Greater Understanding for More Effective ERISA Lien Negotiation

August 13, 2020

By: Teresa Kenyon

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

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

Subrogation versus Reimbursement

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

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

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

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

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

ERISA Liens:  Funding Matters

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

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

Plan Document Request

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

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

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

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

The Documents

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

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

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

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

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

Early Prep

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

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

The Claim/Lien Statement

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

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

Conclusion

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

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

Mitigating Medicare Secondary Payer Liability Related to Futures

July 9, 2020

By Jason D. Lazarus

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

Medicare Futures:  The Problem & Risk

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

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

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

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

How to be Compliant

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

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

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

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

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

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

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

For $1,000.00, the MECE service includes:

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

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

Conclusion

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

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

Unique Planning Tool to Defer Taxation of Contingent Legal Fees

May 13, 2020

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

To learn more download at the link below.

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

United States of America vs. Carrigan & Anderson, PLLC

April 29, 2020

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

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

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

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

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

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

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

To read the opinion, click HERE.

 

[1] 42 U.S.C. § 1395gg

[2] 42 U.S.C. § 1395y

[3] 31 U.S.C. § 3711

Public Benefits Preservation: What Your Client Doesn’t Know will Hurt Them, and You!

April 9, 2020

By: Evelynn Passino

One of the many practice points rarely taught in law school: your client may lose public benefits as a result of a recovery, and you have a duty, as their attorney, to discuss benefit preservation with them. That does not mean you have a duty to actually preserve their eligibility–a competent adult can very well choose to not keep their benefits—but you must make sure they understand their options. Failing to discuss with your client how he or she can maintain their benefits may be grounds for malpractice. This article will provide relevant case law, an overview of the major government benefit programs, protection mechanisms, and best practices for ensuring that the attorney’s duty is met while protecting the client.

Case Law: Grillo & Glorioso

There are now many legal malpractice cases in which attorneys failed to properly advise their clients, but two cases which clearly illustrate this duty are Grillo v. Petiete et al., 96-145090-92 (96th Dist. Ct., Tarrant Cty., Texas) and French v. Glorioso, 94 S.W.3d 739 (Tex. App. 2002). Grillo involved a birth injury resulting in severe brain damage. The attorneys refused a structured settlement in favor of a lump sum of $2.5 million, which was then placed into a court registry. Because there was no structure, she was taxed on the interest earned. Not only did this result in substantially less money for Christina Grillo’s care, she lost Medicare and Medicaid eligibility because a special needs trust was not utilized, leaving her family with the burden of paying for care. Due to her serious medical needs, the funds were exhausted within a few years. The attorneys and guardian ad litem were ultimately liable in the malpractice cases for over $4 million in damages.

In Glorioso, the personal injury victim’s recovery was placed in her attorney’s trust account, where it remained for over a year. While she was not Medicaid-eligible at the time of her injury, she became eligible prior to the case being settled. The personal injury victim eventually lost Medicaid and subsequently filed suit against her attorney for failing to advise her that the funds needed to be in a special needs trust to protect her eligibility. The attorney was able to prove that he had advised her that she would need to establish an SNT to protect her benefits both at mediation and before, and that she had declined. Ultimately, he was not liable for malpractice.

Public Benefit Programs

Government benefits are often compared to a tangled web or alphabet soup, and for good reason. There are a number of programs available, many interact or intersect, and most of them are known by similar acronyms. The first thing to understand is that government benefits generally fall into two types: means-tested (or needs-based) and entitlement. Means-tested benefits require the client to qualify financially, while entitlement benefits are not in any way related to income or assets.

Supplemental Security Income (SSI)

SSI is a means-tested benefit administered by the Social Security Administration, although some states add a supplement. In 2020, SSI is a monthly cash payment of up to $783 for an individual or $1,175 for a married couple. SSI is intended to provide basic support (food and shelter) for people with both financial and medical needs. In many states, receiving SSI automatically qualifies someone for Medicaid coverage in their state.

To qualify for SSI, the person must be a US citizen or non-citizen who meets certain requirements, have limited countable income and resources (less than $2,000 for an individual or $3,000 for a couple), and be one of the following: 65 or older, blind, or disabled. Assume any income or assets are countable unless the program provides an exemption. A person’s primary home and one vehicle are both considered exempt resources. The items in a person’s home are, generally, exempt resources, although there are exceptions for items held solely for their value. For example, a diamond ring that is worn from time to time is exempt, while a diamond or gold that is held as an investment is not.

The recovery from a lawsuit, unfortunately, is not an exempt resource. Any funds given to your client are going to count as income in the first month and as a resource in subsequent months. As illustrated in Glorioso, funds held in an attorney’s trust account can become a countable resource which underscores the necessity to plan early. SSI recipients are sometimes tempted to forego SSI; however, if they also have Medicaid, they must understand both can be lost as most states provide Medicaid coverage automatically with SSI. Preserving SSI eligibility may be important for this reason alone.

Social Security Disability Insurance (SSDI)

SSDI is also administered by the Social Security Administration but is an entitlement benefit. SSDI is a monthly payment that on average provides $1,258 per month. To qualify for SSDI, an individual must be disabled and have enough recent work credits (varies based on the age of the person). After 24 months of SSDI, an individual automatically qualifies for Medicare benefits. There are no financial qualifications for SSDI, so a settlement would have no impact on this benefit.

How to Tell the Difference between SSI & SSDI

The safest option is to request the award letter, but there are a few ways in which SSI and SSDI vary. First, SSI is means-tested while SSDI is not. Second, SSI is always going to be below $783 (unless your state supplements SSI) while SSDI is usually (but not always) over $1,000. Third, qualifying for SSI requires no recent work history while SSDI does. While this is not true 100% of the time, usually SSI is paired with Medicaid and SSDI is paired with Medicare.

Medicaid

Medicaid is health insurance funded by state and federal governments and administered by state agencies. For that reason, Medicaid programs vary across the board, both in terms of offerings and qualifications. Generally, Medicaid is means-tested, although there are some programs which are not. The qualifications are similar to SSI in that there are both financial and medical criteria, such as being pregnant, disabled, or 65 or older. Medicaid provides many benefits, but the one not covered by other government benefit programs is nursing home care. A client receiving this type of care through Medicaid typically cannot afford to lose it.

Like SSI, not all income and assets are countable but the rules are similar. Lawsuit recoveries are countable, meaning they will usually disqualify a person from Medicaid.  As stated above, in many states qualifying for SSI will result in qualification for Medicaid, but the reverse is also true: losing SSI will cause an interruption in Medicaid coverage. If Medicaid coverage is important to the client, then finding out if they have SSI and if their Medicaid is “tied to” their SSI is critical before distributing any part of their recovery to them.

Medicare

Medicare is a federal health insurance program administered by the Centers for Medicare & Medicaid Services (CMS) and is an entitlement benefit. To qualify for Medicare, an individual must be age 65 or older, have End Stage Renal Disease, or be disabled. There are no financial qualifications for Medicare, so it will not be impacted by funds received from a settlement.

There are 4 “parts” to Medicare. Part A covers inpatient care, such as hospital stays and limited skilled nursing care. Part B covers outpatient care, such as doctor’s visits, preventive care, home health care, and durable medical equipment. Parts A and B are what is known as “traditional Medicare.” Part D covers prescriptions. Part C combines parts A and B, and sometimes part D, and is administered by private companies called Medicare Advantage plans or Medicare HMOs. These companies receive funding from the federal government and operate like traditional insurance companies with networks, co-pays, and other out-of-pocket expenses. Most also offer additional coverage, such as dental coverage and gym memberships. Medicare supplements, also known as “Medigap” policies, are policies offered by private companies to fill in the gaps of what traditional Medicare does not pay for.

Medicare Set-Asides

If your client has Medicare or will have Medicare in the next few years, it may be prudent to consider establishing a Medicare Set-Aside (MSA) account. MSAs are not currently required by law but failing to properly advise your client may be grounds for a malpractice claim.

In a nutshell, CMS interprets the Medicare Secondary Payer Act to require that Medicare’s future interests be taken into account when a plaintiff receives compensation from a personal injury settlement. CMS’ preferred method to address this issue is the establishment of an MSA. The MSA is an account set up to pay for injury-related future medicals that are Medicare-covered. Once the MSA is funded, Medicare will continue to pay for non-injury related services, and when the funds in the MSA are exhausted, Medicare resumes coverage for injury related care.

How to Tell the Difference between Medicaid & Medicare

Medicare is a federal program while Medicaid is administered by states and varies from state to state. Medicare is an entitlement benefit; Medicaid is needs-based. While Medicare offers very limited coverage for nursing home stays, Medicaid often covers 100% of the cost. A person can qualify for Medicare after being on SSDI for 2 years. Medicaid qualification in many states is tied to SSI. Finally, set-asides only apply to Medicare. There is no such thing as a Medicaid set-aside.

Section 8 / The U.S. Department of Housing & Urban Development (HUD)

HUD provides several housing programs to assist low income families, the elderly, and people with disabilities. These programs are federally funded but administered at the state level through local housing authorities. The best-known of these programs is the Section 8 voucher program.

The local housing authority determines the amount of the voucher based on the above factors and the cost of rent in the local housing market. The voucher recipient then finds a suitable dwelling for that price (if the rent is higher than the voucher, the recipient pays the excess). The recipient will likely also pay 30-40% of monthly adjusted income.

Section 8 benefits are means-tested but not in the same way as programs like SSI and Medicaid. Those programs consider all income and assets while HUD only looks at the family’s income. This includes income produced by assets, or a percentage of assets deemed as income, but not the assets themselves.

Income generally includes what one would expect it to include: wages, income from a business, interest earned on investments, periodic annuities, etc. Of note are exclusions for lump sums (inheritances, insurance payments, and settlements for personal or property losses) and reimbursement of medical expenses. The lump sum category has an exception to the exclusion, however, for payments in lieu of earnings which includes workers’ compensation (meaning these payments are income).

Just because personal injury settlements are excluded income does not mean no planning or counseling is needed. Individuals who qualify for HUD benefits almost always have other needs-based benefits, so it is important to understand the whole package.

The Supplemental Nutrition Assistance Program (SNAP)

SNAP is a means-tested benefit funded by the federal government and administered by state agencies. Qualifications for SNAP vary by state but are generally based on the family’s income and resources. Non-citizens can qualify for SNAP if they have lived in the United States for 5 years, are receiving disability-related benefits, or are under 18. Like SSI and Medicaid, there are some resources that do not count towards the family’s asset limit, such as a home and vehicle (although there are restrictions on the value of vehicle and the purpose it is used for). Recipients access this benefit through an Electronic Benefit Transfer (EBT) card which functions like a debit card for use at grocery stores. Because this benefit is means-tested, it is impacted by personal injury settlements.

Veterans’ Benefits

Benefits provided by the Veterans Administration (VA) are funded by the federal government. Some are not means-tested, such as disability-connected VA compensation (disability connected), but VA pensions, which include Aid & Attendance and Housebound benefits, are means-tested. VA healthcare benefits can also be needs-based insofar as determining whether the veteran will pay a co-pay. Like other means-tested benefits, VA pensions are impacted by lawsuit recoveries. VA pensions apply an income test and a net worth test.

For the income test, they look at annual income, so they will take the award from the settlement and divide it by 12 to calculate the reduction in monthly benefits. The reduced rate will apply for 12 months. After 12 months, the veteran’s benefits will go back to normal, assuming no other changes.

For the asset test, there is a limit of $127,061 for both the veteran and spouse. Like other benefits, the money cannot be given away to reduce assets, but there are methods of reducing net worth to qualifying levels, such as spending money on medical services or home repairs (so long as it’s for fair market value).

Clients with No Benefits

Even if a client has no benefits presently, you may still need to discuss public benefit preservation strategies with them if there is a likelihood they will be on such benefits in the future. For example, if the client is going to have Medicare, they may want to establish a Medicare Set-Aside. If the client will need to qualify for Medicaid, they may want to consider placing funds in a settlement trust that can transfer assets to a Special Needs Trust.

Public Benefit Preservation Strategies

Once you have identified the client’s benefits, the next step is helping them decide which course of action to take to preserve them. There is one option available to nearly any kind of client: spend the money down to a level where they will qualify for the desired benefits. There are certain rules and timelines that must be followed to do this effectively, so it is critical to speak with an elder law or special needs law attorney who can properly advise you. One thing they cannot do is give the money away as that is considered a transfer for less than fair market value. A few other options are listed below that apply to more narrow circumstances.

Special Needs Trust (SNT)

If the client is disabled and wants to use their money in the future, they can establish an SNT. SNTs are authorized by federal law to shelter funds in the trust from being counted by most government benefit programs. The notable exception is VA benefits. There are two kinds of SNTs: standalone and pooled.

Standalone SNT

A standalone SNT (also known as a (d)(4)(a) trust) can be created and customized for an individual. Standalone SNTs can be expensive to draft, take weeks or months to set up, and a trustee must be appointed. Private banks or trust companies often fill the role of trustee and can be very costly.

Pooled SNT

A pooled trust (also known as a (d)(4)(c) trust) is an existing trust that a person can join. It gets its name because the funds contributed by the beneficiaries are pooled for investment purposes to obtain better returns; however, each sub-account is kept separate, so no beneficiary has access to another beneficiary’s money. By contrast with standalone trusts, pooled trusts are fast to join because the bulk of the drafting is already done. Fees also tend to be lower for two reasons: 1) according to federal law, the trustee must be a non-profit organization; 2) since the trustee is administering the same trust for many people (as opposed to the same number of people who all have different trusts), the trustee can work efficiently.

There are three things to keep in mind about these types of trusts. First, any SNT must include a provision to repay the state for Medicaid services provided since the inception of the trust when the beneficiary passes away. If there are funds remaining after payback, they may go to the designated death beneficiary; however, pooled trusts have the right to retain some or all the funds. These policies vary from trust to trust. Some pooled trusts retain nothing or a small percentage, so it makes sense to shop around. Second, SNTs are “sole benefit” trusts, meaning all funds expended must be for the benefit of the beneficiary only. A beneficiary would not be able to use funds in an SNT to buy gifts for a friend or loved one. Third, there are a number of rules to follow regarding distributions. For example, if someone has SSI, the trust cannot provide funds for food or shelter without causing a reduction the person’s SSI benefit. It is important to work with a trustee who is knowledgeable about the rules in your state and one well versed in working with personal injury settlements.

More generally, the client needs to understand that while the money is still theirs, they will have no control over it. They can make requests of the trustee, but ultimately every disbursement is the trustee’s decision. SNTs are always irrevocable, so they can’t be easily undone once they are created.

ABLE Accounts

If the client has less than $15,000 and they were disabled prior to age 26, they might consider placing the funds in an ABLE account as an alternative to establishing an SNT. These accounts, created by the Achieving a Better Life Experience Act, are available nationwide. Like an SNT, funds in an ABLE account are not “countable,” but unlike an SNT, the client has full control over the account. There is a bonus for those with SSI—they can use the funds for food and shelter purposes, which they cannot do with the funds in an SNT.

ABLE accounts and SNTs are increasingly used together, especially for those with SSI. The SNT can be funded with the full recovery, and the trustee can deposit up to $15,000 per year in the ABLE account, which the client can then use to pay their rent and buy groceries.

Do Nothing

Any competent adult can choose to take their recovery and lose their means-tested benefits. They need to be properly counseled before doing so, however. They might not be thinking about what their benefits really pay for or how much it would cost to buy private health insurance. Many benefit programs have waiting lists, so once a client is disqualified, it may be for good.  Clients must understand all the ramifications and all of their options available under the law to make a truly informed decision.

Best Practices

While the world of government benefits is complicated, there is some good news. You can keep yourself safe from a malpractice lawsuit and ensure your clients are protected if you remember to READ:

  • Review your client’s benefits at intake and throughout the case.
  • Enlist experts early-on to educate you and your client. Whether it’s a local attorney who practices in this area or a company like Synergy, work with people who know these programs inside and out.
  • Award letters—get them! Every government program sends the client a letter explaining what benefit they qualified for. This is the only way to know for sure what benefits your client does or does not have.
  • Document your file regarding your client’s decision and action steps taken to educate them. This is especially important if the client is choosing to forego any of their benefit programs. It is never a bad idea to have them sign something acknowledging that you counseled them on this matter and that they declined to take an action that would preserve their benefits.  One last tip, you might want to add a sentence to your closing statement informing clients that the receipt of a settlement could jeopardize eligibility for government assistance programs.

Medicare Advantage Plans and Workers Compensation Medicare Set-Asides

March 25, 2020

B. Josh Pettingill

We are oftentimes asked about injured workers who have a Medicare Advantage Plan (MAP) and if they still need to use their Workers’ Compensation Medicare Set-Aside (WCMSA) funds if the MAP will cover all their medical care. This brief post will explain Medicare’s position on this issue and then provide real-world analysis. There has been a surge of case law over the last several years regarding MAPs and their ability to assert the same rights as Medicare under the MSP statute. However, there is no case law in existence regarding MSAs or where a MAP has denied paying for accident-related care. Over the years, whenever the injured worker has an MAP, the plan covers everything the MSA normally would (and then some).

Medicare Advantage Plan – Part C

Medicare Advantage Plans also referred to as “Part C” Plans, were established under the Social Security Act as an alternative to traditional Medicare. Medicare Advantage Plans are a type of Medicare health plan offered by a private company that contracts with Medicare to provide all Part A and Part B benefits.

Part C Coverage

Medicare Advantage Plans include Health Maintenance Organizations, Preferred Provider Organizations, Private Fee-for-Service Plans, Special Needs Plans and Medicare Medical Savings Account Plans. If your client is enrolled in a Medicare Advantage Plan, Medicare services are covered through the plan and are not paid for under original Medicare. Most Medicare Advantage Plans include prescription drug coverage (Part D) as well. In order to be eligible for an MAP, you must be eligible for Medicare Part A and Part B.[1] Part C plans can also cover things that traditional Medicare does not pay for such as gym memberships or dental benefits.

Part C Statistics

As of 2018, more than one-third of all Medicare beneficiaries were enrolled in some type of Medicare Advantage Plan. One in every five (20%) of these enrollees were in group plans offered by employers and unions.[2] What this means for Workers’ Compensation cases is that we are seeing a lot of injured workers who have these types of plans.

Medicare’s Position

From Medicare’s standpoint and per the WCMSA reference guide, section 4.1.3:

“A WCMSA is still recommended when you have coverage through other private health insurance, the Veterans Administration, or Medicare Advantage (Part C). Other coverage could be canceled, or you could elect not to use such a plan. A WCMSA is primary to Medicare Advantage and must be exhausted before using Part C benefits to cover your WC claim-related expenses.”[3]

In other words, they don’t care if there are other forms of private health insurance because the claimant’s circumstances may change and there could be a shift in burden for Medicare to pay. However, by including MAPs in the category of “other coverage”, one could interpret that CMS is also admitting that these plans will likely pay if presented with a bill. That is exactly what we have been seeing.

Real-World Implications

As it stands today, these plans are not rejecting claims on the basis they should be paid for out of a Medicare Set-Aside. There have been rumblings from Medicare that they are sharing Section 111 reporting data with the MAPs which could give them the ammunition to reject claims if they were related to the work-related injury. [4] However, they simply do not have the resources or the wherewithal to do this. It is not to say that it won’t happen in the future. That day is not yet upon us.

Conclusion

You cannot proactively advise your clients to go out and purchase a Medicare Advantage Plan in an effort to circumvent the MSA obligation. Medicare’s position is that the WCMSA exists to protect the Medicare Trust Fund which would mean the injured worker proactively spends money from the MSA account as they treat. Along with that, you cannot control how the providers bill and who they bill.

The practical takeaway is that if your client has a Medicare Advantage Plan, there is a very high likelihood they may never spend a dime of their WCMSA funds. That is the way it stands today. Is it possible that CMS could start to share pertinent data with their MAP partners which would give them the chance to potentially deny paying for accident-related care on the basis they have the same rights under the MSP statute? Yes, but not highly likely.

WCMSAs come from Medicare’s interpretation of the MSP and not from any regulation or case law. Accordingly, it would be a significant stretch to say that a Part C plan could insist upon a set-aside when Medicare itself does not even have a specific regulation or statute requiring them. But, do not be surprised if you see Humana, Cigna or any other MAP provider, at least try to do it someday.

[1] Source: www.Medicare.gov

[2] Source: Kaiser Family Foundation analysis of CMS’s Landscape Files and March Enrollment files for 2010-2018

[3] https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Workers-Compensation-Medicare-Set-Aside-Arrangements/Downloads/WCMSA-Reference-Guide-Version-3_0.pdf

[4] Unsubstantiated rumors. The passage of the PAID Act would validate this happening.

Today Planning is More Critical than Ever

March 24, 2020

Now, more than ever, proper settlement planning is critical for disabled clients.  Protecting their recovery should be top of mind and a high priority given the turbulence in our global markets.  There are always going to be ups and downs in the financial markets.  The real estate market has crashed.  The tech market has crashed.  The oil markets have crashed.  There will be ups and downs in everyone’s personal financial situation.  You need a new car, roof or the AC goes out.  Now we have a virus that is creating an economic and social shutdown of our way of life for the foreseeable future.

Our current financial crisis illustrates how critical it is for you to bring in a settlement planner to speak with your clients.  Your clients do not have to plan for their settlement, but they do deserve to speak with someone that has the education, experience, and knowledge to show them the options.  Education about ways to protect the recovery from rapid dissipation and insulation from the market are exceedingly important.

If you have a client that settles their case, they need to know the ramifications of their financial decisions.  The two questions that always need to be addressed immediately before accepting any settlement are:

  1. Can I take any portion of my settlement in cash or will that impact my public benefits?
  2. Can I utilize a structured settlement for a portion of my settlement?

Those two questions have to be asked and answered on every case before anything is finalized.  The answers to those questions will dictate the form of the settlement and set the stage for proper planning.  Not asking those questions, could cause irreparable harm to the client.

As part of the planning process, it is important to meet with a qualified settlement planner to help your client create a visual picture of their future.  They need to do some basic budgeting.  Questions need to be asked like: How much do I NEED now and ongoing?  What do I WANT now and ongoing? What public benefits are necessary for my future?

If a settlement planner can get a picture of the client’s needs and wants, solutions can be created to provide for as much of those as possible.  By making sure critical questions get asked and simple budgeting is done, creating a rock-solid settlement plan becomes much easier.  There are many benefits to crating a settlement plan which includes a structured settlement and public benefit preservation vehicles.

Structured Settlement Benefits

  • Peace of mind (Guarantee and Fixed): The periodic payment schedule is outlined in the settlement documents and does not change with the market fluctuations.
  • Creditor Protection: Future periodic payments are not subject to creditors.
  • Lifetime Income: Annuities are one of the only financial services products that will pay you for the rest of your life (regardless of how long you live).
  • Tax-Free Payments: All payments received from a traditional structured settlement are tax-free.
  • Dollar-Cost Averaging Tool: A structure can create monthly, quarterly or annual income payable to you over a period certain.  These funds can be used to invest in other asset classes over time to lower the risk of a single investment date.

Public Benefit Preservation Benefits

Income:  Public Benefit programs from Social Security can continue to provide income for your lifetime.

Medical Coverage:  Programs through Medicaid and Medicare can provide health insurance benefits at no or a lower cost vs private coverage.

Years upon years of settlement planning experience teaches us inevitably there are clients who need and would benefit from a structured settlement and/or trust to preserve benefits.  All too frequently clients decide to take a cash settlement only to regret their decisions and want to go back on their public benefits they lost.  At the same time, clients can structure too much of their settlement and need cash.  It is critical to make sure that clients have the right allocation of their settlement to upfront cash, structured settlement, and trust.  This blend, crafted at the time of settlement, is a critical foundation for their future.  Proper settlement planning will impact how easily a disabled client transitions from litigation to life.

No Time Limits on Medicare Advantage Plans Private Cause of Action for Double Damages

March 2, 2020

The 11th Circuit Court of Appeals weighed in on the question of whether the Medicare statute, which provides a three-year timeline to the government to request repayment, applies to a private entity providing Medicare benefits (Medicare Advantage plans). The Court’s answer is that the claims filing provision does not bar a claim and that the timeline is not a precondition to filing suit.

Basic primer on Medicare. When Medicare pays for accident-related treatment, it is entitled to be paid by the primary payor. Its payment is made as a conditional payment, conditioned on repayment when other funds become available. In the case of an accident, that could be medical payments coverage, bodily injury coverage or an uninsured/underinsured coverage. If Medicare seeks reimbursement and is denied, the United States can sue the primary plan to recover its payment. If the cause of action is successful, Medicare can be awarded double damages.

Section 1395y(b)(2)(B)(iii) contains a three-year statute of limitations that requires the government to sue within three years of the date that Medicare receives notice of a primary payer’s responsibility to pay.

(iii) Action by United States

…  An action may not be brought by the United States under this clause with respect to payment owed unless the complaint is filed not later than 3 years after the date of the receipt of notice of a settlement, judgment, award, or other payment made pursuant to paragraph (8) relating to such payment owed.

(vi) Claims-filing period

Notwithstanding any other time limits that may exist for filing a claim under an employer group health plan, the United States may seek to recover conditional payments in accordance with this subparagraph where the request for payment is submitted to the entity required or responsible under this subsection to pay with respect to the item or service (or any portion thereof) under a primary plan within the 3-year period beginning on the date on which the item or service was furnished.

A few sections down lies § 1395y(b)(3)(A), which provides a private cause of action available to Medicare beneficiaries and other private entities if a primary plan fails to provide primary payment or reimbursement. This section does not contain a statute of limitations.

(A) Private cause of action

There is established a private cause of action for damages (which shall be in an amount double the amount otherwise provided) in the case of a primary plan which fails to provide for primary payment (or appropriate reimbursement) in accordance with paragraphs (1) and (2)(A).

This is where the Medicare Advantage plan enters. In 1997, Congress enacted Medicare Part C or “Medicare Advantage” program (also known as MAP, Med A, MA, MAO). These plans are administered by private insurance companies that provide Medicare benefits for fixed fees from the Center for Medicare and Medicaid Services. 42 U.S.C. § 1395w-22(a)(4) states that a Medicare Advantage plan may charge a primary plan when a payment “is made secondary pursuant to section 1395y(b)(2).” This established that Medicare Advantage plans can sue under the MSPA to recover from primary plans if they do not pay. These plans must use the MSPA’s private cause of action versus the government cause of action.

In the MSPA Claims v. Kingsway Amigo, 2020 U.S. App. LEXIS 4554 (February 13, 2020), the Court found that there is nothing within the statutory language or structure to suggest the Medicare Advantage plan must comply with the claims filing provision as a prerequisite to seeking reimbursement. The decision starts with a warning as the second sentence of the opinion acknowledges that the case “turns on a careful examination of the often-convoluted rules governing the federal Medicare program.” The court painstakingly reviews the statutory structure of the Medicare statute even with a little levity; the opinion states “Okay, time for a deep breath and a summary.”

The Court found that the dependent “notwithstanding” clause and the permissive term “may” in the actual text of the MSP claims filing provision means that Medicare Advantage plans are not required to bring suit as a prerequisite in the 3-year period. Specifically stating, “[w]ords in a statute must be interpreted according to their ordinary meaning and “may” cannot, by any rendering, mean “must.” The Court finds that when a statute uses the word “may,” it “implies that what follows is a permissive rule and that it does not create a separate bar that private Medicare Advantage plans must overcome in order to sue.

The importance of this decision can’t be overstated.  With no statute of limitations, the private cause of action provisions that MAO’s have been using so aggressively to recover are even more powerful.  Insurers are becoming increasingly more fearful of failure to repay MAOs and this can lead to delays in resolution of a settlement when there are potential Medicare conditional payment or advantage plan liens.  In addition, personal injury lawyers can be the targets of these types of private causes of action as well which in turn gives trial lawyers another thing to worry about when it comes to lien resolution.  Because of these sorts of issues, now more than ever, insurers may want to directly pay MAO liens back directly and demand indemnification.

To avoid these types of scenarios and alleviate concerns, work with Synergy as your partner in bringing to resolution all liens asserted by Medicare Advantage plans, Medicare supplement plans and traditional Medicare outside of litigation. We also offer lien reduction services for many other lien types including ERISA, FEHBA, Military, Disability and Medicaid.

Workers’ Compensation Case: What about the Medicare Set-Aside?

February 13, 2020

An inquiry that Synergy receives on a regular basis involves a Medicare-eligible claimant who has both a workers’ compensation and a third-party liability companion case. The third-party liability claim has resolved and now the workers’ comp carrier has a lien against the liability claim for the amount that has been paid out for past medical/indemnity benefits.   The question becomes:  Is an MSA necessary and does that get handled through workers’ comp, liability or both?

The short answer is it depends.  It depends on how the cases are settled.  In some states, the workers’ comp carrier may be granted what is known as a “holiday” from paying any future medical expenses.[1] Specifically, the holiday can oftentimes be a barrier to washing out the workers’ comp medical claim since the carrier will not have to pay for medicals again until the total amount the claimant received from the third-party case has been spent.

In some states, the lien is negotiated as a percentage based on what the full value of the case is compared to what the client is going to net in their pocket. Once the lien is negotiated, comp is then entitled to an offset for future medical benefits paid on behalf of the claimant. For example, let’s say that the liability case settled for 25% of the estimated full value, and the comp carrier agreed to a waiver of their lien in exchange for a compromised sum. In this example, going forward, the claimant would then be responsible for paying 25% out of pocket towards the cost of their medical care until the comp claim has resolved. It should be noted, if the workers’ comp lien is fully waived at the time of the third-party settlement, then the carrier will not be entitled to an offset on future benefits.

Implications for the Claimant

In both scenarios, if the claimant were to attempt to bill Medicare for accident-related care post-settlement, they would get denied because workers’ comp still has an ongoing responsibility for medicals (ORM).[2] There is the possibility that the claimant could seek medical benefits through either a Medicare Advantage Plan or through private insurance, but these policies typically exclude coverage if there is a workers’ compensation case. So, neither of these solutions would be appropriate. A set-aside must be a consideration but what are the practical implications going forward?

MSA Issue on Holiday States

If the medical claim is not closed out, then the claimant will be forced to pay out of pocket for any accident-related care until the holiday amount has been exhausted from the third-party settlement. Those out of pocket expenses could be much greater than any MSA obligation. Whereas if the workers’ comp claim was resolved, the claimant would then be able to use Medicare, Medicare Advantage, or private insurance coverage. In those states that are entitled to the holiday, the claimant should strongly consider closing out their medical claim with workers’ comp in order to be able to use private health insurance and/or establish a Medicare Set-Aside with the intent to use Medicare for accident-related care once the MSA has been spent appropriately.[3]

MSA Issue on Non-Holiday States

If the workers’ comp claim remains open in those states that are entitled to an offset on future benefits, the claimant would be responsible for paying 25% out of pocket indefinitely for future medical care related to the workers’ comp claim. One way to address this issue is using the settlement proceeds from the third-party cases, the claimant could buy a structured settlement annuity to cover the out of pocket differential.[4] That way, there are guaranteed monies available to take care of the claimant’s out of pocket expenses. If the workers’ comp piece ultimately settles, then the carrier will fund the MSA  as part of the terms of any settlement. If that event were to occur, the claimant could use the structured settlement payments for anything instead of medical expenses.[5]

Conclusion

Finally, if there is a global resolution of both the workers’ comp and the third-party liability case simultaneously, then the MSA should be established through the workers’ comp side since there are formal guidelines in place for workers’ comp cases. That way, there are no unwanted delays in getting the case to the finish line. If the workers’ comp case meets the Centers for Medicare and Medicaid’s review thresholds for workers’ compensation MSAs, then attorneys must decide whether to submit for CMS approval. All parties to a workers’ comp or liability settlement must take into Medicare’s interests when resolving a claim.

 

[1] This is a credit for future benefits.

[2] Medicare will have the ORM information in their system and the claimant’s common working file which will flag/deny anything related to the accident related care.

[3] The exception to this would be if the claimant was receiving attendant care benefits or significant amount of care that is not covered by Medicare or private health insurance.

[4] That structured settlement would function as an informal “MSA” since workers comp pays 75% and the claimant pays the 25% balance. It is almost like a forced MSA on the third-party case.

[5] This assumes a WCMSA is set up and there are funds available to use for medical expenses.