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.