From Roger Baron: Revictimization of Personal Injury Victims By ERISA Subrogation

Reprinted with permission from Roger Baron

“Subrogation on personal injury claims by a health insurer was universally prohibited by law when Congress enacted ERISA in 1974.  Seizing upon the notion of ERISA preemption, ERISA plans and related insurers have manufactured the right of reimbursement (or subrogation) without regard to the impact on the victims.  The unique history of this phenomenon and the need for judicial oversight are addressed in this article.  The recent decision by the 3rd Circuit in US Airways v. McCutchen is highlighted as providing a solid basis for other federal courts to follow.”

http://erisawithprofessorbaron.com/published-articles/

 

Roger Baron

School of Law

University of South Dakota

 

If you need help with ERISA lien resolution, turn to Synergy Lien Resolution Services

US Airways v. McCutchen – Equitable Defenses Limit ERISA’s “Appropriate Equitable Relief”

By Stacey N. Jiunto, Esq. – Staff Lien Counsel

Group health plan descriptions are carefully worded to protect the plan’s reimbursement interests and expand their right of reimbursement. This is often accomplished with provisions stating the plan is entitled to reimbursement from the beneficiary’s recovery without a reduction for procurement costs (the attorney’s fees and litigation costs incurred by the beneficiary to obtain a recovery).

Although most litigation has centered on what qualifies as “appropriate equitable relief,” [1] the U.S. Court of Appeals for the Third Circuit[2] in US Airways, Inc. v. McCutchen, 663 F.3d 671 (3d Cir. Pa. 2011), addressed whether such relief is limited by certain equitable defenses. While the Third Circuit’s approach may be considered novel (at least until adopted by other courts), it presently allows equitable principles to override express plan language when justified by the necessities of the particular case[3]. For attorneys in other jurisdictions representing severely injured beneficiaries against self-funded ERISA liens with strong plan language, referencing the Third Circuit’s logic may prove beneficial.

 

Facts and Procedural Background

Appellant, James McCutchen, sustained severe injuries as a result of a motor vehicle collision and, with the assistance of counsel, recovered $110,000 from the tortfeasors. Subsequently, US Airways (as administrator for the self-funded ERISA Plan) sought reimbursement for the $66,866 it paid for McCutchen’s medical expenses. The amount demanded did not reflect a reduction for procurement costs.

When McCutchen did not pay, US Airways filed suit in the District Court seeking “appropriate equitable relief” under §502(a)(3) of ERISA. Under the plan description, a beneficiary was required to “reimburse the Plan for amounts paid for claims out of any monies recovered from a third party.” McCutchen argued that US Airways would be unjustly enriched if it were to receive a reimbursement of the entire amount paid, without contributing to his attorney’s fees and expenses, while he failed to be fully compensated for his injuries, pain, and suffering. The District Court granted summary judgment to US Airways based on the language, “any monies recovered,” and ordered McCutchen to turn over the portion of his recovery held in trust ($41,500) and pay the additional $25,366 from his own funds. McCutchen appealed.

 

Analysis

Looking at ERISA’s legislative intent, it must be noted that §502(a) limits the available relief to “appropriate equitable relief.” Under Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204, 218 (2002), such a limitation requires the court to recognize the difference between legal and equitable forms of restitution. Thus, the Supreme Court has “interpreted the term ‘appropriate equitable relief’ in §502(a) as referring to those categories of relief that, traditionally speaking (i.e., prior to the merger of law and equity) were typically available in equity.” Cigna Corp. v. Amara, 131 S. Ct. 1866, 1878 (2011). The court in Sereboff v. Mid. Atlantic Medical Services, Inc., 547 U.S. 356 (2006), held that the plan administrator’s claim for reimbursement under the terms of the plan and §502(a)(3) could be based on an equitable lien by agreement but expressly reserved its decision on whether the term “appropriate” would make equitable principles and defenses applicable.

McCutchen argued that “appropriate equitable relief” meant the relief sought must be limited by what is “appropriate” under traditional equitable principles. The Third Circuit agreed, holding that “appropriate equitable relief” must be something less than all equitable belief. US Airways, 663 F.3d at 676. The Third Circuit further acknowledged that “it would be strange for Congress to have intended that relief under §502(a)(3) be limited to traditional equitable categories, but not limited by other equitable doctrines and defenses that were traditionally applicable to those categories.” Id. Specifically, the Third Circuit held that, absent any indication in the language or structure of §502(a)(3) to the contrary, “Congress intended to limit the equitable relief available under §502(a)(3) through the application of equitable defenses and principles that were typically available in equity.” Id.

Upon consulting standard works such as Dobbs, Palmer, Corbin, and the Restatements, the Third Circuit found support for McCutchen’s position that the principle of unjust enrichment is broadly applicable to claims for equitable relief. Id. at 677. US Airways, nevertheless, cited prior decisions (Ryan, Bollman Hat, and Gourley) in which the Third Circuit declined to implement a federal common law rule limiting an ERISA plan administrator’s right to reimbursement under the plan’s terms. However, these decisions came before the Supreme Court’s decisions in Knudson and Sereboff, which clarified the meaning of “appropriate equitable relief” in §502(a)(3) and undermined the reasoning and holdings of the prior decisions.

Moreover, the Third Circuit declared its disagreement with the cases US Airways cited from other Courts of Appeals (O’Hara, Shank, Bombardier Aerospace, and Varco) that refused to apply common law theories to override the express language of benefit plans. The Third Circuit maintained that the written benefit plan is subject to modification or equitable reformation under §502(a)(3). US Airways, 663 F.3d at 678; see Cigna, 131S. Ct. at 1879. Essentially, the notion that plan language can be overcome by equitable principles may serve as additional ammunition in an arsenal of lien reduction arguments.

Applying the principle of unjust enrichment, the Court held that the judgment requiring McCutchen to provide full reimbursement to US Airways constituted inappropriate and inequitable relief. Particularly, “[b]ecause the amount of the judgment exceeds the net amount of McCutchen’s third-party recovery, it leaves him with less than full payment for his emergency medical bills, thus undermining the entire purpose of the Plan. At the same time, it amounts to a windfall for US Airways, which did not exercise its subrogation rights or contribute to the cost of obtaining the third-party recovery.” Id. at 679.

 

Conclusion

The District Court’s final judgment was vacated and remanded for further proceedings to determine what would constitute appropriate equitable relief for US Airways based on full factual findings. Specifically, factors such as the distribution of the third-party recovery between McCutchen and his attorneys, the nature of their agreement, the work performed, and the allocation of costs and risks between the parties to the suit are pertinent to the determination of “appropriate equitable relief.”

[1] Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C.S. §§ 1132(a)(3)(B)

[2] The U.S. Court of Appeals for the Third Circuit is a federal court with appellate jurisdiction over the district courts of Delaware, New Jersey, and Pennsylvania. Its decision is controlling authority in these states.

[3] The Third Circuit did not decide on appeal what would constitute appropriate equitable relief for US Airways because “equity calls for full factual findings” rather than speculation. Id. at 679.

Lien Resolution – The Contract Does NOT always Control

By Jessica D. Thomas, Esq. – Staff Lien Counsel

On May 5, 2010, the Second District Court of Appeals of Florida decided Ingenix v. Ham, 35 So.2d 949 (May 5, 2010). This case addresses the issue of health insurance carriers’ reimbursement reductions. A health insurance company can pursue litigation for subrogation pursuant to Florida Statute section 768.76, which mandates that they are subject to the pro rata reduction for case cost and attorney’s fees. Alternatively, an insurance company may sue under the policy language for breach of contract and reimbursement from the non-ERISA policy holder. However, the second District in Ham reasoned that if Florida Statute Section 768.76(4) is applicable than it, not the policy, controls. Below is a summary of the facts and procedural background with a summary of the important aspects of the Second District Court of Appeal’s holding.

In 2004, Gerald Ham suffered complications from an elective laparoscopic gastric bypass procedure, which resulted in his death. UnitedHealthcare paid Mr. Ham’s medical bills and asserted a lien for reimbursement from any recovery his estate obtained from the medical malpractice suit. Ham argued that under Florida Statute 768.76(4) UnitedHealthcare was only entitled to reimbursement reduced by a pro rata share of attorney’s fees and costs. The Second District court framed the issue as whether or not Florida Statute Section 768.76 applied in light of the language in the insurance policy providing for full reimbursement.

Florida Statute Section 768.76(4) provides that a collateral source provider that has a right of reimbursement shall be limited to the actual amount of collateral sources recovered minus its pro rata share of attorney’s fees and costs. Ham argued that the attorney’s fees and cost were 47% of the settlement and thus the UnitedHealthcare lien should be reduced by 47% as well. UnitedHealthcare paid almost all of Ham’s medical expenses in the amount of $154,075.46. The total settlement proceeds were $1,150,00.00. Ham sought to reduce UnitedHealthcare’s lien amount to $81,660.00 under Florida Statute Section 768.76(4). UnitedHealthcare argued that under the policy they were entitled to full reimbursement. The trial court ruled in favor of the Ham Estate and UnitedHealthcare appealed.

UnitedHealthcare argued that Florida Statute Section 768.76(4) only applied where the right of reimbursement was not founded on a contract, pursuant to Travelers v. Boyles, 679 So.2d 1188 (Fla. 4th DCA 1996). In Travelers the health insurer argued that it was not seeking reimbursement under the statute but rather under the terms of its policy. The insured’s argument was that Travelers’ claim was barred since the uninsured motorist carrier was not a tortfeasor, as indicated in the policy language. According to the holding in Travelers, where the statute is not implicated, a policy provision may allow for full reimbursement. Travelers however, does not stand for the proposition that a policy provision controls when section Florida Statute Section 768.76(4) is otherwise applicable.

In Ham the Second District Court of Appeals relied on their previous decision in Osler v. Collins, 870 So.2d 65, 67-68 (Fla. 2d DCA 2003). In Osler the court held that where an insurance policy contains a right of reimbursement, Florida Stature Section 768.76(4) applies and requires a reduction of the amount of the insurer’s reimbursement by it’s pro rata share of costs and attorney’s fees.

The Second DCA shows a clear understanding that a right of reimbursement comes with a sharing of the cost to obtain such reimbursement. The Ham decision provides some much needed relief regarding the question of whether a right of reimbursement claim, such as this one is subject to a reduction for a pro-rata share of fees and costs. Ham provides hope for the plaintiffs in such cases who are often left with a net of zero after payment to the lien holder. The end result after the ruling in Ham, is that the contract doesn’t always control the outcome of your claim regarding reductions in reimbursement. Instead there has to be an extensive review of the policy language to reveal if the Florida collateral sources provision, Florida Statute Section 768.76(4) applies.

Outsourcing Lien Resolution: Happier Clients and a Better Bottom Line

By Stacey N. Jiunto, Esq. – Staff Lien Counsel

Two questions are at the forefront of every injured party’s mind concerning litigation: 1) how much will I recover, and 2) how long will it take to receive my money? Outsourcing your lien resolution needs offers a solution that can help address both of these issues. Lien resolution specialists strive to efficiently provide the injured party with significant savings[1] in as little as a few months after settlement.[2]

Ethical Guidelines Permitting Outsourcing

The American Bar Association has outlined several guidelines (Formal Opinion 08-451) to address any ethical concerns that may arise when outsourcing. The Florida Bar has also issued its own mandate (Opinion 07-2) in regard to outsourcing that provides similar guidance. Specifically, a lawyer may outsource legal or non-legal support services provided the lawyer remains ultimately responsible for rendering competent legal services to the client. Reasonable efforts should be made to ensure that the conduct of the lawyers or non-lawyers to whom tasks are outsourced is compatible with one’s own professional obligations as a lawyer. Additionally, client consent should be obtained, and appropriate disclosures made, regarding the use of lawyers or non-lawyers outside of the lawyer’s firm. The fees charged must be reasonable and the outsourcing lawyer must avoid assisting the unauthorized practice of law.

Advantages of Outsourcing

The benefits of outsourcing lien resolution to specialists include minimizing operating costs of the firm, gaining a knowledgeable partner, and providing the best possible result to the client. Each phone call made or correspondence written consumes precious firm resources and time of lawyers and support staff. Moreover, inefficiencies abound when lawyers and support staff work with lien holders without being armed with all available arguments that may reduce or eliminate lien obligations. A personal injury law firm that conducts lien resolution services in-house must remain well-versed in all relevant laws and practices in addition to any changes or developments. Alternatively, lien resolution attorneys and analysts already possess the requisite knowledge to handle even the most difficult lien holders and have an established history of achieving results. In addition, lien resolution specialists spend all day every day dealing with subrogation issues so they can more efficiently resolve issues. Lastly, high client satisfaction with regard to the resolution of lien obligations may produce repeat business and/or boost referrals from new clients. Having a client receive a check very quickly after settlement because of efficient lien resolution means a happy client and hopefully a future referral source.

If you have questions about lien resolution outsourcing or the obligations associated with it, contact our lien resolution experts today.

 

 

[1] Lien reductions vary according to the type of lien (Medicare, Medicaid, Private Health Insurance, ERISA, or Military Plans), settlement amount, applicable statutory or equitable arguments, and Plan language.

[2] It is recommended that attorneys initiate lien resolution services prior to settlement in order to accelerate the process and avoid unnecessary delays.

Something Useful from MSPRC – “Self-Calculated Final Conditional Payment Amount” Option

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

The MSPRC announced today a new alternative for resolving conditional payments.  It allows for self calculation of the conditional payment amount when the settlement is $25,000 or less.  The substance of the announcement is immediately below.

“Self-Calculated Final Conditional Payment Amount” Option

The Centers for Medicare & Medicaid Services (CMS) will be implementing an option that will allow certain Medicare beneficiaries to obtain Medicare’s final conditional payment amount prior to settlement. This option will be available in February 2012, for certain settlements involving physical trauma based injuries where treatment has been completed. Under this option, the beneficiary or his representative will calculate the amount of Medicare’s conditional payment amount using information received from the Medicare Secondary Payer Recovery Contractor (MSPRC), the MyMedicare website, or other claims information available to the beneficiary. The MSPRC will review this amount and, if finding the amount accurate, will respond with Medicare’s final conditional payment amount within 60 days. To secure the final conditional payment amount, the beneficiary must settle within 60 days after the date of Medicare’s response.

In order to use this option, ALL of the following criteria must be met:

  1. The liability insurance (including self-insurance) settlement will be for a physical trauma based injury (the settlement does not relate to ingestion, exposure, or medical implant);
  2. The total liability settlement, judgment, award, or other payment will be $25,000 or less;
  3. The Date of Incident occurred at least six months before the beneficiary or his representative submits his proposed conditional payment amount to Medicare;
  4. The beneficiary demonstrates that treatment has been completed and no further treatment is expected either through a written physician attestation or by certifying in writing that no medical treatment related to the case has occurred for at least 90 days prior to submitting the proposed conditional payment amount to Medicare

Explicit instructions on how to use this process will be posted on the Medicare Secondary Payer Recovery Contractor’s website at www.msprc.info by January 15, 2012. CMS will leverage existing processes to the greatest extent possible. This is an initial step to provide beneficiaries and their representatives with Medicare’s conditional payment amount prior to settlement. CMS plans to expand this option as it gains experience with this process.

Requesting the Fixed Percentage Option from the MSPRC for Conditional Payments – A Quick How To

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

In November, the MSPRC announced a fixed percentage option for resolving conditional payments where the settlement is $5,000 or less.  In those cases, the injury victim can resolve Medicare’s recovery claim by paying Medicare 25% of the total liability settlement instead of using the traditional recovery process.  There are certain requirements that must be met in order to utilize this option which I will outline below.  Importantly, when exercising this option the injury victim gives up the right to appeal the fixed payment amount or request a waiver of the recovery.

The option is now available.  In order to elect this option, the following criteria must be met:

  1. The liability insurance (including self-insurance) settlement is for a physical trauma based injury. (This means that it does not relate to ingestion, exposure, or medical implant), and
  2. The total liability settlement, judgment, award, or other payment is $5000 or less, and
  3. The beneficiary elects the option within the required timeframe and Medicare has not issued a demand letter or other request for reimbursement related to the incident, and
  4. The beneficiary has not received and does not expect to receive any other settlements, judgments, awards, or other payments related to the incident.

When should the request be made to utilize this option?  According to CMS, the fixed percentage option request must be submitted before or at the same time notice of settlement documentation is submitted (i.e., when requesting a final demand).  If the request is made in response to a conditional payment notice (CPN), it must be received by the response due date referenced in the CPN.  There is a “fixed percentage option election document” located in the attorney toolkit on the MSPRC’s website.   The document must be completely filled out and mailed to the following address:

MSPRC-Fixed Percentage
P.O. Box 13880
Oklahoma City, OK 73113

A request for the fixed percentage option may be denied if the case does not meet all of the required criteria discussed above.  If the request is denied, the beneficiary will receive an explanation of why the request was denied.  A regular demand letter is then issued separately.  If the request is approved, the beneficiary will receive a bill for repayment of 25% of the total settlement, which must be paid in the timeframe specified on the bill.

While this option is only limited to settlements of $5,000 or less, it is helpful to have this “streamlined” resolution process in those smaller settlements.  It is important to keep in mind that once this option is elected; there is no appeal or waiver of the recovery.

MSPRC Self Service Phone Feature & Other Important Changes

The MSPRC issued the following announcement recently:

MSPRC Self Service Information Feature

The MSPRC is in the process of adding a new feature to the current Customer Service Line: The Self Service Information Feature. This new automated feature will give callers the ability to get the most up-to-date Demand/Conditional Payment amounts and the dates those letters were issued without having to speak with a Customer Service Representative! The Self-Service Feature will be a convenient way for callers to receive accurate and consistent case information while saving time! Some additional benefits of this new feature include:

Extended Calling Hours – The Self-Service Feature will be made available for additional hours outside of the MSPRC Hours of Operation!

Shorter Wait Time – By using the Self-Service Information Feature, callers will no longer have to experience the wait time associated with speaking to a Customer Service Representative!

Unlimited number of cases inquiries on one phone call – After receiving information on a case through the Self-Service Information Feature, callers are given the option of checking multiple cases on that same call!

The Self-Service Information Feature was scheduled to go live September 30, 2011!

Given all of the information circulating lately about changes at the MSPRC and a new contractor coming in, it is interesting to see things moving so quickly.  Why can’t they get conditional payment information out this quick?  Maybe the pressure Congress has put on CMS is trickling down to the MSPRC.  Maybe it is the Medicare Advocacy Recovery Coalition.  Maybe it is the AAJ.  Who knows but the better question is whether the new on hold music will be less depressing than before.

In addition, CMS announced on the MMSEA What’s New page of their website the following (posted on 9/29):

“Beginning in October 2011, CMS will implement an option to pay a fixed percentage of certain physical trauma-based liability cases with settlement amounts of $5000 or less. Detailed information on this option will be posted as an ALERT, on or before October 21, 2011, on the MSPRC website at www.MSPRC.info.

Upcoming improvements to the MSP program, expected within the next 3-9 months, include the following:

  • The implementation of a MSPRC portal, where the beneficiary/representative can obtain information about Medicare’s claim payments, demand letters, etc., and input information related to a settlement, disputed claims, etc.
  • The implementation of an option that allows for an immediate payment to Medicare for future medical costs that are claimed/released/effectively released in a settlement.
  • The implementation of a process that provides Medicare’s conditional payment amount, prior to settlement in certain situations.”

CMS HQ Issues 1st Memo Regarding Liability Medicare Set Asides

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

Many have been asking for formal guidance regarding Medicare set asides in liability settlements.  It seemed as though that was never going to happen.  That came to an end in May of this year with the release of a memo from the Region 6 CMS office regarding liability Medicare set asides.  Up until last week there was nothing from the Baltimore headquarters for CMS.  In the first memo coming from CMS HQ regarding Liability Medicare Set Asides (issued 9/29/11), Charlotte Benson, Acting Director Financial Services Group for CMS, gives us an exception to the need to create a set aside in liability cases.  According to the memo, a liability Medicare set aside isn’t necessary when the Medicare beneficiary’s treating physician certifies in writing that all of the care related to the claimed injury has been completed as of the date of the settlement.

The memo says:

“Where the beneficiary’s treating physician certifies in writing that treatment for the alleged injury related to the liability insurance (including self-insurance) “settlement” has been completed as of the date of the “settlement”, and that future medical items and/or services for that injury will not be required, Medicare considers its interest, with respect to future medicals for that particular “settlement”, satisfied. If the beneficiary receives additional “settlements” related to the underlying injury or illness, he/she must obtain a separate physician certification for those additional “settlements.”

 

When the treating physician makes such a certification, there is no need for the beneficiary to submit the certification or a proposed LMSA amount for review. CMS will not provide the settling parties with confirmation that Medicare’s interest with respect to future medicals for that “settlement” has been satisfied. Instead, the beneficiary and/or their representative are encouraged to maintain the physician’s certification.”

The memo is very important for a number of reasons.  First, it is the first official memorandum from the CMS central office in Baltimore to substantively address liability Medicare set asides.  Second, it provides a mechanism, if the case facts fit the criteria, to avoid the necessity of creating a liability Medicare set aside.  It is a limited exception as the treating doctor must attest in writing that all of the treatment for the released injuries was completed at the time of settlement.  Third, it avoids the need to request CMS review of a proposed “zero” liability Medicare set aside and the parties just need to retain a copy of the doctor’s letter/certification.

Despite the foregoing, every lawyer (plaintiff or defense) should read the Sally Stalcup memo regarding liability Medicare set aside arrangements.  The memo was issued back in May of this year by the Dallas Region 6 CMS office.  The memo, to summarize, indicates that “Medicare’s interests must be protected; however, CMS does not mandate a specific mechanism to protect those interests.”  Furthermore, the law “does not require a ‘set-aside’ in any situation.”  Nevertheless, the law does require “that the Medicare Trust Funds be protected from payment for future services whether it is a Workers’ Compensation or liability case.”  From CMS’s perspective, a set aside is their “method of choice and the agency feels it provides the best protection for the program and the Medicare beneficiary.”

If an injury victim is a Medicare beneficiary or has a reasonable expectation within 30 months of becoming a Medicare beneficiary, a set aside should be considered.  If however a treating physician certifies that all treatment for the released injuries is complete as of the date of settlement, then no set aside is necessary.  Navigating the MSP related issues at settlement can be difficult as well as confusing.  From the lawyer’s perspective, the most important thing is to make sure the injury victim client completely understands the potential impact of settling the case has upon future Medicare coverage of injury related care.

Synergy can make Medicare secondary payer compliance simple by handling these difficult issues for you.  We can prepare the Medicare set aside allocation, provide professional Medicare set aside administration via a Medicare Set Aside trust and resolve Medicare conditional payments.  Synergy does offer a package discount if you take advantage of any combination of these services.  Contact us today to see how can help you.

CMS Issues Important Memo Regarding Liability Medicare Set Aside

In the first memo coming from CMS HQ regarding Liability Medicare Set Asides, Charlotte Benson, Acting Director Financial Services Group for CMS, gives us an exception to the need to create a set aside.  According to the memo, a liability Medicare set aside isn’t necessary when the Medicare beneficiary’s treating physician certifies in writing that all of the care related to the claimed injury has been completed as of the date of the settlement.

The memo says:

“Where the beneficiary’s treating physician certifies in writing that treatment for the alleged injury related to the liability insurance (including self-insurance) “settlement” has been completed as of the date of the “settlement”, and that future medical items and/or services for that injury will not be required, Medicare considers its interest, with respect to future medicals for that particular “settlement”, satisfied. If the beneficiary receives additional “settlements” related to the underlying injury or illness, he/she must obtain a separate physician certification for those additional “settlements.”

When the treating physician makes such a certification, there is no need for the beneficiary to submit the certification or a proposed LMSA amount for review. CMS will not provide the settling parties with confirmation that Medicare’s interest with respect to future medicals for that “settlement” has been satisfied. Instead, the beneficiary and/or their representative are encouraged to maintain the physician’s certification.”

The memo is important for a number of reasons.  First, it is the first official memorandum from the CMS central office in Baltimore to substantively address liability Medicare set asides.  Second, it provides a mechanism, if the case facts fit the criteria, to avoid the necessity of creating a liability Medicare set aside.  It is a limited exception as the treating doctor must attest in writing that all of the treatment for the released injuries was completed at the time of settlement.  Third, it avoids the need to request CMS review of a proposed “zero” liability Medicare set aside and the parties just need to retain a copy of the doctor’s letter/certification.

Despite the foregoing, every lawyer (plaintiff or defense) should read the Sally Stalcup memo regarding liability Medicare set aside arrangements.  The memo was issued back in May of this year by the Dallas Region 6 CMS office.  The memo, to summarize, indicates that “Medicare’s interests must be protected; however, CMS does not mandate a specific mechanism to protect those interests.”  Furthermore, the law “does not require a ‘set-aside’ in any situation.”  Nevertheless, the law does require “that the Medicare Trust Funds be protected from payment for future services whether it is a Workers’ Compensation or liability case.”  From CMS’s perspective, a set aside is their “method of choice and the agency feels it provides the best protection for the program and the Medicare beneficiary.”

If an injury victim is a Medicare beneficiary or has a reasonable expectation within 30 months of becoming a Medicare beneficiary, a set aside should be considered.  If however a treating physician certifies that all treatment for the released injuries is complete as of the date of settlement, then no set aside is necessary.  Navigating the MSP related issues at settlement can be difficult as well as confusing.  From the lawyer’s perspective, the most important thing is to make sure the injury victim client completely understands the potential impact of settling the case has upon future Medicare coverage of injury related care.

To view the memo, click HERE

In the first memo coming from CMS HQ regarding Liability Medicare Set Asides, Charlotte Benson, Acting Director Financial Services Group for CMS, gives us an exception to the need to create a set aside.  According to the memo, a liability Medicare set aside isn’t necessary when the Medicare beneficiary’s treating physician certifies in writing that all of the care related to the claimed injury has been completed as of the date of the settlement.

The memo says:

“Where the beneficiary’s treating physician certifies in writing that treatment for the alleged injury related to the liability insurance (including self-insurance) “settlement” has been completed as of the date of the “settlement”, and that future medical items and/or services for that injury will not be required, Medicare considers its interest, with respect to future medicals for that particular “settlement”, satisfied. If the beneficiary receives additional “settlements” related to the underlying injury or illness, he/she must obtain a separate physician certification for those additional “settlements.”

When the treating physician makes such a certification, there is no need for the beneficiary to submit the certification or a proposed LMSA amount for review. CMS will not provide the settling parties with confirmation that Medicare’s interest with respect to future medicals for that “settlement” has been satisfied. Instead, the beneficiary and/or their representative are encouraged to maintain the physician’s certification.”

The memo is important for a number of reasons.  First, it is the first official memorandum from the CMS central office in Baltimore to substantively address liability Medicare set asides.  Second, it provides a mechanism, if the case facts fit the criteria, to avoid the necessity of creating a liability Medicare set aside.  It is a limited exception as the treating doctor must attest in writing that all of the treatment for the released injuries was completed at the time of settlement.  Third, it avoids the need to request CMS review of a proposed “zero” liability Medicare set aside and the parties just need to retain a copy of the doctor’s letter/certification.

Despite the foregoing, every lawyer (plaintiff or defense) should read the Sally Stalcup memo regarding liability Medicare set aside arrangements.  The memo was issued back in May of this year by the Dallas Region 6 CMS office.  The memo, to summarize, indicates that “Medicare’s interests must be protected; however, CMS does not mandate a specific mechanism to protect those interests.”  Furthermore, the law “does not require a ‘set-aside’ in any situation.”  Nevertheless, the law does require “that the Medicare Trust Funds be protected from payment for future services whether it is a Workers’ Compensation or liability case.”  From CMS’s perspective, a set aside is their “method of choice and the agency feels it provides the best protection for the program and the Medicare beneficiary.”

If an injury victim is a Medicare beneficiary or has a reasonable expectation within 30 months of becoming a Medicare beneficiary, a set aside should be considered.  If however a treating physician certifies that all treatment for the released injuries is complete as of the date of settlement, then no set aside is necessary.  Navigating the MSP related issues at settlement can be difficult as well as confusing.  From the lawyer’s perspective, the most important thing is to make sure the injury victim client completely understands the potential impact of settling the case has upon future Medicare coverage of injury related care.

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