On March 18th, 2019, the United States Attorney for the
District of Maryland announced that a Maryland personal injury law firm
had agreed to pay the United States $250,000 to settle claims that it did not
Reimburse Medicare for payments made on behalf of a firm client. As part of the settlement, the firm “also agreed to (1) designate a person at
the firm responsible for paying Medicare secondary payer debts; (2) train the
designated employee to ensure that the firm pays these debts on a timely basis;
and (3) review any outstanding debts with the designated employee at least
every six months to ensure compliance.”
This is the second such settlement in last year. Back in June of 2018,
the U.S. Department of Justice announced a settlement with a Philadelphia personal
injury law firm involving failure to reimburse Medicare. The firm agreed to start a Medicare “compliance
program” within their firm as part of the settlement. Both
of these settlements should remind attorneys of “their obligation to reimburse
Medicare for conditional payments after receiving [a] settlement or judgment
proceeds for their clients [as well as] not to disburse settlement proceeds
until receipt of a final demand from Medicare to pay the outstanding
debt.”
Consequently in today’s
complicated regulatory landscape, a comprehensive plan for Medicare compliance
has become vitally important to personal injury practices. Lawyers assisting Medicare beneficiaries are
personally exposed to damages and malpractice risks daily when they handle or
resolve cases for Medicare beneficiaries.
The list of things to be concerned about is growing every day. The list includes things such as:
- Not
knowing what medical information/ICD codes are being reported by defendant
insurers complying with Mandatory Insurer Reporting law (MIR) created by MMSEA. 42 U.S.C. § 1395y(b)(7)-(8).
- Agreeing
to onerous “Medicare Compliance” language that may be inapplicable or
inaccurate which binds the personal injury victim.
- Failing
to report and resolve conditional payment obligations leading to personal
liability.
- Not
using techniques to obtain money back from Medicare using the compromise and
waiver process.
- Failure
to identify a lien, such as those asserted by Medicare Part C lien holders
thereby exposing the personal injury lawyer and the firm to double damages.
- Inadequate
education of clients about Medicare compliance when it comes to ‘futures’ and
the risks of denial of future injury related care.
This article
focuses on educating trial lawyers and making suggestions for protecting your
clients as well as your practice when it comes to dealing with clients who are part
of the tort system and Medicare beneficiaries.
The
Basics
The Medicare
program is made up of different parts.
Part A and Part B are thought of as ‘traditional Medicare’ which
includes hospital insurance and medical insurance. Part D is prescription drug coverage that is
provided by private insurers approved by and funded by Medicare. Part C – Medicare ‘Advantage Plans’ or MAOs,
offers all of the coverages through Parts A, B and D but through a private
insurer approved by Medicare.
There is a
connection between Medicare eligibility and Social Security Disability Income
(hereinafter SSDI). SSDI is the only way
to get Medicare coverage prior to retirement age. This is pertinent as many injury victims
become Medicare eligible by virtue of disability. Medicare and Social Security Disability
Income benefits are an entitlement and are not income or asset sensitive like
Medicaid/SSI. Clients who meet Social
Security’s definition of disability and have paid in enough quarters into the
system can receive disability benefits without regard to their financial
situation. Medicare entitlement
commences at age sixty-five or two years after becoming disabled under Social
Security’s definition of disability.
Medicare
Secondary Payer Act & Mandatory Insurer Reporting
The MSP is a
series of statutory provisions enacted in 1980 as part of the Omnibus
Reconciliation Act with the goal of reducing federal health care costs. See
42 U.S.C. § 1395y(b)(6) (2007). The MSP
provides that if a primary payer exists, Medicare only pays for medical
treatment relating to an injury to the extent that the primary payer does not
pay. 42 CFR § 411.20(2) Part 411,
Subpart B, (2007). The regulations that
implement the MSP provide “[s]ection 1862(b)(2)(A)(ii) of the Act precludes
Medicare payments for services to the extent that payment has been made or can
reasonably be expected to be made promptly under any of the following” (i)
Workers’ compensation; (ii) Liability insurance; (iii) No-fault insurance. Id.
The passage of the
Medicare, Medicaid, and SCHIP Extension Act of 2007
(MMSEA) has triggered heightened concerns of all parties to a settlement
involving a Medicare beneficiary. Medicare,
Medicaid, and SCHIP Extension Act of 2007 (P.L. 110-173). Part of this Act, Section 111, extends
the government’s ability to enforce the Medicare Secondary Payer Act. 42 U.S.C. § 1395y(b)(7)-(8). As of April 1, 2011, an RRE, (liability
insurer, self-insurer, no-fault insurer and workers’ compensation carriers)
must determine whether a claimant is a Medicare beneficiary (“entitled”) and if
so provide certain information to the Secretary of Health and Human
(hereinafter “Secretary”) Services when the claim is resolved. This is the so-called Mandatory Insurer Requirement,
MIR for short. Id.
The advent of MIR
causes some very real and difficult problems for lawyers handling claims
involving Medicare beneficiaries. For
example, the biggest problem with the reporting requirement is the required
disclosure of ICD medical diagnosis codes which identify the medical conditions
that are injury related. These ICD codes
can form the basis for the care potentially rejected by Medicare in the
future. If the plaintiff and plaintiff
counsel are unaware of the conditions disclosed by the defendant/insurer
through the reporting process, there could be some serious problems when the
plaintiff seeks medical care from Medicare in the future. For example, if unrelated ICD codes are
reported it could trigger an unwarranted denial of care. Another example arises when the date of
accident that is reported doesn’t match up with what the plaintiff
reports. If the defendant insurer
reports a date of accident that doesn’t match with what was reported by
plaintiff counsel, it could trigger a second and new conditional payment demand
from Medicare. This often leads to
frustration and complication in resolving the conditional payment obligation.
Given the
foregoing, I suggest that the parties should collaborate on this aspect of the
Medicare settlement process. The
practical problem is that defense counsel typically is unaware of what is being
reported and the ICD codes aren’t included in the release. Accordingly, there are no guarantees that
even if the parties discuss this aspect of the reporting conundrum that the
right codes will be reported. However,
it still bears emphasis and discussion.
Without focusing on this issue as part of the settlement process, a
plaintiff, plaintiff lawyer or an elder law attorney involved in the case may
find there are serious unintended repercussions that result.
MMSEA/MIR
Release Language
In this new age of
hypervigilance surrounding Medicare Compliance as a result of MIR, release
language about protecting Medicare can be longer than the release itself. This language is frequently inaccurate or
wholly inapplicable. In practice, I have
seen language that mandates that the personal injury victim will not apply for
Medicare or even Social Security Disability benefits. Equally as bad, language is frequently
included that place a burden on the plaintiff to comply with requirements that
aren’t mandated by any law. Most of the
language improperly cites statutes or regulations that don’t say anything relevant
to the issues at hand.
Therefore, great
care needs to be taken by the personal injury practitioner in terms of what is
agreed upon and included in the release.
It is simple to address these issues concisely and in a way that doesn’t
place any onerous obligations upon the plaintiff. Every case is different and the facts dictate
the use of different language each time but there is a core set of provisions
that can be done in one simple paragraph to deal with the Medicare related
issues at hand.
MMSEA/MIR
and Conditional Payments
The stated intent
of the new reporting requirements was to identify situations where Medicare
should not be the primary payer and ultimately allow recovery of conditional
payments. The Medicare Secondary Payer
Act (MSP) prohibits Medicare from making payments if payment has been made or
is reasonably expected to be made by a workers’ compensation plan, liability
insurance, no fault insurance or a group health plan. 42 CFR § 411.20(2) Part 411, Subpart B,
(2007). However, Medicare may make a
“conditional payment” if one of the primary plans does not pay or can’t be
expected to pay promptly. 42 U.S.C.S. §
1395y(b)(2)(B). These “conditional
payments” are made subject to being repaid when the primary payer pays. Id.
When conditional payments are made by
Medicare, the government has a right of recovery against the settlement
proceeds. 42 U.S.C.S. §
1395y(b)(2)(B)(iii).
Resolution
of Conditional Payments
Resolution of the
government’s interests concerning conditional payment obligations is simple in
application but time consuming. The
process of reporting the settlement starts with contacting the BCRC (Benefits
Coordination Recovery Contractor). This
starts prior to settlement so that you can obtain and review a conditional
payment letter (CPL). These letters are
preliminary and can’t be relied upon to pay Medicare from. However, they are necessary to review and
audit for removal of unrelated care.
Once settlement is achieved, Medicare must be given the details regarding
settlement so that they issue a final demand.
Once the final demand is issued, Medicare must be paid its final demand
amount regardless of whether an appeal, compromise or waiver is sought. Paying the final demand amount within sixty
days of issuance is required or interest begins to accrue at over ten percent
and ultimately it is referred to the U.S. Treasury for an enforcement action to
recover the unpaid amount if not addressed.
42 C.F.R. 411.24(m).
Resolution
of Conditional Payments – Appeal, Compromise or Waiver
The repayment
formula for Medicare is set by the Code of Federal Regulations. 411.37(c) & (d) prescribe a reduction for
procurement costs and that is it. 42
C.F.R. 411.37(c) &(d). The formula
doesn’t consider liability related issues in the case, caps on damages or
policy limits. The end result can be
that the entire settlement must be used to reimburse Medicare. The only alternatives are to appeal which
requires you to go through four levels of internal Medicare appeals before you
ever get to step foot before a federal judge or compromise/waiver. There is plenty of case law requiring
exhaustion of the internal Medicare appeals processes which means that Medicare
appeals are lengthy as well as an unattractive resolution method. See
Alcorn v. Pepples, 2011 U.S. Dist. LEXIS 19627 (W.D. Ky. Feb. 25, 2011). What makes them even more unattractive is the
fact that interest continues to accrue during the appeal so long as the final
demand amount remains unpaid.
An alternative
resolution method is requesting a compromise or waiver post payment of the
final demand. By paying Medicare their
final demand and requesting compromise/waiver, the interest meter stops
running. If Medicare grants a compromise
or waiver, they actually issue a refund back to the Medicare beneficiary. There are three viable ways to request a
compromise/waiver. The first is via
Section 1870(c) of the Social Security Act which is the financial hardship
waiver and is evaluated by the BCRC. 42
U.S.C. § 1395gg. The second is via
section 1862(b) of the Social Security Act which is the “best interest of the
program” waiver and is evaluated by CMS itself.
42 U.S.C § 1395y. The final is
under the Federal Claims Collection Act and the compromise request is evaluated
by CMS. 31 U.S.C. § 3711. If any of these are successfully granted,
Medicare will refund the amount that was paid via the final demand or a portion
thereof depending on whether it is a full waiver or just a compromise.
Part
C Plans – The “Hidden” Lien
Now that you have gone
through the resolution process for your client and gotten the conditional
payment related issues dealt with you might think you are finished, but alas,
you are not. Or you might not be. What lurks out there is that a Part C
Advantage Plan (hereinafter MAO) may have paid for some or all of your client’s
care. You may ask how that is possible
when you were told that the client was a Medicare beneficiary and Part A/B was
paid back for conditional payments. The
reason is that MAOs aren’t Medicare and injury victim clients can elect to enroll
in an MAO during relevant enrollment periods.
Therefore, an MAO may have made payments after election of which you are
completely unaware. Neither Medicare,
BCRC nor CMS will alert you to this fact nor do they have any information as it
relates to MAOs. Therefore, attorneys handling
matters that involve a Medicare beneficiary must be vigilant and do their own
due diligence to track down possible MAO liens or face the possibility of
having to personally pay double the lien.
Although shocking, it is an area of the law that is rapidly developing
in favor of MAO plans.
MAO plans use the
Medicare Secondary Payer statute as the basis for their claims to
reimbursement. 42 C.F.R. § 422.108(f). Accordingly, their repayment formulas are the
same as Medicare under 411.37 (c) and (d) which only requires a procurement
cost reduction. That being said, these
plans are typically willing to negotiate and arguably must provide a mechanism
for a compromise or waiver if they avail themselves of the MSP in terms of
their recovery rights. All of that is
well and good but what happens when you don’t know that an MAO has a lien? The answer is fairly ominous for all the
parties to a personal injury settlement.
A private cause of action can be brought as an enforcement action for
double the amount of the lien. See Humana Medical Plan, Inc. v. Western
Heritage Insurance Company, 832 F. 3d 1229 (11th Cir. 2016). This right is provided for in the Medicare
Secondary Payer Act itself. While
parties have long been afraid of the government using this provision, it is on
behalf of the MAOs that these actions are now being brought effectively to
enforce their reimbursement rights times two.
In summary, when
it comes to MAO liens there is a good chance you may be unaware that a lien
exists without your own research. A good
practice is to obtain copies of all government assistance program cards and any
health insurance cards to see just what the injury victim is receiving in terms
of benefits/insurance coverage. Make
sure a thorough investigation is done if the client is a Medicare beneficiary
for the existence of Part C/MAO liens. The
investigation and inquiry should start upon intake and continue throughout
representation with the final check occurring before disbursement of settlement
proceeds. Failing to do so may expose
you and your firm to personal liability for double damages to a Part C Plan or
Medicare itself. Once a Part C/MAO lien
is identified, you must aggressively pursue reduction methods either using
traditional lien reduction arguments if the MAO doesn’t insist upon adherence
to the MSP or using the MSP’s compromise or waiver process.
Medicare
Futures – The Unregulated New Frontier
Today, there is a
very real threat of Medicare denying future injury related care after the
personal injury case is resolved. This
can be very easily triggered by the MIR and reporting of injury related ICD
codes that happens automatically now with any settlement of one thousand
dollars or greater. Once a denial of
care is triggered, a Medicare beneficiary has to go through the 4 levels of
internal Medicare appeals plus a federal district court before ever getting the
denial of care addressed by a federal appeals court. This is why it must be of primary concern for
the personal injury practitioner to address these issues. Particularly so in catastrophic injury cases
where denial of care could be devastating to the injury victim’s medical
quality of life.
When it comes to
set asides, there are a few key takeaways from this portion of the
article. First, you only have to worry
about this issue if you are dealing with someone that is a current Medicare
beneficiary or arguably those with a reasonable expectation of becoming one
within 30 months. The latter includes
those who have applied for or begun receiving Social Security Disability
benefits. At present, there is no
regulation, statute or case law requiring a Medicare Set Aside to deal with
futures. Instead, it has become
analogous to the situation in resolving cases with those who are on Medicaid or
SSI. In those cases, a client must be
educated about the opportunity to set up a special needs trust to remain eligible
for needs based benefits. Similarly, a Medicare beneficiary should be informed
about the opportunity to set up a Medicare Set Aside to protect future Medicare
eligibility for injury related care. The
good news for attorneys assisting Medicare beneficiaries, is that a Medicare
Set Aside allocation can be used in an offensive manner to set the floor for
medical damages in a case.
All of that being
said, you might be wondering why even consider doing a Medicare Set Aside when
they aren’t required by any law? The
answer is that it is less important as to whether anything is actually set
aside versus doing the legal analysis to determine why anything should be set
aside. Said a different way, this is a
plaintiff issue and not a defense issue.
The only penalty for failing to address this is issue is the potential
loss of future Medicare coverage for any injury related care. So you ultimately want to educate the client
on the risks of failing to do a set aside analysis and then document your file
about what was being done. The next
question might be: What risk is there if there isn’t any law requiring set
asides? Again, the answer boils down to
CMS’s interpretation of the MSP.
According to CMS, since Medicare isn’t supposed to pay for future
medical expenses covered by a liability or Workers’ Compensation settlement,
judgment or award, it recommends that
injury victims set aside a sufficient amount of a personal injury settlement to
cover future medical expenses that are Medicare covered. CMS’s ‘recommended’ way to protect future
Medicare benefit eligibility is establishment of an MSA to pay for injury
related care until exhaustion. See 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.
What
is a Medicare Set Aside?
Before getting
into an overview of the regulatory environment of MSAs, it is first important
to explain what exactly a set aside is.
An MSA is a portion of settlement proceeds set aside, called an
“allocation,” to pay for future Medicare-covered services that must be
exhausted prior to Medicare paying for any future care related to the
injury. The amount of the set aside is
determined on a case-by-case basis and is submitted to CMS for approval if it
is a Workers’ Compensation case and fits within the review thresholds
established by CMS. CMS’s review and
approval process is voluntary. There are
no formal guidelines for submission of liability settlements and the CMS
Regional Offices determine whether or not to review liability submissions (most
presently do not review). CMS explains
on its Web site that the purpose of a Medicare set aside is to “pay for all services
related to the claimant’s work-related injury or disease, therefore, Medicare
will not make any payments (as a primary, secondary or tertiary payer) for any
services related to the work-related injury or disease until nothing remains in
the WCMSA.”
Regulatory
‘Scheme’ – What if Any ‘Law’ is there as it relates to Set Asides in Personal
Injury Settlements?
A formal ‘Medicare
Set Aside’ is not required by a federal statute even in Workers’ Compensation
cases where they have been commonplace since 2001. Instead, CMS has intricate guidelines and
FAQs on their website for nearly every aspect of set asides from when to do
one, to submission to administration for Workers’ Compensation
settlements. There are only limited
guidelines for liability settlements involving Medicare beneficiaries. Without codification of set asides, there are
no clear cut appellate procedures from arbitrary CMS decisions and no
definitive rules one can count on as it relates to Medicare set asides. While there is no legal requirement that an
MSA be created, the failure to do so may result in Medicare refusing to pay for
future medical expenses related to the injury until the entire settlement is
exhausted. There has been a slow
progression towards a CMS policy of creating set asides in liability
settlements as a result of the MMSEA’s passage and the onset of MIR. This culminated with the presumed
codification of formal regulations back in 2014. However, without explanation those
regulations were withdrawn after having gone through significant vetting along
with public commentary. The apparent
reason was complaints from both sides about the regulations fairness and
workability in practice.
In 2016, it became
evident that CMS was not deterred by previous failed attempts at codification
of rules for set asides in liability cases and determined to develop a process
to avoid shifting of the burden to Medicare post resolution of a personal
injury settlement. Late in the fall of
2018, the Office of Management and Budget issued a notification from the
Department of Health and Human Services which oversees CMS of a proposed rule
related to the MSP. The abstract of the rule
says it “would ensure that beneficiaries are making the best health care
choices possible by providing them and their representatives with the
opportunity to select an option for meeting future medical obligations that
fits their individual circumstances, while also protecting the Medicare Trust
Fund.” It indicated that the rule was
“economically significant” and the basis for the legal authority was 42 U.S.C.
1396y(b). The final rule is expected
sometime in 2019.
So while there is
no regulation or statute requiring anything be done when it comes to set
asides, sticking your head in the sand isn’t the answer. It is obvious that Medicare interprets the
MSP as preventing shifting the burden from a primary payer to Medicare post
resolution of a personal injury settlement.
The problem is: How do you do that in a liability settlement given the
issues that cause those cases to frequently settle for less than full
value? Unfortunately, there is no good
answer to that question.
What
do you do to be totally Medicare Compliant?
So what do lawyers
assisting Medicare beneficiaries do given all of the foregoing? In my opinion, you must put into place a
method of screening your files to determine those that involve Medicare
beneficiaries or those with a reasonable expectation of becoming a Medicare
beneficiary within 30 months. You must
contact Medicare and report appropriately the settlement to get a final
demand. Then, you audit the final demand
and avail yourself of the compromise/waiver process. You must also make sure you identify any
potential Part C/MAO liens and resolve those as well.
Conclusion
Start early and do
not let the defendant-insurer control the Medicare compliance process. At the outset of your case you have to
confirm disability eligibility with Social Security and get copies of all
insurance as well as government assistance cards. Make sure you understand who is potentially
Medicare eligible such as those who are on SSDI, those turning 65, someone with
end stage renal disease (ESRD), Lou Gehrig’s disease (ALS) or a child disabled
before age 22 with a parent drawing Social Security benefits. Collaborate with the other side regarding
what is being reported under MIR. Be
active in mandating the proper ICD codes to be included in the release.
All lawyers assisting
those on Medicare must be in the know when it comes to dealing with Medicare
conditional payments as well as Part C/MAO liens. Medicare beneficiaries must understand the
risk of losing their Medicare coverage should they decide to set aside nothing
from their personal injury settlement for future Medicare covered expenses
related to the injury. So it is about
educating the client to make sure they can make an informed decision relative
to these issues. Beyond education of the
client, the most critical issue becomes how to properly document your file
about what was done and why. This part
is where the experts come into play. For
most practitioners, it is nearly impossible to know all of the nuances and
issues that arise with the Medicare Secondary Payer Act. From identifying liens, resolving conditional
payments, deciding to set money aside, the creation of the allocation to the
release language and the funding/administration of a set aside, there are
issues that can be daunting for even the most well informed personal injury
practitioner. Without proper
consultation and guidance, mistakes can lead to unhappy clients or worse yet a
legal malpractice claim.
The lesson to take
away from this article, is not to wind up in federal court over these
issues. Instead, deal with these issues
pre-settlement strategically. If a
client is a Medicare beneficiary, then make sure you know which ICD codes will
be reported under the Mandatory Insurer Reporting law and evaluate with the
client the possibility of a set aside.
Discuss with competent experts the proper steps for MSP compliance. Potentially use the set aside as an element
of damages to help improve settlement value.
Properly word the release if a set aside is being used to make sure the
client doesn’t get saddled with inappropriate language or lose itemized
deductions. Appropriate planning will
avoid a bad outcome or unnecessary trips to federal court.
About the Author
Jason D. Lazarus, J.D., LL.M., CSSC, MSCC is a founding
Principal and Chief Executive Officer of Synergy Settlement Services. Synergy allows trial lawyers to focus on what they do
best by handling the difficult issues at settlement such as lien
resolution, Medicare Secondary Payer Compliance, public benefit preservation,
settlement planning and tax deferral of contingent legal fees. Synergy’s
multi-dimensional approach is powerful and cost effective, enabling plaintiff
law firms to focus on cases while trusting Synergy to deliver strong results to
their clients. Contact Marci Gordon, Synergy director of Sales and Client
Services: marci@synergysettlements.com, tel: (407) 279-4812 or visit synergysettlements.com for more information.