Medicare Lien Surprise: Don’t Ever Rely on a Conditional Payment Letter

An intriguing case, Mayo v NYU Langone Med. Ctr., just came out of the Supreme Court of New York, reminding the trial bar that when resolving a conditional payment for a Medicare beneficiary only the “Final Demand” letter is final. Reliance upon a “Conditional Payment Letter” (CPL) is inappropriate. The Mayo case revolved around whether a settlement agreement may be declared void, based on an incorrect assumption of the Medicare conditional payment amount. The conditional payment amount in this specific case had been no higher than $2,824.50 for about a year according to Medicare CPLs. The Parties entered into a settlement agreement, thinking that the Medicare lien would not exceed $2,824.50, and distributed the funds. After the funds were distributed, the Centers for Medicare and Medicaid Services (CMS) came back and issued a Final Demand of $145,764.08 for related medical care. In the end, the Plaintiff was successful in showing that the settlement agreement was based on the incorrect assumption that the Medicare lien would not exceed $2,824.50, and the Settlement Agreement was vacated.

Synergy’s lien resolution group has seen many cases like this one, where attorneys settle a case based on the assumption that they know the final Medicare lien amount, only to later receive a Final Demand which is much greater than anticipated. Fortunately, Medicare has recently released a tool which is very useful in avoiding such situations. Synergy regularly utilizes this tool to achieve exceptional results in cases for clients which have enrolled in this process prior to settlement. Using this tool can eliminate cases, like Mayo, where attorneys are surprised once they receive a Final Demand from Medicare.

The tool is the Final Conditional Payment Process and was part of the revamped Medicare Secondary Payer Recovery Portal (MSPRP), which came online in January 2016. CMS added functionality to the old MSP Web portal that allows users to notify them when the specified case is approaching settlement, and download time and date stamped Final Conditional Payment Summary forms and final amounts, before reaching a settlement. Additionally, the new portal ensures that relatedness disputes and any other discrepancies are addressed within eleven (11) business days of receipt of dispute documentation.

The process is straightforward and addresses many of the issues that have plagued the plaintiff’s bar in attempting to settle a personal injury action without any certainty of the repayment amount due to Medicare. The process begins when the beneficiary, their attorney, or another representative (SLRS), provides the required notice of pending liability insurance settlement to the appropriate Medicare contractor at least one hundred twenty (120) days before the anticipated date of settlement. If the beneficiary, their attorney, or another representative, believes that claims included in the most up-to-date Conditional Payment Summary form are unrelated to the pending liability insurance “settlement”, they may address discrepancies through a dispute process available through the portal. This dispute may be made once and only once. Following the dispute, CMS has only eleven (11) business days to resolve the dispute. If CMS does not respond within that 11-day window the dispute is automatically granted.

After disputes have been fully resolved, a time and date stamped Final Conditional Payment Letter may be downloaded through the portal. This form will only constitute the Final Conditional Payment amount if settlement is reached within 3 days of the date the Conditional Payment Letter was downloaded. If settlement is not reached within these 3 days, it does not negatively impact your case, but rather will kick you out of this process, and you will be unable to use the Final Conditional Payment Process again for that specific case.

To complete the process, within thirty (30) days of the settlement Medicare is provided the settlement information. This information will include the total settlement/award amount, attorney fee amount or percentage, litigation costs, and any “No-Fault” benefits directly received by the plaintiff. If this information is not provided within thirty (30) days, the Final Conditional Payment amount obtained through the Web portal will expire. To avoid what happened in New York, and to speed the resolution of all your cases involving a Medicare beneficiary, Synergy recommends utilizing all the tools CMS has made available to the trial bar.

Synergy Lien Resolution deals with Medicare on a daily basis. We can help make the process easier and more efficient by handling the resolution of conditional payments directly with Medicare on your behalf. To learn more online about our services, go to Synergy’s Medicare Refund page Should you have questions about how to take advantage of these tools, or if they apply to your case please do not hesitate to contact our experienced and dedicated lien resolution team.

Jasmine Patel

Medicare Lien Resolution Specialist

Big Data and Medicare – Recipe for Disaster

B. Josh Pettingill, MBA, MS, MSCC

Introduction

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

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

Section 111 Reporting: The Purpose

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

Data Reported to CMS

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

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

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

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

Release Language, Reporting & Liability Medicare Set-Asides

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

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

Per 6.5.1 of the CMS Section 111 NGHP User Guide:

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

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

Medicare Common Working File

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

Conclusion

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

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

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

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

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

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

Want more?

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

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

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

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

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

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

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

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

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

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

Medicare Advantage Private Cause of Action is Now Sweeping the Country

Medicare Advantage Private Cause of Action is Now Sweeping the Country

Courts across the country continue to rule that Medicare Advantage Plans (MAP or MAO) are enforceable and shall be entitled to double damages if not repaid in third party liability situations. The trial bar has been aware of this significant exposure since 2016 when Humana Insurance Company v. Paris Blank LLP et al., No. 3:2016cv00079 – Document 23 (E.D. Va. 2016) confirmed that attorneys are personally liable to repay Medicare Advantage plans. (See previous Synergy Blog Post). Adding to the concern is Western Heritage’s ruling which stated that the amount due “shall” be double the amount of the Medicare Advantage plan’s Final Demand (Humana v. Western Heritage Insurance Co., No. 15-11436 (11th Cir. 2016) (See previous Synergy Blog Post)). Two recent cases continue the reasoning that Medicare Advantage Plans, via the Medicare Secondary Payer Act, have a private cause of action and are entitled to double damages when a “primary plan” fails to reimburse them for conditional payments made on behalf of a beneficiary.

The first is Aetna Life Insurance Co. v. Guerreras, et al. filed in the US District Court for the District of Connecticut. In this case, Aetna, who was the Medicare Advantage Plan, filed an action against Nellina Guerrera, her attorneys and the defendant in the personal injury action. Guerrera and her attorneys were dismissed. However, the case is moving forward against the defendant. The private cause of action provision, entitling Aetna to double damages, was not dismissed against Big Y, the defendant, as they were found to be the primary plan or payer as defined by the MSP law. Big Y’s duty was to be sure that Aetna was reimbursed and this was not guaranteed or accomplished by making payment to the insured and their attorney.

The second case is Humana, Inc, United Healthcare Services, Inc. and Aetna, Inc. v. Shrader Sc Associates LLP, out of the US District Court for the Southern District of Texas. In this case, Shrader Associates LLP (a Plaintiff’s law firm representing asbestos trusts) argued that the trusts were not primary plans under the MSP “primary plan” definition. The court disagreed in this opinion, holding that the MSP permits a MAP to sue a primary plan that fails to reimburse it for primary payments.

Unlike the Connecticut case, which held that attorneys are not personally liable, the Texas court found, as has every other court who has dealt with this issue, that attorneys are “primary plans” and are personally liable. In Shrader, the court found that attorneys are expressly listed in the regulations as a “primary plan.”

42 C.F.R. §411.24(g):

“CMS has a right of action to recover its payments from any entity, including a beneficiary, provider, supplier, physician, attorney, State agency or private insurer that has received a primary payment.”

And

42 C.F.R. § 411.24(i)(1):

“If a beneficiary or other party fails to reimburse Medicare within 60 days of receiving primary payment, the primary plan ‘must reimburse Medicare even though it has already reimbursed the beneficiary or other party.”

42 U.S.C. § 1395y(b)(3)(A)

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 [ ] payment … or reimbursement.

Trial Attorneys Beware!

If a trial attorney reports a case to Medicare and the plaintiff is actually on a Medicare Advantage Plan, neither CMS nor BCRC inform the trial attorney. Unless the plaintiff has informed the trial attorney of the existence of a Medicare Advantage Plan, there is no way for the attorney to know. There is no “portal” to check, or central repository of information from which a trial attorney could obtain some level of certainty that any potential repayment obligation is satisfied. Medicare Advantage plans are not required to follow any of the reporting or disclosure obligations that exist for traditional fee-for-service Medicare (A&B) plans. Humana and other Medicare Advantage plans continue to benefit from this lack of transparency to avoid disclosure and to make the private cause of action a profit center funded by the trial bar.

The burden is on the trial attorney to discover and satisfy these Medicare Advantage repayment obligations or potentially be forced to pay double themselves. A few best practices:

Get all insurance cards from your client or their personal representative – Clients on Medicare Advantage plans often refer to their coverage as Medicare.
Confirm effective dates of coverage – Clients can switch back and forth from Medicare A&B to an MAO and back each year.
Potentially a repayment obligation to both CMS and an MAO may exist in the same case for the same accident, so you must check for both.
If you are expecting a large conditional payment amount from CMS and it is small or zero this should be a red flag that potentially an MAO is paying.
Review billing statements from hospitals and providers to determine if an MAO is making payment.
Consult an expert.

Another likely result of this case is that the trial attorney should now expect the same treatment of Medicare Advantage claims by defense counsel as is now the case with Medicare A&B. Defense counsel may demand written confirmation that any purported Medicare Advantage lien has been satisfied, and may be reluctant to disburse funds to the plaintiff with only the expectation that the plaintiff will satisfy this obligation.

Synergy will continue to actively protect injury victims and the attorneys who represent them. If you are having an issue with Medicare or Medicare Advantage plans give us a call and speak to an expert (877) 242-0022.

Janice Vincent

Senior Medicare Lien Resolution Specialist

Cutting Through the Alphabet Soup of Public Benefits

What happens when someone suffers a serious or catastrophic personal physical injury causing permanent disability? Do they get the proper counseling regarding the form of the settlement so as to protect their current assets, preserve public benefits and safeguard the physical injury recovery? Will the recovery be sufficient to pay for all of the victim’s future medical needs without public assistance? Can they recover physically? Can they recover emotionally? All of these issues can be very difficult to face for someone that is seriously injured. Personal injury practitioners who represent disabled clients should be aware of their obligations to advise these clients properly and also understand the hurdles faced by the injury population in terms of recovery both financially as well as physically. This article addresses the issues of major importance when dealing with the form of settlement for a personal injury matter involving a disabled client.

Public Assistance Primer

Because most of a lawyer’s malpractice exposure at settlement is related to public benefit preservation, I think it is important to understand the basics of these benefits. Ethically, a lawyer must be able to explain these matters to the extent that client is informed sufficiently to make educated decisions. There are two primary public benefit programs that are available to those that are injured and disabled. The first is the Medicaid program and the intertwined Supplemental Security Income benefit (“SSI”). The second is the Medicare program and the related Social Security Disability Income/Retirement benefit (“SSDI”). Both programs can be adversely impacted by an injury victim’s receipt of a personal injury recovery. Understanding the basics of these programs and their differences is imperative to protecting the client’s eligibility for these benefits.

Medicaid and Supplemental Security Income (hereinafter SSI) are income and asset sensitive public benefits that require special planning to preserve. In many states, one dollar of SSI benefits automatically provides Medicaid coverage. This is very important, as it is imperative in most situations to preserve some level of SSI benefits if Medicaid coverage is needed in the future. SSI is a cash assistance program administered by the Social Security Administration. It provides financial assistance to needy aged, blind, or disabled individuals. To receive SSI, the individual must be aged (sixty-five or older), blind or disabled and be a U.S. citizen. The recipient must also meet the financial eligibility requirements. Medicaid provides basic health care coverage for those who cannot afford it. It is a state and federally funded program run differently in each state. Eligibility requirements and services available vary by state. Medicaid can be used to supplement Medicare coverage if the client is eligible for both programs (“dual eligible”). For example, Medicaid can pay for prescription drugs as well as Medicare co-payments or deductibles. Because Medicaid and SSI are income and asset sensitive, creation of a special needs trust may be necessary which is discussed in greater detail below.

Medicare and Social Security Disability Income (hereinafter SSDI) benefits are an entitlement and are not income or asset sensitive. Clients who meet Social Security’s definition of disability and have paid in enough quarters into the system can receive disability benefits without regard to their financial situation. The SSDI benefit program is funded by the workforce’s contribution into FICA (social security) or self-employment taxes. Workers earn credits based on their work history and a worker must have enough credits to get SSDI benefits should they become disabled. Medicare is a federal health insurance program. Medicare entitlement commences at age sixty-five or two years after becoming disabled under Social Security’s definition of disability. Medicare coverage is available again without regard to the injury victim’s financial situation. Accordingly a special needs trust is not necessary to protect eligibility for these benefits. However, the MSP may necessitate the use of a Medicare Set Aside discussed in greater detail below.

Laws that Impact Settlement

There are important federal laws that can impact a client’s eligibility for public benefits post settlement that must be explained. There are also financial options provided for under the Internal Revenue Code that should be explored. Below, I will discuss these issues in more detail with a focus on the ethical and malpractice issues raised in discussing the form of a personal injury settlement.

Public Assistance

42 U.S.C. 1396p(d)(4)

The receipt of personal injury proceeds by someone seriously injured can cause ineligibility for needs based government benefit programs. Medicaid and SSI are two such programs. However, there are planning devices that can be utilized to preserve eligibility for disabled injury victims. A special needs trust can be created to hold the recovery and preserve public benefit eligibility since assets held within a special needs trust are not a countable resource for purposes of Medicaid or SSI eligibility. The creation of a special needs trusts is authorized by the Federal law. Trusts commonly referred to as (d)(4)(a) special needs trusts, named after the Federal code section that authorizes their creation, are for those under the age of sixty five. However, another type of trust is authorized under the Federal law with no age restriction and it is called a pooled trust, commonly referred to as a (d)(4)(c) trust.

The 1396p provisions in the United States Code govern the creation and requirements for such trusts. First and foremost, a client must be disabled in order to create a SNT. There are two primary types of trusts that may be created to hold a personal injury recovery each with its own requirements and restrictions. First is the (d)(4)(A) special needs trust which can be established only for those who are disabled and are under age 65. This trust is established with the personal injury victim’s recovery and is established for the victim’s own benefit. It can only be established by a parent, grandparent, guardian or court order. The injury victim can’t create it on his or her own. Second is a (d)(4)(C) trust typically called a Pooled Trust that may be established with the disabled victim’s funds without regard to age. A pooled trust can be established by the injury victim unlike a (d)(4)(A).

The Medicare Secondary Payer Act (“MSP”)

A client who is a current Medicare beneficiary or reasonably expected to become one within 30 months should concern every trial lawyer because of the implications of the Medicare Secondary Payer Act (“MSP”). The MSP is a series of statutory provisions enacted in 1980 as part of the Omnibus Reconciliation Act with the goal of reducing federal health care costs. The MSP provides that if a primary payer exists, Medicare only pays for medical treatment relating to an injury to the extent that the primary payer does not pay. The regulations that implement the MSP provide “[s]ection 1862(b)(2)(A)(ii) of the Act precludes Medicare payments for services to the extent that payment has been made or can reasonably be expected to be made promptly under any of the following” (i) Workers’ compensation; (ii) Liability insurance; (iii) No-fault insurance.

There are two issues that arise when dealing with the application of the MSP: (1) Medicare payments made prior to the date of settlement (conditional payments) which is beyond the scope of this article and (2) future Medicare payments for covered services (Medicare set asides). Since Medicare isn’t supposed to pay for future medical expenses covered by a liability or Workers’ Compensation settlement, judgment or award, CMS recommends that injury victims set aside a sufficient amount to cover future medical expenses that are Medicare covered. CMS’ recommended way to protect an injury victim’s future Medicare benefit eligibility is establishment of a Medicare Set Aside (“MSA”) to pay for injury related care until exhaustion.

In certain cases a Medicare Set Aside may be advisable in order to preserve future eligibility for Medicare coverage. A Medicare set aside allows an injury victim to preserve Medicare benefits by setting aside a portion of the settlement money in a segregated account to pay for future Medicare covered healthcare. The funds in the set aside can only be used for Medicare covered expenses for the client’s injury related care. Once the set aside account is exhausted, the client gets full Medicare coverage without Medicare ever looking to their remaining settlement dollars to provide for any Medicare covered health care. In certain circumstances, Medicare approves the amount to be set aside in writing and agrees to be responsible for all future expenses once the set aside funds are depleted.

The problem is that MSAs are not required by a federal statute even in Workers’ Compensation cases where they are commonplace. There are no regulations, at this time, related to MSAs either. Instead, CMS has intricate “guidelines” and “FAQs” on their website for nearly every aspect of set asides from submission to administration. There are only limited guidelines for liability settlements involving Medicare beneficiaries. While there is no legal requirement that an MSA be created, the failure to do so may result in Medicare refusing to pay for future medical expenses related to the injury until the entire settlement is exhausted. There has been a slow progression towards a CMS “policy” of creating set asides in liability settlements over the last seven years as a result of the Medicare Medicaid SCHIP Extension Act’s passage. All of the uncertainty surrounding set asides creates a difficult situation for Medicare beneficiary-injury victims and contingent liability for legal practitioners as well as other parties involved in litigation involving Medicare beneficiaries. There do appear to be regulations on the horizon for set asides based upon Medicare’s renewed focus on it for 2018. For the time being, a set aside analysis should be considered for settlements or judgments involving current Medicare beneficiaries.

Dual Eligibility: The Intersection of Medicare and Medicaid – SNT/MSA

If you have a client that is a Medicaid and Medicare recipient, extra planning may be in order. If it is determined that a Medicare Set Aside is appropriate, it raises some issues with continued Medicaid eligibility. A Medicare Set Aside account is considered an available resource for purposes of needs based benefits such as SSI/Medicaid. If the Medicare Set Aside account is not set up inside a Special Need Trust, the client will lose Medicaid/SSI eligibility. Therefore, in order for someone with dual eligibility to maintain their Medicaid/SSI benefits the MSA must be put inside a Special Needs Trust. In this instance you would have a hybrid trust which addresses both Medicaid and Medicare. It is a complicated planning tool but one that is essential when you have a client with dual eligibility.

Conclusion

So what do trial lawyers do given all of the foregoing to protect clients who are on government assistance programs? You must put into place a method of screening your files to determine which clients are disabled sufficiently to warrant further planning. Once you identify a client as falling into that category, you must determine if outside experts should be consulted. The easiest way to remember the process once you have identified someone as sufficiently disabled 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 the client about the available planning vehicles or have an outside expert do so. The “D” stands for document what you did in relation to protecting the client. If the client decides that they don’t want any type of planning, a choice they can make, then document the education they received about the issue with them signing an acknowledgement. If they elect to do a settlement plan, hire skilled experts to put together the plan so that they can help you document your file properly to close it compliantly.

Disabled clients especially need counseling given the likelihood they will be receiving some type of public benefits. To prevent being exposed to a malpractice cause of action, the personal injury practitioner should understand the types of public benefits that a disabled client may be eligible for and techniques that are available to preserve those benefits. Having this knowledge will help the lawyer identify disabled clients they may want to refer for further consultation with other experts.

Synergy’s settlement consulting group is one of the premier plaintiff focused settlement planning firms offering services nationwide. Our settlement consulting firm assists injury victims and their attorneys in creating innovative settlement plans for personal injury and workers’ compensation case. We specialize in evaluating cases where clients are eligible for public benefits and advising on special needs trusts, settlement trusts, Medicare set-asides, and financial planning options for the personal injury settlement. We can help injury clients plan for the uncertainties they face by maximizing the use of funds available to the client from both the settlement itself and government benefits.

Defer Taxation of Your Legal Fees and Take Control of Timing of Income

Many attorneys have questions when it comes to how to avoid the spikes in income and the accompanying taxation common with contingent legal fees. There are custom tailored solutions for attorneys who work on a contingent fee basis to avoid these issues. Attorney fee structures and deferred compensation arrangements allow lawyers to avoid taking income all in one taxable year when they earn a large fee. These solutions are pre-tax and tax-deferred investment vehicles only available to an attorney prior to resolving a case and earning the fee. They have to be explored and decided upon prior to signing a release. While these solutions may seem complex, they are actually quite simple. Having an expert advisor such as Synergy who can provide you with different options is critical. The remainder of this blog answers some frequently asked questions about deferral of contingent legal fees.

What is an “Attorney Fee Deferral”?

Attorney’s that work on a contingency fee basis can defer taxation of their fees through the use of several products. An attorney can utilize high end deferred compensation, traditional structured settlement annuities, and offshore assignment programs.

How is it different than a 401(K) or any other retirement plan?

There are two main differences from traditional plans. Traditional plans have deferral limits and a penalty for early withdrawal (prior to 59 ½). To compare:

Deferral Limits: There is no limit on the amount an attorney can defer using these products. Traditional plans are restricted by annual guidelines issued by the IRS. In October, the IRS issued Notice 2017-64 for the calendar year 2018. It reviews the current year 415 plan guidelines. Most of the plans are capped at contributions of $18,500 for this year.

Withdrawal Limitations: Attorney Fee Deferral programs do not have pre-fifty-nine and a half withdrawal penalties or limitations. An attorney can defer his fees early on and start to take distributions with no penalty at any age. In a traditional plan, you would incur a 10% tax penalty for early withdrawal unless you met one of the few exceptions.

How come my CPA or Tax Professional does not know about it?

These programs cater to a very small percentage of the overall US population. Not only is it specific to attorneys, it is specific to the subset that works on a contingency fee basis. Many CPAs aren’t aware of niche tax decisions such as the Childs v. Commissioner decision described below. Once a CPA is educated about these solutions, they quickly see the immense value to the attorney clients they work with on a regular basis.

What is the underlying legal basis that allows this to be done?

In 2001, the Richard A. Childs, et al. v Commissioner of Internal Revenue ruling held that attorneys can defer their fees and pay taxes in the calendar year they are actually received. Under Childs, a lawyer is allowed to defer his or her fees and be paid out over time using a periodic payment schedule and only pay taxes on the amounts as they are received. The programs available all utilize this in their plan design.

Where does my fee go and does it earn interest?

The fee paid over to a life insurance company or trust company which then either funds an annuity contract or investment account. The annuity insurance contract earns a fixed return. The investment account would earn variable interest based on market performance. Similar to most retirement plans, there are a variety of investment choices from fixed interest to high-risk stock portfolios.

Do I need to defer my entire fee?

No, in fact, it is very common to defer as little as $25,000 of a fee. Many attorneys defer portions of several fees each year while others defer in large amounts.

Will deferring my fee guarantee I pay less taxes?

No, the use of a fee deferral does not guarantee that you will pay less in taxes. It does allow more of your money to work for you over time but nobody can predict the future tax tables. The taxes paid will be upon receipt. Some plans do allow you to extend deferrals which may allow you to plan around new tax changes.

Are there limitations I need to consider?

Yes, the main limitation is with accelerating or changing the payment plan. The plan you set up is a part of the underlying settlement agreement and release. It cannot be changed without selling the payments on the secondary market which will result in a loss. Some products do offer loan provisions.

What are some ways you have seen attorneys use the programs?

The primary use of deferred fees is to create a flow of income that can be used for retirement. However, we have clients that use them for a variety of reasons:

Create recurring cash flows to cover law firm costs
Create golden handcuffs for associates
Spread out the tax implication of a large fee
Bridge retirement income between ages 50 and 59 ½

Conclusion

Tax deferral mechanisms for lawyers are a great way to smooth out those income spikes caused by larger fees or just take better control over the timing of income. Because of the variety of options, there is likely something that will best suit your needs and investment preferences. It no longer is just limited to a fixed investment vehicle. Explore these options so that you can take back control over your income. Learn more by visiting https://partnerwithsynergy.com/service/attorney-fee-deferral/

Ahlborn is Alive & Well

Since the landmark decision by the US Supreme Court in Arkansas Department of Health and Human Services v. Ahlborn in 2006, state Medicaid agencies have grappled with how to recover monies spent for injury related care through their third party liability statutes without violating the Ahlborn decision. Many states continued to apply third party recover statutes that seemingly violated Ahlborn. In the 2012 WOS v. EMA matter, the Supreme Court was asked to review one such statute from North Carolina. North Carolina’s statute required that up to one-third of any damages recovered by a beneficiary for their injuries must be paid to Medicaid to reimburse it for payments it made on account of the injury. The Supreme Court, in 2012, found that this statute was not compatible with the federal anti-lien provision and violated the holding of Ahlborn which “precludes attachment or encumbrance” of any portion of a settlement not “designated as payments for medical care”. WOS reaffirmed Ahlborn and strengthened the argument that Medicaid could only recover from the portion of the recovery that represented past medical expenses. After the WOS decision, Congress passed a law (Bipartisan Budget Act of 2013) attempting to legislatively overturn Ahlborn.

The Bipartisan Budget Act (BBA) passed and became law in 2013. The BBA included a provision overturning the Supreme Court decision Arkansas Department of Health and Human Services et al. v. Ahlborn (Ahlborn). Under Ahlborn, Medicaid could only seek reimbursement for medical care received by a Medicaid enrolled plaintiff from the portion of a settlement that was attributable to medical costs. The new provision in the BBA permitted Medicaid to seek full reimbursement for all related medical costs it covered. Section 202(b) of the Bipartisan Budget Act of 2013 made changes in three key areas:

Language was stricken from 42 U.S.C. § 1396a(a)(25)(B) so that the clause “to the extent of such legal liability” was removed;
Language was stricken and added to 42 U.S.C. § 1396a(a)(25)(B) so that rather than expressly limiting Medicaid’s reimbursement rights for payments made for “health care items or services” the language now has no limitation and Medicaid ‘s rights are against “any payments from [a] third party.” and;
Finally, 42 U.S.C. § 1396k(a)(1)(A) was changed to remove the limitation on Medicaid’s recovery rights which previously had stated that those rights extended only to payments for “medical care” now there is no limitation and their rights are against “any payment.”

AAJ was quick to understand the significance of the repeal of Ahlborn and in 2013 alerted the membership stating:

“The Bipartisan Budget Act (BBA) which was just approved by Congress and signed into law contains language damaging to plaintiffs covered by Medicaid … The provision in the new law overturns a unanimous 2006 United States Supreme Court decision in United States vs. Ahlborn. In Ahlborn, the Court ruled that only the portion of the settlement that represented payment for medical expenses could be claimed by the state Medicaid agency. The BBA allows a state to claim ALL of a settlement or judgment. The BBA also counters a 2013 Supreme Court decision (Wos vs. E.M.A.) that rejected (6-3) North Carolina’s lien on Medicaid claimants’ tort recoveries. We expect the result of the new law to be that plaintiffs who are Medicaid recipients will recover less and in many cases will be unable to pursue claims at all because any recovery would have to be reimbursed to Medicaid.”

Due to AAJ’s efforts and others who lobbied against its implementation, the BBA’s harmful Medicaid lien provisions never took effect and were finally permanently repealed this past week. After its latest victory on behalf of injury victims, AAJ’s CEO Linda Lipsen said:

“I am pleased to announce that after years of hard work, we were able to secure a permanent and retroactive repeal of the Bipartisan Budget Act (BBA) language that overturned the Supreme Court decision Arkansas Department of Health and Human Services et al. v. Ahlborn (Ahlborn).

In a 9-0 decision, the Court held in Ahlborn that Medicaid could only seek reimbursement from Medicaid enrollees from the portion of a settlement attributable to medical costs. The Ahlborn decision was universally lauded as promoting fair and proportionate settlements for Medicaid recipients. But, in 2013, the BBA was enacted and included a provision overturning Ahlborn. This granted Medicaid a right of first recovery for full reimbursement of covered medical costs before plaintiffs could receive any recovery for lost wages, non-economic damages, or any other type of recovery.

AAJ worked hard to delay implementation of the harmful BBA provision and it was initially delayed until October 2016. We secured a second delay which ran through October 1, 2017, but expired, effectively overturning Ahlborn. Since the expiration of the second delay, AAJ has been working around the clock to secure a permanent and retroactive repeal of the harmful BBA provision. This repeal was finally realized in the budget deal reached by the House and Senate this week.

We believe this is a great victory that will ensure Medicaid recipients retain access to the courts. I want to thank the AAJ staff, especially Sarah Rooney, who worked tirelessly to secure this incredible result!”

Synergy enthusiastically agrees with the AAJ’s comment that this is a “great victory” for Medicaid recipients and for the trial lawyers who serve them. Medicaid’s recovery rights now continue to be limited to only the portion of a Medicaid beneficiary’s tort judgment or settlement designated as payments for [past] medical care. Pursuant to WOS v. EMA, “[t]he federal Medicaid statute’s anti-lien provision, 42 U. S. C. §1396p(a)(1), pre-empts a State’s effort to take any portion of a Medicaid beneficiary’s tort judgment or settlement not “designated as payments for medical care,” Arkansas Dept. of Health and Human Servs. v. Ahlborn, 547 U. S. 268, 284.” Synergy’s lien resolution group continues to fight on behalf of Medicaid beneficiaries when the state Medicaid agency attempts to take more than the law allows. Armed with Ahlborn and WOS, the fight is made easier.

When attempting to resolve a Medicaid lien regardless of Ahlborn, utilizing state law is now more important than ever. Many state statutes allow for attorney fee reductions, reductions for litigation costs, and even for compromises based upon equity. Often these reduction provisions are not known, and certainly not raised, by the various recovery vendors who work on behalf of state Medicaid agencies so it is very important to be informed and use the appropriate reduction arguments available.

An example of the type of issues that still remain in negotiating Medicaid liens, is whether or not the Medicaid plan is traditional Medicaid or a Medicaid HMO. In some states, such as our home state of Florida, this makes a significant difference as to the strength of the plan’s recovery rights and methods for seeking reduction.

To best address these complex issues for your clients we encourage you to contact one of Synergy’s Medicaid lien specialists.

Limitations on Hospital/Provider Liens When the Plaintiff is on Medicare

One of the most difficult issues trial counsel must resolve involves addressing hospitals/providers liens for Medicare clients. Recently the Centers for Medicare and Medicaid Services (CMS), via the Medicare Learning Network (MLN), released policy memo SE17018 which provides excellent and concise answers to most of these issues. This memo addresses when a hospital/provider should bill, how much they can bill, and when they must withdraw their claim against the plaintiff.

Hospitals/Providers are increasingly telling trial counsel that they cannot bill Medicare in third party liability (TPL) situations. Although providers, physicians, and other suppliers must bill liability insurance rather than bill Medicare, after the “promptly period” they can submit bills to CMS. The “promptly period” is a 120-day period that begins to run when the hospital/provider submits a bill to an insurer, files a lien against the plaintiff, provides the service or discharges the plaintiff from the hospital, whichever is earliest. After this 120 days has expired the hospital/provider has the option of either submitting the claim to CMS or maintaining their claim against the plaintiff. They cannot do both.

According to the memo:

“Billing both Medicare and maintaining a claim against the liability insurance/beneficiary’s liability insurance settlement is not permitted.” Id. A2; Medicare Secondary Payer Recovery Manual Chapter 2, Section 40.2(B).

The expiration of the “timely filing period” is another vital event to place in trial counsel’s calendar. The “timely filing period” is one calendar year from the date of service, and the existence of liability insurance does not toll or extend this filing period. This is critcal information for the trial attorney as once the “timely filing period” has passed the hospital/provider must withdraw their claim against the plaintiff.

According to the memo:

“The existence of a liability insurance or potential liability insurance situation does not change or extend Medicare’s timely filing requirements…. claims/liens against the liability insurance/beneficiary’s liability insurance settlement (with certain exceptions) be withdrawn once the timely filing period has expired.” Id. A4

And

Claims/liens against … liability settlement must be dropped once Medicare’s timely filing period has expired Id. A2

And

“CMS’ liability insurance billing policy is that providers are required to drop their claims/liens and terminate all billing efforts to collect from a liability insurer or a beneficiary once the Medicare timely filing period expires[.]” Id. A5

In complex cases where litigation takes longer than one year, trial counsel should be able to use this memo to have the hospitals/providers withdraw their claims. Additionally, in cases that do resolve within the one year “timely filing period”, this memo along with Chapter 2 of the Medicare Secondary Payer Recovery Manual provides separate limitations on the recovery rights of hospitals and providers.

If the hospital/provider does submit a bill to Medicare then they are forever limited to the Medicare approved payment amount. This is true even if the hospital/provider has their bill denied by CMS, or even if they refund to Medicare the amount they were paid.

According to the memo:

“Is limited to the Medicare approved amount … once they have billed Medicare, even if they return any payment received from Medicare.” Id. A6, A2, See; Medicare Secondary Payer Recovery Manual Chapter 2, Section 40.2(D).

Finally, if the hospital/provider did not submit a bill to Medicare, but rather after the expiration of the “promptly period” asserted a claim against the plaintiff, then their claim must be reduced by procurement costs.

According to the memo:

“May charge actual charges but is limited to the amount available from the settlement less applicable procurement costs (for example, attorney fees, other litigation costs).” Id. A6; See Also, Medicare Secondary Payer Recovery Manual Chapter 2, Section 40.2(D).

Understanding and calendaring the “promptly period” and “timely filing period” is essential for trial attorneys who represent Medicare beneficiaries. The billing departments of most hospitals and providers are staffed with individuals who do not recognize the significance of the Medicare billing guidelines. It is common for these groups to assert unenforceable repayment demands, and knowing how best to turn these rules to your client’s benefit will result in a significant increase to the injury victim’s net recovery.

Liability Medicare Set Asides (LMSAs): October is Here! Now What?

By B. Josh Pettingill, MBA, MS, MSCC & Jason D. Lazarus, J.D., LL.M., MSCC

The debate regarding addressing Medicare’s future interest in liability settlements is filled with nuance and subtleties. An essential step in understanding the big picture is starting with the genesis of set asides, the Medicare Secondary Payer (MSP) Statute. Although, the finer points of this issue may leave room for interpretation, the MSP is express and clear. It precludes Medicare from paying for any item or service when payment has been made by a liability insurance policy, self-insured or no fault plan¹.

The debate is limited to the fashion in which we address a statue that has not been enforced up until this point as it relates to payments made by Medicare after settlement. The fact that a law has not been enforced in this way in the past does not mean it is irrelevant, especially when recent steps by the Centers for Medicare and Medicaid Services (CMS) begin to do just that. This article will examine the form, function and attempts at regulation surrounding set asides in liability cases.

A Medicare Set Aside (MSA) is currently not required by any regulation or statute, even in workers’ compensation cases. However, an MSA, according to CMS, is Medicare’s preferred method for protecting its future interests when the settlement funds future medical care. Starting October 1st, CMS is purportedly going to deny making payments for accident related care post-settlement of a liability or no-fault claim on the basis they should be paid for out of an MSA. In its conclusion, this article will provide suggested best practices to being complaint with the MSP statute and avoid possible Medicare denials from ever occurring.

Historical Enforcement of the MSP Statute

Enforcement of the MSP as it pertains to future Medicare covered services began back in 2001 when CMS announced in a policy memorandum the requirement to set aside a portion of workers’ compensation settlements allocated to future Medicare covered expenses². Accordingly, the MSP future medicals enforcement only took place in workers’ compensation matters. The memorandum was the advent of the Workers’ Compensation Medicare set aside (WCMSA). In 2007, Section 111 Reporting Requirements (part of the Medicare, Medicaid, and SCHIP Extension Act) added a mechanism for CMS to collect date about Medicare beneficiaries who receive liability, workers’ compensation or no-fault liability settlements, judgments or awards³. This Section 111 Reporting Requirement gave CMS further ammunition to track compensable ICD codes related to the liability case. A tremendous amount of electronic data gets reported every day now for settlements of 1k or greater involving a Medicare beneficiary.

Up until now, there has been little to no enforcement of MSP for future medicals in the context of liability settlements. In most instances, Medicare has continued to process medical claims as if there never were a recovery made for future medical care. On very rare occasions, they would deny medial claims submitted by providers. However, the frequency of denials is likely to increase going forward. Therein is the real risk associated with not considering Medicare’s future interests going forward. As will become evident from the next section of the article, there are new developments which makes the threat of denials much more likely.

MM9893 and SE17019 Alerts to the Medical Community

According to the CMS alert that was sent out in February⁴, starting October 1, 2017 “Medicare and their contractors will reject medical claims submitted post-resolution of a liability settlement on the basis those claims “should be paid from a Liability Medicare Set Aside (LMSA)”⁵. The commentary cited the basis for rejection of the claims as enforcement of the MSP statute. It also stated that Liability and No-Fault MSP claims that do not have an MSA “will continue to be processed under current MSP claims processing instructions.” CMS also warned medical providers to make sure their billing staffs were aware of changes . These “new policy changes” have the medical community, the plaintiff’s bar and the insurance industry all scrambling to get their internal procedures in place to address this change in how CMS processes liability and no-fault medical claims.

Last week, CMS issued a subsequent alert to the medical community on September 19th⁷. It reiterated that Medicare is supposed to be secondary to all forms of liability, no-fault and workers’ compensation insurance as it relates to future medicals. The purpose of the alert was to remind medical providers that they should be billing liability, no-fault or workers’ compensation Medicare set aside arrangements first before they attempt to collect payment from Medicare or its contractors. The other key takeaways were as follows:

The obligation to protect the Medicare trust funds exists regardless of whether or not there is a formal CMS approved MSA amount.
The CMS review process is voluntary for WCMSA amounts, and there is no formal process for reviewing proposed LMSA or NFMSA amounts, a Medicare beneficiary may or may not have documentation they can provide the physician, provider, or supplier from Medicare approving a Medicare Set-Aside amount.

The number of LMSAs and NFMSAs that currently exist or have been previously established is de minimis. That is the apparent good news; the direct impact to plaintiffs should potentially be minimal. However, there still may be unintended (or intended) consequences for Medicare beneficiaries. Medical providers may be overly concerned about Medicare not getting paid back when they send a claim to be processed and reimbursed. Is it possible that the medical providers will implement a more stringent internal screening process for both new and current patient’s claims. As a result, they may refuse to treat the plaintiff if they believe that Medicare will not reimburse them. For example, what if they started asking the following questions on their intake?

Have you been injured in a personal injury accident in the last 3 years?
Did you have a personal injury claim that was resolved in the last 3 years?
If yes, what were the compensable body parts claimed?
Did you establish a Medicare Set Aside arrangement as part of the resolution?
If yes, how much money was set aside?

At minimum, these alerts are the latest signals to support that CMS is continuing its pursuit of establishing formal guidelines for liability MSAs. Although, these alerts do not create any new regulations or statutes regarding MSP compliance, that does not mean CMS will simply continue to sit back and not enforce the MSP statute. The alerts do create policies which can lead to denials of care or make it much more likely.

CMS Expands Voluntary Submission Thresholds to include LMSAs and NFMSAs.
In addition to the alerts CMS has sent to providers, they began a search for a new set aside review contractor. When CMS put out the request for a new workers’ compensation review contractor in December of last year, they said the new review contractor would not only review workers’ compensation MSAs but also liability and no-fault MSAs. Specifically, there would be a two tier review process for liability and no-fault MSA submissions⁸. The first tier would be a full review like what currently takes place with workers’ compensation MSAs that meet the submission thresholds. The second tier would be a “cursory” review that involves a less stringent methodology for cases that fall within a different threshold (yet to be determined by CMS).

CMS recently selected their new workers’ compensation review contractor⁹. On September 1st, the contract was awarded to Capitol Bridge LLC. It should be noted, that the value of the contract is over $60,000,000 – that is more than 10x the dollar amount the last review contractor received¹⁰. It is highly likely that the enormous compensation increase is due in part that the workload is going to increase substantially if/when they add voluntary submission thresholds for LMSA and NFMSAs¹¹. Starting in 2018, the new review contractor will step into said role. In fact, the new review contractor has already initiated training sequences under the old review contractor. Whether or not voluntary review thresholds are ever implemented for LMSAs and NFMSAS, all parties must be preemptive in identifying potential claims involving Medicare beneficiaries.

What changes are going to happen starting October First and beyond? Here are some possible scenarios:

Nothing is going to happen. Medicare continues to process claims like they always have done with the occasional audit of a Medicare beneficiary.
CMS issues a new policy memorandum to include voluntary submission review thresholds regarding LMSAs.
The frequency of Medicare post-settlement denials increases for liability and no-fault claims.
CMS issues a LMSA Reference Guide similar to what they have in workers’ compensation.
CMS issues formal guidelines for LMSAs and NFMSAs in 2018.

Let’s examine the most likely scenario that may play out in the immediate future.

The most likely scenario is that post-settlement denials will start to increase for situations when Medicare’s interests were not adequately considered.

Through the Section 111 reporting requirement, as discussed above, Medicare has developed a comprehensive system to track all settlements with current Medicare beneficiaries. In 2015, Medicare implemented the new ICD coding system. ICD-10 has 140,000 codes—more than 8 times the 17,000 codes in ICD-9. The additional codes enable responsible reporting entities to be more specific on claim forms in reporting the care provided to plaintiffs. What this means for plaintiffs is that when they go to treat for accident related care in the future, if treatment consists of a body part or ICD code previously reported to Medicare as part of the settlement, CMS may send a letter of denial or a treater might refuse to provide care. Consequently, the plaintiff may lose their Medicare benefits for accident related care indefinitely, until they have properly reimbursed Medicare for any past claims they have denied as well as sufficient funds have been spent down to adequately protect their “future interests”.

Insurance carriers and payers will start to be more stringent on incorporating an LMSA as part of the terms of the settlement.

Since 2001, insurance companies have been using Worker’s Compensation Medicare Set Aside agreements (WCMSA) as a tool to resolve cases involving a Medicare beneficiary with a future medical component¹². Trying to use a WCMSA in a liability claim is like putting a square peg in a round hole. There is a fundamental difference between worker’s compensation claims and liability claims. The primary issue with WCMSA’s is they fully fund future Medicare allowable expenses related to an industrial accident since the carrier is liable for all future medical costs. Whereas, most if not, all liability cases resolve for a compromised amount due to issues such as pre-existing conditions, liability, causation, caps on damages and limited coverage. The common result in liability settlements involving Medicare beneficiaries is a disagreement between the parties as to what should be done for MSP compliance once the liability claim resolves. This disagreement causes delays in the settlement and ends up costing all parties involved. In the absence of formal guidelines or voluntary review thresholds for LMSAs, all MSP compliance issues must be discussed early in the settlement process to avoid these delays. An early dialogue about expectations of what will be done to protect Medicare’s interests also makes imminent sense to avoid possible complications at settlement.

Addressing Medicare’s Future Interests without a CMS Approved MSA

Before settling their case, the plaintiff needs to understand this risk of potential denial of accident related care related to Mandatory Insurer Reporting under Section 111¹³. If a settlement will be reported to Medicare under the Mandatory Insurer Reporting laws (Section 111 reporting), Medicare will be on notice of the settlement and the injury related ICD codes. Denials will be related to “diagnosis codes or family of diagnosis codes”¹⁴. Such a denial could require a lengthy internal appeals process before Medicare payments for accident related care might have to be reinstated by a Federal District Court.

While there is currently no regulation or law that mandates a liability Medicare set aside, it does not mean there will be no consequences when there is an attempt by the plaintiff to shift the burden to Medicare for future injury-related care. It is very clear from Medicare’s public statements that the agency believes that set asides are the best method to protect the program from paying for injury-related care when future medicals are funded by a settlement. That does not mean it is the only way to demonstrate that Medicare’s interests were considered when a case involving a Medicare beneficiary is settled, it simply means it is one way.

From a practical standpoint, any of the below options could theoretically serve as alternatives to doing a liability set aside:

Plaintiff can use other health insurance to pay for accident related care.
Plaintiff can pay out of pocket as they go for treatment.
Plaintiff can set up a Medical Savings Account if they qualify.
Plaintiff can set up a settlement preservation trust to earmark funds for requisite healthcare.
Plaintiff can purchase a structured settlement to designate for any and all future medical care.

With any of these above options, there is no shift in burden for Medicare to pay for accident related care. Although it is certainly not recommended, another option would be for the plaintiff to do absolutely nothing. They can do nothing and continue to bill Medicare for accident related care after their case has resolved. If Medicare ever audited the file or established new conditional payments, then the plaintiff could simply pay Medicare back at their reduced fee schedule. However, if nothing is done to shift that burden away from Medicare, CMS could deny paying benefits for accident related care indefinitely, or up to the entire amount of the plaintiff’s settlement has been spent for accident related care. If the plaintiff is receiving Social Security disability or retirement benefits, the government can also garnish those monthly payments to recoup an overpayment or a conditional payment. Plaintiff attorneys and insurance carriers alike have to stop speculating and have to start preparing for the potential October 1st changes.

Conclusion
The MSP was established over thirty five years ago but this law is still the governing authority as it relates to liability and no-fault claims involving Medicare beneficiaries. The only debate that remains is, what are going to be the next action steps taken by CMS to fully and readily enforce the MSP statute as it relates to futures? It is critical to note, CMS does not have to issue any new formal policies for them to deny making payments for accident related claims post-settlement. They do not have to wait and see whether or not an LMSA or NFMSA has been established. Under the MSP, Medicare is always supposed to be a secondary payer to all forms of insurance.

Protecting Medicare’s interests on liability settlements should be a collaborative process for all parties involved. The parties must openly communicate (early and often) to determine proper Section 111 reporting data, the Medicare eligibility status of the plaintiff, as well as potential MSP release language. They must also be proactive regarding the potential for an LMSA: which party is going to handle, and how much, if any, is going to be set aside based on all of the facts of the case. There is currently no one size fits all solution to MSP compliance. The fundamental question all parties must ask when resolving a claim has to be, “does the resolution of this claim shift the burden to Medicare to pay for future accident related care?”
CMS has stated the set aside issue is the plaintiff’s responsibility and the role of the defendant is to report settlements with current Medicare beneficiaries under Section 111 reporting . Plaintiff’s counsel has legal malpractice risks if they fail to properly advise the client regarding the set aside issue when they are currently eligible to receive Medicare benefits. It is incumbent upon all parties to a liability or no-fault settlement to consult with competent MSP compliance experts, advise their respective clients on what the potential implications are for not properly taking into account Medicare’s interests, and document the file as to what was or wasn’t done to protect Medicare’s future interests.

[1] The MSP is a series of statutory provisions enacted in 1981 as part of the Omnibus Reconciliation Act with the goal of reducing federal health care costs. The MSP provides that if a primary payer exists, Medicare only pays for medical treatment relating to an injury to the extent that the primary payer does not pay. CFR Title 42, Part 411, Subpart B, Section 411.20 (2) provides “[s]ection 1862(b)(2)(A)(ii) of the Act precludes Medicare payments for services to the extent that payment has been made or can reasonably be expected to be made promptly under any of the following” (i) Workers’ compensation; (ii) Liability insurance; (iii) No-fault insurance. The one exception is conditional payments pre-settlement.
[2] Parashar B. Patel, Medicare Secondary Payer Statute: Medicare Set-Aside Arrangements, Centers for Medicare and Medicaid Services Memorandum, July 23, 2001
[3] https://www.cms.gov/medicare/coordination-of-benefits-and-recovery/mandatory-insurer-reporting-for-non-group-health-plans/overview.html
[4] This informal alert was reissued and summarized by Medicare Learning Network in June 2017.
[5] https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/2017Downloads/R1787OTN.pdf
[6] https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/Downloads/MM9893.pdf
[7] https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/Downloads/SE17019.pdf
[8]https://www.fbo.gov/index?s=opportunity&mode=form&tab=core&id=d3b45cd4fe90079ae5eaf5b2a96b9298&_cview=0
[9]https://www.fbo.gov/index?s=opportunity&mode=form&id=244bfc6f69ffabc8e368ab7eb68d01d4&tab=core&tabmode=list&=
[10] The last review contractor received a $6 million contract.
[11] The number of LMSA and NFMSA submissions could result in as many as 51,000 per year according to the draft proposal for the new review contractor.
[12] Parashar B. Patel, Medicare Secondary Payer Statute: Medicare Set-Aside Arrangements, Centers for Medicare and Medicaid Services Memorandum, July 23, 2001.
[13] For years, Synergy has stressed the importance of proper reporting of ICD codes. Failure by the responsible reporting entities (RREs) to report a claim in a timely manner can result in penalties of up to $1,000 per day. They can also be on the hook for double damages if Medicare’s reimbursement claim is not resolved at the time of resolution.
[14] MM9893 alert referenced not only individual ICD codes but family of ICD codes could trigger a denial.
[15] Stalcup CMS Handout

Total “Medicare” Compliance in a New Age

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

“Although the statute is structurally complex—a complexity that has produced considerable confusion among courts attempting to construe it—the MSP’s function is straightforward.” US v. Baxter Intern., Inc., 345 F. 3d 866 (11th Cir. 2003). Attorneys are consistently exposed to liability risks when handling cases for Medicare beneficiaries. This practitioner-based article addresses the growing concerns when working for Medicare beneficiaries and advises attorneys how to deal with Medicare issues strategically instead of ending up in federal court. Jason Lazarus develop answers to help address attorney’s questions when working with Medicare beneficiaries. In this Article, the author reviews the basics of Medicare coverage. Once representing a Medicare beneficiary, both the attorney and Medicare beneficiary client should be aware of the implications of the Medicare Secondary Payer Act as it relates to Conditional Payments as well as Medicare set asides. The Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA), triggers important compliance requirements impacting attorneys involved in the representation of those who are Medicare eligible. Next the author suggests ways to navigate the resolution process for clients and how to deal with conditional payment issues before turning to Part C Advantage Plans (MAO) as the “hidden” lien. The author discusses the threat of Medicare’s denial of care in future personal injury cases and the four levels of internal appeals process. The author urges lawyers to stay aware and educated when working for Medicare beneficiaries.

To View this article as published by The Elder Law Journal at the University of Illinois College of Law »

About the Author

Jason Lazarus is a founding Principal and Chief Executive Officer of Synergy Settlement Services. He is also the managing partner and founder of the Special Needs Law Firm in Florida. Formerly he was the President of a National Settlement Planning firm and previously spent ten years assisting injury victims as a settlement planner. Prior to his experience starting his settlement practice, Mr. Lazarus practiced as a Medical Malpractice and Worker’s Compensation attorney. Mr. Lazarus has presented and published work on Elder Law topics in AAJ’s Trial Magazine, NAELA Journal, ElderLaw Report, and more. Mr. Lazarus received his J.D. from Florida State University and his LL.M. in Elder Law from Stetson University College of Law. Mr. Lazarus is also a Medicare Set Aside Consultant certified by the International Commission on Health Care Certification.