Medicare Set-Asides

By B. Josh Pettingill, MBA, MS, MSCC

Synergy receives numerous calls every week regarding what is required to properly self-administer an MSA.  The purpose of this article is to provide some guidance to attorneys regarding self-administered Medicare set aside (MSA) accounts. In administering MSAs, funds may only be used to pay for future Medicare covered, injury related medical expenses of the plaintiff. The Center for Medicare and Medicaid Services’ (CMS) guidelines indicate that the set aside funds should be placed in an interest-bearing account and may be either professionally administered or self-administered (Reference: 10/15/04, Memo Q 2).

The MSA “administration process” begins as soon as the attorney releases the settlement proceeds to the plaintiff. The plaintiff has the option of funding the MSA with a single lump sum out of the settlement proceeds or with future periodic payments using a structured settlement annuity (Ref: 7/23/2001 CMS Memo). When a set aside is funded with a lump sum, Medicare begins to pay for injury related health care as soon as the account is totally exhausted.

With an annuity funded MSA, there are two components of the set aside. The first component is the “seed money” which is used to cover the first 1-2 years’ worth of qualified medical expenses. The second component is future periodic payments from the annuity.  One year from the anniversary date of the settlement, the annuity payments will start to pay into the set aside account. When the funds are temporarily exhausted in any given year, Medicare begins paying for treatment related to the injuries. During this time of temporary exhaustion, the plaintiff will be responsible for any co-payments and deductibles.  If the funds are not all spent in a given year the remainder is carried over to the next year.  With annuity funding it functions much like a yearly insurance deductible. The MSA report should indicate the breakdown of the seed money, annuity payments and timeframe of the payments. The duration of the annuity payments are based on the life expectancy of the individual.

We recommend that attorneys issue separate checks from their trust account to fund a lump sum MSA, one for the MSA amount and one for the balance of the settlement proceeds. . The check should be written to the plaintiff with the subject referencing: John Doe Medicare set aside Account or John Doe MSA Account. To take it a step further, some attorneys actually request the defendant issue a separate check to seed or fully fund the MSA account. If the MSA is being funded with a structured settlement, the annuity will also be funded by the defendant with the seed being included in the cash paid at settlement.

Prior to releasing any settlement monies, attorneys should also have the plaintiff sign a separate document indicating they understand what their obligations are for self-administering the MSA account. Synergy offers an MSA consultation which includes a separate waiver for the plaintiff to sign indicating they understand the MSA obligations and are willing or not willing to create a set aside account. Attorneys do not have to hire an expert to advise and prepare such a document but it is the prudent way to ensure all parties are protected.

After settlement and establishing an MSA, Medicare may refuse to pay for any medical expenses related to the injury until the amount set aside for future medical expenses is properly exhausted. Consequently, there are certain steps that should be followed in administering the MSA account:

1.         Initial Set Aside Account Funding – The Medicare set aside Account will initially be funded by either a lump sum or via seed money with future annual payments from an annuity. We recommend a checking account be used to hold the funds for reasons I will explain below. It is not the responsibility of the attorney to oversee or assist in the process of establishing a self-administered MSA account. The plaintiff is responsible for opening the account. This account must be a segregated account and not comingled with any other non-MSA funds.

Note: If the MSA is being funded with an annuity, then a direct deposit form should be completed and sent back to the life insurance company issuing the annuity. This will ensure the annuity payments go directly to the MSA account and are not mailed directly to the plaintiff.

2.         Set aside Account – The Medicare set aside funds must be placed in an interest-bearing account checking or savings account. All interest earned on the Medicare set aside account has to be used solely for medical expenses from the accicdent/incident that would otherwise be covered by Medicare.

3.         Distribution of the set aside Account Funds – The funds in the Medicare set aside account must be used solely for legitimate medical expenses incurred for those medical needs related to or resulting from the injuries suffered, which would otherwise be reimbursable or paid for by Medicare. Funds in the Medicare set aside Account may not be used to pay for non-Medicare covered medical services. For a list of services not covered by Medicare, a copy of the booklet, “Medicare & You” can be obtained from the local Social Security office or by using the following link: http://www.medicare.gov/medicare-andyou/medicare-and-you.html.

The best gauge for determining what is covered by Medicare is the Medicare set aside analysis that was completed by the independent company or MSA specialist. If there are any questions concerning what Medicare covers, the plaintiff can also call l-800-MEDICARE.

The plaintiff may also use the MSA account to pay for the following costs that are directly related to the MSA account: document copying charges, mailing fees/postage fees, any banking fees related to the account and income tax on interest income from the set aside account (Ref: WCMA Reference Guide 2013).

4.         Reimbursement to Medicare – In the event CMS determines that Medicare has paid benefits prior to the depletion of funds in the Medicare set aside account, CMS, or its designated fiscal intermediary or carrier, shall have the right to seek and receive reimbursement of any such conditional payments or overpayments from the Medicare set aside Account to the extent that there are funds remaining in the account at that time. This situation can potentially arise if the medical providers bill Medicare for treatment related to the accident after the case has resolved but prior to the settlement funds being dispersed.

5.         Accounting Records – The administrator must maintain accurate records of the distributions and expenditures from the Medicare set aside account. The records should indicate the date of service, the diagnosis, the service received, who received payment and the date of the payment. The plaintiff may also want to keep a receipt or other evidence of each and every payment made from the Medicare set aside Account.  Using a debit card from a segregated account is an easy way to keep accurate accounting.  Anytime the injury victim goes to treat with a provider, they simply use the debit card to pay for the qualified medical expense. If the account balance ever gets down to zero, all they need to do is print out and mail the bank statement to Medicare with their receipts.

6.         Annual & Final Accountings – The plaintiff shall submit a final accounting ledger within 60 days of the MSA funds being depleted. The annual and final accounting will include evidence of every payment made from the Medicare set aside account. For liability MSAs, the accounting only has to be done upon the account balance reaching zero. In worker’s compensation cases, there are annual reporting requirements. The purpose of these account filings is for Medicare to confirm the MSA funds have been spent appropriately.

Once an MSA account has been completely exhausted and assuming the funds have been spent properly, the plaintiff has met their obligation to protect Medicare’s interests. They can then start to submit bills to Medicare again. At that time, the plaintiff should send a final attestation to Medicare as proof the funds were spent appropriately. The current address for sending final accounting on MSA accounts is:

Medicare Secondary Payer Recovery Contractor

Attention: MSP-Medicare Set Aside Reconciliation (NGHP)

P.O. Box 138832

Oklahoma City, OK   73113

7.         Delivery of Notices & Accountings – For worker’s compensation cases, the annual self-attestation should continue through depletion of the account. It is important that the administrator understands and complies with this requirement. The self-attestation letter must be signed and forwarded to CMS’ Medicare contractor no later than 30 days after the end of each year (beginning one year from establishment of the MSA account).

8.         Distributions Following Death of Beneficiary – In the event that the beneficiary dies before the funds in the Medicare set aside account are depleted, the MSA account should remain open for 180 days from the date of death to enable any outstanding bills for medical expenses incurred as a result of the incident that would otherwise be covered by Medicare to be paid. After the 180 days has elapsed, any funds remaining in the Medicare set aside account are payable to the claimant’s estate or proper payment subject to the appropriate State probate laws.

9.         Misappropriated Set Aside Account Funds – If the final accounting reveals that funds in the account were used to pay for items other than qualified medical expenses related to the accident, CMS may withhold Medicare coverage until the misappropriated amount is replenished and spent on injury related Medicare covered services. For example, if the plaintiff purchased a hot tub with funds from their MSA account, they would have to replenish their account with an amount equal to what was improperly used and then spend that money on injury related Medicare services before Medicare would cover future injury related treatment.

10.       Billing Rates – The MSA allocation is either prepared based on the usual and customary fee schedule or on the state’s worker’s compensation fee schedule, depending on the type of case. In the real world, doctors have the freedom to charge whatever rates they desire. It is important that the plaintiff attempt to negotiate with their providers for the lowest possible cost. This is easier said than done. With an MSA, the plaintiff essentially becomes a private payer for all Medicare covered treatment related to the accident until exhaustion. The MSA will not enjoy paying Medicare rates.

It should be noted that all of the above referenced guidelines come directly from the CMS memorandums relevant to worker’s compensation cases. Another helpful tool for administering MSA accounts is the, Worker’s Compensation Guidebook. To view the guide, use the following link:

http://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Workers-Compensation-Medicare-Set-Aside-Arrangements/Downloads/March-29-2013-WCMSA-Reference-Guide-Version-13-copy.pdf

For liability cases, CMS has yet to issue a memorandum with guidelines for the administration of Liability MSA’s. Although it is perfectly “legal” for the plaintiff to self‐administer a liability MSA account, it can be a daunting task and create huge liability. If the plaintiff elects to self‐administer their account, they must have both the financial and medical administrative competency to do so. There are no “Medicare set aside police” monitoring set asides but if the MSA is improperly administered; it can lead to a loss of coverage for injury related Medicare covered services.

Attorneys should explain to their injury victim clients the intricacies of self-administration and let them make an informed decision before opting to self-administer. Professional administration is the recommended method to ensure full compliance with Medicare Secondary Payer requirements and to eliminate any possibility of the plaintiff ever losing their Medicare coverage. There is an additional cost for professional administration but with that cost, comes the peace of mind that Medicare coverage will not be jeopardized.

Synergy offers a Medicare set aside administration program through the use of a formal trust agreement with a corporate trustee and a separate professional Medicare set aside administrator. With a Medicare set aside Trust, the plaintiff has a professional trustee that has a fiduciary duty paired with a set aside Administrator, who handles managing the set aside funds and reporting to CMS. Administrative fees/expenses for administration of the MSA and/or attorney costs specifically associated with establishing the MSA cannot be charged to the set aside arrangement (Ref: 5/7/04 Memo).  Therefore, the professional administration costs must be paid for by the injury victim.

For all of your Medicare secondary payer compliance needs, please visit us at www.synergymsa.com or call us at 877-242-0022.

By B. Josh Pettingill, MBA, MS, MSCC

Plaintiff attorneys should go on the offensive in regards to any Medicare set aside (MSA) issue that may arise in a personal injury case involving a current Medicare beneficiary. According to the May 25, 2011 CMS policy memorandum issued from the Dallas regional office, an MSA is never required by any law or statute; however, it is the preferred method for protecting Medicare’s future interests when settling cases involving a Medicare beneficiary. There are situations when an MSA is simply not applicable in a personal injury case. You can still be compliant with the Medicare Secondary Payer statute (MSP) without doing an MSA so long as there is a documented solid legal basis for not doing so.

No MSA
The fundamental question every plaintiff attorney must ask when resolving a personal injury case has to be, “does the resolution of this claim shift the burden to Medicare to pay for future accident related care?” If the answer is “no”, then you should document your file with the reason for not doing a MSA. For example, it could be that a primary payer exists, the plaintiff isn’t a Medicare beneficiary, or future medicals aren’t funded as part of the settlement. If this is the case, Synergy can prepare a “No MSA” letter for your file. This evaluation letter serves as documentation for your file to show that Medicare’s interests were properly considered at the time of the resolution of the case.

Here is an example of a recent case Synergy handled for a plaintiff in Alaska where a “No MSA” letter was done. The plaintiff was a Medicare beneficiary but was also receiving private health insurance through his spouse’s employer. Additionally, as former military serviceman, he had Veteran Affairs (VA) benefits. He was receiving all of his accident related medical care from the VA and was not using his Medicare benefits. It should be noted that the VA will cover all care with the exception of emergency care that would require treatment at a non-VA facility. In the event he ever had to have emergency care from a non-VA facility, he would be able to use the private health insurance. Therefore, there was not a burden shift to Medicare to pay for his ongoing treatment. Synergy prepared a MSA evaluation letter for the attorney to have in his file that Medicare’s future interests had been adequately taken into account and there was no need to set aside anything at the time of the resolution.

Future Medicals Not Funded
CMS has also made it clear when a MSA is not necessary. There was a policy memorandum issued by CMS headquarters dated September 30, 2011, indicating there are cases where a Liability MSA wasn’t needed. This CMS memorandum is important for a number of reasons. It is the first and only official memorandum from CMS headquarters in Baltimore to address liability Medicare set asides. It also provides a mechanism, if the case facts fit the criteria, to avoid the necessity of establishing a Medicare set aside in a personal injury case. This memorandum provides a limited exception; the treating doctor must attest in writing that all treatments for the released injuries were completed at the time of settlement. To document this exception, the treating physician’s letter should be obtained and retained by both the trial lawyer and the client. Below is an excerpt from the memo:

Where the beneficiary’s treating physician certifies in writing that treatment for the alleged injury related to the liability insurance (including self-insurance) “settlement” has been completed as of the date of the “settlement”, and that future medical items and/or services for that injury will not be required, Medicare considers its interest, with respect to future medicals for that particular “settlement”, satisfied. If the beneficiary receives additional “settlements” related to the underlying injury or illness, he/she must obtain a separate physician certification for those additional “settlements.”

In other words, there is no need to establish a Medicare set aside account if the treating physicians puts in writing that no Medicare covered future treatment is needed for accident related care. Synergy was recently retained on a case where the plaintiff was a current Medicare beneficiary and claimed he would not need any future accident related treatment. Post settlement, the plaintiff requested the attestation from his treating physician indicating the same. However, his physician refused to attest in writing that he would never require any additional treatment related to his accident. Ultimately, the plaintiff engaged Synergy to prepare a zero allocation report as evidence that Medicare’s interests had been taken into account. After Synergy reviewed all of his medical records and prescription payouts, it was determined there was in fact a nominal amount that should be set aside. Although, all parties assumed it would be a zero allocation amount, the MSA report documented that Medicare’s interests had properly been take into account by setting aside a very small amount for future care.

There are situations where there is not an attestation by a treating physician where future medicals aren’t funded. A Connecticut case, Sterrett v. Klebart, is illustrative of this point. In Sterrett, the court stated that “the settlement payment to Sterrett does not address any future medical expenses that may be covered by Medicare and the facts of this case mandate the conclusion that the defendants and their carriers lack liability with regard to any such expenses.” The court found that the settlement represented a “substantial compromise” considering the potential verdict range. The settlement was a compromise due to the nature of the injuries and defenses according to the court. Further, the court understood that even though Sterrett would incur medical bills payable by Medicare, the settlement didn’t compensate for such future medical benefits. Instead, the limited settlement funds it found were payable for the plaintiff’s non-economic damages with a small portion to be used for non-Medicare covered economic damages. For those reasons, the court held that no set aside was required and found that the parties had reasonably considered the interests of Medicare in the settlement of the case. Many personal injury cases fit within these parameters and the argument can be made that future medicals haven’t been funded.

Lowest MSA Possible
If an MSA is prepared for a personal injury case, the goal is always the same post-settlement: get the lowest MSA amount possible while making sure all parties are protected. There is a strict methodology for preparing an MSA per CMS but this methodology is only applicable in the workers compensation context. As it relates to liability MSA’s, there is no clear guidance on preparing MSA’s. In the absence of guidance, most MSA practitioners follow the workers compensation methodology. This is not always the best approach, since workers compensation cases and personal injury cases are completely different. For all of the foregoing reasons, we believe there is flexibility to reduce the MSA amount in many instances. There are numerous ways to arrive at the lowest defensible MSA amount on a personal injury claim. I will highlight only one of those ways in this article. Per CMS, when a Medicare set aside is prepared, the methodology assumes a recovery of the full value of future medicals. In other words, the methodology assumes your client is getting paid out dollar for dollar on future medicals. The problem with this methodology as it relates to liability MSA’s is that a full recovery is almost never made. Arguably, every personal injury case resolves for a compromised amount. What happens when there are significant damages with a limited recovery? What if the plaintiff has pre-existing conditions? What if there are small policy limits? What if the liability is questionable? In our opinion, all of these issues must be taken into account before arriving at a final MSA amount.

Benoit vs. Neustrom was the first case to directly support reducing liability MSA’s based on a limited recovery. In the Benoit case, the plaintiff took the position he was only recovering 10% of his total damages. The judge looked at all the facts of the case and reduced a $300,000.00 MSA all the way down to $10,000.00. Let’s look at a recent scenario of applying a reduction approach.

Facts of the Case:

1. $1,000,000.00 Policy limits settlement
2. *Full Value of Case $4,166,484.00
3. Net Recovery to Plaintiff $517,000.00
4. Percentage of Recovery 12.4%
5. Full MSA Amount $116,105.04
6. Reduced MSA Amount $14,397.02

*The full value of the case was based on future medical care as determined by life care plan, past medical expenses and wage loss.

In this scenario, Synergy took a $116k MSA and reduced it all the way down to less than $15k. That represents nearly a 90% reduction on the MSA amount. The best practice is to set aside the full MSA amount if sufficient funds are available from the recovery. However, when there is a tough liability case or a limited coverage situation, the reduced MSA approach is always better than the “do nothing” approach. If Medicare ever audited the file in the future, a strong argument could be made that Medicare’s future interests were adequately addressed and protected. The plaintiff set aside a reasonable amount of money based on the facts of the case.
Section 111 Reporting has given CMS the ability to track current Medicare beneficiaries settling claims, but the reality is CMS handles every personal injury resolution differently. We have had clients recover millions of dollars and Medicare continues to pay for their accident related care. On the opposite end of the spectrum, we have seen plaintiffs get Medicare benefits for accident related care denied on cases settling for less than $50k. Some have even had their benefits denied as late as two years post-settlement. Until CMS provides formal guidance on these issues to plaintiff attorneys, Synergy will continue to advocate for techniques that lower the MSA or completely eliminate the MSA obligation, while ensuring our clients are properly protected.

Best practices remain the same: 1) Consult competent experts such as those at Synergy. 2) Advise the client regarding potential implications if they are a Medicare beneficiary and receive money for future medicals. 3) Document your file regarding what you did (or did not do) to address Medicare’s future interests and go on to the next case.

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

Recently, an Arizona Federal judge ruled that he would not make a determination on whether a Medicare Set-Aside (MSA) is necessary on a medical malpractice case. According to Judge Stephen McNamee:

[t]he Court finds that there is no justiciable case or controversy ripe for review. As such, the Court does not have subject matter jurisdiction to hear this case. This case is not ripe for review because no federal law mandates CMS to decide whether Plaintiff is required to create a MSA. That CMS has not responded to Plaintiff’s petitions on the issue, is not reason enough for this Court to step in and determine the propriety of its actions. There may be a day when CMS requires the creation of MSA’s in personal injury cases, but that day has not arrived.

We have received a flood of inquiries as to whether or not this case eliminates the need to do an MSA in liability settlements. The answer is “no”.  This decision does not give the plaintiff or counsel a pass on considering Medicare’s future interests in a liability settlement. The opinion actually says that an MSA isn’t required, which simply reaffirms Medicare’s position on set-asides. An MSA is never required, whether it be for a workers compensation or liability settlement. This decision does not change the current Medicare secondary payer landscape.  Attorneys still need to consider Medicare’s future interests when resolving claims.

The Aranki case is similar to other cases that have addressed the question of the necessity of a Liability Medicare Set-aside (LMSA) to “protect Medicare’s interests” under the Medicare Secondary Payer Act (MSP).  All of the cases that have been reported revolve around the confusion of the necessity of MSAs in liability settlements or the inability to get CMS approval of a liability set aside.  The area is so rife with confusion that most lawyers just don’t know what to do when resolving a case with a Medicare beneficiary.  Courts, like the one in Aranki, acknowledge the confusion but do little to clarify.  My previous articles and blog posts regarding this subject have tried to debunk the myths surrounding the MSP and liability settlements.  In a recent Florida Supreme Court opinion regarding collateral sources, Joerg v. State Farm, one such article was cited by the Court.  Despite all of the foregoing, many lawyers fail to recognize the potential risks of failing to advise clients about these issues.  Analyzing the Aranki case and the issues presented is a good opportunity to discuss this very important issue.

The plaintiff, Rachel Aranki, was the victim of medical malpractice in 2009, which left her partially paralyzed and in chronic pain.  She filed a medical malpractice action in Arizona state court against the treating physician.  The case was settled prior to going to trial.  At the time of settlement, Ms. Aranki was a Medicare beneficiary.  The question of whether CMS would mandate a set-aside stymied the finalization of the settlement.  The plaintiff, in an effort to comply with the MSP, sought a response from CMS on the necessity of an LMSA, but they got no response.  The state court judge enforced the agreement to settle and ordered Ms. Aranki to file a declaratory judgement action in federal court on the LMSA issue.  The United States District Court for the District of Arizona issued its order dismissing the matter for lack of subject-matter jurisdiction.  In the opinion, the Court stated that “no federal law or CMS regulation requires the creation of a MSA in personal injury settlements to cover potential future medical expenses.”  This is a true and accurate statement of the current state of the law as it pertains to set-asides.  However, that is not the end of the story.

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

The real issue when a case involving a Medicare beneficiary is settled boils down to the risk taken by the plaintiff in terms of coverage of their future injury-related care by Medicare.  It isn’t a defense issue.  It is a plaintiff issue.  The plaintiff, if he/she does nothing without legal justification, could face a situation where Medicare denies future injury-related care since nothing was set aside.  The plaintiff needs to understand this risk before settling their case.  Since the settlement will be reported to Medicare under the Mandatory Insurer Reporting laws, Medicare will be on notice of the settlement and the injury related ICD codes.  That could trigger a denial of care and a lengthy internal appeals process before Medicare payments for accident related care might be reinstated by a Federal District Court.

While on the subject of Mandatory Insurer Reporting, it is important to address a few things.  As a practice point, plaintiff counsel should be proactively dealing with the defense in terms of what they report, as inaccurate reporting can cause problems with conditional payments as well as eligibility for future benefits.  For example, if a case involves neck and back injuries, but the defense takes the position that the neck is pre-existing and settles for payments exclusively for the back, then reports the ICD codes for the neck along with the back – that is a problem.  Another problematic issue is reporting the wrong date of accident which could trigger Medicare to issue a new final demand for conditional payments.  Another important practice point is to be leery of Medicare language being included in the release, as many times it has inappropriate language along with inaccurate references to the Medicare Secondary Payer Act.

Given all of the foregoing, what do you do?  “Nothing” isn’t the answer.  The answer is to consult competent experts on the subject to help navigate the complexities, advise the client about the risks and document your file as to what you did along with why.  I like to use the acronym of CAD, Consult Advise Document, to remember the steps.  The bottom line for personal injury practitioners is that the LMSA issue poses a legal malpractice threat, not some type of legal action by CMS against you. There is no mechanism for the government to bring any type of legal action related to Medicare Set-asides.  If you don’t pay back a conditional payment, the government can bring an action against the trial lawyer as the regulations do provide for this but there is no corollary for set-asides.

Similarly, the defendants don’t have any exposure or liability if nothing is set aside.  They simply don’t have a dog in the fight.  Their insistence on requiring a set-aside may expose them to some liability which is a good counter argument to a recalcitrant defendant.  According to Medicare, the defendant’s only obligations are to report a settlement to Medicare under the Mandatory Insurer Reporting laws and put the plaintiff on notice if future medicals are funded.  There is amemorandum from CMS MSP Regional Coordinator Sally Stalcup that lays out this obligation for defendants.  Providing that policy memo to defense counsel can also be helpful in allaying fears the defense has about their responsibilities/exposure.

To summarize, the best practice is to evaluate the case and document what is being done along with why.  This is especially critical if nothing is being done and the client is eligible to receive Medicare benefits (or has a “reasonable expectation”).  There are certainly justifications for doing nothing in proper situations.  For example, nothing may be done because after educating the client, the client refuses to set anything aside.  Or, it could be that future medicals aren’t funded.  It could be that, due to liability issues, the case was settled for less than full value and when you run an equitable distribution calculation the amount of future medicals covered by Medicare is minimal.  On the other hand, in certain cases there might be a desire or need to set something aside. In those cases, an estimate of future medical expenses that are Medicare covered should be obtained or a full allocation done.  That is appropriate documentation.

Also, don’t forget about CMS’ exception memorandum which was disseminated back in September of 2011.  In that memo, the Baltimore HQ office indicated there are cases where a Liability Medicare Set-aside wasn’t necessary, period.  The memo stated that if the treating physician certified in writing that there would be no future medical expenses covered by Medicare for the injuries suffered in the accident, then nothing needed to be set aside.  To document this exception, the treating physician’s letter should be obtained and retained by both the trial lawyer, as well as the client.

Finally, it is important to understand that certain injury victims will be dual eligible.  This means that they receive not only Medicare, but Medicaid as well.  When someone is dual eligible additional planning concerns arise.  If it is determined that a Medicare Set-aside is appropriate or needed in the future, it raises some issues with continued Medicaid eligibility.  A Medicare Set-aside account is considered an available resource for purposes of needs-based benefits such as SSI/Medicaid.  If the Medicare Set-aside account is not set up inside a Special Needs Trust, the client will lose Medicaid/SSI eligibility.  Therefore, in order for someone with dual eligibility to maintain their Medicaid/SSI benefits the MSA must be put inside a Special Needs Trust.  In this instance, you would have a hybrid trust which addresses both Medicaid and Medicare.  It is a complicated planning tool but one that is essential when you have a client with dual eligibility.

By B. Josh Pettingill, MBA, MS, MSCC

Traditional Medicare vs. Medicare Advantage Plans

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

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

Traditional Medicare Eligibility – Part A and Part B

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

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

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

Part A & Part B Coverage

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

Practical Implications

If your client only has Part A and Part B as their primary source of health insurance, then Medicare may refuse payment for accident related care post-settlement that the client was compensated for in the underlying settlement. Through the Section 111 reporting requirement, Medicare has developed a comprehensive system to track all current Medicare beneficiaries. Beginning later this year, Medicare is implementing the new ICD coding system. ICD-10 has 141,000 codes—more than 8 times the 17,000 codes in ICD-9. The additional codes will enable responsible reporting entities to be more specific on claim forms in reporting the care provided to plaintiffs. What this means for plaintiffs is that when they go to treat for accident related care in the future, if treatment consists of a body part or ICD code previously reported to Medicare as part of the settlement, CMS may send a letter of denial. Consequently, the plaintiff may lose their Medicare benefits for accident related care indefinitely, until they have properly reimbursed Medicare for any past claims they have denied, as well as sufficient funds have been spent down to adequately protect their interests. In order to avoid this happening, a Medicare set aside can be established at the time of settlement.

Medicare Advantage Plan – Part C

Medicare Advantage Plans, also referred to as “Part C” Plans, were established under the Social Security Act as an alternative to traditional Medicare. Medicare Advantage Plans are a type of Medicare health plan offered by a private company that contracts with Medicare to provide all Part A and Part B benefits.

Part C Coverage

Medicare Advantage Plans include Health Maintenance Organizations, Preferred Provider Organizations, Private Fee-for-Service Plans, Special Needs Plans, and Medicare Medical Savings Account Plans. If your client is enrolled in a Medicare Advantage Plan, most Medicare services are covered through the plan and are not paid for under original Medicare. Most Medicare Advantage Plans offer prescription drug coverage as well. In order to be eligible for a Medicare Advantage Plan, you must be eligible for Medicare Part A and Part B. Source: www.Medicare.gov

Practical Implications

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

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

Risks to Consider

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

Legal Basis for Protecting Medicare’s Future Interests

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

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

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

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

Step 1: Evaluation of Case

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

Step 2: Findings

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

1. No MSA letter
2. MSA Consultation: plaintiff executed wavier and acknowledgment for counsel
3. MSA Estimate
4. Allocation

Step 3: Deliverable

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

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

Conclusion

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

B. Josh Pettingill, MBA, MS, MSCC
Vice President of MSP Compliance

The “law” as it relates to Medicare Set Asides in liability settlements is an evolving area with new developments happening quite frequently. This year there have already been several noteworthy legal decisions pertaining to the protection of Medicare’s future interest in liability settlements. Below is a discussion about a recent case with important pointers for attorneys and plaintiffs when there will be no future care.

Berry vs. Toyota

On January 10, 2015, the United States Western District Court of Louisiana released its opinion in Berry vs. Toyota Motor Sales. The court concluded there was no need to establish a Medicare set aside, given the fact that all of Mr. Berry’s treating physicians signed affidavits indicating no future accident-related treatment was going to be required. It was not surprising the court came to this conclusion given that there was already a Centers for Medicare and Medicaid Services (CMS) policy memorandum from the CMS headquarters indicating the same. Below is an excerpt from the memo:

Where the beneficiary’s treating physician certifies in writing that treatment for the alleged injury related to the liability insurance (including self-insurance) “settlement” has been completed as of the date of the “settlement”, and that future medical items and/or services for that injury will not be required, Medicare considers its interest, with respect to future medicals  for that particular “settlement”, satisfied. If the beneficiary receives additional “settlements” related to the underlying injury or illness, he/she must obtain a separate physician certification for those additional “settlements.”

In other words, there is no need to establish a Medicare set aside if the treating physician attests in writing that no Medicare covered future treatment is needed for accident related care.

Facts of the Case:

1. All of Mr. Berry’s primary physicians signed affidavits indicating no future treatment was required as related to the accident.
2. Mr. Berry signed an affidavit indicating he was not going to treat in the future for accident related care.
3. The settlement was contingent upon the court ruling no MSA was needed and that both sides had adequately taken into account Medicare’s interests.

Holding:

The court held that based upon the evidence submitted no MSA was required.  This was based upon the affidavits of the treating physicians which went to reasonably foreseeable future medical needs or lack thereof.

The Takeaways:

1. The court’s opinion was in line with the CMS policy memorandum of September 2011.
2. There is no special attestation form provided by CMS for treating physicians or the plaintiff to sign. All that is needed is an attestation on the physician’s letterhead indicating no future treatment is required for accident related care.
3. A court can recognize and affirm Medicare’s interests have been adequately taken into account by the settling parties if so desired.

All parties felt the need to get the court’s blessing that Medicare’s interests were adequately taken into account even though a policy memorandum from the CMS regional headquarters on this exact issue already existed. The plaintiff also had to sign an affidavit indicating he was not going to treat in the future for accident related care. Without knowing the exact details, we have to assume both sides were overly concerned about protecting Medicare’s interests to take such actions. Let’s revisit the CMS policy memorandum issued by CMS headquarters on September 30, 2011.

This CMS memorandum is important for a number of reasons. It is the first and only official memorandum from CMS headquarters in Baltimore to address liability Medicare set asides. It also provides a mechanism, if the case facts fit the criteria, to avoid the necessity of establishing a liability Medicare set aside. As discussed above, this memorandum provides a limited exception as the treating doctor must attest in writing that all of the treatment for the released injuries was completed at the time of settlement.

When the case facts meet the criteria, securing the attestation from the treating providers is only part of the steps toward MSP compliance. In addition, attorneys still need to educate their clients on potential future ramifications of the attestation. Specifically, if a plaintiff ever has to treat again in the future for accident related care; they can’t seek to have Medicare cover that care. This case and more importantly the memorandum, gives clear guidance to the plaintiff when there is no future accident related treatment as to how to properly document what they did to comply with the MSP.

Synergy was recently retained on a case where the plaintiff was a current Medicare beneficiary and claimed he would not need any future accident related treatment. Post settlement, the plaintiff requested the attestation from his treating physician indicating the same. However, his physician refused to attest in writing that he would never require any additional treatment related to his accident. Ultimately, the plaintiff engaged Synergy to prepare a zero allocation report as evidence that Medicare’s interests had been taken into account. After Synergy reviewed all of his medical records and prescription payouts, it was determined there was in fact a nominal amount that should be set aside. The MSA report we prepared documented that Medicare’s interests had properly been taken into account by setting aside a small amount for future care.

For those plaintiffs who are a current Medicare beneficiary and future medical care is funded by the settlement, obtaining a Medicare set aside analysis is always the best practice. There are numerous ways to deal with Medicare secondary payer compliance to ensure all parties to the settlement are protected. At Synergy, we have the solutions that will help you settle cases compliantly for Medicare beneficiaries.

For all of your Medicare secondary payer compliance needs, please visit us at www.synergysettlements.com or call us at 877-242-0022.

Insurance carriers are bringing up the Medicare set aside (MSA) “issue” when it comes time to draft the release more frequently. In many instances, the plaintiffs are not yet eligible for Medicare benefits, nor may they ever be entitled to receive Medicare benefits.  Plaintiff attorneys need to proceed with caution with regard to the Medicare set aside release language. Inappropriate provisions in the release could constrain their client’s options relative to receiving public benefits and have adverse tax implications, which could result in a legal malpractice claim.

As a recent example, Synergy was asked to review Medicare release language. The insurance carrier insisted the plaintiff agree to language indicating he would not ever apply for social security disability benefits. Agreeing to this would impede his ability to receive disability income and eventually Medicare benefits. In another case, the insurance carrier insisted the plaintiff not only establish an MSA but also submit the MSA to the Centers for Medicare and Medicaid Services (CMS) for review and approval. The insurance carrier attempted to build these terms into the mediation agreement. This client was receiving Medicaid benefits but was never going to be eligible for Medicare since she had not earned enough working credits to qualify.

These problems are occurring because some MSA vendors, in an effort to drive business, have been convincing insurance carriers that failing to do a set aside in any case exposes them to future liability/consequences if not properly addressed. CMS has made it clear that the MSA issue is the plaintiff’s responsibility and the role of the defendant is to report current Medicare beneficiaries under Section 111* mandatory insure reporting. The reality is that the defendant has no exposure but plaintiff counsel has legal malpractice risks if they fail to properly advise the client regarding the set aside issue when they are a current Medicare beneficiary or have a reasonable expectation of becoming one within 30 months.   

If you have a client who is a current Medicare beneficiary that is going to require accident related care in the future and there are funds earmarked towards future medical treatment, a Medicare set aside should be considered. However, there are numerous ways to deal with Medicare secondary payer compliance to ensure both your firm, as well as your clients are protected. At Synergy, we have the solutions that will help you settle cases compliantly for Medicare beneficiaries.  

*It should be noted that it is impossible for a defendant/insurance carrier to report a claim to Medicare when the plaintiff is not a current Medicare beneficiary.

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