B. Josh Pettingill
Problem 1) There is still an incredible amount of misinformation in the marketplace about Liability MSAs.
Despite efforts to raise awareness and educate stakeholders about LMSAs, many of the largest liability insurance carriers are still convinced that failure to address Medicare’s future interests on liability case creates exposure for them. There is a contingent of MSP compliance “experts” and MSA vendors who have persuaded the insurance industry that if they do not establish an MSA when resolving a liability claim, then CMS can levy serious fines, penalties, or bring legal action against them. These scare tactics can adversely impact the resolution of a liability claim. The carriers have become so concerned about the issue that they have started to mandate an MSA on every liability case involving a Medicare-eligible plaintiff where future medical costs were either claimed or released.
The most common issue regarding exposure raised by some MSA vendors is that CMS can impose a lien post-settlement on a closed case; thereby retroactively exposing the carrier for not properly extinguishing all the liens. This argument is completely without merit. Since there are no regulations or statutes empowering Medicare to take any punitive action against a carrier related to Medicare-covered services after settlement, insurance carriers should concentrate on liability for conditional payments and Section 111 reporting requirements.
Problem 2) Attorneys are ignoring the potential MSA issue instead of proactively addressing it early on with the plaintiff.
The MSA issue is most frequently brought up at the end of the settlement when there has never been a prior discussion during negotiations. As such, plaintiff attorneys are often caught off guard with unsubstantiated demands by the defendant. The injury victim is blindsided as well by the fact they may be getting less money in their pocket to spend freely because some of it will need to be earmarked for Medicare’s purposes. The insurance carriers are worried because they firmly believe they have exposure for failure to address the issue. Therefore, the carriers are oftentimes pushing the MSA as a contingency of the settlement. In situations where the MSA is not a material term of the settlement, MSP provisions are frequently presented at the time the release is signed; which is typically done through an MSA addendum with numerous stipulations. Disagreement on whether an MSA is appropriate has, unfortunately, become the norm when settling catastrophic liability cases with a Medicare-eligible plaintiff. These frequent occurrences leave all involved with a bad taste in their mouth about “Medicare Set-Asides”.
The plaintiff’s bar can no longer pretend as if the MSA issue does not exist. Many plaintiff attorneys believe that they do not need to do anything with respect to protecting Medicare’s future interests. While it is true there is currently no regulation or law that mandates a Medicare Set-Aside, it does not mean there will be no consequences if 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 medical costs are funded by a settlement[1]. Additionally, and most importantly for trial lawyers, CMS has stated in recent meetings with stakeholders that the MSA issue is strictly a plaintiff issue[2]. This means plaintiff counsel has the liability and exposure for a malpractice claim if things go wrong post-settlement.
Action Step: Start early in educating the injury victim about all MSP compliance issues.
Instead of ignoring the MSA issue or being reactive to it when the defendant brings it up at the end of the case, it is incumbent on the plaintiff attorney to introduce the possibility and concept of an MSA to their Medicare-eligible client at the very beginning of the case. Plaintiff’s counsel has legal malpractice risks if they fail to properly advise the client regarding the set-aside issue when they are currently eligible to receive Medicare benefits. Best practices are for plaintiff’s counsel to consult with experts about proper Medicare compliance techniques, educate the plaintiff on the issues surrounding the MSP statute and then document what they have done to comply with the MSP statute.
The MSA is an insurance policy, not a scare tactic.
A Medicare Set-Aside account is an insurance policy for all parties involved. If the plaintiff spends down the MSA funds appropriately, then their medical insurance (Medicare benefits) will never be disrupted. 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 health care. It is like an insurance deductible in the sense that once the funds have been spent down appropriately, Medicare will then kick in and start to pay again. If the plaintiff were to pass away prematurely, then the MSA funds remaining in the account would go to the plaintiff’s beneficiaries.
From the plaintiff attorney’s standpoint, simply having a discussion with the plaintiff about the potential implications of failing to protect the Medicare Trust Fund is protection against getting sued for legal malpractice. Take as an example, Synergy received a panic-stricken call from a plaintiff attorney who told us that he resolved a claim for $80k several years prior but recently had received a disturbing phone call from his former client who informed him that Medicare refused to pay for a shoulder surgery on the basis that it was related to her accident. This former client was threatening a legal malpractice claim and a bar complaint because the trial attorney never advised the client that there was any possibility that Medicare could deny benefits. This type of scenario can be avoided by a conversation with the plaintiff about the MSP statute and properly considering Medicare’s future interests.
When discussing the potential for an MSA, one way it can be presented to the plaintiff is that there is a very high likelihood that Medicare will continue to pay for their ongoing, accident-related care post-settlement. However, if Medicare happens to audit their file, CMS does have the authority under the MSP statute, to deny making payments on their behalf, either temporarily or indefinitely until Medicare’s interests have been properly considered.
Will Medicare continue to pay for future injury-related care going forward? That is anyone’s best guess, but CMS has spent a tremendous amount of time and resources to ensure the Medicare trust fund gets protected. If the plaintiff agrees to set aside funds in a self-administered MSA account, they may opt to take a “wait and see” approach as it relates to medical care. If Medicare continues to pay for treatment, then the MSA account would simply function as a specialty savings account. If after a prolonged period, Medicare has been paying for their accident-related care, then they may elect to do something else with their MSA monies. If Medicare ever came back and said they should not have paid a bill or attempted to deny benefits, the plaintiff would still have the set-aside in place and would possibly get the benefit of reimbursing Medicare at the Medicare allowable rate. That would mean fewer dollars spent on medical care if they had paid directly at the time of the treatment[3]. If the plaintiff is proactively using the set-aside account, they are billed at the usual and customary fee schedule or the cash price (AKA the lowest rate they could negotiate with the provider).
Conclusion
An MSA potentially introduces another level of complexity to the file, which may contribute to unwanted delays in receiving the settlement funds. We frequently get involved in cases where the defendant insists on an MSA or the plaintiff is not even eligible for Medicare benefits. It is not always a cut-and-dry issue of whether the MSA is appropriate. Synergy has also seen firsthand on many occasions where there is agreement by the respective settlement parties to do a set-aside but there is a large discrepancy on the amount that should be earmarked for the MSA account.
Due to the foregoing, there needs to be greater education amongst the plaintiff and defense about the real potential implications of failing to adequately consider Medicare’s future interests. The settlement parties must be proactive regarding the potential for an LMSA: which party is going to handle the preparation of the MSA analysis, and how much, if any, is going to be set aside, based on all the facts of the case. Plaintiff’s counsel should insist on controlling the MSA process from start to finish. Many of our clients engage us to do a preliminary MSA analysis prior to sending out a demand package. That way, the MSA amount is already established as an element of damages that must be addressed before the claim can be resolved.
Synergy frequently is able to either eliminate the need for an MSA or we have been able to greatly reduce the MSA obligation. These savings are real dollars that go directly to the injury victim instead of Medicare. There are numerous ways to deal with Medicare Secondary Payer compliance without having to do a Medicare Set-Aside to ensure all parties are protected. Currently, there is no “one size fits all” approach to addressing LMSAs. All parties must make their best effort to protect Medicare’s interests.
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[1] Sally Stalcup, MSP Regional Coordinator (May 2011 Handout). See also, Charlotte Benson, Medicare Secondary Payer – Liability Insurance (Including Self-Insurance) Settlements, Judgments, Awards, or Other Payments and Future Medicals – INFORMATION, Centers for Medicare and Medicaid Services Memorandum, September 29, 2011.
[2] https://namsap.site-ym.com/news/412493/SPECIAL-EDITION-BULLETIN-Liability-Medicare-Set-Asides.htm
[3] It should be noted that using the funds proactively from the set-aside account is always the best practice. CMS has also telegraphed that formal guidelines on LMSAs will get the benefit of the Medicare allowable rate which is not the case now.
