Settlement documents, such as the release, for cases involving Medicare beneficiaries will often contain puzzling boilerplate Medicare Secondary Payer (MSP) compliance terms. At times, you may also see lengthy addendums to the release that appear to have been copied straight from an MSP Act treatise. When reviewing settlement documents, attorneys should focus on some key terms such as those addressing conditional payments and/or Medicare Advantage Organization (MAO) payments, Section 111 Mandatory Insurer Reporting and the avoidance of cost-shifting post-settlement injury-related care to Medicare.  Provisions regarding the plaintiff’s waiver of their right to pursue the private cause of action under 42 U.S.C. § 1395y(b)(3)(A) are also common. This article will discuss each of these issues to help you better decipher the MSP compliance terms you may encounter in a settlement.

Reimbursement of Conditional Payments / Medicare Advantage Plan (MAP) Payments

The conditional payment reimbursement obligation stems from the Medicare Secondary Payer Act and implementing regulations. While the Act generally prohibits Medicare from making payment for services to the extent that payment has been made or can reasonably be expected to be made promptly under any of the following “(i) workers’ compensation; (ii) liability insurance; (iii) no-fault insurance”, an exception is made when payment is not expected to be made promptly or within 120 days of receipt of the claim.[1]  In such cases, Medicare will make payment, but it is conditioned upon the reimbursement of the payment to the Medicare Trust Fund from a settlement, judgment or award.

Primary payers have an obligation to reimburse the Medicare Trust Fund for any payments made on behalf of a Medicare beneficiary. This obligation is demonstrated by a judgment, payment conditioned upon release of liability, or other means, as enumerated in 42 C.F.R. § 411.22. A failure to reimburse the Medicare Trust Fund may result in Medicare filing suit directly for double damages against any or allentities that were responsible for reimbursement of the conditional payments.[2] Entities may include a beneficiary, provider, supplier, physician, attorney, state agency or private insurer that has received a primary payment.[3] The Centers for Medicare & Medicaid Services (CMS) Memo from December 5, 2011, further notes that Medicare Advantage Organizations (MAOs) and Prescription Drug Plans (PDPs) have the same rights of recovery as Medicare under the MSP Act.

A conditional payment settlement provision will generally place the burden of conditional payment and MAO reimbursements on the injured party.  Since a final conditional payment amount is only available after the case is settled (absent the use of the Final Conditional Payment Process), settlement documents that specify an interim conditional payment amount for reimbursement are problematic.  Considering this, it is important that the injured party be advised that the final conditional payment number may differ from the number listed in the terms. When investigating reimbursement amounts, keep in mind that the MAO reimbursement amount must be secured from the recovery contractor that has been retained by the specific plan. CMS’ conditional payment information only addresses payments made under traditional Medicare, Parts A and B. Given the exposure that attorneys face when conditional payments and MAP reimbursement claims are missed, a process should be implemented to ensure that the reimbursements are made in a timely manner and inappropriate reimbursement claims properly disputed.

                                           Section 111 Mandatory Insurer Reporting

Attorneys may question the appropriateness of provisions involving the sharing of information for Section 111 Mandatory Insurer Reporting. Section 111 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA) was enacted in order to effectively implement the MSP framework.  This enforcement mechanism notifies Medicare of settlements involving Medicare beneficiaries and began in January of 2011. According to CMS, the Section 111 MSP reporting process is designed to ensure Medicare is properly reimbursed for items and services provided to beneficiaries.

Section 111 reporting is the responsibility of a Responsible Reporting Entity (RRE) to Medicare for liability, no-fault, and workers’ compensation plans and insurers. It is not done by the Plaintiff’s attorney. The RRE must report to Medicare if the plan has an Ongoing Responsibility for Medical (ORM) or if the Total Payment Obligation to the Claimant (TPOC) is greater than the threshold of $750.00 for physical trauma cases. Additionally, the RRE must query the Medicare system regularly to identify when a claimant becomes eligible for benefits while the claim is still open.

Under Section 111 reporting requirements, the RRE must provide the injury victim’s first name, last name, date of birth, gender, Medicare Beneficiary Identifier (MBI), and Social Security Number (or the last five digits). Additionally, the RRE must report International Classification of Diseases, Tenth Revision (ICD-10) diagnosis codes for the illnesses/injuries alleged, claimed or released in the Total Payment Obligation to Claimant (TPOC) settlement, judgment, award, or other payment. The TPOC report must also include the date and amount of the settlement. A failure to report under Section 111 reporting may result in civil money penalties being imposed against the RRE.

Given the Section 111 Mandatory Insurer Reporting obligation, it is appropriate for the defense to include a cooperation provision in the settlement terms. Considering the significant role that ICD-10 codes play in the conditional recovery process, parties should be aligned in their selection of codes as well as the accident dates. One way to do this is by adding specific ICD-10 codes to the settlement terms, being careful not to use vague codes or an excessive number of codes.

Post-Settlement Injury Related Care

The MSP Act and supporting regulations specifically state that Medicare is precluded from making payments for services to the extent that payment has been made or can reasonably be expected to be made promptly under any of the following: (i) workers’ compensation; (ii) liability insurance; (iii) no-fault insurance.[4] Given this clear language, workers’ compensation settlements will usually address the post-settlement injury-related care by including the funding of a Workers’ Compensation Medicare Set-Aside (WCMSA) in connection with the settlement. This is appropriate given an employer’s lifetime obligation to pay for the employee’s reasonable, necessary and related medical bills. If CMS’ voluntary review of the WCMSA is available to the parties, the settlement terms may include an agreement to seek review from CMS.

Liability settlements are not the same as workers’ compensation settlements. Although CMS had begun the process of promulgating regulations, the process was aborted. At this time, there is only the language of the MSP Act, and two CMS memos that address liability settlements to provide guidance. Per the May 25, 2011 CMS policy memorandum a/k/a Stalcup memo, “Each (plaintiff) attorney is going to have to decide, based on the specific facts of each of their cases, whether or not there is funding for future medicals and if so, a need to protect the Trust funds.” The second memo is from September 30, 2011 and is known as the Benson memo. It notes that when a treating physician completes a written certification that the injury-related treatment has been completed and no further injury-related care is indicated, Medicare considers its interest, with respect to future medicals for that “settlement” satisfied.  

Absent rules from CMS on liability settlements, the language of the MSP Act and Medicare’s prohibition from making payment in certain situations should be considered. When a liability settlement contains an element of future injury-related treatment, a Medicare beneficiary plaintiff may choose to “set aside” funds from the net settlement for this treatment. This complies with the goal of the MSP Act, which is the preservation of the Medicare Trust Fund. On the other hand, parties may at times just add a settlement provision that indicates there is no intention to cost shift post settlement injury related care to Medicare and that Medicare has no interest in the settlement. The decision of whether to “set aside” funds in a liability settlement is an individual one and depends on the specific facts of the case. When reviewing liability settlement terms that address future injury-related care, watch for contingencies that cannot be met, such as having CMS review a liability MSA.

Private Cause of Action Waiver

It is not unusual to see settlement terms that include the plaintiff’s agreement to waive their right to bring a private cause of action. The private cause of action is related to the obligation to reimburse Medicare for conditional payments and MAO plans for their payments. In order to enforce this obligation, Medicare beneficiaries, and others with standing, may bring an action against a party for double the amount owed to Medicare. This right comes from the MSP Act which states: “There is established a private cause of action for damages (which shall be in an amount double the amount otherwise provided) in the case of a primary plan which fails to provide for primary payment (or appropriate reimbursement) in accordance with paragraphs (1) and (2) (A).”[5]

The agreement to waive the private cause of action may not be of consequence when the parties intend to and actually address the conditional payments and MAO payments. The decision of whether or not to agree to this waiver however is up to the plaintiff’s attorney.

Conclusion

Attorneys should focus on key MSP compliance areas when reviewing settlement documents: conditional payments and MAO reimbursements, Section 111 Mandatory Insurer Reporting, and post-settlement injury-related care. Proper understanding and handling of these terms can protect both the firm and the client from future liability. Moreover, MSP compliance experts, such as those at Synergy, can assist in crafting strategies to ensure compliance and mitigate risks. Contact us today.

[1] 42 U.S.C. § 1395y(b)(2)(A)(ii); 42 C.F.R. § 411.20(a)(2).

[2] 42 U.S.C. § 1395y(b)(2)(B)(iii); 42 U.S.C. § 1395y(b)(3).

[3] 42 C.F.R. § 411.24.

[4] 42 U.S.C. § 1395y(b)(2)(A)(ii); 42 C.F.R.§411.20(a)(2)).

[5] U.S.C. § 1395y(b)(3)(A).

By: Rasa Fumagalli, JD, MSCC, CMSP-F | Director of MSP Compliance Services