MEDICARE COMPLIANCE
Welcome to Synergy’s blog page dedicated to the topic of Medicare compliance. Our team of Medicare experts share their InSights and knowledge on the latest developments and best practices for law firms to stay compliant with the MSP. Stay up-to-date with the latest trends and strategies to ensure that you have the information you need to navigate the complex world of Medicare compliance. Our blogs provide practical tips and advice for ensuring that your clients receive the medical care they need while complying with Medicare’s requirements. Let our experts guide you through the intricacies of Medicare compliance and help you stay on top of the latest developments in this rapidly-evolving field.
February 9, 2023
Rasa Fumagalli, JD, MSCC, CMSP-F
Settlements involving Medicare beneficiaries require additional scrutiny to ensure compliance with the MSP Act. While the Act generally prohibits Medicare from making payment when payment is expected from a primary payer (workers’ compensation plan, liability insurance plan or no-fault insurance), an exception is made when payment is not expected to be made promptly or within 120 days of receipt of the claim. In such cases, Medicare will make payment, but it is conditioned upon the reimbursement of the payment to the Medicare Trust Fund. Compliance with the MSP Act is essential to ensure that Medicare is not making payments for which it is not responsible for.
Primary payers have an obligation to reimburse the Medicare Trust Fund for any payments made on behalf of a Medicare beneficiary. This obligation is demonstrated by a judgment, payment conditioned upon release of liability, or other means, as enumerated in 42 C.F.R. §411.22. Failure to reimburse may result in Medicare filing suit directly for double damages according to 42 U.S.C. §1395y(b)(2)(B)(iii) and 42 U.S.C. §1395y(b)(3). The Centers for Medicare & Medicaid Services (CMS) Memo from December 5, 2011, further notes that Medicare Advantage Organizations (MAOs) and Prescription Drug Plans (PDPs) have the same rights of recovery as Medicare under the MSP Act. This article will discuss the interplay between annual reporting and recovery thresholds, Section 111 Mandatory Insurer Reporting, and conditional payment recovery. A subsequent article will address Medicare’s interest when it comes to post-settlement injury-related treatment.
Annual Reporting and Recovery Thresholds
Prior to 2014, CMS often spent more money pursuing a conditional payment recovery claim than the claim was worth. To address this issue, the Strengthening Medicare and Repaying Taxpayers Act of 2012 (“SMART Act”) was signed into law in January of 2013. The SMART Act requires CMS to publish annual “settlement threshold” figures as of November of 2014. If a settlement falls below the annual threshold, the settling parties are exempt from MSP compliance obligations. This amendment has helped to streamline the conditional payment recovery process and save CMS resources.
On December of 2022, CMS published the 2023 recovery thresholds for liability, no-fault insurance, and workers’ compensation settlements, judgments, award, or other payments. Effective January 1, 2023, CMS’s threshold for physical trauma-based liability insurance settlements is $750.00, meaning settlements of $750 or less do not need to be reported and Medicare’s conditional payments related to the cases do not need to be repaid. The same threshold applies to no-fault insurance and workers’ compensation settlements, provided the insurers do not have an ongoing responsibility for medicals.
Section 111 Mandatory Insurer Reporting
To effectively implement the Medicare Secondary Payer (MSP) framework, Section 111 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA) was enacted, establishing the Mandatory Insurer Reporting requirement. This enforcement mechanism notifies Medicare of settlements involving Medicare beneficiaries and began in January of 2011. According to CMS, the Section 111 MSP reporting process is designed to ensure Medicare is properly reimbursed for items and services provided to beneficiaries.
Section 111 reporting is the responsibility of a Responsible Reporting Entity (RRE) to Medicare for liability, no-fault, and workers’ compensation plans and insurers. The RRE must report to Medicare if the plan has an Ongoing Responsibility for Medical (ORM) or if the Total Payment Obligation to the Claimant (TPOC) is greater than the threshold of $750.00. Additionally, the RRE must query the Medicare system regularly to identify when a claimant becomes eligible for benefits while the claim is still open.
Under the Section 111 reporting requirements, the RRE must provide the injury victim’s first name, last name, date of birth, gender, Medicare Beneficiary Identifier (MBI), and Social Security Number (or the last five digits). Additionally, the RRE must report International Classification of Diseases (“ICD”)-10 diagnosis codes for the illnesses/injuries alleged, claimed or released in the Total Payment Obligation to Claimant (TPOC) settlement, judgment, award, or other payment. CMS encourages RREs to supply as many valid ICD-9/ICD-10 Diagnosis Codes as possible for the most accurate coordination of benefits. However, in CMS’s recent webinar on Section 111 reporting, it was cautioned against submitting diagnosis codes for pre-existing or unrelated conditions, even if included in the initial medical records. The TPOC report must also include the date and amount of the settlement.
If the RRE fails to comply with Section 111 reporting obligations, they may face a penalty of up to $1,000 per day per claim. As of January 2023, this penalty has yet to be enforced although the imminent arrival of final regulations on Civil Monetary Penalties for Section 111 violations will likely change this. A scenario where CMS may impose penalties is when the RRE submits information that conflicts with their later position when CMS attempts to recover conditional payments.
The Role of ICD-10 Diagnosis Codes in Conditional Payment Recovery
ICD codes are maintained by the World Health Organization (“WHO”) and are designed as an international health care classification system used to collect morbidity and mortality statistics, develop claim reimbursement systems, and conduct disease-related surveillance. To ensure greater accuracy, the Centers for Medicare and Medicaid Services (CMS) adopted ICD-10 codes for Section 111 Mandatory Insurer Reporting for all claim reports with an accident date on or after April 1, 2015. This switch offered five times more diagnosis codes than those found in the ICD-9 system.
The conditional payment recovery process may begin either with the Medicare beneficiary self-reporting the accident or the RRE fulfilling its Section 111 Mandatory Insurer Reporting obligation. When reporting the accident to Medicare, the beneficiary or their representative must provide diagnosis codes for the injured body part. If the beneficiary or representative self-reports through the Medicare Secondary Payer Recovery portal, they can select a specific code, a range of codes, a list of codes, or enter a text description of the diagnosis. The RRE’s Section 111 Mandatory Insurer report will also include ICD-10 diagnosis codes claimed or released in the Total Payment Obligation to Claimant (TPOC) settlement, judgment, award, or other payment. Medicare will use these codes to determine the amount of conditional payment recovery.
Medicare uses the ICD-10 code information to search their database and identify related payments. However, at times, their conditional payment letters will seek reimbursement for services unrelated to the injuries suffered by the beneficiary. This could be due to an algorithmic error or improper bundling of treatments for both unrelated and related conditions. Therefore, it is essential to review the payment summary form carefully to identify and dispute any erroneous payments. When enrolled in a Medicare Advantage plan (Part C or Part D), the plan must be contacted directly to resolve any reimbursement claims, and the itemized Explanation of Benefits should be carefully examined to dispute any inappropriate recovery attempts.
Conclusion
The MSP Act provides a comprehensive framework for Medicare to protect itself from overpayments and ensure that applicable settlements are reported. With the help of Section 111 Mandatory Insurer Reporting and ICD-10 codes, Medicare has the tools to identify and recover funds when a primary payer is available. Considering the significant role that ICD-10 codes play in the conditional recovery process, parties should be aligned in their selection of codes as well as the accident dates.
The Synergy Settlement Services team of MSP compliance attorneys and lien resolution specialists have the expertise to advise you on these matters, so that you are compliant with the intricacies of the Medicare Secondary Payer Act. Contact us for more information.
November 14, 2022
By: Kevin James, Esq.
The Medicare Secondary Payer Act (MSP) has often been described by many courts as notoriously “complex”. This complexity has only increased as Medicare Advantage Organizations (MAO) have increasingly become more litigious in attempts to make law and validate their recovery rights under the MSP.
From exhausting administrative appeals, to applying the correct statute of limitations, to the correct application of the procurement cost reduction under 42 CFR 411.37, to even what the lien amount should be has vexed many personal injury attorneys when aggressive Medicare Advantage Organizations (MAOs) attempt recovery from a members tort settlement.
The 11th Circuit Court of Appeals has attempted to bring some clarity to the statute of limitations in a recent case.
Procedural History
An individual was attacked by a dog, pursued a tort claim against the tortfeasor and obtained a settlement in 2012 for $25,000. The defendant insurance carrier reported this settlement to CMS as required under the MSP, but the MAO plan was never notified.
The Medicare beneficiary was covered under an MAO plan, that since had gone defunct, and paid approximately $8,000 to cover medical bills incurred by the patient. The defunct plan had assigned it its rights to a subsidiary of MSP Recovery or MSPA Claims 1, a Miami based-group that pursues recovery actions.
At some point in 2015, MSPA Claims 1, the assignee for the MAO plan, became aware of the claim and sent a demand letter to the tortfeasor’s carrier, Tower Hill. For reasons unknown, MSPA Claims 1 did not file suit until August of 2018.
At the district court level, MPSA Claims 1 filed suit under the private cause of action provision, 42 U.S.C. § 1395y(b)(3)(A). Both parties then filed summary judgment motions arguing that the 3-year statute of limitations contained in the governmental cause of action was applicable to the case. The essential argument was whether the 3-year statue began to run when the case settled or when MSPA Claims 1 became aware of their potential interest.
The private cause of action that MSPA Claims 1 made in its claim does not actually contain a statute of limitations, the Court requested further arguments on if the governmental statute was the applicable one.
Tower Hill filed a motion for reconsideration and argued that the Court should borrow Florida’s statute of limitations which has a four-year statute of limitations for causes of “actions other than recovery for real property”. The District Court ruled in favor of Tower Hill ruling MSPA Claims 1 claim untimely.
Holding
The question before the circuit court, as briefed by the parties, was whether the governmental statute of limitations began to run when the payments and settlement occurred in 2012 or when MSP claims became aware of the settlement. Both parties agreed that the district court had erred by borrowing from Florida’s four-year statute of limitation. Essentially the parties were seeking a determination on if the statute was notice-based or one of occurrence.
Addressing the first question of which statute of limitations is the correct one, the Court ultimately decided that none of the statutes that henceforth been proffered was the correct one.
The Court agreeing that there existed no statute of limitation in the private cause of action that MSPA Claims 1 brought its claim under, the Court ultimately ruled that the appropriate statute of limitation to apply was found in 26 U.S.C. § 1658(a), a catch all statute of limitations found in the federal code. This statute contained a four-year statute of limitations. Thus, the Court held there was no need to borrow from Florida state law and the three-year statute of limitations applied to the government only.
The question left to be answered was when did MSPA 1 Claim’s claim accrue. Thus, the court had come full circle and returned to the essential disagreement between the parties.
The Court found that Section 1658(a) is one of occurrence and that since the MSPA Claims 1 became entitled to reimbursement, through the Medicare Secondary Payer Act, when it paid the claims and the case had been settled in 2012, the claim had accrued in 2012. As stated previously, this was more than six years after the claim had been settled, with the court ultimately ruling that MSPA Claims 1 suit was untimely.
Conclusion
While this case was a defeat for the MAO plan in this instance, it did clarify within the 11th Circuit what the appropriate statute of limitations are for an MAO plan to avail itself of the private cause of action. It also arguably extends the rights of MAO plans as the government would only have a three-year window to enforce its claims while MAO plans now have four.
This case also illustrates why Medicare Advantage liens are often referred to as “hidden liens”. This makes it doubly important that plaintiff’s attorneys are doing their due diligence in ensuring they have located any potential lien holders in a case, particularly when dealing with Medicare eligible individuals. Developing a process to identify and then monitor which “Part” of Medicare a personal injury victim has coverage under is critical to proper resolution as well as compliance with the MSP at settlement.
October 18, 2022
By: Rasa Fumagalli, JD, MSCC, CMSP-F
Medicare has struggled over the years to provide rules clarifying existing Medicare Secondary Payer (MSP) compliance obligations when it comes to post-settlement injury-related care that is released in a liability settlement. Their first attempt at proposed rulemaking took place in 2012 and resulted in the notice of proposed rule being withdrawn in 2014. Their most recent attempt, which began in December of 2018, sought to provide a proposed rule that “would clarify existing Medicare Secondary Payer (MSP) obligations associated with future medical items related to liability insurance (including self-insurance), no fault insurance, and workers’ compensation settlements, judgments, awards, or other payments.”[1] Although this notice of proposed rule had been delayed many times over the years, it was finally withdrawn on October 13, 2022.
Medicare’s withdrawal of the notice of proposed rule does not give settling parties a free pass when it comes to Medicare Secondary Payer compliance issues. So where does this leave parties settling liability cases involving Medicare beneficiaries? The answer, as always, lies in the Medicare Secondary Payer Act. The Act states that Medicare is prohibited from making payments for services “to the extent that payment has been made or can reasonably be expected to be made under any of the following: (i) workers’ compensation; (ii) liability insurance; (iii) no-fault insurance.”[2] Further guidance comes from the May of 2011 CMS Region VI Stalcup memo and the CMS September of 2011 Benson memo which both provide insights into Medicare’s position when it comes to shifting the burden to Medicare post settlement.[3] Unlike accepted workers’ compensation settlements, liability settlements have different considerations and require a more nuanced analysis of the potential impact of the MSP Act on a settlement. Although a Medicare Set-Aside allocation may be appropriate in a certain case, there are many settlements where other options are more appropriate.
The Medicare trust fund remains in dire financial straits. Medicare’s decision to withdraw the notice of proposed rule might mean that a greater focus will be placed on the Section 111 Total Payment Obligation to Claimant (TPOC) reporting resulting in increased denials of post-settlement injury-related claims. For the time being, our recommendation is as always make sure that your client is educated about the potential impact of the MSP on payment for future injury-related care post settlement. Consulting with experts and having the issues explained to an injury victim are best practices. Then ultimately, you want to document your file about what has been done to educate the client and their final decision. If a denial of care occurs in the future, you then have documentation of what was done and why.
Medicare is analogous to Medicaid at settlement meaning just like the obligation to advise a Medicaid beneficiary about the availability of a special needs trust, you need to explain to your client about the possibility of establishing a set-aside. As commentators have suggested, a lawyer must “ensure his client is informed about the options of structured settlements, trusts and the effect of the judgment or settlement on the client’s public benefits.”[4] The same is true for Medicare beneficiaries. Making sure a client receives proper counseling about the form of settlement is required by the Rules of Professional Conduct.[5]
We will continue to monitor this issue and keep you advised of further developments. Synergy’s team of MSP compliance experts is here to assist you in navigating the murky waters of MSP compliance.
[1] Miscellaneous Medicare Secondary Payer Clarifications and Updates (CMS-6047), RIN: 0938-AT85.
[2] 42 C.F.R. § 411.20; see also 42 U.S.C. § 1395y(b)(2)(A).
[3] Memorandum from Sally Stalcup, MSP Regional Coordinator, CMS, Medicare Fee for Service Branch, Division of Financial Management and Fee for Service Operations (May 25, 2011), available at https://static1.squarespace.com/static/5807a480d482e9eb1f5d9c54/t/589d81823e00bea366d73d90/1486717333702/00-CMS-Sally-Stalcup-Memo-5-25-2011.pdf; Memorandum from Charlotte Benson, Acting Director, Financial Services Group, Office of Financial Management, Department of Health & Human Services, Centers for Medicare & Medicaid Services, to Consortium Administrator for Financial Management and Fee-for-Service Operations, Medicare Secondary Payer—Liability Insurance (Including Self-Insurance) Settlements, Judgments, Award, or Other Payments and Future Medicals – INFORMATION (Sep. 30, 2011), available at https://www.cms.gov/files/document/future-medicals.pdf.
[4] Bernard A. Krooks & Andrew H. Hook, Special Needs Trusts: The Basics, The Benefits and The Burdens, 15 ALI-ABA Est. Plan. Course Materials J., 17 (Dec 2009).
[5] See Model Rules of Prof’l Conduct, R. 1.0(e) and 2.1.
Rasa Fumagalli, JD, MSCC, CMSP-F
Personal injury settlements rarely make an injury victim whole. In light of this, cost management decisions factor into the strategy of the case. For example, while both life care plans and medical cost projection reports may be used as support for a settlement demand, their costs are very different. Life care plans may range anywhere from on the low end $10,000 to $20,000 or more, while medical cost projections are much more economical. The decision on which report to select may depend on the nature of the injuries, the expected range of settlement of the case, available coverage and time constraints associated with the settlement negotiations.
A comparison of the two reports is reflected in the below chart. Although both reports provide support for a demand of future injury-related medical care, the life care plan will usually be based on an in-home visit and interview with the injury victim. The medical cost projection, on the other hand, is based on information that is provided by the attorney handling the matter. Both reports are based on a review of medical records, but the life care plan report may also look to information gained through a conversation with a treating physician. Life care plans often have addendums that address lost earnings, replacement costs of household services and home modifications, while medical cost projections do not. In deciding which of these reports is appropriate to increase the value of the case, an attorney should avoid using a sledgehammer to crack a nut.
| Life Care Plan (LCP) | Medical Cost Projection (MCP) |
|---|---|
| Medical costs | Medical costs |
| Durable medical equipment/supplies | Durable medical equipment/supplies |
| Prosthetics/orthotics | Prosthetics/orthotics |
| Physician/specialist visits | Physician/specialist visits |
| Rehabilitation/physical therapy | Rehabilitation/physical therapy |
| Future surgeries/procedures | Future surgeries/procedures |
| Medications | Medications |
| Home health care | Home health care |
| Long term care | Long term care |
| Transportation mileage | Transportation mileage |
| Assessment of lost income | N/A |
| Assessment of loss of earning capacity | N/A |
| Estimate of home modifications | N/A |
| Estimate of vehicle modifications | N/A |
| Estimate of cost of replacement of household services that can no longer be performed | N/A |
| Vocational therapy | N/A |
| Based on in-home visit and interview with injury victim | Based on intake packet provided by injury victim’s attorney |
| Review of medical records | Review of medical records |
| Contact with physicians | N/A |
| Average cost: $15,000 | Synergy’s cost: $2,500 |
Conclusion
In the right case, don’t miss the opportunity to hit the defense hard early on by quantifying the future medical damages suffered by your client. You don’t have to spend tens of thousands of dollars on a life care plan to do this. Instead, let Synergy prepare a Medical Cost Projection (MCP) report quickly, based upon existing medical records (costs $2,500.00). That way you can quickly present evidence of future medical expenses and include the future medical cost projection report in your initial demands so you can settle cases earlier on. Contact Synergy today to learn more about how our MCP report can simplify the negotiation of future medical care for your case.
August 11, 2022
Evelynn Passino, J.D.
For clients with public benefits, closing out their case is not as simple as issuing a check for their net recovery. If the client has Medicare or will be eligible soon, then steps must be taken to comply with the Medicare Secondary Payer (MSP) Act. If the client has means-tested benefits, such as Medicaid or Supplemental Security Income (SSI), then additional steps may be necessary to ensure their recovery and eligibility for those benefits is protected.
Means-Tested Benefits
In cases where the client has means-tested benefits, their settlement recovery may be a countable resource, which means that receipt of those funds may cause them to be ineligible for their benefits. It is important to understand that not all public benefits programs operate the same way. For example, SSI, while it is a federal program, has state-specific nuances because some states supplement SSI benefits. Programs such as Medicaid, Section 8 benefits offered by the US Department of Housing and Urban Development (HUD), and the Supplemental Nutrition Assistance Program (SNAP) are administered on a state or local level, creating variations in how these programs work. Each program has its own eligibility requirements, which can include both categorical qualifications (such as being disabled, over 65, etc.) and financial qualifications. The financial qualifications may place limitations on income, assets, or both. Generally, means-tested benefits programs will exclude certain assets from being counted, such as a home, vehicle, and personal effects. Cash is almost always a countable resource and having too much of it available will cause the client to lose his or her benefits.
It is critical to know which benefits the client has so that educated decisions can be made about how to handle the recovery. Getting copies of the client’s benefit cards and award letters is recommended. If the client no longer has their award letters, which outline what benefit the client qualified for, these can usually be requested from the office administering the benefit. Some programs, such as the Social Security Administration, offer these online.[1]
Preserving Means-Tested Benefits
If a client is in danger of having more resources than they are allowed under their government program, then there are actions they can take to protect their benefits. One option is to use the money to purchase exempt resources, like a home or vehicle, or use the money to improve those resources, such as adding accessibility features to their car or adding a wheelchair ramp to their home. They may also want to pay down debts; however, they should be careful about this where there is not a clean paper trail, such as money loaned between family members. Paying back a person in those circumstances could appear (to the government) like a gift, which will be counted as a transfer for less than fair market value and may trigger transfer penalties resulting in ineligibility.
If the client is disabled, then another option is to deposit the money in a special needs trust (SNT). An SNT, when created and administered in compliance with 42 U.S.C. § 1396p(d)(4)(a-c), is typically not a countable resource, although programs differ as to how they can be used and what they can pay for. An SNT can be funded with either first-party money (such as a personal injury recovery) or third-party money (such as inheritance or other gift). An SNT can be created for an individual and managed on their behalf by a trustee of their choosing (called a standalone trust), or a person can join a pooled trust, which is an existing trust administered by a non-profit association. Generally, pooled trusts are faster to set up and lower in cost due to them being administered by a non-profit. Standalone trusts, however, can be customized, and the client has more control in choosing their trustee. In either case, if the client is receiving Medicaid, then Medicaid has a right to be paid back from the balance of the trust when the beneficiary dies (this is known as “Medicaid payback”).
Lastly, the client always has the option to forgo their benefits but should exercise caution in doing so because some benefits are difficult to re-qualify for if the client changes their mind later. They should also be careful if intending to preserve some benefits and not others. For example, some clients are willing to lose their SSI benefits after a settlement because they expect to have cash from the recovery available but want to continue receiving Medicaid benefits. In most states, a person qualifies for Medicaid automatically once they qualify for SSI, and this is how many on Medicaid access this benefit; however, the reverse is also true, that if a person loses eligibility for SSI then they also lose Medicaid. If they lose SSI-related Medicaid, there may be another Medicaid program they can qualify for, but they should confirm this before taking action that will jeopardize their SSI benefits.
Medicare
The MSP Act (42 U.S.C. § 1395 y(6)(b)) works to preserve the Medicare trust fund by ensuring that Medicare does not pay injury-related claims when another person or entity is liable. The Centers for Medicare and Medicaid Services (CMS) does this by seeking reimbursement on injury-related claims that accrued prior to settlement and asserting that Medicare’s interests be considered for claims which can be expected in the future.
Conditional Payments
CMS is notified of an accident through Mandatory Insurer Reporting (MIR), which is required by Section 111 of the Medicare, Medicaid, and SCHIP Extension Act of 2007. This reporting is done by liability insurers, no-fault insurers, workers’ compensation plans and insurers, and self-insured organizations. This puts CMS on-notice so they can begin tracking injury-related claims which they will seek reimbursement for at settlement. If a conditional payment is not repaid, CMS can take action against any of the entities responsible for payment, including the plaintiff’s law firm, and can seek double damages. 42 U.S.C. § 1395y(b)(2)(B)(iii); 42 U.S.C. § 1395y(b)(3).
Future Interests
MIR includes notification to CMS when the case settles, giving Medicare notice of the injuries and ICD-10 codes applicable to the case. Medicare’s preferred method for considering its future interests is through the creation of a Medicare Set-Aside (MSA). An MSA begins with an allocation, which is a report summarizing the expected injury-related care and prescriptions that would otherwise be covered by Medicare for the remainder of the Medicare beneficiary’s life. The allocation projects the cost of such care at the usual and customary prices where the injury victim lives. In worker’s compensation cases, there is a voluntary process for CMS to review the allocation in cases where certain thresholds are met. For someone who is a Medicare beneficiary at the time of settlement, this review may occur if the settlement exceeds $25,000. If the client has a reasonable expectation of being eligible for Medicare within 30 months (such as those who have applied for Social Security Disability Insurance), then CMS will only review the MSA if the settlement amount is more than $250,000. There is currently no review process for liability and no-fault cases.[2] CMS’ expectation is that the injury victim will set aside the amount of money in the MSA allocation and use this money to pay for Medicare-covered, injury-related services and prescriptions until exhaustion. CMS will resume normal coverage when the account has been properly exhausted, even if additional injury-related care is needed after that time.
It is important to note that the MSP Act does not explicitly require that an MSA be created or how much it is to be funded.[3] CMS has provided some guidance about when an MSA is not necessary, such as when the settlement, judgment, or award does not fund future medical costs or when the injury victim’s treating physician certifies that no further injury-related treatment is needed.[4]
Medicare’s enforcement mechanism regarding future medicals is to deny claims that are injury-related if they determine the Medicare beneficiary did not consider Medicare’s interest at the time of settlement. This provides additional room to argue how much is appropriate for an MSA or if an MSA is even advisable. What makes sense for a particular client will depend on their risk tolerance. If a client is risk-averse, they will probably want to fully fund a set-aside and administer it correctly to reduce the risk that Medicare will ever deny a claim. On the other end of the spectrum, some clients choose not to fund an MSA because they are adamant about not getting further injury-related treatment or they prefer to “roll the dice” and keep billing Medicare for injury-related care until Medicare denies it. For clients who are in the middle, they may want to fund an MSA, but not in full. One option is to reduce the MSA based on the value of damages suffered relative to the settlement amount obtained.
Funding
If a client decides to fund an MSA, then they need to decide how to fund it. MSAs can be funded by lump sum or by structured settlement annuity. The annuity is often preferred because it allows the MSA to be fully funded with less money out-of-pocket. It can also create a scenario where the MSA is temporarily exhausted, in which case Medicare will resume normal coverage until the next annuity payment is deposited into the MSA. Lump sum funding makes more sense when the MSA is smaller, and an annuity would not be advantageous.
Administration
The next step is determining how to administer the MSA. This depends on the client’s capacity, willingness, and whether they have means-tested benefits. For clients with capacity and no means-tested benefits, one option is to self-administer their MSA. This means they will take the recommended amount from their settlement, place it in a separate account, and pay any Medicare-covered, injury-related bills from this account. It requires some work on the client’s part to manage the account, keep records, and report to CMS (if required).[5] For those who do not want the hassle of administering their own account, there are companies that offer professional administration. These companies take custody of the MSA funding, provide the Medicare beneficiary with a card they can show when receiving injury-related care (similar to an insurance card), and handle all payments, recordkeeping and reporting. Generally, they can also get fee discounts for their clients on various services using their networks, which help the MSA last longer. There is a fee for these services, which unfortunately cannot be paid from the MSA funds. These companies often also have self-administration assistance services at a lower cost for those who wish to self-administer, but want some help with certain aspects, or want to take advantage of the network discounts.
If the client is dual-eligible, meaning they have both Medicare and Medicaid (or other means-tested benefits), then it is important to determine whether the MSA will be a countable resource for them. In most states and under most programs, it is countable, meaning the money in that account is treated like any other cash the client has available to them; however, some programs have begun to create exemptions for counting MSAs, so it is worth exploring where your state stands on this. If the MSA will be countable, then self-administration is not an option, and the MSA should be professionally administered and held in a special needs trust.
Conclusion
When a client has public benefits, it is important to understand which benefits they have, how those programs work, and what options are available. If they want to preserve their benefits, then there are likely to be some steps they need to take to ensure no interruption in the services they receive. It is helpful to get experts involved who understand these programs and can make sure the client makes an informed decision, whatever that decision may be.
Synergy Settlement Services works with clients every day to help them understand their obligations under the Medicare Secondary Payer Act and how to preserve eligibility for their benefits. Call Synergy today at (877) 242-0022 to learn how we can help.
[1] https://www.ssa.gov/myaccount/
[2] Memorandum from Sally Stalcup, MSP Regional Coordinator, CMS, Medicare Fee for Service Branch, Division of Financial Management and Fee for Service Operations (May 25, 2011), available at https://static1.squarespace.com/static/5807a480d482e9eb1f5d9c54/t/589d81823e00bea366d73d90/1486717333702/00-CMS-Sally-Stalcup-Memo-5-25-2011.pdf.
[3] Id.
[4] Id.; Memorandum from Charlotte Benson, Acting Director, Financial Services Group, Office of Financial Management, Department of Health & Human Services, Centers for Medicare & Medicaid Services, to Consortium Administrator for Financial Management and Fee-for-Service Operations, Medicare Secondary Payer—Liability Insurance (Including Self-Insurance) Settlements, Judgments, Award, or Other Payments and Future Medicals – INFORMATION (Sep. 30, 2011), available at https://www.cms.gov/files/document/future-medicals.pdf.
[5] CMS offers a self-administration toolkit for those who wish to handle this themselves: https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Workers-Compensation-Medicare-Set-Aside-Arrangements/Downloads/Self-Administration-Toolkit-for-WCMSAs-Version-1_3.pdf.
July 21, 2022
Rasa Fumagalli, JD, MSCC, CMSP-F
Netflix’s new baking competition show “Is it Cake” challenges judges to identify which of two identical objects is edible and which is not. Attorneys settling cases involving work-related injuries may find themselves similarly perplexed when it comes to whether a work-related injury will be treated as a workers’ compensation or liability case for purposes of the Medicare Secondary Payer Act (“MSP”). Depending on who the employer is at the time of a work-related injury, some injured employees may be covered by programs that are required under federal law. Depending on the nature of the program, the MSP compliance obligations will either be handled as a workers’ compensation or liability settlement. For example, the Longshore and Harbor Workers’ Compensation Act (“LHWCA”) that provides benefits for work-related injuries sustained by certain maritime and dock workers is viewed as workers’ compensation insurance when it comes to MSP compliance issues. On the other hand, the Federal Employers Liability Act (“FELA”) which provides benefits for railroad employees, who sustain injuries due to the negligence of a railroad carrier, is viewed as liability insurance when it comes to MSP compliance issues. (See MSP Manual, Chapter 1, Section 10.4)
Both liability and workers’ compensation settlements are impacted by the MSP Act. The MSP is comprised of a series of statutory provisions intended to reduce 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 MSP Act and supporting regulations specifically state that Medicare is precluded from making 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. (42 U.S.C.§1395y(b)(2)(A)(ii), 42 C.F.R.§411.20 (a)(2)). A primary payer’s responsibility for payment may be demonstrated by “a judgment, payment conditioned upon the beneficiary’s compromise, waiver, or release (whether or not there is a determination or admission of liability) of payment for items or services included in a claim against the primary payer or the primary payer’s insured or by other means…” (42 C.F. R§411.22(b)). The parties first and foremost should ensure that pre-settlement injury-related payments (conditional payments) made by Medicare are reimbursed to the appropriate Medicare Trust Fund. In addition, and in light of the MSP, settlements that close out future injury-related medical benefits should avoid cost shifting the post-settlement injury-related care onto Medicare.
The MSP compliance distinction between a liability settlement and a workers compensation settlement is an important one since it may impact the way parties address post settlement injury related care. The Centers for Medicare and Medicaid Services (“CMS”) has issued a great deal of guidance when it comes to workers’ compensation settlements that close out future injury related medical. The Workers’ Compensation Medicare Set-Aside Arrangement (“WCMSA”) Reference Guide (“Guide”), Version 3.7, 6/6/2022, explains that parties should take Medicare’s interest, with respect to future medicals, into account by including a WCMSA into the settlement terms. The WCMSA should contain sufficient funds from the settlement to cover the total cost that will be incurred for future injury related Medicare covered treatment. CMS encourages parties to seek CMS approval of the proposed WCMSA when the settlement meets CMS’ internal workload review thresholds. The benefit to CMS’ review and approval of the proposed amount is the certainty in knowing that Medicare will become the primary payer for any injury-related services that exceed the properly exhausted CMS determined WCMSA. Although the Guide also states that CMS approval of a proposed WCMSA amount is not required, Section 4.3 notes that CMS may treat the use of non-CMS approved products as “a potential attempt to shift financial burden by improperly giving reasonable recognition to both medical expenses and income replacement.” Non-CMS approved products are MSA reports that are not submitted to CMS for review.
If CMS concludes that there was an improper cost shift, it may deny payment for injury-related services until it is provided with attestation of appropriate exhaustion equal to the total settlement, less procurement costs and paid conditional payments. The parties may overcome this denial by showing CMS, at the time of the WCMSA exhaustion, that both the initial funding of the MSA was appropriate and the funds were used properly.
To understand the importance of the differences between whether a work injury is treated as workers’ compensation versus liability case in the context of the MSP, consider a FELA settlement. FELA is treated as a liability settlement for purposes of the MSP due to its differences from the typical workers’ compensation case. Although a FELA settlement involves a work-related injury, the railroad employee must show that his/her injuries were, due in whole or in part, to the negligence of the railroad. This burden of proof is different than the burden of proof in a typical workers’ compensation case. In most jurisdictions, for a workers’ compensation case, a worker must only show that he suffered an accidental injury, which arose out of and in the course of his employment. There is no need to show negligence.
Once a settlement agreement is reached in a FELA case, the parties should consider the potential impact of the MSP Act on the settlement. If the railroad employee is a Medicare beneficiary at time of settlement, Medicare will be given notice of the settlement under Section 111’s Mandatory Insurer Reporting obligation. The notice of settlement may result in the potential risk of Medicare denying post-settlement injury-related care. If the railroad employee has completed his injury-related treatment and no further treatment is indicated, the beneficiary may wish to obtain a written certification from the treating physician to that effect. Pursuant to CMS’ 9/30/2011 Memo, there is no need for a liability MSA when the treating physician makes this certification.
If, however, the beneficiary continues to treat for his injuries, or will need future injury-related care, an MSA might be considered to avoid any potential issues with Medicare denying post-settlement injury-related care. While a workers’ compensation settlement will usually fully fund the WCMSA, the liability MSA may at times consider the relative value of each of the elements of damage being compensated in the settlement (pro-rata apportionment). This apportionment approach considers the ratio between the total potential case value and the net settlement. Parties may also choose to fully fund the liability MSA. The decision of how much, or how little, risk to assume when it comes to post-settlement injury-related care is one that should be made by the beneficiary and documented in the attorney’s file.
Conditional payments, payments made by Medicare for injury-related care provided prior to settlement, must also be addressed in connection with a settlement. In a workers’ compensation case, conditional payment recovery is handled by the Commercial Repayment Center (“CRC”). The CRC seeks to pursue recovery directly from the workers’ compensation insurer carrier while the case is open. Once the case settles, the conditional payment recovery will move from the CRC to the Benefits Coordination and Recovery Center (“BCRC”) since the beneficiary is now the identified debtor. Since a FELA settlement is viewed as a liability settlement, the BCRC will handle the conditional payment recovery and seek recovery from the beneficiary debtor. Payments made by a Medicare Advantage Plan (“MAP”) must also be addressed. Information regarding the MAP payments is provided by the relevant insurance carrier themselves and not the BCRC/CRC.
While one work injury case may look just like any other, your MSP compliance approach may depend on whether CMS views the case as liability or workers’ compensation. A thorough understanding of the differences and risks of various approaches is necessary in order to avoid any unexpected consequences of inaction.
Contact Synergy Settlement Services to discuss the way our MSP compliance team may assist you.
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