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 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.
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: email@example.com, tel: (407) 279-4812 or visit synergysettlements.com for more information.