Posted by Marlene Wilson
I resolve a lot of old no-fault medical only cases. A lot of times the insured has no attorney. If I see Medicare is involved, I usually get a CMS condensed payment letter and resolve the case. Sometimes it looks like we are paying for accident related medical, but potential for some payments to get through could exist, I suppose. The release we use protects and idemnifies us for past and future issues. I understand that CMS can go after anyone for past lien payments despite the language in the release. However, once a settlement has occurred (i.e. 20k to cover future medical costs) and insured agrees in release to use settlement funds for accident related medical expenses only, is there liability to the insurer in the future after the signing of the release? Is CMS's right subrogated to the actions of the insured post settlement? In other words, I suppose I can live with potential past exposure or liens (or relatedness issues), but once the settlement is paid, I want to be done with future exposure. What is my exposure if insured cost shifts to Medicare post settlement? Another question is if the insured is not currently on Medicare (or has some private health plan on Medicare) but gets it 10 years from now, post- signing of a release, and cost shifts MVA related expenses to Medicare. Does the release protect future exposure?
The Medicare Secondary Payer provisions state Medicare is always secondary to WC and other insurance, including no-fault and liability insurance. The Medicare Set Aside (MSA) obligation in a liability settlement, however, is only clear in a case where a definitive allocation for future injury-related medical expenses exists for a client entitled to Medicare, i.e. a verdict sheet or a settlement release with a definitive allocation.
When settling a liability case in which payment for future medical expenses are not specifically negotiated or if a release is implemented that uses broad language, such as "all claims past and future", the current standard is to facilitate a damages/recovery "reasonable person" analysis to determine if a portion of the recovery recognizes future injury-related care and then further determine the amount of future injury-related care for which Medicare would otherwise be responsible.
The standard to be applied to MSA analysis in liability settlements is "substantial compliance" grounded in good faith, appreciating the fact that MSA guidance does not yet exist for liability settlements. If, however, in good faith a reasonable person would surmise that an allocation for future injury-related medical expenses is appropriate, two options exist: i) identify the appropriate allocation and educate the client to ensure that those proceeds are spent down on future injury-related care or ii) contact the appropriate Medicare regional office, share the fact pattern of the case and determine whether they elect to review and approve the allocation.
GFRG generally only recommends an MSA be established in a liability case when: i) 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 ii) the settlement contemplates future injury-related expenditures. If you do not have both of these elements, you do not need to consider an MSA.
If you do have both of these elements, then look to the client’s Medicare entitlement status. If the client is not currently entitled and has no reasonable expectation of Medicare entitlement within thirty months, then no MSA is needed. If the client is entitled or has a reasonable expectation of Medicare entitlement within thirty months, then a damages/recovery evaluation should be performed. Part of this evaluation process involves determining whether there will be a future medical allocation (FMA) in the settlement. After performing the damages/recovery calculation, determine what percentage of the gross settlement is allocated for all medicals (past and future). Subtract from the total medical allocation the amount comprised of past medical expenses in the form of liens. If the claimant has a balance remaining in the total medical allocation, the analysis continues.
Next, investigate the client’s future injury-related care requirements (future cost of care). For those clients who are expected to have no further injury-related care, obtain a letter from their treating physician stating that, to a reasonable degree of medical certainty, the client will no longer require any Medicare covered treatments related to injuries sustained in the incident. If the client requires future injury-related care, look to the amount of the future medical allocation compared to the future cost of injury-related care for which Medicare would otherwise pay. GFRG recommends a liability MSA be funded on behalf of the client for the lesser of the two numbers. GFRG can provide a recommendation as to whether CMS approval of the liability MSA should be obtained.
Medicare’s right to recover is from the date of the injury through the date of the settlement. If you settle a case for a claimant that is currently not Medicare entitled and has no reasonable expectation of entitlement within thirty months, then Medicare will not have an interest in the settlement.
Hopefully, we have addressed your issues; however, attached are two documents for your review. The first document is our position paper regarding the need for liability MSAs; the second is our articles about the MMSEA provisions and how this affects the settlement community. Please let us know if you have any additional questions.