MEDICARE COMPLIANCE

Are the defendants/insurance carriers throwing everything but the kitchen sink into your release language in regards to protecting Medicare’s interests? Be careful what you agree to include in the settlement documents.   It can potentially cause a loss of itemized medical deductions on your client’s tax return and obligate them to set aside monies when it is inapplicable.  Call Synergy at 877-242-0022 or visit us at www.synergymsa.com  to make sure you and your clients are protected.

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

On December the 19^th the Strengthening Medicare Secondary Payer Rules Act was passed by the House.   The Senate passed the Act on December the 21^st.  It is on its way to President Obama to sign.  The SMART Act will modify some of the current processes related to Medicare conditional payment recovery.  While there are some significant improvements, it falls short of fixing all flaws in the MSP system when it comes to conditional payments.  The good news is that it creates a 3 year Statute of Limitations for recovery actions relating to conditional payments.  The mediocre news is that while it streamlines the process for obtaining conditional payment amounts it no longer has the enforcement provision originally proposed that would have stripped Medicare of the right to pursue recovery if they failed to timely provide the information.  Below is a summary of the changes the bill makes to the Medicare Secondary Payer Act.

Bill Summary:

• Requires CMS to issue a “potentially” final demand before settlement, judgment or award
• Establish a right of appeal regarding conditional payments for insurance companies and self insureds
• Create a 3 year SOL
• Discontinue the use of the full SSN for mandatory insurer reporting
• Make fines permissive for defendants/insurers who don’t comply with the mandatory reporting

Bill Details:

Either party, 120 days before the reasonably expected date of settlement, judgment, award or other payment, notify the Secretary of the impending resolution of the case.

The Secretary shall maintain a website portal that will provide access to information regarding items and services paid for by Medicare related to the notice.  It must be updated timely but not later than 15 days after the date a payment is made.  The website must include provider or supplier name, diagnosis codes, date of service and conditional payment amounts.  It must also identify claims and payments that are related to a potential settlement, judgment, award or other payment.  There has to be a secure method for electronic communications.  Lastly, the website must permit a download of a statement of reimbursement amounts being claimed by Medicare.

Obtaining the statement of reimbursement, if done within the prescribed periods of time, shall constitute the final conditional demand amount.  There is a protected period which is 65 days from the notice, which can be extended by another 30 days.  If settlement occurs during this period and the statement was downloaded within 3 business days of settlement then it shall constitute the final demand.

If there are discrepancies in the statement of reimbursement amount, the Secretary must provide a timely process to resolve such discrepancies.  The discrepancies must be resolved by the Secretary within 11 days after receiving documentation of the discrepancies or the Secretary loses the right to dispute those discrepancies.

A right to appeal and appeals process must be created by the Secretary through the promulgation of regulations.  However the appeal rights would be limited to the applicable plan (so only for defendants/insurers) and only relate to the subsections of the SMART Act.

There are two provisions relating to Mandatory Insurer Reporting.  The first makes assessment of fines for non-compliance with the reporting requirement discretionary versus mandatory.  The second gives the Secretary 18 months to eliminate the use of the Medicare beneficiary’s Social Security number for the reporting process.

Lastly, the SMART Act provides for a 3 year Statute of Limitations on recovery actions by the government.  The 3 years runs from receipt of notice of settlement, judgment, award or other payment.

To see a copy of the text of the Act, click HERE

Below is a statement issued by the AAJ after the passage on the 21^st:

Dear Colleague,

With the help and hard work of the AAJ Public Affairs team, the U.S. House and Senate have passed a bill that will bring certainty to the Medicare Secondary Payment (MSP) reimbursement process! This legislation is a huge victory for your clients on Medicare. It will simplify their lives—and your practices.

The version of the SMART Act that passed mandates a three-year statute of limitations on the Centers for Medicare & Medicaid Services (CMS) so that the agency cannot ask for additional money from clients or their attorneys after the statute expires.

In addition, the bill will simplify the current online portal process for calculating MSP reimbursement. An improved online process will help you resolve your Medicare Secondary Payer claims faster and easier. While the SMART Act offers great improvements, AAJ knows there is still more work to be done. We will continue working to improve the MSP process.

Much of the time at the end of this Congressional session has been consumed by the “fiscal cliff” negotiations. Lawmakers have resisted passing any legislation that deviated from this discussion. AAJ Public Affairs staff Sarah Rooney, Kate deGravelles, and Sue Steinman provided exceptional counsel to ensure that this legislation passed.

AAJ knows how many of you continuously struggled with CMS to receive timely, final reimbursement numbers. Many of you worked with AAJ Public Affairs to advocate for this legislation, and now, after more than two years, we have an accomplishment that will make a difference for lawyers all across the country.

Thank you for your support as an AAJ member. We could not have done this without you. When you stand with us it makes a tremendous difference in our ability to achieve positive advocacy results.

Best Regards and Happy Holidays,

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

With Medicare Secondary Payer (“MSP”) Compliance on everyone’s minds these days, it is no wonder that MSP vendors have tried to capitalize on these fears by offering services targeting them.  The problem is that some of these vendors may be doing more harm than good.  There is a national MSA provider and vendor that is offering an opinion letter to plaintiff personal injury attorneys (and to a lesser extent defendants) stating that no MSA is needed in certain liability settlements.  The letter provides a false sense of security.  The letter focuses on the risk of Medicare targeting the personal injury attorney with a recovery action.  However, that isn’t the real risk.  The real risk, and it is a big one, is that the plaintiff attorney might be sued for legal malpractice if a Medicare eligible client is denied future injury related care as a result of the settlement without being informed of their options or properly protected when it comes to the MSP.  With the implementation of mandatory insurer reporting for Medicare beneficiaries, all defendants must report settlements[1] (currently 50k or more) to Medicare.  Reporting includes the ICD9 codes related to the claimed injuries.  Reporting allows Medicare to flag those ICD9 codes and then deny payment for that future injury related care.  If the client is denied Medicare coverage for injury related care, what good is that no-MSA letter provided by this vendor?

In the case of a denial of future injury related Medicare covered services, the client would be left with a Medicare appeals process that does not let them see the inside of a court room for 420 days in certain circumstances[2].  Who would the client sue if that were the case?  While they likely would have a claim against the vendor that provided that letter, the more attractive target may be their own attorney that turned to this particular vendor and secured the letter on their behalf.  Legal malpractice exposure related to denial of future Medicare injury related benefits could be in the hundreds of thousands of dollars.  It is a very large exposure for plaintiff, personal injury practitioners and one that should not be taken lightly.  This is particularly so in the case of attorneys who rely on these opinion letters issued without a solid legal basis or foundation.  In reviewing said letter, it appears there are some misstatements and major inaccuracies.  Below I will delve into these issues and address the alternatives to a “no-MSA” opinion letter for those that are Medicare beneficiaries.

As a preliminary matter, I must make clear that the only time a personal injury lawyer needs to address this issue is if their settlement involves a Medicare beneficiary or arguably[3], those who have a “reasonable expectation” of becoming a Medicare beneficiary within 30 months.  A fundamental flaw with the letter created by this particular vendor, in my opinion, is that it acknowledges an obligation to address Medicare’s future interest but then opines it isn’t necessary simply because the recovery was too small.  Fundamentally, that is problematic because there is no basis for that assumption.  Furthermore, the letter states, inaccurately, that “[f]ederal laws establishes MSAs to prevent legally responsible parties in workers’ compensation or liability settlements from permanently shifting the burden of future medical expenses for injury related care to Medicare.”  There are no such “laws”.  There are some regulations that can be cited for the proposition that you can’t shift the burden in workers’ compensation cases when a Medicare beneficiary settles his or her claim.  Those regulations are inapplicable to liability settlements and are irrelevant in the context of a letter addressing whether to implement a liability set aside.  A more accurate statement would be that currently Medicare interprets the Medicare Secondary Payer Act as requiring protection of Medicare’s future interests when resolving a liability case.

The letter I reviewed was written in the latter part of last year.  It says that CMS has issued no guidance about when or how to use MSAs in third party liability cases.  That simply is not true.  There are two handouts/memorandums issued last year that address Medicare Set Asides in third party cases.  The first and most important is the Stalcup handout/memo issued in May of 2011 by the Dallas Regional Office Director for CMS, Region 6.  The handout, by its own words, indicates there are no “laws” requiring a set aside.  However, the handout does indicate that the law does require “the Medicare Trust Fund be protected from payment for future services whether it is a Workers’ Compensation or liability case.”  CMS’ method of choice for protecting the Medicare trust fund from making payments for future Medicare injury related care is a set aside according to the Stalcup handout/memo.  The Stalcup handout is not a memo from CMS’s headquarters and only applies to the states the Dallas regional office covers so it is limited in scope.  The second is a memo from the CMS headquarters office in Baltimore issued in September of 2011.  In this memo CMS provides a procedure to avoid establishing a liability Medicare set aside.  The memo provides that if the treating physician certifies in writing that the treatment for the injuries suffered in the accident are complete and that future Medicare covered services for the injury will not be required then a set aside isn’t necessary.  The Stalcup handout/memo is consistent with the public statements CMS has made regarding MSAs in liability cases.  The September 2011 memorandum from CMS HQ tells us when you don’t have to establish a liability Medicare Set Aside which presumably means CMS’s position is that in certain cases you do have to establish a liability Medicare Set Aside.  Accordingly, it is difficult to claim CMS has provided no guidance about liability Medicare Set Asides.

What I don’t disagree with is the methodology the letter employs in terms of its analysis of whether the set aside issue needs to be addressed.  First, the letter analyzes whether there is a permanent burden shift from a primary plan (liability insurer) to Medicare for future injury related care and the injury victim’s need for future injury related care.  If those two issues are addressed with a yes, then the letters says to look at Medicare entitlement or reasonable expectation within 30 months[4].  If the answer is yes, then look at whether the claim resolves future medical.  If yes, then the letter says to look at the gross recovery to determine whether it compensates the injury victim for future medicals based upon a damages versus recovery analysis.  This is where the analysis goes astray as there is absolutely nothing in the letter which examines the damages suffered versus what was recovered to support the opinion of no MSA being needed.  I would assert there is nothing which would ever support this type of opinion.  I will explain why further below.

Ultimately the letter says that although the vendor recognizes the injury victim client IS AN MSA CANDIDATE, an MSA is not warranted since the settlement does not contain sufficient proceeds to cover future injury related medical expenses.  While I believe you can potentially get to that opinion in the right case, there is no analysis or justification in the opinion letter I reviewed for that position.  I would propose that there is a much better way to deal with this issue and one that would protect the attorney from a legal malpractice claim instead of focusing on whether Medicare might bring a recovery action.  There is no law that provides for Medicare to recover damages in the context of failure to establish a set aside.  There would have to be a large extension of current conditional payment recovery laws under the MSP to justify any type of potential action to recover in the area of Medicare set asides.  Even if such an action were allowed, what would be the damages anyway?  There would only be a few scenarios where there is a potential for damages but as far as I know there has not been a single action by Medicare against any personal injury attorney in workers’ compensation cases or liability settlements that deal with failure to establish a set aside.  How could Medicare bring an action against a plaintiff attorney when there is no way that the attorney can force a client to set money aside if the injury victim refuses?  That really isn’t the primary issue though.

Getting back to an alternative solution to the situation where the case involves a Medicare beneficiary but there are limited settlement dollars.  Instead of just focusing on an opinion related to having no MSA, it makes more sense to estimate the future Medicare covered services and then apply an appropriate reduction methodology.  If you are going to recognize the need for an MSA like this vendor does in the letter, shouldn’t you do the analysis and justify a very small set aside with a proper analysis?  So what would that look like?  I would propose the following hypothetical:  Case is settled for $50,000 policy limits.  40% fee of $20,000 and costs of $2,500.  There is a small Medicare lien of $5,000.  Client will net $22,500.  An MSA estimate provides that Medicare’s exposure for future injury related care is $100,000.  The total value of the case if there had been no policy limits is $1,000,000.  The client has recovered 2.25% of their total damages.  The set aside based on an Ahlborn type of analysis[5] would be $2,250.  That type of analysis is what I would suggest adequately protects the attorney and the client.  While I would acknowledge that CMS has never approved this type of methodology, they have not disapproved of it either.  What CMS has said in the two memorandums issued in 2011 is that you have to properly address this issue.  An opinion letter that recognizes a set aside obligation in a liability settlement but then arbitrarily says not to set aside any money because of the small size of the settlement doesn’t afford much protection, if any.  Isn’t it a false sense of security they are selling?  Is it worth the exposure for the personal injury attorney?  Is it worth the potential loss of Medicare entitlement for injury related care for the injury victim?  Wouldn’t it be better to just set aside the $2,250 after a defensible analysis?

There will be certain cases where the MSA estimate and reduction methodology does not yield enough of a reduction from a practical perspective.  For example, if the same scenario I discussed in the same paragraph remained the same but the value of the case was dropped from $1M to $200,000 then the client recovered 11.25% of their damages and the set aside amount would be $11,250.  That would consume half of net settlement.  In that case, an argument could be made based on the underpinnings[6] of the Ahlborn decision, by analogy, that there should be no set aside because if the client were forced to set aside half of their net recovery then they would be setting aside dollars that aren’t necessarily meant to compensate for future medical.  Again, at least there is a rational basis for that argument and an analysis was undertaken to properly address the issue, rather than reliance upon an opinion letter that simply makes some assumptions.

Every lawyer who represents injury victims is going to have to decide what kind of protection they want in this new world of Medicare Secondary Payer Compliance.  Making wise choices is critical to avoid a large amount of potential exposure.  I believe that anyone who has one of these types of opinion letters discussed in this article has a tremendous amount of risk and exposure.  According to the CMS Stalcup handout/memo, if future medicals are funded for a Medicare beneficiary when they settle their case then the attorney “should to see to it that those funds are used to pay for otherwise Medicare covered services related to what is claimed/released in the settlement judgment award.”  The responsibility for defense counsel is a little bit different according the handout.  If future medical is funded, then defense counsel or the insurer “should make sure their records contain documentation of their notification to plaintiff’s counsel and the Medicare beneficiary that the settlement does fund future medicals which obligates them to protect the Medicare Trust Fund.”  “It will also be part of their report to Medicare in compliance with Section 111, Mandatory Insurer Reporting requirements.”  So to properly consider Medicare’s future interest according to CMS, it would necessitate advising the client of the obligation to set monies aside and the potential risk of denial of future injury related care if the issue is ignored.  Further, potentially engaging in the analysis I outlined above may be prudent for proper consideration of Medicare Secondary Payer Compliance.  Failure to properly address this issue can have disastrous consequences for an injury victim and expose plaintiff counsel to potential malpractice claims.

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

The MSPRC announced today a new alternative for resolving conditional payments.  It allows for self calculation of the conditional payment amount when the settlement is $25,000 or less.  The substance of the announcement is immediately below.

“Self-Calculated Final Conditional Payment Amount” Option

The Centers for Medicare & Medicaid Services (CMS) will be implementing an option that will allow certain Medicare beneficiaries to obtain Medicare’s final conditional payment amount prior to settlement. This option will be available in February 2012, for certain settlements involving physical trauma based injuries where treatment has been completed. Under this option, the beneficiary or his representative will calculate the amount of Medicare’s conditional payment amount using information received from the Medicare Secondary Payer Recovery Contractor (MSPRC), the MyMedicare website, or other claims information available to the beneficiary. The MSPRC will review this amount and, if finding the amount accurate, will respond with Medicare’s final conditional payment amount within 60 days. To secure the final conditional payment amount, the beneficiary must settle within 60 days after the date of Medicare’s response.

In order to use this option, ALL of the following criteria must be met:

1. The liability insurance (including self-insurance) settlement will be for a physical trauma based injury (the settlement does not relate to ingestion, exposure, or medical implant);
2. The total liability settlement, judgment, award, or other payment will be $25,000 or less;
3. The Date of Incident occurred at least six months before the beneficiary or his representative submits his proposed conditional payment amount to Medicare;
4. The beneficiary demonstrates that treatment has been completed and no further treatment is expected either through a written physician attestation or by certifying in writing that no medical treatment related to the case has occurred for at least 90 days prior to submitting the proposed conditional payment amount to Medicare

Explicit instructions on how to use this process will be posted on the Medicare Secondary Payer Recovery Contractor’s website at www.msprc.info by January 15, 2012. CMS will leverage existing processes to the greatest extent possible. This is an initial step to provide beneficiaries and their representatives with Medicare’s conditional payment amount prior to settlement. CMS plans to expand this option as it gains experience with this process.