Tuesday, November 27, 2007

Medical Malpractice, Medicare Set Aside

Posted by Matthew Garretson

I need some advice. Here is my situation. I represent a lady (80 years old) who was given a medication to which she had a known and documented allergy. She has a terrible reaction, suffers multi-organ failure and a mini-stroke. She spends a week in the hospital and is discharged to a nursing home where she will live the rest of her life. I have reached a settlement with the doctor who prescribed the medication and the case is pending against the pharmacy that dispensed the medication.

I have a conditional payment letter from Medicare claiming $7,000. What happens if Medicare is paid the final amount of its claimed lien but the client suffers complications from the mini-stroke (i.e. - falls and breaks a hip) a year or more from now and is readmitted to the hospital and incurs bills of $50,000 which are paid by Medicare? Does the client (and my firm) risk Medicare coming after us for more money to pay these future bills which "might" be related to the negligence/original injury and settlement? Should all of the settlement proceeds go into a Medicare Set Aside Trust? Thanks for any and all suggestions.

-Virginia Attorney

It would be very rare that a Liability Medicare Set Aside (LMSA) would be required under those facts. The Medicare Set Aside obligation is unique as it applies to a liability settlement as opposed to the traditional application in a workers’ compensation (“WC”) settlement. A WC settlement (with its two distinct components - indemnity and medical damages) has a definitive shift of future health care obligation (from the carrier to Medicare) which carries a clear obligation to protect Medicare’s interest in cases involving a plaintiff entitled (or soon to be entitled) to Medicare. In WC settlements involving Medicare beneficiaries, federal regulations provide that the obligation for work-related injury medical expenses should not be shifted to Medicare from the responsible party. Accordingly, a portion of a Medicare beneficiary’s workers’ compensation settlement must be set aside to pay for the beneficiary’s future work related injury and / or illness. Federal regulations also provide that Medicare will not pay for any medical expenses for the work-related injury or illness until the amount allocated to future medical expenses is exhausted. Medicare has a formalized guidance and protocol established for workers’ compensation settlements to ensure the agency’s interests are protected. Formalized guidance and protocol, however, is not available for liability settlements.

Satisfying Medicare’s interest for future injury-related care in liability settlements has a myriad of variables which don’t exist in WC (economic and non-economic damages, derivative claims, and other factors confounding recovery including, but not limited to caps, and policy limits). These factors make it much more difficult for the Centers for Medicare & Medicaid Services (CMS) to determine the amount allocated for future medical expenses. The only liability cases wherein Medicare contends that it is clear an obligation exists is a case involving a Medicare beneficiary where there is a defined judicial allocation for future medicals (i.e. an interrogatory / verdict sheet with a definitive allocation for future medicals). These cases are obviously the exception and not the norm. More commonly, liability cases settle with a broad, general release. When we evaluate such cases, we employ the appropriate standard of “properly considering Medicare’s interest.” The determining factors include:

  • Is the Client currently entitled to Medicare?
  • Was it a pure Liability case? Was there any workers compensation component?
  • What was plead & released (indemnity & meds only, specific allocations? Etc.)
  • Has the settling parties properly satisfied Medicare’s conditional payments (date of injury through date of settlement?
  • Who has been paying for injury related care?
  • Will there be future injury related care (treatment, management, drugs)? (If not, obtain a treating physician letter)
  • Will Medicare now (after the settlement) be absorbing the burden?
  • What documentation exists concerning the types of damages being released? (Certainly the settling parties should heavily document their files and incorporate language into the settlement documents explaining how they have “considered Medicare’s interests.” Examples include: Complete analysis and allocation by qualified “MSA” professional / vendor and / or letters from treating physicians supporting that no future injury-related care is necessary or supporting small costs only)

Based upon the facts you provide (and assuming the liability settlement is below $1M in gross recovery), at face value your case does not look like an LMSA candidate. Of course, the appropriate measures need to be taken to reimburse Medicare for past injury-related care and I recommend that you memorialize in your file the internal evaluation in regards to the necessity of an LMSA. Also, given the clients age, I am also mindful of Medicare’s limited coverage of nursing home care – Certainly your client may exhaust the settlement proceeds on the nursing home care and may need to explore alternative nursing home coverage via Medicaid or other programs.

As a final note, for cases in which the above analysis does trigger a concern in a liability case, we typically gather the necessary case detail to generate a neutral damages / recovery evaluation. This evaluation produces a determination identifying the appropriate (if any) future medical allocation (FMA). At this point, we perform a future cost of care analysis (FCC) which will identify the injury-related care for which Medicare would otherwise pay. We then recommend the liability Medicare set aside of the lesser of the two numbers. Furthermore, we evaluate and provide a recommendation as to the need to pursue Centers for Medicare & Medicaid Services (CMS) approval. Again, such cases are the exception and not the norm.

I hope this information is helpful.

Medicare Lien Question

Posted by Matthew Garretson & Mary Skinner

Matt, Read your very fine article on Medicare Reimbursements in AAJ Section Connection…

Question: I resolved a S/F case down here in Florida. Client was operated on at a private charitable hospital run by Catholic Health. Surgery was elective but needed to repair torn rotator cuff. Hospital took Medicare info at admission. A few weeks after surgery (Feb. ‘06), I wrote for hospital records, etc.

Hospital then filed lien for full amount of bill (27K). I called hospital attorney and was told that hospital did not have to file with Medicare and that they would wait as long as it took for me to settle the case.

In reading your article, I question whether this is correct. Our jurisdiction does have a hospital lien law that protects most hospitals. However, I was under the impression, perhaps incorrect, that if the provider was a participating provider that they could not bill the patient. Again, date of accident was Dec. ‘05 and date of service was in Feb. ‘06. Hospital says they had option of billing Medicare or filing lien and waiting for settlement (which did occur a year later). Thanks for your reply and citations, if available.

-Florida Attorney

I am happy to try to help. Mary Skinner, our Manager of Medicare Services, may have some additional insights. Also, I wanted to make sure that you had seen [pages 2 and 3 of the document I sent you] that speak to this issue of Medicare’s new policy (May 2006) allowing providers to wait and bill the beneficiary for the actual charges. Previously, participating providers were required to bill Medicare. See CR 4024, Transmittal 49, updating Pub 100-05 Medicare Secondary Payer, April 7, 2006. I believe the hospital is correct. If your client hasn’t signed the settlement agreement yet, you might tell the hospital that client will not sign unless hospital submits to Medicare b/c that is the only way she can be ensured an acceptable net settlement. (i.e. telling the hospital that it has everything to loose). Hope this info helps.

-Matt Garretson

The hospital is correct, please see below. However, the hospital may not demand payment from the beneficiary until the beneficiary has possession of the settlement proceeds.

-Mary Skinner

Provider/Supplier Billing in MSP Liability Accident Situations

The following is to explain Medicare policy with respect to provider and supplier billing options when Medicare is secondary payer to liability insurance. This article pertains to liability insurance only and does not pertain to Med-Pay/no-fault insurance.

Where a provider/supplier has reason to believe that it provided services to a Medicare beneficiary for which payment under liability insurance may be available, the provider/supplier;

· Within the first 120-days, must bill only the liability insurer, unless it has evidence that the liability insurer will not pay within the 120-day period. If the provider/supplier has such evidence, it may bill Medicare for conditional payment, provided it supplies documentation to support the fact that payment will not be made within 120 days.
· After the 120-day period has ended, the provider may, but is not required to, bill Medicare for conditional payment if the liability insurance claim is not finally resolved.
· If the provider/supplier chooses to bill Medicare, it must withdraw claims against the liability insurer or any lien that was placed on the beneficiary’s settlement.
· If the provider/supplier chooses to continue its claim against the liability insurance settlement, it may not also bill Medicare. (Note: Medicare timely filing limitations in 42 CFR 424 continue to apply. If a provider or supplier chooses not to bill Medicare during the Medicare filing period, it may not bill Medicare after this period has expired even if it is unable to collect from the proceeds of the liability insurance settlement.)

The provider or supplier may not collect payment from the beneficiary until after the proceeds of liability insurance are available to the beneficiary. Liability insurance is not the primary payer until after payment is made by liability insurance. If the liability insurance payment is made to the beneficiary, the provider may accept money from the beneficiary only if the beneficiary voluntarily makes payment. The provider can in no way demand payment from the patient.

After receiving payment from the liability insurance company, the provider must submit an MSP bill. Providers should submit an MSP bill even if payment in full was received and Medicare will not be making any payment, as the patient’s Medicare utilization will be updated.

Providers/suppliers that choose to bill Medicare must accept the Medicare approved amount as payment in full and may charge beneficiaries only for deductible, coinsurance, and non-covered items or services.

Providers/suppliers that choose to pursue liability insurance may charge beneficiaries actual charges, up to the amount of the proceeds of the liability settlement but may not collect payment from the beneficiary until after the proceeds of liability insurance are available to the beneficiary.

Where a provider/supplier chooses to bill Medicare for conditional payment, it must cease all attempts to collect payment from the proceeds of the liability settlement (including any liens it may have placed against any settlement). The continued pursuit of collection of payment of actual charges from the proceeds of liability insurance after the provider/supplier has billed Medicare violates the provider/participation agreement. Therefore, the collection of actual charges from the proceeds of liability insurance after Medicare has paid for the services is an incorrect collection.

By submitting the assigned bill, the provider or supplier voluntarily gave up its right to collect actual charges for Medicare covered services from the beneficiary (either directly from the beneficiary after settlement of the liability claim or indirectly from the liability insurance payer). Hence the provider or supplier no longer has a right to be paid in excess of the Medicare allowed amount and can bill the beneficiary only for the applicable deductible, coinsurance amounts and any non-covered amounts. The provider or supplier, in accord with its assigned claim, must refund the beneficiary any amount collected in excess of the Medicare payment for the services and amounts for which the beneficiary is otherwise liable.

If a provider/supplier receives payment form a liability insurer after having already billed Medicare for the services, the provider should:

Return the payment to the liability insurer; or,
Forward any payment received from the liability insurance company to the beneficiary. The provider may retain only the amount of any unpaid deductible, coinsurance, or non-covered services.

The provider must notify Medicare regarding details of the liability involvement/payment and Medicare will then recover its conditional payment(s) from the beneficiary.

The provider should not submit an adjustment (XX7) or cancel (XX8) type of bill in an effort to refund Medicare for services subsequently paid by liability insurance. AdminaStar Federal will accept a refund in the form of a check if the provider chooses to refund the payment made by Medicare. However, if the provider chooses to refund the Medicare payment, the provider may only retain from the liability payment, an amount equal to Medicare’s allowed amount. The provider must refund to the beneficiary the balance of the liability payment in excess of the Medicare allowed amount plus any amounts for which the beneficiary is otherwise liable (such as unmet deductible, coinsurance, and non-covered services). Providers that choose to refund the Medicare payment should utilize the Liability Data Worksheet to insure the payment is applied to the correct patient account.

Submitting a Conditional Claim upon Denial from the Liability Insurer
If the provider/supplier receives a denial from the liability insurance company, it may bill Medicare conditionally using the most appropriate denial code. To submit a conditional claim, use one of the appropriate denial codes along with an occurrence code 24 (date of denial). If there has not been a payment and 120 days have passed since the liability insurer was billed, you may use the DA denial code. When using the DA code, you will not use the occurrence code 24.