Medicare Set- Aside Arrangements in Workers’ Compensation & Liability Settlements Presented by...

Medicare Set- Aside Arrangements in Workers’ Compensation & Liability

Settlements

Presented by John J. Campbell, JD, CELA, MSCC

© 2009 Law Offices of John J. Campbell, P.C.

Law Offices of John J. Campbell, P.C.4610 S. Ulster St., Ste. 150Denver, CO 80237(303) [email protected]

mailto:[email protected]

http://www.jjcelderlaw.com/

Medicare Secondary Payer Requirements

• Medicare Secondary Payer Statute– 42 U.S.C. §1395y

• Medicare Secondary Payer Regulations– 42 C.F.R. §§411.20-.37 and 411.40-47

• CMS Policy Memoranda & FAQ’s – policy & procedure for WCMSAs

Medicare Secondary Payer Requirements

Pre-Settlement: Post-Settlement:

Conditional Pay- MSA

ment /Right of

Recovery

Medicare Secondary Payer Statute

42 U.S.C. §1395y (2) Medicare secondary payer (A) In general Payment under this subchapter may not be made,except as provided in subparagraph (B), withrespect to any item or service to the extent that— . . .(ii) payment has been made or can reasonably beexpected to be made under a workmen'scompensation law or plan of the United States or aState or under an automobile or liability insurancepolicy or plan (including a self-insured plan) orunder no fault insurance. . .

Medicare Secondary Payer Statute42 U.S.C. § 1395y(B) Repayment required (i) Authority to Make Conditional Payment The Secretary may make payment under this title withrespect to an item or service if a primary plandescribed in subparagraph (A)(ii) has not made orcannot reasonably be expected to make payment withrespect to such item or service promptly (asdetermined in accordance with regulations). Any suchpayment by the Secretary shall be conditioned onreimbursement to the appropriate Trust Fund inaccordance with the succeeding provisions of thissubsection.


42 U.S.C. § 1395y

(B) Repayment Required . . .(ii) Primary plans A primary plan, and an entity that receives paymentfrom a primary plan, shall reimburse the appropriateTrust Fund for any payment made by the Secretaryunder this title with respect to an item or service if it isdemonstrated that such primary plan has or had aresponsibility to make payment with respect to such item or service.


42 U.S.C. § 1395y(B) Repayment Required . . .(iii) Action by United States In order to recover payment made under this title for an item or service, the United States may bring an actionagainst any or all entities that are or were required orresponsible . . . to make payment with respect to the sameitem or service (or any portion thereof) under a primaryplan. The United States may . . . collect double damagesagainst any such entity. In addition, the United States mayrecover under this clause from any entity that has receivedpayment from a primary plan or from the proceeds of aprimary plan's payment to any entity.

Medicare Conditional Payments

• Payments made by Medicare for services that may be responsibility of a primary payer– Applicable to WC, Liability, No Fault Auto

• Medicare has “right of recovery” for the full amount of any Conditional Payment from primary payer and from any entity who receives payment from primary payer (e.g., providers, claimants, attorneys, etc.)

• Makes no difference if overpayment occurs before or after settlement

Medicare Rights of Recovery

• Medicare Rights of Recovery have priority over all other private, statutory or government liens and claims

• Right of Recovery is triggered when payment is made


• Penalties– Double damages plus interest– Prosecution by Department Of Justice


• Case Law– U.S. v. Sosnowski, 822 F. Supp. 570, 573 (W.D. Wis. 1993).

• U.S. v. Harris, Case No. 5:08CV102 (N.D.W.V. Nov. 13, 2008).

– U.S. v. Baxter International, 345 F.3d 866 (11th Cir. 2003). • MMA of 2003 –

– Prompt payment not required– No admission of liability needed– Defines primary payer (self-insured plans)– Legislatively codified Baxter and overturned Thompson v. Goetzman,

315 F.3d 457 (5th Cir. 2002), aff'd en banc, 337 F.3d 489 (5th Cir. 2003).

» Brown v. Thompson, 374 F.3d 253 (4th Cir. 2004)

– Telecare Corp. v. Leavitt, 409 F.3d 1345 (Fed. Cir. 05/25/2005)

Medicare’s Interests In WC & Liability Settlements

• Medicare will not pay if “payment has been made” by “an automobile or liability insurance policy or plan (including a self-insured plan) or under no fault insurance” for an Item or Service Covered by Medicare -- Medicare retains status as secondary payer, even after a WC or liability settlement;

42 C.F.R. § 411.46: • CMS authorized to review the "reasonableness" of

an allocation for future medical expenses in a WC settlement;

• CMS will disregard a WC settlement completely if it appears to be an attempt to shift responsibility for future medical expenses to Medicare.


• Medicare will not pay for future injury-related medical expenses until allocation to future medicals in WC or Liability settlement exhausted.

• If there is no allocation in WC or Liability settlement, CMS will require that the entire settlement be spent on future work-related medical expenses before Medicare will cover those services.


• Arguably, CMS Has No Authority in a Liability Settlement to:– Review reasonableness of allocation;– Disregard settlement if it appears to be

“attempt to shift responsibility” to Medicare.

• BUT … Regional Offices are doing exactly this! AND -- CMS could easily expand regulations if needed

Reasonably Considering Medicare’s Interests in WC & Liability Settlements

• July 23, 2001: "Workers' Compensation: Commutation of Future Benefits”

• CMS has published ten additional memoranda defining and refining CMS policies and procedures for the use, submission, approval and administration of WCMSA's. All of CMS' memoranda have been published as FAQ's on CMS' website: http://www.cms.hhs.gov

http://www.cms.hhs.gov/

CMS Policy Memoranda (FAQ’s)

• Commutation vs. Compromise• Criteria for Submission and Review of

WCMSA’s• No Payment of Administrative Fees or

Attorney’s Fees from WCMSA’s• Submission through COBC• Information Required With WCMSA

Submissions• Estimated Time for Review (45-60 days)• Self-administration Permitted


• No Reduction in WCMSA Amount or early termination of WCMSA

• Payment of Taxes• Payments allowed when Claimant not

Eligible for Medicare• MSA Amount Must Include Future

Prescription Drug Expenses• Determination of Life Expectancy• Use of Rated Ages• Pricing of implantable devices


• CMS has not yet published policy or procedures for Liability MSAs, but:– Medicare’s Interests Must be

Reasonably Considered– COBC must be notified of settlement– CMS ROs may review at their discretion

and have been doing so since 2006


CMS “requires” submission and review of theWC Settlement agreement and a Medicare SetAside Arrangement (MSA) whenever the WCsettlement meets the following review criteria:

Class 1: The claimant is currently eligible for Medicare and total uncommuted value of WC settlement exceeds $25,000; or Class 2: The claimant is reasonably expected to become eligible for Medicare within 30 months of a WC settlement with total uncommuted value of more than $250,000.

• These are workload control criteria only. THESE ARE NOT SAFE HARBORS!!


• Whether or not to review proposed settlement agreement and MSA in a Liability settlement is completely at the Regional Office’s Discretion;

• No review criteria specified for Liability MSAs.


• Set Aside Amount = Reasonable Settlement Allocations to:

– Future Medical Expenses and – Future Rx Expenses For:– Injuries related to the claim which would – Normally be Covered by Medicare– Based on the Claimant’s Life Expectancy

(actual or rated age)

• Determined Based upon MSA Allocation Report, Life Care Plan, IME, etc.


• The first Medicare Set Aside Trust was submitted to and approved by HCFA (now CMS) in 1995.

• WHY?

– To provide a structured and safe means for the settling WC claimant (and WC carrier) to reasonably consider Medicare's interest with the "blessing" of CMS. The same reasoning applies to both WC and Liability settlements today.


– CMS does not require a formal trust or administration agreement, but use one anyway!

– Whether MSA is self-administered or professionally administered:

• If Improper Distribution, Medicare Will Not Cover Future Medical Expenses Until Refunded and Properly Exhausted

Reasonably Considering Medicare’s Interests in WC and Liability Settlements

• WCMSA’s are Submitted Through The Coordination Of Benefits Contractor (COBC)

• All WCMSA Submissions Must Include:– Cover Letter With Basic Information;– Rated Age or Other Life Expectancy; – Medical Analysis and Cost Projection – LCP,

IEP, Medicare Set Aside Allocation Report, or Physician’s Statement;


– Proposed WC Settlement With Allocations– Set Aside Amount;– Medicare Set-Aside Arrangement (trust,

custodial agreement or self-administered), Including Name of Administrator;

– Medical Records (at least 2 yrs.);– Claims Payment History;– CMS Approval Conditional Until a Final Signed

WC Settlement and Approval Order is Provided.


• Liability MSAs are submitted to the appropriate Regional Office if the RO agrees to review;

• Submissions that substantially follow the requirements for contents of WCMSA submissions tend to be approved more often.


• Unique issues in Liability – e.g., comparative fault, state tort damage caps, insurance policy limits, etc.

• Policies for Liability MSAs are being developed on case by case basis through Regional Offices;

• Liability MSAs are being treated exactly the way WCMSAs were being treated prior to CMS’ July, 2001 memorandum;

• Policy memos on Liability MSAs will come – just a matter of time


• CMS is increasing efforts to enforce its interests under the MSP statute

– CMS Regional Offices would not be able to conduct discretionary review of Liability MSAs unless CMS Central Office authorized this!

– Medicare, Medicaid & SCHIP Extension Act of 2007 (MMSEA)

• Mandatory reporting requirements for WC and Liability insurance carriers effective July 1, 2009

• Whenever there is a “payment” carrier must determine whether claimant is eligible for Medicare


• Medicare, Medicaid & SCHIP Extension Act of 2007 (MMSEA) – cont.

– If claimant eligible, carrier required to report information required by CMS

– Civil penalties for failure to report on time -- $1,000 per day per claim!


• MMSEA does not say anything about liability MSAs being required effective 7/1/2009– The requirement to reasonably consider

Medicare’s interest in Liability settlements has been in the MSP statute since 1980!

– CMS representatives have been stating this position publicly since at least 2005.


• MMSEA does say that required reporting entities must provide information required by CMS– CMS is almost finished developing data fields for

mandatory reporting

– So far, information required includes all information and documentation required for CMS review and approval of WCMSAs

– Why gather this information from WC and Liability carriers if not to strengthen CMS’ ability to enforce its interests in WC and Liability settlements?


• The MMSEA is clearly designed as an MSP enforcement tool for both WC and Liability!

• Practitioners not currently considering Medicare’s post-settlement interests in Liability settlements (i.e., through funding of a Liability MSA) are risking significant exposure to liability for themselves and the Liability carrier and unnecessary loss of Medicare benefits to plaintiff.

Medicare’s Interests In WC Settlements

• Best Practices in Liability Settlements:– Use reasonable allocation to fund MSA;– Supporting documentation in file;– Use formal agreement or trust;– Administer as if a WCMSA;– Attempt submission to RO for review in

larger settlements

CMS Regional Offices

Region I: Boston JFK Federal Building, Rm. 2325Boston, MA 022031-617-565-1188 Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, Vermont

Region II: New York26 Federal Plaza, Room 3811New York, NY 102781-212-616-2200 New Jersey, New York, Puerto Rico, Virgin Islands

Region III: Philadelphia150 South Independence Mall WestPhiladelphia, PA 191061-215-861-4140 Delaware, District of Columbia, Maryland, Pennsylvania, Virginia, West Virginia

CMS Regional Offices

Region IV: Atlanta 61 Forsyth Street, SW, Suite 4T20Atlanta, GA 303031-404-562-7150 Alabama, North Carolina, South Carolina, Florida, Georgia, Kentucky,

Mississippi, Tennessee

Region V: Chicago233 North Michigan Avenue, Suite 600Chicago, IL 606011-312-886-6432 Illinois, Indiana, Michigan, Minnesota, Ohio, Wisconsin

Region VI: Dallas1301 Young Street, Rm. 714Dallas, TX 752021-214-767-6427 Arkansas, Louisiana, New Mexico, Oklahoma, Texas

CMS Regional Offices (cont.)

Region VII: Kansas City601 East 12th Street, Room 235Kansas City, MO 641061-816-426-5233 Iowa, Kansas, Missouri, Nebraska

Region VIII: Denver1600 Broadway, Suite 700Denver, CO 802021-303-844-2111 Colorado, Montana, North Dakota, South Dakota, Utah, Wyoming

Region IX: San Francisco75 Hawthorne Street, 4th Floor, Suite 401San Francisco, CA 941051-415-744-3628 American Samoa, Arizona, California, Commonwealth of Northern Marianas

Islands, Guam, Hawaii, Nevada

CMS Regional Offices (cont.)

Region X: Seattle2201 Sixth Ave, Ms/Rx-44Seattle, WA 981211-206-615-2306 Alaska, Idaho, Oregon, Washington

CMS Regional Offices, Point of Contact for WCMSAs

If your claim is pending in Regional Office, RO RO Point of Contact CT, Maine, MA, NH, NY, Puerto Rico, RI, Vermont, Virgins Islands

Boston Region JFK Federal Office Bldg., Room 2275 Boston, MA 02003-0003

617 565-1318

Delaware, DC, FL, NJ, PA, TN, Virginia, West Virginia

Philadelphia Region The Public Ledger Bldg., Ste 216 US Dept. of Health & Human Services 150 S. Independence Mall W., Philadelphia, PA 19106-3499

Sean Emberson or Richard Meehl 215 861 4178

GA, KY, IL, Indiana, MI, Minnesota, Ohio, WI

Chicago Region Div. of Survey and Certification, 105 W. Adams St., 15th Floor, Chicago, IL 60603-6201

Carol Hanson or Okla White 312 353 1801

Al, Arkansas, LA, MI, NM, NC, OK, SC, TX

Dallas Region 1301 Young St., Rm. 833 Dallas, TX 75202-4305

214 767 6402

American Samoa, AR, CA, CO, Guam, Hawaii, Montana, Nevada, North Dakota, Northern Marianas Islands, South Dakota, Utah, WY

San Francisco Region Div. of St. Operations 75 Hawthorne St., Suite 401 San Francisco, CA 94105

Tom Bosserman 415 744-4907 Ian Fraser 415 744-3665 Tina Lim 415 744 3673 Irene Cheng 415 744 3582

Alaska, Idaho, Iowa, Kansas, Missouri, Nebraska, Oregon, Washington

Seattle Region Blanchard Plaza Bldg. 2201 6th St. Avenue Seattle, WA 98121-2500

Jonella Windell 206 615 2385 Bert Vance 206 615 2329

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