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Our offices will be closed on January 1, 2010. We will reopen January 4, 2010. Happy New Year!

How Does New York's Anti-Subrogation Law Effect ERISA Plan's

Question
In light of the enactment of NY's anti-subrogation law (GOL 5-335 and CPLR 4545), what effect does that have on a Self-Funded ERISA plan's attempt to assert a lien on a personal injury settlement (note: notice of the lien was asserted prior to passage of the legislation?

Answer
ERISA expressly preempts state laws insofar as they relate to employee benefit plans (29 U.S.C. 1144(a)).HOWEVER, under ERISA this preemption does not apply to those laws which regulate insurance, banking, or securities (29 USC 1144(b)(2)(A).This is known as the savings clause. Thus; for a state law to apply, it must be found to regulate insurance. Click here to find a summary piece we distributed after the passing of this new law.We feel that the NY law regulates insurance as we discuss in the piece below.The rub is that if state law regulates insurance (and thus is not preempted) it will apply to insurance companies. Unfortunately, the Supreme Court in FMC Corp v. Holiday, 498 US 52, 61 (1990) held that the "Deemer clause" exempts self-funded plans under ERISA from state laws that "regulate insurance" within meaning of the saving clause, and thus self-funded ERISA plans are exempt from state regulation insofar as that regulation relates to the plans. Thus, a self-funded plan would most likely NOT be effected by the new legislation.Until case law begins to build based upon this new legislation I believe this is the reasonable interpretation.

I hope you find this response helpful.
Michael Russell

Is Medicare Entitled To Any Reimbursement Where It Is Not The "Medicare Recipient," But An Heir?

Posted by John Cattie

Question:
Our client's mother was a passenger in a vehicle being driven by a family member. Mother sustained massive injuries, was hospitalized more than a month, and passed away three months later. Our client brought a wrongful death case against the driver, policy limits only 25/50, and insurance company wants to deduct $25,000 for contributory negligence.

Our question: Is Medicare entitled to any reimbursement where it is not the "Medicare recipient" receiving the settlement, but an heir?

An added note: The decedent had no assets, so no probate estate has been opened.

Thank you.
Missouri Attorney

Answer:
Great question. According to the Medicare policy, a beneficiary’s death does not materially change Medicare’s interest in recovering its payments made on behalf of the beneficiary while alive. Upon death, the estate of the beneficiary comes into existence by operation of law. An executor or administrator whose sole purpose is to conclude all business and financial matters that still remained at death manages it. Medicare’s interest in the outcome of a third party liability claim is one of these matters. Therefore, Medicare’s claim is properly asserted against the estate.

Medicare’s policy also sets forth the steps to be taken by the Medicare contractor in such situation: 1) when the contractor learns that the beneficiary has died, it identifies and contacts the executor or administrator, or whoever is acting in that capacity. It finds out if they are in possession of all Medicare correspondence that had been sent to the beneficiary while alive. If the information was not available, it sends the executor or administrator dated copies of all such notices; 2) if a settlement has been reached, a letter containing an initial determination should have been sent. The rights to request a waiver and/or appeal that are expressed in this letter apply equally to the estate, if there is a surviving spouse or dependent that is entitled under Title II or XVIII. When neither of these parties exists, waiver under §1870(c) may not be granted. (However, relief may still be available under §1862(b) or FCCA; and 3) the contractor will ensure that the executor or administrator understands Medicare’s priority right to satisfaction of its claim be re-emphasizing the fact in conversations.

In short, Medicare’s recovery rights are not ended by virtue of the beneficiary’s passing. However, you have told us that no estate has been opened due to the beneficiary having no assets. This appears as though a waiver could be argued based on financial hardship, but more facts would be needed to determine whether a waiver would really be appropriate. For additional guidance, please contact our Lien Resolution Supervisor, Joanne Saccone, at (704) 559-4300.

My best,
John Cattie

One Line Charges to Medicare

Posted by Carol Brown

Question:
We have probably all run into the above problem, that is, when receiving a conditional payment summary or final demand from Medicare one or more of the line item charges include multiple diagnosis codes, of which, some, but not all, are related to the claim.

In simpler terms, because I’m not sure the above sentence is structurally sound; say you have a fall where your client suffers a broken hip. You receive correspondence from Medicare and there is a line item charge for $100, with diagnosis codes related to fracture and, for example, diabetes. You have no way of knowing how much of the $100 is related to your case and how much is not since there is just one charge and multiple diagnosis codes.

So, naturally, you call Medicare. Ever helpful, they say, “Sorry, we can’t parse the charges out, you owe the entire $100.”

Now, this can’t be the law. Because after all, while Medicare has a claim for reimbursement, its only claim is for payments related to your case. Not for unrelated charges (such as diabetes in the example). And, it seems to me, that since Medicare has the claim, it must bear the burden of proving its claim. It can’t just say “too bad, pay the entire charge.”

How has anyone dealt with this issue, and has anyone had any success? I’m looking to see what others are doing in this regard.

Thanks,
Pennsylvania Attorney

Answer:
By way of background, typically this issue is a result of a provider’s billing practices. If a provider billed these charges together, they typically show up in Medicare’s system together and then end up as one line item, whether the charges are related or not. As of our latest understanding of Medicare’s system, it does not allow for separation of these line items. There are appeal options to dispute claims pulls including the ability to request a hearing before an ALJ, but this is akin to your compromise request approach and can be time consuming. The viability of this approach would obviously depend on the amount of non-incident related included in the claims.

Carol Brown

Medicare Secondary Payer Act And Double Damages?

Posted by Sylvius Von Saucken

Question:
I was at a conference last week where the Medicare Secondary Payer Act was discussed. The belief was that you could get double damages for the failure of an insurer to pay the proper Medicare reimbursement. Do you know anything about this? And if yes, what does it mean to plaintiffs attorneys?

-Pennsylvania Attorney

Answer:
The concept of a private cause of action where a Medicare beneficiary can use an applicable plan to recover damages on behalf of both Medicare and the Medicare beneficiary is valid.

Hidden in the headaches that typically follow resolving Medicare’s conditional payment reimbursement rights is an enforcement provision that gives Medicare beneficiaries a private cause of action allowing the beneficiary to sue for double the amount of what Medicare paid which has not be repaid for the accidental injuries or exposures.

This private cause of action is often over-looked by insurance carriers/TPAs, claims handlers and defense lawyers. If it is not quickly and properly addressed by the knowledgeable risk/claims manager, Plaintiff’s attorneys might use this separate cause of action to increase the value of their cases and bring about higher settlement values. According to one recent commentator who writes for insurance companies, this little used part of the Medicare Secondary Payer Act (42 U.S.C. §1395y(b)(3)(A)) might create significant issues for claims adjusters, as very few, if any, claims adjusters establishes reasonable reserves for failing to reimburse Medicare’s conditional payments.

The private cause of action is set forth in 42 U.S.C. § 1395y, and provides:

(A) Private cause of actionThere is established a private cause of action for damages (which shall be in an amount double the amount otherwise provided) in the case of a primary plan which fails to provide for primary payment (or appropriate reimbursement) in accordance with paragraphs (1) and (2)(A).

The purpose of this private cause of action statute was to help the federal government recover conditional payments from insurers or other primary payers, to encourage private parties to enforce Medicare’s rights, and to save money for the taxpayers. The premises underlying the private cause of action are:

(1) The beneficiary can be expected to be more aware than the government of whether other entities may be responsible to pay medical expenses,
(2) Without double damages, the beneficiary might not be motivated to sue an insurer/TPA because Medicare may have already paid the expenses and the beneficiary would have nothing to gain by pursuing the primary payer, and
(3) With the private right of action and double damages, the beneficiary can pay back the government for its outlay and still have money left over to pay for the litigation.

The 2003 amendments to the MMA were specifically enacted to overturn previous court decisions that limited the effectiveness of the MSP private cause of action. The 2003 Amendments also made it easier for injured Medicare recipients to bring these private actions on behalf of CMS-Medicare against an expanded class of entities and individuals with insurance, and clarified when such entities are required to pay the Medicare beneficiary’s medical expenses.

These amendments established:

(A) All businesses, trades or professions shall be deemed to have insurance regardless of whether or not it carries its own risk.
(B) Any judgment or payment conditioned upon the recipient’s compromise, waiver or release whether or not there is a determination or admission of liability will demonstrate a plan’s responsibility to reimburse Medicare.
(C) Reimbursement to Medicare was no longer tied to anticipation of “prompt” payment because the Secretary of Health and Human Services may make conditional payments if a primary plan has not made, or cannot reasonably be expected to make payments with respect to such services promptly.

Prior to the 2003 amendments, it was not clear whether Medicare had a right of reimbursement from certain self-insured defendants. After the amendments, it became crystal clear Medicare’s right of reimbursement applies to practically all tort or workers’ compensation settlements in which Medicare payments have been made on behalf of the tort plaintiff.

Relevant case law suggests the private cause of action exists when the insurer/TPA was aware of the conditional payment and ignored Medicare’s interest. Then, and only then, can the Plaintiff file to seek double recovery for the unreimbursed payment. Court decisions decided since the enactment of the 2003 amendments consistently permit the private cause of action to proceed against insurers and similar entities including employers, who are deemed responsible for the tort or workers’ compensation victim’s injuries.

Lawyers representing tort and workers’ compensation claimants should understand the MSP private cause of action and might decide to use it as a tool to advance their clients’ interests. For example, before a case goes to trial, you might consider the ramifications of adding a Medicare Secondary Payer private cause of action lawsuit to potentially increase the settlement demand or bring a reluctant Defendant to the settlement table.

All that being said, there are some caveats to this technique.

The private cause of action exists when Medicare’s conditional payment reimbursement obligation has not been satisfied.

As a result:
• While it is true that Medicare beneficiaries can bring a private cause of action against primary plans (defined in the MSP Act as a workmen's compensation law or plan of the United States or a State or under an automobile or liability insurance policy or plan (including a self-insured plan) or under no fault insurance), the cause isn’t “ripe” until the defendant’s obligation to have paid (or, said differently, Medicare’s overpayment) has been established by settlement or judgment. • If there is a settlement, then this cause of action is ripe – HOWEVER, most, if not all settlement agreements require plaintiffs to indemnify defendants for any liability related to the MSP Act.

So, if you asked us to consider when to bring a private cause of action against primary plans for their failure to provide coverage of items that Medicare ended up paying, then that cause of action typically isn’t “ripe” until the Medicare beneficiary (your client) settles the underlying PI case with the defendant and at that time the plaintiff indemnifies the defendant. So, in essence, even if the plaintiff could collect based on the private cause of action, their indemnifying for MSP obligations and attorney fees changes the paradigm, where it is the Plaintiffs who would lose out, rather than the defendants, whose primary plans paid for the settlement.

The bottom line: this private cause of action is real, but may not be practical to use in the typical settlement scenario. On the other hand, this cause of action has much more staying power where your client’s case goes to trial and you receive a verdict. At that point, there is no corresponding indemnification agreement. In that circumstance, double damages would still be on the table. Knowing this, the private cause of action may be best implemented as additional settlement leverage (increase pressure to settle by threatening a suit with a private cause of action), or to increase damages if the case actually proceeds to trial; noting that if the case goes to trial with a private cause of action, and the case subsequently settles, your verifying and resolving Medicare’s claims would work in conjunction with your dismissal of the private cause of action as part of your settlement agreement (as you would be ensuring Medicare’s reimbursement).

Please let us know if this clears the muddy waters a bit.
Sylvius von Saucken

New York Collateral Source and Anti-Subrogation Amendment: Part F

It relates to the Governor’s mandate-relief bill, S6068/S52205/A9052, which passed both the Senate and Assembly on Tuesday night. The law passed the Assembly by a vote of 135 – 0 and the Senate by a vote of 59 - 2, and now awaits Governor David Paterson’s expected signature. Part F of the bill amends both the CPLR and GOL as well as repeals certain provisions of CPLR relating to collateral source payments. This synopsis was prepared by Mike Russell, the attorney in our firm who spearheads our Private/ERISA lien resolution practice. Mike’s summary follows:

The rationale of a modified version of the collateral source rule, C.P.L.R. § 4545, has been discussed by New York courts for years. The general consensus is that the thrust of the collateral source rule was to prevent double recoveries by plaintiffs. Additionally, there has been agreement that the “question of whether the defendants' liability insurance carriers should be held ultimately responsible for all of the plaintiff's damages, even for damages specified in section 4545 which have been compensated from collateral sources, is a question best left to the Legislature, and not the courts” (Humbach v. Goldstein, 229 A.D.2d at 67-68). That question has been answered by the Legislature after the passage of a new bill which 1) amends subdivision (c) of section 4545 of the Civil Practice Law and Rules and 2) adds section 5-335 to the General Obligations Law.

· §4545(c) – In actions for personal injury, injury to property, or wrongful death, the law allowed for the admission (and subsequent reduction of awards) of evidence pertaining to collateral source benefit payments. The amendment adds clarity and exempts only life insurance and payments for which there is a statutory right for reimbursement from the definition of collateral source.
· §5-335 – This new section limits and essentially eliminates the non-statutory right of benefit providers to reimbursement and subrogation in the case of third party settlements and claims (personal injury and wrongful death). Benefit providers are defined as any insurer, health maintenance organization, health benefit plan, preferred provider organization, employee benefit plan or other entity which provides for payment or reimbursement of health care expenses, health care services, disability payments, lost wage payments or any other benefits under a policy of insurance or contract with an individual or group. Those parties entering into a third party settlement would not be subject to subrogation or reimbursement claims or liens of a benefit provider unless such provider had a statutory right to reimbursement. Furthermore, it would be presumed that settlements would incorporate the modified collateral source rules of §4545- i.e. settlement would not include damages which were compensated by benefit provider unless provider had statutory right.

IMPORTANT ISSUES

Collateral Source Provider’s Rights of Recovery Greatly Limited

For several years there have been efforts to pass the above amendments and to essentially eliminate a collateral source provider’s right to recovery unless such provider had a right set forth by statute. Today the right of recovery is limited to only those provider’s who have a “statutory right to reimbursement.” This statutory right is conferred upon worker’s compensation benefit providers and government benefit providers including Medicare and Medicaid. Such providers are granted liens according to the law. However, health insurance providers or those defined as “benefit providers” are not granted such a statutory right and hence their rights of recovery are effectively eliminated. In the state of New York there is currently no statute which addresses a provider’s rights to reimbursement/subrogation for benefits or payments made pursuant to an insurance policy or other agreement.

Furthermore, there are no statutory rights under ERISA. Any group benefit plan, while falling under the shadow of ERISA (29 USC § 1002(1)), will only have a contractual right to subrogation/reimbursement. This contractual right is rooted in the language of the particular policy and agreement between the Plan and its members. Within ERISA there are no provisions which provide for subrogation or reimbursement. Rather, there is a provision which provides for “appropriate equitable relief” in the enforcement of plan language (29 USC §1132(a)(3)). Hence under ERISA there is not a clause which confers the right of subrogation or reimbursement. A plan’s contractual language controls its rights and thus under ERISA “benefit providers” will have a contractual but NOT a statutory right.

Presumption Established: Collateral Source Principle Extended to Settlements

In Teichman v. Community Hosp. of Western Suffolk, 87 N.Y.2d 514, the Court of Appeals made it very clear that the reach of §4545 extended only to admissibility at trials and actual judgments. The Court took notice of the section’s silence regarding settlements and stated that while parties to a settlement could consider the receipt of collateral source payments, there was nothing in §4545 which compelled “the conclusion that medical expenses were necessarily excluded from [a] settlement” (Id. at 523). It was this decision that provided the insurer with an interest in the matter and ultimately allowed for their intervention.

With the addition of §5-335 there is silence no more. This section very clearly states that “when a plaintiff settles with one or more defendants in an action for personal injuries, medical, dental, or podiatric malpractice, or wrongful death, it shall be conclusively presumed that the settlement does not include any compensation for the cost of health care services, loss of earnings or other economic loss to the extent those losses or expenses have been or are obligated to be paid or reimbursed by a benefit provider except for those payments as to which there is a statutory right to reimbursement.” This presumption language is the driving force behind the exclusion of liens and rights to subrogation/reimbursement.

Interplay with ERISA: Will Preemption Apply?

It is uncontested that almost every single group benefit plan in this country is subject to ERISA regardless of its particular funding structure. The exceptions usually being government plans, church plans, and individual plans. Under ERISA, all state laws are preempted insofar as they relate to employee benefit plans (29 USC § 1144(a)). So the question becomes will this new law be preempted?

ERISA preemption does not apply to those laws which regulate insurance, banking, or securities (29 USC § 1144(b)(2)(A)). This is known as the Savings clause. The Supreme Court in FMC Corp v. Holiday, 498 US 52, 61 (1990) held that self-funded ERISA plans (employer directly pays benefits rather than purchasing insurance to do so) are exempt from state laws BUT that state laws which regulate insurance are “saved” from preemption with regard to insurance companies and that “an insurance company that insures a plan remains an insurer for purposes of those laws.” Thus if this new law “regulates insurance” then ERISA preemption will not apply.

According to the United States Supreme Court’s opinion in Kentucky Assoc. of Health Plans v. Miller, 123 S.Ct. 1471, 1478 (2003), for a state law to be considered a law that “regulates insurance” under the Savings clause it must satisfy the two following requirements: (1) state law must be specifically directed toward entities engaged in insurance and (2) the state law must substantially affect the risk pooling agreement between the insurer and the insured. First §5-335 is specifically directed toward entities engaged in insurance as it defines not only benefit providers (see insurance industry single out above) but it also specifically excludes their liens and rights of reimbursement/subrogation if not statutorily based. Second, by shifting responsibility for a portion of a plaintiff’s damage, there can be no doubt that this new law will substantially affect the risk pooling agreement. In conclusion, we believe that this new law will regulate insurance and thus will not be preempted by ERISA.

I hope this synopsis has been helpful. Should you have any questions regarding the above, or if you would like to discuss Private Health/ERISA, Medicare Medicaid, hospital and/or workers compensation lien resolution issues in general, please do not hesitate to contact me or Mike Russell, the author of this synopsis or visit http://www.garretsonfirm.com/.

SSI versus SSD

Posted by Sylvius Von Saucken

Question:
How can I determine if client is receiving SSD as opposed to SSI?
Client injured in MVA. I have conditional payment info from MSPRC. Emergency room registration info lists “primary insurance” as “Medicare” and “secondary insurance” as “Medicaid,” (I don’t know if this information was given by client or already in computer from prior visits). Client is not reliable source as to what benefits he had been receiving. I want to make sure if and when case settles that only obligation is to reimburse MSPRC. I don’t want to make client ineligible for SSI (if he’s really getting those benefits) and I want to protect myself too from any issues if I distribute money to client.

Any help is appreciated. Would client’s Medicare card (or some other card) give the answer?

Ohio Attorney

Answer:
This is a fact pattern we are seeing with greater regularity. The “dual-entitled” beneficiary whose settlement conjures up both a Medicaid lien under Rev. Code §5101.58 and a potential Medicare claim under 42 U.S.C. §1395y(b)(2) brings up additional considerations to settle. Typically, because Medicare does not pay for all of a disabled person’s (if not over age 65) medical expenses, if that person’s income and countable resources are less than threshold levels, he/she would also apply for Medicaid (to pay co-pays not covered by Medicare; to pay for long-term care after the first 100 days of hospitalization, etc.)

First, if your client has Medicare (red, white and blue card), and is under age 65, he/she could only use Medicare if he/she received SSDI for at least 24 consecutive months and had an established work history prior to becoming disabled. Medicaid, on the other hand, would be based on medical and financial need (rather than work history).

Second, the type of Medicaid program in which your client is enrolled will be relevant to crafting an appropriate benefit preservation plan, if needed.

Third, because SSI is based on financial need and there is a maximum benefit to be paid out, often once you know how much “Social Security” your client receives, and IF your client has a prior work history, you can better identify whether the benefit is SSI or SSDI.

The good news – our sister company has a government benefit preservation program: www.tglflaw.com. The process involves not taking your client’s word for it, as our paralegals verify actual benefits with your client’s case workers, and then provide a report, depending on the scope of our engagement. Our firm’s fees are always based on flat fees, and we offer consulting and full benefit preservation planning, with the understanding that our fee will always be commensurate with a client’s net recovery (so our services are truly value-added and education-oriented).

The really good news – with a formalized process to “verify and resolve” conditional payment reimbursement obligations to address “recovery” issues, you can have a better idea how much is left to preserve and then provide your client with information designed to help the client make informed decisions intended to integrate settlement goals with benefit preservation (to handle the “eligibility” side of the two-sided benefit coin).

Our best,
Sylvius von Saucken

Does Medicaid Have A Pre-1980 Rule?

Posted by Sylvius Von Saucken

Question:
I have 2 questions for you about Medicaid. I have tried researching and have come up empty handed. Question 1: Medicaid. Do we have a duty to notify Medicaid of a potential lien in an asbestos case in Michigan? Is there a pre 1980 rule like in Medicare? I could use authority for this? Question 2: IRS. If we believe a client has an IRS lien, do we have a duty to notify the IRS? This lien is more than 10 years old, and there does not appear to be a judgment, but we want to cover ourselves. Thanks so much for your time.

-Michigan Attorney

Answer:
With respect to Medicaid, there is no pre-1980 rule as “1980” is relevant to the year in which the Medicare Secondary Payer statute was passed. With respect to Medicaid, the rules concerning “notice” are all governed by the state Medicaid statute. Many of those state statutes have been changed in the recent years (after Ahlborn) to require affirmative notice to the state when settlement occurs.

To answer your question, I’ve compiled the following summary:

1. MCLA §400.106(4) (eff. 11/24/04) places an affirmative duty on a Medicaid beneficiary and/or his/her representative (counsel) to notify the MI Dept of Community Health and Casualty Unit (Medicaid tort recovery unit) anytime a settlement is pending for which injury-related medical expenses were paid for by Medicaid. (See below)

M.C.L.A. 400.106

Michigan Compiled Laws Annotated Currentness
Chapter 400. Social Services
The Social Welfare Act (Refs & Annos)
County Department of Social Services

400.106. Medically indigent individual defined; other definitions; actions wherein state department and/or Medicaid contracted health plan have right to recover expenses, notice, settlements, priority for recovery against proceedsSec. 106. (1) A medically indigent individual is defined as:

(3) An individual receiving medical assistance under this act or his or her legal counsel shall notify the state department when filing an action in which the state department may have a right to recover expenses paid under this act. If the individual is enrolled in a Medicaid contracted health plan, the individual or his or her legal counsel shall provide notice to the Medicaid contracted health plan in addition to providing notice to the state department.

(4) If a legal action in which the state department, a Medicaid contracted health plan, or both has a right to recover expenses paid under this act is filed and settled after November 29, 2004 without notice to the state department or the Medicaid contracted health plan, the state department or the Medicaid contracted health plan may file a legal action against the individual or his or her legal counsel, or both, to recover expenses paid under this act. The attorney general shall recover any cost or attorney fees associated with a recovery under this subsection.

(5) The state department has first priority against the proceeds of the net recovery from the settlement or judgment in an action settled in which notice has been provided under subsection (3). A Medicaid contracted health plan has priority immediately after the state department in an action settled in which notice has been provided under subsection (3). The state department and a Medicaid contracted health plan shall recover the full cost of expenses paid under this act unless the state department or the Medicaid contracted health plan agrees to accept an amount less than the full amount. If the individual would recover less against the proceeds of the net recovery than the expenses paid under this act, the state department or Medicaid contracted health plan, and the individual shall share equally in the proceeds of the net recovery. As used in this subsection, “net recovery” means the total settlement or judgment less the costs and fees incurred by or on behalf of the individual who obtains the settlement or judgment.

Medicare Compliance in Motor Vehicle Accidents

Posted by John Cattie

Question:
I am trying to settle a Motor Vehicle Accident case with a knee injury. My client was born 12/02/45 making him more than 62 1/2 years old and Medicare eligible in 30 months or less. Settlement will be less than 100,000. There is a 50% chance of having knee replacement surgery at some point in the future. Treating Ortho says total medical costs in today’s dollars approximately $20,000. The client is eligible for No-Fault medical. Approximately $14,000 left available. What needs to be done as far as Medicare is concerned? Thanks in advance.

Minnesota Attorney

Answer:
When we talk about achieving absolute Medicare compliance, we are really talking about two separate and distinct moving parts. Medicare has: 1) past interests, represented by conditional payments made from the date of injury to the date of settlement for injury-related care; and 2) future interests, represented by payments made by Medicare from the date of settlement going forward. Only when both interests are properly addressed may one attain absolute Medicare compliance.

To satisfy Medicare's past interests, the parties must reimburse Medicare for those conditional payments made. Typically, this is done out of the settlement proceeds once the final settlement has occurred. To satisfy Medicare's future interests, the claimant should determine whether a Medicare Set-aside Arrangement ("MSA") would be appropriate. While we know that MSAs are commonly used in workers' comp cases, the use of MSAs in a liability case is rare. Basically, a MSA is only appropriate in a liability case if the settlement release contains a definitive allocation to future meds or there is a jury verdict form containing a line item for future meds.

In a MVA case you ask about, two issues need to be addressed. 1) Medicare's past interests - since your client is not yet a Medicare beneficiary, Medicare would not have paid anything for injury-related care. Therefore, Medicare has no past interests that need be satisfied. 2) Medicare's future interests - because this is a MVA with no known workers' comp component, unless the settlement release contains a definitive allocation to future medical expenses, a MSA is not necessary. Therefore, Medicare's interests are fully protected.

Even though a MSA is not necessary, you will want to document your file and memorialize the fact that you considered Medicare's interests at the time of settlement. Ways of doing that are inserting Medicare specific language into the release depicting that the settling parties considered Medicare's interests or getting documentation from a professional operating in the Medicare compliance space showing that you considered Medicare's interests by seeking an independent 3rd party evaluation of your case.

Hope this helps,
John Cattie

A Medicare Supplement Question

Posted by Elizabeth Vish

Question:
I ran across your site while researching a Medicare Supplement question and wondered if you might be kind enough to help. Here's the question:

Does Medicare's Super Lien subrogation powers go to supplemental coverage as well? The state that I am referring to is Missouri, a non-subrogation state. If not, are there any different or other special lien subrogations for these policies? If not, do normal state lien and subrogation rules apply?

Thank you.
Missouri Attorney

Answer:
Medicare supplemental plans (Part C, Medicare HMOs) “may” have the same right of recovery of traditional federal Medicare, but they must have the “magic” language in their plan. See Care Choices HMO v. Engstrom 330 F3d 786 (6th 2003) saying these plans can create the same reimbursement right as Federal Medicare has IF it is in their plan agreement with the Medicare beneficiary.

There continues to be a debate as to whether state law (defenses) applies (b/c these clearly aren’t ERISA plans) – the plan will argue that state law is preempted if they have contractual reimbursement language since the language (if the plans included it) gives the plan a reimbursement right arising out of federal law (42 U.S.C. §1395mm(e)(4)).

Surprisingly, we find that about 50% of the Medicare Advantage Plans we review don’t have the contractual reimbursement language in them. The reason is that they originally thought they could get by with out it and still enjoy the reimbursement right arising out of federal law... Then, Engstrom comes down and they are caught in a situation where the court is saying, "No, you only get the strength of the federal reimbursement right" IF and only IF you included reimbursement language in your plan documents". So, you might be surprised that some of the older plans (which may have covered your clients at the date of injury) did not have the right language.I hope this helps. I have also copied, our in house ERISA/private lien subject matter expert, who can provide additional guidance.

My best,
Libby

Medicare’s Recovery Rights on Loss of Consortium Claim in Nursing Home Case

Posted by Matthew Garretson

Question:
I have a loss of consortium claim settled on behalf of surviving children (wrongful death claim). The estate did not receive anything. I’m looking for authority that states there is no Medicare right to recovery for medicals against children's recovery.

Thanks,
Arizona Attorney

Answer:
I recently prepared the following analysis of this question under Ohio law. I expect that most of it will be relevant to your question.
(1) Recovery Limited to state created rights. Medicare Secondary Payor rules (42 USC § 1395y(b)(2), 42 CFR §§ 411.24, 28) limit recovery to medical expenses incurred by the decedent. Medicare recovery does not extend to state-created rights for the decedent’s family to recover for his or her wrongful death, unless the Ohio statutes provide that medical expenses are recoverable by the beneficiaries as part of their claims under Ohio’ wrongful death statute.

(2) Ohio’s Wrongful Death Act. Ohio provides a cause of action whenever the death of a person is caused by wrongful act, neglect or default, and the act, neglect or default would have entitled the injured party (had he or she not died) to maintain an action for damages against the liable party. ORC § 2125.01.

(3) Who Brings The Action? The personal representative of the deceased Medicare beneficiary files suit for the exclusive benefit of the surviving spouse and next of kin of the decedent. ORC § 2125.02.

(4) From Which Claim Are Past Meds Recoverable? Under Ohio law, medical expenses paid by Medicare (on a conditional basis) are not recoverable from the wrongful death “estate”. Instead, a wrongful death action may be brought for the “exclusive benefit” of the decedent’s heirs. Recovery for wrongful death extends only to compensatory damages which include: loss of support; loss of services; loss of society; loss of prospective inheritance, and; mental anguish. ORC § 2125.02(B). No provision is made for recovery of the decedent’s medical expenses.

(5) Ohio Survival Act. Recovery of a decedent’s medical expenses must be pursued through a separate action on behalf of the decedent’s estate. Compensatory damages which include past medical expenses (paid by Medicare) are recoverable under Ohio’s Survival Act. ORC § 2305.21. Actions which survive death include actions for “injuries to the person.”

a. Survival action allows for recovery of damages for injuries sustained by deceased up to time of death. Jones v. Wittenberg University, 534 F.2d 1203 (6th Cir. 1976) (Applying Ohio law; reversed on other grounds)

b. In contrast with wrongful death actions, survival actions are not concerned with the wrong to the beneficiaries, but rather the wrong to the decedent. Jones v. Wittenberg University, 534 F.2d 1203 (Applying Ohio law; reversed on other grounds)

(6) Is there any authority for this Medicare lien recovery position? Yes.

a. In United States Fidelity & Guaranty Co. v. Decker, 122 Ohio St. 285 (Ohio 1930), the Ohio Supreme Court ruled that assets gained through a wrongful death action are not the assets of the estate. “It is not property which belonged to the decedent in his lifetime, and the claim did not come into existence until his death.” As such, the proceeds do not belong to the estate, but must be distributed to the beneficiaries.

b. In Fogt v. United Ohio Ins. Co., 76 Ohio App. 3d 24 (Ohio App. 1991), the Ohio Appellate Court held that, as wrongful death proceeds are not considered full assets of the estate, they “may not be used…to satisfy the decedent’s general or contracted debts.” See also State ex rel. Goldberg v. Mahoning County Probate Court, 93 Ohio St. 3d 160 (Ohio 2001).

(7) What do we learn from these cases? Decker and Fogt demonstrate that, in Ohio, recovery from a third party liability settlement (or award) under the Wrongful Death Act is:

• received by individuals to whom Medicare gave no benefit and not intended to reimburse for past medical expenses paid by Medicare;

• not fully considered to be a part of the estate, and may not be used to satisfy the debts of the estate.

Proceeds allocated to or resulting from an action under the Survival Act include:

• compensatory damages such as past medical expenses, which are allocated to the decedent’s estate, under which Medicare stands in the same shoes as that of any other general creditor.

AND…while Medicare does not expressly limit its right of recovery to exclude wrongful death portions of an award, Medicare is only recovering for medical expenses paid. To that extent, Medicare’s recovery right will follow the estate within which those same medical expenses are claimed as a measure of damages. To the extent that Ohio statutes provide for the measure of damages in both a survival action and a wrongful death action, Medicare will follow Ohio law.

My best,
Matt Garretson

Can A Set-Aside Amount Change If A Drug Becomes Generic?

Posted by John Cattie

Question:
I have seen your information through WILG which is always informative. Can you answer a question? If a set aside includes say $20,000 for Cymbalta use and that medication later becomes available as a generic, could it be possible to petition CMS for a reduction as the medication is no longer say $10 dose, but now $2? Numbers are just for example purposes, of course, but the general idea is interesting.

-New York Attorney

Answer:
This is a very good question. CMS’ most recent Memo (April 2009) discusses prescription drugs in MSAs, but it does not directly answer your question. Before answering your question, there are a couple important points to keep in mind: 1) the submission of a MSA proposal to CMS for review and approval is voluntary, not mandatory; and 2) CMS has workload review thresholds in place that allow submission only in certain circumstances.
Having said that, I think that if/when a generic equivalent to Cymbalta becomes available, the switch to that generic equivalent can be made and the MSA amount reduce based on the average wholesale price (AWP) of that generic equivalent. CMS tells us that, so long as the MSA proposal specifically names the generic equivalent to be taken and that generic equivalent exists, then it is proper for the generic to be included as opposed to the name brand drug.
Therefore, 1) if the MSA proposal is not/has not been submitted to CMS, it’s OK to change from Cymbalta to the generic and adjust the MSA amount appropriately. Just keep records as to why the change is occurring. 2) If the MSA proposal is/has been submitted to CMS, while we do not have exact guidance from CMS, I believe a petition to CMS to change based on the new generic becoming available would be proper.

My best,
John Cattie

The New MMSEA Reporting Obligations

Posted by Sylvius Von Saucken

Question:
Could you confirm that the new MMSEA reporting obligations apply to settlements on or after Jan. 1, 2010, and has not been extended to some other date?

-Kentucky Attorney

Answer:
As of today’s date, we are unaware of any extension of time for the trigger date for RREs needing to report settlements involving Medicare beneficiaries beyond Jan. 1, 2010. Per CMS’ User Guide (version 2.0, dated July 31, 2009), the reporting obligations apply on or after Jan. 1 2010. An excerpt from that Guide is below:

Section 111 RREs are required to register with the COBC and fully test the data submission process before submitting production Claim Input Files. RREs will be assigned a quarterly file submission timeframe during which they are to submit Claim Input Files. Once in a production mode, RREs will submit their initial claim files containing information for all liability insurance (including self-insurance), no-fault insurance, and workers’ compensation claims involving a Medicare beneficiary as the injured party where the settlement, judgment, award or other payment date is January 1, 2010, or subsequent, and which meet the reporting thresholds described later in this guide. In addition, initial claim files must include claims on which ongoing responsibility for medical payments exists as of July 1, 2009 and subsequent, regardless of the date of an initial acceptance of payment responsibility (see the Qualified Exception in Section 11.9). Subsequent quarterly file submissions are to contain only new or changed claim information using add, delete and update transactions.

Note – ORM still requires a July 1, 2009 starting date, but ORM applies to WC cases, not liability cases. In other words, if a RRE agrees to start paying for ongoing medicals after July 1, 2009 and stops paying for those medicals as part of a settlement involving a payment for other damages, that RRE reports twice, with the first report occurring between April 1 and June 30, 2010 for those cases where ORM started on or after July 1, 2009.

Our best,
Sylvius von Saucken

Enforceable Liens that Involve ERISA

Posted by Michael Russell

Question:
Can a plan sue the personal injury attorney as a defendant for simply holding the settlement proceeds of a plan participant in their trust account to which the plan may have a lien? Also, what does a plan have to do to have an enforceable lien? If the plan pays benefits but does not have the participant sign a repayment agreement per the plan is the lien still enforceable and is that still ERISA or is it a contract claim?

Answer:
With regard to your first question, there is nothing which prevents the plan from suing an attorney in such a situation. However, as the funds have not been disbursed to the client there is limited danger in such a scenario.

Regarding enforceability, it really depends upon the language of the plan (contractual right) or the state where your client resides (equitable right). If the language of the plan gives the plan a right to subrogation and/or enforcement then there is presumably an enforceable lien. Likewise, if there is no plan language but state case law recognizes that the insurer has an equitable right to subrogation then presumably there is an enforceable lien. For example in the state Illinois, the Supreme Court in a 1990 decision, decided that a health plan can only have a contractual right. In either case there are no formal steps for perfection which you may see with other liens.

Repayment or reimbursement agreements are common but by no means are they necessary to trigger enforceability. Again the plan language will dictate. I also have to point out that there is really no difference between an ERISA claim and a contract claim in such context. ERISA does not specifically provide for subrogation (no specific provision) but it does allow for appropriate equitable relief. See 29 USC 1132(a)(3). This relief is obtained through enforcing the terms of the plan which is itself a contract. The focus should be first on the plan language and second on the reimbursement agreement, if any.

I hope this email provided useful insightful in response to your inquiry. I am happy to discuss a particular case in more detail. Often ERISA cases are very fact specific and without more info it is hard to give a complete answer (and sometimes even with all the info a complete answer cannot be given).

Michael Russell

Medicare as Primary Payor?

Posted by Mary Skinner

Question:
Our firm has a case where the carrier for the defendant hospital is listed as the “primary payor,” although they’re disputing liability. The carrier contacted Medicare in pursuit notifying them of our client’s claim, and the information was entered into the computer system as the “primary payor.” (Medicare is secondary). We’ve notified Medicare that the defendant hospital will not pay, and they need to be removed, so our client can continue receiving benefits. We have even offered to provide a letter from the carrier confirming this, however; they believe that both the letter and the fact that we agreed to protect Medicare’s lien would not be sufficient. So now, we have a brain injured client who is in jeopardy of having his doctors refuse to see him due to the fact that their bills are being denied by the primary payor, and Medicare (as secondary payor) can take anywhere from 4-6 months before “considering” whether to pay the bills being denied. How fair is that? Despite my pleas for help, Medicare has NO answer as to how to resolve.

I’d love to hear how others are dealing with this situation.Thanks,
-Florida Attorney

Answer:
You should contact the provider of service to ensure that they have all the necessary information and documentation to bill Medicare correctly. When Medicare is the secondary payer to automobile medical/no-fault or liability insurance, providers may, but are not required to, bill Medicare for conditional payment. Conditional payment means Medicare will pay the claims as if they had primary responsibility. When Medicare makes conditional payments they will however, actively pursue recovery of the funds paid by Medicare from the responsible person's auto or liability insurance. When a provider has reason to believe or knows that they have provided services to a beneficiary/client for which payment under liability insurance may be available they must:
• Bill only the liability insurer during the 120-days after services have been provided unless the providers have evidence that the liability insurer will not pay within the time period.
• If they have evidence that the liability insurer will not pay within the 120-day timeframe*, they may, but are not required to, bill Medicare for conditional payment. If they bill Medicare within the 120-day time period, the provider must supply documentation to support that payment will not be made promptly.
• After the 120-day timeframe has ended, the providers may, but are not required to, bill Medicare for conditional payment if the liability insurance claim is not resolved. At this point, the 120-day payment documentation is no longer required; however, we still need the liability insurer's name and address. *Note: The 120-day timeframe is defined as the earlier of the following:
• The date a claim is filed with an insurer or a lien is filed against a potential liability settlement. • The date the service was furnished or, in the case of inpatient hospital services, the date of discharge.

Sometimes providers file liens in auto and liability cases and wait for a settlement before submitting a bill to Medicare-this is not considered a conditional payment, as providers are not requesting that Medicare pay. However, the 120-day timeframe is still to be followed. If providers choose to bill Medicare after the 120-day period they must withdraw claims against the liability insurer or liens placed on the beneficiary's/clients settlement. The Medicare reimbursement must be accepted as payment in full and providers may charge the beneficiary/client only for applicable deductible, coinsurance, and non-covered services. When the claim that a provider is filing includes a trauma diagnosis and an auto or liability insurance is involved, they must include the name, policy number and address of the liability insurer if requesting a secondary or a conditional payment. If liability insurance payment is made, Medicare will not pay secondary unless benefits are exhausted.

Mary Skinner

Medicare on Settlement Check

Posted by Matthew Garretson

Question:
Evidently, defense firms are now trying to say the new Medicare laws require them to put Medicare’s name on the settlement checks “to protect their clients from liability.” Is anyone else seeing this? How would you handle it?

-Arkansas Attorney

Answer:
While it is never a good thing to have Medicare’s name on the check, if it happens Medicare’s process is as follows: All parties must endorse the check. Once Medicare issues its Final Demand, the check is then sent to Medicare Secondary Payer Recovery Contractor (MSPRC) for deposit. MSPRC will issue a separate check, minus Medicare’s claim amount, to the attorney after a five-day waiting period; or send MSPRC a separate check for only Medicare’s claim amount, along with the multi-party check. Medicare will deposit the check made out to Medicare and endorse the multi-party check. The multi-party check will be immediately returned to the attorney.

We are seeing more and more of this as defendants reacts to the new MMSEA Statute that (beginning next year) requires them to report all settlements with Medicare beneficiaries to Medicare (see www.garretsonfirm.com and see MMSEA section). This puts defendants on Medicare’s radar (if the claimant doesn’t pay the Medicare reimbursement claim (a/k/a Medicare lien). So, we have some defendants now either a) putting Medicare’s name on the check; or, b) saying “we’ve got a settlement, but we will not make payment until we have proof that Medicare’s reimbursement claim has been satisfied. You might consider informing the defendants that CMS has clarified in several recent town hall meetings that CMS’ recovery practices have not changed on account of the new MMSEA statute. Furthermore, CMS has published several “user guides” and interpretative “alerts” and at no time have they stated that putting Medicare’s name on the check is a requirement. See http://www.cms.hhs.gov/MandatoryInsRep/Downloads/RevisedSection111022309.pdf. “The new Section 111 requirements do not change or eliminate any existing obligations under the MSP statutory provisions or regulations.”

I hope this information helps.

My best,
Matt Garretson

Estimating the Amount of a Medicare Lien

Posted by Mary Skinner

Question:
I am trying to estimate the amount of a Medicare lien. Does anyone know whether Medicare pays for home nursing care or home pharmacy infusion services?

Pennsylvania Attorney

Answer:
If a patient needs skilled nursing or rehabilitation care at home, either Medicare Part A (following a minimum three-day hospital stay) or Part B (no hospital-stay requirement) can cover it. The care may be provided in the patient's home or anywhere else he or she stays. If a patient meets the requirements to qualify for home care, Medicare can cover skilled nursing care and physical and speech therapy as needed while the patient recovers from an illness, condition, or injury. Medicare also covers needed medical supplies and equipment.
Medicare doesn't generally cover non-medical at-home care and assistance, including meals and housekeeping. However, if a patient is getting Medicare coverage for skilled nursing or therapy at home, Medicare generally pays for limited visits by an aide from a home care agency to help him or her with personal care. If Medicare covers skilled care for the patient, it can also cover the services of an occupational therapist to help him or her relearn how to accomplish daily personal care and household tasks safely.

As for the home pharmacy infusion services Medicare Part B, there is some coverage for certain therapies administered using durable medical equipment (a mechanical or electronic external infusion pump). Unfortunately, only a select few therapies are covered and only under very specific conditions. These include some anti-infective, some chemotherapy drug, some inotropic therapies (e.g., dobutamine), some pain management and a few other therapies. For parenteral and enteral nutrition therapies, there can be coverage in Part B only if the need for the therapy is documented to be for at least 90 days and other coverage criteria are met. There may be coverage for intravenous immune globulin (IVIG) for primary immune deficiency patients but the supplies and equipment are not paid for. More specific information can be obtained by contacting the Medicare entities called Durable Medical Equipment Medicare Administrative Contractors (DME MACs). The coverage criteria for home infusion that all contractors follow are found from a DME MAC.

For home nursing visits needed for beneficiaries receiving infusion therapy, there can be Medicare Part A coverage under Medicare’s home health benefit only if the patients are serviced by a Medicare-certified home health agency, as well as considered to be homebound and in need of intermittent (not 24 hour) home nursing.

My best,
Mary Skinner

Workers Compensation Case, MSA Threshold Requirement

Posted by John Cattie

Question:
My question concerns the threshold requirement of Medicare Set Asides (MSAs).

CMS states, "Also, any previously settled portion of the workers compensation claim must be included in computing the total settlement amount."

When a C&R settlement is entered into, typically there are no "previously settled portions" (at least in California). So, would one be prudent or required to use the previously paid Temp Disability & Perm Disability Advances, in addition to previously paid medical treatment to ascertain the low threshold for submitting a MSA to CMS?

Thank You,
California Attorney

Answer:
When computing the total settlement amount for CMS submission purposes, we can look to the CMS Memo dated April 25, 2006 for guidance. That Memo tells us that “CMS will only review new WCMSA proposals for Medicare beneficiaries where the total settlement amount is greater than $25,000.” Furthermore, CMS stresses this is a CMS workload review threshold, not a substantive safe harbor amount. When computing the total settlement amount, CMS tells us “that the computation of the total settlement amount includes, but is not limited to, wages, attorney fees, all future medical expenses (including prescription drugs) and repayment of any Medicare conditional payments.”

You have accurately noted that CMS tells us that “any previously settled portion of the WC claim must be included in computing the total settlement amount.” So, if the claim being settled today also had components that were settled previously, it is appropriate to include those amounts when computing the total settlement amount for CMS submission purposes. Though previously paid Temp Disability & Perm Disability Advances would not necessarily be deemed to be a “previously settled portion of a WC claim”, it would be proper to include those amounts for the limited purpose of calculating the total settlement amount for CMS submission. Based on the language of the Memo, such payments would fall under the “but not limited to” provision.

It is important to note, as CMS stresses in its Memos, that the thresholds provided are workload review thresholds, not substantive safe harbor amounts. This means that if the total settlement amount fails to reach the threshold, it means that CMS would not review/approve a MSA proposal in that case. However, it DOES NOT mean that a MSA does not have to be done. MSAs are appropriate in those workers comp cases involving: 1) a current Medicare beneficiary or a person possessing a “reasonable expectation” of Medicare entitlement within 30 months of settlement; 2) a settlement that closes future meds, effectively shifting the burden of future injury-related care from the carrier to Medicare on a permanent basis going forward; and 3) that individual does, in fact, require future injury-related care otherwise covered by Medicare. Finally, please note that submission of MSA proposals to CMS for review and approval is voluntary, not mandatory.

My best,
John Cattie

Post-settlement Payment to Medicare

Posted by Mary Skinner

Question:
Over three years ago we settled a Fen Phen claim for a client that was not eligible for Medicare yet. Even though they were not eligible, out of caution we submitted to CMS/Medicare a listing of all of our Fen Phen clients (including this client) to confirm that liens did not exist. Medicare did not respond in regard to this client's status.

The settlement included a future payment if the client had heart valve surgery before a specified date. The total value of the settlement, including the settlement guarantee, was less than $200,000.

The client has since then had heart valve surgery. We learned post-surgery that he started using Medicare in the last year or two and that Medicare paid for the surgery.
Given these facts, are we still obligated to hold this post-settlement payment from a client that was not Medicare eligible at the time of settlement and contact Medicare?

-Texas Attorney

Answer:
Although your client was not Medicare entitled at the time of settlement, he was entitled when he received the settlement for surgical guarantee. Having said that, you will need to open a record with Medicare, using the surgery date as the date of incident and reimburse Medicare for any injury related claims they may have paid.

Regards,
Mary Skinner

Notifying MSPRC For Redetermination

Posted by Mary Skinner

Question:
We have a client who is Medicare eligible that had a total knee replacement related to a Motor Vehicle Accident paid for by Medicare. Initially, we received correct payment summary forms which included the correct Medicare payments for treatment related to the MVA, however, when we settled the case we received a letter stating Medicare did not pay any claims related to the MVA. I tried to correct this with MSPRC over the phone with no luck. Do I need to send an appeal to Medicare to receive the money? What process do I go through to get this corrected? We know for a fact Medicare has paid and do not want this to come back to haunt us.

Minnesota Attorney

Answer:
Yes, you would need to appeal this in writing to the MSPRC by requesting a "Redetermination" of their final demand. Labeling your letter in this manner will reduce the possibility of your letter getting forwarded to the wrong department.

Attorneys and/or beneficiaries have an obligation not only to notify the MSPRC when they have included non injury related claims in their listing but also when they have omitted related claims.

My Best,
Mary Skinner

Medicare's Part with Social Security Claims

Posted by John Cattie

Question:
I represent a 55 year old woman who has been receiving Social Security total disability benefits for years. Her medical problems are prolific. She has never applied for nor received Medicare benefits. In January 20008, she fell and broke her wrist and ankle. This week, at mediation, the Defense offered $45k (a very good settlement under the circumstances) to settle all claims (including a substantial private subrogation claim) contingent upon receiving a release from Medicare. Both her doctor and the insurance company doctor indicated that she will need no future care for these injuries, and, as indicated above, Medicare has not paid a dime, nor is she currently receiving Medicare benefits. This is my "introduction" into the potential claims that Medicare may make. Given the relatively small nature of the settlement, it is hard for me to believe that Medicare would be very interested in this; however, I am not certain as to how to proceed. Can you provide some guidance and/or cite chapter and verse as to where I should begin looking?

Thank you in advance.
Minnesota Attorney

Answer:
This is a fairly common scenario which we are seeing with greater frequency. Generally speaking, Medicare has 2 interests that must be satisfied at the time of settlement: 1) past interests, in the form of any conditional payments Medicare has made for injury-related care from the date of injury to the date of settlement; and 2) future interests, in the form of an evaluation as to whether a MSA is appropriate or not. The MSA protects Medicare's future interests by using settlement proceeds to pay for future injury-related care otherwise covered by Medicare. Until recently, these Medicare compliance obligations were really only the concern of the plaintiff. However, in light of the new Medicare reporting statute (the "MMSEA"), certain defendants/insurers will have reporting obligations to Medicare beginning as soon as 1/1/2010. Because of this new reporting obligation, insurance companies are taking a much greater interest in ensuring absolute Medicare compliance for the settling parties. This is why they are asking for a release from Medicare. Unfortunately, Medicare will not issue them a "release" in this case. But there are other ways to satisfy their desire for absolute Medicare compliance.

Achieving absolute Medicare compliance in this case will likely come in the form of a two prong attack: 1) ensuring that Medicare has not paid anything for injury-related care to date; and 2) ensuring that a MSA is not appropriate in this case. The easiest way to satisfy prong 1 is to have the insurance company, who should already be registered as a Responsible Reporting Entity with CMS under the MMSEA, query CMS to determine the Medicare entitlement status of your client. To do this, you would provide them with limited data about your client as follows: 1) Social Security Number; 2) first initial of first name; 3) first 6 characters of last name; 4) date of birth; and 5) gender. Using this information, the insurance company can query CMS on its own. The result of that query is that they will see that your client is not a Medicare beneficiary, meaning Medicare would have not paid anything for injury-related care in this matter. That would satisfy prong one.

To satisfy prong two, we would require a little more information. We know based on current law (namely 42 U.S.C. 1395y(b)) and federal regulations (42 C.F.R. 411.46, 47)) that MSAs are an appropriate method for protecting Medicare's future interests in work comp. To date, 12 CMS Memos tell the legal community how to use MSAs in work comp cases. However, CMS has not issued similar Memos specific to the use of MSAs in liability cases. Furthermore, there is no current statute mandating the use of MSAs in liability cases. As such, we believe the use of MSAs in liability cases should be limited to those rare circumstances where the settlement release contains a definitive allocation to future meds. However, understanding that this is an unsettled area right now, we believe it is of the utmost importance to document your file and memorialize the fact that you are considering Medicare's future interests at the time of settlement. This can take shape in several ways, from inserting specific language in the settlement agreement to having a MSA evaluation performed by someone who focuses their practice on such issues. Either way (WC or liability), the MSA issue should be addressed and properly handled. This would satisfy prong 2, ensuring absolute Medicare compliance for your client as well as the other parties involved in the settlement.

Hope this helps.

My best,
John

Medicare Billing Question

Posted by Mark Maughan

Question:
What steps do you advise clients to take when a hospital refuses to bill Medicare claiming that they must first bill and receive a denial from the liability carrier? We are involved in a case with a trucking company that is disputing liability, and I know that their insurer will not send a written denial letter that the hospital wants before billing Medicare. Can we submit the bill to Medicare directly? Is there a procedure for that? Obviously it would be a conditional payment by Medicare if they pay the bill, but getting there is getting harder and harder.

Thanks for any advice,
Ohio Attorney

Answer:
When a service provider learns that a beneficiary received services that may be payable by another payer primary to Medicare, the provider is required to pursue payment from that primary payer for a period of 120 days following the date of treatment. At the end of the 120 day period, if the insurer has not made payment, the provider may choose to bill Medicare conditionally or to continue to wait for payment from a future insurance settlement. If the provider chooses to bill Medicare, then it becomes the Medicare Secondary Payer Recovery Contractor’s responsibility to recover Medicare’s payment if a settlement occurs at some point in the future. The provider is not required to send the bill to Medicare if they choose to pursue payment from a possible future insurance settlement.

Has it been 120 days since the last date of service? If it hasn’t, you will have to wait for 120 days to pass, and then the hospital can bill Medicare. If the 120 days has passed, and the provider still won’t bill Medicare they may be unaware of the procedure. It may help to speak with them and educate them on the process. You would be surprised of the number of facilities and providers that don’t realize they can bill Medicare without a denial from the primary payer.

To answer your question regarding direct Medicare billing, yes, you can send in a claim requesting Medicare make payment to your client. If you’d like information regarding this process, let me know and I will have our Manager of Medicare Services, Mary Skinner reach out.

I hope the above is helpful.

My best,
Mark H. Maughan

Bankruptcy and Private Liens

Posted by Michael Russell

Question:
I would like your input on this scenario. A client files bankruptcy on April 15, 2009. Then on April 22, 2009 she is nearly killed in a head-on collision that was not her fault. We find that a $100k limit is the only option available. The ERISA carrier has a $225k lien and the client has applied for (and will get) Social Security. Undoubtedly she will have future bills because of her injuries. Is there any good scenario in this? The bankruptcy lawyer will not respond to my calls.

All I want to do is return as much as possible for the client in the best, legal and ethical way.

Thanks for your input.
Ohio Attorney

Answer:
There are two major components to this question; bankruptcy and ERISA / private lien resolution.

1. Bankruptcy. It depends on what type of bankruptcy they filed. If they filed a Ch.7, the proceeds should not be an asset of the bankruptcy estate, as Ch.7’s are looked at as a “snapshot in time” and since the accident was post-petition, there was no asset to report. However, if she filed a Ch.13, the schedules will need to be amended to show the lawsuit (even if the $$ is undetermined). As you know, many states have exemptions for Personal Injury lawsuits, but they must be listed in order to take advantage of the exemption. So, if she did file a Ch.13, then you would want to consider amending the schedules as appropriate.

2. Lien. Depending on whether the ERISA carrier’s benefits plan is self-funded or insured there may be various defenses depending on whether state or federal law applies and in what jurisdiction this case would fall into. Just based off the facts below it would seem that the made whole defense would be an alternative worth exploring. Because the amounts paid by the carrier far exceed the potential recovery (based off limit of 100k) there will clearly be an argument that the client was not made whole by her recovery. However depending on the jurisdiction and the language of the benefits plan, the made whole rule may or may not apply. To give a more detailed answer on what defenses may apply we would need further info including the funding status of the plan (Form 550 from year of injury), the plan language (summary plan description), and the clients state of residence.

Michael Russell

SSDI (Social Security Disability Insurance) Inquiry

Posted by Carol Brown

Question:
I represent a gentleman who was rear ended by a truck. As a result of the accident, he is receiving social security disability benefits. Is social security entitled to subrogation regarding benefits paid?

Answer:
Social Security Disability Insurance (SSDI) is an entitlement program based on a person’s prior work history and disability qualifiers. Social Security does not have a statutory right of reimbursement for disability benefits paid in liability situations. However, generally SSDI beneficiaries under age 65 are eligible for Medicare coverage in the month after they have received 24 months of SSDI benefits. There is a five-month waiting period from onset of the disabling condition for disabled individuals to be qualified to receive SSDI benefits. As a result of this waiting period, there is a total of 29 months after the onset of the disability before an individual is eligible for Medicare benefits.

Having said that, if your client becomes eligible for Medicare prior to settlement and/or is still treating for accident related care it is important to note that CMS has a direct right of action to recover its payments from any entity, including a beneficiary, provider, supplier, physician, attorney, state agency, or a private insurer that has received a third party payment, 42 CFR 411.24. MSP laws are applicable to situations where a beneficiary may file a claim and/or a civil action against a third party seeking damages for injuries received and medical expenses incurred as a result of that illness/injury. Per 42 U.S.C. 1395y(b) (2) and 1862 (b) (2)(A)(ii) of the Act, Medicare is precluded from paying for a beneficiary's medical expenses when payment "has been made or can reasonably be expected to be made under a workers' compensation (WC) plan, an automobile or liability insurance policy or plan (including a self-insured plan), or under no-fault insurance.

Hope you find this helpful. If we can assist you in the future, please do not hesitate to contact me.

Carol Brown

Tri-Care Subrogation Claim

Posted by Michael Russell

Question:
Can you request a subrogation claim from Tri-Care if you are a defendant in a personal liability case in MN and this is being done 2+ years later?

Answer:
I apologize but from the wording of your question I am unable to determine the exact thrust of the inquiry. If you could provide further details in terms of what you are requesting and who you are requesting from, I would be happy to elaborate on my answer.

Tri-Care derives the authority to assert a subrogation claim under 42 U.S.C. §§ 2651-2653, which authorizes recovery of the reasonable value of medical care furnished or paid for by the United States under circumstances creating tort liability for such medical care in a third party. 32 C.F.R. § 199.12(b).

In the state of MN personal injury claims and property damage claims based upon negligence must be brought within 6 years. Thus the fact this is 2+ years later will not matter.

I hope you found this somewhat helpful and again I am happy to respond if further info is provided. Thanks.

Michael Russell

Can Medicare Recover From An Estate?

Posted by Mary Skinner

Question:
My mother just recently passed away and has left a small estate of 3 properties and some amount of CD's to me and my 2 bothers. I just learned from an Arkansas Lawyer that our estate will go into probate for all creditors to be paid including Medicare. Can Medicare make a claim? We spend our whole working lives paying into Medicare and now I am hearing that after my mother dies she now has to repay for the services she needed while disabled. Where can I find this federal or state law that states that Medicare can take an estate?

Arkansas Attorney

Answer:
Medicare does not have a right to recover from the estate unless your mother or her estate has filed a claim against another party for injuries sustained as a result of their wrongdoing and received a settlement. The only time that Medicare can assert a claim (lien) against the estate is IF your mother was injured and as a result there was a claim initiated against a third party who was responsible for the injury and received a settlement. If Medicare made payments for claims (conditional payments) that were for the treatment of the injury then Medicare can recover those payments from the settlement and the estate.

The regulations regarding Medicare's right to reimbursement on conditional overpayments in liability situations can be found under 42 CFR s411.23, 411.24,411.26,411.37,411.50,411.52, and 411.54. It is important to note at this point that "liability insurance" means insurance (including a self-insured pan) that provides payment based on legal liability for injury or illness or damage to property. It includes, but is not limited to automobile liability insurance, uninsured motorist insurance, underinsured motorist insurance, homeowners' liability insurance, malpractice insurance, product liability insurance and general casualty insurance. These regulations also established that Medicare would be secondary to no-fault insurance, which is defined as "insurance that pays for medical expenses for injuries sustained on the property or premises of the insured." This insurance includes, but is not limited to automobile, homeowners, and commercial plans. This insurance is sometimes called "medical payments coverage", "personal injury protection", or "medical expense coverage". 42 CFR ss411.50

I hope this helps.
Mary Skinner

ERISA Health Care Plan Language

Posted by Michael Russell

Question:
My client has a self funded ERISA health care plan. A plan participant's dependent was hurt during childbirth and a lawsuit ensued. The hospital and the plaintiffs have agreed, in principle, to settle the claim for 2 million dollars.

In exchange for reimbursement of all past plan funds expended on medical care for the dependent, the plaintiffs have asked the plan to waive all future rights to subrogation from the settlement funds.

The plan does not have crystal clear language as to whether it is entitled to the future funds. Is there anything else in particular to be looking at when advising my client whether or not to take the deal offered? For what it is worth, my heart is voting for settling the claim.

Texas Attorney

Answer:
Subrogation and reimbursement rights are governed largely by the plan language itself. In this case I would look to the recovery elements that the Plan claims an interest. Here we are talking about whether or not a Plan is entitled to receive a credit against future benefits. To my knowledge the 5th circuit has not dealt directly with this issue. Generally, a Plan will be entitled to reimbursement only for payments made prior to the time the Plan participant settles UNLESS there is specific language creating a right to this credit or the plan has some type of exclusionary language.

- 7th circuit
o No future credit unless specific language (express clause required)
- 9th
o Exclusionary clause can achieve same result as credit
• Refusal to pay tortfeasor caused injuries unless payment considered advancement and granted lien

Because the Plan does not have crystal clear language it would seem there would not be a reimbursement right for future expenses from the settlement funds. Another thing to consider is the language of the settlement agreement. If the settlement funds were allocated for particular damages it could also affect right to future credit (ex. None of these funds are intended to cover future medical expenses/ claims for future medical are waived hence no reimbursement right). I hope you find this helpful and please let me know if you have any additional questions.

Michael Russell

Small Claims Settlements

Posted by Mary Skinner

Question:
I have a small claim that was settled by letter and negotiations. There were no legal documents filed. Does Medicare need to be notified?

Thank you in advance.

Michigan Attorney

Answer:
Yes, any settlement that involves a Medicare beneficiary must be reported and Medicare's interest protected.

Section 42 CFR 411.23 states that a beneficiary must cooperate in any action taken by the Centers for Medicare and Medicaid Services in recovering conditional payments. Failure to do so or not protecting the Medicare program during and after settlement negotiations may result in CMS taking action against the beneficiary to collect the mistaken payment.
In the event that reimbursement is not made to Medicare as required by 42 USC 1395y(b)(2)(B)(I), action may be brought against any entity responsible for payment (and may collect double damages from insurance companies), or any entity that has received a third-party settlement. Under 42 CFR 411.24(g), this includes attorneys whose fees are paid from settlement proceeds. Please refer to US v. Sosnowski, et. al. where judgment was entered against a beneficiary and his attorney for failing to reimburse Medicare after receiving settlement proceeds on a personal injury case.

CMS has a direct right of action to recover its payments from any entity, including a beneficiary, provider, supplier, physician, attorney, State agency, or a private insurer that has received a third party payment, 42 CFR 411.24.

In addition, Medicare has the authority to refer non-collectible debts over to the United States Department of Treasury for possible offset of a beneficiary's benefits.

The regulations regarding Medicare's right to reimbursement on conditional overpayments in liability situations can be found under 42 CFR s411.23, 411.24,411.26,411.37,411.50,411.52, and 411.54. It is important to note at this point that "liability insurance" means insurance (including a self-insured pan) that provides payment based on legal liability for injury or illness or damage to property. It includes, but is not limited to automobile liability insurance, uninsured motorist insurance, underinsured motorist insurance, homeowners' liability insurance, malpractice insurance, product liability insurance and general casualty insurance. These regulations also established that Medicare would be secondary to no-fault insurance, which is defined as "insurance that pays for medical expenses for injuries sustained on the property or premises of the insured." This insurance includes, but is not limited to automobile, homeowners, and commercial plans. This insurance is sometimes called "medical payments coverage", "personal injury protection", or "medical expense coverage". 42 CFR ss411.50

Hope this is helpful, Mary Skinner

Made Whole Issues

Posted by Michael Russell

Question:
I need some fresh thoughts on a made whole issue I am briefing. Here’s the scenario: Client is severely injured in a collision. Health insurer pays substantial medical bills. Tortfeasor's limits are inadequate, but it's all we can get. Health insurer's subrogation provision does not contain Lawson language, so the made whole rule applies. (The insurer concedes this point.) The issue becomes whether client received "full compensation." Health insurer argues that the total of compensation received must include the amount of the subrogation interest and quotes Copeland Oaks ("The made-whole rule provides that an insurer cannot enforce its subrogation rights unless and until the insured has been made whole by any recovery, including any payments from the insurer.") I think this argument is a stretch, and there is some helpful language in Blue Cross v. Hrenko. Why does the subrogation interest get to be added into the amount of compensation - making "full compensation" more easily in reach?

-Ohio Attorney

Answer:
The determination of what elements make an insured ‘made whole’ vary from court to court. Unfortunately Copeland Oaks does consider insurer benefits in its made whole calculation and the case has been cited 14 times for this issue. I haven’t found any cases which state the opposite- that insurer benefits should not be included in make whole determinations. However I did come across Minnesota’s subrogation statute which specifically excludes such benefit payments (“full recovery does not include payments made by a health Plan to or for the benefit of a covered person” MSA 62A.095(2)). Maybe something to go on or argue…

Mike Russell

CMS Set Aside, Attorney Fees

Posted by John Cattie

Question:
Am I correct in my understanding that attorney fees as procurement costs are only allocable to Medicare where past medical benefits paid by Medicare are being settled or compromised along with past wage loss benefits (i.e. claim petitions)?

-Pennsylvania Attorney

Answer:
Correct – as we currently sit, Medicare does not allow the procurement costs of a case to be allocated to satisfaction of Medicare’s future interests (i.e. MSA evaluation and/or MSA set up). The procurement costs may only be allocated to satisfaction of Medicare’s past interests (i.e. conditional payments or CPs it may have made from date of injury to date of settlement). In the future, it may be possible to allocate procurement costs to satisfaction of Medicare’s future interests as is set forth in HR 2641, a piece of legislation sitting with the House Ways and Means Committee that purports to create safe harbors and bright line rules in the area of Workers’ Comp MSAs. Until that day (or CMS tells us otherwise), procurement costs may only be allocated to verification and resolution of the CPs paid for injury-related care from date of injury to date of settlement.

Kindest regards,

John Cattie

Past Payments Made By Medicare

Posted by Sylvius Von Saucken

Question:
I understand that no MSA is required on a medical malpractice case but that doesn't answer the question whether Medicare can post settlement refuse to pay claims in light of 1395Y(b)(2)(A)(i). Do you think we should be telling our clients that it might be a possibility?

Also, in mediation, do you suggest we avoid submitting written itemizations of damages that include large components of future medical expense that would ordinarily be covered by Medicare?

Thanks in advance for your thoughts.
Ohio Attorney

Answer:
You raise a very good point, given the fact that the statutory language of sub(b)(2)(A)(i) from 42 U.S.C. §1395y refers to "payments made or to be made". However that subsections goes on to exempt from immediate recovery those payments made on a conditional basis.

When read in conjunction with subpara. (b)(2)(B) (conditional payments Medicare can make, subject to recovery), and when considering the MSP Statute in light of recent CMS clarifications concerning the Medicare reporting rules for Responsible Reporting Entities (insurance companies), effective July 1, 2009, for settlement occurring on or after Jan. 1, 2010, the statutory construct clearly refers to past payments made by Medicare, or to payments Medicare should not make based on its secondary payer status.

In the case then of a WC settlement, clients should be told that there is a possibility that Medicare can refuse to pay a medical claim unless its interests were properly considered as part of the settlement process. In the case of a medical malpractice (liability) case, however, the same analysis whether there exists a future cost of care and a permanent burden shift, combined with a future medical allocation and properly documented file will be the best way to then determine what, if anything, you need to tell the clients.

Until further statutory evidence, interpretations or case law is presented that proves the MSP Statute is intended to apply to future costs of care and not just conditional payments; as even the rules for double damage for attorneys and the broad liability to attorneys and settling parties alike for non-compliance only apply to conditional payments (rather than future ones), we would not recommend advising your clients that Medicare would challenge their future medical claims absent the proper analysis of the case.

To the extent that the mediation does not result in a specific, carved out amount of future medical expenses to be paid, whether you also discuss or review future medicals to build your damage analysis is not dispositive of the question whether or not a MSA should be considered.

Simply put, if it is in your client's best interests to submit life care plans and other evidence of damages, you should continue to do so. That type of evidence, while probative of arguments for damages leading to settlement do not, unless the parties agree, result in a line item for future medicals that would, in our opinion, trigger the need to consider whether there also exists a permanent shift of the burden of paying for those future medical expenses (over to Medicare). It is those two critical elements, and not the existence of a life care plan or similar documents, that can lead to the need to properly consider Medicare's interests through the use of a MSA.

To be clear, there are very limited instances when we see liability MSAs. Those include jury verdict sheets, the settlement of cases which are greater than maximum caps on damages under state law would permit, or the existence of an injury that the parties all understand will require future costs of care such as the loss of a limb for someone who is entitled to Medicare - Medicare would pay the costs of prosthetics and no amount of arguing would prevent the parties from recognizing the existence of future costs of care. However, even in that case, if there is another source of coverage, there may not be a permanent burden shift. As discussed, you need both conditions to be met before you can move forward with determining whether a MSA will be needed to properly consider Medicare's interests.

Please let us know if you have any follow up questions.

Our best,
Sylvius von Saucken, J.D.

MSA Guidelines In Liability Cases

Posted by Mary Skinner

Question:
My client fell in December 2007 and had to undergo a total knee replacement in 2008. All medical coverage provided through her employer's group plan; with a 3rd party lien of $55k. My client retires in June 2009 at age of 72. The client's primary insurance is now Medicare. Should we go through a CMS Review to determine whether or not a MSA will be required for questionable future follow-up care?

Hawaii Attorney

Answer:
Not necessarily. CMS has not issued any guidelines regarding MSA in liability cases and until we receive guidance from CMS about the use of MSAs in liability cases, the most important thing you can do is document your efforts at considering Medicare's interests. Whether that documentation comes in the form of an internal memo within your firm, notes from a telephone consultation on the case, language inserted within the settlement agreement itself, or an MSA evaluation from an independent, neutral 3rd party like GFRG, documenting your efforts to substantially comply with 42 U.S.C. 1395y(b)(1) will serve to show Medicare that you indeed did make a good faith effort at protecting its interests. In turn, you will be protecting your client's Medicare benefits.

GFRG generally only recommends an MSA be established in a liability case when:1.) The liability settlement is above $800K in gross recovery or there is a judicial allocation/verdict for future medicals regardless of the settlement amount. 2.)There is going to be a permanent shift of the burden of paying future injury-related medial expenses from the liable third party to Medicare; and 3.) The settlement contemplates future injury-related expenditures. If you do not have any of these elements, you do not need to consider an MSA.

Based upon the information you provided, 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 even though Medicare was secondary the fact that he had Medicare requires that notify Medicare. Additionally, I recommend that you memorialize in your file the internal evaluation in regards to the necessity of an LMSA.

The only liability case 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).

I hope this helps.
Mary Skinner

Should We Have A MSA For Workers Compensation

Posted by John Cattie

Question:
My old firm is pretty close to settling the civil portion of a workers compensation case that I have. We are probably going to settle the WC case for a dollar with a lien waiver. My client is on Social Security disability. If we settle the WC case for a dollar, do we have to have a Medicare Set Aside? The settlement on the third party will probably be around 200k.

Illinois Attorney

Answer:
We know from the April 2003 CMS Memo that settlements containing both a Workers Compensation component as well as a liability component should be treated akin to WC cases for MSA purposes. Therefore, the fact that the parties in the WC case are settling for a dollar with a lien waiver will not shield the claimant from the MSA requirement. The focus should be on who will be paying for future meds going forward. If the burden of making those payments is being shifted from the WC carrier to Medicare going forward, and the claimant will require future injury-related care, then a MSA may be appropriate.

John Cattie

ERISA Inquiry

Posted by Michael Russell

Question:
My client lost a foot in an accident. The ERISA plan paid $59,000 in medical benefits and the only insurance is a $25,000 uninsured motorist policy which limits have been tendered. The plan demands the whole $25,000. They filed a motion for the same. Their plan language says their "first priority" and what they are entitled to regardless of "made whole." Any thoughts on how to get my client something while, the plan, without doing anything to recoup its losses in regard to the liability claim now just demands every penny of the settlement?

Thank you.

Answer:
First and foremost, the status funding of the plan needs to be determined. Generally the language of the Summary Plan Description and the Form 5500 and corresponding schedule A(s) are used to determine the funding status. These documents and other plan document information can be requested from both the employer and insurer or third party administrator.
If self-funded, then ERISA would pre-empt state law under section 1003(a). Thus we would look to the seventh circuit. Possible defenses…
1. Specific Fund Doctrine
a. Party must be seeking to impose constructive trust or equitable lien on specifically identifiable property rather than attempting to impose personal liability
i. Ask two questions regarding the PLAN language
1. Does it specify that plan recover specifically from settlement award?
2. Does it specify that plan can recover only up to amount paid?
ii. If no, it is likely that the lien unenforceable
2. Made Whole Doctrine (7th circuit is default jurisdiction)
a. Thus doctrine may be abrogated by clear and unambiguous language. Plan’s language that you note seems to do this.
b. No help here.
3. Common Fund Doctrine (plan’s recovery is reduced so it bears proportion of attorneys fees and costs)
a. Common fund doctrine applies in seventh circuit unless plan specifically provides that beneficiary is responsible for all attorney’s fees. 338 F.3d 680
b. The first priority language may overcome this argument but worth a try.
c. Reduce demand by % of fees.
4. Other
a. Does the plan limit recovery to settlement amounts allocated for medical expense? If so what amount was allocated for medical expenses?

If insured, then state law defenses would be available under section 1144(b)(2)(A). Under Wisconsin…
1. Made whole doctrine
a. May be abrogated by plan language – that is the case here. No help.
2. Common Fund Doctrine
a. Applies if
i. Money recovered solely by efforts of attorney
ii. Notice given that action commenced and reasonable fee requested
iii. And carrier does not become party to action1. 162 Wis.2d 821
3. Specific Fund
a. See above
4. Uninsured Motorist Coverage
a. Depending on the language of the plan, the carrier may or may not be able to subrogate itself against the UM carrier.

I hope you find this response helpful in addressing your client’s situation. Although, we are unable to make a definite determination at this time we would be happy to provide a full evaluation if you could provide us with the information above. Please let me know if you have any questions and please let me know how we can provide further assistance. Thank you and I look forward to your response.

My Best,
Michael Russell