Tuesday, August 31, 2010

Timing of Reimbursement to Medicare

Pa. R.C.P. 229.1 requires disbursement of settlement proceeds within 20 days of receipt of the signed release; if no Medicare waiver of no lien [is achieved] by that date does an insurer/defense lawyer have a right to retain settlement proceeds in violation of Pa. R.C.P. 229.1?

Despite the fact that federal law provides a reimbursement right for Medicare (42 U.S.C. §1395y), the timing of such reimbursement would not, in our opinion, lead to federal preemption such that state laws governing distribution of net settlement proceeds can be ignored. The question presupposes that plaintiff's counsel did not open a tort recovery record with the Medicare Secondary Payer Recovery Contractor (MSPRC) such that at least a list of conditional payments was not provided prior to the 20 day period provided under PA law. Presuming that were the case, the insurer would deliver the settlement proceeds to plaintiff's counsel for holding in its IOLTA or trust account pending resolution of the Medicare reimbursement claim. Plaintiff's counsel would, having been placed on notice of a just, third party claim (Medicare) have an ethical responsibility under Pa Rul Prof. Conduct 1.15(b) to notify the third party and to deliver those funds. Comment 6 of those rules specifies that lawyers may have a duty under applicable law (in this case, federal law), to protect third party funds against wrongful interference by their own clients. (See excerpts below).

Rule 1.15 Safekeeping Property
(a) A lawyer shall hold property of clients or third persons that is in a lawyer's possession in connection with a client-lawyer relationship separate from the lawyer's own property. Such property shall be identified and appropriately safeguarded. Complete records of the receipt, maintenance and disposition of such property shall be preserved for a period of five years after termination of the client-lawyer relationship or after distribution or disposition of the property, whichever is later.

(b) Upon receiving property of a client or third person in connection with a client-lawyer relationship, a lawyer shall promptly notify the client or third person. Except as stated in this Rule or otherwise permitted by law or by agreement with the client or third person, a lawyer shall promptly deliver to the client or third person any property that the client or third person is entitled to receive and, upon request by the client or third person, shall promptly render a full accounting regarding such property.

[6] Paragraph (c) also recognizes that third parties may have lawful claims against specific funds or other property in a lawyer's custody such as a client's creditor who has a lien on funds recovered in a personal injury action. A lawyer may have a duty under applicable law to protect such third-party claims against wrongful interference by the client. In such cases, when the third party claim is not frivolous under applicable law, the lawyer must refuse to surrender the property to the client unless the claims are resolved. A lawyer should not unilaterally assume to arbitrate a dispute between the client and the third party. When there are substantial grounds for dispute as to the person entitled to the funds, the lawyer may file an action to have a court resolve the dispute.

Given the duties imposed on an attorney with respect to delivering funds to Medicare, the parties can address the timing issue of Pa. R.C.P. 229.1 as follows: (1) add in the release recital language describing the Medicare reimbursement issues; (2) use condition precedent language to trigger payment under the settlement agreement such that the insurer pays the attorney upon proof a tort recovery record has been established, noting that 42 C.F.R. §411.24(g) creates transferee liability where the insurer pays the attorney, who then has a duty under the Medicare regulations to reimburse Medicare; and (3) use as a condition subsequent, proof of satisfaction of the Medicare reimbursement obligation. By following the formalized process to verify, resolve and satisfy, and by starting early, counsel can avoid the catch-22 suggested by the questioner.

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

Our best,
Sylvius von Saucken, Esq.

Monday, August 30, 2010

Supplemental Medicare Plans

I understand Medicare supplements may bolster their ability to obtain reimbursement by including certain language in their plan. Since the NY GOL 5-335 prevents settling insured parties from derogating any of their contractual obligations, does this new law prevent private Medicare Supplemental programs from recovering?

If the plan is a Medicare supplement (picks up where Medicare falls short), then it is nothing more than an insurance policy that has no direct affiliation with Medicare and none of the rights of Medicare. A supplemental plan is resolved just like any private health insurance plan- it's all based on the plan language and state law. Thus a state anti-subrogation law like NY's 5-335 which prevents subrogation/reimbursement unless the provider has a statutory right, would be applied a Medicare supplemental plan. Such providers may argue that they have the same rights as Medicare but if your client is receiving traditional Medicare (parts A & B) and this supplemental policy is filling the gaps then there is no basis to such an argument.

Please note that there supplemental plans need to differentiated from Medicare Advantage Plans (MA Plans). A MA plan is established under Part C of Title XVIII of the Social Security Act.[1] The MA program allows eligible individuals to elect to receive Medicare benefits through enrollment in private insurance plans. For individuals enrolled in MA plans, the federal government pays for all or most of the premiums for the insurance in lieu of paying Medicare benefits directly to medical providers as under the 'regular' Medicare arrangement. Private insurance carriers, who participate in the MA program, contract with CMS to administer Medicare benefits. Whereas supplemental plans do not have the same rights of recovery as Medicare, MA plans may have the same rights to recover as Medicare and thus would not be subject to state law.

To differentiate between the two types of plans it is necessary to examine the policy or EOB language of a plan and to look at what Medicare has actually paid. I hope you found this response helpful and please let us know if you have any additional questions.

Michael D. Russell, Esq.

Friday, August 27, 2010

MSAs In Liability Settlements

Has your thinking with respect to liability settlement MSAs changed at all since your 2/16/09 paper on misinformation on MSAs in Liability Settlements?

In short, our thinking remains the same because there has been no change in the law since that paper dated 2/16/09. Furthermore, there has been no new guidance published by Medicare with regards to the use of MSAs in liability settlements. The obligation remains the same as it always has been under the Medicare Secondary Payer Act: to consider and protect Medicare's interests, understanding that obligation is two-fold (past and future). While settling parties must consider and protect Medicare's future interest at the time of settlement, that does not automatically mean you pay Medicare money in the form of setting up a MSA. What it does mean is that the settling parties should review the currently enacted law and guidance regarding MSAs in light of their case specific facts and then determine if a MSA is appropriate. No matter how that question is answered (MSA is appropriate or MSA is not appropriate), the settling parties should document their files and memorialize the fact that Medicare's future interest has been considered and protected at the time of settlement. A fully documented file may be your best defense against any future concerns.

For a deeper discussion about the use and propriety of MSAs in liability settlements, please click here to view the MSA White Paper dated August 19, 2009. The guidance provided therein is as good now as it was then. I am also happy to help you find the appropriate ways to document your files so that you can ensure you have met your statutory obligation to consider and protect Medicare's future interest.

My best,
John Cattie, Esq.

Thursday, August 19, 2010

Responsibilities Of Defense Counsel In Liability Settlement Involving Medicare

Thank you for contacting the Garretson Firm Resolution Group, Inc. ("GFRG") with your MMSEA question.

Misunderstanding related to the implementation of the MMSEA has made parties cautious about settling claims, even those which they want to settle. Section 111 reporting requirements have effectively bottlenecked the settlement community. As the standard bearer in the Medicare compliance community, parties on both sides of the negotiating table constantly ask us the following question: "How can we settle claims and still be Medicare compliant in light of the MMSEA?"

The reporting delay, while providing the RRE more time to ready itself, does not provide comfort with regard to exposure to Medicare. The insurer/self-insured is still concerned about a few primary issues: 1) how do I ensure Medicare is paid back for conditional payments made from the date of injury to the date of settlement; 2) how do I ensure Medicare's future interests are properly considered and protected; and 3) how can I avoid the $1,000 per day, per claimant penalty for non-compliance under MMSEA? Likewise, the claimant also has concerns due to MMSEA, such as: 1) what is the extent of my Medicare compliance obligations in the MMSEA world; and 2) how can I ensure that the defense will pay settlement proceeds in a timely manner once a claim is settled?

Understanding that claims being settled today, for Medicare entitled injured parties, will have to eventually be reported, we offer the following advice. This settlement solution has dual intentions: 1) to provide the insurer with the knowledge that all Medicare compliance obligations are being handled in a compliant manner such that it will not be liable to Medicare post settlement; and 2) to allow the claimant's attorney to receive settlement proceeds in a timely manner once the parties have agreed to the terms of the release. The settlement solution essentially creates a series of affirmative obligations on both sides as conditions precedent and conditions subsequent to settlement.

Conditional Payments:
Reimbursing Medicare for conditional payments (those that were made from date of injury to date of settlement) is a claimant obligation; however, CMS can come back to the payer for reimbursement of conditional payments if they are not satisfied by the injured party. Action steps include the following:
- Claimant should open a tort recovery record with Medicare and request a conditional payment listing ("CPL"); and bring evidence of that to the settlement table
-Indemnification language included in settlement agreement to protect the defense
-Settlement occurs and then the claimant submits the settlement details to CMS along with its procurement costs (case costs and expenses) and requests a final demand.
-Defense pays the settlement to the claimant's attorney with the agreement from the attorney that the net funds will not be paid to the claimant until the reimbursement is completed.
-Final demand is received from CMS.
-Once reimbursed, CMS will provide the claimant with a copy of the final demand and proof that the reimbursement claim has been satisfied.

Obviously, since reimbursing CMS is an affirmative obligation on the claimant, the claimant requires settlement proceeds to handle its obligation in a compliant manner. Defense may be hesitant about disbursing settlement proceeds to the claimant prior to knowing that CMS has been reimbursed for conditional payments made date of injury to date of settlement. The above steps allow CMS to be reimbursed promptly, but also afford the defense a high level of comfort knowing that Medicare compliance obligations linked to settling the claims are being handled in a compliant manner.

Future Cost of Care
Satisfaction of Medicare's future interests is a topic of great discussion currently in the settlement community; however, that discussion is misguided. Insurers are being led astray by certain entities attempting to apply the current law and guidance regarding Medicare Set-aside Arrangements ("MSAs") to the liability context. As it currently stands, the MSA is a tool used in workers' compensation settlements to protect Medicare's future interest. All currently enacted laws and guidance regarding the use of MSAs is specific to the workers' compensation arena, and there is no currently enacted law which mandates the use of MSAs in a liability settlement. In fact, there is not even a statutory definition of the term 'MSA' or 'Medicare Set-aside Arrangement' at this point. In the absence of any currently enacted law or guidance specific to the use of MSAs in a liability settlement, MSAs are appropriate when the following fact pattern exists - that is, a definitive allocation to future medical expenses in the settlement release or a line item for future medical expenses in a jury verdict form, plus a permanent burden shift to Medicare.

Even if MSAs were appropriate in liability settlements today, the insurer/defense do not need to play a role on setting up the MSA. Under currently enacted law, there is no legal liability on the defendant for failing to do so. The current law only provides double damages exposure to an insurer where conditional payment reimbursement obligations exist but were not satisfied. (See 42 U.S.C. 1395y(b)(2)(B)). That responsibility is, and always has been on the Medicare beneficiary's shoulders (where applicable).

I have included a link (click here) to our white paper for your reference. Please let me know if you have any questions or need anything further.

My best,
Marlene Wilson, ARM

What are the specific responsibilities of defense counsel in a liability settlement involving Medicare. I represent a hospital and would like to make sure I am covering all the bases when settling a plaintiff's medical malpractice claim. I don't want to rely on the plaintiff's attorney to make sure everything is done correctly. I realize we have to report once the settlement is finalized. I would like to know if you have suggestions for a step by step process to ensure my client does not run afoul of Medicare.

Tennessee Attorney

Tuesday, August 17, 2010

Attorneys fees for a WCMSA

Can you take an attorney fee off of a Workers' Compensation Medicare Set-Aside? The injured worker settled his Workers' Compensation case in 2005 with open medical benefits. There is a WCMSA for $35,000 that Medicare has approved. Can we take 20% of that as a fee?

Tennessee Attorney

Great question and one that is commonly asked by those of us that would like to be paid for the work we do. Before addressing your specific question, let me note that the MSA figure is a subset of the gross settlement amount, and attorneys are entitled to take their fee based on the gross settlement amount (depending on the terms of their retainer agreement, of course).

Now, specifically addressing whether you are entitled to take a fee from the MSA approved amount itself, we can look to the CMS Policy Memoranda for guidance. In the CMS Policy Memorandum dated May 7, 2004, sent to all Associate Regional Administrators, CMS addresses the question of administrative fees and attorney costs specifically associated with establishing Medicare set-aside arrangements. This memo included CMS' new (and presently enacted) policy:

"Administrative fees/expenses for administration of the Medicare set-aside arrangement and/or attorney costs specifically associated with establishing the Medicare set-aside arrangement cannot be charged to the set-aside arrangement... For example, if the settling parties submit a MSA proposal to CMS that claims that the injured individual will need $50,000 worth of work-related medical expenses that would otherwise be reimbursable under Medicare and the settling parties claim that it will cost $10,000 in administrative and attorney fees in order to both administer and establish the MSA, then CMS will only evaluate/judge the reasonableness of the $50,000 figure.

CMS will not evaluate whether or not the $10,000 in administrative and attorney fees are reasonable nor will CMS permit the settling parties to add that $10,000 amount to the $50,000 MSA amount. Therefore, if CMS approves that proposal for a $50,000 MSA, the settling parties' $10,000 in administrative and attorney fees cannot be charged to or against the MSA of $50,000 because CMS considers those costs to be a separate issue for the settling parties to negotiate."

So, in summary, any money used to establish a MSA cannot be used to pay for the administrative costs nor the attorney fees required to establish or administer the MSA. Since the MSA is a subset of the gross recovery amount, the attorney is entitled to take a fee. However, those proceeds must come from another part of the recovery other than the MSA as the only appropriate use of MSA proceeds is to pay for future injury-related care that would otherwise be covered by Medicare.

Hope this helps,
John V. Cattie, Jr., Esq.

Wednesday, August 4, 2010

Liability Payments in Medicare Cases

A driver in NY was involved in an accident. His hospital bill was mistakenly paid by Medicare (instead of No-fault). The driver eventually settled his bodily injury liability claim against a third party. Does Medicare have any reimbursement claim against the settlement for the money it paid out since in NY the third party in a car accident pays only for pain and suffering and not for medical bills?

New York Attorney

Yes. Medicare has a right to recover for pain and suffering and other nonmedical services. The only situation in which Medicare recognizes liability payments to nonmedical losses is when payment is based on a court order on the merits of the case. Since liability payments are considered to have been made "with respect to" medical services related to the injury event when the settlement does not expressly include an amount for medical expenses and non-medical expenses.

Federal law takes precedence over State law and private contracts. Medicare is the secondary payer regardless of state law or plan provisions. These Federal requirements are found in Section 1862(b) of the Social Security Act {42 USC Section 1395y(b)(5).

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.

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. Medicare is a claimant against the no-fault insurer to the extent that Medicare has made payments to or on behalf of the beneficiary for services related to claims against the no-fault insurer.

Mary Skinner