B. Josh Pettingill

Problem 1) There is still an incredible amount of misinformation in the marketplace about Liability MSAs.

Despite efforts to raise awareness and educate stakeholders about LMSAs, many of the largest liability insurance carriers are still convinced that failure to address Medicare’s future interests on liability case creates exposure for them. There is a contingent of MSP compliance “experts” and MSA vendors who have persuaded the insurance industry that if they do not establish an MSA when resolving a liability claim, then CMS can levy serious fines, penalties, or bring legal action against them. These scare tactics can adversely impact the resolution of a liability claim. The carriers have become so concerned about the issue that they have started to mandate an MSA on every liability case involving a Medicare-eligible plaintiff where future medical costs were either claimed or released.

The most common issue regarding exposure raised by some MSA vendors is that CMS can impose a lien post-settlement on a closed case; thereby retroactively exposing the carrier for not properly extinguishing all the liens. This argument is completely without merit. Since there are no regulations or statutes empowering Medicare to take any punitive action against a carrier related to Medicare-covered services after settlement, insurance carriers should concentrate on liability for conditional payments and Section 111 reporting requirements.

Problem 2) Attorneys are ignoring the potential MSA issue instead of proactively addressing it early on with the plaintiff.

The MSA issue is most frequently brought up at the end of the settlement when there has never been a prior discussion during negotiations. As such, plaintiff attorneys are often caught off guard with unsubstantiated demands by the defendant. The injury victim is blindsided as well by the fact they may be getting less money in their pocket to spend freely because some of it will need to be earmarked for Medicare’s purposes. The insurance carriers are worried because they firmly believe they have exposure for failure to address the issue. Therefore, the carriers are oftentimes pushing the MSA as a contingency of the settlement. In situations where the MSA is not a material term of the settlement, MSP provisions are frequently presented at the time the release is signed; which is typically done through an MSA addendum with numerous stipulations. Disagreement on whether an MSA is appropriate has, unfortunately, become the norm when settling catastrophic liability cases with a Medicare-eligible plaintiff. These frequent occurrences leave all involved with a bad taste in their mouth about “Medicare Set-Asides”.

The plaintiff’s bar can no longer pretend as if the MSA issue does not exist. Many plaintiff attorneys believe that they do not need to do anything with respect to protecting Medicare’s future interests. While it is true there is currently no regulation or law that mandates a Medicare Set-Aside, it does not mean there will be no consequences if a plaintiff attempts to shift the burden to Medicare for future injury-related care.  It is very clear from Medicare’s public statements that the agency believes that set-asides are the best method to protect the program from paying for injury-related care when future medical costs are funded by a settlement[1].  Additionally, and most importantly for trial lawyers, CMS has stated in recent meetings with stakeholders that the MSA issue is strictly a plaintiff issue[2].  This means plaintiff counsel has the liability and exposure for a malpractice claim if things go wrong post-settlement.

Action Step: Start early in educating the injury victim about all MSP compliance issues.

Instead of ignoring the MSA issue or being reactive to it when the defendant brings it up at the end of the case, it is incumbent on the plaintiff attorney to introduce the possibility and concept of an MSA to their Medicare-eligible client at the very beginning of the case. Plaintiff’s counsel has legal malpractice risks if they fail to properly advise the client regarding the set-aside issue when they are currently eligible to receive Medicare benefits. Best practices are for plaintiff’s counsel to consult with experts about proper Medicare compliance techniques, educate the plaintiff on the issues surrounding the MSP statute and then document what they have done to comply with the MSP statute.

The MSA is an insurance policy, not a scare tactic.

A Medicare Set-Aside account is an insurance policy for all parties involved. If the plaintiff spends down the MSA funds appropriately, then their medical insurance (Medicare benefits) will never be disrupted. Once the set-aside account is exhausted, an injury victim gets full Medicare coverage without Medicare ever looking to the remaining settlement dollars to provide for any Medicare-covered health care.  It is like an insurance deductible in the sense that once the funds have been spent down appropriately, Medicare will then kick in and start to pay again. If the plaintiff were to pass away prematurely, then the MSA funds remaining in the account would go to the plaintiff’s beneficiaries.

From the plaintiff attorney’s standpoint, simply having a discussion with the plaintiff about the potential implications of failing to protect the Medicare Trust Fund is protection against getting sued for legal malpractice. Take as an example, Synergy received a panic-stricken call from a plaintiff attorney who told us that he resolved a claim for $80k several years prior but recently had received a disturbing phone call from his former client who informed him that Medicare refused to pay for a shoulder surgery on the basis that it was related to her accident. This former client was threatening a legal malpractice claim and a bar complaint because the trial attorney never advised the client that there was any possibility that Medicare could deny benefits. This type of scenario can be avoided by a conversation with the plaintiff about the MSP statute and properly considering Medicare’s future interests.

When discussing the potential for an MSA, one way it can be presented to the plaintiff is that there is a very high likelihood that Medicare will continue to pay for their ongoing, accident-related care post-settlement. However, if Medicare happens to audit their file, CMS does have the authority under the MSP statute, to deny making payments on their behalf, either temporarily or indefinitely until Medicare’s interests have been properly considered.

Will Medicare continue to pay for future injury-related care going forward? That is anyone’s best guess, but CMS has spent a tremendous amount of time and resources to ensure the Medicare trust fund gets protected.  If the plaintiff agrees to set aside funds in a self-administered MSA account, they may opt to take a “wait and see” approach as it relates to medical care. If Medicare continues to pay for treatment, then the MSA account would simply function as a specialty savings account. If after a prolonged period, Medicare has been paying for their accident-related care, then they may elect to do something else with their MSA monies. If Medicare ever came back and said they should not have paid a bill or attempted to deny benefits, the plaintiff would still have the set-aside in place and would possibly get the benefit of reimbursing Medicare at the Medicare allowable rate. That would mean fewer dollars spent on medical care if they had paid directly at the time of the treatment[3]. If the plaintiff is proactively using the set-aside account, they are billed at the usual and customary fee schedule or the cash price (AKA the lowest rate they could negotiate with the provider).

Conclusion

An MSA potentially introduces another level of complexity to the file, which may contribute to unwanted delays in receiving the settlement funds. We frequently get involved in cases where the defendant insists on an MSA or the plaintiff is not even eligible for Medicare benefits. It is not always a cut-and-dry issue of whether the MSA is appropriate. Synergy has also seen firsthand on many occasions where there is agreement by the respective settlement parties to do a set-aside but there is a large discrepancy on the amount that should be earmarked for the MSA account.

Due to the foregoing, there needs to be greater education amongst the plaintiff and defense about the real potential implications of failing to adequately consider Medicare’s future interests. The settlement parties must be proactive regarding the potential for an LMSA: which party is going to handle the preparation of the MSA analysis, and how much, if any, is going to be set aside, based on all the facts of the case. Plaintiff’s counsel should insist on controlling the MSA process from start to finish. Many of our clients engage us to do a preliminary MSA analysis prior to sending out a demand package. That way, the MSA amount is already established as an element of damages that must be addressed before the claim can be resolved.

Synergy frequently is able to either eliminate the need for an MSA or we have been able to greatly reduce the MSA obligation. These savings are real dollars that go directly to the injury victim instead of Medicare. There are numerous ways to deal with Medicare Secondary Payer compliance without having to do a Medicare Set-Aside to ensure all parties are protected. Currently, there is no “one size fits all” approach to addressing LMSAs. All parties must make their best effort to protect Medicare’s interests.

Want more? Watch for our free Third Thursday Webinar ‘Liability MSAs: The Whole Truth and Nothing but the Truth‘

[1] Sally Stalcup, MSP Regional Coordinator (May 2011 Handout). See also, Charlotte Benson, Medicare Secondary Payer – Liability Insurance (Including Self-Insurance) Settlements, Judgments, Awards, or Other Payments and Future Medicals – INFORMATION, Centers for Medicare and Medicaid Services Memorandum, September 29, 2011.

[2] https://namsap.site-ym.com/news/412493/SPECIAL-EDITION-BULLETIN-Liability-Medicare-Set-Asides.htm

[3] It should be noted that using the funds proactively from the set-aside account is always the best practice. CMS has also telegraphed that formal guidelines on LMSAs will get the benefit of the Medicare allowable rate which is not the case now.

B. Josh Pettingill, MBA, MS, MSCC

Introduction

A vital step to navigating the MSP statute is understanding the dynamics between the Section 111 Reporting Requirement and the potential interplay for a Liability Medicare Set Aside (LMSA). The MSP statute precludes Medicare from paying for any item or service when payment has been made by a liability insurance policy, self-insured or no-fault plan^[1]. The MSP statute gives CMS the authority to deny making payments for accident-related care when there is a primary payer involved. Additionally, if CMS inadvertently makes payments when they should not, they can seek reimbursement for those erroneous payments. The MSP statute may be the authority for CMS to deny making payments when there is a primary payer, but the Mandatory Insurer Requirement is the catalyst for CMS to identify cases for potential recovery or denials.

The Medicare, Medicaid SCHIP Extension Act (MMSEA), specifically, the Mandatory Insurer Requirement (MIR) created a mechanism for CMS to collect data about Medicare beneficiaries who receive liability, workers’ compensation or no-fault liability settlements, judgments or awards. The Section 111 Reporting Requirement gave CMS the ability to track Medicare beneficiaries electronically. There is a tremendous amount of data that gets reported every day for settlements of $750.00 or greater, involving a Medicare beneficiary. John Albert, Acting Director of the Office of Financial Management’s Division of Medicare Coordination[2], estimated that 97% of the information CMS has on file comes directly from the data that is reported by the insurance carriers (responsible reporting entities or RREs for short) at settlement.

Section 111 Reporting: The Purpose

The purpose of Section 111 Reporting “is to enable CMS to pay appropriately for Medicare-covered items and services furnished to Medicare beneficiaries. Section 111 Reporting is used as a tool for CMS to determine when other insurance coverage is primary to Medicare, meaning that it should pay for the items and services first before Medicare considers its payment responsibilities[3].” To unbundle this, Medicare does not want to pay for accident-related care if they know the plaintiff has received a portion of settlement proceeds to cover future, accident-related care. They also want to make certain they are reimbursed for any conditional payments. The reporting notification lets them know the case has resolved.

Data Reported to CMS

CMS has created a Reference Guide to document the reporting requirements[4]. Specifically, the guide includes the “What, Why, and How” of reporting. According to the reference guide, the following are required reporting data fields:

• The identity of the claimant (their Medicare Health Insurance Claim Number [HICN] or Social Security Number [SSN];
• The first letter of their first name; the first six letters of their last name;
• Date of birth and gender;
• Other information related to the claimant, such as the International Classification of Diseases 9th (or 10th) Revision (ICD-9 or ICD-10) diagnosis codes.

Below is an actual screenshot from an educational training program sponsored by CMS on reporting. One of the very first points of data that must be reported are the ICD Codes.

There is no policy or regulation that requires the defense to share with the plaintiff the information or ICD codes being reported via Section 111. The RRE’s (the insurance carriers) obtain the information that gets reported by asking the plaintiff attorneys. According to CMS, the defendant should simply “ask the individual” (plaintiff)[5]. Insurance companies will frequently include as part of a release, a separate Medicare reporting addendum and affidavit for the plaintiff to acknowledge and sign. The plaintiff has no obligation to provide that information but defendants are now making this a condition of the terms of any settlement agreement. In exchange for a full release and settlement check, the plaintiff must provide the personal information required to report to CMS.  Since the defendant must report ICD codes and the system will not allow reporting without the ICD codes, it is incumbent on plaintiff attorneys to provide the correct codes to be reported.  Plaintiff’s counsel must be proactive in communications with the defendant to insist on accurate reporting. When in doubt, the ICD codes should be included in the settlement agreement and release. To take this a step further, the settlement parties could also agree to include the ICD codes in the mediation agreement. That way, there can never be a dispute as to what was reported.  This avoids the problems which can arise from improper codes being reported or unrelated care being included in the data provided to CMS.

Release Language, Reporting & Liability Medicare Set-Asides

Many insurance carriers demand the reporting information and require the plaintiff to do a Liability MSA in return to payment of the settlement monies. Since the insurance carrier is cutting the check to resolve the case, it gives them leverage to dictate the terms of the settlement. Some plaintiff attorneys may be more apt to agree to (or overlook) Medicare secondary payer release provisions in an effort to expedite the exchange of settlement funds. These MSP provisions demanded by the defendants are sometimes inaccurate; they may not be applicable or they may restrict the plaintiff in terms of future benefits. In many instances, the plaintiffs are not yet eligible for Medicare benefits, nor may they ever be entitled to receive Medicare benefits which makes it inappropriate to include any MSP language at all in the release.

There are defendants who still request the Section 111 MIR reporting information from plaintiffs who are not yet eligible for Medicare or may never be eligible for Medicare benefits. They sometimes also insist the plaintiff establish a Liability MSA even when they aren’t a current Medicare beneficiary. The MIR Section 111 User Guide discusses what claims are reportable[6]:

Per 6.5.1 of the CMS Section 111 NGHP User Guide:

Information is to be reported for claims related to liability insurance (including self-insurance), no-fault insurance, and workers’ compensation where the injured party is a Medicare beneficiary and medicals are claimed and/or released or the settlement, judgment, award, or other payment has the effect of releasing medicals.

It is clear from the Section 111 user guide when the plaintiff is a current Medicare beneficiary, the case should be reported[7]. It is not possible to report a claim for someone who does not yet have a Medicare number.

Medicare Common Working File

After the data gets reported to CMS, CMS will update (or establish) what is known as the “common working file” for that Medicare beneficiary. This file is automatically created by the federal government when an individual enrolls in Medicare. This common working file (CWF) is a tool used by CMS to track national Medicare records for individual beneficiaries enrolled in the program. The CWF is used to determine eligibility and to monitor the appropriate use of Medicare benefits[8]. If Medicare receives a bill from any treating physician (or another provider) which matches the ICD codes in the common working file, then benefits could be denied. CMS recently announced that any LMSA will also be tracked to the CWF[9]. That is important because it enables the provider to observe that an LSMA was established and potentially seek payment from the LMSA first before billing Medicare.

Conclusion

Plaintiff attorneys need to proceed with caution with regard to the reporting data but also the Medicare set aside release language. Inappropriate provisions in the release could constrain their client’s options relative to receiving public benefits and have adverse tax implications, which could result in a legal malpractice claim. Below are several examples of Medicare language commonly used by insurance carriers and included in the release or in an addendum to the release that is either not accurate or taken out of context as it relates to MSP compliance:

• I (plaintiff) understand that should future medical treatment related to the “Accident” be required, the expense associated with that treatment will be paid solely from the proceeds of this settlement.
• I am aware that no further medical expense or prescription drug expense related to the treatment I have received or will receive in the future related to the “Accident” will be submitted to Medicare for payment.
• I understand that if Medicare is not protected as set forth in the Extension Act, Medicare may cease all benefits otherwise available to me.
• I understand and agree that I will not make an application for Social Security Disability benefits.

Inclusion in the release of the above language may be detrimental to the plaintiff’s ability to receive future benefits for accident-related care.  An MSA is never required by any law or statute even in workers’ compensation cases; however, it is the preferred method for considering Medicare’s future interests when settling cases involving a Medicare beneficiary who requires future medical care. The risk still exists for the plaintiff to lose their Medicare coverage if Medicare’s future interests are not adequately considered and accounted for. Given the current inner workings of Medicare, the risk for denial of benefits is extremely low, but it still is a risk nonetheless.

Plaintiff’s counsel should be proactively dealing with the defense counsel in terms of what they report, as inaccurate reporting can cause problems with conditional payments as well as eligibility for future benefits.  For example, if a case involves neck and back injuries, but the defense takes the position that the neck is pre-existing and settles for payments exclusively for the back but reports the ICD codes for the neck and back, this is problematic.  Another problematic issue is reporting the wrong date of the accident which could trigger Medicare to issue a new final demand for conditional payments.

Synergy has observed firsthand examples of all of these occurrences. In a recent liability case, there was an MSA done but Medicare sent the plaintiff a bill post-settlement for a surgery that was not related to the liability claim. It was a coordination of benefits nightmare to resolve this issue. On another case, a defendant failed to report the case in a timely manner. It had been over a year since the resolution. The plaintiff received a letter from CMS indicating they were recently made aware of a settlement and for the plaintiff to provide CMS all of the case details to determine whether or not there were conditional payments owed.

Currently, there is no “one size fits all” approach to MSP compliance for liability cases. All parties must make their best effort to consider Medicare’s interests. Section 111 Reporting has given CMS the ability to track current Medicare beneficiaries settling claims but the reality is CMS handles every liability case differently. The importance of correct data reporting can’t be overstated.  Not only can the wrong body parts potentially be denied due to improper reporting but the information that gets reported is forever linked to the plaintiff’s common working file.  ICD codes that are reported can trigger future denials of care.  Therefore, until CMS provides formal guidance on LMSAs, the plaintiff’s bar and the insurance carriers must consult with competent MSP compliance experts, advise their respective clients on what the potential implications are for not properly taking into account Medicare’s interests, and document the file regarding what was done, in order to protect Medicare’s interests.

Want more?

Watch our free Third Thursday Webinar Liability Medicare Set-Asides (LMSAs): Eliminate, Reduce & Comply

For more information about LMSAs, go to https://partnerwithsynergy.com/total-medicare-compliance/

[1] The MSP is a series of statutory provisions enacted in 1981 as part of the Omnibus Reconciliation Act with the goal of reducing federal health care costs. The MSP provides that if a primary payer exists, Medicare only pays for medical treatment relating to an injury to the extent that the primary payer does not pay. CFR Title 42, Part 411, Subpart B, Section 411.20 (2) provides “[s]ection 1862(b)(2)(A)(ii) of the Act precludes Medicare payments for services to the extent that payment has been made or can reasonably be expected to be made promptly under any of the following” (i) Workers’ compensation; (ii) Liability insurance; (iii) No-fault insurance. The one exception is conditional payments pre-settlement.

[2] (https://www.cms.gov/About-CMS/Leadership/ofm/Office-of-Financial-Management-.html)

[3] https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Mandatory-Insurer-Reporting-For-Non-Group-Health-Plans/Overview.html

[4] https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Mandatory-Insurer-Reporting-For-Non-Group-Health-Plans/Downloads/New-Downloads/NGHPQuickRef.pdf

[5] Section 3-2 of the MIR Reference Guide

[6] https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Mandatory-Insurer-Reporting-For-Non-Group-Health-Plans/Downloads/New-Downloads/NGHPUserGuideVer52Ch3Policy.pdf

[7] Past Medicare beneficiaries can be also be reported. It is possible to lose Medicare eligibility but the plaintiff may still have a Medicare number in the system.

[8] https://searchhealthit.techtarget.com/definition/common-working-file-CWF

[9] https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/2017Downloads/R1787OTN.pdf