What Sets SSNPT Apart?

Clients who receive needs based benefits such as Medicaid and SSI require special planning to protect eligibility for those public benefits. More and more frequently, a pooled special needs trust is being utilized to preserve eligibility given the ease with which one can be set up and the relatively low cost. (more…)

Distributions from Special Needs Trusts: In Kind Distributions, Credit Cards, Gift Cards, or Debit Cards

You are the trustee of a special needs trust. Your beneficiary (Beth) lives in public housing, receives SSI (Supplemental Security Income) and MA (Medical Assistance), and has just asked you for a $200 gift card to Target so that she can buy headphones, clothes, toiletries, and some food. (more…)

Medicare Advantage Plans and Liability Medicare Set Asides

By B. Josh Pettingill, MBA, MS, MSCC

Traditional Medicare vs. Medicare Advantage Plans

There is often confusion between “Traditional Medicare”, Part A and Part B coverage and Medicare Advantage Plans. It is critical to identify exactly what benefits your client is actually receiving before the resolution of their case. The best time to confirm public benefit eligibility is during the intake of the case. In addition to a detailed client interview, a copy of all health insurance cards should be requested. That way, appropriate Medicare secondary payer (MSP) compliance or other planning can be undertaken ahead of resolution of the case.

Some clients elect out of Part A and B of Medicare coverage and instead opt for Part C, Medicare Advantage plan coverage. What happens when your client is on a Medicare Advantage Plan in terms of MSP compliance? Do Medicare’s future interests still need to be taken into account? Should a Medicare set aside (MSA) still be a consideration? Before we address these questions, let’s take a look at the difference between Traditional Medicare Plans versus Medicare Advantage Plans.

Traditional Medicare Eligibility – Part A and Part B

In order to be eligible for Medicare benefits, you must fall into one of the following categories:

You are age 65, a US citizen and have worked for at least 10 years, earning 40 credits.
You have a disability and have been receiving Social Security Disability Insurance (SSDI) for more than 24 months.
You have been diagnosed with End-Stage Renal Disease.
You have been diagnosed with Amyotrophic Lateral Sclerosis (ALS), commonly known as Lou Gehrig’s Disease.

If you are unsure if your client is eligible to receive Social Security benefits, then a Social Security Consent for Release of Information form can be submitted to your local Social Security office to verify eligibility. This form is also known as the Form SSA-3288. The form can be downloaded at http://www.ssa.gov/forms/ssa-3288.pdf.

Part A & Part B Coverage

Medicare Part A (hospital insurance) covers inpatient care at a hospital, skilled nursing facility (SNF), and hospice. Part A also covers services like lab tests, surgery, doctor visits, and home health care. Medicare Part B (medical insurance) covers doctor and other health care providers’ services, outpatient care, durable medical equipment, home health care, and some preventive services.

Practical Implications

If your client only has Part A and Part B as their primary source of health insurance, then Medicare may refuse payment for accident related care post-settlement that the client was compensated for in the underlying settlement. Through the Section 111 reporting requirement, Medicare has developed a comprehensive system to track all current Medicare beneficiaries. Beginning later this year, Medicare is implementing the new ICD coding system. ICD-10 has 141,000 codes—more than 8 times the 17,000 codes in ICD-9. The additional codes will 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. 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 interests. In order to avoid this happening, a Medicare set aside can be established at the time of settlement.

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, most Medicare services are covered through the plan and are not paid for under original Medicare. Most Medicare Advantage Plans offer prescription drug coverage as well. In order to be eligible for a Medicare Advantage Plan, you must be eligible for Medicare Part A and Part B. Source: www.Medicare.gov

Practical Implications

If the plaintiff has a Medicare Advantage Plan, they are not using traditional Medicare coverage. A Medicare Part C Plan is comparable to any other private health insurance plan. Medicare Part A and Part B claims payments are processed through CMS. In contrast, Medicare Advantage Plans are offered by private insurance companies, who receive compensation from the federal government to provide all Part A and B benefits to enrollees, but do not process claims through the CMS. CMS cannot deny a claim if the bill is never submitted to them. With a Medicare Advantage Plan, all the medical claims are processed by a private insurance company.

This private insurance company will serve as the primary payer for accident related treatment. Therefore, an argument could be made that as long as the Part C coverage is maintained, the plaintiff will never use Medicare Part A or Part B. Consequently, there is no shift in the burden to Medicare to pay for future accident related treatment.

Risks to Consider

The decision to implement an MSA is ultimately the plaintiff’s decision to make. The reality is if the plaintiff were to ever lose their Part C coverage, then a burden shift to Medicare will occur. Medicare Part A and Part B will become the primary payer of accident related treatment. We often have clients who still elect to establish a MSA account to ensure there is an insurance policy in the event they ever lost their Part C coverage.

Legal Basis for Protecting Medicare’s Future Interests

The legal basis for addressing Medicare’s future interests comes from Section 1862(b)(2)(A)(ii) of the Social Security, Act [42 USC 1395 y(b)(2)] which precludes Medicare payment for services to the extent that payment has been made or can reasonably be expected to be made promptly under liability insurance. The fundamental question every attorney 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?” Medicare is always supposed to be secondary to all forms of insurance according to federal law. This means that when there is a primary payer for injury related care, they are supposed to pay first. With a Part C Plan, the burden of future medical expenses in a personal injury case will not be shifted to Medicare.

Should an MSA be a Consideration for a Plaintiff with a Medicare Advantage Plan?

Part C plans have begun asserting that they have the same rights as Medicare under the MSP and its implementing regulations. Case law is evolving on that issue but the leaning seems to be towards that interpretation of the MSP. That being said, MSAs were created by CMS as a means to protect Medicare’s future interests. MSAs come from Medicare’s interpretation of the MSP and not from any regulation, statute 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 have legal basis to insist upon them in liability settlements.

Despite the foregoing, it is important to bear in mind that an injury victim while currently enrolled in Part C could switch back to Parts A/B (traditional Medicare). If the client believes they will maintain their Part C Plan for their lifetime, then they may opt not to do an MSA since there will never be a shift in burden to CMS for future medicals. However, if they were to go back to traditional Medicare, CMS may deny claims for accident related care indefinitely. CMS has made it clear that it the plaintiff counsel’s obligation to determine whether or not a Medicare set aside (MSA) should be implemented. Synergy has developed a multifaceted process to ensure plaintiff attorneys are addressing the protection of Medicare’s future interests as to comply with the Medicare Secondary Payer Act. This simple, straightforward process guides plaintiff attorneys as to adequately comply with plaintiff’s obligations under the Medicare Secondary Payer Act.

Step 1: Evaluation of Case

Synergy’s experienced staff will gather case specific information and necessary documentation.

Step 2: Findings

Relying on their expertise and experience, Synergy will recommend a Medicare Compliance solution.

No MSA letter
MSA Consultation: plaintiff executed wavier and acknowledgment for counsel
MSA Estimate
Allocation

Step 3: Deliverable

If it is determined that the MSA is not applicable, then Synergy provides a letter to counsel memorializing Medicare’s interests have adequately been taken into account (No MSA letter). If it is determined an MSA is appropriate, then Synergy can provide:

Plaintiff executed wavier for counsel (Client does not want MSA despite recommendation)
MSA Estimate (MSA analysis with future cost projection)
Allocation (Full “Cadillac” MSA)

Conclusion

If you have a client who is a current Medicare beneficiary that is going to require accident related care in the future and there are funds earmarked towards future medical treatment, a Medicare set aside should be considered and fully explained to the client. If you have a client who is enrolled in a Medicare Advantage plan, then they must be properly advised on the potential risks of losing Part A&B coverage should they need to go back to them. There are numerous ways to deal with Medicare secondary payer compliance to ensure both your firm, as well as your clients are protected. The recommended course of action remains the same for plaintiffs on Part A, Part B or Part C coverage: Consult, Advise and Document (“CAD”). Consult competent experts such as those at Synergy. Advise the client regarding potential implications if they are a Medicare beneficiary and receive money for future medicals. Document your file regarding what you did to address Medicare’s future interests and go on to the next case.

Introducing Medicare 360° – A Complete Medicare Secondary Payer Compliance Solution

Synergy Settlement Services’ experts will resolve the most difficult and complex Medicare Secondary Payer compliance challenges facing your firm. Medicare 360° is the complete solution for Medicare conditional payment resolution and Medicare Set Aside (MSA) allocations. Medicare 360° combines the most powerful services from our lien resolution group and our MSP compliance group into one solution.

Medicare 360° Benefits:

• Complete Medicare Secondary Payer Compliance to close cases rapidly and compliantly for Medicare beneficiaries

• Very reasonable cost

• A comprehensive Medicare compliance solution that handles the entire process from reporting potential for third party liability to the Medicare contractor, resolving Medicare’s repayment demands (including the first two (2) levels of administrative appeals) and protection of the plaintiff’s future Medicare eligibility

• Plaintiff centric services (Synergy doesn’t do defense work)

• Complete outsourcing solution for the trial attorney and their firm

• Peace of mind knowing that it is being handled by a team of highly credentialed MSP experts

Medicare 360° Services:

Phase 1: Medicare Conditional Payment Services – Medicare Conditional Payment Audit and Verification
This service includes the audit and verification of conditional payments for cases that originate from a personal injury case. The process includes reporting to the Centers for Medicare and Medicaid Services (CMS), the audit and dispute of Conditional Payment Summaries, the request for Final Demand, and includes 1st and 2nd level administrative appeals.

Phase 2: MSP Compliance Service – Medicare Set Aside Allocation without CMS Submission
This service includes preparation of a Medicare Set Aside allocation report that complies with CMS requirements for submission. Normal turnaround time for set aside allocations is 10 days from the due date we receive all necessary documents. Pricing includes coverage for one revision to the report.

Medicare 360° Pricing*: $2,500

*A 50% deposit is required at time of intake. If report needs to be expedited, a $500 rush fee will apply.

Double Damages For Medicare Advantage Plans? – 11th Circuit To Decide

In Humana Medical Plan, Inc. v. Western Heritage Insurance Co., No. 12-20123, 2015 U.S. Dist. LEXIS 31875, the U.S. District Court for the Southern District of Florida granted Humana’s Motion for Summary Judgment and held that Humana’s right to reimbursement for the conditional payments it made on behalf of plan beneficiary under a Medicare Advantage Plan was enforceable and Humana was entitled to double damages pursuant to 42 U.S.C. § 1395y(b)(3)(A). The 11^th Circuit will now have the opportunity to decide if this break from precedent is appropriate.

Under the MSP Act’s private cause of action, the Southern District of Florida found that Humana has a right to recover from Western Heritage the benefits it paid and is statutorily entitled to recover double damages. The Court concluded that after Western Heritage became aware of payments by the Humana Medicare Advantage Plan, it had an obligation to independently reimburse Humana. The Court ruled that as a matter of law, Humana is entitled to maintain a private cause of action for double damages pursuant to 42 U.S.C. § 1395y(b)(3)(A) and was therefore, entitled to $38,310.82 in damages.

Western Heritage’s position is that the district court’s holding departed from the plain language of the Social Security Act giving a privately run Medicare Advantage Organizations (“MAOs”) a new cause of action for double damages against primary plans. This holding is contrary to the decisions of several circuit courts and ignores the law’s carefully crafted scheme that permits MAOs to assert (state court) subrogation claims or otherwise bill providers or insurers for health care claims for which MAOs are “secondary,” but does not permit federal court claims, much less for double damages.

Western Heritage arguesthat there is a distinction between Medicare, which has a cause of action for double damages against parties who fail to reimburse conditional payments, and MAOs, who have no such cause of action. This distinction is clearly reflected in the MAO statute, the Medicare Secondary Payer (MSP) Act, the SMART Act amendments to the MSP Act, and the implementing regulations promulgated by the Centers for Medicare and Medicaid Services (“CMS”).

The gist of this position is contained in the following four arguments.

First, the secondary payor provisions that are specifically applicable to MAOs do not contain any direct cause of action by MAOs against primary payors, let alone an action for double damages. (See, 42 U.S. § 1395w-22(a)(4)). Had Congress intended to grant MAOs a right of action against primary payors, such right would have been included here. However, the right simply does not exist in the MAO statute.

Second, the provision of the MSP Act that does provide for a private right of action, on which the district court relies, makes no mention at all of MAOs. (Id. 1395y(b)(3)(A)). Again, had Congress intended MAOs to have the right to sue, it could easily have included MAOs expressly in this provision, but did not.

Third, it is also clear based on the mechanics of the overall MSP statutory and regulatory scheme that neither Congress nor CMS, in its implementation of the MSP Act, intended to grant MAOs a private right of action. Had Congress and CMS intended to bestow such a benefit on MAOs, either would have imposed upon MAOs the same disclosure obligations already imposed on CMS, without which, the MSP payment system does not work. More specifically, CMS administers a program that permits settling parties to ascertain any potential reimbursement obligation following a settlement, judgment, award or other payment in which Medicare beneficiaries are involved. However, no such program exists for MAOs.

Fourth, under the newly enacted SMART Act amendments to the MSP Act, CMS is required to provide claims and repayment information to primary payors during settlement discussions so that they can account for Medicare reimbursement in their settlements with beneficiaries. In other words, the statute and regulations provide a mechanism to mitigate the possibility that a primary plan will be sued by Medicare for double damages as a result of entering into a settlement with a Medicare beneficiary. However, neither Congress (in the statute) nor CMS (in regulation or guidance), imposed similar requirements on MAOs, or comparable protections for primary payors considering settling beneficiaries’ claims, clearly signaling that they did not intend a right of action in favor of MAOs. With rights come obligations — given that Medicare has the right to sue primary payors for conditional payments, so Medicare has the obligation to inform primary payors of the claims and repayment information at and following settlement. That MAOs have no such obligation further bolsters the conclusion that they have no right to anything more than a subrogation claim.

The district court’s decision permitting a cause of action by MAOs against primary payors, in addition to being incorrect as a matter of law, creates a severe impediment to settlement. As the present case illustrates, primary plans are unable to ascertain whether the party with whom they are negotiating is an MAO plan member and to what extent payment was made to the plan member by the secondary payor, a private MAO. As a result, if the underlying decision stands, primary plans will need to think twice before settling claims and thereby risking a double damages cause of action; even if, like Western Heritage here, they acted in the utmost good faith to learn of any reimbursement obligation. This impediment to settlement runs counter to the longstanding objectives of judicial economy and stands to harm Medicare beneficiaries, primary payors and the Medicare Advantage (“MAO”) plans, whose cases will now be more likely to proceed through trial.

Humana vs. Western Heritage – Double Damages for Medicare Advantage Plans

In Humana Medical Plan, Inc. v. Western Heritage Insurance Co., No. 12-20123, 2015 U.S. Dist. LEXIS 31875, the U.S. District Court for the Southern District of Florida granted Humana’s Motion for Summary Judgment and held that Humana’s right to reimbursement for the conditional payments it made on behalf of plan beneficiary under a Medicare Advantage Plan was enforceable. Consequently, Humana was entitled to double damages pursuant to 42 U.S.C. § 1395y(b)(3)(A).

In resolving the underlying personal injury action that gave rise to this case, the plaintiff confirmed there were no outstanding Medicare liens against the settlement proceeds. As evidence the plaintiff presented a letter from The Center for Medicare and Medicaid Services (”CMS”) dated December 3, 2009 which confirmed CMS had no record of processing Medicare claims on behalf of the plaintiff.

Eventually Western Heritage, the third party carrier, learned of Human’s Medicare Advantage lien and attempted to include Humana as a payee on the settlement draft. The state court judge ordered full payment to the plaintiff without including any lien holder on the settlement check. The judge simultaneously ordered plaintiff’s counsel to hold sufficient funds in a trust account to be used to resolve all medical liens.

While Humana and the plaintiff remained in ongoing litigation, Humana filed this action against Western Heritage seeking double damages pursuant to 42 U.S.C. § 1395y(b)(3)(A).

The Medicare Secondary Payer Act (MSP) provides for a private cause of action when a primary plan fails to reimburse a secondary plan for conditional payments it has made.

“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).”

42 U.S.C. § 1395y(b)(3)(A).

42 C.F.R. §422.108(f) extends the private cause of action to Medicare Advantage Plans (Medicare Advantage Organizations “MAO”s).

“MAOs will exercise the same rights to recover from a primary plan, entity, or individual that the Secretary exercises under the MSP regulations in subparts B through D of part 411 of this chapter.”

Additionally, CMS directors have issued memorandum asserting that:

“notwithstanding recent court decisions, CMS maintains that the existing MSP regulations are legally valid and an integral part of Medicare Part C and D programs.”

CMS, HHS Memorandum: Medicare Secondary Payment Subrogation Rights (Dec. 5, 2011).

While the Eleventh Circuit has not yet addressed the issue of whether a Medicare Advantage Organization, such as Humana, may bring a private cause of action against a primary plan under the secondary provision of the Act, the Third Circuit has addressed the issue and held that it can. In Avandia II the Third Circuit reasoned that the Medicare statute should be read broadly and that the language of the Medicare Advantage Organization statute (42 U.S.C. §1395w-22(a)(4)) cross references the Medicare Secondary Payer Act’s (“MSP”) language (42 U.S.C. § 1395y(b)(2)(A)) which allows these plans to utilize the enforcement provision of the MSP (42 U.S.C. 1395y(b)(3)(A)). The Third Circuit added to their opinion that the MAO plans are able to use the MSP. To deny them this ability, would put them at a competitive disadvantage, and moreover that the federal agency had enacted reasonable regulations in 42 C.F.R. § 422.108. This regulation is relied on by the MAO plans in their recovery actions as it states that the MAO plans have the same recovery rights as traditional Parts A & B

Unlike the Third Circuit the Ninth Circuit in Parra v. Pacificare of Arizona, 2013 U.S. App. LEXIS 7861 was not persuaded that the cross referencing of the MAO Statute (42 U.S.C. §1395w-22(a)(4) ) and the MSP (42 U.S.C. §1395y(b)(2)) created a federal cause of action. The Ninth reasoned that this cross-reference simply explains when MAO coverage is secondary to a primary plan, but does not create a federal cause of action in favor of a MAO. Here the Court found that “[l]anguage in a regulation may invoke private right of action that Congress through statutory text created, but it may not create a right that Congress has not”. They elaborated by stating in clear terms that, “It is relevant laws passed by Congress, and not rules or regulations passed by an administrative agency, that determine whether an implied cause of action exists”.

Western Heritage argues that this Court should follow Parra and “interpret the Medicare Act as not providing a private right of action in favor of MAOs such as Humana.” However, as predicted in my last post on this topic the holding in Parra is too narrow to be of any assistance and the Court here finds the facts of Parra distinguishable. The Court found the Third’s Circuit’s analysis regarding the ability of an MAO to bring a private cause of action under the MSP Act to be persuasive.

Pursuant to the MSP Act’s private cause of action, the Court found that Humana has a right to recover from Western Heritage the benefits it paid and is statutorily entitled to recover double damages. Additionally, “if Medicare is not reimbursed as required by paragraph (h), the primary payer must reimburse Medicare even though it has already reimbursed the beneficiary or other party.” 42 C.F.R. § 411.24(i)(1). Therefore, the Court concludes that after Western Heritage became aware of payments by the Humana Medicare Advantage Plan it had an obligation to independently reimburse Humana. Because it didn’t, the Court rules that as a matter of law, Humana is entitled to maintain a private cause of action for double damages pursuant to 42 U.S.C. § 1395y(b)(3)(A) and is therefore entitled to $38,310.82 in damages.

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 will likely demand written confirmation that any purported Medicare Advantage has been satisfied, and may be reluctant to disburse funds to the plaintiff based solely on the expectation that the plaintiff will satisfy this obligation. As a matter of practice it may be more expedient to have defense issue separate settlement drafts to the plaintiff and the MAO rather than a single check with two (2) payees.

Medicare Gives Refunds? How Can My Client Get One?

Repaying Medicare for conditional payments is a necessary but unpleasant process which can result in a greatly reduced net recovery or no recovery at all for an injured Medicare beneficiary. The Medicare Secondary Payer Statute has a repayment formula that is designed to maximize the return of funds to Medicare and provides no consideration for the future well-being of the Medicare beneficiary. The only consideration that Medicare makes in applying its repayment formula is whether or not the amount of the Medicare Conditional Payments is less than, equal to or greater than the gross settlement. (42 C.F.R. 411.37(c); 42 C.F.R. 411.37(d)). Despite Medicare’s blind application of the repayment regulations, there is a way for the injured Medicare beneficiary to increase his/her net recovery. This is by way of obtaining a refund from Medicare which sounds crazy, but it works.

In the worst case scenario where the amount of Medicare Conditional Payments is equal to or exceeds the gross settlement, the injured Medicare beneficiary experiences the harshest treatment. In that circumstance, the Medicare beneficiary must return all of their net settlement (after attorney fees and costs) to Medicare, resulting in a zero net recovery to the plaintiff. The regulations provide:

“If Medicare payments equal or exceed the judgment or settlement amount, the recovery amount is the total judgment or settlement payment minus the total procurement costs.”

(42 C.F.R. 411.37(d))

This is a situation that is happening with increased frequency as the cost of medical treatment rises and a contracting economy forces many parties to carry only the mandatory minimum limits of insurance coverage. The practical effect of this regulation is seen daily by the attorneys who represent injury victims as they wrestle with the equitable and ethical issues of resolving a policy limits case wherein only the attorneys/Medicare will see any portion of the settlement funds. It may even be the case that the only settlement funds come from the Medicare beneficiary’s own Uninsured Motorist coverage. In that case, the injured plaintiff has been paying premiums for insurance coverage just so Medicare and their attorney can be paid in the event they suffer massive injuries. (See 42 C.F.R. 411.50(b) authorizing repayment to Medicare from UIM proceeds).

In an attempt to reduce the unforgiving nature of the repayment formula, many attorneys have looked for ways to ensure their clients see at least a nominal amount of the personal injury settlement. These client centric attorneys often want to reduce or waive their fees and costs once they have received the “Final Demand” from the MSPRC. Despite the good intentions of these attorneys, if they reduce or eliminate their fees without updating the settlement information provided to MSPRC they are committing Medicare fraud. According to the regulations:

“Recovery against the party that received payment—

(1) General rule. Medicare reduces its recovery to take account of the cost of procuring the judgment or settlement, as provided in this section, if—

(i) Procurement costs are incurred because the claim is disputed; and

(ii) Those costs are borne by the party against which CMS seeks to recover.”

(42 C.F.R. 411.37(a))

If the costs (including attorney fees) are not borne by Medicare beneficiary then under the above regulation Medicare would not have applied the reduction formula to their demand for repayment. Yet informing Medicare that the attorney has waived fees or costs will only result in Medicare increasing its repayment demand in the same amount, still leaving the injured plaintiff with nothing. This leaves the only option of “gifting” all or a portion of the attorney fees back to the client, which involves its own set of tax consequences and potential ethical quandaries.

As an answer to this problem, Synergy has developed a low-cost way for Medicare beneficiaries to take advantage of seldom used statutes/regulations to obtain a refund of all or part of the funds which were paid to MSPRC in satisfaction of Medicare’s “Final Demand.” There are three statutory provisions under which Medicare may accept less than the full amount of its Conditional Payment:

1. §1870(c) of the Social Security Act;

2. §1862(b) of the Social Security Act; and

3. The Federal Claims Collection Act (FCCA).

Each statute contains different criteria upon which decisions to waive or compromise Medicare’s claim are considered. Additionally, the authority to grant a waiver or compromise under each of these statutes is limited to specific entities. Medicare contractors have authority to consider beneficiary requests for waivers under §1870(c) of the Act. Whereas, authority to waive Medicare claims under §1862(b) and to compromise claims under FCCA, is reserved exclusively to the Center for Medicare and Medicaid Services (“CMS”).

MSPRC has the authority to grant full or partial waivers to beneficiaries for whom repayment of Medicare’s Conditional Payments would pose a financial hardship. According to the regulations:

“There shall be no recovery if such recovery would defeat the purposes of this chapter or would be against equity and good conscience.”

(See, 42 U.S.C. § 1395gg (c), §1870(c) of the Social Security Act; 42 C.F.R. 405.355-356; 42 C.F.R. 405.358; 20 C.F.R. 404.506-512; Medicare Secondary Payer Manual (MSP), Chapter 7 § 50.5.4.4).

In order to apply for this “Financial Hardship” waiver, the Medicare beneficiary must file form SSA-632-BK with MSPRC which documents their financial situation. Synergy also includes in this request a letter drafted by the Medicare beneficiary (not their attorney) explaining the undue hardship that repaying Medicare would cause. These decisions by MSPRC are made on a case by case basis. The MSPRC’s manual explains their approach well and provides indicators of whether or not a waiver should be granted.

In addition to a request made to MSPRC for a “Financial Hardship” waiver under §1870(c) of the Social Security Act, Synergy requests a “Best Interest of the Program” waiver direct from CMS under §1870(b) of the Social Security Act. Requests for a waiver under this statute are often overlooked by even the most seasoned attorneys and lien resolution companies. Synergy however understands that the settlement proceeds for which the Medicare beneficiary is fighting to retain is the only source of a recovery for the injuries sustained and must provide for their future needs. Therefore, Synergy vigorously pursues every avenue that can be used to obtain a refund from Medicare. CMS has authority to waive in full or in part Medicare’s claim for repayment when it is “in the best interest of the program.” This rather vague criteria is nowhere further defined and lies completely at the discretion of CMS.

It is important to note that an evaluation by CMS of a “Best Interest of the Program” waiver is a separate and distinct evaluation than a request for a Compromise under the Federal Claims Collection Act (FCCA). As the stakes are high for the Medicare beneficiary, Synergy always makes both a request for this waiver and a request for a compromise when seeking a refund from CMS of the amounts the beneficiary has already paid to satisfy the “Final Demand.”

The third and final method for obtaining a refund from Medicare is a Compromise request made to CMS. Authority to grant a Compromise is granted to CMS under the Federal Claims Collection Act (FCCA). (31 U.S.C. 3711).

The Medicare Secondary Payer Manual compiles the statutory and regulatory sources, articulating the criteria in a straight forward manner as follows:

“[31 U.S.C.3711] gives Federal agencies the authority to compromise where:

The cost of collection does not justify the enforced collection of the full amount of the claim;
There is an inability to pay within a reasonable time on the part of the individual against whom the claim is made; or
The chances of successful litigation are questionable, making it advisable to seek a compromise settlement.”

(Medicare Secondary Payer Manual (MSP), Chapter 7 § 50.7.2)

As one can see, there are many things for CMS to evaluate on a case by case basis to determine if the proposed Compromise should be accepted or not. Synergy has developed detailed processes to insure that each relevant factor is brought to the attention of CMS so that the Medicare beneficiary has the best possible chance for obtaining an acceptance of the offered Compromise.

Obtaining a refund from Medicare of all or part of the funds paid to satisfy the “Final Demand” is not an easy task. It requires intimate knowledge of a variety of statutes, regulations, and the Medicare Secondary Payer Manual. However, it may be the only method by which a severely injured Medicare beneficiary will be able to obtain any portion of their personal injury settlement funds. Synergy has the knowledge and experience to employ all available tactics to obtain a refund for our customers. We also have a successful track record in obtaining substantial refunds for Medicare beneficiaries. We understand the importance of preserving settlement funds for the injured plaintiff and share the client centric mentality of the plaintiff’s bar. To that end, Synergy provides a Medicare Lien Resolution Service at a very low up front cost by taking our fee in proportion to how successful we are in obtaining a refund for the Medicare beneficiary (% of savings).

To see the kind of results Synergy achieves for its clients in terms of lien reduction, click HERE

Special Needs Trusts – The Differences

Special Needs Trusts – The Differences

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

A special needs trust is a trust that can be created pursuant to Federal law whose corpus or any assets held in the trust do not count as resources for purposes of qualifying for Medicaid or SSI. Thus a personal injury recovery can be placed into a SNT so that the victim can continue to qualify for SSI and Medicaid. Federal law authorizes and regulates the creation of a SNT. The 1396p[i] 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.[ii] There are three primary types of trusts that may be created to hold a personal injury recovery and one type used when it isn’t the injury victim’s own assets, each with its own unique requirements and restrictions. First is the (d)(4)(A)[iii] 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. Second is a (d)(4)(C)[iv] trust typically called a pooled trust that may be established with the disabled victim’s funds without regard to age. The third is a trust that can be utilized if an elderly client has too much income from Social Security or a pension to qualify for some Medicaid based nursing home assistance programs. This trust is authorized by the federal law under (d)(4)(B)[v] and is commonly referred to as a Miller Trust. Lastly, there is a third party[vi] SNT which is funded and established by someone other than the personal injury victim (i.e., parent, grandparent, donations, etc. . .) for the benefit of the personal injury victim. The victim still must meet the definition of disability but there is no required payback of Medicaid at death as there is with a (d)(4)(A) or (d)(4)(C).

Since the pooled (d)(4)(C) trust and the (d)(4)(A) SNT are most commonly used with personal injury recoveries, I will focus on comparing these two types of trust. There are several significant differences between a (d)(4)(C) pooled trust and a (d)(4)(A) special needs trust. I will discuss these differences first starting with the (d)(4)(C) pooled trust. As a starting point, a disabled injury victim joins an already established pooled trust as there is no individually crafted trust document. There are four major requirements under Federal law necessary to establish a pooled trust. First, the trust must be established and managed by a Non-Profit.[vii] Second, the trust must maintain separate accounts for each Beneficiary, but the funds are pooled for purposes of investment and management.[viii] Third, each trust account must be established solely for the benefit of an individual who is disabled as defined by law, and it may only be established by that individual, the individual’s parent, grandparent, legal guardian, or a Court.[ix] Fourth, any funds that remain in a Beneficiary’s account at that Beneficiary’s death must be retained by the Trust or used to reimburse the State Medicaid agency.[x]

As for the differences from a (d)(4)(A) special needs trust, there are four primary differences. First, a (d)(4)(A) special needs trust can only be created for those under age 65. However, a (d)(4)(C) pooled special needs trust has no such age restriction and can be created for someone of any age. Second, a Pooled Special Needs trust is not an individually crafted trust like a (d)(4)(A) special needs trust. Instead, a disabled individual joins a Pooled Trust and a professional non-profit trustee pools the assets together for purposes of investment but each beneficiary of the trust has his or her own sub-account. Third, a pooled trust is managed by a not for profit entity who acts as trustee overseeing distributions of the money. The non-profit trustee may manage the money themselves or hire a separate money manager to oversee investment of the trust assets. Fourth, at death the non-profit trustee may retain whatever assets are left in the trust instead of repaying Medicaid for services they have provided as is the case with a (d)(4)(A) special needs trust.[xi] By joining a pooled trust, a disabled aged injury victim can make a charitable donation to the non-profit who manages the pooled trust and avoid the repayment requirement found within the Federal law for (d)(4)(A) special needs trusts. Other than the aforementioned differences, it operates as any other special needs trust does with the same restrictions on the use of the trust assets.

With a (d)(4)(A) special needs trust, a trustee needs to be selected unlike the pooled trust where it is automatically a non-profit entity. This provides some flexibility to the family or loved ones to have a hand in the selection of the trust company or bank acting as trustee. However, it is important to have a trustee experienced in dealing with needs based government benefit eligibility requirements so that improper distributions are not made. Many banks and trust companies don’t want to administer special needs trusts under $1,000,000.00 in trust assets which can make it difficult to find the right trustee. Most pooled special needs trusts will accept any size trust and the non-profit is experienced in dealing with those that are receiving disability based public benefits. With the (d)(4)(A), there are no startup costs except the legal fee to draft the trust which can vary greatly. The (d)(4)(C) pooled trusts typically have a one-time fee at inception which can range from $500 to $2,000 which is typically much cheaper than the cost of establishing a (d)(4)(A) special needs trust. Most trustees (pooled or (d)(4)(A)) will charge an ongoing annual fee which is typically a percentage of the trust assets. These fees vary between 1-3% depending on how much money is in the trust. A (d)(4)(A) will offer many investment choices for the funds held in the trust while a (d)(4)(C) will have only one investment strategy.

The major limitation of all types of special needs trusts is that the assets held in trust can only be used for the sole benefit of the trust beneficiary. So in the case of a disabled injury victim that funds a pooled special needs trust with their personal injury recovery, those funds can only be used for their benefit. The disabled injury victim could not withdraw money and gift it to a charity or family. The purpose of the special needs trust is to retain Medicaid eligibility, and use trust funds to meet the supplemental, or “special” needs of the beneficiary. These can be quite broad, however, and include things that improve health or comfort, non-Medicaid covered medical and dental expenses, trained medical assistance staff (24 hours or as needed), independent medical check-ups, medical equipment, supplies, programs of cognitive and visual training, respiratory care and rehabilitation (physical, occupational, speech, visual and cognitive), eye glasses, transportation (including vehicle purchase), vehicle maintenance, insurance, essential dietary needs, and private nurses or other qualified caretakers. Also included are non-medical items, such as electronic equipment, vacations, movies, trips, travel to visit relatives or friends and other monetary requirements to enhance the client’s self-esteem, comfort or situation. The trust may generally pay for expenses that are not “food and shelter” which are part of the SSI disability benefit payment. However, even these items could be paid for with trust assets but SSI payments could be reduced or eliminated. This may not be problematic if the disabled injury victim qualifies for Medicaid without SSI eligibility. However, many states grant automatic Medicaid eligibility with SSI so one has to be careful about eliminating the SSI benefit.

Why Consider Using a Pooled Trust Regardless of the Size of the Settlement?

Pooled Trusts are useful in smaller settlements because of the relatively low costs of joining a pooled trust. As discussed above, they are also preferable in many settlements to a (d)(4)(A) SNT because a (d)(4)(C) pooled trust can be established by the injury victim and does not require a parent, grandparent, legal guardian or court order like a (d)(4)(A) SNT. Even though the pooled trust accepts relatively small settlements, the trust beneficiary gets the benefit of having a professional trustee manage their trust. With a (d)(4)(A) it is very difficult to find a professional trustee to manage a small trust. The pooled trust under (d)(4)(C) avoids that problem. There are no minimum trust deposits required for a pooled trust so it can be used for settlements as small as a few thousand dollars. It may not make sense to establish a pooled trust with too small of a settlement, but it is a viable option.

Benefits of Using the Settlement Solutions National Pooled Trust

The Settlement Solutions National Pooled Trust (SSNPT for short) is the only national pooled trust created exclusively for personal injury victims. The trustee, Foundation for Those With Special Needs, Inc. is a non-profit formed exclusively to protect those with special needs. Through retained funds, the Foundation is able to support other charitable organizations that protect and promote the civil justice system. SSNPT has the lowest fees of any national pooled trust. In addition and most importantly, SSNPT has a very generous retained funds policy. If the client elects to have the funds distributed at his or her death instead of them being retained by the non-profit, the trustee will distribute the remaining funds after Medicaid is paid back and only retains 10% or $10,000 whichever is less. Many pooled trusts retain 100% of the remaining assets at death and don’t allow distribution at all. Other will retain a large amount with many retaining as much as $25,000.00.

SSNPT has a wide array of investment options that can be utilized by the trust beneficiary. Most pooled trusts manage all of the assets a single way and don’t provide any options in regards to managing the assets held in trust. This makes the SSNPT a great alternative for cases of any size where the client needs to keep Medicaid/SSI eligibility and customized management is desired. SSNPT even has a sub-trust for those that are “dual” eligible for Medicaid and Medicare. In those cases, where an MSA is done, it needs to be wrapped in a special needs trust wrapper to keep it from being an available resource. SSNPT has a low cost solution for these types of clients.

For more information on the SSNPT, visit www.ssnpt.com

[i] 42 U.S.C. § 1396p.

[ii] To be considered disabled for purposes of creating an SNT, the SNT beneficiary must meet the definition of disability for SSDI found at 42 U.S.C. § 1382c. 42 U.S.C. § 1382(c)(a)(3) states that “[A]n individual shall be considered to be disabled for purposes of this title … if he is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or … last for a continuous period of not less than twelve months (or in the case of a child under the age of 18, if that individual has a medically determinable physical or mental impairment, which results in marked and severe functional limitations, and which can be expected to result in death or … last for a continuous period of not less than 12 months).”

[iii] 42 U.S.C. § 1396p (d)(4)(A) provides that a trust’s assets are not countable if it is “[a] trust containing the assets of an individual under age 65 who is disabled (as defined in section 1382c (a)(3) of this title) and which is established for the benefit of such individual by a parent, grandparent, legal guardian of the individual, or a court if the State will receive all amounts remaining in the trust upon the death of such individual up to an amount equal to the total medical assistance paid on behalf of the individual under a State plan under this subchapter.”

[iv]42 U.S.C. § 1396p (d)(4)(C) provides that a trust’s assets are not countable if it is “[a] trust containing the assets of an individual who is disabled (as defined in section 1382c (a)(3) of this title) that meets the following conditions: (i) The trust is established and managed by a non-profit association. (ii) A separate account is maintained for each beneficiary of the trust, but, for purposes of investment and management of funds, the trust pools these accounts. (iii) Accounts in the trust are established solely for the benefit of individuals who are disabled (as defined in section 1382c (a)(3) of this title) by the parent, grandparent, or legal guardian of such individuals, by such individuals, or by a court. (iv) To the extent that amounts remaining in the beneficiary’s account upon the death of the beneficiary are not retained by the trust, the trust pays to the State from such remaining amounts in the account an amount equal to the total amount of medical assistance paid on behalf of the beneficiary under the State plan under this subchapter.”

[v] 42 U.S.C. § 1396p (d)(4)(B).

[vi] Third party special needs trusts are creatures of the common law. Federal law does not provide requirements or regulations for these trusts.

[vii] 42 U.S.C. § 1396p (d)(4)(C).

[viii] Id.

[ix] Id.

[x] Id.

[xi] If the funds remaining in the trust at death are sufficient to repay Medicaid’s payback right in full, many pooled trusts will distribute some portion of the remaining monies to the trust beneficiary’s heirs. However, each pooled trust will have a different policy and the amount retained at death can vary greatly. It is very important to investigate how much is retained in this type of situation. Some trusts will only retain $5,000 while others may retain $50,000.

Are you Cutting A Check to the IRS this Year?

Are you Cutting A Check to the IRS this Year?

By Daniel J. Alvarez, J.D. and Anthony F. Prieto, Jr., CFP®

As the tax season draws to a close, you may be reviewing your tax return with some displeasure. Did you cut too large of a check to the Department of Treasury for your 2014 tax bill? If so, there are several options for you to consider to lessen the tax burden for 2015.

Due to the contingent nature of compensation as a plaintiff lawyer, unique pre-tax and tax deferred retirement planning options are available. Herein we will compare and contrast traditional small business retirement plans with some of the unique tax deferred options available when you earn a contingent fee.

The following are common advantages to deferral in general:

Creating an automatic investment program to help augment your retirement
The possibility of paying less tax on the withdrawal than the current tax rate
Potentially manipulating tax brackets during the deferral years and the withdrawals years
Earning interest on money that would have gone directly to your immediate tax burden
Being able to invest 100% of the money pre-tax instead of after tax

Given these obvious advantages, which of the following is the best fit for your practice? The information below may be helpful in determining which plan or combination of plans makes the most fiscal sense.

Traditional Small Business Retirement Plans

A few examples of those that would fall under the traditional options include 401(k)s, Defined Benefit Plans, Profit Sharing, SEP IRAs and Simple IRAs are a few that would fall under the traditional options. These plans allow employees/owners to contribute funds on a pre-tax basis into the plan. The plan typically has a myriad of investment options to consider. All taxes are deferred until the funds are withdrawn.

Pros:

Easy to install
Each employee/owner makes independent deferral and investment decisions

Cons:

The plans typically have low deferral limits ($25k or less)
Most small business plans require the employer match employee contributions
These plans are typically subject to withdrawal penalties before age 59.5 and RMD withdrawals beginning at age 70.5

Attorney Fee Structured Settlement Plans

Attorneys are allowed to defer their fees by utilizing structured settlement annuities similar to those that are used for planning purposes with personal injury clients. The fee structure is not tax free, but is instead tax deferred. One hundred percent of the fee can be put into the fee structure or just a portion of the fees. It is done on a pre-tax basis so that taxes are not recognized until the year in which future periodic payments from the fee structure are received. For example, an attorney can earn a $250,000 fee in 2014 but set up a payment plan that pays him from 2020 to 2030. There would be no taxable income in 2014, the entire $250,000 fee would go into the fee structure annuity and the tax burden would be spread out from 2020 to 2030.

Pros:

Easy to use
No investment risk
Unlimited deferral amount
No early withdrawal tax penalties
Ability to create a lifetime income

Cons:

Plan cannot be modified after the release is signed (No acceleration or deceleration of payments)
Fixed investment option only
Coordination with Client and Defendant required

Alternative Fee Deferral Programs

Several new alternatives have popped up in the marketplace over the last few years that rely on the same premise and case law as the Attorney Fee Structured Settlements. The two that are most commonplace are the use of offshore assignment companies and deferred compensation programs.

Offshore Assignment Companies (non-insurance partners) allow the attorney to defer the fee into the Assignment Company that then invests the proceeds through a variety of investment options.

Pros

Variety of investment options
Unlimited deferral amounts
No early withdrawal tax penalties

Cons

Plan cannot be changed after the release is signed (No acceleration or deceleration of payments)
Complex investment program involving offshore assignments
Coordination with Client and Defendant required

The Deferred Compensation program is done through the use of a Rabbi Trust. This option does not involve an offshore assignment and has flexible withdrawal options.

Pros

Variety of investment options
Unlimited deferral amounts
No early withdrawal tax penalties
Withdrawal rights can continue to be deferred
Simple language Incorporated in Client Agreement (not release)

Cons

Complex investment program for highly qualified investors
Ongoing investment management and withdrawal decisions

As this article points out, there are pros and cons to each alternative. Each attorney should seek out a qualified planner and tax professional to help them navigate the options. In all probability, the best option is a combination of the programs. A fixed income component, such as a fee structure annuity, is a wise piece of any diverse investment portfolio. Plaintiff attorneys should carefully consider whether adding fixed income pre-tax makes the most sense for their financial goals. In addition, other alternative deferred compensation programs should be explored as well.

Please contact Synergy today at (877) 242-0022 or info@synergysettlements.com for more information on utilizing these unique planning opportunities exclusively available for contingent legal fees.