Q & A from Medicare Secondary Payer Act: Protecting Medicare’s Interest in Insurance Settlements Audio Conference

MEDVAL News on April 25, 2011
Posted by tempadmin

Jennifer Jordan recently presented Medicare Secondary Payer Act: Protecting Medicare’s Interest in Insurance Settlements for Lorman Education Services. The following is a transcript of questions and answers from the audio conference.

Our firm currently has a claim where the claimant has a reasonable expectation of Medicare entitled in the next 30 months but the settlement amount is less than 250K. We had an MSA prepared and it is our position that in doing so, we have taken Medicare’s interests into consideration and that is all we need to do. Our client, however, insists that is not the case. My question is: is it?

It is all you need to do as far as I am concerned from a MSP compliance standpoint, but as you will recall from the presentation, you can do more with regard to funding and administration to make sure that the money meets its intended purpose and Medicare not placed in a position in the future of making payments even though its interests were considered and funded at settlement. You cannot force CMS to opine as to the sufficiency if doesn’t meet the criteria for review, and in fact CMS has complained recently that about a third of its submissions are non-threshold and rejecting those is bogging down its process. Another thing I’ve seen is adopting a statement of understanding as an appendix to the settlement agreement, outlining the responsibilities and understanding of all parties with regard to the MSP. Like I said in the presentation, adopt a level of compliance that you are fully prepared to defend if and when the time comes – that’s all you can do right now.

According to the presentation, an insurer is required to report a settlement. It is my understanding that a hospital is required to report any possible liable third parties that are discovered to CMS; however, is a hospital required to notify CMS at the time of settlement (if the hospital knows of the settlement) that the Medicare beneficiary is about to receive settlement proceeds? Or is it sufficient for a hospital to inquire of the patient/their representative as to whether any Medicare liens have been satisfied? (The general practice at the hospital in question is to wait to receive payment until any outstanding Medicare lien is satisfied).

The hospital has no MMSEA reporting requirement of a third party liability settlement where it is not the RRE. As a Medicare provider it has an obligation to ask all the right questions about a potential primary payer situation and report those back to Medicare, but no obligation that I am aware of to continue to follow the matter and report developments [but that is not an area of Medicare knowledge that I am proficient in so don’t hold me to that]. I’m assuming you are referring to a situation where the hospital is holding a lien against the settlement rather than accepting the Medicare payment pursuant to chapter 2 of the MSP manual § 40.2. In that case, the general practice is prudent because if the hospital accepts payment from the settlement proceeds prior to Medicare being reimbursed, it is subject to a reimbursement claim pursuant to 42 USC 1395y(b)(2)(B)(ii) as a party in receipt of settlement funds.

To what degree will weak causation assist in minimizing the amount of an MSA (e.g. toxic tort case where it is questionable whether case would even survive summary judgment)?

Again I reiterate the significance of the Bradley v. Sebelius decision in the 11th circuit [621 F3d 1330]. Unless and until CMS understands that full recovery in liability settlements is uncommon and influenced by a number of legal and financial factors, we will continue to struggle with its insistence that it is entitled to full reimbursement from dollar 1 for all related medical, past and future. For those accepting of the fact that Medicare does have a future interest to protect, I merely recommend that they allocate with the means of their settlements and explain as much as they can within the settlement docs what MSP compliance measures they were able to provide. Break down the settlement amount into its component parts and the fair & reasonable portion that represents medical is what it is. Artificially inflating other claims will basically push CMS to assert its usual claim that it is not bound by such designations. Until we get more definitive guidance from CMS, Congress or the Courts, we can only adopt a defensible position and hope for a reasonable court and a better understanding of the MSP when the time comes, if it comes.
If funds are set aside and the beneficiary does not survive long enough to spend the money on treatment, who owns the remaining money?

Medicare only has rights to reimbursement for payments made, so after repaid, the money reverts to the estate of the deceased unless in some kind of a custodial situation where the carrier retained a reversionary interest or perhaps a pooled trust situation where the funds remain with the trust for the benefit of other trustees.

Jane Doe is seriously injured on 1/1/11 and incurs $250,000 in medical expense in the first 2 weeks of treatment. The adverse driver is clearly at fault and has a liability policy limit of only $100,000. The insurer wants to settle for the policy limit on 2/1/2011.before any of the medical expenses have been paid by Medicare. Can I request the conditional payment letter, which will presumably show “0” in payments, and settle case and allow Medicare to pay the medical expenses after the settlement is completed?

You likely can’t outrun or defraud Medicare simply by acting quickly. MSPRC will never issue a demand with 30 days not matter what the circumstances, and until a demand is made, you cannot make a final payment, even if it is zero. They know the providers have 180 days to submit billing and they hold out in all cases as long as they can to make sure that they captured as much billing as they can before making demand. Because there is a demonstration of Medicare payments which would trigger the reporting to the COBC under 42 CFR 411.25 anyway, you’d be hard pressed to convince CMS that you disbursed funds unknowingly and not find yourself on the other end of a reimbursement action as a person in possession of funds from the settlement.

Do Medicare Advantage Plans have to act on behalf of Medicare to enforce Medicare’s rights to recover settlement proceeds? And, if so, to what extent are Medicare Advantage Plans obligated to pursue such Medicare rights? Can Medicare Advantage Plans settle claims without Medicare’s approval and, if so, to what extent do they have to pursue such claims?

Interestingly, the answer is yes & no. MA Plan is secondary and obligated to coordinate benefits and seek reimbursement where applicable, but does not have the power to file a claim in court for recovery. There’s a technicality in the Medicare statute that only confers all of the powers of the “Secretary of Health and Human Services” upon the MA Plan, meaning that it may make a conditional payment, charge interest and waive rights, but cannot bring an action, subrogate or seek recovery within the 3 year period beginning 3 years from the date of services (that no one uses) because those sections of the MSP state that the “United States” may…. There have been 2 cases in just the past few months that discuss the issue: Parra v. PacifiCare [2011 U.S. Dist. LEXIS 33630] and Humana v. Reale [2011 US Dist LEXIS 8909]. So in the end, it appears that not only is the MA Plan able to but required to purse recovery & completely authorized to negotiate without any input from Medicare, but should it need to pursue court action, the MS Plan needs to rely upon contract law in state court or possibly refer the claim to the DOJ where I assume that a claim for double damages would be possible since a recovery of a Medicare payment is still involved.

Hospitals can choose to bill the liability carrier, in lieu of Medicare, where liability insurance is available. You discussed the issue of future medicals related to the accident, incurred after the date of accident. If Medicare were to pay for treatment related to the accident (after the settlement), would the hospital still be a possible liable party from which Medicare could try to recover its payments? Or, if the hospital accepted its payment at a time when Medicare did not have a lien, would the hospital be free of any such liability?

If the hospital lien was satisfied from settlement proceeds and Medicare has a claim for conditional payment reimbursement, it may seek repayment from anyone in possession of settlement funds pursuant to 42 USC 1395y(b)(2)(B)(iii) and 42 CFR 411.24(g) which includes the hospital. What we don’t have is any evidence of CMS successfully asserting claims for post-settlement conditional payments, only its intent to do so as demonstrated in Stricker.

Medicare billing policy permits providers like 180 days to submit billing, so just because you managed to conclude a claim prior to Medicare being billed for related services does not diminish its reimbursement rights.

I just settled a liability bodily injury case for $125K at Friday’s mediation (4/15/11). The plaintiff had health insurance, which covered his treatment/oral surgery. Do I need to report this settlement to Medicare now?

MMSEA Section 111 reporting would not apply since does not start until 1/1/12 for claims settlement on or after 10/1/11. Reporting under 42 CFR 411.25 wouldn’t apply since there is no demonstration that Medicare made payment. While you could voluntarily report to COBC to make sure Medicare wasn’t owed, there does not appear to be any obligation to do so.

I am a Plaintiff’s attorney. I received a jury verdict and the insurance company sent me two checks, one for the Medicare conditional amount and one for the balance. The conditional payment was payable to my firm and Medicare, and I forwarded it to Medicare. I then received the final settlement letter, which was less than the conditional payment amount. I called Medicare and was told that a “Closing letter” would be sent, and 14 weeks later, the balance of the conditional payment minus final settlement would be sent back to me for my client.
3 questions:

Are you familiar with the closing letter, 14 week wait scenario?
Not surprised actually. If just making a conditional payment inquiry, MSPRC has 45 days to respond, if to do nothing but notify the parties that it will be needing more time. On average, this process takes us 3 to 6 months to obtain a demand. If you’ve reached conclusion in 14 weeks, you are still better off than waiting for all settlement checks to be issued once demand finally made.

What can I do to expedite receipt of the balance?

Typically you want to initiate a conditional payment search prior to settlement so that the balls are in motion when the check sent for final endorsement. If MSPRC is getting hit cold with a check, 120 days is not surprising nor would I think unreasonable. However given that I’d be happy with 120 days from request to demand, I still think that the 3 party check makes them act faster.

You mentioned a CA case setting a 30 day limit for returning the balance. Can you foreword that cite?

Wall v. Leavitt [2008 US Dist LEXIS 23956] (note that the court didn’t say there was a 30 day limit, only that even 30 days in this case would have been reasonable since the funds were turned around in a record 11 days)

Some health care systems have fronting PL/GL policies from domestic U.S. insurers that are 100% reinsured by the systems’ offshore captive insurance companies. If the system is self-administering the claims, the U.S. insurer typically requires that the system pay the claimants directly for settlements. The systems realize that they should be the RRE in this situation, rather than the U.S. insurer. However, they have questions about how to populate certain reporting fields, specifically fields 72, 73, and 75 (see attached). Does the system use its own TIN, office code/site ID, and claim number, or the fronting insurance company’s TIN, office code ID, and claim number?

I think you need to review the Alert from April 5, 2010 (also may be implemented in the latest user guide under foreign RREs). If the system is making payments directly than it is the RRE and the answers to your data fields lie in the creation of the fake TIN in field 72 and utilizing the options to populate the other fields with zeros or spaces pursuant to the descriptions in the chart for the other fields. The form for the fake TIN is 9999xxxxx, the x’s representing a 5 digit number of the system’s selection.

With regard to “negotiating” the amount due on the conditional payment letter – you gave a “formula” to determine the ratio of procurement – I didn’t quite catch it all – will you please provide me with the formula…..it was atty fees + expenses…….

[(attorneys’ fees + expenses) / total settlement amount] x Medicare demand

See 42 CFR 411.37

If you have a Plaintiff that claims they do not have Medicare, they have a letter that shows they have been denied SSDI, but a query regarding Medicare shows this Plaintiff eligible, how can you determine whether or not they actually have Medicare? Do you have to go through the lengthy process with Medicare or is there some other way? Plaintiffs counsel believes that the letter from SSDI should be enough and is bringing a Motion to Compel. As a side note, I believe the Plaintiff did have Medicare in the past but claims that was years ago.

If the plaintiff executes a form SSA 3288, you can go to any social security office to request Medicare statue information. The problem with the query appears to be if the plaintiff was ever entitled to Medicare for any period of time, the system is continuing to kick out false positives and that sounds like what happened here.

I wondered whether there is any guidance re how to treat plaintiffs in a medical monitoring claim against defendants with liability insurance — because those types of damages are possibly similar to future-oriented medical payments under a workers comp setting. Would defendants need to determine who is likely to be eligible for Medicare in 30 months, as in a workers’ compensation setting, as opposed to who is eligible at the time of settlement?

Might need more info here. I don’t understand if you’re proactively funding the monitoring MSA style whether ultimately needed or not, or monitoring for some period to provide treatment if needed when needed. Either way, the 30 months only applies if you are seeking CMS review in a WC settlement so kind of irrelevant. If Medicare eligible during this period of time and funds provided or treatment provided if needed, you’d be in compliance by making sure that Medicare not pay. Thing I’d wonder about is the reporting requirement if providing a promise to treat if needed, because that technically would be ORM and need to be reported. Not sure if you want to flesh out that question a little more so I understand the question better