Electronic Payment Feature of Medicare Secondary Payer Recovery Portal

February 23, 2021

Rasa Fumagalli, JD, MSCC, CMSP-F

The Centers for Medicare & Medicaid Services (CMS) agency has made significant improvements over the years in their online self-service tools for Medicare beneficiaries, their representatives, insurers, and recovery agents. Beneficiaries may obtain detailed information regarding their claims by registering on the MyMedicare.gov website. If the beneficiary has a third-party claim, he or she can access the Medicare Secondary Payer conditional payment information from their MyMedicare page or by entering the Medicare Secondary Payer Recovery Portal (MSPRP). Click here to see the MSPRP User Guide.

Today, the MSPRP allows beneficiaries and their representatives to self-report claims, upload Proof of Representation and Consent to Release forms, obtain conditional payment information and submit disputes to CMS. The MSPRP also allows the beneficiary or his representative to make an electronic payment of the conditional payment demand through Pay.gov, a secure government-wide collection portal. With the current delays that the USPS is experiencing, this is a useful alternative. Additional details regarding the process may be obtained here: https://go.cms.gov/2ZICL2N

Binding CMS to its WCMSA Determination

February 11, 2021

Rasa Fumagalli, JD, MSCC, CMSP-F

Securing CMS review of a Workers’ Compensation Medicare Set-Aside (WCMSA) proposal can, at times, be cumbersome.  Once the CMS WCMSA determination letter is received, parties may often just close their files after the settlement funds are disbursed. This brief article will address the frequently overlooked CMS determination finalization process.

Parties that seek CMS review of a WCMSA should follow the guidelines that are set forth in CMS’ WCMSA Reference Guide (Guide). The most current version of the Guide, Version 3.2 was released on October 5, 2020, and outlines the process used by CMS in reviewing WCMSA proposals.

According to the Guide, the main benefit of seeking CMS review of a WCMSA proposal is the certainty that CMS will become the primary payer for injury-related, Medicare-covered services upon proper exhaustion of a CMS-determined WCMSA.  This benefit, however, requires that the parties properly finalize the CMS determination. Section 15.3 of the Guide addresses this requirement in a “note,” which states: “the case will not be considered final until CMS receives the final settlement with the appropriate WCMSA amount.”

CMS determination letters also remind parties of this requirement. The first two pages of a CMS determination letter include the following statement:

“Approval of this WCMSA amount is not effective until the Centers for Medicare & Medicaid Services (CMS) receive a copy of the final executed workers’ compensation settlement agreement, which must include this approved WCMSA amount. Please include the CMS Case Control Number listed at the top of this letter in any correspondence. Submit your settlement agreement via the Portal if your original submission was via the Portal. If you originally submitted outside of the Portal, submit the settlement agreement to the following address:

WCMSA Proposal/Final Settlement
P. O. Box 138899
Oklahoma City, OK 73113-8899”

This last step is an important one since it gives CMS notice that the CMS determined WCMSA has been properly funded. This funding is then reflected in Medicare’s Common Working File for the beneficiary and serves to limit the amount of the settlement that may be considered for future medicals.  Failure to properly finalize the CMS determination may result in the unintended consequence of Medicare considering the entire settlement as a future medical allocation, thereby defeating the benefit of the CMS review.  Since there is often a delay between the issuance of the CMS determination and the actual settlement that funds the CMS determination, it is imperative that parties not overlook the finalization requirement.

Preparing for the ERISA Lien Battle

February 11, 2021

Teresa Kenyon, Esq.

The dreaded ERISA lien. The vendors representing ERISA self-funded health plans’ interests certainly want you to believe that it must be reimbursed in full. They will cite the US Airways v McCutchen case, tell you that they are not subject to equitable doctrines, and, therefore, do not have to reduce for attorney fees, limit, or waive their full recovery even if your client was not made whole from a compromised settlement. How do you get an ERISA plan to be fair and equitable?

What is ERISA?

ERISA is an acronym for the Employee Retirement Income Security Act. That is right, its original intention in its 1974 creation was focused on pension plans not health benefits. According to the US Department of Labor, ERISA protects the interest of employee benefit plan participants and their beneficiaries. It requires plan sponsors to provide plan information to participants. It establishes standards of conduct for plan managers and other fiduciaries. And it establishes enforcement provisions to ensure that plan funds are protected and that qualifying participants receive their benefits.[1]
Great! This all sounds good. The employee is protected. The Plan must follow rules. The Plan must provide detailed reporting to the federal government. It must provide disclosures to the participants and establish guidelines on how denied claims can be appealed. And it must ensure that the funds are protected and delivered in the best interest of the plan to pay future claims.

An ERISA plan as it relates to health benefits is an “Employee Welfare Benefit Plan.” The ERISA statute defines it as

“any Plan, fund or program which was… established or maintained by an employer or by an employee organization… for the purpose of providing for its participants or their beneficiaries through the purchase of insurance or otherwise, (A) medical, surgical or hospital care or benefits…”[2]

Recovery of Settlement Funds

But what is the Plan’s expectations when they have paid for medical expenses, as they are required to do, and the beneficiary recovers money from an at fault party or their insurance carrier?
In theory, subrogation and reimbursement is a logical idea. The health plan lien holder’s mantra is that a Plan should not have to pay for medical treatment when someone else is the reason for the need of that medical treatment. It follows that all costs of a loss should be placed on the wrongdoer and that the Plan can be reimbursed by the actual injured party. And this can function flawlessly when there are enough funds to reimburse all parties who have suffered a loss. The thought that Polly the Plaintiff should not receive a double recovery when someone else actually carried the burden makes logical sense. But what about when there are not enough funds recovered? Settlements can be limited due to policy limits, liability issues, comparative fault, etc.

In equity, the amount any Plan recovers from a settlement fund should be parallel to what the injured plaintiff is recovering for their loss. If the Plan has paid $30,000 in medical expenses and the settlement is limited to $100,000 whether due to policy limits, liability issues, or otherwise, where is the equity in allowing the plan to recover their full $30,000? Why does a Plan have more rights to reimbursement than Penny, the actual injured plaintiff? The inequity that plaintiffs see on a regular basis as it relates to ERISA self-funded liens is disheartening.

Assume that Penny had lost wages of $20,000 while she was recovering from her loss. Assume that she has a hospital lien of $70,000 because her health plan did not pay for the out of network provider that the ambulance drove her to on the day of her loss. Assume that she lost her job and eventually obtained another employer which provided her health benefits leading to another health insurance claim for reimbursement of $50,000. By numbers alone, Penny the plaintiff is not fully compensated for her loss. Why should the original Plan receive their full $30,000? Why has the case law developed to allow a Plan to add one sentence to a 100-page Plan Document that gives it the right to collect in full even if it totals 1/3 of the limited settlement and even when there are other hands out at the table?

Based on those facts, this is not functioning as was originally intended when ERISA was created. As far back as 1997, a District Court judge identified that that a particular case before the court “becomes yet another illustration of the glaring need for Congress to amend ERISA to account for the changing realities of the modern health care system. Enacted to safeguard the interests of employees and their beneficiaries, ERISA has evolved into a shield of immunity that protects health insurers,  utilization review providers, and other managed care entities from potential liability for the consequences of their wrongful denial of health benefits.”[3]

Funding Status

State laws are in place in many places to prevent this type of thievery of settlement funds. In most states, the law generally requires the lien be reduced by attorney fees and be reduced or eliminated completely when the injured plaintiff is not made whole or was partially at fault for the loss. But not all plans are subject to state law. This is where the funding type matters. The United States Supreme Court decided in FMC Corp. v. Holliday that state laws shall not limit a self-funded ERISA Plan from recovering from a settlement if the language of the Plan Plan’s language clearly says so.[4]

So, what constitutes self-funded? An employer Plan is self-funded if the employer pays for the employees’ medical benefits through their own funds. The employer assumes the financial risk directly and is liable for the payment of all medical bills. Compare this to an employer who secures an insurance policy, and the insurance carrier assumes all the financial risk and pays all the medical bills. It is all about where the funds come from to pay the medical claims. The convoluted part is that most self-funded plans use insurance carriers to administer or pay their claims. The big-name insurance carriers are involved in both self-funded and fully insured health plans. The insurance card can look very similar because they both reflect Cigna or Blue Cross.

How do you determine the funding status? You must obtain the relevant documents from the plan administrator.

Supporting Document Request

There is a laundry list of items that the plan participant is entitled to receive under the ERISA statute § 1024(b)(4).[5] “The administrator shall, upon written request of any participant or beneficiary, furnish a copy of the latest updated summary, [sic] plan description, and the latest annual report, any terminal report, the bargaining agreement, trust agreement, contract, or other instruments under which the plan is established or operated.

      • The Plan Document (written instrument pursuant to 29 U.S.C. § 1102) in effect on the date of injury as well as any document amending, supplementing, or otherwise modifying the Plan Document; Summary Plan Description and employee benefits booklet in effect at the time of injury as well as all documents issued subsequently during any year in which benefits were paid;
      • SPD Wrap Documents;
      • Bargaining Agreement, Trust Agreement, Contract, etc. under which Health Plan is established;
      • Trust Agreement or other document establishing funding for the Plan;
      • Annual Return/Report (IRS/DOL Form 5500), including all attached Financial Schedules;
      • Administrative Services Agreement with any Third-Party Administrator for the Plan;
      • An affidavit from the Plan Administrator attesting to self-funded status of the Plan;
      • A complete statement of benefits paid to or on behalf of claimant/beneficiary;
      • Specific plan component(s) paying benefits (e.g., health, dental, vision, AD&D, disability, etc.);
      • “Stop-loss” or excess/re-insurance coverage (insurer, policy numbers, and attachment points).”

An administrator is required to provide the requested documents. The ERISA statute has created a civil penalty[6] which has been increased to $110/day.[7] Subrogation vendors, insurance carriers, and defense firms regularly state that they do not have all the documents, that they are not the proper party for requesting the documents, that the documents are not necessary to ascertain the funding status of the plan, etc. Essentially, they assert that they are not subject to the penalty for their failure to comply which includes the failure to comply completely.

In this list are documents that will lead you to discover the funding status of the Plan. You will likely not obtain all of them and not all are needed to assess the funding status of the Plan. In order to review what you really need, it is recommended that you ensure that you have the relevant ones to assess the Plan’s rights.

Form 5500

The first to review is the Form 5500.[8] This Form is an IRS document but should be completed by ERISA plans and can give some great guidance if you know what you are looking for as you review the document. The first place to look is section 8 and 9.

Section 8b lists the plans whose funding type will be checked in section 9. Many review this part of the Form and assume that because Insurance is marked in 9a(1) that the health plan is fully insured. But that is an incorrect reading. In fact, looking at this alone cannot give you all the answers, it only leads you down a road. This Form reflects that this employer has both insured plans and self-funded benefit plans. 4A is the health plan, 4B is the Life Insurance, 4D is Dental etc. Section 9 only tells you that some of those are insured and some of those self-funded (paid for by the general assets of the plan sponsor). Perhaps the health is self-funded, but the life insurance and dental are insured. The next step is to look at the Schedules to determine which is which. Schedule A lists the insured coverages and Schedule C lists the self-funded. Unfortunately, even with an 82-page instruction guide,[9] these Forms are often completed incorrectly or incompletely which makes them often unreliable for determining funding status.

The Plan Documents

The most important document to review is the Plan Document. Not only will there be some indication of funding type within this document, but it is also the terms of this document that govern the right of recovery of a self-funded plan. The US Supreme Court held in US Airways, Inc. v. McCutchen[10] that a self-funded plan could claim a right to a disproportionate share of the recovery if the contract were clearly written to eliminate equitable principles. McCutchen argued that a recovery by the US Airways plan, in his case, would be an inequitable windfall to the plan and a complete blow to the injured plaintiff, himself. The Plan attempted to claim full reimbursement of their $66,866 payment towards medical expenses from his $110,000 policy limit recovery even though his net, after attorney fees and costs, was only $66,000.  McCutchen argued that the Plan should take no more than the portion that would be classified as a “double recovery” thereby allowing him to receive compensation for the rest of his damages. .

Ultimately, US Airways had to reduce their reimbursement claim by attorney fees as their policy was silent on that equitable doctrine. Further, when the case was remanded to the lower court, it was discovered that the Court was looking at the wrong document completely. In Cigna Corporation v. Amara, the US Supreme Court indicated that “summary documents, important as they are, provide communication with the beneficiaries about the Plan, but that their statements do not themselves constitute the terms of the Plan.”[11] The Master Plan Document controls and you should not settle for just the Summary Plan Description.

The McCutchen Court held that the Plan should be enforced as written and that both sides should be held to their mutual promises. This is inequity at its finest. McCutchen had no part in agreeing whether certain terms would be part of the contract nor did he have the ability to strike terms from the contract. It is a classic contract of adhesion. One where the Plan is in the power position and able to modify their contracts year over year and ensure that they remain in power. Because of that, any ambiguities are to be resolved in the favor of the injured plaintiff and not the drafter.[12]

This is one place where ERISA self-funded plans and the vendors that handle them miss the mark and yet it was a big focus in the McCutchen decision. They ride the train of power as if simply being an ERISA self-funded plan gives them a strong legal right of recovery in all situations. They conveniently miss the places where their contract language has deficiencies. Instead, they want Polly the plaintiff to overlook those ambiguities or just interpret it based on what the Plan meant to write. It does not work that way! We recently had a case where the Summary Plan Description (SPD) referenced a Master Plan Document (MPD) but the subrogation vendor could only produce two SPDs with different dates.  The representative’s response to our identifying this as a major issue was to still reference a document that does not exist and asked that we refer to the “MPD (also titled SPD but is in fact the MPD).”

At least one court had it right.

“Any burden of uncertainty created by careless or inaccurate drafting of the summary must be placed on those who do the drafting, and who are most able to bear that burden, and not on the individual employee, who is powerless to affect the drafting of the summary or the policy and ill-equipped to bear the financial hardship that might result from a misleading or confusing document. Accuracy is not a lot to ask. And it is especially not a lot to ask in return for the protection afforded by ERISA’s preemption of state law causes of action– causes of action which threaten considerably greater liability than that allowed by ERISA.”[13]

Conclusion

When it comes to ERISA Plans and ensuring that your injured plaintiff retains compensation for her injuries, it is important to make sure that the ERISA Plan has a right to be at the table and has a right to request reimbursement from the settlement funds. This article narrowly focuses on just a few of the many things that must be investigated as it relates to an ERISA Plans demand. Synergy’s Experts are ready to step in and fully review your next ERISA lien.

[1]  https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/fact-sheets/what-is-erisa

[2] 29 U.S.C. § 1002(1).

[3] Andrews-Clarke v. Travelers Ins. Co., 984 F. Supp. 49 (D. Mass. 1997).

[4] FMC Corp. v. Holliday, 498 U.S. 52 (1990)

[5] 29 U.S.C. 1024(b)(4).

[6] 29 U.S.C. 1132(c)(1)

[7] 29 CFR 2575.502c-3

[8] Obtain your own at FreeERISA.com or on the US Department of Labor website to be found here: www.efast.dol.gov/portal/app/disseminatePublic?execution=e2s1

[9] www.dol.gov/sites/dolgov/files/EBSA/employers-and-advisers/plan-administration-and-compliance/reporting-and-filing/form-5500/2020-instructions.pdf

[10] 569 U.S. 88 (2013).

[11] Cigna Corp v Amara, 131 S. Ct 1866 (2011).

[12] Contra proferentem is the common law doctrine that contracts and other written instruments should be construed against the drafter.

[13] Hansen v Continental Ins Co, 940 F2d 971 (5th Cir. 1991)

Medicare Set-Asides for General Liability Settlements: How to Protect Your Clients and Practice

February 3, 2021

Rasa Fumagalli, JD, MSCC, CMSP-F and Jennifer L. Yu, Esq.

In stark contrast to the world of worker’s compensation, most attorneys agree that there is a dangerous amount of gray area surrounding the subject of Medicare Set-Asides for liability settlements.  This is so because the Centers for Medicare and Medicaid Services (CMS) has been slow in providing any real guidance for liability settlements that include compensation for future medicals costs.

To date, the guidance consists of the May 2011 CMS Stalcup memo (one regional director’s view) and the September 2011 CMS memo regarding treating physician certifications.

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

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

Since that time, the proposed rulemaking has been continuously postponed. In light of this, it falls upon the attorney to take “reasonable efforts” to protect Medicare’s interest.  Failure to do so could result in possible disruption of a client’s benefits and open the attorney up to a malpractice claim.  One of the most effective ways to protect against this is by calling in a Medicare expert for an MSP case evaluation.

The absence of formal regulation by CMS does not mean that the MSP Act does not apply to liability settlements. The MSP Act clearly prohibits Medicare from making payment when “payment has been made or can reasonably be expected to be made under a…liability insurance policy or plan (including a self-insured plan) or under no-fault insurance.”[1] The exception to this occurs when payment is not reasonably expected to be made “promptly” or within 120 days of receipt of the claim by the primary payer.

If Medicare makes payment in this situation, the payment is conditioned upon the reimbursement of the payment to the Medicare Trust Fund.  A primary payer’s reimbursement obligation to Medicare may be demonstrated by: “a judgment, a payment conditioned upon the recipient’s compromise, waiver or release (whether or not there is a determination or admission of liability) of payment for items included in a claim against the primary payer or by other means.”[2]

The above provisions may impact a plaintiff’s settlement in the following way: If the plaintiff is a Medicare beneficiary and accepts a settlement that provides funds intended to compensate her for future medicals, this is a payment that has been made under a liability plan. Should the plaintiff require future injury-related Medicare-covered treatment, Medicare is prohibited from making payment for these services. Should an inadvertent payment be made, the Medicare Trust Fund could demand reimbursement.

Assessing next steps for your client when it comes to the MSP comes down to your client’s risk tolerance.  There is no requirement that any moneys be set aside for future care covered by Medicare, but it is important to keep in mind that Medicare is on notice of any settlement as it has the benefit of the Section 111 mandatory insurer reporting requirement for any physical trauma liability settlement over $750.00.  The Section 111 Total Payment Obligation to Claimant (TPOC) report must include the injury-related diagnosis codes, since the codes are added to the plaintiff beneficiary’s Medicare Common Working File. This can easily trigger a future denial of injury related care by Medicare.  An MSA is the easiest way to protect against this issue.  It will ensure that the proper amount of money is apportioned and also acts as a type of deductible; meaning that once those funds are depleted Medicare will pick up the payments from that point.

Conclusion

The MSP Act and the language used in the abstract of the proposed rule regarding “existing” MSP obligations should be considered by plaintiffs’ attorneys that are handling liability if Medicare is involved. If the settlement funds future medicals, then a decision to apportion some of the settlement funds as an LMSA may prevent your client from experiencing future issues with Medicare. The MSP compliance strategy however should always be driven by the circumstances of the case. If the area of MSP compliance is outside of your legal expertise, protect your firm and your client by partnering with an expert in the field. Until CMS provides additional guidance, the safest and easiest way to navigate the gray area is to work with an outside MSP compliance expert to assess your clients’ future need and provide supporting documentation for your file.

 

[1] 42 U.S.C. § 1395y(b)(2)(a).

[2] 42 C.F.R. § 411.22.

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

February 2, 2021

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

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

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

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

Unraveling the Conundrum of Medicare Reimbursement

January 14, 2021

Rasa Fumagalli, JD, MSCC, CMSP-F

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

Legal Background

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

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

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

Medicare Coverage Types

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

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

Conditional Payment Recovery Process for traditional Medicare Part A and B

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

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

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

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

Medicare Advantage Plan Recovery claims

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

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

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

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

Conclusion

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

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

Liability Medicare Set-Asides: Where are we Today?

November 12, 2020

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

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

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

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

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

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

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

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

 

 

[1] 42 U.S.C. § 1395y(b)(2)(a).

[2] 42 C.F.R. § 411.22.

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

October 20, 2020

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

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

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

October 8, 2020

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

Public Benefits

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

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

ABLE Accounts

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

The Bad News

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

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

The Good News

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

How is this different from a Special Needs Trust?

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

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

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

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

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

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

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

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

What happens to remaining funds when the client dies?

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

Conclusion

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

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

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

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

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