With Synergy’s Help, How Rich Hospitals Profit From Patients in Car Crashes

February 2, 2021

Synergy handles Hospital Lien disputes nationally on behalf of Trial Lawyers and their injured clients. Synergy’s Michael Walrath, Esq., as the nation’s leading authority on the nuances of state-specific hospital lien law and the facts underlying the “reasonable value” of hospital care, was tapped to assist investigative reporter Jessica Silver-Greenberg in her research for the New York Times expose of hospital lien practices. The article, entitled How Rich Hospitals Profit From Patients in Car Crashes, was published on February 1st, 2021, and can be viewed in its entirety here.

As this explosive report details, hospitals routinely forgo health insurance for auto accident patients, instead using liens to enhance their reimbursement and usurp money otherwise intended to compensate injury victims for lost wages, pain, and suffering, and other non-medical-special damages.

Cited examples include Monica Smith, a Medicaid recipient, whose Medicaid reimbursement would have been $2,500, but Parkview Regional Medical Center in Indiana instead levied a hospital lien for $12,856.00. While not illegal in most states, the practice effectively diverts settlement proceeds from injury victims in need, to overreaching hospitals intent on maximizing profits. A memo surfaced in 2014 litigation in Washington State, which estimated the practice generated an additional $10 million annually, to the facility.

As the article points out, lien practices are so lucrative, many hospital systems use specialized lien and debt collection companies to enhance their receivables. Post-settlement lien disputes are sunk costs on a file, further disincentivizing injury lawyers, who are already at a disadvantage for lack of internal hospital data. Synergy’s Medical Bill Clinic is available to level the playing field by leveraging specialized systems, data sets, and hospital billing experts to ensure your clients do not pay more than the reasonable value of the care they receive. Learn more about Synergy’s Medical Bill Clinic here.

Unraveling the Conundrum of Medicare Reimbursement

January 14, 2021

Rasa Fumagalli, JD, MSCC, CMSP-F

Personal injury settlements involving Medicare beneficiaries will often have conditional payment claims by Medicare and/or Part C plan liens. Since accurate and complete information regarding Medicare’s payments may be unavailable during settlement negotiations, practitioners may find themselves engaged in guesswork. The confusion between Medicare’s interim and final conditional payment figures have also resulted in post-settlement disputes between parties. Lack of information on Part C plan liens also can lead to exposure for double the lien amount.  This article will examine the Medicare Secondary Payer (MSP) Act conditional payment obligations/Part C plan liens and provide a roadmap for navigating the recovery process.

Legal Background

The Medicare Secondary Payer (MSP) Act, 42 U.S.C.§1395y(b)(2)(A)(ii) prohibits Medicare from making payment for medical services when “payment has been made or can reasonably be expected to be made under a workers’ compensation law or plan of the United States or a State or under an automobile or liability insurance policy or plan (including a self-insured plan) or under no-fault insurance.” A primary plan’s responsibility for such payment may be “demonstrated by a judgment, a payment conditioned upon the recipient’s compromise, waiver, or release (whether or not there is a determination or admission of liability) of payment for items or services included in a claim against the primary plan, or the primary plan’s insured or by other means.” 42 U.S.C.§1395y(b)(2)(B)(ii).

When a primary plan has not made or cannot reasonably be expected to make prompt payment for the service, Medicare may make a payment conditioned upon reimbursement of the payment to the appropriate Medicare Trust Fund. A failure to reimburse the Medicare Trust Fund may result in Medicare filing suit directly for double damages against any or all entities that were responsible for reimbursement of the conditional payments. 42 U.S.C.§1395y(b)(2)(B)(iii); 42 U.S.C.§1395y(b)3. Section 111 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA) Mandatory Insurer Reporting obligations require the primary plan’s Responsible Reporting Entity to report any liability physical trauma settlement involving a Medicare beneficiary that exceeds $750.00. This “defense” reporting requirement puts Medicare on notice of nearly any settlement involving a Medicare beneficiary.

In a December 5, 2011 Memo, the Centers for Medicare & Medicaid Services (CMS) advised that Medicare Advantage Organizations (MAOs) and Prescription Drug Plans (PDPs) have the same rights of recovery as Medicare under the MSP Act.   A detailed discussion of resolution of Part C (Medicare Advantage) liens is beyond the scope of this article but it is very important to make sure that these liens are resolved properly as well since MAOs have become very aggressive with their litigation recovery tactics.

Medicare Coverage Types

Medical payments may be made on behalf of a Medicare beneficiary under a traditional Medicare Part A or B Fee-For-Service plan or under a Medicare Advantage Organization Part C or Part D drug plan. The traditional Part A coverage is the most basic coverage and is limited to a hospitalization benefit. Although it is premium free, there are deductibles and co-payments. Part B coverage provides for expanded services such as outpatient physician visits, diagnostic studies, certain outpatient surgeries and physician-administered drugs. This coverage has a monthly premium associated with it along with co-payments and deductibles. Medicare’s Benefits Coordination and Recovery Center (BCRC) provides information regarding payments made under these plans upon request or through the Medicare Secondary Payer Recovery Portal (MSPRP).

Medicare Part C, or Medicare Advantage plans, are offered by private insurers and provide the same benefits that are offered under Parts A and B as well as additional services such as dental and vision care. These plans have monthly premiums as well as co-payments and deductibles. The plans are paid a fixed amount by Medicare for each Medicare beneficiary enrollee. Medicare Part D plans provide pharmacy prescription drug coverage and are provided by private insurers that are paid by Medicare.

Conditional Payment Recovery Process for traditional Medicare Part A and B

A Medicare beneficiary is responsible for giving Medicare’s Benefits Coordination and Recovery Center (BCRC) notice if he/she is involved in an automobile accident, has a workers’ compensation injury, or takes legal action for a medical claim. This notice is separate and distinct from the Section 111 Mandatory Insurer Reporting Obligation by the defense. The beneficiary may report their claim by calling the BCRC or through the Medicare Secondary Payer Recovery Portal (MSPRP). If a beneficiary has a representative working on his behalf, the BCRC and MSPRP will require the submission of appropriate Proof of Representation and Consent to Release Note documentation.  Once the BCRC receives the initial report of the claim, the BCRC will send the beneficiary a Rights and Responsibilities letter that explains the conditional payment recovery process.

The BCRC will then begin to identify payments that were made in connection with the reported injury. These conditional payments are “interim” payments and are subject to change. The first Conditional Payment Letter (CPL) will include a Payment Summary Form and should be sent to the beneficiary within 65 days of the issuance of the Rights and Responsibilities letter.

A final conditional payment figure may be provided to the beneficiary prior to settlement if the final conditional payment process is initiated through the MSPRP within 120 days of the settlement. This process only allows one conditional payment dispute that must be resolved within that 120-day period. A final time and date stamped conditional payment figure will then be provided and may be relied upon as long as the final settlement agreement is reached within three business days of requesting the final conditional payment amount. The settlement documents must be submitted to the BCRC within 30 calendar days of requesting the final conditional payment amount. If these steps are not complied with, the conditional payment figure is not final.

If the beneficiary only reports a settlement, the BCRC will issue a Conditional Payment Notice (CPN). The CPN will also be issued when the BCRC is notified of the settlement through the Section 111 Mandatory Insurer Reporting.  The CPN requires a response within 30 calendar days in order for the beneficiary’s attorney’s procurement cost reduction to be allowed. The underlying charges may also be disputed. After 30 calendar days, the CPN will become a demand letter. Once the “final” demand is issued, interest will begin to accrue for each 30-day period the debt remains unpaid. In order to avoid the accrual and assessment of interest, Medicare suggests that the full demand be paid. If an appeal/ waiver request is granted, Medicare will refund the payment.

Medicare Advantage Plan Recovery claims

Although Medicare Advantage Plans are private insurance plans that provide benefits to Medicare beneficiaries, Medicare views these plans as secondary payers under the MSP Act.  To date, the BCRC and MSPRP do not provide information regarding payments made by these plans. Information regarding their payments must be secured from the plans themselves. Unfortunately, the plan information is not always readily available to the practitioners since a beneficiary may not be the best source of information when it comes to the identification of plans. This may be especially true when there is a significant delay between the injury date and the settlement. The BCRC’s inability to provide this plan enrollment may hamper a beneficiary’s ability to address the reimbursement interest of a Medicare Advantage plan.

The Provide Accurate Information Directly Act (PAID) legislation was proposed to remedy this issue. It was added into H.R. 900 “Further Continuing Appropriations Act, 2021 and Other Extensions Act” and signed into law on December 11, 2020. The language requires CMS to provide information upon request regarding a beneficiary’s enrollment in a Medicare Advantage Plan or Medicare Part D plan during the preceding three-year period. The ability to access this information will help practitioners identify reimbursement claims that are associated with their settlements. In the meantime, payments under a Medicare Advantage Plan may be reflected in billing statements. The beneficiary may also find information regarding their Medicare claims by registering on MyMedicare.gov.

Attorneys should be aware that Medicare Advantage plans can bring a private cause of action as an enforcement action for double the amount of the lien if it isn’t satisfied at settlement.  This right is provided for in the Medicare Secondary Payer Act.  See 42 C.F.R. §422.108(f).  The action can be brought against the personal injury attorney or the defendant insurer.  The seminal case on this issue is, for now, Humana v. Western Heritage Ins. Co., from late 2016.  Humana sued Western Heritage when the plaintiff didn’t reimburse the plan after resolution of the case.  The 11th Circuit ruled that Humana was entitled to maintain a private cause of action for double damages pursuant to 42 U.S.C. § 1395y(b)(3)(A) and was therefore entitled to double the claimed lien amount as a matter of law.

When it comes to Advantage plan liens, there is a good chance you may be unaware that a lien exists without your own research.  A good practice is to obtain copies of all government assistance program cards and any health insurance cards to see just what the injury victim is receiving in terms of benefits/insurance coverage.  Make sure a thorough investigation is done if the client is a Medicare beneficiary for the existence of Part C/Advantage plan liens.  The investigation and inquiry should start upon intake and continue throughout representation with the final check occurring before disbursement of settlement proceeds.  Failing to do so may expose you and your firm to personal liability for double damages to a Part C Plan or Medicare itself.

Conclusion

Any personal injury settlement that involves a Medicare beneficiary should address the conditional payments, if any, in the settlement. It is important to understand the difference between interim conditional payment amounts and final conditional payment amounts in order to prevent any unexpected consequences post-settlement. Until the changes in the PAID Act are implemented, a practitioner should also be mindful that Medicare Advantage Plan payment information will not be provided by the BCRC. By mastering the framework of conditional payments, the conundrum of Medicare reimbursement can be unraveled.

Want more? Register for this month’s webinar on Unraveling the Conundrum of Conditional Payments here.

Liability Medicare Set-Asides: Where are we Today?

November 12, 2020

By: Rasa Fumagalli, JD, MSCC, CMSP-F

The Centers for Medicare and Medicaid Services (CMS) has been slow in providing detailed guidance in the area of liability settlements that include compensation for future medicals. To date, the guidance consists of the May 2011 CMS Stalcup memo and the September 2011 CMS memo regarding treating physician certifications. Although CMS issued Notice of Proposed Rulemaking regarding Liability Medicare Set-Asides (LMSA) and settlement of future medicals in 2013, it was withdrawn in October of 2014.

In the fall of 2018, the Department of Health and Human Services issued an initial notification of proposed rulemaking related to the Medicare Secondary Payer Act. The most recent abstract of the proposed rule states:

“This proposed rule would clarify existing Medicare Secondary Payer (MSP) obligations associated with future medical items, services related to liability insurance (including self-insurance), no-fault insurance, and worker’s compensation settlements, judgments, awards, or other payments. Specifically, this rule would clarify that an individual or Medicare beneficiary must satisfy Medicare’s interest with respect to future medical items and services related to such settlements, judgments, awards, or other payments. This proposed rule would also remove obsolete regulation.”

Since the initial notification in the fall of 2018, the target date for the notice of proposed rulemaking has been continuously postponed. The most recent target date of August 2020 has now come and gone. In light of this, it is unlikely that the notice of proposed rulemaking will occur in 2020.

The absence of formal regulation by CMS does not mean that the MSP Act does not apply to liability settlements that close out future medicals. The MSP Act clearly prohibits Medicare from making payment when “payment has been made or can reasonably be expected to be made under a workmen’s compensation law or plan of the United States or a State or under an automobile or liability insurance policy or plan (including a self-insured plan) or under no-fault insurance.”[1] The exception to this occurs when payment is not reasonably expected to be made “promptly” or within 120 days of receipt of the claim by the primary payer. If Medicare makes payment in this situation, the payment is conditioned upon the reimbursement of the payment to the Medicare Trust Fund.  A primary payer’s reimbursement obligation to Medicare may be demonstrated by: “a judgment, a payment conditioned upon the recipient’s compromise, waiver or release (whether or not there is a determination or admission of liability) of payment for items included in a claim against the primary payer or by other means.”[2]

The above provisions may impact a plaintiff’s settlement in the following way. If the plaintiff, a Medicare beneficiary, accepts a settlement that provides funds intended to compensate the plaintiff for future medicals, this is a payment that has been made under a liability plan. Should the plaintiff require future injury-related, Medicare-covered treatment, Medicare is prohibited from making payment for these services. Should an inadvertent payment be made, the Medicare Trust Fund would expect reimbursement. Medicare will be aware of the settlement due to the Section 111 mandatory insurer reporting requirement for any physical trauma liability settlement over $750.00.  The Section 111 Total Payment Obligation to Claimant (TPOC) report must also include the injury-related diagnosis codes, since the codes are added to the plaintiff beneficiary’s Medicare Common Working File. This data is used to prevent Medicare from making payments when Medicare is the secondary payer.

The MSP Act and the language used in the abstract of the proposed rule regarding “existing” MSP obligations should be considered by plaintiffs’ attorneys that are handling liability claims for Medicare beneficiaries. If the settlement funds future medicals, then a decision to apportion some of the settlement funds as an LMSA may prevent your client from experiencing future issues with Medicare.  A settlement that does not fund future medicals should include an analysis that provides support for the position so that Medicare does not have an interest in the settlement when it comes to future medicals. Although additional guidance by CMS when it comes to LMSAs is pending, we should be careful what we wish for.

 

 

[1] 42 U.S.C. § 1395y(b)(2)(a).

[2] 42 C.F.R. § 411.22.

Why Was the Ahlborn Case Such a Significant Victory for Injury Victims?

October 20, 2020

Heidi Ahlborn was injured in a very serious car accident in January of 1996. At the time, she was a nineteen-year-old college student pursuing a degree in teaching. She suffered a catastrophic brain injury that left her incapable of finishing college and unable to care for or support herself in the future. When the Arkansas Department of Health tried to assert a lien against Ahlborn’s settlement, she sued, and the case went all the way to the Supreme Court, who found in her favor.

For more information, read this excerpt from Synergy’s CEO, Jason D. Lazarus‘ book ‘The Art of Settlement.’

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ABLE Accounts: Helping Clients on Public Benefits Make the Most of their Recovery

October 8, 2020

ABLE accounts, named for the Achieving a Better Life Experience Act, have been around since 2014 but remain underutilized across the country despite offering a way for people with disabilities and public benefits to save money without jeopardizing their public benefits eligibility. [1]  The reasons why are likely a combination of the limitations that apply to ABLE accounts and a lack of awareness, but for those who qualify and understand how to use them, ABLE accounts can make a world of difference.

Public Benefits

Before delving into the intricacies of ABLE accounts and how they can help your client, you should first understand the problem they were created to solve. Those with means-tested benefits, such as Supplemental Security Income (SSI), Medicaid, housing benefits, or Supplemental Nutrition Assistance Program (SNAP) benefits, must keep their income and resources below a certain threshold (usually around $2,000) or risk losing their benefits. [2]  This threshold varies by program and by state, so it is important to understand exactly which benefits a client has. There are many assets which are exempt (not counted), such as a home, vehicle, and household effects; but a personal injury recovery, while not taxable, is countable by nearly every public benefit program (the exception is assistance provided by the Department of Housing and Urban Development (HUD)). If you write a check to your client for their net recovery and they have one of the benefits above, they will have an obligation to report it to the agency which oversees their benefit and will likely lose the benefit until they spend the money or deposit the funds in a special needs trust or an ABLE account. [3]

The list above includes the common means-tested benefits, but this is not an exhaustive list. There are also entitlement benefits which are not means-tested; therefore, they are not affected by income or assets. Social Security Disability (SSDI) and Medicare are the most common, but some forms of Medicaid are not means-tested. Many clients do not fully understand which benefits they have, so the best practice is to get copies of their award letters. Sometimes you can make an educated guess based on the amount they receive—SSI pays a maximum of $783 in 2020, so if the client is receiving $1,200, then they do not have SSI. If they are receiving $700, it could be either SSI or SSDI. The only way to know for sure is to review the award letter.

ABLE Accounts

The Achieving a Better Life Experience Act is a federal law allowing individuals who are disabled to create a tax-advantaged savings account which is exempt from being a countable asset by the major public benefits programs. This allows them to save and invest or spend funds on “qualified disability expenses” (QDE). QDEs are broadly defined to include virtually anything used to support the health and wellness of the account holder.

The Bad News

ABLE accounts are only available to people whose onset of disability occurred prior to turning age 26. The client does not need to have been diagnosed before age 26, but they must be able to certify that their condition presented before that age. This limitation was likely imposed by Congress to limit the number of people who could take advantage of the tax savings. The fact that ABLE accounts have not been utilized as expected, coupled with the many reasons a person can become disabled at any age, has spurred several attempts to raise the age to 46 through the ABLE Age Adjustment Act, but as of the time of this post no changes have been made in that regard.

The other limitation, and the reason ABLE accounts are not the go-to solution for personal injury recoveries, is that only $15,000 can be contributed per calendar year and only one account can be created. An account holder who is working can contribute an additional $12,140 (more in some states) in earnings. This additional amount will grow tax-free but is not sheltered for public benefit purposes. The account balance can continue to grow year after year, up to a maximum set by the state (most are $270,000). If the person has SSI, the account balance must stay under $100,000 or the excess will be counted as income.

The Good News

There are many benefits to having an ABLE account. A big one is the tax advantage. The funds are invested (some offer different portfolio options to choose from) and grow tax-free. Distributions are also tax-free so long as the funds are used on QDEs.

How is this different from a Special Needs Trust?

The exemption from income and asset-counting rules is similar to a special needs trust (SNT) but with two big differences. One difference is that ABLE accounts have fewer restrictions. SNTs are meant to supplement, not replace, public benefit programs. For this reason, SNTs cannot disburse funds for things that are provided by other benefits. For example, if someone has SSI and their SNT disburses funds for food or shelter expenses, the individual’s SSI check will be reduced by up to a third. This is because SSI is meant to provide funds for food and shelter expenses (which includes rent), so the trust would be “replacing” that benefit by expending funds for that purpose. ABLE accounts, because they can be used on qualified disability expenses, can be used for food and shelter expenses. This is an area where SNTs and ABLE accounts can work together. A common workaround is to fund the SNT with the full amount of the net recovery and ask the trustee to disburse funds into the ABLE account each month so the beneficiary can pay for rent, groceries, and utilities. This allows the client to use their settlement recovery for all their needs and protect their benefits.

The other way in which an SNT is different from an ABLE account is that an SNT is a legal document, so it must be drafted by an attorney and distribution decisions will be made by a trustee. An SNT beneficiary cannot compel or have control over the distributions (this lack of control is why the trust is not a countable resource). ABLE accounts, in contrast, are controlled by the client or their representative and require no attorney assistance. All one needs to do is find an ABLE account provider which accepts people in their state.[4] Most have options to sign up online, which can be done in minutes. Further, all decisions about what gets paid are made by the account holder.

The funds can generally be accessed by paper check, electronic transfer, or by using a prepaid card which is linked to the account. The client could even transfer funds to their own personal bank account, but they need to be careful about doing this. If they keep the money into the next calendar month, it will become a countable asset. There are tax consequences for not following the rules, and there could be negative consequences to the client’s benefits (although this has yet to be reported). While there is much to be said for the independence of getting to decide how the money is spent, this should not be offered to clients who are likely to abuse or misunderstand it.

One of the biggest complaints about SNTs is the beneficiary’s lack of control. Since the trustee is charged with making disbursements according to the trust’s terms and the client’s best interest, there is room for disagreement between the trustee and the beneficiary. This can be very frustrating for a beneficiary, having just completed years of litigation, who has strong feelings about what they want and need. If the client is likely to butt heads with the trustee, one strategy is to front-load an ABLE account with $15,000 before funding the SNT. The client can use the SNT for most of their needs but will have the ABLE account to use for things the trustee might deny. Some trustees are open to further funding an ABLE account year after year without asking what the funds will be used for, while others apply the same standards as they would apply to any trust disbursement. This is still a grey area in the trust administration world, so it is up to the trustee to determine what happens to funds in the SNT once the deposit is made.

Instead of using an SNT, could I set up a structure to pay $15,000 per year into an ABLE account?

The answer, unfortunately, is unclear. There are no rules or regulations either allowing or prohibiting ABLE accounts from being funded this way. You could set up a structure to pay to the ABLE account, but the risk would be that either it would be prohibited by a later regulation or that the Social Security Administration or another benefit program would decide to make the contribution a countable resource. These scenarios do not seem likely, but they are possible.

Even if it was explicitly permissible, there are some risks that come with funding this way. One is that the $15,000 threshold could be changed, while the annuity would be virtually set in stone. If the maximum contribution went to $14,000 and a $15,000 check arrived, the ABLE provider would deny it, which would create a headache for the client and the life company. Further, if the client was going to save the money long-term, they would need to make sure they did not reach the maximum threshold. A more likely risk would be that the client might deposit their own money (maybe an unexpected gift, for example). Since the ABLE account cannot accept a penny more than $15,000, if a check that arrived would cause the account to exceed this amount, again, they would deny it.

All of that being said, using a structured settlement to fund an ABLE is still a viable planning option.  To have certainty, you would want to fund through a stand-alone or pooled special needs trust.  That way the trustee can move $15,000 annually into an ABLE account.  It also provides the necessary flexibility in case the maximum contribution goes up or down, the trustee would have the ability to contribute less or more with the balance of the structured settlement payment remaining in the SNT.

What happens to remaining funds when the client dies?

The answer to this question depends on the state. Initially, ABLE accounts were treated like SNTs in this regard: when the client died, Medicaid had a right to be reimbursed for services provided (not including those paid at settlement). A growing number of states have changed this and now disburse funds to the client’s estate. Medicaid Estate Recovery will still apply, but instead of money automatically going to Medicaid, statutory protections can be invoked which prevent estate recovery in certain circumstances.

Conclusion

ABLE accounts are still worthwhile for clients who qualify, and they can certainly be part of a well-rounded settlement plan. It is unfortunate that unless the recovery is very small, ABLE accounts cannot be the entire solution. There are some rules to follow and limitations to be mindful of, but the ability to save beyond the income and asset limits while having control over the money cannot be underestimated.

[1] https://www.cnbc.com/2019/08/24/theres-a-game-changing-way-for-the-disabled-to-save-but-few-use-it.html

[2] Linked here are the rules and exemptions for the major benefit programs: SSI, HUD, and SNAP. For Medicaid exemptions, see your local Medicaid eligibility manual, many of which can be found here.

[3] It is important to note that funds should be used to purchase services or exempt assets so as not to cause ineligibility in a different way. Any purchases need to be at fair market value, which means the money cannot be given away without triggering a transfer penalty.

[4] A list of ABLE account providers can be found here. One to make note of is STABLE, which is based in Ohio, but accepts account holders in every state.

Greater Understanding for More Effective ERISA Lien Negotiation

August 13, 2020

By: Teresa Kenyon

Medical liens or reimbursement demands are generally an unwelcomed part of the whole recovery process for personal injury attorneys.  It’s the case after the case. The target is always moving and there is a lot of information to process and laws to apply. This is generally not the chore that most personal injury attorneys have a strong desire to conquer. You must meticulously ensure that the liens or claims are addressed before disbursing funds or else you have greater problems well after your case has concluded. Medical liens can even pop up when you least expect it. And they can wreak havoc on a case and ruin the overall client experience after you have masterfully secured a recovery. For a personal injury attorney representing an injured client, these medical liens are no fun.

In reality, health plan subrogation has one goal: to move settlement funds away from the injured party and give those funds to health insurance carriers. When someone is injured and requires medical treatment, a health insurance card is produced to secure payment of those medical services. This insurance card could be from Medicare, Tricare, Medicaid or through a private health insurer like Aetna, Blue Cross Blue Shield, Kaiser, etc. It is important to note that even Medicaid and Medicare, including Advantage, RX and supplement plans, can be handled by private health insurance carriers. It can be mystifying. The medical providers (hospitals, doctors, rehabilitation centers, physical therapists, etc.) have contractual arrangements with the health insurance carriers and payment amounts are predetermined according to those contracts. When someone is injured due to the negligence of another and if other insurance coverage is responsible for compensating the injured party, these insurance carriers and government agencies want their money returned.

Subrogation versus Reimbursement

There are two general legal theories for the attempt to receive money back: subrogation and reimbursement. The terms are sometimes used interchangeably, even in case law. Subrogation has the health carrier “stepping in the shoes” of the injured party and presenting their claim directly against the liable party or their insurance carrier. The more formal definition is the substitution of one person in the place of another with reference to a lawful claim or right. On the other hand, reimbursement is when the health carrier directs their attention to the injured party (the beneficiary of the medical treatment) after the injured party has collected settlement funds from the liable party or responsible insurance carrier.

For example, subrogation involves the injured party’s insurance carrier Aetna (or their recovery vendor) going directly to GEICO (the liable third party insurance carrier) and demanding that GEICO reimburse Aetna for the $20,000 in medical expenses paid to various providers by Aetna after the car accident in which the GEICO insured was found liable / accepted liability. On the other hand, reimbursement is when Aetna goes to the injured party directly and demands repayment for the $20,000 in medical expenses paid for medical treatment from the $100,000 policy limits received from GEICO. These concepts are similar but different. The result is unfortunately the same. The injured party receives less money for their injuries.

The thought is that without subrogation or reimbursement, the injured party is obtaining a double recovery. When performing subrogation functions, these health insurance carriers tell themselves that they are collecting the medical damages paid for that should be paid for by another entity – the responsible insurance carrier. The problem is that most recoveries do not fully compensate or make the injured party whole. This is especially the case with a limited settlement. In those cases, the subrogator does not then adjust their claim when medical damages are only one small fraction of the total damages. As a result, there is a huge inequity with the subrogating carrier taking much more than their fair share of that limited settlement.

The idea of subrogating has been around for years as it relates to property damage. In the health insurance context, subrogating by going directly to a liable insurance carrier is a fairly new idea in practice. It is also not readily accepted by most auto, premise or other types of liability insurance carriers. Many subrogation vendors make a big push for their employees to focus on subrogation and obtain the reimbursement directly from the insurance carrier. They treat it more like a coordination of benefits thereby cutting out the plaintiff attorney representing an injured party and sidestepping any need for reduction due to equitable doctrines. The irony here is that subrogation itself is an equitable doctrine.

As you approach the handling of your client’s medical liens, take note that each type of medical lien needs to be handled in a slightly different way. ERISA requires a different approach and cadence than a Medicare or a Tricare claim. Each are governed by their own set of laws whether it be statutory, contractual or equitable. These laws often change. Sometimes this is for the benefit of the injured party but unfortunately, more often these change benefit the collecting medical benefit program. In our experience, the most harmful action an attorney can take is to begin to negotiate a lien without having a full understanding of the rights of recovery. Given that fact, below is an outline of issues to be concerned about in that regard as it relates to ERISA liens.

ERISA Liens:  Funding Matters

For ERISA plans, fully understanding recovery rights means verifying the funding source, knowing which law is applicable, obtaining pertinent governing documents and identifying any and all arguments that can result in reduction of the lien. ERISA reimbursement claims stem from employer-based health plans; however, there are exceptions. Religious employers and government employers do not fall under the ERISA framework and would be subject to state law.

ERISA plans are either fully-insured or self-funded. This is the very first assessment that must be done to validate an ERISA plan’s recovery rights. Both plans may have recovery rights in some states. Only the self-funded plan may have recovery rights in every state. Where these rights are derived varies based on this funding status. In some situations, a plan may be governed by the contract language, but that policy may be overridden by state law in some states.  It certainly gets complicated. For a deeper read, review the Preemption Clause (29 U.S.C. § 1144(a) (2012)), Savings Clause (§ 1144(b)(2)(A)) and Deemer Clause (§ 1144(b)(2)(B)).

Plan Document Request

The first step to determine funding status and recovery rights is a document request pursuant to the ERISA statute. There is the laundry list of items that the plan participant is entitled to receive under the ERISA statute 29 USC § 1024(b)(4):

The administrator shall, upon written request of any participant or beneficiary, furnish a copy of the latest updated summary, plan description, and the latest annual report, any terminal report, the bargaining agreement, trust agreement, contract, or other instruments under which the plan is established or operated.

An administrator is required to provide the requested documents. The ERISA statute has created a civil penalty under 29 U.S.C. § 1132(c)(1) which has been increased to $110/day under 29 CFR § 2575.502(c)–(3).

Subrogation vendors and defense firms that represent self-funded plans will often state that they do not have the documents in-house, therefore they are not the proper party for requesting the documents. They add that the documents are not necessary to ascertain the funding status or recovery rights of the plan and therefore unnecessary. Essentially, they shake off any penalty for their client’s failure to comply. Some of these vendors refer you directly to the plan administrator to obtain the documents. Other vendors readily express their aversion if you send the request to the proper party which is the employer/plan sponsor. It is tricky to know which approach should be used with which vendor.

The Documents

Aside from the ERISA statute, case law has developed about the various documents and how they relate to the right of recovery. The Master Plan Document (MPD) is the controlling document and many times the plan’s-favorable terms are contained in the more readily available Summary Plan Description (SPD) but not present in the MPD. This is a big deal—attorneys should use this to their advantage.

Recovery vendors will often cite the US Airways, Inc v McCutchen case as the reason why they are entitled to 100% recovery. The irony here is that McCutchen actually required a reduction for attorney fees because the policy language did not clearly state that it would not bear any attorney fee or litigation cost incurred to obtain the recovery. The U.S. Supreme Court found that in the absence of clear language in the policy, equitable principles fill the gaps. Those equitable principles most commonly include the Common Fund and Made Whole rules.

McCutchen was remanded and new issues arose as in the interim, the U.S. Supreme Court decided Cigna Corp v Amara, 563 US 421 (2011).  It was found to be inappropriate to use the SPD to explain the terms of the plan and instead pointed to ERISA 102(a) which obliges plan administrators to furnish SPDs, but indicated that it does not suggest that information about the plan provided by those disclosures (the SPD) is itself part of the plan.

On remand, it was discovered that SPD had recovery provisions which supported the plan’s claim of an equitable lien under ERISA but the MPD did not. There were several deficiencies. The MPD did not mention reimbursement and instead only allowed subrogation. It also did not reference first-party insurance recoveries and instead specified only third-party recoveries. Because the MPD did not support it, US Airways’ claim was only applicable as to his third-party recovery of $10,000.00 and not his larger first party recovery. That claim was then subject to the Common Fund doctrine. This part of the story is not usually mentioned by the subrogator and sometimes seemingly not even known by the analyst/examiners citing the case.

The lesson is to dig into those plan documents. Not just the SPD. The first response of 99% of self-funded plans is to say they are entitled to 100% simply because they are ERISA self-funded. Synergy is your partner to find the cracks in the policy and create leverage based on the deficiencies found therein.

Early Prep

Although a lien may be the last thing on your mind when you are settling the underlying case, there are some steps you can take during your handling of the case that can solidify certain sticking points to enable more effective, leveraged lien negotiation later.

As you have no doubt have experienced, there are cases where you cannot obtain the full amount of damages. What that also means is that you did not collect the full amount of any alleged medical damages. This could be because of a pre-existing condition that were exacerbated by the loss or it could be because liability was not accepted 100%. If there is a range of accepted treatment but the carrier refused to agree that, for example, a neck surgery 2 years later was causally related to the loss, have that documented by the defense or insurance carrier like in an email thread etc. Unfortunately, a defense medical exam usually does not carry much weight for a lien holder. They will say that it only proves the defense was doing their job, denying relatedness as a means of decreasing the overall settlement they would have to pay out. On the other hand, the actual communications leading to the eventual deceased settlement could show the disconnect and help you secure a well-deserved reduction.

The Claim/Lien Statement

Review the lienholder claim summary closely. Lien statements come in all sizes and with varying pieces of information. You should at a minimum require that the lienholder provide the treatment dates, billing codes (ICD and CPT), provider names, billed amount and paid amount to determine the validity and relatedness of their included claims.

Lienholders do not always accurately present their claims. Be careful of bundled charges or claim lines that show a lump sum with a large payment. Get the breakdown showing individual claim payments, procedure codes, etc., to ensure all are related. Claims can be backed out or adjusted and a lien holder may still show them on their lien statement. The claim summaries need to be carefully reviewed to ensure that duplicate claims or unrelated claims are not included. This is especially important for medical malpractice cases and pre-existing injuries.

Conclusion

The predominant piece of advice is to not negotiate until you have analyzed all the above pieces of the puzzle and how they fit together. Negotiating before assessing everything will place you at a huge disadvantage and then when you turn the lien over to Synergy, we are much more limited in our ability to obtain the biggest reduction.

Synergy Settlement Services is your ERISA lien expert. The ERISA team has over 100 years of combined experience and many have come from the other side. We will tirelessly work to reduce the lien claim, bring the matter to a close and eliminate any risk and additional expense for you or your client. Luckily, Synergy’s day in and day out handling of liens with the same vendors repeatedly gives us insider knowledge to get the best result.

Mitigating Medicare Secondary Payer Liability Related to Futures

July 9, 2020

By Jason D. Lazarus

Medicare Secondary Payer Compliance for law firms when it comes to “futures” is all about risk mitigation.  How do you properly and compliantly close a file when you represent a Medicare beneficiary?  The biggest risk a trial lawyer faces when dealing with settlements for a Medicare beneficiary is the denial of future care as a result of Mandatory Insurer Reporting (MIR).  If a client does not understand that risk and has a problem with Medicare paying for future injury-related care, then the law firm is exposed to malpractice risks.  So how do you protect your law firm and make sure your client can make an informed decision about Medicare compliance issues?  The answer is to educate yourself and the client by turning to an expert Medicare compliance partner.

Medicare Futures:  The Problem & Risk

Today, there is a very real threat of Medicare denying future injury-related care after the personal injury case is resolved.  This can be very easily triggered by the MIR and reporting of injury-related ICD codes which happens automatically now with any settlement of one thousand dollars or greater.  Once a denial of care is triggered, a Medicare beneficiary has to go through the four levels of internal Medicare appeals plus a federal district court before ever getting the denial of care addressed by a federal appeals court.  This is why it must be of primary concern for the personal injury practitioner to address these issues, particularly in catastrophic injury cases where denial of care could be devastating to the injury victim’s medical quality of life.

Consider this scenario: You represent a current Medicare beneficiary in a third-party liability case.  As part of the workup of the case, you determine the client will need future medical care related to the injuries suffered.  This could be determined by either deposing the treating physician or by the creation of a life care plan for litigation purposes.  Ultimately, you settle the case.  Since the client is a Medicare beneficiary, the defendant will report the settlement under the Mandatory Insurer Reporting law as it is greater than $750.00 in gross settlement proceeds.  The defendant puts some language into the release about a Medicare Set-Aside being the injury victim’s responsibility and that they can’t shift the burden.  Everyone signs the release and settlement dollars are paid.  The file is closed, then forgotten.  What happens though if that course of action triggers a denial of future care by Medicare?

Unfortunately, there is no cookie-cutter answer for what to do about Medicare compliance.  It is a case-by-case analysis.  In some instances, there may be an argument that future medicals aren’t funded at all by the settlement.  In other cases, there might be an argument that a reduced amount of future medicals should be set aside to satisfy obligations under the MSP because the case settled for less than full value.  There are just too many possibilities to give a simple one size fits all answer.  However, what is clear is that doing nothing has its risks.  For example, the client who received the denial of care likely will face a lengthy appeal process within Medicare that must be exhausted before having the issue addressed by a federal district court.  In that scenario, the client is going to have to decide between paying out of their own pocket for future care or waiting for the care until exhausting all appeals in anticipation of prevailing over Medicare.

While the problem created for the client is a serious one if they are denied care, an equally scary proposition for the trial lawyer is their exposure for malpractice claims in this scenario.  Let’s assume that the injury victim who got this denial letter was not properly advised of the risks of failing to set aside money. Would the trial lawyer potentially face a suit for legal malpractice?  The answer is most likely they would.  There could be all sorts of arguments made about whether they fell below the standard of care, but in the end, this is a known issue and one that is of the law.  Worse yet, a trial lawyer and his/her firm could have Medicare breathing down their necks.  While we haven’t seen any instances of Medicare pursuing a law firm over failing to set up a Medicare Set-Aside, as discussed earlier, there are recent examples of law firms being pursued by the Department Of Justice (DOJ) related to other aspects of the MSP and failing to have a process internally to ensure compliance with the MSP.

How to be Compliant

If you represent a Medicare beneficiary, you must determine if future medicals have been funded and, if so, advise the client regarding the legal implications of the MSP related to futures.  The easiest way to remember the process once you have identified someone as a Medicare beneficiary or someone with the reasonable expectation is by the acronym “CAD”.  The “C” stands for consult with competent experts who can help deal with these complicated issues.  The “A” stands for advise/educate the client about the MSP implications related to future medical.  The “D” stands for document what you did in relation to the MSP.  If the client decides that they don’t want an MSA or to set aside anything, a choice they may make, then document the education they received about the issue with them signing an acknowledgment.  If they elect to do an MSA analysis, hire a company to do the analysis so that they can help you document your file properly and close it compliantly.

In addition, release language is critical when it comes to the question of documentation of considering Medicare’s future interests.  Release language I have seen prepared by defendant/insurers is typically overbearing.  Frequently the language cites regulations that are related to workers’ compensation settlements and typically will specifically identify a figure to be set aside.  The latter can potentially cause a loss of itemized deductions for the client.  Not only is release language an important consideration, so is the method of calculation of the set-aside, potential reduction methodologies, and funding alternatives (lump sum vs. annuity funding).  These issues do impact how the release is crafted as well as considerations of whether to submit to CMS for review and approval (which is rarely a good idea).  Submission of a liability set aside isn’t required and a settlement should never be made contingent upon CMS review and approval.  Some regional offices will not review a liability set aside whiles others will.  Since review/approval is voluntary, I typically don’t recommend submission given the lack of appeal process should CMS come back with an unfavorable decision.  Furthermore, making a settlement contingent upon CMS review/approval could create an impossible contingency if the settlement is in a jurisdiction where the regional office will not review.

The key to compliance is to start early and not let the defendant-insurer control the Medicare compliance process.  At the outset of your case you have to confirm disability eligibility with Social Security and get copies of all insurance as well as government assistance cards.  Make sure you understand who is potentially Medicare eligible such as those who are on SSDI, those turning 65, someone with end-stage renal disease (ESRD), Lou Gehrig’s disease (ALS), or a child disabled before age 22 with a parent drawing Social Security benefits.  Collaborate with the other side regarding what is being reported under MIR.  Be active in mandating the proper ICD codes to be included in the release.

Medicare beneficiaries must understand the risk of losing their Medicare coverage should they decide to set aside nothing from their personal injury settlement for future Medicare-covered expenses related to the injury.  It is about educating the client to make sure they can make an informed decision relative to these issues.  Beyond education of the client, the most critical issue becomes how to properly document your file about what was done and why.  This part is where the experts come into play.  For most practitioners, it is nearly impossible to know all the nuances and issues that arise with the Medicare Secondary Payer Act.  From identifying liens, resolving conditional payments, deciding to set money aside, the creation of the allocation to the release language, and the funding/administration of a set-aside, there are issues that can be daunting for even the most well-informed personal injury practitioner.  Without proper consultation and guidance, mistakes can lead to unhappy clients or, worse yet, a legal malpractice claim.

The lesson to take away regarding Medicare compliance is to strategically deal with these issues pre-settlement.  If a client is a Medicare beneficiary, then make sure you know which ICD codes will be reported under the Mandatory Insurer Reporting law and evaluate with the client the possibility of a set-aside.  Discuss with competent experts the proper steps for MSP compliance.  Potentially use the set aside as an element of damages to help improve settlement value.  Properly word the release if a set aside is being used to make sure the client doesn’t get saddled with inappropriate language or lose itemized deductions.

Synergy’s Medicare Expert Case Evaluation Service:  Mitigating the MSP Risk

If you represent a client who is Medicare-eligible and is treating for their injuries, I recommend a Medicare Expert Case Evaluation (MECE) when you resolve the case.  As part of the MECE, a Synergy Medicare Compliance expert will consult with your client regarding Medicare future interest protection mechanisms and the risk of doing nothing.  After being advised, your client can make an informed decision about what they would like to do, and you can document your file accordingly.

For $1,000.00, the MECE service includes:

  • Unlimited client consultation
  • Template communications to your client
  • Customized acknowledgment form to document your file
  • Settlement documentation consultation for MSP compliance

If an MSA allocation report is desired after consultation with the client, the cost of the MECE is applied towards the $2,500 charge for a Medicare Set Aside allocation report.

Conclusion

The whole system is flawed when it comes to Medicare.  You take all the risks, you do all the work, you bear all the costs and, after you win, you must address the Medicare Secondary Payer Act.  Synergy flips that paradigm on its head and fixes the broken system.  Our team will create a comprehensive plan to allow you to close your file compliantly by addressing Medicare’s “future interest,” freeing you up to take on the next battle.  You can focus on what you do best and everyone wins.

If you have a client who is Medicare eligible that is going to require future accident-related care, a Medicare Set-Aside should be considered and a MECE completed. There are numerous ways to deal with Medicare Secondary Payer compliance (without a set-aside) to ensure both your firm as well as your clients are protected. It just requires expert analysis with Synergy’s help.

Unique Planning Tool to Defer Taxation of Contingent Legal Fees

May 13, 2020

An often-overlooked issue for plaintiff attorneys is the management of taxation of their own contingent legal fees. As part of the normal rhythm of their practices, many attorneys experience peaks and valleys with their own personal income. This leads to concerns for trial attorneys about the unpredictability of their own income. However, attorneys have a unique opportunity, not available to others who earn professional fees, to take their contingent legal fees and invest them on a pre-tax and tax-deferred basis to smooth out income.

To learn more download at the link below.

[hubspot type=form portal=7609853 id=d2197b81-262f-4cd9-a9a1-b097768e218f]

United States of America vs. Carrigan & Anderson, PLLC

April 29, 2020

United States of America vs. Carrigan & Anderson, PLLC, Stephen P. Carrigan:  U.S. Attorney brings suit against personal injury lawyer and his firm over failing to pay back Medicare for conditional payments

By Jason D. Lazarus, J.D., LL.M., MSCC, CSSC

In yet another example of Medicare compliance-related issues, a Houston law firm and its managing partner have been sued by the government for failing to pay back Medicare conditional payments. This is a unique situation though as plaintiff counsel did properly report the settlement to Medicare and attempted to resolve it, albeit through improper channels.  In March of 2020, the United States Attorney in Texas filed suit on behalf of the Centers for Medicare and Medicaid Services (CMS) against the firm and the managing partner to recover the unpaid conditional payments plus interest, fees, and costs. While it has become commonplace for the Department of Justice to pursue lawyers and law firms for failing to reimburse Medicare conditional payments in the recent past, those were situations where Medicare’s right to reimbursement were completely ignored. Here that was not the case; instead, the law firm notified CMS’ Benefits Coordination & Recovery Center (BCRC) of the lawsuit and communicated with them about settlement but ultimately the firm disagreed with the final demand amount.  Instead of requesting an appeal, the matter was addressed in Texas state court. It is a cautionary tale in terms of following proper procedures if one does decide to challenge the amount owed to Medicare under the Medicare Secondary Payer Act (MSP).

Attorney Stephen P. Carrigan and his firm represented Tomas Tijerina in a personal injury lawsuit related to a car accident in April of 2014. In April of 2016, Mr. Carrigan’s firm notified the BCRC about Tijerina’s accident, his resulting injuries, and lawsuit to recover damages.  In March of 2017, Carrigan properly notified BCRC that the personal injury case had been settled for $70,000.00.  The next month, in April, BCRC sent out an Initial Determination with a payment summary detailing the $46,244.74 that Medicare was claiming as required reimbursement.  That same month, Carrigan filed a motion in Texas state court challenging the amount asserted by Medicare and notified Medicare of the pending action in state court.  In July of 2017, Medicare issued its Final Demand letter for $47,343.05 which included the related medical expenses plus statutory accrued interest. In August of 2017, Carrigan sent Medicare an order issued by the state court that reduced Medicare’s Conditional Payments by 90% down to $4,700 along with a check for the $4,700.

That brings us to March of 2020 where the U.S. Attorney, Ryan Patrick, filed suit against Carrigan and his firm in the United States District Court for the Southern District of Texas. Central to the lawsuit is the issue of the Texas state court lacking jurisdiction to adjudicate Medicare’s recovery of conditional payments under federal law. In the complaint, Mr. Patrick pointed to sovereign immunity and the fact that the Texas state court lacked subject matter jurisdiction related to conditional payments made under the MSP. He outlined that proper challenges, disputes, or attempts to reduce/avoid reimbursement due to Medicare for conditional payments must go through the administrative appeal process set out in the Medicare Act and regulations.  According to the complaint, only after exhaustion of those administrative remedies can a claim be made to a United States District Court, which has exclusive subject matter jurisdiction to hear claims under the MSP. There is plenty of case law on that point and it is a winning argument. The complaint also laid out the liability for an attorney who fails to reimburse Medicare under 42 U.S.C. § 1395y(b)(2)(B)(ii); 42 C.F.R. § 411.24(g).

It is very likely that the suit by the government will be successful and the attorney will be liable for the full lien amount plus interest, fees, and costs. The fact that the state court had no jurisdiction and based its order on applying Ahlborn, a Medicaid lien decision, to a Medicare conditional payment means there is little likelihood that the federal district court will respect the state court’s ruling. Sovereign immunity and preemption by federal law alone prevents the state court ruling from being given any consideration at all by the federal court.  This all could have been avoided by paying the final demand and then seeking a compromise/waiver.  By doing so, you avoid the interest meter from continuing to run and eliminate the need to engage in lengthy appeals involving exhaustion of administrative remedies within Medicare. If Medicare grants a compromise or waiver, they issue a refund back to the Medicare beneficiary.  There are three viable ways to request a compromise/waiver. The first is via Section 1870(c) of the Social Security Act which is the financial hardship waiver and is evaluated by the BCRC.[1]  The second is via section 1862(b) of the Social Security Act which is the “best interest of the program” waiver and is evaluated by CMS itself.[2]  The third way is under the Federal Claims Collection Act and the compromise request is evaluated by CMS.[3]  If any of these are successfully granted, Medicare will refund the amount that was paid via the final demand or a portion thereof depending on whether it is a full waiver or just a compromise.

The critical takeaway is that an attorney must use the proper channels for challenging conditional payments owed to Medicare. There are multiple considerations before deciding to appeal or seek a compromise/waiver of conditional payments. Certain steps are necessary to resolve a conditional payment which includes audit/verification of the amount after receiving the conditional payment letter and securing a final demand by providing final settlement details to Medicare. Failure to resolve a conditional payment exposes a trial lawyer to personal liability for the amount of the conditional payment and the government does pursue lawyers individually if they fail to reimburse Medicare, so be very careful when it comes to dealing with Medicare as you do not want to become a cautionary tale. You and your firm never want to be in this position or have the possibility of a double damages claim by the government. The key here is to work with competent experts when it comes to Medicare compliance. Synergy specializes in protecting law firms against this sort of precise scenario by being your Medicare compliance expert partner.

To read the opinion, click HERE.

 

[1] 42 U.S.C. § 1395gg

[2] 42 U.S.C. § 1395y

[3] 31 U.S.C. § 3711