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Eliminating or Getting the Lowest Medicare Set Aside on a Personal Injury Case

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.

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.

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