (allocation) to the settlement, and a burden shift of the payment and management of that future care over to Medicare. As part of developing an absolute Medicare Secondary Payer compliance mindset, each settling party should know what role is to be played for three distinct obligations, two of which arise on the part of plaintiffs and one the defendant: Plaintiffs / Claimants

• Verify, resolve and satisfy any past conditional payments made by Medicare; and • Consider how best to address any future interests Medicare would have in not paying for

future injury-related care. Defendants / Insurers

• Electronically report liability settlements or judgments to Medicare starting Oct. 1, 2011 (following Section 111 of the MMSEA).

The Garretson Resolution Group continues to closely monitor how decisions such as Schexnayder and Smith affect settlements and future cost of care issues such as MSAs. Please see our website at www.garretsongroup.com for resources such as White Papers, articles and other practice tips related to Medicare Secondary Payer. To view a copy of the Schexnayder decision, click here. To view a copy of the Smith decision, click here.


http://garretsonfirm.com/garretson/pdf/Schexnayder_V_ScottsdaleInsCo.pdf

http://garretsonfirm.com/garretson/pdf/Smith_V_MarineTerminals.pdf

1 of 1 DOCUMENT

BILLY SMITH, PLAINTIFF vs. MARINE TERMINALS OF ARKANSAS,DEFENDANT and AMERICAN HOME ASSURANCE COMPANY,

INTERVENOR

Case No. 3:09 - CV - 00027-JLH

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OFARKANSAS, JONESBORO DIVISION

2011 U.S. Dist. LEXIS 90428

August 9, 2011, DecidedAugust 9, 2011, Filed

PRIOR HISTORY: Smith v. Marine Terminals of Ark.,Inc., 2010 U.S. Dist. LEXIS 121909 (E.D. Ark., Nov. 17,2010)

COUNSEL: [*1] For Billy D Smith, Plaintiff:Christopher Richard Heil, George R. Wise, Jr., LEADATTORNEYS, Brad Hendricks Law Firm, Little Rock,AR; Brian G. Brooks, Attorney at Law, Greenbrier, AR.

For Marine Terminals of Arkansas Inc, Defendant: GaryRay Bratton, LEAD ATTORNEY, Elissa M. Marcopulos,Gregory W. O'Neal, Bratton, O'Neal & Thorp, P.C.,Memphis, TN.

For American Home Assurance Company, Intervenor:Joseph B. Guilbeau, Juge, Napolitano, Guilbeau, Ruli,Frieman & Whiteley, Metarie, LA.

JUDGES: HONORABLE J. LEON HOLMES, UNITEDSTATES DISTRICT JUDGE.

OPINION BY: J. LEON HOLMES

OPINION

ORDER

Before the Court is a Motion to Determine Set AsideAmount, filed on behalf of plaintiff, Billy Smith, andjoined by defendant, Marine Terminals of Arkansas, andintervenor, American Home Assurance Company. In hismotion, plaintiff asks the court to confirm and/ordetermine a reasonable allocation representing the futurecost of medical treatment causally related to injuriessustained in plaintiff's accident of April 14, 2006 thatwould also be covered by Medicare, commonly referredto as the "Medicare Set Aside" ("MSA"). Because BillySmith is a current recipient of Social Security Disabilitybenefits, he is currently Medicare eligible [*2] and theparties must reasonably consider and protect Medicare'sinterests consistent with the Medicare Secondary PayorAct, 42 U.S.C. § 1395y.

Billy Smith sued Marine Terminals of Arkansas, Inc.for damages associated with a permanent and disablinginjury to his right hand while working as a truck driveraboard a floating barge owned and operated by hisemployer. The accident occurred on April 14, 2006 whena co-worker of Smith closed a crane bucket on Smith'sright hand during an operation underway in which Smithwas assisting. Smith originally asserted entitlement torecovery under the Jones Act and general maritime lawfor alleged negligence of his employer and allegedunseaworthiness of the barge. Those claims weredismissed by the Court on defendant's Motion for

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Summary Judgment which was granted in part by thisCourt on November 17, 2010 dismissing all claims basedupon Smith's alleged status as a seaman. Smith had alsofiled an alternative claim based on vessel negligencepreserved to him by Section 905(b) of the Longshore andHarbor Workers' Compensation Act, 33 U.S.C. § 901 et.seq., which claim survived summary judgment.

Smith contends that Marine Terminals of Arkansas("MTA") [*3] was negligent in failing to provide him asafe place to work and failing to properly conduct,supervise, direct and/or control the operation beingconducted at the time of the injury. Plaintiff also contendsthat as a result of the accident he sustained severe andpermanently disabling injuries to his right hand,emotional and mental pain, anguish and distress, loss ofpast and future wages and wage earning capacity,disfigurement and past and future medical expenses.

Following the accident, Smith was taken to the localEmergency Room in a personal vehicle but was promptlytransferred to the Barnes Jewish Hospital in St. Louiswhere he was treated primarily by Dr. Charles Goldfarb,orthopedist. Smith underwent approximately fivesurgeries on his right hand which had been crushed in theaccident. He has also undergone a carpal tunnel surgeryon the right hand. After discharge from Dr. Goldfarb, heunderwent extensive physical therapy at Southern HandCenter. Plaintiff also treated with mental practitionersafter the accident for post traumatic stress.

Smith received weekly compensation benefits andmedical expenses for a time under the LHWCA paid bythe intervening workers' compensation [*4] carrier,American Home Assurance Company. Benefits wereterminated effective March 17, 2009, at about the timeBilly Smith filed suit asserting that he was a Jones Actseaman. The LHWCA and Jones Act are mutuallyexclusive remedies. Following the accident of April 14,2006 and through March 17, 2009, American Home paida total of $265,423.27 in total benefits allocated asfollows: $51,976.40 in weekly compensation benefits and$213,447.07 in medical benefits.

The parties reached a settlement agreementfollowing a day-long court-ordered settlement conferencein which all parties were represented by counsel andpresided over by Honorable H. David Young, MagistrateJudge, on February 23, 2011. Under the terms of thatsettlement agreement, Billy Smith agreed to compromiseand discharge all claims against defendant asserted in the

liability suit and all claims under the LHWCA against theemployer and intervening workers' compensation carrierin exchange for a total payment by the parties released of$1,000,000.00. In addition to the aforementionedpayments, the parties agreed to the following asconditions to the settlement:

1. American Home was to waive itsentire lien of $265,423.47 on [*5] pastbenefits paid under the LHWCA;

2. In order to consider and protectMedicare's interest in the settlement,plaintiff, through his counsel, was to retainthe Garretson Resolution Group todetermine a Medicare Set Aside amountand seek submission with the Center forMedicare and Medicaid Services ("CMS")for approval;

3. The parties agreed that thesettlement required approval of aMedicare Set Aside and that plaintiffwould self-administer the required MSAfunds from the proceeds of the settlementconsistent with CMS guidelines andrequirements;

4. The overall settlement was alsoconditioned upon obtaining USDOLapproval by the District Director of thesettlement of the underlying LHWCAclaim following approval of the MSApursuant to Section 908(i) of the LHWCA;and

5. The two involved carriers wouldmutually release all potential claimsbetween them.

The general terms and conditions of the settlement wereplaced upon the court record following the successfulsettlement conference on February 23, 2011.

Following the settlement agreement, plaintiffthrough his counsel, did in fact retain the GarretsonResolution Group, a professional and experiencedMedicare vendor, to determine a proposed [*6] MedicareSet Aside allocation and to submit the MSA to CMS forconsideration of settlement. The Garretson ResolutionGroup's Workers' Compensation Medicare Set Aside

Page 22011 U.S. Dist. LEXIS 90428, *2

Arrangement Analysis And Report are attached asExhibit 1 to this Order. In that report, the GarretsonResolution Group determined that $14,647.00 was areasonable allocation to cover the projected lifetime costfor medical care that was expected to be incurred by BillySmith for treatment of accident-related injuries thatwould otherwise be covered by Medicare. The court hasreviewed the comprehensive and detailed analysis by theGarretson Resolution Group supporting its determinationof this MSA. Although it is not necessary to repeat all thedetails in that report, the court has thoroughly reviewed itand notes the following.

Dr. Goldfarb determined that Billy Smith reachedmaximum medical improvement with respect to objectiveinjuries to his right hand by March 21, 2007 after Smithhad undergone a Functional Capacity Evaluation whichindicated that he had no functional grip in his right handbut could grasp light small items given the limited use ofhis right thumb and fingers on his right hand. There ismore of a dispute [*7] with respect to the psychiatrictreatment. Smith had been treating regularly with Dr.Margaret Singleton and Dr. David Erby who haddiagnosed posttraumatic stress disorder. Pursuant to thattreatment, Smith was taking several medications. Thedefendant had Smith examined by Dr. Wayne Stillings,psychiatrist, who concluded that although claimant haddeveloped PTSD following the accident of April 14,2006, as of February 19, 2008, it was Dr. Stillings'sopinion that claimant no longer needed psychiatrictreatment that was causally related to the April 14, 2006work accident. Furthermore, it was Dr. Stillings's opinionthat Smith was able to return to work within therestriction that he is unable to work in the proximity of acrane.

Dr. Erby had likewise indicated that Smith couldreturn to work as long as he was not working on or near acrane.

From early 2009 through the present time, Smith hastreated only with his cardiologist, Dr. Shalender Mittal,primarily for non-accident related conditions. Smith hasnot received any treatment since approximately January2009 for work-related injuries. Based upon a review ofthese records and proceedings in this matter as well as thesubmissions [*8] of counsel it is apparent that had thiscase proceeded to trial, it would have been necessary forthe fact-finder to consider and resolve disputed issuesinvolving claimant's credibility, ability to work, necessity

of future medical treatment and causation of futuremedical treatment, the outcome of which would requirethe weighing and balancing of medical evidence touchingupon all of these issues, which is in significant conflict.

As agreed by the parties as a condition of settlement,the Garretson Resolution Group did in fact determine theMSA and submitted it to CMS for review andconsideration on March 17, 2011.

The Court has also reviewed and considered theAffidavit of John V. Cattie, Jr., Esq., an attorney andLead Consultant with the Garretson Resolution Group,dated July 6, 2011, and attached as Exhibit 2. In hisaffidavit, Mr. Cattie details conversations andcorrespondence he had with CMS representativespursuant to the Garretson Resolution Group's effort tosupply CMS with information requested and to obtain aresponse regarding the MSA. CMS ultimately decidednot to review the MSA submission in the context of thesettlement citing workload threshold. However, theworkload [*9] threshold mentioned in Mr. Walters'sletter is $25,000.00 and clearly the settlement amount of$1,000,000.00 significantly exceeds that threshold. It isapparent to the Court from the aforereferenced CMScorrespondence and affidavit from attorney Cattie thatregardless of the details and potential deficiencies in theoriginal submission, that CMS has decided it will not, forwhatever reason, review or reconsider the proposedMSA, which response or lack thereof potentiallyjeopardizes what otherwise appears to be a reasonablesettlement in the best interests of Billy Smith to acceptand complete.

Based upon the records and proceedings of thismatter and the stipulations and submissions of counsel,the court makes the following findings of fact:

1. Billy Smith's date of birth is March19, 1960. He is currently receiving SocialSecurity Disability benefits such that he iscurrently eligible for Medicare benefits;

2. Billy Smith is a covered employeeunder the LHWCA and can pursue a claimunder the general maritime law preservedto him under Section 905(b) of theLHWCA against his employer in hisemployer's capacity as a vessel owner.However, to recover, Billy Smith mustshow that the negligence [*10] which


caused his accident of April 14, 2006emanated from the vessel or vesseloperations of his employer. Should herecover, he would be entitled to pecuniarydamages for his economic losses and pastincurred economic expenses as well aspast and future medical expenses. Theprecise amount of future medical expensescannot be determined with certainty andalways involves some speculation.

3. Considering all the facts andcircumstances of this case, including theliability and medical causation issues thatare in significant dispute, in particularassociated with future economic andmedical damages; the parties' agreement tosettle this case for a total payment of$1,000,000.00, with a full waiver of theworkers' compensation lien on benefits of$265,423.27, as well as the otherconditions associated with the settlement;represent a reasonable compromise toavoid the uncertainty and expense shouldthe case proceed to trial.

4. Billy Smith is obligated toreimburse Medicare for all conditionalpayments made by Medicare to date, formedical expenses incurred by Smith.Smith has represented that Medicare hasmade no conditional payments in this case.Likewise, Billy Smith is obligated to[*11] self-administer those funds set asidein his Medicare Set Aside account and toadminister those funds in compliance withCMS/Medicare guidelines.

5. In recognition of the jointresponsibility of the parties to considerand protect Medicare's interest in asettlement like this one whichcompromises and discharges employee'sclaims for future medical expenses againsta liability defendant, in this case claimant'semployer, Marine Terminals of Arkansas,and which disposes of his potentialmedical claims under the LHWCA, it wasreasonable for the plaintiff to retain theGarretson Resolution Group to provide a

professional analysis and determination ofthe projected Medicare Set Asideallocation. The court finds that theGarretson Resolution Group'sdetermination of the MSA of $14,647.00and the supporting rational are reasonable.Specifically, the court finds that$14,647.00 is a reasonable estimate anddetermination of the future expectedmedical treatment that Billy Smith willrequire resulting from his accident-relatedinjuries that would otherwise be coveredby Medicare.

6. There is no evidence that BillySmith or any other party is attempting toshift the responsibility for payment [*12]of such future medical expenses for thetreatment of work-related conditions andinjuries to the federal government or toMedicare. On the contrary, the partieshave done all that is reasonable andprudent and within their ability andauthority to do to protect Medicare'spotential interest in this settlement.

7. The court finds that CMS has failedto consider and approve the GarretsonResolution Group's competent MSAdetermination of $14,647.00.

Based upon the foregoing findings of fact, theundersigned makes the following conclusions of law:

1. The parties shall and have reasonablyconsidered and protected Medicare'sinterest in the settlement of this matter.

2. Medicare is a secondary payorunder the Medicare secondary payorprogram, to the extent that there areMedicare covered expenses incurred byBilly Smith, in the past or in the future,arising out of the accident and injuriesalleged in this lawsuit.

3. Billy Smith is obligated toreimburse Medicare all conditionalpayments made prior to the time of thesettlement, and for all medical expenses


submitted to Medicare prior to the date ofthis Order, even if such conditionalpayments are asserted by Medicaresubsequent to the effective [*13] date ofthis Order.

4. The findings of fact support theconclusion that Billy Smith is currentlyMedicare eligible and therefore considereda Medicare beneficiary. The sum of$14,647.00 as a Medicare Set Aside, asdetermined by the Garretson ResolutionGroup is approved by this court to be setaside by Billy Smith out of the settlementproceeds for future medical expensesassociated with treatment required forphysical and mental injuries sustained inthe accident of April 14, 2006, fairly andreasonably takes Medicare's interest intoaccount, and as such, Billy Smith shouldset aside this amount to protect Medicare'sinterests as a secondary payor for futuremedical expenses arising out of theinjuries alleged in his lawsuit.

Based upon the foregoing conclusions of law, thecourt enters the following Order:

IT IS HEREBY ORDERED that:

1. Upon Billy Smith and/or theGarretson Resolution Group receivingconfirmation for Medicare/CMS of anyconditional payments made by Medicarefor medical services provided prior to thedate of this order, Billy Smith shallpromptly reimburse Medicare for suchconditional payments.

2. Billy Smith shall set aside the fullamount of $14,647.00 from his settlement[*14] proceeds in an account separatefrom any other checking or savingsaccounts for the exclusive payment offuture medical expenses incurred fortreatment of injuries sustained in hisaccident of April 14, 2006 which wouldotherwise be paid or payable by Medicare.

3. Billy Smith shall comply with theguidelines and procedures of the Centerfor Medicare and Medicaid Services forself-administering his MSA account in theamount of $14,647.00.

4. All of the parties hereto may relyupon the Court's acceptance of the MSA at$14,647.00 and shall proceed accordinglywith the completion of the settlementprocess consistent with the conditions andterms of the settlement agreement reachedon February 23, 2011.

5. The Motion To DetermineMedicare Set Aside amount is granted.

6. The case is hereby re-closed.

SO ORDERED this 9th day of August, 2011 in LittleRock, Arkansas.

/s/ J. Leon Holmes

HONORABLE J. LEON HOLMES

UNITED STATES DISTRICT JUDGE


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