Lorman Teleconference – October 21, 2009
Responses to Unanswered Questions
First, I would like to thank everyone who attended the teleconference today. With all the MSP changes that have occurred in the past year or so, it is a lot of information to fit in 90 minutes and I only hope that everyone was satisfied with the contents. 90 minutes does not allow for any real in-depth discussion of the many intricacies that the MSP has developed over recent years, so please feel free to send questions as you process what was discussed. In the past, we have generally maintained a dialogue for several days following the call. This is the fourth time Lorman has requested that I give this call this year, so clearly it is still a hot topic desperately in need of more understanding in both the legal and insurance industries, as well as obviously the federal government. Again thank you for your time and interest in today’s topic and let me know if I can be of any assistance with your future MSP issues.
What is the time line for resolving the conditional payments issue? I was under the impression that they were not resolved until after the settlement was complete, but from what you said today, it sounds like they can be dealt with earlier….can you address?
In a liability settlement, you cannot technically settle an overpayment demand until the settlement is reached because the obligation does not arise until that point. However you can initiate the search and have dialogue with the MSPRC with regard to ballpark figures. Unless extenuating circumstances exist in which you posses a chance of obtaining a waiver, you can pretty closely determine your obligation because procurement costs are likely the only thing to be considered. However you are correct in that you cannot resolve the issue until after settlement. If you’ve done all the leg work proactively, you can likely be ready to make that payment nearly upon settlement.
If a liability settlement is entered into without a MSA, is there any possibility that Medicare would ever have recourse against a settling defendant? We have heard this from more than one insurance company and defense attorney.
It would take one simple act of Congress to adopt the same regulation that exists in WC for intentionally shifting the burden of future related medical treatment to Medicare, permitting it to entirely ignore the settlement. But as it stands, there is currently no definitive statutory authority for Medicare’s recourse against a defendant who took no MSP measures in its settlement. The threat is in Medicare potentially electing to provide conditional payments for treatment post-settlement (as is its right under the secondary payer act) because the beneficiary was technically not provided with funds for the same in the settlement, payments for which CMS seeks recovery from the defendant, backed by the full weight of statutory recovery rights regardless of the settlement. Under that theory, Medicare would still have the right to track down every payee for every dollar from the settlement to pay for the related medical treatment even though occurring after the fact. From a public policy standpoint, it is hard to image Medicare denying anyone medical treatment so this is a very real possibility.
Why would you even submit for CMS review? Isn’t it better to just take your chances?
I wouldn’t just take my chances so much as do everything within reason to comply with the MSP with respect to my settlement short of pay unnecessarily high amounts of money based upon unreasonable policies by CMS. There are in my opinion many ways in which to better protect Medicare’s interests in a settlement rather than those which CMS has implemented in its WCMSA review program. So long as MSP obligations are met, CMS will have to prove otherwise should it wish to challenge the adequacy of an allocation in the future. If that occasion even arises, chances are that something drastically changed with respect to the medical condition that was not foreseeable at the time of injury and worthy of debate – and most importantly, this likely represent less than 1% of all settlements that took MSP measures seriously. For the most part, the vast majority of claims settled with MSAs will likely never utilize the funds set-aside for their intended purposes so self-insuring against such a small possibility seems like the only reasonable course of action rather than pay a premium in every case for assurances that I question with withstand time.
Are set-asides only required in work comp cases, or are they also required in personal injury cases that are not work-related? And if required in regular PI cases, is it up to Plaintiff’s counsel to set up the set-aside trust, or does the third-party settling tortfeasor have the obligation?
The only thing that is “required” in any insurance settlement is that Medicare is prohibited from providing related treatment. A set-aside is basically the only way to effectively prevent that occurrence, whether WC or liability, as the source of the obligation is the same.
There is no requirement that the set-aside allocation be in a formal trust. A competent Medicare beneficiary is capable of administering the funds. However professional administration services do exist and carry an annual cost. Determination of whose obligation it is to set up an MSA account such as this is a point of negotiation among the parties as part of the settlement.
If the injured party has health insurance, e.g., through a spouse, at the time of a settlement involving a liability insurer, is there any reporting requirement or set aside agreement requirement?
CMS’ position in WC is that the health insurance could always disappear and Medicare entitlement will always remain, therefore MSA is appropriate – so it can only be assumed that the same theory would apply to liability. Regardless, it would be most prudent to make an allocation whether the money is actually ever used or needed to treat the injury/illness subject to the settlement. Documentation in the settlement agreement will at least limit the amount that needs to be demonstrated was spent on related treatment prior to Medicare benefits becoming available should they ever become needed.
Now as a totally separate issue, the reporting requirement has nothing to do with the need for a set-aside arrangement. An insurer will always have an obligation to report the settlement of any claim by a Medicare beneficiary.
Are there MSA vendors that will assist with recommendations of MSA amounts in liability settlements?
Most MSA vendors will make liability recommendations. But be aware of what you are asking for when you select your vendor. Many will provide the same recommendation as would be made for CMS review of a WC claim. Although that figure would more than adequately protect Medicare’s interests in the settlement, it may not serve the other parties well in that it is likely too large with respect to the total settlement amount in compromise settlements. MSAs at the other extreme may be overly aggressive and only protect Medicare’s interests to the letter of the statute and regulations, leaving the injured beneficiary with quite possibly inadequate funds to actually treat. Basically you need to select a vendor that can help you determine to what extent you want to protect all parties to the settlement and provide settlement solutions that fit your needs.
If the entire settlement amount, or the entire settlement amount less procurement costs are sent to Medicare, and they return a portion to the beneficiary, could there still be a need for a set aside?
The process of sending the entire settlement check to Medicare is only effective to resolve conditional payment amounts. Medicare will not, and apparently cannot, accept any funds in anticipation of future medical expenses. If anticipated future related medical needs exist, you would certainly still need an MSA.
Would a defendant in a liability claim be protected if separate checks were issued for procurement costs payable to plaintiff and attorney, with remainder paid to plaintiff, attorney and Medicare?
Not as well as giving Medicare the first shot at resolving its claim from the total settlement. Plaintiff and attorney lose their incentive to cooperate in the Medicare issues if they’ve received the majority of their share. But if it becomes a deal breaker, and you have a decent estimate of the Medicare claim, that is still better than a hold harmless or indemnification agreement.
In a liability situation, would a jury verdict stating an amount of future medical expenses be definitive to Medicare if they begin denying claims of the plaintiff?
That amount would serve as the deductible before Medicare benefits would become available for treatment of that injury/illness. Thing to always remember is that CMS is constrained by the laws that give rise to the underlying claim, and are similarly bound by any judgments or awards granted on the basis of the same.
In WC setting, what if settlement is for claim rejection/denial – is MSA even an issue because per se no treatment under the WC claim?
CMS will accept that no MSA is being made because the claim is totally denied so long as you provide the legal theory for the basis of the denial and demonstrate that no indemnity or medical payments have ever been made (or the reasons for the ones made).
Do you need to have an MSA if the claimant is not a Medicare recipient and has no reasonable expectation of becoming one?
Unless an undocumented worker or someone similarly situated with respect to Medicare entitlement, everyone will become eligible for Medicare at age 65 regardless of whether they ever enroll. In CMS’s eyes, where there is foreseeable related medical, an MSA is necessary at least from age 65 on in order ensure that Medicare coverage is never sought should whatever other medical benefits disappear. In reality, although the money is ear marked for such, if in fact there is never any need for it for related medical treatment, the claimant is free to do as he pleases with the funds, understanding of course that should Medicare treatment ever be needed that the amount will act as essentially a deductible before Medicare benefits will be provided.
Does Medicare have the ability to take action against a plaintiff’s attorney if the attorney gets a reduction for procurement costs then gives all or a portion of the reduction to the plaintiff?
So long as Medicare’s demand is satisfied, it would have no further claim against any of the parties to the settlement. What an attorney decided to do with or about his fee I assume is his decision unless state law regarding attorney conduct would have provisions about such matters.
What are attorneys 3 obligations to Medicare?
Repay any Medicare payments made for past treatment related to the claim
Provide adequate funds to pay for future treatment related to the claim that is otherwise covered by Medicare
Report all insurance settlements or open workers’ compensation claims with an on-going responsibility for medicals or Medicare beneficiaries to CMS (technically that one only falls on the insurer but defense counsel would be remiss not to remind its client of the obligation)
Would Medicare stop future benefits after being paid from a third party settlement?
Medicare is supposed to exclude related benefits post-settlement but that is currently contingent upon MSPRC knowledge of the settlement and enforcement efforts. If we can talk in terms of 6 months from now, Medicare will be on notice of all settlements and have the information in their “common working file” to know to deny payments for treatment of the related injury/illness. So under the MSP, Medicare should not provide benefits but it is impossible to know what the reality in practice will be. My concern would be that Medicare would mistakenly make payment, figure it out, and then seek repayment from the deepest pockets available in receipt of funds from the settlement, possibly leaving no settlement ever entirely final.
Medicare Set-Aside Allocation/Arrangement Recommendations
Submissions to Centers for Medicare and Medicaid Services
Pharmacy Benefit Management