Posted by Matthew Garretson
I just learned of this animal today. It provides for fines and what appears to be attorney liability if funds are not set aside out of settlement proceeds for future medical expenses to be incurred by a plaintiff who is receiving Medicare at the time of settlement or who may be receiving it within 30 months of settlement. It is based on the Medicare, Medicaid and SCHIP Extension Act of 2007. How does this work?
There is a lot of misinformation about this issue out there. The difficult issue here is that there is the Medicare Set Aside ("MSA") industry that is trying to drive clients towards MSAs as a result of Section 111 of the MMSEA. Having listened to the first 5 town hall teleconferences with CMS (starting Oct. 1, 2008 and ending on January 28, 2009) concerning MMSEA application, it is clear that MMSEA does NOT equal MSA. In fact, the sole purpose of Section 111 is to close a perceived loophole in conditional payment reporting. This (to date) has nothing to do with future costs of care. Section 111 modifies 42 U.S.C. Section 1395y(b) by adding a new para. (8), which creates the concept of "Responsible Reporting Entities". But those MSA vendors who are drumming up business by stating that these new reporting requirements extend to future Medicare covered expenses is to blatantly ignore the import of the rest of 42 U.S.C. Section 1395(y)(b), which addresses CMS' recovery rights for medical payments made on a conditional basis when the plan provider or other insurer has not promptly made such payments.
This issue crystallizes when you consider the statutory history of MSP. On Dec. 5, 1980, the MSP statutes as we know them today were modified to take into account these subrogation issues. It was not until 23 years later, under Section 301 of the Medicare Modernization Act, when Congress added (and the President signed into law on Dec. 8, 2003) enforcement provisions to the MSP statute, focusing compliance on plaintiffs' attorneys and their Medicare entitled clients. Now, 4 years later, on Dec. 29, 2007, Congress closed the loop with Section 111 of the MMSEA by placing a reporting obligation on defense insurance carriers. Note that for plaintiffs and their attorneys, the obligation is to "verify and resolve", but for defendants, the sole obligation is to verify. Simply put, CMS is merely stating that when the law says that it is meant to be a secondary payer, they mean it. Section 111 does not reach to future costs of care issues, and is not intended to.
Instead, it is intended to address the other half of the reporting obligation when two parties agree to settle their differences, and from date of injury to date of settlement, CMS has been making payments for injury-related medical expenses on a conditional basis.