Handling Medical Liens in a Post-Montanile World, Tackle Head On

Teresa S. Kenyon

A fleeting memory of Montanile may have plaintiff attorneys encouraging injured parties to quickly spend their settlement funds thereby avoiding the lien asserted by their health plan. This would be a false narrative that could prove to be costly. No doubt about it, ERISA self-funded plan rights are often unyielding. But overall, they still need to be addressed head-on and brought to definite resolution. Fortunately for the injured party, if the health plan fails to take appropriate action then the Plan’s rights are not as ironclad as it may have thought. If all of the pieces of the puzzle are all there, Montanile can be a positive and the injured party can retain more of their settlement funds. Unfortunately, when some of those pieces of the puzzle are missing, handling and ultimately paying the lien is still required.

As you may recall, in Montanile v. Board of Trustees of the National Elevator Industry Health Benefit Plan, 136 S Ct 651 (2016), the Court found that if a plaintiff fully exhausts the settlement funds so that they are no longer in the possession and control of the plaintiff, then an ERISA plan could not make a claim against the plaintiff since the subject of their claim, the settlement fund, is fully dissipated. However, there are limitations and exceptions to this. To mirror the facts in Montanile that brought the success, two key pieces must be in the puzzle. First, the plaintiff attorney must be cooperative with the Plan and show a good faith effort to resolve the lien claim. Second, if the Plan is unresponsive in return, then the funds can arguably be spent on nontraceable items. Miss these two pieces and you’ll likely have a negative result.

There is no doubt that Montanile was a win for injured parties especially following the other ERISA related US Supreme Court decisions of McCutchen, Seraboff, and Knudson that have ultimately served to provide strength to self-funded plans seeking reimbursement against an injured party’s settlement funds. Understandably, it may be tempting in a post-Montanile world for plaintiff attorneys to just ignore the lien, take their fee and disburse the remaining funds to their client – doing so in the name of Montanile. However, that is not usually a recommended course of action. The best way to handle an asserted ERISA lien is to resolve the asserted ERISA lien; reach an agreement with the lien holder thereby fully and completely bringing the matter to a close. This avoids any potential ethical issues for attorneys in states that follow ABA Ethical Rule 1.15 which provides:

(e) When in the course of representation a lawyer is in possession of property in which two or more persons (one of whom may be the lawyer) claim interests, the property shall be kept separate by the lawyer until the dispute is resolved. The lawyer shall promptly distribute all portions of the property as to which the interests are not in dispute. ABA Rule 1.15.

and it ensures that the client is protected from any later action from the Plan including offset of future benefits or the time and expense of defending a reimbursement action brought by the Plan. Attorney due diligence is key. Avoiding the lien holder and hiding from the reimbursement demand is not suggested. In fact, it is not at all what Montanile or his attorney did. A key piece in Montanile is that the plaintiff attorney demonstrated due diligence by informing the ERISA plan of the pursuit of a third-party claim, cooperating with the Plan by signing additional agreements (which isn’t recommended), and giving the Plan fourteen (14) days’ notice with an opportunity to object before disbursing the remaining settlement funds. These actions matter. Without these pieces of plaintiff counsel’s due diligence, the Court would have likely ruled differently.

Notifying the Plan is the first step to showing due diligence. As most plaintiff attorneys know, self-funded plans have expanded their policy language to encompass all defenses as case law evolves. The plan language has been repeatedly modified to ensure the Plan is in a robust posture for reimbursement. Most policy provisions state that a plan participant must notify the Plan that they are pursuing a third-party liability claim. If the Plan does not respond, then that piece of Montanile puzzle is present. On the other hand, if the Plan is never informed, then the plan participant cannot later argue that the Plan did not respond timely and that piece is forever missing.

Most ERISA Plan Administrators and their recovery vendors have responded to the Montanile case by clearly objecting to disbursement of settlement funds during negotiations. Plan Administrators now make faster decisions when negotiating lien claims. As negotiations stall, they are prepared to file legal action, provide the necessary testimony, and actively litigate their claim. Plans are being more proactive rather than waiting around for a windfall. The industry has a very different landscape from a decade ago, whereby Plans did not necessarily expect to see subrogation dollars. Now, the Plan’s outstanding subrogation interests are often represented as a line item on their accounts receivable. Thus, the more aggressive nature of pursuing their claims including asserting a claim directly against the tortfeasor and filing civil actions for reimbursement against injured parties. Plaintiff counsel’s mild cooperation with the Plan from the onset is likely to pacify most Plan Administrators and keep their assertive action and interference at bay.

Note that the Montanile Court made it clear that had the Plan taken more aggressive action, and sooner, that their recovery rights may have been preserved. The crux of the Montanile case is that when negotiations stalled, it was Montanile’s attorney who continued to be active by voicing his intent to distribute the settlement funds to Montanile unless the plan objected within 14 days. The Plan was radio silent. For six months. Ultimately, because of their inactivity, the funds had been dissipated by Montanile by the time the Plan brought its subrogation enforcement claim in the form of a reimbursement action. Although Montanile is a win for injured parties, an important puzzle piece is that plaintiff counsel must show due diligence to ensure that proper steps are taken. If the Plan fails to act, then piece one of Montanile can be relied on for plaintiff’s benefit.

Funds spent on non-traceable items

The second piece of the puzzle is examined more fully in another reimbursement action pursued by The Board of Trustees of the National Elevator Industry Health Benefit Plan. The Plan ensured that they did not fail to act timely this time and immediately took steps to ensure the reimbursement of the Plan when there was a third-party liability settlement. In Board of Trustees of National Elevator v. Goodspeed, 2019 WL 1934475 (E.D. Pa. May 1, 2019), the focus was on what the funds were dissipated on – whether they were traceable or not. Here, unfortunately for the Goodspeeds’ the Court found that their attempt to dissipate funds under a Montanile theory failed and that there was still an identifiable fund of which the Plan’s equitable lien could attach. The pertinent language from Montanile is:

“We hold that, when a participant dissipates the whole settlement on nontraceable items, the fiduciary cannot bring a suit to attach the participant’s general assets under §502(a)(3) because the suit is not one for ‘appropriate equitable relief’.” Justice Thomas in Montanile

In Goodspeed, the injured tort victim netted $304,463.22 after deducting attorney fees and costs. The Plan had notified the Goodspeeds’ attorney that they held a lien on the settlement proceeds prior to the case settling. Nonetheless, the attorney disbursed all $300,000plus to the Goodspeeds’ and did not reimburse the Plan’s asserted equitable lien of $82,088.36. The Goodspeeds’ deposited the check in their joint savings account in October 2017. Between October 2017 and May 2018, the couple spent or withdrew more than $304,463 from the account. Specifically, and traceably, they transferred $200,000 to a certificate of deposit with right of survivorship and purchased a van for $62,000. Presumably, the Goodspeeds’ believed that these actions would defeat the Plan’s reimbursement right because the funds were not only comingled with other general assets but also because the funds were dissipated. Regrettably, this belief was incorrect. The Court specifically found that there is an identifiable fund and allocation of the fund was now ready to be discussed.

The second key piece to Montanile is that the dissipation of funds must be attributed to nontraceable items. It is not enough to fall into the Montanile bucket by just dissipating the funds. The use of the funds must be nontraceable which would include food, travel, remodeling a house, paying off bills, or other disposable items. Traceable items include identifiable things like vehicles and certificates of deposit as specifically outlined in Goodspeed.

Since Montanile, and as expected, other case decisions have been guided by it and attempted to fill in any gaps or otherwise expand its meaning. In Cognetta v Bonavita, 2018 WL 2744708 (E.D. N.Y) the Plan filed a declaratory action to establish a constructive trust for the benefit of the Plan before the settlement funds were even in existence. The Court allowed it. Other Plans could follow this course of action. Plans are also intervening in the underlying case as a means of protecting their equitable lien and avoiding a Montanile defense. But this is a jungle that most plaintiff personal injury attorneys will not want to enter just to avoid paying an equitable lien claim. Unfortunately, another option for a scorned Plan Administrator is to offset future benefits if the injured party is still an active participant with the Plan. And finally, another risk is that the Plan names the tortfeasor in a subrogation action. Then the terms of the release obtained by the tortfeasor would be triggered whereby the tortfeasor would point to the indemnity clause placing the issue right back in the plaintiff attorney’s lap. Arguably, the Montanile dissipation argument would not be viable in that situation.

Conclusion

In the end, it comes with great risk to bury your head in the sand of Montanile and hope that the equitable lien just goes away. The better course of action is to tackle it head-on, thereby closing the case knowing that the lien issue is resolved completely and not still lingering. Synergy Settlement Services is your ERISA lien experts. 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. To watch our ERISA, Medicare advantage and Medicare refunds training course, visit our video learning center.

To learn more about handling medical liens in a post-montanile world watch our educational video below.

Settlement Language Can Make or Break a Workers Compensation Case

B Josh Pettingill

Appropriate settlement language can make a significant impact on the total amount of the workers’ compensation settlement, as well as dollars that the injured worker receives. This brief article will provide plaintiff/applicant attorneys with the requisite settlement language to maximize the workers’ compensation recovery, as well as protect their respective firms and clients.

Since the insurance carrier is cutting the check to resolve the workers’ compensation case, they may potentially have leverage to dictate the terms of the settlement. Some plaintiff/applicants’ attorneys may – agree to or overlook certain critical provisions of the settlement to expedite the resolution. Below are the key areas to focus on when drawing up a mediation, or settlement agreement to ensure a timely resolution, as well as maximize the recovery.

Medicare Set-Aside

Make sure to include an all-inclusive figure that encompasses Medicare-covered items, non-Medicare-covered items, and indemnity. Oftentimes, there are ways to get the MSA amount lowered due to the errors by the carrier’s MSA expert or through funding with a structured settlement. Any savings on the MSA can go directly in the injured workers’ pockets. Do not ever agree to terms that suggest some fixed amount PLUS the MSA. If that were to happen, then any savings on the MSA would go the carrier and not the claimant/applicant.

Structured Settlement

There must be language that allows the injured worker the option to place a portion of the settlement proceeds into a structured settlement. If not, some carriers may refuse to fund a structured settlement at a later time. This also allows for time for a qualified settlement consultant to meet with the injured worker to develop a proper settlement plan. Furthermore, you should include verbiage that states any structured settlement shall be brokered or co-brokered by Synergy Settlement Services, or XYZ Plaintiff Structured Settlement Company.

Funding the Agreement

Language should also be included about paying the settlement monies in a timely manner and funding any structured settlements expeditiously. These could be provisions for extra attorney fees, as well as penalties and interest for failure to do so. For example, this could be based either on a certain number of days after CMS approval or approval by the judge of compensation claims.

Continuation of Benefits

Attorneys for the injured worker should include language that medical and indemnity benefits will stay intact for a set time period or until the settlement checks have been issued. That way, the injured worker does not lose out on any benefits and there is no gap in coverage. This can be life-threatening to catastrophically injured workers if they are not able to receive ongoing medical care.

Conclusion

These are just a few of many issues that should be addressed in the settlement/mediation agreement. Other topics include reversionary clauses, CMS approval of the Medicare Set-Aside and what happens if CMS comes back with a larger suggested MSA amount than what was submitted. Settlement language can either make or break a settlement. You need to have a qualified settlement consultant to assist with these complex issues. Synergy attends mediations at no cost to you or your client and offer a number of services to attorneys for workers’ compensation claims, liability claims, medical malpractice and more. Ask us today how we can help protect your law firm firm/your client, maximize the recovery of a workers’ compensation case and make your firm more efficient.

To learn more about Synergy’s Workers’ Compensation Medicare Set-Asides, visit our website.

Reversionary Clauses and the Impact on Injured Worker

B. Josh Pettingill

Reversionary clauses have become a common term of settlement in workers’ compensation cases involving a Medicare Set Aside (MSA). It is important for workers’ compensation attorneys to understand how these clauses can impact the injured worker, as well as the settlement.

What is a reversionary clause?

A reversionary clause means that when the injured worker passes away, any funds remaining in the WCMSA account would “revert” back to the carrier. The carrier essentially receives a rebate, or a refund on any unspent medical funds. The argument by the carrier for a reversionary clause is that they should only pay for medicals if the claimant is alive. Therefore, if the claimant passes away before the funds are exhausted, there is a “windfall” of money to the claimant’s beneficiaries or family.

Most plaintiff/applicant attorneys are not apt to agree to such a clause since it is money that the injured worker does not get to keep. There are multiple variations of a reversionary clause where it could be based either on a lump sum amount on the remaining funds in the account, the number of guaranteed annuity payments remaining on any structured settlement used to fund the MSA obligation, or a combination of both[1].

You must be careful when agreeing to use their professional MSA administration company for the MSA account. One trick that carriers use is to offer to pay for lifetime professional administration “for the benefit” of the claimant. They do this for multiple reasons. They may have financial relationships with certain providers that incentivize them monetarily to push business towards a certain company. This also gives assurance that they will get paid back if there is a reversionary clause in place. The MSA administrator becomes a cash collector for them upon the injured worker’s passing. If professional administration is not in place, then it is exceedingly difficult to collect from a claimant’s estate even if this is a material term of the settlement.

Plaintiffs’ attorneys must be proactive to exclude or modify reversionary clauses

A reversionary clause should never be agreed to as a provision of a workers’ compensation settlement. Furthermore, if a settlement is reached, then the injured worker should be given the choice to select the company to professionally administer the WCMSA at the carrier’s expense.

There are rare occasions when a reversionary clause may be useful to reaching an agreement if there is a catastrophically injured person with a large WCMSA and reduced life expectancy. We have seen firsthand where a reversionary clause has helped bring the settling parties together because it allows the carrier to pay more dollars to get the case resolved in exchange for having some protection in the event the injured worker passed away prematurely. If the carrier insists on a reversionary clause, then you can always negotiate that only a certain percentage of any remaining funds or a certain number of annuity payments will revert to the carrier.

About Synergy’s Workers’ Compensation Settlement Experts

Synergy’s Workers’ Compensation Settlement Services team is headed up by Jason Lazarus who is a former workers’ compensation attorney and Josh Pettingill who frequently testifies as an economist on workers’ compensation matters. Both Jason and Josh are Medicare Set Aside Consultants Certified by the International Healthcare Commission, have served as MSP compliance expert witnesses and have authored numerous articles on Medicare Set Asides. Collectively, they have handled over 10,000 workers’ compensation cases and have taught over 500 hours of CLE education on settlement planning, Medicare Set Asides, public benefits protection and other complex issues impacting the value of workers’ compensation matters.

[1] High dollar WCMSAs are typically funded by way of a structured settlement that is only payable for as long as claimant is alive or for the claimant’s life expectancy. MSAs can typically be funded at a present value cost of 40%-60% less than the cost to fund the lump sum MSA amount.

Evidence Based MSAs (EBMSAs): Don’t Accept Blindly

B Josh Pettingill

Evidence Based MSAs (EBMSAs) have taken the workers’ compensation industry by storm the past several years. It is imperative for workers’ compensation attorneys to understand how EBMSAs can impact both the settlement value, as well as your clients’ benefits post-resolution. EBMSAs can be a cost savings mechanism in resolving a workers’ compensation claim. However, using an EBMSA to resolve a claim is not without risks.

EMBSAs are prepared based upon clinical guidelines and trends in medical research to project future Medicare covered expenses. This is a logical approach one would think. However, The Centers for Medicare and Medicaid Services (CMS) takes a different position as it relates to their approved methodology for preparing an MSA with a future cost projection.

Three Key Components of Evidence Based MSAs

There are numerous MSA practitioners and companies who offer EBMSAs for workers’ compensation cases. There are three key components to an EBMSA that should be noted:

The EBMSA utilizes a pricing strategy that does match up to the CMS approved pricing guidelines when pricing a WCMSA[1].
The EBMSA mandates professional administration for the claimant for a specified term[2].
The EBMSA assumes the settlement parties will not seek CMS approval of the WCMSA.

Real World Pricing Strategy

There are two components of a Medicare set aside: prescription drugs and medical items/services[3]. The largest part of an MSA is usually prescription drugs. On average, prescription drugs make up 65% of the total MSA amount from a dollar standpoint. EBMSAs tend to be priced the CMS approved way as it relates to medical items and services. However, as it relates to prescription drugs, there is massive dichotomy in the approach for pricing. Specifically, CMS requires that any recommended drugs be allocated for the life of the claimant/applicant[4]. Whereas, EBMSA uses period certain durations (shorter timeframes) based on supporting medical evidence.

The Pros & Cons of an EBMSA

The cost of prescription drugs and their inclusion in an MSA can be one of the primary barriers to settlement of a workers’ compensation case. Since EBMSAs do not use full life expectancy to calculate future prescription drug costs, there can be a massive cost differential when compared with a non-evidence based MSA. One could argue that Medicare is being purposely being defrauded by a substantial amount by not using the appropriate pricing strategy for medications. However, an argument could also be made that pricing the MSA this way is more consistent with the “real world” approach; more importantly, the medical evidence supports this approach. It is not realistic to price medications for the lifetime of an injured worker. In fact, extended use of certain medications can contribute to a reduced life expectancy.

EBMSAs frequently have mandatory professional administration as a requirement to use them. The argument for the EBMSA is that the MSA funds will always be spent appropriately with a professional administrator. But the caveat is that the claimant/applicant must agree to use that company’s professional administration service. Unfortunately, that particular company may not always be the best solution for the injured party’s needs.

EBMSAs are not submitted to CMS which clearly is a pro but it has risks associated with non-submission. CMS approval of a WCMSA is always voluntary but recommended in order to have final closure. In other words, CMS approval provides the guarantee that CMS cannot come back years down the road and argue not enough money was originally set aside to consider their future interests. CMS approval is still the only way to have definitive peace of mind that your client is protected. One could even argue that there are malpractice risks for the claimant’s attorney if they rely solely on the carrier’s expert in determining the MSA amount using the evidence based method, while at the same time not getting CMS approval as part of the settlement process.

There are certainly benefits to an EBMSA such as reduced exposure to the employer/carrier which frees up other dollars to be used to resolve the claim. These companies claim that if CMS ever disagrees with the amount or denies something post-settlement that the claimant/applicant, as well their attorney, will be indemnified and held harmless. Also, the MSA company will either pay back Medicare if this were to happen or fight the claim that not enough funds were earmarked for the Medicare set aside.

Conclusion

As an attorney for injured workers, if you are presented with an EBMSA by the employer/carrier, you must consider the implications. We recommend obtaining an independent MSA analysis or medical cost projection to ensure that the EBMSA is an accurate reflection of the future medical costs. CMS has stated that the MSA is a claimant issue, not a carrier issue. If one chooses to accept the EBMSA, keep in mind that you are also relinquishing your ability to control the MSA process. As such, you are at the mercy of the employer/carrier’s expert for determining your client’s future needs.

An EBMSA is only one way to resolve a workers’ compensation claim. Synergy can help the injured worker and their attorney to not only save money but also maximize the recovery of the case. The last thing you want to happen is for CMS to return years later and disagree with the EBMSA amount because there was no CMS approval. Your client could find themselves in a situation whereby Medicare is denying coverage for accident related care. Such a situation could result in a legal malpractice case. Having a trusted partner to help take control of the MSA process, as well as guide you through the complex settlement issues, is imperative. To learn more about Synergy’s services for workers’ compensation settlements, visit our website by clicking HERE

[1] According to the WCMSA Reference Guide

[2] The duration depends on the product

[3] Durable equipment, medical services, items, etc.

[4] According to the WCMSA Reference Guide, “Reviewers (CMS) use the evidence in the records to determine if the proposal accounts for the reasonably probable future prescription drug needs. This includes the prescription drug history, the treatment notes, provider medication lists, and physician dispensing records.”

Liability Medicare Set-Aside (MSA) Case Studies: Eliminate, Reduce & Comply

B. Josh Pettingill

There is mounting evidence that the Centers for Medicare and Medicaid Services (CMS) will establish formal guidelines for liability MSAs in the imminent future. Medicare Secondary Payor compliance related to future medical care is an issue that can’t be ignored but that doesn’t necessarily mean setting up a Medicare Set-Aside on every case involving a Medicare beneficiary. The following post will highlight several real-world case studies in order to educate plaintiff attorneys on how to eliminate or reduce any Medicare Set-Aside issues for liability claims.

Key Takeaways

Medicare Secondary Payor Compliance is serious business and shouldn’t be ignored as evidenced by recent DOJ actions against personal injury law firms.
There is no black and white solution as it relates to MSP compliance and futures.
Plaintiff attorneys must control the MSA process if they want to avoid unwanted delays.
A treating physicians’ attestation indicating the care is completed is the only CMS approved way to avoid an MSA.
Plaintiff attorneys must be vigilant about the release language for their client’s protection of Medicare benefits.

Introduction

Most defendants have started to mandate, as part of the release language, that the plaintiff choose one of two below options for addressing Medicare’s future interests, without exception in return for payment of the settlement monies:

Plaintiff agrees to get a letter from the treating doctor that, as of the date of settlement, all accident-related medical care has been provided/completed[1]. This is a viable solution to avoid any possible future denial of injury related Medicare covered services.
Plaintiff agrees to do a Medicare Set-Aside and agrees not to bill Medicare for any future care related to the subject accident until the set-aside is exhausted.

To illustrate this point, below is an actual email (redacted) from a defense attorney to the plaintiff attorney that highlights such a tactic by the insurance carriers. This case involved a $15,000 global settlement on an auto accident. This email is a perfect example of what is becoming the norm for Medicare-eligible plaintiffs.

Dear Plaintiff’s Attorney,

I apologize for the delay in getting back to you. I have conferred with my client on this issue, and due to your client’s Medicare eligibility, my client is obligated under the laws previously mentioned to protect Medicare, which includes the treating physician certification requirement or doing a Medicare set aside. This is a legal obligation and therefore I am not authorized to remove these terms from the Release. The treating certification can simply be in the form of a letter that tracks the language in the CMS Memo.

Thank you,

Defense Attorney

Application

One could argue that most liability cases that settle for $15,000 or less do not fund future medicals when all damages are considered; therefore, there is no need to consider a liability set-aside for any case that resolves under $15,000. In the case example involving the email from defense counsel, the client had reached maximum medical improvement (MMI) and had completed all the accident-related care. The settlement was delayed for months before the attorney contacted Synergy for assistance because the attorney did not want to jeopardize his client’s Medicare benefits. Ultimately, Synergy was able to provide template language to the attorney for the treating doctor to specify that the care was completed at the time of the settlement. If the circumstances had been different and this plaintiff had required future care in this example, then the parties could have done an analysis of the future medical expenses compared to the net recovery to calculate the MSA amount. An MSA does not always involve getting a full report done with a comprehensive medical review; it simply means setting aside monies based on all the facts of the case. To avoid these types of delays post-settlement, one idea for attorneys to consider is to have consensus by the settlement parties on release language (including any/all Medicare language) prior to going to mediation. That way, there are no unwanted delays in receiving the settlement funds once the case had been resolved.

No Medicare Set-Aside

There are situations when a no-treatment attestation letter by a treating physician is not applicable whereby future medicals are not funded. This is a prime example: Synergy was retained on a policy limits case that resolved for a total of $500,000 whereby a husband and wife were hit by a drunk driver after leaving a restaurant. As a result of the accident, both became paraplegics. The past liens were greater than $1 million and the future damages exceeded $25 million. Even though the release language stated that it was a release for past, present and future damages, there were simply no monies leftover to fund any future medicals. In this scenario, Synergy was able to put together a “No MSA” letter for the plaintiff, indicating the same and that Medicare’s future interests were adequately considered. The file was documented to indicate why nothing was set-aside. The release language also memorialized that there were no settlement funds paid out for future medicals.

Conclusion

There is no black and white approach to addressing MSP compliance on liability settlements. Synergy has created a litmus test for attorneys to screen cases and to determine whether an MSA is an appropriate solution. To download that document, click here. Plaintiff’s counsel should insist on controlling the MSA process from start to finish as they are the ones who have legal malpractice risks and personal liability if, in fact, they fail to properly advise their client regarding the Set-Aside issue. Synergy frequently can justify why there is no need for an MSA or greatly reduce the MSA obligation. These savings are real dollars that go directly to the injury victim instead of Medicare.

Synergy provides no cost consultations to attorneys; please contact us if you have any questions that we can help you with at (877) 242-0022 or schedule a consultation here.

[1] On September 29, 2011, CMS issued a memorandum indicating there is no need for a liability Medicare Set-Aside and that its interests would be satisfied if the treating physician certified in writing that treatment for the alleged injury related to the liability insurance had been completed as of the date of settlement

To learn more about Liability Medicare Set-Asides MSAs Case Studies watch our educational video below.

Taking Advantage of the WCMSA Re-Review Process

B. Josh Pettingill

We frequently receive inquiries regarding workers compensation MSAs (WCMSAs) and whether it is possible to get CMS (Centers for Medicare and Medicaid Services) to re-review an MSA once an amount has already been approved. The good news is that it is possible. However, you only get one opportunity and certain criteria must be met to qualify. It is vital for claimant/applicant attorneys to audit their files to see which cases may be eligible.

For years, CMS only allowed a re-review of an WCMSA in two limited circumstances: 1) blatant errors and mistakes with the report or 2) omission of pertinent documentation from the submission. In many instances, the claimant’s medical condition may have improved considerably since the approval letter was issued. Accordingly, it was becoming cost prohibitive then for the carrier to resolve the claim if they must overfund an MSA that does not match the injured worker’s current medical condition.

However, CMS changed their position recently. There are situations where CMS will actually take the time to re-review the WCMSA. Per the Workers Compensation MSA Reference Guide, the following guidelines for the case must be met to be eligible for an amended review[1]:

CMS has issued a conditional approval/approved amount at least 12 but no more than 48 months prior.
The case has not yet settled as of the date of the request for re-review.
Projected care has changed so much that the submitter’s new proposed amount would result in a 10% or $10,000 change (whichever is greater) in CMS’ previously approved amount.

Takeaway – an Amended WCSMSA Review is Possible in Certain Circumstances

If you have a case that was approved even a day beyond four years ago or less than a year ago, then you are stuck with the original approved MSA amount. As of this writing, there is still no formal appeal process for WCMSAs. But, at least you now have the option for an amended review in certain circumstances. Do not let an overinflated, CMS approved WCMSA be a barrier to resolving a workers’ compensation case. Whether it is the first time for CMS approval or an amended review, Synergy’s team of experts can help to ensure a timely settlement while maximizing the recovery.

In our next post, we will discuss Evidence Based MSAs, the implications of getting one and not submitting to CMS for review/approval. To learn more about Synergy’s Workers’ Compensation Medicare Set-Asides, visit our website.

[1] https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Workers-Compensation-Medicare-Set-Aside-Arrangements/Downloads/WCMSA-Reference-Guide-Version-2_9.pdf

Medicare Compliance: A second law firm sued by DOJ for failing to be Medicare compliant

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

On March 18, 2019, the United States Attorney for the District of Maryland announced that the law firm of Meyers, Rodbell & Rosenbaum, P.A., has agreed to pay the United States $250,000 to settle claims that it did not reimburse Medicare for payments made on behalf of a firm client. As part of the settlement, the firm “also agreed to (1) designate a person at the firm responsible for paying Medicare secondary payer debts; (2) train the designated employee to ensure that the firm pays these debts on a timely basis; and (3) review any outstanding debts with the designated employee at least every six months to ensure compliance.”

This is the second such settlement in the last year. In June 2018, a similar settlement was announced by the U.S. Department of Justice Attorney’s Office for the Eastern District of Pennsylvania. To read more about this prior settlement, click HERE. Both of these settlements should remind attorneys of “their obligation to reimburse Medicare for conditional payments after receiving [a] settlement or judgment proceeds for their clients [as well as] not to disburse settlement proceeds until receipt of a final demand from Medicare to pay the outstanding debt.”

In today’s complicated regulatory landscape, a comprehensive plan for Medicare compliance has become vitally important to personal injury practices. Lawyers assisting Medicare beneficiaries are personally exposed to damages and malpractice risks daily when they handle or resolve cases for Medicare beneficiaries. The list of things to be concerned about is growing daily. The list includes things such as:

Not knowing what medical information/ICD codes are being reported by defendant insurers complying with Mandatory Insurer Reporting law (MIR) created by MMSEA.
Agreeing to onerous “Medicare Compliance” language—that may be inapplicable or inaccurate –which binds the personal injury victim.
Failing to report and resolve conditional payment obligations leading to personal liability.
Not using processes to obtain money back from Medicare using the compromise and waiver process.
Failure to identify a lien, such as those asserted by Medicare Part C lien holders thereby exposing the personal injury lawyer and the firm to double damages.
Inadequate education of clients about Medicare compliance when it comes to ‘futures’ and the risks of denial of future injury-related care.

What do you do? The answer is to develop a process to identify those who are Medicare beneficiaries in your practice and make sure that a process is put into place to deal with the myriad of issues that can arise. Given the liability a law firm faces for failing to be compliant, outsourcing this function to experts like those at Synergy helps mitigate the firm’s risk. Synergy’s Total Medicare Compliance program allows a law firm to address issues like Medicare Conditional Payment obligations, Medicare Advantage liens as well as Medicare Set Aside concerns by turning to us.

All lawyers assisting those on Medicare must be in the know when it comes to dealing with Medicare conditional payments as well as Part C/MAO liens. 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. Ultimately, 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.

For more information about our Medicare Compliance services, click here.

Understanding the Mechanics of Subrogation

How subrogation and reimbursement claims impact the injury victim’s settlement.

When an individual suffers an injury and seeks medical attention, typically that care is paid for by an insurance carrier. Those bills might be paid by Medicare, Medicaid, TRICARE, or a plan provided through their employer. This is true even if the injury suffered was caused by a third party. The surety of payment for medical services is why individuals are willing to pay high premiums for insurance coverage or to comply with cumbersome federal/state regulations to retain benefits.

However, most purchasers or beneficiaries of these plans and polices are unaware that there are circumstances wherein they will be required to repay these plans thousands or even millions of dollars. The little known and often misunderstood legal principles behind this obligation are subrogation and reimbursement.

Having spent more than 20 years in the health insurance subrogation/reimbursement industry, I have learned that a case example is the best way to explain how subrogation/reimbursement claims impact the individual injury victim.

A Typical Injury Case Example

In the typical case, an individual is injured in a motor vehicle accident. The individual then retains an attorney to assert a claim against the allegedly negligent driver. During the course of pursuing that claim, the attorney is advised that his client’s health insurance carrier paid $20,000 to various medical providers for injuries suffered in the accident. This notice advises the attorney that they are required to repay this amount upon settlement of the motor vehicle case. It is the position of the various insurance providers, government agencies, and courts that it was the at-fault party who should have paid the medical bills, not the injury victim’s own insurance carrier. Therefore, $20,000 from the settlement funds obtained by the injury victim’s attorney to compensate them for their injuries goes back to the insurance company. In many situations, primarily with Medicare, the facts and numbers can mean that the injury victim receives no portion of the settlement, and all of it goes back to the insurance carrier.

Subrogation and Reimbursement Explained

The terms subrogation and reimbursement are used interchangeably both within the industry and often by the courts. Despite this conflation, the two are different legal concepts and hold different perils for the injury victim attempting to obtain compensation for their injuries. Subrogation means to substitute one person for another. Often subrogation is analogized to “standing in someone else’s shoes.” Within our context it means that the health insurance carrier can “stand in the shoes” of the injury victim–essentially becoming the injury victim for the limited purpose of asserting a claim against the at-fault party for the amount of medical benefits they have provided. The insurance carrier asserts a claim independent of the claim being asserted by the actual injury victim. Reimbursement, on the other hand, is when the insurance carrier claims that their insured recovered money from the at-fault party for expenses which the insurance carrier, and not the injury victim, paid. The concept of reimbursement guards against an individual receiving a “windfall” by recovering money for an expense that was paid by another.

To add to this already confusing analysis is that each type of health insurance coverage has different recovery rights. These rights may be governed by state law, federal law or a combination of both.

Repayment considerations with the Medicare Secondary Payer Act

Medicare and Medicare Advantage beneficiaries will face the Medicare Secondary Payer Act when they are attempting to resolve a repayment demand being asserted against any settlement or award they obtain. Under this Act, Medicare is identified as a “payor of last resort” and creates what is often referred to as a “super lien.” The amount due back is calculated per federal regulation and is dependent on the size of the settlement relative to the amount of benefits provided as follows:

C.F.R. 411.37(c)
- Medicare payments are less than the judgment or settlement.
  - Add (Attorney’s Fees) and (Costs) = Procurement Costs
  - (Procurement Costs) / (Gross Settlement Amount) = Ratio
  - Multiply (Lien Amount) by (Ratio) = Reduction Amount
  - (Lien Amount) – (Reduction Amount) = Medicare Demand
C.F.R. 411.37(d)
- Medicare payments are equal to or exceed the judgment or settlement.
  - Add (Attorney’s Fees) and (Costs) = Procurement Costs
(Settlement Amount) – (Procurement Costs) = Medicare Demand

This “super lien” must be repaid within sixty (60) days of their post-settlement demand. Failure to repay the amount demanded could result in garnishment of Social Security benefits, interest being added to the amount owed, or even a doubling of the amount due, and a direct lawsuit against the injury victim and/or their attorney. There are alternative ways to resolve a conditional payment amount that involves a compromise or waiver request.

Repayment Demands and Medicaid

Another federal government health insurance program that will assert a repayment demand against its beneficiaries is Medicaid. The Medicaid program is funded by the federal government but administered by each state. Part of the requirement for the states to receive Medicaid funds is to assert repayment demands in cases where another party has become responsible for items or services that Medicaid has already provided. The repayment formulas, process, and requirements vary greatly from state to state. Though all of them have statutory rights to repayment under both federal law and state law. Additionally, most states provide for both civil and criminal penalties for individuals, or their attorneys, who fail to repay Medicaid.

Repayment Demands and Medicaid

Federal employees, both civilian and military, also face a daunting challenge when attempting to resolve their personal injury actions. Many civilian federal employees received their health insurance via the Federal Employee Health Benefits Act (FEHBA). These plans are quasi-government plans that are administered by private insurance carriers but overseen by the Office of Personnel Management. (OPM). Recently FEHBA plans achieved a significant victory before the United States Supreme Court in case called Nevils. In this case, the FEHBA plans were able to obtain a ruling which allows them to circumvent state law and enforce the terms of their plan as written. Since this is as relatively new change in interpretation there have been no cases yet limiting the rights of these plans. Fortunately, these plans are all available for review online at the Office of Personal Management website

Repayment demands from Veteran Affairs and TRICARE

Members of the military and their families must confront repayment demands from both Veterans Affairs (VA) and TRICARE. Both forms of insurance require the beneficiary to notify them of the potential for a third party to be responsible for the items or services they have provided. What is especially unique about military repayment demands is their request that the injury victim’s attorney represent the United States government free of charge. While there is no requirement that an attorney agree to this representation, the government can make resolving their interest more cumbersome in the event they refuse to sign the form. This is another example of the kind of leverage the government and insurance providers use on the trial attorney in an effort to obtain repayment.

Repayment demands and ERISA

Though tens of millions of Americans receive their insurance coverage via a government-sponsored plan, most are covered by an employer-sponsored health plan. These plans are established under the Employee Retirement Income Security Act (ERISA). An ERISA plan’s rights to repayment from an injury victim’s settlement or award is greatly dependent on how the ERISA plan is funded. Large employers with substantial assets often have a “self-funded” ERISA plan. This means that claims are paid by the company itself (or a fund it establishes) rather than by an insurance company. The law gives these “self-funded” ERISA plans extremely strong recovery rights. These same rights do not exist if the employer has a “fully insured” plan wherein an insurance carrier pays claims.

It is the “self-funded” ERISA plans which most often exercise subrogation and reimbursement rights as separate causes of action. An ERISA plan may have the right to initiate a law suit in the name of one of its plan members without even informing the individual. The “self-funded” ERISA recovery industry returned over $1,000,000,000.00 to ERISA plans in 2014 alone. This is $1 billion in settlement proceeds taken from injury victims each year. The rationale the United States Supreme Court gave when they last opined on ERISA was that the employee “bargained” for the subrogation/reimbursement rights that were contained in their contract for insurance.

Repayment demands and Hospitals/Providers

In addition to the repayment of insurance providers, there are situations where a hospital or provider may assert a repayment demand themselves. Often these repayment demands from providers is due to a lack of insurance, or a choice on the part of the provider not to bill insurance. Addressing these types of repayment demands may involve not only state statutes, but perhaps even county ordinances.

Identifying and resolving healthcare repayment obligations is a challenging part of any modern-day personal injury claim. Failure to properly address these claims could result in the loss of benefits, the accrual of interest, or even the imposition of civil or criminal penalties against both the injury victim and their attorney.

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Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.