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