Medicare Set-Asides
A Medicare Set-Aside (MSA) is a tool that allows injury victims to preserve Medicare benefits by setting aside a portion of the settlement money in a segregated account to pay for future Medicare covered services. The funds in the set aside can only be used for Medicare covered expenses for injury related care. Once the set aside account is exhausted, an injury victim gets full Medicare coverage without Medicare ever looking to the remaining settlement dollars to provide for any Medicare covered future health care. Medicare may approve the amount to be set aside in writing and agree to be responsible for all future expenses once the set aside funds are depleted if the parties choose to submit the allocation to CMS for review and it a reviewable MSA. Advising injury victims about Medicare compliance and set asides are an integral part of the responsibilities of a trial lawyer at settlement.
Below are our Synergy InSights on all things related to MSAs, written by our industry leading Medicare compliance experts.
Navigating Medicare compliance is a critical task when handling personal injury settlements involving Medicare beneficiaries. Ensuring total compliance with the Medicare Secondary Payer Act (MSP) requires a strategic approach and thorough understanding of the law/regulations. This blog post is a basic guide for trial lawyers when it comes to Medicare Secondary Payer compliance.
Identifying and Reporting Medicare Beneficiaries
The first step in Medicare compliance is to identify clients who are current Medicare beneficiaries or those reasonably expected to become beneficiaries within 30 months. Implement a screening method to flag these cases within your firm. Once identified, contact Medicare and report the settlement to obtain a Conditional Payment letter and ultimately a Final Demand. Carefully audit the Conditional Payment Letter and use the compromise/waiver process to achieve further reductions post payment of the Final Demand. Additionally, identify and resolve any Part C/Medicare Advantage Organization (MAO) liens.
Release Language
Release language is a vital component in Medicare compliance. Avoid overbearing or irrelevant language that can negatively impact your client. For example, make sure that the release doesn’t take away specific rights related to their government benefits. Also, ensure the release does not make the settlement contingent on CMS approval or other requirements that have no legal basis.
Early Intervention and Collaboration
Start the compliance process early in your case. Confirm disability eligibility with Social Security and gather all relevant insurance and government assistance documentation. Collaborate with opposing counsel on the information reported under the Mandatory Insurer Reporting (MIR) requirements. Ensure proper ICD codes are included to avoid future Medicare claim rejections.
Advising Clients on Medicare Futures Implications – Education and Expert Consultation
When dealing with Medicare beneficiaries, it’s crucial to assess whether future medical expenses are being paid as part of the settlement. If so, then: Consult, Advise and Document.
Educate your clients about the impact of not setting aside funds for future Medicare-covered expenses. Proper documentation of all compliance steps is crucial. Consult with experts to navigate the complexities of the MSP, including lien identification, conditional payment resolution, MSA creation, and release language. Expert guidance is essential to avoid mistakes that could lead to client dissatisfaction or legal malpractice claims.
If clients opt out of creating a Medicare Set-Aside (MSA), ensure they acknowledge the implications in writing. For those who choose to create an MSA, work with specialized companies like Synergy to perform the analysis and document the process accurately.
Avoid Complications at Settlement
The key takeaway is to manage Medicare compliance issues proactively to avoid disputes that could land you in federal court. Ensure proper ICD codes are reported and evaluate the necessity of an MSA with your client. Collaborate with experts and consider the potential for using the MSA as a negotiation tool to enhance settlement value. Carefully word the release to protect your client’s interests and avoid inappropriate language.
Conclusion
By following these steps, you can achieve total Medicare compliance, safeguard your clients’ interests, and navigate the complexities of the MSP with confidence. Proper planning and expert consultation are paramount to ensuring a smooth settlement process and avoiding legal pitfalls.
Turn to Synergy for experts who can help create a Medicare compliance strategy for your firm to mitigate liability risks and protect clients. Inadequate compliance processes can result in financial liabilities and worse yet damage to your firm’s reputation. Having a Synergy expert perform a Medicare Expert Case Evaluation (MECE) helps you educate your client related to future potential denial of care and then document your file appropriately. Ensure your Medicare processes protect both your clients and your practice by partnering with Synergy for total Medicare compliance.
Written by: Jason D. Lazarus, J.D., LL.M., CSSC, MSCC
By Jason D. Lazarus, J.D., LL.M., MSCC
When representing a Medicare beneficiary, personal injury law firms should prioritize compliance with the Medicare Secondary Payer Act (MSP). Inadequate compliance processes can lead to severe consequences, including government actions against the firm. This blog post outlines the risks and best practices related to MSP compliance to safeguard both your firm and your clients.
Government Actions for Non-Compliance
The government’s enforcement of the MSPA is evident in several cases where personal injury law firms faced significant monetary liability for non-compliance:
Harrisburg, August 2020: A law firm paid $53,295 to resolve liability for non-repayment of Medicare conditional payments in a malpractice case against a pharmacy.
Philadelphia, January 2020: Another firm settled allegations of failure to reimburse Medicare by agreeing to pay $6,604.59, implementing compliance practices, and acknowledging potential liability under the False Claims Act.
Baltimore, November 2019: A law firm paid $91,406.98 to resolve allegations of failure to pay back Medicare, emphasizing that joint representation and referral cases must also comply. You can’t refer a case and be absolved of liability.
Maryland, March 2019: A firm settled for $250,000 due to reliance on an incorrect conditional payment letter rather than a final demand from Medicare.
Philadelphia, June 2018: A firm settled for $28k and agreed to initiate a compliance program as part of a settlement which was according to the US Attorney meant to remind attorneys of their obligation to reimburse Medicare.
These cases underscore the government’s commitment to bringing legal actions to recover Medicare dollars from personal injury law firms and holding attorneys accountable for non-compliance, regardless of the circumstances.
Best Practices for MSP Compliance
To navigate the complex regulatory landscape, personal injury law firms can adopt best practices for Medicare compliance. Firms should:
- Identify Medicare Beneficiaries: Establish processes to determine if clients are Medicare beneficiaries early in the representation.
- Understand Reporting Requirements: Make sure to appropriately report representation to Medicare and be aware of the medical information and ICD codes reported by defendant insurers under the Mandatory Insurer Reporting law (MIR) created by MMSEA.
- Appropriate Release Language: Avoid agreeing to inaccurate or onerous Medicare compliance language in settlement documents prepared by the other side.
- Resolve Conditional Payments: Ensure timely reporting and resolution of conditional payment obligations to avoid personal liability.
- Utilize Compromise and Waiver Processes: Implement procedures to reclaim funds from Medicare when appropriate.
- Educate Clients: Inform clients about Medicare compliance issues, especially regarding potential denial of future injury-related services.
- Monitor Liens: Be vigilant about identifying and addressing all Medicare liens, including those from Medicare Part C lien holders.
Implementing a Compliance Strategy
Client education for those who are Medicare eligible is the cornerstone of a successful Medicare compliance strategy for law firms. Lawyers and their staff must be well-informed about MSP-related issues to identify potential problems before they escalate into malpractice claims or personal liability. Outsourcing to a strategic partner who has deep expertise in the Medicare Secondary Payer Act should also be considered. Developing a systematic approach to handle Medicare beneficiaries and related compliance concerns is essential for protecting both clients and the firm’s integrity.
Conclusion
The government’s enforcement of the Medicare Secondary Payer Act highlights the necessity for personal injury law firms to ensure MSP compliance thoroughly. Non-compliance can result in significant monetary consequences, personal liability, and damage to the firm’s reputation. By adopting best practices and ensuring thorough firm-wide processes, law firms can navigate the complexities of Medicare compliance, safeguarding their practice and serving their clients effectively.
Turn to Synergy for experts who can help create a Medicare compliance strategy for your firm to mitigate liability risks and protect clients. Inadequate compliance processes can result in financial liabilities and worse yet damage to your firm’s reputation. Ensure your Medicare processes protect both your clients and your practice by partnering with Synergy for total Medicare compliance.
By Jason D. Lazarus, J.D., LL.M., MSCC
Medicare’s clear as mud position on post-settlement care coverage in liability settlements poses significant challenges for personal injury attorneys. Understanding and addressing the potential denial of future injury-related care is crucial to safeguarding your clients’ future eligibility and ensuring compliance with the Medicare Secondary Payer Act (MSP). This blog post explores the unregulated frontier of Medicare futures and the critical steps law firms must take to navigate these complexities.
Medicare’s Potential Denial of Future Care
Personal injury settlements today come with a new, daunting reality: the threat of Medicare denying future care for injury-related conditions. This risk is automatically triggered by the Mandatory Insurer Reporting (MIR) system, which reports settlements over $750 along with specific injury-related ICD codes. Once a denial occurs, the appeal process is long and arduous, often spanning multiple levels of internal Medicare appeals and federal courts. This can be particularly devastating in catastrophic injury cases, where denied care severely impacts the victim’s quality of life.
Understanding the Risks and Liabilities
Historically, trial lawyers did not worry about Medicare’s payment for future care post-settlement. However, this landscape has changed dramatically. Consider a scenario where a Medicare beneficiary’s settlement triggers a denial of future care because the settlement included funds for future medical expenses. This reality was highlighted in 2018 when a personal injury victim received a denial notice from Medicare, stating that “you may have funds set aside from your settlement to pay for your future medical expenses and prescription drug treatment related to your injury(ies).” The denial was related to a 2014 personal injury settlement wherein the Medicare beneficiary was paid money as damages for future injury related care.
The Evolution of MSAs
For years, personal injury settlements did not consider Medicare’s secondary payer status, shifting the burden to Medicare for future care. This changed in 2001 when CMS introduced MSAs for Workers’ Compensation cases to prevent shifting the burden from primary payers to Medicare. This compliance tool ensures that settlement funds for future medical expenses are used before Medicare becomes the primary payer.
Addressing Medicare Compliance Related to Futures
There is no one-size-fits-all solution for Medicare compliance related to futures. Each case requires a thorough, individualized analysis. If future medical expenses are funded by the settlement, doing nothing is risky. A client facing a denial of care may endure a lengthy appeals process, deciding between paying out-of-pocket or delaying care.
For trial lawyers, the risk of malpractice claims looms if they fail to advise clients properly about setting aside funds. Though no cases have yet seen Medicare pursuing law firms for failing to establish Medicare Set-Asides (MSAs), recent Department of Justice actions on MSP compliance emphasize the importance of addressing Medicare related issues.
Fundamental Concepts Related to Set-Asides
Set-asides are only necessary when dealing with current Medicare beneficiaries or those expecting to become beneficiaries within 30 months. Although no statute or case law mandates MSAs, they are similar to special needs trusts used in Medicaid or SSI settlements. Clients should be educated about MSAs to protect future Medicare eligibility for injury-related care just like with SNTs. MSAs can also be used to strategically set a baseline for medical damages in negotiations.
Why Consider Setting Up an MSA?
Despite the absence of a legal requirement for MSAs, conducting a legal analysis to determine the necessity of setting aside funds is crucial. This issue primarily concerns plaintiffs, with the penalty for non-compliance being the potential loss of future Medicare coverage for injury-related care. CMS recommends establishing an MSA to protect future Medicare eligibility, ensuring Medicare becomes the primary payer once the MSA is exhausted.
Conclusion
Medicare beneficiaries who attempt to shift the burden of future injury-related care to Medicare after a settlement may face denial of coverage. Medicare interprets the MSP Act as requiring consideration of their future interests. While set-asides are not legally mandated, they are recommended by CMS to protect future Medicare eligibility. Failure to address this issue can result in denied care and significant complications for clients and attorneys alike.
Turn to Synergy for experts who can help create a Medicare compliance strategy for your firm to mitigate liability risks and protect clients. Inadequate compliance processes can result in financial liabilities and worse yet damage to your firm’s reputation. Having a Synergy expert perform a Medicare Expert Case Evaluation (MECE) helps you educate your client related to future potential denial of care and then document your file appropriately. Ensure your Medicare processes protect both your clients and your practice by partnering with Synergy for total Medicare compliance.
By Jason D. Lazarus, J.D., LL.M., MSCC
Representing Medicare-eligible clients in personal injury cases introduces a layer of complexity since it requires compliance with the Medicare Secondary Payer Act (MSP). As trial lawyers, your duty extends beyond securing settlements; you must ensure clients are safeguarded against the potential pitfalls of non-compliance with MSP regulations. Before touching on compliance, it is first important to understand Medicare’s various components and their implications for the injured.
Medicare Program Overview
Medicare is divided into four parts:
Part A – Covers inpatient hospital and skilled nursing facility care.
Part B – Covers outpatient medical services, including physician visits and durable medical equipment.
Part D – Provides prescription drug coverage through private insurers.
Part C (Medicare Advantage Plans) – Offers an alternative, bundling Parts A, B, and D through private insurers.
Eligibility for Medicare typically begins at age 65 or after two years of receiving Social Security Disability Insurance (SSDI) benefits, crucial for many injury victims who qualify due to disability.
The Challenge of MSP Compliance
The MSP Act, established to curb federal healthcare costs, stipulates that Medicare acts as a secondary payer when other insurance (e.g., workers’ compensation, liability insurance and no-fault) is available. This secondary payer status necessitates careful navigation to ensure that Medicare’s interests are considered, particularly when dealing with conditional payments and future medical costs.
Navigating Conditional Payments and Medicare Set-Asides
Two primary issues arise related to MSP compliance:
Conditional Payments – Medicare payments made prior to settlement, which must be reimbursed/ addressed
Medicare Set-Asides (MSAs) – Future medical expenses that Medicare would otherwise cover.
The Medicare, Medicaid, and SCHIP Extension Act (MMSEA) of 2007 heightened the focus on MSP compliance by introducing the Section 111 Mandatory Insurer Reporting (MIR) requirements. Insurers must report the Medicare status of claimants, along with relevant details, to Centers for Medicare & Medicaid Services (CMS)upon settlement. Failure to comply by defendant Responsible Reporting Entities can result in significant penalties which is why you may experience hypervigilance with defense counsel related to Medicare.
Practical Challenges and Solutions
The advent of MIR has introduced challenges, such as ensuring the accurate reporting of medical diagnosis codes (ICD codes) and the correct date of accident. Errors in reporting these data points can lead to problems such as more complicated conditional payment resolution or potential future Medicare claims being denied. To mitigate these issues, trial lawyers should:
Work with opposing counsel to ensure accurate information is reported.
Only agree to precise release language that addresses MSP compliance without imposing unnecessary burdens on the injured party.
Stay informed and proactive in resolving conditional payments and considering MSAs where applicable.
Conclusion
Understanding and navigating Medicare compliance under the MSP Act is essential for trial lawyers. The complexities introduced by the MSP and MMSEA demand a thorough grasp of the regulations and a strategic approach to settlements involving Medicare beneficiaries. By doing so, lawyers can protect their clients’ interests and ensure compliance, avoiding the costly repercussions of non-compliance. Ensuring compliance not only protects clients but also shields the legal practice against potential liabilities. By acknowledging the complexities of MSP compliance and proactively addressing the associated challenges, trial lawyers can better serve their clients and navigate the maze of Medicare settlements with confidence.
Turn to Synergy for experts who can help create a Medicare compliance strategy for your firm to mitigate liability risks and protect clients. Inadequate compliance processes can result in financial liabilities and worse yet damage to your firm’s reputation. Ensure your Medicare processes protect both your clients and your practice by partnering with Synergy for total Medicare compliance. Learn more here.
Rasa Fumagalli, JD, MSCC, CMSP-F
It is well established that parties to a settlement involving a current Medicare beneficiary should consider Medicare’s potential interest in the settlement. This interest comes from the Medicare Secondary Payer (“MSP”) Act and supporting regulations which provide a framework for Medicare to recover conditional payments from settlements involving Medicare beneficiaries and to avoid making improper payments. The Act prohibits Medicare 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” (42 C.F.R. § 411.20; 42 U.S.C. § 1395y(b)(2)(A)).
Since Medicare is a secondary payer, parties should address pre-settlement injury-related conditional payments and take appropriate steps to avoid the appearance of a cost shift of future injury-related medical to Medicare in certain settlements. Coordinated Section 111 Mandatory Insurer Reporting is beneficial whenever possible since this reporting serves to drive Medicare’s coordination of benefits. This enforcement mechanism began in January of 2011 and notifies Medicare of settlements involving Medicare 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 reporting 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. The TPOC report must also include the date and amount of the settlement.
Section 111 data collection plays a pivotal role in the enforcement of the MSP Act. An RRE’s or insurer’s reporting violations will subject them to civil money penalties as of October 11, 2024. CMS is also expanding their collection of Section 111 data in the area of workers’ compensation by adding a specific WCMSA data field. As of April 4, 2025, an RRE will now have to include the specific amount of the WCMSA, even if none is included, when reporting the Total Payment Obligation to Claimant (TPOC) data. The reporting requirement will apply to both CMS-approved and to non-submitted WCMSAs. This additional data will make it easier for CMS’ to deny post-settlement injury-related care. Although this additional reporting field only applies to workers’ compensation settlements, it is possible that this may be rolled out to liability settlements at some future date. Discussion of ways to make it even easier for Medicare Advantage Plans to access this information is also taking place behind the scenes.
A recent settlement agreement between MSP Recovery, Inc. d/b/a LifeWallet, and 28 property and casualty (“P&C”) insurers highlights the significance of data sharing when it comes to the preservation of the Medicare Trust Fund. By way of background, LifeWallet has been on a lengthy mission to discover Medicare Advantage liens and enforce primary payer obligations on behalf of their assignments from various Medicare Advantage Organizations. ( See Synergy’s 4/20/2023 blog for additional information the cases https://synergysettlements.com/would-better-billing-by-providers-result-in-fewer-msp-recovery-claims-cases/) A key settlement term reflects the P&C Insurers’ agreement to share the last 10 years of processed claims data and to share data of future claims with LifeWallet in order to assist LifeWallet in their claims reconciliation abilities. A confidential cash payment from the P & C Insurers to LifeWallet is also being made to settle existing claims.
So how does all this data collection impact the injured party and their attorney? When it comes to conditional payment demands, a failure to address them in a timely manner may result in significant consequences. There may be Department of Treasury collection efforts, suits for double damages as well as an offset of the injured party’s benefits. An attorney may also face a legal malpractice claim or attorney disciplinary proceedings. Similar consequences exist for failing to address a Medicare Advantage Plan lien which can be easily missed due to lack of transparency. Similar to conditional payments, there can be collection efforts by entities like LifeWallet, which also can be for double damages, against personal injury law firms.
A recent attorney disciplinary proceeding entitled Disciplinary Counsel v. Adams, Slip Opinion No. 2024-Ohio-559, considered an Ohio attorney’s failure to address conditional payments in the attorney’s permanent disbarment. The disciplinary counsel filed a four-count complaint against Attorney Adams alleging the neglect of three client matters among other things. The first count involved Adams’ improper handling of a Medicare lien in the amount of $3,969.75, failure to distribute the settlement proceeds to the client, and a failure to refile a UM/UIM case within the statute of limitations.
As a result of Adams’ mishandling of the Medicare lien, the Department of Treasury notified the client that her monthly Social Security benefit would be reduced by up to 15% to satisfy the outstanding Medicare lien. Although the client notified Adams of this, he continued to avoid this issue and took no action to resolve. Meanwhile, the Medicare lien continued to increase due to interest being added on. Adam’s client also filed a legal malpractice complaint that resulted in a default judgment against Adams with compensatory and punitive damages, attorneys’ fees, plus court costs and prejudgment interest. In reviewing this count, the Ohio Board of Professional Conduct of the Supreme Court noted numerous ethical violations by Adams and ordered Adams to pay his client $12,971.74 in restitution. The Board further reviewed the three other counts and agreed with the initial hearing panel’s recommendation that Adams should be permanently disbarred from the practice of law in Ohio.
Although Adams’ actions were extreme, plaintiffs’ attorneys do face risks when it comes to Medicare Secondary Payer compliance issues. CMS’ collection of settlement data not only allows Medicare to recover for conditional payments made prior to settlements, but it also enables them to decline payment of post-settlement injury-related care in certain liability settlement. This risk is one that should be discussed and addressed whenever an attorney is representing a Medicare beneficiary in a personal injury matter that includes an element of future medical.
Conclusion:
Medicare Secondary Payer compliance issues should never be ignored. A proactive approach that screens the Medicare status of each client should be undertaken and updated throughout the duration of representation. It is also imperative that conditional payments and Medicare Advantage liens be addressed in a timely way. Injured parties should be advised about the potential impact of the Medicare Secondary Payer Act on their post-settlement injury-related care and files properly documented. We also recommend that counsel on both sides work together to make sure that the RREs report accurate and consistent Section 111 data to Medicare.
Synergy’s team of MSP compliance experts is here to help you navigate the maze of Medicare. Our MSP 360 services include an MSP compliance audit service, Medicare Expert Case Evaluation (MECE) consultation, Medicare Set-Aside services, and conditional payment negotiations. Reach out to our team today here.
April 20, 2023
Rasa Fumagalli, JD, MSCC, CMSP-F
MSP Recovery Claims, Series LLC, and MSPA Claims 1, LLC have filed several cases on behalf of Medicare Advantage Organizations (MAOs) against insurers for failing to reimburse the MAOs for injury-related medical payments made on behalf of their enrollees. These cases often originate from a glitch in the coordination of benefits process during initial treatment. This article provides an overview of the Medicare Secondary Payer (MSP) billing policies and recent cases, including the consolidated MSP Recovery Claims, Series LLC v. United Automobile Insurance Company and MSPA Claims 1, LLC v. Covington Specialty Insurance Company cases (Nos. 21-12439, 21-12428) in the United States Court of Appeals, Eleventh Circuit.
The Medicare Secondary Payer Act and regulations provide a framework for Medicare to recover conditional payments from settlements involving Medicare beneficiaries and to avoid making improper payments. The Act prohibits Medicare 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” (42 C.F.R. § 411.20; 42 U.S.C. § 1395y(b)(2)(A)). A primary payer’s obligation to reimburse Medicare for conditional payments may be shown by a judgment, payment conditioned upon release of liability, or other means. If Medicare makes a conditional payment, it has the right to recover payments from providers, suppliers, physicians, attorneys, state agencies, or private insurers that have received a primary payment (42 CFR Sections 411.24). Medicare Advantage Plans have the same recovery rights as traditional Medicare.
Chapter 3 of the Medicare Secondary Payer (MSP) Internet Only Manual (IOM) provides detailed instructions to providers to enable them to bill a primary plan before Medicare is billed. Providers are instructed to alert the MSP contractor, the entity responsible for coordination of benefits, whenever they receive a request from an attorney or insurance company for a copy of the billing or medical records of a Medicare beneficiary. Providers are also instructed to obtain information regarding possible MSP situations. This may be done by asking the Medicare patients if the requested services are for treatment of an injury resulting from an automobile accident or other incident for which liability or no-fault insurance may pay, or for which another party may be responsible. Section 20.2.1 provides model admission questions to ask Medicare beneficiaries to enable proper coordination of benefits.
In addition to the guidance in the Manual, the Medicare Learning Network (MLN) periodically releases memos for physicians and other providers about billing procedures in situations where Medicare is a Secondary Payer. The February 19, 2020 memo discusses the use of a Medicare Set-Aside Arrangement (MSA) to pay for injury-related services. The February 23, 2021 memo advises providers about the appeal process to follow when Medicare denies treatment due to an open or closed Liability, No-Fault, or Workers’ Compensation MSP record on the beneficiary’s Medicare file.
Despite the IOM and MLN guidance provided by CMS, providers may, at times, submit bills to Medicare or the MAO plans instead of the primary payer. This can result in cases settling without the primary payer reimbursing the MAO plan for their payments. As noted above, this fact pattern has been the subject of numerous cases brought by MSP Recovery on behalf of MAOs against various insurance companies.
The most recent consolidated cases, MSP Recovery Claims, Series LLC v. United Automobile Insurance Company and MSPA Claims 1, LLC v. Covington Specialty Insurance Company, Nos. 21-12439, 21-12428 before the United States Court of Appeals, Eleventh Circuit (February 22, 2023 These cases involve situations where United Automobile Insurance Company and Covington Specialty Insurance Company settled cases without reimbursing the MAO plans for their payments. Rather than seeking reimbursement from the injury victims and their attorneys, MSP Recovery Claims and MSPA Claims pursued the insurance plans for double damages.
MSPA Claims 1 LLC, as the assignee of the Florida Healthcare Plus Inc, a Medicare Advantage Organization, brought an exemplar claim against Covington in a putative class action. It involved a Medicare beneficiary, known as “P.M.” who injured her ankle and foot in February of 2014 when she fell down stairs at a property owned by 3550 Palm Beach Holdings, LLC. Although Covington insured the property under general liability and no-fault policies, P.M.’s medical providers billed the Florida Healthcare Plus plan and received payment for her medical expenses. Florida Healthcare Plus’s right to reimbursement as a secondary payer was assigned to MSPA.
MSPA advised Covington of its reimbursement rights in July of 2015. Covington declined to reimburse the Florida Healthcare Plus plan, arguing that the medical expenses were not reported to Covington within the policy’s one-year provision from the date of the accident. Covington settled the claim directly with P.M in 2016. MSPA argued that the claims filing deadline in the Covington Insurance policy was preempted by the Medicare Secondary Payer Act. The district court granted summary judgment in favor of Covington. MSPA Claims 1, LLC brought this appeal.
The US Court of Appeals, 11th Circuit, was not persuaded by MSPA’s argument that there is no time limit for an MAO seeking reimbursement from a primary plan. Although the Medicare Secondary Payer Act applied a three-year claim filing period to employer group health plans, there was no basis for the Court to infer that the provision preempts a claims-filing deadline in a no-fault or general liability policy. MSPA’s attempt to argue that Covington’s primary payer status could be established based on its settlement with P.M. was also barred since it was not pled in the complaint. Since MSPA’s initial argument focused on Covington’s status as a primary payer based on the terms of its insurance policy, Covington’s defense that was based on the one-year claims-filing deadline was valid. The Court affirmed the district court’s ruling that granted summary judgment.
The MSP Recovery Claims, Series LLC v. United Auto cases involved two exemplar Medicare beneficiaries, “W.T.” and “W.M.,” who sustained injuries in accidents covered under United Auto’s no-fault policies. United Auto sought summary judgment based on MSP Recovery’s failure to send United Auto a “pre-suit demand letter” as required by the Florida Motor Vehicle No-Fault Law. Although MSP Recovery argued that the Medicare Secondary Payer Act preempted Florida’s pre-suit demand requirements, the district court granted summary judgment to United Auto.
The US Court of Appeals agreed with the district court’s ruling. Although MSP Recovery argued that the Court’s prior decisions compelled the conclusion that the Medicare Secondary Payer Act preempted this provision of the Florida Motor Vehicle Act, the Court disagreed with MSP Recovery’s interpretation of their decisions. The Court also declined to hold as a matter of first impression that the Medicare Secondary Payer Act preempts the Florida Motor Vehicle Act’s requirement of a pre-suit demand letter. In reaching this decision, it considered the three classes of preemption. Preemption exists when a congressional legislative scheme is so pervasive that Congress left no room for the states to supplement it; when the text of a federal statute explicitly manifests Congress’ intent to displace state law, and when it is physically impossible to comply with both federal and state law. The Court found that the provisions of the Florida Motor Vehicle Code do not create an unconstitutional obstacle to the operation of the Medicare Secondary Payer Act.
Although MSP Recovery Claims, Series LLC, and MSPA Claims 1 did not prevail in these cases against the insureds, it would appear that they may have prevailed in their collection efforts against the injured party and/or their counsel. This path, however, is inconsistent with MSP Recovery’s business model that targets insurers. Considering the potential exposure that an injured party and their counsel may face, best practices dictate the need to proactively address payments made by any MAOs in connection with a settlement. Whenever insurance information is available, it should also be shared with the providers so that the correct plans may be billed before Medicare.
In conclusion, these cases highlight the importance of proper coordination of benefits in the Medicare Secondary Payer system. Providers must follow the guidance provided by the Medicare Secondary Payer Act and regulations, as well as the Medicare Learning Network, to ensure that they bill the primary payer before billing Medicare or an MAO. Insurers must also be aware of their obligations to reimburse MAOs for conditional payments made on behalf of their enrollees. Failure to comply with these requirements can result in costly litigation and potentially double damages for insurers.
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