Garretson Firm Lien Resolution Ask the Experts

MSA Guidelines In Liability Cases

2011-04-18T09:52:00.001-04:00

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

Medicare's Part with Social Security Claims

2011-04-18T09:51:00.001-04:00

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

Medicare Compliance in Motor Vehicle Accidents

2011-04-18T09:50:00.001-04:00

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

Medicare Set Aside Arrangements Terms

2011-04-18T09:49:00.003-04:00

My client is a Medicare beneficiary who suffered a neck injury in a Motor Vehicle Accident. Their auto insurance has paid for treatment to neck thus far. Adverse driver policy limits are $25,000 and case will probably settle for less than that. It is unknown if he or she will need any future neck treatment. How do you recommend we deal with MSA issues in such a small case? Also, can you direct me to a site which shows how to establish an MSA? Wyoming Attorney

Responsibilities Of Defense Counsel In Liability Settlement Involving Medicare

2011-04-18T09:49:00.001-04:00

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

Reimbursement Rights For ERISA

2011-01-25T08:50:00.001-05:00

Question
A minor was injured, pays 100% of the Erisa lien. He or she will need future scar revenue 4-5 years later. How is the cost determined for the future part of Medicare lien?

Answer
Good morning and thank you for the question. Subrogation and reimbursement rights for ERISA plans are governed solely by the plan language itself. In this case I would look to the recovery elements that the Plan claims an interest. It appears that we are talking about whether or not a Plan is entitled to receive a credit against future benefits. 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. Assuming that the original agreement between the ERISA plan and the client was a full and final settlement of the plan's claims which arose as a result of the third party injury, the plan would arguably not have a claim for these post settlement treatments.

- Shell v. Amalgamated Cotton Garment, 43 F.3d 364 (8th Cir. 1994)
o No future credit unless specific language (express clause required)
- Qualls v. BC of Cal., 22 F3d 839 (9th Cir. 1994)
o Exclusionary clause can achieve same result as credit
 Refusal to pay tortfeasor caused injuries unless payment considered advancement and granted lien.
 The language stated that benefits would be ADVANCED ONLY to the extent that the plan retained a lien upon a third party settlement. Because there had been a third party settlement and the lien was satisfied, the plan did not have to advance future benefits.

If a 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, Esq.

ERISAâ€™s Preemption Clause

2011-01-24T09:13:00.001-05:00

Question
I represent a man who sustained traumatic brain injuries that have rendered him wheelchair-bound and unable to feed himself. His wife's health insurance is an ERISA plan, self-funded to $150,000 per fiscal year, with stop-loss health insurance beyond that initial amount. The $150,000 deductible was paid twice before my client's wife left her job and the ERISA health insurance coverage ended. The insurer is claiming a lien for over $500,000 - despite paying $300,000 with stop-loss insurance paying the rest. The settlement was for the policy limit of just over $1 million. The IRS 5500 reflects that the funding is 'general assets of the sponsor'. The plan has learned from every case from FMC v. Halliday through Sereboff.

Is the plan subject to GOL 5-335 if, as case law suggests, its right is not statutory in itself but instead controlled by the scope of the plan which is a contractual document? Are my options more academic than practical -- leaving me only to negotiate the best resolution and hold my nose while I pay. The Medicaid lien was settled at about an 8% pro rata share, the ERISA provider is looking for more than 100% of what it paid.

Answer
Thank you for the question. If the plan is in fact self-funded (general assets) with strong language then you may be at the mercy of the plan. While I agree with you wholeheartedly regarding the statutory v. contractual right and the application of GOL 5-335, the real problem is ERISA’s preemption clause. 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 and if an ERISA plan is in fact insured you can use state law defenses. See FMC Corp. v. Holiday, 498 US 52 (1990). If the employer plan provides benefits through a contract with an insurance carrier then the plan can be categorized as insured. On the other hand, if benefits are provided by the assets of the employer (in part or in whole) or through a trust, then the plan will most likely be categorized as self-funded.

Thus, if the plan was insured rather than self-funded, there is strong argument to be made that 1) 5-335 is a law which regulates insurance 2) an ERISA plan’s right is based on contract/equity not statute and 3) an insured plan cannot seek reimbursement because of 5-335. Unfortunately here a self-funded plan enjoys preemption and is not subject to the savings clause. See FMC Corp.

The issue I would focus on here is the stop loss issue. While it is well settled that the existence of stop loss coverage does not change the plan’s designation as a self-funded ERISA plan, we believe that the stop loss coverage can change the scope of a plan’s reimbursement right. As a result I would suggest demanding proof that 1. Any funds claimed over the attachment point would be reimbursed to the stop loss carrier and 2. The stop loss carrier had a right to such reimbursement. A stop loss arrangement provides for payment to the plan over certain attachment points. Without such proof there is the threat of unjust enrichment as the plan may receive a windfall from payments previously received from the stop loss carrier and any reimbursement made from your client. So in your example…

- Plan pays 500k in two years
- Attachment point is 150k per year
- Plan pays 500k but is actually reimbursed by stop loss carrier for anything over 150k per year; in effect plan out only 300k
- Require proof that if your client paid more than 300k, the stop loss carrier would receive those
- Don’t want plan to receive windfall (payment from your client and stop loss carrier)

Having settled the third party claim and dealing with a strong self-funded ERISA plan puts you between a rock and hard place. However you have the stop loss issue in this case. As an industry standard, many recovery vendors will agree to a 1/3 split of the gross proceeds. It is certainly not ideal but under the circumstances it may provide some hope. I would also remember that you have a sympathetic client and recovery vendors and plans look at litigation as a last resort.

I hope you found this response helpful and please let me know if you have any additional questions.

Michael Russell, Esq.

ERISA Rights On Benefit Entitlements

2011-01-12T09:14:00.001-05:00

Question
My client was injured in an automobile accident and medical expenses were paid by his employer under an ERISA plan. Subsequently, he died from an unrelated cause. I represent his wife as the personal representative of the estate for the injuries sustained in the accident. No claims have been made against his estate from the ERISA sponsored plan and pursuant to the state law all claims are barred based on the statute running. My question when and if there is a limitation for the presentment of an ERISA lien on a decedent's estate? What authority would speak to this limitation?

Answer
Thank you for the question. First let me say that I have seen attorneys successfully use the argument that an ERISA plan did not assert a claim against the estate in time and thus they have no right. Often times such an argument is used to greatly reduce the claim but not as a complete bar (leverage). As a general matter an ERISA plan’s statute of limitation is controlled by state contract law. This period begins when the plaintiff receives the third party recovery.

There is only one statute of limitations found in ERISA and it deals exclusively with a breach of fiduciary duty. ERISA Section 413. Generally under ERISA there are five causes of action (all found under Section 502). The fiduciary duty cause of action is under Section 502(a)(2) but under the facts of your case this cause of action is not applicable. The cause of action which is applicable is ERISA Section 502(a)(3) which provides appropriate equitable relief to enforce any terms of the plan. When an ERISA plan brings an action to enforce its right to reimbursement it does so under this section. Thus there is no specific statute of limitations in ERISA for these types of cases.

When there is a cause of action based on benefits entitlement or other ERISA rights (not fiduciary claim and thus no applicable SOL in ERISA), federal courts have looked to the most closely analogous state statute of limitations. (Miles v. New York State Teamsters Conference Pension & Ret. Fund Employee Pension Benefit Plan, 698 F.2d 593 (2nd Cir. 1983), Advisory Comm. For Stock Ownership $ Trust for Mont. Banc-system, Inc. v. Kuhns, 1996 US App LEXIS 2273, (9th Cir. 1996); Nikaido v. Centennial Life Ins., 42 F.3d 557 (9th Cir. 1994); Administrative Comm. of Wal-Mart Stores, Inc. v. Soles ex rel. estate of Hollander, 2003 WL 21688109 (8th Cir. 2003); Duchek v. BCBS of NE, 153 F.3d 648, 649 (8th Cir.1998).

Additionally, the Supreme Court has told us that when Congress does not provide a SOL for claims arising under federal statutes, a court should normally apply an appropriate state SOL. Reed v. United Transp. Union, 488 US 319 (1989). As mentioned ERISA plans are limited to seeking “appropriate equitable relief”. 29 U.S.C. § 1132(a)(3)(B) aka Section 502(a)(3). This relief must be sought through the enforcement of the terms of its plan. Because ERISA does not say anything more than appropriate equitable relief, the plan language alone controls the right to recovery. Because an ERISA Plan’s right to recovery is controlled exclusively by the terms of a written plan the most appropriate and analogous state statute certainly has to be the contract SOL. BCBS Alabama v. Sanders, 138 F.3d 1347 (11th Cir. 1998).

I hope you found the response helpful. Thanks.
Michael Russell, Esq.

New York Collateral Source and Anti-Subrogation Amendment Question

2011-01-04T14:17:00.001-05:00

Question
Mr. Russell: I apologize for the question to the extent you have already addressed the issue. Here is my concern: MA Plans step into the shoes of Medicare with a statutory right of reimbursement. There is no real issue on this point. However, when the client chooses to participate in a replacement plan, presumably they do so in return for greater benefits than those provided under traditional Medicare. This leads me to believe that subrogation, in New York, is limited only to those benefits that would have been provided under traditional Medicare and not any of the "extras" which are provided by the private insurer as a result of participation in the replacement plan. Have there been any developments regarding this specific concern? As always, your time and expertise is greatly appreciated.

New York Attorney

Answer
Thank you for the question. I think it is a very valid concern and a great point to consider. I wish that I could tell you that there had been some developments regarding this issue. However to my knowledge there have not been any challenges directed at this issue. As you are probably aware there are a number of litigations deciding the issue of the scope of the reimbursement rights but this mainly revolves around whether or not state laws/restrictions can apply and how closely the right mirrors Medicare.

Despite the lack of clarity I would encourage you to focus on these extras. In dealing with such a gray area any leverage can help.

Let me know if you have any questions. Thanks.
Michael Russell, Esq.

The Shenk Circuit Decision

2010-12-21T13:26:00.001-05:00

Question
Has Shenk been the subject of another circuit decision so that the Supreme Court can now look at the appropriate equitable relief argument rejected by the 8th circuit in Shenk?

Answer
The issue of appropriate equitable relief was presented and rejected by the 11th Circuit in Zurich American Ins. Co. v. O’Hara, 604 F.3d 1232 (11th Cir. 2010). The Court stated that the plan must be enforced as written to preserve integrity of written, bargained-for benefit plan. The made whole doctrine was rejected. So we have a case here which was not decided differently from Shank but the attorneys in O’Hara have petitioned the Supreme Court for cert (attached).

It also worth noting that Public Justice (formerly Trial Lawyers for Public Justice) has joined in the cause. They are also fighting this issue in the 9th (Western District of Washington; Case No.: CV10 298 RSM; CGI Technologies and Solutions v. Rose) and 3rd Circuits. So while the issue isn’t poised to be immediately before the Court a conflict among circuits may yet arise, which would increase the odds of cert being granted at some point.

I hope you found the response helpful and please let us know if you have any additional questions.

Michael Russel, Esq.

CMS Extends MMSEA Reporting Deadline

2010-12-16T11:15:00.002-05:00

Question
I understand that the reporting period for liability insurance cases has been moved back to 10-1-11. However, I am not sure how this affects ORM cases where the client is receiving treatment. I presume this only applies when the client is eligible for Medicare in any event. How does this affect uninsured motorist cases?

California Attorney

Answer
The extension of the trigger date and reporting date for reporting liability cases has been extended to October 1, 2011 and the first quarter of 2012, respectively. This extension only applies to liability cases that do not have an ongoing reporting obligation.

Workers' Compensation, no-fault (motorist) cases, and liability cases with ORM must still be reported during the applicable submission window during the first quarter of 2011. You will report cases where the ORM was assumed on or after January 1, 2010. The reporting is only required when the injured party is a Medicare beneficiary as of the date of the settlement or when ORM is assumed, if earlier. Go to the news section on our website to view our client advisory related to the extension of time to report.

Please let us know if you have any further questions.

Our best,
Marlene Wilson

Medicare Advantage Plans

2010-12-10T16:53:00.001-05:00

Question
Are all Medicare replacement plans such as Humana governed by the same Federal rules as Medicare? Humana is claiming to be governed by Medicare rights to subrogation.

Answer
Thank you for the question. My response pertains only to Medicare Advantage plans and not to supplemental plans. Supplemental plans are only intended to cover what Medicare does not, do not contract with Medicare, and should be treated no differently than any other insurance policy under the laws of a particular state.

Below is a quick synopsis on these MA plans.

Medicare Advantage (aka Medicare+ Choice, Medicare HMO, Medicare Part C)

- General Info

A MA plan is established under Part C of Title XVIII of the Social Security Act. 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. The Federal Government pays for MA coverage on a monthly basis (42 USC 1395w-23) and then annually determines the “per capita” rates for these payments (42 USC 1395mm). Here there is a direct affiliation with Medicare in the form of a contract.

- Reimbursement Rights

A MA plan may charge a MA member for services provided if the member has been paid for such services. 42 U.S.C. § 1395mm(e)(4). Furthermore, pursuant to federal regulations, a MA plan exercises the same rights to recover from a primary plan, entity, or individual that the Secretary exercises under the MSP regulations. 42 C.F.R. § 422.108(f). The regulations were amended in 2005 to remove any ambiguity which suggested that the States could exercise authority over MA plans in any area other State licensing laws and any laws relating to plan solvency. This position was reinforced in CMS’ Medicare Managed Care Manual, Chapter 4: Benefits and Beneficiary Protections. This chapter of the manual was rewritten and became effective on December 18, 2009, and states at 130.3 that a Medicare Advantage Organization (MAO) is the secondary payer when proceeds from a no-fault or liability settlement are available. At 130.7 the manual states the MAO may exercise the same rights to recover that the Secretary exercises and state law cannot take away this right. Because a MA plan steps into the shoes of Medicare it may have the same rights and limitations of Medicare in terms enforcing reimbursement rights. This includes procurement cost reductions and wrongful death prohibitions.

As a practical matter the rights of MA plans are a hotly contested matter. There has been no definitive case law on the matter although there are several litigations currently underway regarding the reimbursement rights of MA plans, including Parra v. Pacificare of Arizona, No. 410CV00008 in US District Court. I can tell you that Humana is at the forefront of many of these litigations and they will not hesitate to file suit to enforce their rights. As a resolution group we take a conservative approach and based upon the federal regulations it would appear that MA plans have a legitimate argument.

If you have any follow up questions please do not hesitate to contact us. Thank you and I hope you found the response to be helpful.

Michael Russell, Esq.

"Stop-Loss" Scenarios in ERISA Plans

2010-11-17T16:44:00.001-05:00

Question
Does the fact that a self-funded ERISA plan purchased stop loss insurance bring it back under NYs new anti-subrogation law? If so is it complete or does the plan still have a lien up to its deductible?

Answer
“Stop-Loss” Scenarios. If the Plan benefits provided were both partially funded and partially insured we are dealing with a “stop-loss” coverage situation. These situations arise when an employer or Plan purchases insurance coverage intended to reimburse it for higher or catastrophic losses. In the case of a higher loss, a self-funded Plan would pay the entire loss but would be reimbursed for any amount above where the insurance policy (between the plan and carrier) took effect (known as the “attachment point”). The use of “stop-loss” insurance does not change a self-funded plan into an insured plan. Bill Gray Enter., Inc. Emp. Health & Welfare Plan v. Gourley, 248 F.3d 206 (3rd Cir. 2001), American Medical Security, Inc. v. Bartlett, 111 F.3d 358 (4th Cir. 1997). Courts have reasoned that stop loss arrangements do not change the fact that the ultimate liability to plan participants remains with the Plan.

However, there is one potential exception. In some cases an attachment point could be set very low and the Plan is attempting to function as and enjoy the benefits of a self-funded plan under ERISA when in fact it is really an insured plan. Such examples would include a specific attachment point of $500 (individual claim) or $25,000 for an aggregate attachment point (total benefits paid for all participants). In such cases, courts could look to the substance of the Plan rather than its alleged form. See Brown v. Granatelli, 897 F.2d 1351, 1355 (5th Cir. 1990). In determining whether a stop-loss Plan is truly self-funded or merely illusory, a court will look to the loss experience and how often the stop-loss coverage has applied.

Thus if there is a low attachment point then it could be argued that the plan functions as insurance and NY anti-subro law should apply. Additionally the argument could be made that any payments made above the attachment point should be deemed an insurance arrangement and thus these amounts could be voided by the anti-subro law. A logical argument but there is no caselaw to substantiate and you would be hard pressed to find a plan which would agree to such an argument. However it never hurts to try. I would also note that sometimes stop loss carriers will actually assert a claim as well. These claims should not be honored as 1) there is no contractual privity between the stop loss carrier and the insured and 2) any claim would be barred by the anti-subro law.

I hope you found this helpful and please let me know if you have any additional questions.

My Best,
Michael D. Russell, Esq.

ERISA Plan Language

2010-11-11T08:44:00.001-05:00

Question
A Malpractice case arose June 2006. The medical bills were paid by an insurance company. ACS Recoveries had submitted a subrogation claim. I received copy of the Employee Benefit Handbook in effect in 2006 with the following language: "Plan has the right to recover any benefits it has paid for these medical expenses from any settlement you may receive from the third party." Handbook goes on to talk about it being an ERISA plan. Does this language meet requirement of Sereboff?

I asked for additional info including plan description, reports filed with Sec. of Labor. ACS has not provided this info.

Will the above language & ACS not providing me with the plan description & reports give me traction to negotiate subro claim?

Answer
Thank you for the question. To have a valid and legitimate interest, the ERISA plan must have plan language which seeks an equitable right to reimbursement. ERISA plans are limited to seeking appropriate equitable relief and ERISA does not grant an express right to reimbursement. 29 U.S.C. § 1132(a)(3)(B). An ERISA plan has a right of reimbursement which sounds in equity if the plan language imposes a constructive trust or equitable lien upon a third party recovery. To qualify as equitable the plan language MUST 1) specify that recovery will be made from an identifiable fund and 2) specify that recovery must be limited to a specific portion of paid fund. If either of these requirements are not met in the plan language, the plan does not have an equitable right to recovery and thus they do not have a reimbursement interest under ERISA. See Sereboff, 126 S.Ct. 1869 (2006).

Based on the language presented in your question the plan arguably meets the requirements of Sereboff. First the language specifies the fund when it states "from any settlement you may receive from a third party". Second the language specifies a specific portion when it states “any benefits it has paid." While the plan may seek an equitable remedy it is important to identify other plan weaknesses including whether the made whole or common fund doctrine may apply.

With regard to the document request portion of your question, ERISA grants a plan participant the right to make a written request and receive certain specified documentation from the plan administrator. This right is stated at 29 U.S.C. § 1024(b)(4) which provides as follows:

The administrator shall, upon written request of any participant or beneficiary, furnish a copy of the latest updated summary, plan description, and the latest annual report, any terminal report, the bargaining agreement, trust agreement, contract, or other instruments under which the plan is established or operated.

The failure to provide this information within 30 days can result in the imposition of a penalty of up to $110 per day for each day of noncompliance. See 29 U.S.C. § 1132(c)(1)(B) and 29 C.F.R. § 2575.502c-1 (increased penalty from $100 to $110).

However it is important to note that 1) this penalty is purely discretionary and in cases where courts have enforced the actual figure is closer to $50 per day and 2) ACS is not an administrator, the actual employer is the administrator. Thus the teeth to this provision are not as big as they appear but it certainly is something that you can use for leverage. I would try to argue that they are an agent of the administrator and thus you could seek to impose such a penalty.

Also you may find this recent case of particular interest. In Thompson v. Transam Trucking, Case No. 2:08-cv-927, 10/26/10, the U.S. District Court of Ohio, Southern District, ruled against the plan participant on her claim for benefits for an out-of-network medical care, BUT the Court does rule in favor of the participant on her claim for statutory penalties against the plan administrator for failure to provide requested documents. The court assesses a penalty in the amount of $50 per day, PER DOCUMENT, for a total of $17,600.

I hope you found this response helpful.
Michael D. Russell, Esq.

What Is Medicare's Right To Recovery When Involving MICRA

2010-10-27T08:49:00.001-04:00

Question
I understand that MICRA did away with the subrogation rights of private health insurers, but does Medicare maintain a right of recovery in the event of a settlement of a medical malpractice case for bills that it has paid.

California Attorney

Answer
Thank you for the question. The answer to your question is that yes Medicare maintains its right to recovery despite MICRA. First, MICRA is a state law. Second, arguably payments made by Medicare fall outside the scope of collateral payments described in MICRA.

I would also caution not to disregard all private health insurer claims in California. It is important to remember that a self-funded ERISA would contest such an argument based on the fact that a self-funded ERISA is deemed not to be insurance. See FMC Corp. v. Holiday, 498 US 52 (1990). Thus this state law would not be saved from preemption. However, I would completely agree that an individual insurance policy or an insured ERISA plan would be barred from seeking recovery under MICRA.

Michael D. Russell, Esq.

Self-Funded Insurance Form 550

2010-10-13T15:40:00.001-04:00

Question
ABC Company Supermarkets furnished health coverage to my client, an ABC Company employee, was injured in a Motor Vehicle Accident. ABC Company is claiming to be self-funded and has asserted a lien against my client's settlement proceeds for 100%. Form 5500 line 9a (plan funding arrangement) is marked insurance and general assets of the sponsor. Schedule A line 7 is marked health, HMO and prescription drug, line 8 is marked nothing. Line 9 shows $1,396,016 for (a) Total Premiums or subscription charges paid to carrier and (b) is marked N/A. Does this indicate ABC Company is partially self funded, and if so will state law apply (Florida) to reduce the lien to less than 100%?

Answer
Thank you for the question. Before getting to the Form 5500 question I want to touch upon the plan language of the ABC Company Plan. All SPDs should contain basic information about the plan including funding status. While not always conclusive (or accurate) it is the best place to start. Assuming the SPD states the plan is self-funded the next place to go is the Form 5500 and the question you pose below.

As line 9a indicates both insurance and general assets we can conclude that welfare plan as a whole has some aspects which are self-funded and others which are insured. This may mean that some benefits such as dental, vision, and life insurance are provided through insurance agreements while the medical portion is provided through employer assets. It may also mean that some employees receive medical coverage through insurance while others receive self-funded medicals (largely due to geographical issues). The next step is to examine the Schedule A(s) which you have correctly done.

For each insurance arrangement under the Plan there will be a Schedule A. Under the circumstances of your question it would appear that some medical (health) benefits are provided through insurance. One scenario could be that a portion of employees receive insured health benefits. Compare the number of plan participants on the main form (line 6) with the number of people covered under the HMO on the Schedule A (line 1(e)). If a large number of participants are represented by the Schedule A(s) you may have a good argument that the plan is insured. Another scenario could be the use of a stop loss policy.

If the Plan benefits provided were both partially funded and partially insured we are dealing with a "stop-loss" coverage situation. These situations arise when an employer or Plan purchases insurance coverage intended to reimburse it for higher or catastrophic losses. In the case of a higher loss, a self-funded Plan would pay the entire loss but would be reimbursed for any amount above where the insurance policy (between the plan and carrier) took effect (known as the "attachment point"). The use of "stop-loss" insurance does not change a self-funded plan into an insured plan. Bill Gray Enter., Inc. Emp. Health & Welfare Plan v. Gourley, 248 F.3d 206 (3rd Cir. 2001), American Medical Security, Inc. v. Bartlett, 111 F.3d 358 (4th Cir. 1997). Courts have reasoned that stop loss arrangements do not change the fact that the ultimate liability to plan participants remains with the Plan.

However, there is one potential exception. In some cases an attachment point could be set very low and the Plan is attempting to function as and enjoy the benefits of a self-funded plan under ERISA when in fact it is really an insured plan. Such examples would include a specific attachment point of $500 (individual claim) or $25,000 for an aggregate attachment point (total benefits paid for all participants). In such cases, courts could look to the substance of the Plan rather than its alleged form. See Brown v. Granatelli, 897 F.2d 1351, 1355 (5th Cir. 1990). In determining whether a stop-loss Plan is truly self-funded or merely illusory, a court will look to the loss experience and how often the stop-loss coverage has applied. Thus if there is a low attachment point then it could be argued that the plan functions as insurance.

As a last resort you could request that the plan sponsor produce an affidavit that states that the medical plan is self-funded and the benefits provided to your particular client came from the assets of the employer.

I hope you found this response helpful.
Michael Russell, Esq.

Medicare Advantage Plan Language

2010-10-12T08:40:00.001-04:00

Question
This is a follow-up question seeking clarification of a response Michael D. Russell of your office was kind enough to provide on August 30, 2010: Client is enrolled in a Medicare Advantage / Medicare Replacement Plan. Subrogation / Reimbursement is sought for all claim payments made by the private insurer. Is it fair then to say that pursuant to, the private insurer only retains a statutory right to reimbursement of those claims actually paid by Medicare? If so, how is one able to distinguish between those claims actually paid by Medicare and those paid by the private insurer?

Notes:
My concern is that private insurers (and their subrogation contractors) are wrongfully relying on the federal statute as a basis for seeking reimbursement of claims that are not subject to subrogation / reimbursement in New York.

New York Attorney

Answer
Thank you for the question. If the plan is truly a Medicare Advantage Plan then the private carrier is responsible for making all payments. A Medicare entitled individual chooses to opt into a Medicare Advantage plan. Private insurance carriers, who participate in the MA program, contract with CMS to administer Medicare benefits. The Federal Government pays for MA coverage on a monthly basis (42 USC 1395w-23) and then annually determines the "per capita" rates for these payments (42 USC 1395mm). However Medicare does not directly make payment for a person's care. Thus a person on MA does not receive any payments from Medicare. NOTE THAT THIS IS NOT THE CASE WITH SUPPLEMENTAL POLICIES. SUPPLEMENTAL POLICIES ACT IN CONCERT WITH MEDICARE AND ARE NOTHING MORE THAN INSURANCE POLICIES WHOSE RIGHT TO REIMBURSEMENT WOULD BE BARRED BY STATE LAW.

The only exception where both the private carrier and Medicare would make payments is a situation where an individual was on Medicare for some period and then opted into a Medicare Advantage program. In such a case be sure that you compare the payments made by both entities as we have seen private carriers attempt to claim identical payments.

So can NY GOL Section 5-335 bar a MA plan's right to reimbursement? Well it depends on the authority cited to substantiate their right. If the MA plan merely points to contractual language then arguably their claim would be barred. However if the basis for their claim is 42 CFR 422.108(f) then arguably they are asserting a statutory right. The overall issue of MA plans and the applicability of state law is hotly contested and I would expect some case law on the matter in the near future.

Michael D. Russell, Esq.

MMSEA Reporting Regarding Spouses

2010-09-29T09:29:00.001-04:00

Question
After your great presentation at the AAJ Nursing Home Seminar this weekend, I had an issue arise. A resident is deceased and suit was filed by both the estate and the wife. The case is settled. Medicare was involved via US attorney. Now, the defense is demanding that the wife's SSN to report to Medicare. The CMS memos I've found are silent on whether a spouse must give their SSN. This does not make sense to me that he/she would have to. Another dealt with this issue? I would prefer to protect my client's privacy. Thanks.

Wisconsin Attorney

Answer
You have asked a very good question and one that has not been asked very often; but yes, if the spouse is bringing a suit, then she will be required to provide her Social Security Number.

In the situation where the injured party is a Medicare beneficiary and is deceased; the reporting entity will need to report information under Section 111 about the injured party and also about the claimant. Page 169 of Version 3.1 of the User Guide provides the definition of a Claimant. "The claimant may be the beneficiary's estate, or other claimant in the case of wrongful death or survivor action." Claimant information will include who the claimant is, i.e. an estate or family member, the tax identification number of the claimant, the claimant's contact information and information about the claimant's representative, if applicable. If more than one claimant is bringing suit, then information will need to be provided for each claimant.

Fields 104-118 in Version 3.1 of the User Guide provide the instructions for reporting a suit brought by a claimant. Additionally, fields 119 -131 provide instructions for the information needed about the claimant's representative, i.e. representative's name or the firm name, tax identification number, and contact information.

Please let us know if you need any further information about this reporting requirement.

Our Best,
Matt Garretson, Esq.

Tri-Care's Recovery Rights

2010-09-24T10:15:00.002-04:00

Question
Question:
Does an injured claimant have any made whole rights in relation to Tri Care's lien or subrogation rights? My client is a catastrophically injured young boy with BI limits of $100K, Medical payment coverage of $30K and UIM limits of $300K. His medical expenses are in excess of $100K and climbing. Is there some way to protect my client from Tri Care co-opting the benefits leaving him with little or nothing?

Answer
A few thoughts in regard to your question.

Tri-Care's Rights

Tri-Care derives the authority to assert a subrogation claim under the Federal Medical Care Recovery Act (FMCRA), 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).

Made Whole Considerations

Allen v U.S., 668 F.Supp. 1242, 1257-58 (W.D. Wis. 1987), concludes that 42 U.S.C. § 2652(c) gives priority to the injured person and that he or she must be "made whole" before the government can recover its medicals. However this case needs to be taken with a grain of salt. It is important to note this case was not decided solely on the made whole issue. The fact that the liable party was the husband of the injured party and it was the husband who qualified for government care is significant. Before addressing the made whole issue the court had already determined that FMCRA did not give the government the right to seek reimbursement. It is also worth noting that this is the only case, to my knowledge, which has interpreted 2652(c) as a made whole rule. Furthermore, the government has not accepted the made whole argument in dealing with other statutory rights of reimbursement (Medicare, Medicaid, etc.).

Commercial Union Ins. Co. v. US, 999 F.2d 581 (C.A.D.C). The Court here stated that FMCRA is silent as to priority of government's right to recover from tort-feasor medical expenses it incurred on behalf of injured employee over injured employee's right to recover nonmedical damages from tort-feasor. The Court also pointed out that 42 USC 2652(c) allows the injured party to recover damages for those damages not covered under FMCRA and giving the government priority would essentially render this section useless. Ultimately the Court held the interpleaded fund would be distributed on ratable basis, such that each claimant received share of fund proportionate to their share of total judgment figure, since FMCRA was silent on question of priority of claimants' rights and since "equity is equality." While the circumstances of this case may vary from your question, the case certainly provides some guidance.

Procurement Costs

It is also worth noting that in a case where the injured party pursued the tort claim and the government passively waited for reimbursement, courts have required an equitable reduction in the government's claim. Mosey v. U.S., D.Nev.1998, 3 F.Supp.2d 113. As a general matter, in our experience, the government is willing to take such matters into consideration and may adjust accordingly so the injured party receives some compensation.

First Party Coverage

It can be argued that the United States does NOT have a right to the proceeds of first party insurance proceeds under the Federal Medical Care Recovery Act [1(a)., 42 U.S.C.A. 2651(a)]. The Court in Government Employees Ins. Co. v. Andujar, 773 F.Supp. 282, held that the United States did not have a direct right to UM proceeds under FMCRA. The FMCRA only gives the government the right to recover from the tortfeasor. In this case neither the injured party nor their insurer, were considered tortfeasors and thus the government did not have a right to recover on any settlement from the Uninsured/Underinsured motorist portion of an auto policy.

While, there is no direct right under FMCRA there MAY be a right under the express terms of the insurance policy and applicable state law. This second prong of the analysis requires an evaluation of the policy itself. If the government can qualify as an "insured" or "third party beneficiary" under the terms of the policy then they will have a right to these proceeds. In the aforementioned Andujar case the Court looked at the specific provisions of the policy. Because it was determined that GEICO's automobile policy could not be interpreted to include the government as an "insured" (policy actually specifically excluded the government from this classification), the Court held that the government could not recover the proceeds under this alternative theory. Thus in your case I would recommend that you obtain the policy for further analysis.

Michael D. Russell, Esq.

Can An ERISA Lien Be Tax Deductable?

2010-09-21T16:44:00.002-04:00

Question
Can a client claim ERISA lien payment (reimbursement for medical expenses) for medical deduction?

Answer
That is a great question, but the answer is likely "no". The answer can be found by looking at both the income taxation of settlement rules under IRC §104(a)(2), and the medical expense deduction rules under IRC §213. Typically, a medical expense when paid can be deducted if the taxpayer itemizes on Schedule A. Those expenses are still subject to a 7% cap against adjusted gross income. But, where funds are received for a settlement, those funds are excluded from taxation. However, where a taxpayer claims a deduction for medical expenses, and later settles, the amount of the medical expenses deducted becomes taxable in the year of settlement. For example, if a taxpayer settles a case in 2010 and receives a lump sum of $100,000 as part of a personal injury settlement, but paid out of pocket $3,000 in medical expenses, which were deducted in 2008, the taxpayer would recognize $3,000 in gross income from the settlement. This is to ensure that a medical expense deduction against income is not taken when funds are received as part of a settlement and the taxpayer did not have to pay for his/her medical expenses out-of-pocket, or the taxpayer was reimbursed (such as from settlement proceeds).

The technical question that remains is whether the adjustment under IRC §104(a)(2), referencing IRC §213(d) is intended to only work retrospectively. There may be an argument, for example, that funds set aside for a Medicare set aside are deductible, as they represent payments actually made for medicals post-settlement. But there are equal arguments against that treatment.

So if an ERISA plan pays for medical expenses that would not be deductible in the first place, because the taxpayer did not make those payments. When a taxpayer reimburses the plan with dollars from a settlement, those dollars would remain tax-exempt through operation of the Tax Code. But I do not believe the reimbursement of those expenses would permit the taxpayer to take an income tax deduction (as an itemized deduction) because the source of funds is from a third party (and not the taxpayer).

Sylvius von Saucken, Esq.

Does IHS Have A Lien Against Settlement Proceeds?

2010-09-08T09:39:00.004-04:00

Question
I represent an Indian person in a personal injury claim. The Indian Health Service paid the medical expenses. The amount paid by IHS is 88% of the auto insurance policy limits, which the insurance carrier is paying to my client and my firm. Is IHS entitled to 100% of what it paid for its subrogation claim?

Answer
Indian Health Services can recover the reasonable value of care provided from a liable third party tortfeasor. Thus if an injury is related to the tortious conduct of a third party, IHS will assert its rights under the Federal Medical Care Recovery Act (FMCRA), to assert reimbursement rights for injury-related medical care. Under the FMCRA, IHS has three years from the date that the action accrues to file a cause of action. However, it should be noted that under the FMCRA the statute of limitations is effectively tolled under 28 U.S.C. § 2416(c) until IHS knows or reasonably could have known that the injury was caused by a tortious third party as determined under state law. Thus the key is when the United States had knowledge of a potential claim which could then extend the statute of limitations period.

Presuming that the statute of limitations is still open, the next question becomes what recovery tools does IHS have to implement. IHS possesses both a subrogee/intervention right and an independent right of recovery to payments when a third party is responsible for payment for all or part of the same medical treatment for which IHS made payment. Any amount paid by IHS for medical care and services shall constitute a claim in favor of the U.S. against any third party for medical care or services provided to a veteran. Both HIS' independent right and its separate right in subrogation (as well the corresponding statute of limitations) are governed by Federal law, but the determination of the underlying tort liability will still be governed by the applicable state law, which creates the property rights (liability) in the first place.

Does IHS have a lien against settlement proceeds? While there is no specific statutory authority providing for such a lien, there is no denying that IHS has an interest in third party scenarios through its right to intervene or to seek individual action against a third party. In situations where the IHS' interest is not protected, the government may intervene in the third party action resulting in the settling parties, especially plaintiff's counsel, losing control over the proceeding. This is especially so if the case is removed to Federal court. Even more threatening is the scenario where the government brings an independent cause of action against the third party (post-settlement) and the releasing parties, including their counsel, are pulled back into the fray as a result of the original release and applicable indemnification provisions. The releasing parties may not release a claim of the United States. By affirmatively notifying IHS and resolving any asserted interest, an attorney is assuring him/herself of a controlled outcome while at the same time avoiding any potential future issues for both themselves and their clients.

Michael D. Russell, Esq.

McKinney v. PHA - The Federal Court's "Sweet Spot" For Identifying Medicaid Lien Recovery Rights

2010-09-03T12:28:00.003-04:00

Question
Abstract: There has been a considerable amount of commentary among personal injury practitioners on listservs regarding the McKinney v. PHA decision and what it means for attorneys in Pennsylvania as well as for practitioners throughout the country. The objective of this Practice Tip is to use McKinney to reference two familiar methods for determining allocation for past medical expenses, and illustrate how courts may not adhere to either due to a move toward a more equitable determination based on the thought that a settlement is a compromise for all.

A Memorandum and Order issued last week, on August 24th by Judge Schiller of the U.S. District Court, E. D. Pa. answered the question of how much the Department of Public Welfare (DPW) is to be reimbursed from personal injury settlements.

Answer
Some of the main points and key facts McKinney v. PHA are:

- A family filed suit against the Philadelphia Housing Authority claiming that the agency ignored complaints about mold in their housing unit that ultimately resulted in injury.
- A settlement was reached in June for just more than $11.9 million.
- DPW expended over $1.2 million to provide healthcare/ Medicaid benefits for the parties alleging injuries.
- The approved settlement only allocated for attorney fees, costs and amounts for those parties; there was no allocation for past medical expenses.

The Medicaid beneficiary argued for an employment of the 'ratio theory,' as derived from Arkansas Dept. of Health and Human Services v. Ahlborn, 547 U.S. 268 (2006), to determine allocation for past medical expenses by multiplying a ratio (the agreed settlement amount divided by case's true value) to the whole DPW lien.

DPW argued that state statute established a means to determination allocation, 62 Pa. C.S. §1409(b)(11) presumption of one-half of net or the actual Medicaid lien amount, whichever is less.

The Federal Court:

o Reasoned that the Ahlborn 'ratio theory' argued for by the Medicaid beneficiaries is not required to be used by courts in all cases;
o Bypassed the application and constitutionality of 62 Pa. C.S. §1409(b)(11) by his issuance of a court order to allocate the settlement proceeds;
o Found that 62 Pa. C.S. §1409(b)(11) ignores the reality of settlement, which by nature is a compromise for all parties, including DPW; and
o Based on the record, identified the factors and uncertainties leading the parties to settle, along with the reasonable portion of the settlement allocable to past medical expenses; attributing two-thirds of the total Medicaid lien as the portion of the settlement for past medical expenses.

Practice Tips: What does McKinney mean in light of Ahlborn and Tristani?

1. A new means of finding the sweet spot for Medicaid recovery?

The Court in McKinney found that Ahlborn did not require the 'ratio theory' be used in all events to determine allocation for past medical expenses. If the parties are moving toward settlement, we recommend the parties take into account the court's power to determine the parties' (including DPW's) equitable rights. Following McKinney, in Pennsylvania, should the matter of the Medicaid lien be litigated, the courts of competent jurisdiction are more likely to consider the equities of settlement along with the statutory recovery construct. If the record is sufficient, the court will also have the power to weight and consider factors. For settling parties, when working with DPW to identify its recovery rights, it will be even more important to properly document the file, including the bases for settlement, along with the pros and cons of litigation. Consistent with traditional recovery methodologies, information supportive of damages will still be highly relevant to determine, based on a good faith analysis, the reasonable portion of a settlement allocable for past medicals.

The Court in McKinney also confirms that which we already knew “ that Ahlborn was not intended to be a panacea for the Medicaid lien resolution process. Rather than seeking an Ahlborn-allocation hearing, which can cost time and resources, the parties may be well-served in working to identify settlement factors, duly recognizing that the 'black boarded' damage model (of recovery based on a pro rata share of settlement dollars when compared to total stipulated damages) may create one recovery pole star. But, state statutes, such as the 50% net presumption under 62 Pa. C.S. §1409(b)(11) creates another one. Using settlement factors (such as risks of litigation, reasons for settlement, etc.) may help the parties find an answer that recognizes the inherent benefits of settlement for all the parties, including the DPW. Failing to settle among the parties, a properly documented lien resolution process would provide a court of competent jurisdiction with the tools necessary to get the parties the rest of way, if needed, based on McKinney's "compromise" standard.

2. The Influence on Tristani

Settling parties and their counsel, by now well aware, especially in Pennsylvania, of the Tristani v. Richman, 609 F.Supp.2d 423 (2009) interlocutory opinion (since its release last year), have been eagerly awaiting its ultimate fate to be determined by the Court of Appeals for the Third Circuit. DPW third party recovery has created a flexible approach to cases in which a Tristani-type argument, essentially asking DPW to take a more proactive role in its own recovery based on an interpretation of the interplay of the federal Medicaid laws and those of Pennsylvania. When considering the impact of Tristani (noting that story has not yet been completely told), a portion of that opinion found that the 'one-half of net rule' for recovery in §1409(b)(11) is consistent with Ahlborn's holding. Now reading McKinney with Tristani, we can see a further refinement of a lien resolution methodology for Pennsylvania. Clearly, the 'one-half of net rule' no longer guarantees DPW full reimbursement in a case that settles. But that is still not the end of the lien story.

If it appears that the parties are going to settle, a court, if asked, may take the McKinney court up on its offer to use this new settlement tool - taking the nature of settlements and compromise factors into account to determine what portion of the settlement is attributable to past medical expenses. As a result, the settling parties, when dealing with the DPW (Medicaid) lien may be able to reduce that lien beyond a one-half of net standard. If the case proceeds to trial and results in a jury verdict, 62 Pa. C.S. §1409(b)(11) will still serve to identify the lien amount. The parties would presume that where a total Medicaid lien remains less than one-half of the jury award, DPW is likely to be fully reimbursed. However, where the lien exceeds the one-half amount, DPW's reimbursement is likely to be capped at one-half of net.

3. A national shift towards an Equitable Model

It appears that McKinney, when read with Tristani, and taking into account the United States' Supreme Court's 9-0 ruling in Ahlborn, is signaling a potential shift towards the equitable model that is inherent in all compromises.

Attorneys in North Carolina, Ohio and Florida will know that these states also have a statute for determining right to reimbursement based on gross settlement value. These statutes operate on the presumption, much like that in Pennsylvania, that the portion of a settlement allocated to past medical expenses equals the one-half of net proceeds or the actual Medicaid expenditures, whichever is less. When working with these statutes, however, equity also has to come into play, based on a reasonable allocation for past medical expenses.

The Garretson Firm Resolution Group will continue to closely monitor how McKinney may affect the resolution of Medicaid liens in Pennsylvania, and also, any decisions that result in similar developments among other jurisdictions.

TRICAREs' Recovery Policy (Continued)

2010-09-03T10:28:00.002-04:00

Question
I am concerned that signing the agreement to represent the government's interest may create a conflict of interest if there is a dispute as to the portion of a settlement that represents the government's recovery. There may be issues as to whether some bills are causally related to the claim or whether the settlement was reduced because of the plaintiff's comparative negligence, etc. I would prefer to keep the government from intervening and would be willing to sign some acknowledgement of the government's interest but I am not comfortable signing their agreement to represent.

Florida Attorney

Answer
Signing the agreement means that the govt's claims will be addressed as part of the process. For example, if an attorney files suit, and then contacts TRICARE representatives, signing the agreement means the attorney would need to amend the complaint to include the govt's claim under 42 USC Sections 2651-53.

Further, depending on which version your state adopted, you are likely held to the same standards under ABA Model Rule 1.15(d), in which if you receive settlement proceeds and are aware of a just and valid third party claim (in this case, Tricare), then you have a fiduciary duty to notify and pay that third party.

So your concerns about conflict are addressed in the Code of Professional Responsibility if you are holding settlement proceeds in your IOLTA account (or once you do). If you are not yet there in your negotiations because the settlement funds have not been delivered, then your concerns can be addressed by adding language in the agreement to represent that all you are doing is protecting the govt's interests, but not at the expense of your client.

The problem: the govt cannot hire counsel to protect its reimbursement rights. It has the right to intervene. So if you do not sign, JAG will likely take the necessary steps to intervene. And once that happens, there will be no offset to TRICARE's reimbursement claim for attorney fees or expenses. It will be every party for itself. For that reason, we have recommended attorneys add the language they feel comfortable adding, send it back as a modified agreement, and then work out the details. To date, we have not had a denial of modified agreements, but that is also because we helped prep the Tricare representatives so they knew about the changes and were comfortable with them from a recovery standpoint.

Hope this helps.

My best,
Matt Garretson

TRICAREs' Recovery Policy

2010-09-02T11:46:00.002-04:00

Question
I have a client who had her bills paid by TRICARE. Is this treated the same as Medicare in that we have an obligation to notify TRICARE about the case and obtain a lien amount?

Thanks.
Maryland Attorney

Answer
The U.S. military's rights arise under the Medical Care Recovery Act (42 U.S.C. Sections 2651-53). The MCRA states that when the Federal Government provides treatment or pays for treatment of an individual who is injured or suffers a disease, the Government is authorized to recover the reasonable value of that treatment from any third party legally liable for the injury or disease. The statute provides an independent right of recovery, but only for those payments actually made. The statute does not contemplate any recovery for future payments to be made. (32 C.F.R. Section 757.14(a) and (d)).

Each service branch has a slightly different model agreement, but the basics are all here, namely, that:

1.the federal government has a right to assert a separate cause of action to recover for injury-related care paid by TRICARE/CHAMPUS on a conditional basis;
2.federal law precludes the service branch from being able to hire civilian counsel so they ask for counsel to sign an agreement, protecting the military's interests;
3.the primary benefit to the agreement is the access to medical records to help prove the case, provided there is reasonable advance notice (two weeks);
4.the primary drawback is the regular status reports (which is not a large time commitment, but is an added step to settling a Tricare case);
5.absent this agreement, the govt. can intervene in your action, causing more grief than it is worth (in not signing the agreement); and
6.there is nothing unusual about the language of the agreement. We can send relevant statutes for your review, noting the agreement is consistent with federal law.

Hope this helps.

My best,
Matt Garretson, Esq.

Timing of Reimbursement to Medicare

2010-08-31T09:19:00.003-04:00

Question
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?

Answer
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.

Supplemental Medicare Plans

2010-08-30T10:19:00.002-04:00

Question
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?

Answer
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.

MSAs In Liability Settlements

2010-08-27T15:43:00.003-04:00

Question
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?

Answer
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.

Responsibilities Of Defense Counsel In Liability Settlement Involving Medicare

2010-08-19T13:51:00.004-04:00

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

Background:
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

Answer
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

Attorneys fees for a WCMSA

2010-08-17T11:46:00.002-04:00

Question
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

Answer
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.

Liability Payments in Medicare Cases

2010-08-04T10:28:00.001-04:00

Question
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

Answer
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

Reimbursements Made To Medicare

2010-07-30T08:41:00.001-04:00

Question
Although we have notified/submitted forms to Medicare of a 3rd party claim, we have not received a response yet. Do we need to repay Medicare?

A Note: What is my obligation as an attorney and what are risks to client of not getting lien/subrogation claim opened and paid?

Pennsylvania Attorney

Answer
Yes. Reimbursement must be made to Medicare for any conditional payments they have made that are related to your client's injuries. Federal law allows CMS to make claim or institute suit for recovery against all individuals and entities involved. Although the beneficiary remains primarily responsible, claim may be made against others, including an attorney for the beneficiary, third party insurers that funded the settlement and/or the tort feasor.

A release in favor of an insurer or its insured, or an agreement obtained by the attorney stating the debt is the responsibility of the beneficiary, does not preclude enforcement. There is also a procedure by which Medicare has the authority to refer non-collectible debts over to the United States Department of Treasury for possible offset of a beneficiary's monthly Social Security or Railroad Retirement benefits.

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.

I hope this helps,
Mary Skinner

Bankruptcy & Medicare Liens

2010-07-15T14:36:00.002-04:00

Question
I have a case where the plaintiffs were involved in a wreck, lost their jobs, and declared bankruptcy (chapter 7) as a result. Medicare paid for all of the injuries resulting from the wreck. We would like to settle, but I am not sure what kind of priority Medicare would take in the bankruptcy court. Please let me know your thoughts. Thanks.

Tennessee Attorney

Answer
Thanks for your question. The entire settlement amount may be considered an asset of the Chapter 7 bankruptcy estate, depending on timing and disclosure issues. Timing issues refer to when the signature injuries occurred when compared to the time the debtor-client filed the bankruptcy petition. And disclosure issues refer to whether the settlement was listed as a contingent asset (even if not reduced to a judgment or payment) on the bankruptcy schedules. If it was not listed on the Schedules, the bankruptcy would need to be reopened so that the asset could be properly distributed among all creditors who filed a claim. (Medicare may not be the only issue to consider.)

Finally, the Chapter 7 trustee, if in possession of settlement funds will have a duty to reimburse Medicare should conditional payment reimbursement be involved within the meaning of the MSP statutes. Medicare also takes the position that timing is a critical factor in determining whether Medicare has a reimbursement right. In fact, any Medicare claims matters involving bankruptcy are automatically escalated to policy analysts for CMS (at the regional offices). So these cases get flagged by the MSPRC (lead contractor) for further review by Medicare policy specialists to identify (1) whether Medicare's right occurred before or after the petition is filed; and (2) what position, if any, Medicare will take.

From the trustee's perspective, because Medicare is not a general, unsecured creditor, and has priority claims status, in some cases, the Medicare reimbursement portion is not even sent to the bankruptcy estate.

Our team has a classification protocol to identify and address these issues, following a bankruptcy coordination methodology that has worked in both mass tort and single event cases. We would be happy to assist as you deem proper, and upon request by your client.

Best,
Kati Payne

Should Lawyers Sign Indemnification Agreements?

2010-07-14T09:14:00.002-04:00

Question
Should a lawyer sign an indemnification agreement with respect to Medicare reimbursement claims?

Answer
There are 8 states that will not permit attorneys to sign indemnification agreements.

Following these eight state ethics rules, attorneys in those states cannot agree to indemnify. The best attorneys can do is have their clients indemnify. The states are North Carolina, New York, Illinois, Indiana, Kansas, Missouri, Arizona and Florida, all of whose ethics bar committees have opined that attorneys signing hold harmless agreements along with their clients is a violation of Model Rules 1.8(e), creating an impermissible conflict of interest, in violation of Model Rule 1.7(a). The ethics opinions are building up. While we cannot opine on such matters, knowing there are 8 hot button states will help us to avoid unpleasant circumstances.

- Illinois State Bar Assn Op. No. 06-01, July 2006 WL 4584284
- Indiana State Bar Assn Op. No. 1 of 2005
- Kansas State Bar Assn Legal Ethics Op. KBA 01-05 (May 23, 2002)
- North Carolina State Bar Ethics Op. RPC 228 (July 26, 1996)
- Advisory Committee of the Sup. Ct. Missouri, formal Op. No. 03-05, 2003
- Florida Bar Ethics Op. No. 70-8, Revised (April 23, 1993)
- New York City Bar Inquiry Reference No. 10-12 (June 1, 2010)
- North Carolina RPC 228 (prohibiting lawyers from agreeing to personally indemnify the insurance company for unpaid liens.)
o RPC 228 quotes Rule 5.1(b). That rule is now 1.7(a), which provides that a lawyer whose personal interest is adverse to the client has a conflict of interest.

If an attorney agrees to be personally liable and later Medicaid sues the attorney based on the indemnification, you may have a legal claim against your client.

Sylvius von Saucken, Esq.

Asbestos Exposure Claims (Cont. from 6/11/10)

2010-06-17T17:04:00.002-04:00

Question
If the last know exposure is prior to December 5, 1980, is the plaintiff required to notify CMS?

Answer
See answer below. If the plaintiff or plaintiff's attorney can show, by uncontroverted evidence that the last date of exposure occurred on or before the effective date of the MSP statute (Dec. 5, 1980), Medicare does not have a right of reimbursement, and the RRE does not have a duty to report. However, we have advised both parties to settlement that "wordsmithing" will not remove a duty where one exists, so plaintiffs have to be ready to stand by their screening process, and defendants must be able to reasonably rely on that process if they are to take the position no reporting need occur.

Answer: Provided you have a formalized screening process designed to prove the last date of exposure occurred on or before December 4, 1980, a Responsible Reporting Entity will not have a reporting obligation under the MMSEA. Medicare may have a recovery claim only where there was asbestos exposure on or after the effective date of the MSP statute, December 5, 1980. Medicare's claim would be for all Medicare reimbursed services on or after December 5, 1980, which are related to the liability settlement, judgment, or payment. Medicare's recovery claim is based upon specific Medicare reimbursed services rather than some percentage of the liability settlement, judgment, or payment. Further, Medicare has stated in liability recoveries, (but not Workers Compensation), that "If the asbestos exposure ended before December 5, 1980, Medicare will not pursue recoveries from asbestos liability settlements, since the MSP liability provisions were not effective until that date." However, please note that once a post-1980 exposure date is determined, Medicare requires that exposure claims are submitted based on the "date of first exposure."

Sylvius von Saucken, Esq.

How Do You Analyze ERISA Plans To Determine A "Lien"?

2010-06-15T10:00:00.003-04:00

Question
I was perusing your blog and noticed a comment on Missouri being an anti-subrogation state but that such is preempted by ERISA. While I agree with that general statement, I have a puzzling question. As an attorney for an insurance company, I consistently see lawyers asking me to ignore the ERISA "lien" (which I call a subrogation interest rather than a lien). If I tell them I must honor ERISA's "lien", they tell me the deal is off. I'd like to be assured that the plan cannot sue the insurance company if I refuse the honor the "lien," but no attorney has been able to convince me.

My position has always been that Knudson prohibits the plan from suing the insurer for not including the plan on the settlement check as they have no remedy at law. However, some plan will provide me with a signed "lien" which appears to voluntarily executed. If a plan asserts that the anti-subrogation status of Missouri is preempted by ERISA, is the Plan held to the sole remedy of equitable relief in that they cannot assert an action at law against the insurer for not honoring the purported lien? Or, can the plan assert that they have a voluntary lien agreement (which Missouri recognizes under Ford v Allstate, 2 SW3d 810) with the beneficiary for which the tortfeasor's insurance company must honor or face an action at law for not honoring it? In other words, can they choose not to opt for preemption where it benefits them even though we would have to analyze the ERISA qualified plan to determine whether they have legitimately obtained a non-voidable lien?

Missouri Attorney

Answer
Thank you for the question. I will admit that the situation presented can be difficult to wrap one's head around and I can certainly understand the confusion. That said, I think we can break things down to gain a clearer perspective. Simply put, I believe there are two approaches that a health plan could utilize to seek recovery; one under ERISA and another under state law contract/lien principles. From your inquiry it is apparent that you are well versed in this subject matter and it is hoped that some of the more basic material below does not bore you as elementary knowledge. Because of the complex nature of these issues I find it is always better to be as complete and thorough as possible.

Before diving into the analysis I also want to point out that I am in complete agreement with your approach of referring to ERISA interests as an interest rather than a "lien". When GFRG refers to an "ERISA lien" it is more a term of convenience than an accurate legal statement. We both know the term "lien" has a significant legal meaning and using the phrases subrogation or reimbursement interest is more appropriate.

First Approach: ERISA (a plan may seek "appropriate equitable relief")

ERISA defines an employee welfare benefit plan as a plan, fund, or program; established or maintained; by an employer, an employee organization, or both through the purchase of insurance or otherwise, for the purpose of providing medical, surgical, or hospital care or benefits or benefits in the event of sickness, accident or disability, for its participants or their beneficiaries. The ONLY exceptions are individual plans, government plans, and religious group plans. 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 and if an ERISA plan is in fact insured you can use state law defenses such as the anti-subrogation approach of Missouri. (Missouri "" Travelers Indem. Co. v. Chumbley, 394 SW 2d 418"¦ health plans are barred from seeking recovery through subrogation or reimbursement because under MO law a claim for personal injuries is not assignable).

To avoid the state prohibition through preemption, an ERISA plan would need to prove that it is self-funded. This can be done through various documentation including the summary plan description, the annual Form 5500, and if need be an affidavit from the plan administrator.

Assuming that an ERISA plan has validated its self-funded status and its corresponding right of preemption, the plan is entitled to appropriate equitable relief as provided under ERISA and Sereboff, 126 S.Ct. 1869 (2006). As you correctly state in your inquiry, the sole remedy is equitable relief and they cannot assert an action at law under ERISA. Thus a plan may seek its right of subrogation or reimbursement as provided in its plan language so long as that language seeks recovery from a specific fund (third party proceeds) and a specific portion of said fund (amount of benefits paid under plan). The plan could not seek an action at law against a third party insurer under ERISA.

Second Approach: State Law ("lien on proceeds")

This approach would be applicable in a case where a plan has obtained a voluntary lien agreement. Please note that this response is dealing directly with a health plan rather than a provider who has a voluntary lien. I believe that a lien granted to a provider for services should be evaluated in a different manner.

There are two important considerations when looking at an ERISA plan's right when a voluntary lien agreement is involved. First and foremost, the lien agreement is almost certainly a direct product of the plan's summary plan description language dealing with subrogation/reimbursement. For a valid reimbursement agreement to be utilized a plan arguably must have some reference or requirement in its plan language to such an agreement. Why? If there was no reference such a reimbursement agreement would be void for lack of consideration since the plan is already obligated to pay for the benefits. If on the other hand there was a reference then the agreement was just another specific term in the plan language regarding subrogation/reimbursement. I truly believe that an ERISA plan would have a very difficult time differentiating this separate agreement from its subrogation/reimbursement rights under the plan language.

The second consideration is the Ford v. Allstate case, 2 SW 3d 810. The Court here allowed a lien on a claim (rather than an assignment of the claim) for personal injury. What is important to note is that this case dealt with a lender who was granted a lien for adequate consideration. It is also important to note that in fn. 3 the Court specifically mentions that had this case dealt with subrogation the analysis and results may have been different. Furthermore the Schweiss v. Sisters of Mercy case, 950 SW 2d 537, addresses reimbursement provisions and the fact that such agreements imposed by health plans would be invalid as against public policy under MO state law.

While a health plan could assert a right under MO law and the theory of a voluntary lien, it appears that such an approach would be difficult to differentiate from its rights under ERISA. It has been our experience that the ERISA right of recovery is always preferred and plans will take this over state created remedies. The reason is that state law will have greater protections for the plan participant and the right of action under state law can be harder to prove/proceed under.

I hope you found this analysis helpful and please let me know if you have any additional questions or comments. Thanks for the inquiry.

My Best,
Michael D. Russell, Esq.

Asbestos Exposure Claims

2010-06-11T11:48:00.004-04:00

Question
The vast majority of cases, at our firm, are asbestos exposure cases. Are defendants required to report when the last exposure alleged is prior to December 5, 1980?

Answer
Provided you have a formalized screening process designed to prove the last date of exposure occurred on or before December 4, 1980, a Responsible Reporting Entity will not have a reporting obligation under the MMSEA. Medicare may have a recovery claim only where there was asbestos exposure on or after the effective date of the MSP statute, December 5, 1980. Medicare's claim would be for all Medicare reimbursed services on or after December 5, 1980, which are related to the liability settlement, judgment, or payment. Medicare's recovery claim is based upon specific Medicare reimbursed services rather than some percentage of the liability settlement, judgment, or payment. Further, Medicare has stated in liability recoveries, (but not Workers Compensation), that if the asbestos exposure ended before December 5, 1980, Medicare will not pursue recoveries from asbestos liability settlements, since the MSP liability provisions were not effective until that date. However, please note that once a post-1980 exposure date is determined, Medicare requires that exposure claims are submitted based on the date of first exposure.

Sylvius von Saucken, Esq.

ERISA Liens

2010-06-09T15:35:00.002-04:00

Question
I was wondering where Florida attorneys stand as to their liability for the payment/non-payment of clients ERISA liens? If a settlement is reached must we pay the lien? Are we required to hold it in trust? If we disburse to the client will we be liable to the plan? I am well aware of the Longaberger case in the 6th Circuit but was unable to find any controlling precedent in Florida. I am also aware of Florida's rule 5-1.1 regulating trust accounts (basically a copy of ABA MRPC 1.15) requiring disputed funds to be held in trust.

Also, if the plan language is well crafted what tools may I use to attempt to negotiate the lien down?

Answer
Thank you for the inquiry. Your questions hits upon several good points. First and foremost, if an ERISA plan is asserting a valid and legitimate reimbursement interest ("lien") in your client's settlement proceeds then arguably that interest should be satisfied. To have a valid and legitimate interest, the ERISA plan must have plan language which seeks an equitable right to reimbursement. ERISA plans are limited to seeking appropriate equitable relief. 29 U.S.C. Â§ 1132(a)(3)(B). An ERISA plan has a right of reimbursement which sounds in equity if the plan language imposes a constructive trust or equitable lien upon a third party recovery. To qualify as equitable the plan language MUST 1) specify that recovery will be made from an identifiable fund and 2) specify that recovery must be limited to a specific portion of said fund. If either of these requirements are not met in the plan language, the plan does not have an equitable right to recovery and thus they do not have a reimbursement interest under ERISA. See Sereboff, 126 S.Ct. 1869 (2006). Thus it is important to make sure the plan is seeking an equitable remedy.

Some of the considerations for resolving this interest.

- Ethical Obligations. Florida Rule 5-1.1 and holding disputed funds in trust. An ERISA plan is no different than any other claimant.
- Client Contractual Considerations. If the interest is not resolved or the plan participant does not cooperate according to the terms of the plan, the participant may subject themselves to legal action and additionally they may face a future set off or complete loss of future benefits.
- Constructive Trust Consideration. The Longaberger case was not about imposing liability on the attorney as much as it was about the plan's equitable right. The Longaberger plan had a first priority right to the settlement proceeds. Because the attorney received a third of those proceeds the attorney was responsible for reimbursing the plan one third of its lien. The plan did not seek damages or a cause of action against the attorney but rather it sought the recovery of funds. While Longaberger is a sixth circuit case with very specific facts it certainly should serve as a cautionary tale to attorneys in every circuit.

In negotiating the reimbursement interest I would recommend a careful evaluation of the plan language. As mentioned above, the plan must have specific language to establish its right. Furthermore, equitable doctrines such as made whole and common fund may apply depending on the plan language and whether you are applying state or federal law (applicable law is based upon the funding of the plan; self-funded plans enjoy federal preemption while insured plans can be limited by state insurance law). Additionally, there can be other weaknesses in the plan language such as requiring third party liability or limiting the reimbursement to medicals recovered.

As a general matter I would encourage you to take a proactive approach and deal with the ERISA plan on the front end. It is important to remember that the plan's right of reimbursement does not come into existence until the settlement or verdict is reached. Prior to this time they only have a right to subrogate and this is the last thing that many of these plans and their agents want to get involved with. Because the interest is not "perfected" until settlement we take the approach that a case should not be settled unless the interest is resolved. If you were dealing with a self-funded ERISA plan with draconian language the only leverage you may have is the threat of walking away and thus the plan would receive nothing. If the case settles this opportunity is lost and the plan has an enforceable right.

As you can see this is a complex area of the law which is constantly changing. Because of this you may encounter a lien or a government benefits issue that demands experience and expertise not commonly available inside of a personal injury firm (such as healthcare billing and coding expertise). To ensure the proper evaluation and favorable resolution of such a matter, your client may require the consultation or retention of outside assistance to advise and address the issue. Your fee agreement should provide for this at your discretion, and stipulate that any reasonable costs may be passed along to the client. In this manner the cost can be placed on the client and both you and the client can be assured that the interest will be properly and efficiently resolved.

Thanks again and please let us know if you have any additional or follow up questions. Take care.

Michael D. Russell, Esq.

Medicare Reimbursement Settlements

2010-06-08T08:54:00.002-04:00

When dealing with Medicare reimbursement in a liability claim, can the argument be made and does Medicare factor in disputed liability on the underlying case and also causation issues on damages as a means to reduce the amount which must be reimbursed? Also, if the client is doing poorly economically, will Medicare factor that in its final reimbursement amount? Georgia Attorney

Medicare Reimbursement Settlements

2010-06-08T08:50:00.002-04:00

Question
When dealing with Medicare reimbursement in a liability claim, can the argument be made and does Medicare factor in disputed liability on the underlying case and also causation issues on damages as a means to reduce the amount which must be reimbursed? Also, if the client is doing poorly economically, will Medicare factor that in its final reimbursement amount?

Georgia Attorney

Answer
There are administrative remedies within the MSP Provisions that allow for either the compromise or waiver of Medicare's interest; however certain criteria must be met.

Compromises

CMS is given authority to consider the compromise of Medicare's claim under the Federal Claims Collection Act (FCCA) at 31 USC, 3711 et seq. and 42 CFR 401.613. The Medicare Secondary Payer Recovery Contractor (MSPRC) is not permitted to compromise a claim. Compromise requests must be submitted in writing to the MSPRC, who will forward the request to the appropriate CMS Regional Office for requests of (<$100,000) or Central Office for requests of (> $100,000) for consideration.

A compromise decision made by CMS is final and is not subject to appeal. That being said, if you are not in agreement with the CMS compromised amount, you do not have to accept it and can pursue other options. One option would be to reach out to the person at the Regional Office who made the decision and discuss the case with them; many times this is beneficial in getting them to see things your way. Another option is to decline the offer and pursue a waiver thru the MSPRC.

A compromise can be requested before or after settlement. If the request is post-settlement, settlement information must be submitted in writing before your request will be processed.

CMS uses the following factors to determine if a compromise or suspension of a claim is warranted. Whether or not a compromise will be granted depends on a number of factors and each matter is considered on a case-by-case basis.

1.Inability to pay - the cost of collection does not justify the enforced collection of the full amount of the claim;
2.If there is an inability to pay within a reasonable time on the part of the individual against whom the claim is made; or
3.Chances of successful litigation are questionable, making it advisable to seek a compromised settlement.

To request a compromise, you must specify the amount you want Medicare to accept. Submit in writing the reason for the compromise and how you determined the amount to be repaid. A full reduction cannot be requested. All compromise requests must be in writing and submitted to the MSPRC who will then forward it on to the appropriate CMS Regional Office.

Waivers.

The authority to consider a Medicare beneficiary's request for waiver on behalf of CMS, under 1870(c) of the Social Security Act and guidelines can be found in 20 CFR 404.506-509. It can only be requested after settlement and final determination has been issued by Medicare.

The MSPRC has the authority to consider a waiver requests under 1870 © of the Social Security Act. Waivers can only be requested after settlement and final determination has been issued by the MSPRC. All waiver requests must be in submitted in writing along with a completed questionnaire SSA-632K form. This questionnaire requests information regarding the beneficiary's monthly income, expenses and assets as well as the reasons for requesting a full or partial waiver. It is recommended that along with the completed questionnaire that you provide the MSPRC with a compelling story of the facts of the case.

CMS may waive all or part of its recovery in any case where an overpayment under Title XVIII has been made with respect to a Medicare beneficiary who is: without fault AND when adjustment or recovery would either defeat the purpose of Title II or Title XVIII of the Act (repaying Medicare would create a financial hardship), OR be against equity and good conscience for the beneficiary to repay Medicare.

"Without Fault" Standard. To determine if a beneficiary is "without fault," the lead contractor will consider four factors. These are:

1.The amount of out-of-pocket medical expenses incurred by the beneficiary;
2.Whether the beneficiary's assets are insufficient to pay Medicare;
3.The beneficiary's assets, monthly income, and expenses; and
4.The age of the beneficiary and whether he or she has any physical or mental impairments.

If you are pursuing a waiver based on the fact that your client incurred accident related out-of-pocket medical expenses include as much documentation as possible to support your argument Proper documentation of out-of-pocket medical expenses must be submitted before they can be considered in the waiver request.

"Defeat the Purpose" Standard. To "defeat the purpose of the Social Security or Medicare programs" means that a recovery against a beneficiary will cause financial hardship by depriving the beneficiary of income required for ordinary and necessary living expenses. An example of financial hardship includes a case where the beneficiary has spent the settlement or insurance proceeds and the only remaining income from which the beneficiary could attempt to satisfy the Medicare claim is from money needed to pay for his or her basic monthly living expenses.

"Against Equity and Good Conscience" Standard. The "against equity and good conscience" test considers, but is not limited to, the following factors:
1.The degree to which the beneficiary did not contribute to causing the overpayment;
2.The degree to which Medicare contributed to causing the overpayment;
3.The degree to which repayment would cause undue hardship to the beneficiary; and
4.Whether the beneficiary would be unjustly enriched by granting a waiver or was harmed by relying on erroneous Medicare information

If you or your client does not agree with the waiver determination you can request a re-determination of the decision. The re-determination request must be made in writing within 120 days of the date of the waiver determination.

If you have any questions please don't hesitate to contact me.

My Best,
Mary Skinner

Are Medicare Set-Asides Required?

2010-06-07T09:32:00.001-04:00

Question
Mother, father and two children were in a serious accident. Mother has catastrophic injuries. Her bills exceed $175,000. The auto insurance policy limits are $25,000 per person and $50,000 per accident. Medicare has not paid any money for the mother's treatment at this point, but she has applied and will be on Medicare in August of this year at which time it is expected that Medicare will pay future costs relating to the accident.

I have two questions. First, am I correct that we are not required to report the settlement to Medicare, if we settle before October 1, 2010 according to your February 25, 2010 advisory?

Second, from your August 18, 2009 article on Medicare Set-Asides in liability settlements, my sense is that a $25,000 settlement in which future medicals are not specified, where the plaintiff has $175,000 in past medical, substantial pain and suffering, substantial past and future lost wages and other damages would not require a Medicare Set-Aside. Is this correct? My plan is to use the practice tips outlined in your August 18, 2009 article to convince defense counsel that a set aside is not required unless things have changed since August of 2009.

The mother also has an auto products defect case on file, but this is a long way off from settlement or trial.

Thanks for your assistance.
Texas Attorney

Answer
To answer your first question, the reporting to which you refer deals with defense reporting of the settlement to Medicare for MMSEA Section 111 purposes. This is different than the plaintiff reporting the settlement to Medicare as a part of verifying/resolving any conditional payments made by Medicare from date of injury to date of settlement. Let's assume your client becomes entitled to Medicare as of August 1, 2010. For MMSEA Section 111 purposes, if the case settles prior to October 1, 2010 and is to be paid in a lump sum (i.e., TPOC) as opposed to containing an ongoing responsibility to pay future meds (i.e., ORM), then defense does not have to report. However, if the settlement contains ORM, then the trigger date for those settlements is January 1, 2010 and defense would have to report for MMSEA Section 111 purposes. If the case settles on or after October 1, 2010, defense has to report, no matter whether the settlement is for TPOO or has ORM.

If the case settles on or after August 1, 2010, you would also have the obligation to verify and resolve any conditional payments made by Medicare from date of injury to date of settlement. Therefore, there are two aspects to Medicare reporting, one from the defense and one from the plaintiff and depending on when the case settles and the terms of the settlement determines who has to report.

With regards to your second question, the obligation to consider and protect Medicare's interests includes protecting its future interests. That means, you should ask and answer the question "Is a MSA appropriate under these case specific facts?" You are correct in your deduction that, based on your case specific facts, a MSA would not be appropriate and the guidance in the August 2009 MSA White Paper is as good today as the day it was published. Please let me know if you have additional questions.

My best,
John Cattie

MSAs

2010-06-04T10:52:00.003-04:00

Question
I have an 82 year old client who has a Medicare replacement policy with Healthnet of the Northeast. The client suffered a full rotator cuff tear in a MVA but it is very unlikely that surgery is needed. Causation is an issue. Insurance carrier wants language in the release that the client agrees to pay any future medical expenses from the settlement and that the client agrees not to submit any bills to Medicare for payment. The carrier claims that this is required under the Social Security Act. I have never encountered this before and am unsure as to how I should advise my client regarding signing this. Any guidance is appreciated.

Connecticut Attorney

Answer
Certainly, your fact pattern is one commonly encountered these days due to the vast amount of misinformation promulgated towards the insurance community regarding Medicare compliance under the Medicare Secondary Payer ("MSP") Act. Because of their new reporting obligations under Section 111 of the MMSEA (Medicare, Medicaid and SCHIP Extension Act of 2007, found at 42 USC Sec. 1395y(b)(8)), insurance companies want to ensure that Medicare will not chase them for reimbursement of any interest, either past (represented by conditional payments made by Medicare from date of injury to date of settlement) or future (represented by payments made by Medicare for injury-related care post settlement). In their zeal for satisfying Medicare's interests, they often miss the forest for the trees.

Essentially, the carrier is insisting that, instead of billing Medicare for future injury-related care, a Medicare Set-Aside ("MSA") be established to pay for future injury-related care. Nowhere in currently enacted law or guidance from CMS are we told that a MSA must be established as a part of our third party liability settlements. The obligation under the MSP Act is to "consider and protect" Medicare's interests, both past and future. Many insurance companies fail to understand that considering and protecting Medicare's interests does not always mean that you pay Medicare money. In fact, in the third party liability context for MSAs, it rarely means that. What it does mean is that the settling parties should be documenting their files to show what steps have been taken to consider and protect Medicare's future interests, including MSA evaluations, letters from treating physicians indicating exactly what care the injured individual will require, and other items.

Another concept most insurance companies do not realize yet is that the obligation to consider and protect Medicare's future interests falls on the claimant as opposed to the defense. In short, the obligation to satisfy Medicareâ€™s future interests via a MSA or any other vehicle is the responsibility of the claimant and claimantâ€™s attorney, not the defendant. As support for that position, we can look to the federal regs at 42 CFR 411.46, which contains no language placing liability on the defense (unlike 42 CFR 411.24). Furthermore, evidence exists on the CMS website under the Intro to WC tab of the WCMSA site. See: this CMS page. If we look at the Future Medical Services portion in the final paragraph, we see that Medicare asserts that the liability to consider and protect Medicareâ€™s future interests extends to those entities that RECEIVE a primary payment (as opposed to liability for conditional payments made date of injury to date of settlement as promulgated under 42 CFR 411.24 whereby Medicare may recover its conditional payment interest from any entity that MAKES/RECEIVES a primary payment).

To sum up, the insurance community appears to be receiving misinformation about Medicare compliance, and requires a re-education as to the appropriate scope of their obligations. For starters, I would forward to them our MSA White Paper supporting the proposition that MSAs are rarely appropriate in the liability context, and when they are appropriate, they are plaintiff oriented obligations to handle. Further, share with them the language of the CMS website about Future Medical Services. These tools should make the insurer more comfortable with the notion that it does not face exposure to Medicare on these future interest issues. Finally, I make myself available to you for a conference call to discuss these issues.

Sylvius von Saucken, Esq.

Settling Medicare's Lien Amount

2010-05-27T09:25:00.002-04:00

Question
In a situation where an injured party on Medicare has ongoing medical treatment associated with a personal injury claim or suit that may not settle for many months or a year or more, does requesting Medicare payment information prior to settling a claim or lawsuit start the clock running on interest owed on Medicare's lien amount for medical payments made by by Medicare? What benefit is there if any to requesting this information at the outset of a cae or before a case settles as opposed to waiting until after settlement occurs and thereby avoiding interst accruing on Medicare's lien amount?

Answer
The MSPRC (Medicare Secondary Payer Recovery Contractor) begins identifying claims for recovery when it receives notice of a pending no-fault, liability, or WC matter. However, it does not issue a formal recovery demand letter until there is a settlement, judgment or award. It is against the date of that formal Final Demand Letter that interest accrues. Resolving Medicare's interest in a settlement takes time so starting early will allow you to have an ongoing accounting of Medicare's interest in your case so starting early is crucial.

Sylvius von Saucken

When Can Attorney's Process Their Fee?

2010-05-20T15:28:00.001-04:00

Question
Regarding a plaintiff attorney's contractual obligation, can we tell our clients that, when a settlement payment comes in, we plan to process our attorney fees and hold the rest until the lien has been satisfied, or must the entire settlement amount, including our fees be held?

Answer
According to the Medicare contractors at MSPRC, they presume attorneys will take their fees and expenses from the gross settlement, prior to Medicare reimbursement. Having said that, if there is any concern that there may not be sufficient funds to cover that reimbursement obligation, we recommend you escrow the entire settlement, provided there are no needs-based government benefits(such as SSI and/or Medicaid) to protect.

Sylvius von Saucken

Submission Process For WCMSAs

2010-05-19T11:27:00.002-04:00

Question
What is the new submission process for WCMSAs?

Answer
Recently, the Centers for Medicare & Medicaid Services (“CMS”) announced a new submission process in development for Workers’ Compensation Medicare Set-aside Arrangements (“WCMSAs”). As CMS has previously suggested, it will be moving forward with the development of a web portal. Once introduced, this web portal will enable WCMSA submitters to submit WCMSA proposals electronically via the internet. The web portal should allow for WCMSA proposals to be viewed by CMS on a more expedited basis. Scheduled to be introduced in first quarter 2011, the web portal would provide submitters with a real-time receipt acknowledgement from CMS. CMS will announce further developments regarding the web portal at a later date.

GFRG will continue to monitor CMS communications and provide this new information to the settlement community as it becomes available. To view the CMS announcement in its entirety, click here

CMS’ Updated Procedures For Calculating Life Expectancies For MSAs

2010-05-18T08:48:00.002-04:00

Question
What is the procedure for calculating life expectancies for MSAs?

Answer
The Centers for Medicare & Medicaid Services (“CMS”) recently announced a new procedure regarding how life expectancies for Medicare Set-aside Arrangement (“MSA”) purposes should be calculated. As of April 12, 2010, CMS will begin referencing the 2005 United States Life Tables recently published by the Centers for Disease Control (“CDC”) for Workers’ Compensation (“WC”) MSA calculations.

Practically speaking, the settlement community should begin referring to the CDC’s Table 1: Life Table for the total population, United States, when calculating a claimant’s life expectancy for MSA purposes. CMS will be applying this table for WCMSA proposals received on or after April 12, 2010 as well as any WCMSA case reopened on or after April 12, 2010.

GFRG will continue to monitor CMS communications and provide new information to the settlement community as it becomes available. To view the CMS announcement in its entirety, click here

Medicare Secondary Payer Enhancement Act of 2010

2010-05-14T09:47:00.006-04:00

Question
What is the Medicare Secondary Payer Enhancement Act of 2010?

Answer
Recently, Congressmen Patrick Murphy (D-PA) and Tim Murphy (R-PA) introduced HR 4796, a bill titled the “Medicare Secondary Payer Enhancement Act of 2010.” This piece of legislation purports to provide a seemingly less complicated approach to reimbursing Medicare for conditional payments made for injury-related care under the Medicare Secondary Payer (“MSP”) Act (42 U.S.C. §1395y(b)). Additionally, this bill purports to allow for less onerous requirements for entities obligated to report to Medicare under the recently enacted Medicare, Medicaid and SCHIP Extension Act of 2007 (“MMSEA”).

If passed by Congress and signed into law, the Medicare Secondary Payer Enhancement Act of 2010 would provide for the following:

•Voluntary Calculation and Payment of Conditional Payments. Claimants and plans would be able to submit a payment to Medicare, calculated in good faith, as full satisfaction of any reimbursement obligation to Medicare for conditional payments made by Medicare if submitted within ninety (90) days of the anticipated settlement, judgment, award or other payment.

•Secretary’s Ability to Contest Amount of Payment. Medicare would have the ability to contest the payment made according to the above procedure within seventy-five (75) days of receipt of such payment from the claimant or plan if Medicare determines that the payment made was not the total amount owed by submitting a final demand to the claimant or plan for the remaining balance owed.

•Request for Final Demand for Reimbursement. The claimant or plan would be able to request a final demand amount from Medicare within 120 days prior to the expected date of settlement, judgment, award or other payment. Within sixty (60) days of receiving such final demand request, Medicare would provide that final demand. The claimant and plan would then have sixty (60) days from the receipt of that final demand from Medicare to provide payment as satisfaction of that final demand amount.

•Failure of the Secretary to Provide Final Demand for Conditional Payment. If Medicare failed to provide final demand as set forth above, the claimant or plan would not be liable for submitting payment to Medicare to satisfy any outstanding reimbursement claims asserted by Medicare.

•Right of Appeal. Medicare would establish a right of appeal and appeals process for the payment procedures set forth above, including review through an Administrative Law Judge and access to the U.S. District Court.

•De Minimus Threshold. There would be no reimbursement obligation when the settlement, judgment, award or other payment did not exceed $5,000.

•Reporting Requirement Safe Harbors. The MMSEA would be amended to allow Medicare the discretion not to apply the statutory $1,000 penalty for each day of noncompliance with respect to a responsible reporting entity’s reporting obligation. This section would also allow for the creation of safe harbors from penalties asserted under the MMSEA.

•Use of Social Security Numbers and Other Identifying Information in Reporting. The MMSEA would be amended so that responsible reporting entities would not be required to access or report social security numbers or health identification claim numbers (i.e., Medicare numbers) of claimants.

•Statute of Limitations. A three (3) year statute of limitation, measured from the date of reporting, would be established within which time the federal government must bring any action associated with compliance under the MSP.

•User Fee. Each person or plan that submits a payment to fulfill a MSP reimbursement obligation or each person or plan that submits a request for a final demand letter as set forth above would be subject to a $30 fee, payable to Medicare.

We will continue to follow the progress of this legislation, in addition of other pieces of legislation that may affect the settlement community. Please check www.garretsonfirm.com often for updates as well as new client advisories and practice tips. A copy of HR 4796 may be found by clicking here

ERISA Plans & Reimbursement Agreements

2010-05-13T08:55:00.001-04:00

Question
My client, 19 years old, was injured in a motor vehicle accident and the ER/hospital bill will approach $300,000. Her parents each have insurance through work. The mom's plan has less onerous reimbursement language, but mom's birthday comes after dad's, so dad's plan will pay the bill first (which is one of the funkier rules I've seen).

Dad's plan is ERISA with some component of insurance, although we don't yet know how the insurance comes into play. The plan administrator wants our client and her dad to fill out some paperwork in order to begin processing the claims. The problem with the paperwork is that it sets forth a series of acknowledgements and agreements, including the agreement to assign rights to the plan and the understanding that the plan is asserting an equitable lien against any recovery.

As I recall from a recent CLE, if insurance is involved in the plan, then state law governing reimbursement may govern the reimbursement. In our state, the law requires that the insurer reduce for its share of attorney fees and costs.

I am concerned that the form my client is being asked to sign could permit the plan to claim an equitable lien for all payments, even those that might otherwise be subject to state law. I also wonder if by asking the client to agree to something beyond the language of the policy and the law, the plan has opened a window for our client to request her mother's plan to cover the claims (recall mother's plan has friendlier reimbursement language).

Finally, what requirement is there that client and father sign the agreement at all? The insured should not have to make additional agreements (beyond what is in the plan documents) in order for the plan to process the claims and make payments.

Thanks.

Answer
Thank you for the question. I have answered your question in two separate parts. If you should have any questions with regard to this response please feel free to reach out so we can discuss further.

1. ERISA Plans: Self-Funded & Fully Insured

Both insured Plans and self-funded Plans are both ERISA-covered. ERISA defines an employee welfare benefit plan as a plan, fund, or program; established or maintained; by an employer, an employee organization, or both through the purchase of insurance or otherwise, for the purpose of providing medical, surgical, or hospital care or benefits in the event of sickness, accident or disability, for its participants or their beneficiaries. The only exceptions are individual plans, government plans, and religious group plans. 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 and if an ERISA plan is in fact insured you can use state law insurance defenses. This would include the common fund doctrine mentioned in your question.

Funding status can be determined by analyzing the plan language and the Form 5500 (annual filing with Depart of Labor). Special attention should be paid to the Schedule A(s). If these documents are ambiguous another good option is requesting a signed affidavit from the plan administrator.

2. Reimbursement Agreements

The first consideration should be whether or not the plan language provides for or requires the signing of a separate agreement. The second consideration should be whether or not the language of the reimbursement differs or changes the right laid out in the original plan documentation. If the plan says that no benefits may/will be provided unless an agreement is signed then beneficiary may stuck between a rock and a hard place. If, in the alternative, there is no mention of the agreement in the plan language and/or the terms of the agreement differ substantially from that of the plan then you may a serious challenge. The strongest argument is that such a reimbursement agreement would be void for lack of consideration since the plan is already obligated to pay for the benefits.

Michael D. Russell

Reporting Threshold of $5,000 In Mass Tort Cases With Multiple Settlments

2010-05-05T14:37:00.001-04:00

Question
Regarding dollar reporting threshold of $5,000, in mass tort cases or where there are multiple settlements paid out over time, is the reporting requirement for $5,000 in aggregate or only for a single $5,000 payment or above?

Answer
The answer is that the reporting threshold is considered in the aggregate, but where exceeded, each payment is to be reported separately. For liability settlements, the threshold for settlements, judgments, awards or other payments on or after January 1, 2010 through December 31, 2011 is any amount up to and including $5,000. In response to your question about how the threshold amount is applied, Section 11.4 of Version 2.0 of the User Guide states that “Where there are multiple TPOCs associated with the same claim record, the combined, cumulative TPOC amounts must be considered in determining whether or not the reporting threshold is met. However, multiple TPOCs must be reported in separate TPOC fields as described later in this guide.” This section goes on to state that “The threshold dollar and date ranges apply to the date when the threshold is met (the most recent TPOC Date). The COBC will use the most recent TPOC Date supplied on the claim report when checking the threshold ranges. Timeliness of reports will be determined based upon the applicable date for the TPOC which caused the threshold to be met (the last, latest, most recent TPOC Date reported on the claim record).

Section 11.10.2 of the User Guide reinforces the above and states that “…the sum of all TPOC amounts must be used when determining whether the claim meets the applicable reporting threshold. Use the most recent, latest TPOC Date associated with the claim when determining whether the claim meets the interim reporting thresholds defined in Section 11.4.”

Section 11.5 of the User Guide provides a detailed description of how multiple TPOCs need to be reported. The definition as used in the User Guide references above for TPOC is the Total Payment Obligation to the Claimant. The TPOC refers to the dollar amount of a settlement, judgment, award or other payment in addition to/apart from ongoing medicals. A TPOC generally reflects a one time or lump sum payment. A complete definition of TPOC is in Section 2 of the User Guide.

Sylvius von Saucken

Can A Defendant Require A MSA?

2010-05-03T12:01:00.001-04:00

Question
We have been trying to reach a settlement of a medical negligence claim with substantial past medical expenses but relatively little in anticipated future Medicare-eligible expenses. The client has significant deficits but future needs primarily are for attendant care rather than the kind of medical care Medicare will pay for.

The defendant's insurer is insisting that we either set up a Medicare set aside trust or get a release from Medicare. Do you have any suggestions on how best to deal with this?

Missouri Attorney

Answer
Certainly, your fact pattern is one commonly encountered these days due to the vast amount of misinformation promulgated towards the insurance community regarding Medicare compliance under the Medicare Secondary Payer ("MSP") Act. Because of their new reporting obligations under Section 111 of the MMSEA (Medicare, Medicaid and SCHIP Extension Act of 2007, found at 42 USC Sec. 1395y(b)(8)), insurance companies want to ensure that Medicare will not chase them for reimbursement of any interest, either past (represented by conditional payments made by Medicare from date of injury to date of settlement) or future (represented by payments made by Medicare for injury-related care post settlement). In their zeal for satisfying Medicare's interests, they often miss the forest for the trees.

Nowhere in currently enacted law or guidance from CMS are we told that a Medicare Set-Aside ("MSA") must be established as a part of our third party liability settlement. The obligation under the MSP Act is to "consider and protect" Medicare's interests, both past and future. Many insurance companies fail to understand that considering and protecting Medicare's interests does not always mean that you pay Medicare money. In fact, in the third party liability context for MSAs, it rarely means that. What it does mean is that the settling parties should be documenting their files to show what steps have been taken to consider and protect Medicare's future interests, including MSA evaluations, letters from treating physicians indicating exactly what care the injured individual will require, and other items.

Another concept most insurance companies do not realize yet is that the obligation to consider and protect Medicare's future interests falls on the claimant as opposed to the defense. In short, the obligation to satisfy Medicare’s future interests via a MSA or any other vehicle is the responsibility of the claimant and claimant’s attorney, not the defendant. As support for that position, we can look to the federal regulations at 42 CFR 411.46, which contains no language placing liability on the defense (unlike 42 CFR 411.24). Furthermore, evidence exists on the CMS website under the Intro to WC tab of the WCMSA site. If we look at the Future Medical Services portion in the final paragraph, we see that Medicare asserts that the liability to consider and protect Medicare’s future interests extends to those entities that RECEIVE a primary payment (as opposed to liability for conditional payments made date of injury to date of settlement as promulgated under 42 CFR 411.24 whereby Medicare may recover its conditional payment interest from any entity that MAKES/RECEIVES a primary payment).

To sum up, the insurance community appears to be receiving misinformation about Medicare compliance, and requires a re-education as to the appropriate scope of their obligations. For starters, I would forward to them our MSA White Paper and Act Two articles (attached) supporting the proposition that MSAs are rarely appropriate in the liability context, and when they are appropriate, they are plaintiff oriented obligations to handle. Further, share with them the language of the CMS website about Future Medical Services. These tools should make the insurer more comfortable with the notion that it does not face exposure to Medicare on these future interest issues. Finally, I make myself available to you for a conference call to discuss these issues.

My best,
John Cattie

Providing Clients' Social Security Number To A Responsible Reporting Entity

2010-04-30T10:51:00.001-04:00

Question
What is the general consensus about providing a client's SS # to an insurance company "because Medicaid now requires reporting."

I was told the following: “Write a letter back to the insurance company asking them to put in writing that they will use the SS# for the sole purpose of running it through the CMS Query Access System. Additionally, ask the insurance company to put in writing that they agree not to disseminate the SS# to anyone or entity other than Medicare and also those they agree to indemnify your client for attorney's fees and damages should they breach these terms. If they agree to the terms, provide the SS# before settlement. Otherwise, provide the SS# after settlement as is required by the statute. This usually ends the conversation.”

Ohio Attorney

Answer
I agree completely. I would just add that in order for the insurance company (known as the Responsible Reporting Entity “RRE” for purposes of Section 111 Reporting”) to run the query system, they need four data points: Name; DOB; Gender; and SS# or Medicare #. I would suggest you provide these 4 pieces of information with exactly the same limited use language articulated below. I would encourage you to provide this in your very first communication with the insurance company. This will allow them to ping the query system right away, which tells them YES or NO as to your client’s Medicare entitlement (it tells them nothing else). Instead of relying on your client to tell you whether or not they are on Medicare, you can use the defendant to tell you (assuming you tell them to provide you with their results of the query search).

Additionally, if you wait until settlement time to provide this information, it will cause significant disbursement delays. If you refuse to provide the information, the insurance company will either not fund the settlement, or they will put Medicare’s name on the check which will cause a minimum of 10-12 week delay.

I would also note that these new insurer reporting requirements ONLY affect Medicare Parts A&B; not Medicaid or any other parts of Medicare (C&D).

Thanks,
Tate G. Johnson

Does Medicaid Have A Right Of Subrogation On The Wrongful Death Claim?

2010-04-29T16:04:00.002-04:00

Question
I represent the children of an older gentleman who died after sustaining serious bodily injuries in Texas. We put the insurance company on notice of a wrongful death claim which they settled. We did not bring a survivorship claim. Does Medicaid have a right of subrogation on the wrongful death claim?

Texas Attorney

Answer
We appreciate you reaching out to us with your question. Texas Medicaid's right of recovery is found at VTCA HRC §32.033 (see below). Texas Medicaid may have a right of recovery for the decedent's injury related care for which they paid. Additionally, they may have a Medicaid Estate Recovery claim for expenditures unrelated to the injury.

Please let me know if we can be of further assistance with either of these potential obligations.

My best,
Elizabeth Vish

Sec. 32.033. SUBROGATION. (a) The filing of an application for or receipt of medical assistance constitutes an assignment of the applicant's or recipient's right of recovery from:

(1) Personal insurance;

(2) Other sources; or

(3) Another person for personal injury caused by the other person's negligence or wrong.

(b) A person who applies for or receives medical assistance shall inform the department, at the time of application or at any time during eligibility and receipt of services, of any unsettled tort claim which may affect medical needs and of any private accident or sickness insurance coverage that is or may become available. A recipient shall inform the department of any injury requiring medical attention that is caused by the act or failure to act of some other person. An applicant or a recipient shall inform the department as required by this subsection within 60 days of the date the person learns of his or her insurance coverage, tort claim, or potential cause of action. An applicant or a recipient who knowingly and intentionally fails to disclose the information required by this subsection commits a Class C misdemeanor.

(c) A claim for damages for personal injury does not constitute grounds for denying or discontinuing assistance under this chapter.

(d) A separate and distinct cause of action in favor of the state is hereby created, and the department may, without written consent, take direct civil action in any court of competent jurisdiction. A suit brought under this section need not be ancillary to or dependent upon any other action.

(e) The department's right of recovery is limited to the amount of the cost of medical care services paid by the department. Other subrogation rights granted under this section are limited to the cost of the services provided.

(f) The commissioner may waive the department's right of recovery in whole or in part when the commissioner finds that enforcement would tend to defeat the purpose of public assistance.

(g) The department may designate an agent to collect funds the department has a right to recover from third parties under this section. The department shall use any funds collected to pay costs of administering the medical assistance program.

(h) The department may adopt rules for the enforcement of its right of recovery.

Medical Malpractice Liability Insurer Question

2010-04-27T09:38:00.001-04:00

Question
I am pursuing a medical malpractice claim against a California nursing home and a VA hospital, both of whom were partly responsible for a single injury. The VA provided all care to fix the injury, on its own dime; it is now asserting a lien regarding this care. Am I reading 38 USC 1729 too narrowly if I argue that a medical malpractice liability insurer is not among the third-parties to whom this section applies?

California Attorney

Answer
You raise an interesting argument, but one that is not likely to be agreed upon by a court. Technically, the term third party is defined under 38 U.S.C. §1729(i)(3)(D) to include a “person obligated to provide, or to pay the expenses of health services under a health-plan contract.”

The definition of a health plan contract under 38 U.S.C. §1729(i)(1)(A) includes a contract, medical or hospital service agreement (under which services are provided). Depending on the long-term care agreement that had your client receiving treatment at the nursing home, the nursing home is likely to be considered a third party within the meaning of the statute.

Even if you could argue that the statute is intended to be read to exclude the nursing home, arguably, the statute itself is going to be broadly construed as a statute providing recovery by the United States of cost of care and services furnished to a veteran for non-service-related injuries as part of Congress’ power to raise and support armies. A state’s argument that the statute violated the U.S. Constitution (Tenth Amendment) failed based on this very same rationale adopted by the federal court (U.S. v. State of Md., 914 F.2d 551 (1990)).

A more intriguing challenge is the argument that the United States remains partially to blame for the injuries for which it now claims to be able to be reimbursed. Clearly, the United States is not a third party within the meaning of the statute. If, for example, the United States wishes to recover against the nursing home for the nursing home’s share of medical expenses the United States incurred, it might do so by intervening in a separate cause of action, depending on whether the statute of limitations remains open for it to do so. However, the United States should not be able to recover for any medical expenses it incurred for which responsibility lies at the feet of the United States, through its representatives.

Helpful?
Sylvius von Saucken

Medicare's Interest In A Med Pay Accident

2010-04-22T10:01:00.001-04:00

Question
I have a client who was involved in a serious automobile accident and is now paralyzed from the waist down. He will be in the hospital for months and his medical bills are already in excess of $500,000. Medicare is his primary health insurer and the no-fault Med Pay of $10,000 is exhausted. There is only $125,000 available from the tortfeasor and my client's underinsured motorist coverage.

I have heard that it is possible to affect a pre-settlement compromise with Medicare and/or CMS in these types of situations. However, despite extensive research, I cannot seem to find any information on who to contact or how to attempt to negotiate a settlement of Medicare's interest prior to settling the case. Is that possible and, if so, how can I go about doing this? Otherwise, I fear that Medicare will be entitled to all of the funds, less procurement costs, leaving my client with nothing.

Thank you so much for your time and your invaluable questions and answers forum!!!

Nevada Attorney

Answer
In order to request a compromise you must go through all the hoops in securing Medicare's conditional payments. The first step is reporting the case to the COB at 800-999-1118. They will assign the case to the Medicare Secondary Payer Recovery Contractor (MSPRC). Once the case has been assigned to the MSPRC you will need to provide them with the proper authorization and in return they will provide you with Medicare's conditional payments. It is at this point that you can move forward with your pre settlement compromise request. The request would be sent to the MSPRC who in turn will forward it to the appropriate CMS Regional Office.

To request a compromise, you must specify the amount you want Medicare to accept in writing and the reason for the compromise and how you determined the amount to be repaid. A full reduction cannot be requested. A compromise may be requested any time after it has been determined that Medicare has made conditional payments, before or after settlement.

CMS is given authority to consider the compromise of Medicare's claim under the Federal Claims Collection Act (FCCA) at 31 USC, 3711 et seq. and 42 CFR 401.613. The MSPRC is not permitted to compromise a claim. Compromise requests are reviewed and determined by CMS Regional Office. A compromise decision made by CMS is final and is not subject to appeal.

If you need further assistance please don't hesitate to contact me.

My Best
Mary Skinner

Medicare Subrogation

2010-04-20T14:59:00.001-04:00

Question
I represent a man seriously injured due to the negligence of a state employee in a car wreck. Medicare has paid a lot of his medical bills and under federal statute has a right of subrogation. However, under R.C. 2743.02(D), recoveries against the state "shall be reduced by any collateral recovery received by the claimant"- construed to mean that the state is immune from subrogation claims from those entities which have paid the plaintiff's medical bills (see Community Ins. Co. v ODOT, (2001)92 Ohio St. 3rd 376). If the client receives no money from the state for the bills paid by Medicare, there is no money to satisfy Medicare's subrogation claim, other than whatever money is otherwise received from the state in settlement of the claim. Since non-economic damages in claims against the state are capped at $250,000, a claim against the state where Medicare has paid a significant amount may leave little or no money for the client if Medicare's subrogation claim must still be satisfied. The State is adamant that the U.S. Sup. Ct. Case of Alden v Maine supports its claim that insurance companies and Medicare may not maintain subrogation claims against the State of Ohio and that R.C. 2743.02 is not preempted by a federal law passed in the exercise of Article I, Sec. 8 authority is this correct?

Does the federal statutory right of subrogation for Medicare supersede the Ohio state law on this matter? Is Medicare still entitled to receive out of the proceeds of a settlement the amount it paid, despite the Ohio statutory and case law above? I think the answer to both questions is yes, but I'm hoping there are counter arguments supported by case law.

Thanks.
Ohio Attorney

Answer
Unfortunately Medicare is entitled to reimbursement for all injury related conditional payments made from date of injury to date of settlement, period. Having said that, I would highly recommend you consider one of several administrative remedies available to you and your client – Pre-settlement compromise, Post-settlement Compromise, or Post-settlement waiver. These remedies are great for situations where the client would end up with little or nothing if they had to pay back the entire conditional payment amount to Medicare. These are based on hardship and the general ideas of fairness and equity.

Please let me know if you need further information or would like our firm to assist.

Tate Johnson

ERISA Plan Funding

2010-04-13T15:48:00.001-04:00

Question
I attended one of your seminars but I cannot find my materials on the question below. With regard to the Plan funding arrangement on Form 5500, the company checked both (1)Insurance and (4) General assets of the sponsor. If the plan explicitly states it shall receive subrogation on a first priority basis do I have a leg to stand on in seeking a reduction?

Answer
I am glad to hear you attended one of our seminars and thank you for the question. As you will remember the Form 5500 can give you an indication as to how an ERISA plan is funded. The importance of funding status cannot be underestimated as the funding status will control whether we apply state or federal law. Based upon your inquiry it appears as though the plan uses insurance for certain benefits and self-funding for other benefits. The next step would be to check the Schedule A which accompanies the basic form. Schedule A should be filled out for each insurance policy that is used in the operation of the plan. Under line 7 of Schedule A it will indicate what type of policy you are dealing with. While the Form 5500 is a good indicator, these forms are not always accurate and they should be compared with any statements made in the Summary Plan Description.

Both insured Plans and self-funded Plans are both ERISA-covered. ERISA defines an employee welfare benefit plan as a plan, fund, or program; established or maintained; by an employer, an employee organization, or both through the purchase of insurance or otherwise, for the purpose of providing medical, surgical, or hospital care or benefits or benefits in the event of sickness, accident or disability, for its participants or their beneficiaries. The only exceptions are individual plans, government plans, and religious group plans. 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 and if an ERISA plan is in fact insured you can use state law defenses. Unfortunately Ohio virtually mirrors the 6th Circuit and thus funding status may not be a major concern in your case.

The language that states that it shall “receive subrogation on a first priority basis” really does not mean much. First and foremost, plans often rightfully distinguish between subrogation and reimbursement. Second, under ERISA a plan must be seeking an equitable remedy. ERISA plans are limited to seeking appropriate equitable relief. 29 U.S.C. § 1132(a)(3)(B). An ERISA plan has a right of reimbursement which sounds in equity if the plan language imposes a constructive trust or equitable lien upon a third party recovery. To qualify as equitable the plan language MUST 1) specify that recovery will be made from an identifiable fund and 2) specify that recovery must be limited to a specific portion of said fund. If either of these requirements are not met in the plan language, the plan does not have an equitable right to recovery and thus they do not have a reimbursement interest under ERISA. See Sereboff, 126 S.Ct. 1869 (2006). Thus it is important to make sure the plan is seeking an equitable remedy. Finally, you would want to see if the plan addresses equitable defenses which may apply such as the made whole doctrine (insured made whole before plan allowed to recover) and the common fund doctrine (reduction for procurement costs).

In conclusion the entire subrogation/reimbursement provision(s) of a plan needs to be carefully evaluated to ascertain whether the plan in fact has a right and whether any defenses would bar or limit that right. Also the plan may have other weaknesses based upon the underlying tort or the allocation of settlement proceeds.

If you have a copy of that language I would be more than happy to give it a quick review. Thanks for the question and please let me know if you have any follow-ups.

My Best,
Michael D. Russell

Medicare's Name On The Check

2010-04-08T10:20:00.002-04:00

Question
In Florida, do insurance providers argue for Medicare to be a payee on a settlement check just because there is a Medicare lien to be paid back out of a settlement?

Connecticut Attorney

Answer
Our firm has been seeing the fact pattern of the settling party putting Medicare’s name on the check more and more in recent weeks, not only in Florida but around the country. The reason for this increase is because those entities are misunderstanding their Medicare compliance obligations in light of the MMSEA. They believe that, by putting Medicare’s (or Medicaid’s) name on the settlement check, Medicare’s interests (as well as themselves) have been fully protected. This is neither the intent of the MMSEA nor is this the most effective way to protect Medicare’s interests. In fact, there is no legal requirement to put Medicare’s name on the settlement check as a payee. Medicare was not a party to the legal action, merely an entity entitled under the Medicare Secondary Payer Act to be repaid for conditional payments made from date of injury to date of settlement.

As evidence that it is not required under law to put Medicare’s name on the check, we look to Tomlinson v. Landers, 2009 WL 1117399 (M.D.Fla.). The case and memo are available here. This was an auto accident case which was being settled for the $100K policy limit where Medicare had made some conditional payments. The defendant added Medicare’s name to the settlement check without discussing this prior with the plaintiff. The plaintiff returned the check, asking that it be re-issued without Medicare’s name on the check. The defendant insisted that it had no choice under federal law (namely 42 CFR 411.24) but to put Medicare’s name on the check. The plaintiff assured the defendant that Medicare would be reimbursed out of the settlement proceeds and agreed to indemnify defendant for any Medicare claims. The defendant refused to remove Medicare as a payee on the check.

The court held that: 1) federal law does not mandate that a primary payer (i.e. the defendant) make payment directly to Medicare; 2) the defendant would not have violated federal law by omitting Medicare’s name from the check; and 3) a primary payer may be liable to Medicare if the beneficiary/payee does not reimburse Medicare for any amounts owed within 60 days. In the end, plaintiff prevailed as the parties failed to reach a meeting of the minds with regard to this issue of reimbursing Medicare and the settlement was rejected.

As a practical matter, we know that Medicare prefers that settlement proceeds not be sent to them until the final claim determination (i.e. final demand) has been calculated. The final demand is that conditional payment amount less procurement cost offset allowed by Medicare in that particular case. This calculation cannot be performed until the final demand is requested from Medicare and this cannot be done until the settlement has been finalized. Thus, putting Medicare’s name on the check is not only unnecessary, but impractical.

If you have more questions about Medicare compliance, please feel free to give me a call to discuss further.

My best,
John Cattie

Providers Time Limit To Bill Medicare

2010-04-01T12:37:00.002-04:00

Question
In Missouri, a hospital does not have a valid hospital lien on a wrongful death case. The wrongful death proceeds belong to the heirs. In our case, 120 days passed and the hospital filed a lien which is not being recognized by the liability carrier. The hospital then files a claim against the estate of the deceased. There are no assets in the estate.

What is the time limit for the hospital to bill Medicare? If the hospital admits it its claim against the estate that it doesn't intend to bill Medicare, is that binding? Does it prevent the hospital from later billing Medicare?

Missouri Attorney

Answer
Depending on the date of service, providers can have up to 26 months to bill Medicare. The lien is not binding; the provider can remove the lien at any time and then submit a claim to Medicare for a conditional payment. The provider cannot have a lien in place and also submit a claim to Medicare, the lien must be removed first.

If the provider chooses to bill Medicare, then it becomes the Medicare Secondary Payer Recovery Contractors responsibility to recover payment from the settlement for any injury related care that they have paid.

I hope this helps.
Mary Skinner

Defense Reporting Obligations

2010-03-31T16:45:00.002-04:00

Question
By receiving "supplemental" interrogatories from defense firms; is there an obligation to report to Medicare to satisfy insurance companies' obligations? You already answered that plaintiffs do not need not sign authorizations. Can you list what information plaintiffs are required to provide. I can understand name, date of birth, HIC# and whether enrolled in Medicare and receiving Medicare benefits. Do we have to give Social Security numbers? How about answering whole series of questions re Social Security Disability? Questions re end state renal disease and Lou Gehrig's disease? Thanks for your help!

New Jersey Attorney

Answer
Thank you for reaching out to us with your question. There is much confusion surrounding the requirements under Section 111.

The information that the defense is allowed to obtain to determine Medicare entitlement includes the following:

• First letter of first name
• First six characters of last name
• Gender
• Date of birth; and
• Health Insurance Claim Number (HICN) OR the Social Security Number (Medicare prefers that the HICN be used, if available)

The above information is what the defense needs to query the Medicare system to determine whether the claimant is a Medicare beneficiary. The response that Medicare will provide to the defense will only include whether there was a match and the claimant is a beneficiary; or that there was no match. The defense will not receive information about when the claimant became entitled or why they are entitled. The defense is allowed to query the system as soon as they receive notice of a claim, but the trigger date for reporting is whether the claimant is a beneficiary on the date of the settlement.

There is additional information that the defense needs for the Section 111 reporting if there is a settlement with a Medicare beneficiary. This information does not need to be provided to the defense until there is a settlement. There is no reason why the defense needs information about a claimant’s disability or illness. This is protected information and is not required for Section 111 reporting. Click here to view the list of the data points that are needed for the query and also for the reporting.

Please let us know if you need anything further.

My best,
Marlene Wilson

New Reporting Requirements for Insurers

2010-03-30T17:18:00.001-04:00

Question
Here is the latest I am hearing from defense counsel. They are saying that “at the early stages of the case (and by mail or phone request, so they don't have to do it by written discovery) they call or write and ask for the full name, birth date, social security #, etc. of the plaintiff" because of the new Medicare reporting requirements.

What is this about? Is it legit? Does Medicare run the business of personal injury law practice now?

West Virginia Attorney

Answer
Insurers now have to report all settlements with Medicare beneficiaries to CMS in the quarter following settlement. In order to determine which settling claimants are Medicare entitled, they have to submit 4 data points to a Query system, which will simply tell them Yes or No as to Medicare entitlement. The four data points are Name, DOB, SS# or Medicare #, and Gender.

It is in your and your clients best interest to provide these initial data points as early as possible so that the insurance company (or self insured entity), otherwise known as the Responsible Reporting Entity (RRE) can search the query system and determine your client’s Medicare status well ahead of settlement. This will help move things along at settlement time. We also advise firms to stipulate with defense at the time of settlement as to the 50 or so data points they will ultimately report to CMS (Medicare) post settlement IF your client is Medicare entitled. The collaborating as to the injury information is critical to ensure the RRE is not reporting different injuries to CMS than what you/your client have satisfied in payment of the tort recovery obligation.

Assuming the insurance company is not requesting anything more than those 4 data points noted above, they are not overstepping at this stage of litigation. Some firms provide them with “limited use” language that says you are providing them for the sole purpose of determining Medicare entitlement so as to allow the RRE to find out whether they will have to report in accordance with Section 111 reporting requirements.

Please let me know if you want more detail, and I can provide offline. Additionally, our website has an entire section regarding MMSEA (Section 11 Insurer Reporting Requirements) and exactly what it requires of RREs (and more importantly what it DOES NOT require).

My best,
Tate G. Johnson, Esq.

Plan Language Inquiry In The Longaberger Case

2010-03-29T12:02:00.001-04:00

Question
I have read with interest, your article on the Garretson Firm Resolution Group website regarding the Longaberger case and its meaning.

I do have a question - suppose in the liability case I did not seek medical expense recovery and settled the case for pain and suffering only. Would the plan still have a claim for reimbursement? I see the wording of the sample given in the article refers to "any recovery" but have any courts weighed in this aspect?

Thanks for your time.

Answer
That is a very good question. Courts have weighed in on this matter and generally they will defer to the express language of the policy and the fact that ultimate discretion will lie with the administrator in interpreting plan language. In using the words "any recovery" it is a pretty safe bet that this includes recoveries which do not specifically provide for past medicals. Many plans do not stop there and will actually have additional provisions that state that regardless of how a settlement is allocated they will still have a right of first recovery and the participant must not do anything to prejudice the plan's rights. Thus the allocation technique is most effective when dealing with plans that limit their rights to recoveries for medical expenses. This is less common but something that we still see. This discussion really emphasizes the importance of carefully evaluating the plan language.

While this may seem to be a bit unjust I believe that this type of issue will be fought out in the coming years. Particularly in the scope of the meaning of "appropriate equitable relief" (as designated by ERISA) and states which limit or prohibit the recovery for medical expenses.

Thanks for the question and please let me know if you have any follow ups.

Michael Russell

The 50 Data Points

2010-03-25T14:27:00.002-04:00

Question
What are the 50 data points?

Answer
The 50 data points are comprised of the following data categories:

1) Injured party data;
2) Primary plan data;
3) Injured party attorney data;
4) Incident data; and
5) Settlement data.

The particular data points to be reported will change depending on the case-specific facts, and may be as many as 131 data points in rare cases. For more information, including the detailed list of data points, visit our website at www.garretsonfirm.com.

Sylvius von Saucken

TRICARE Statutory Obligation For Attorney Fees

2010-03-24T14:30:00.001-04:00

Question
My client is a 72 year old retiree who suffered serious injuries in a car accident. In addition to Medicare, she has TRICARE through the Air Force. The Medicare lien has been resolved reasonably. I am now trying to resolve the TRICARE lien, but the Air Force, unlike Medicare, will not compromise the lien to account for one-third of the attorneys' lien. The Air Force states that "5 U.S.C. sec. 1306 prohibits the payment of counsel fees by the United States."

Would you please provide any legal authority to support a one-third reduction of the TRICARE medical lien for attorneys' fees? In Vermont, it is standard practice for this reduction of an insurance lien. The insurer must pay its proportionate share of procurement costs (attorneys' fees and expenses). Thank you.

Answer
TRICARE derives the authority to assert a subrogation claim under the Federal Medical Care Recovery Act (FMCRA), 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). Unfortunately there is no statutory reference under the FMCRA which requires the government to reduce its reimbursement claim based upon attorneys’ fees and costs associated with the settlement.

It has been our experience that while TRICARE does not have a statutory obligation to reduce for procurement costs they will consider such a reduction in the context of hardships (financial/physical). The issue is that each TRICARE office usually has its own guidelines and procedures for reduction consideration. While this can make the process unpredictable, we have found that submitting information and addressing hardships is an effective means of gaining reduction rather than pushing the single concept of procurement costs.

However it also worth noting that in a case where the injured party pursued the tort claim and the government passively waited for reimbursement, at least one court has required an equitable reduction in the government’s claim. Mosey v. U.S., D.Nev.1998, 3 F.Supp.2d 1113. While this case involved a VA patient rather than a TRICARE beneficiary, it dealt with the same regulatory scheme under which the government seeks recovery, the FMCRA. The Court held that a balance of equities test should be applied in such circumstances. While this case and VT law may not be controlling they may be persuasive especially in the context of any hardships your client may have endured. I am also not aware of any law which prohibits the US from taking such a reduction.

Please let me know if you have any follow up questions and thank you for the question.

Michael Russell

Query Access System

2010-03-23T10:38:00.001-04:00

Question
Can a plaintiff's lawyer get into the QUERY ACCESS system? If so, how? If not, how do we develop a system that will satisfy carriers and our client?

Answer
The CMS Query Access system is a tool developed by CMS for use by those entities that have registered as an RRE. CMS recognized the difficulties an RRE would have in truly determining who is a current Medicare beneficiary versus who is not a current Medicare beneficiary. Since the reporting obligation under the MMSEA only ripens when the injured individual is a current Medicare beneficiary at the time of settlement, judgment, payment or other award, the RRE needed a way to know when it must report settlements to Medicare. Unfortunately, plaintiff attorneys do not have access to the Query Access System unless they are somehow registered as an RRE. Instead, the way you can develop your system that will satisfy carriers and your clients is to have a standard operating procedure in place at your firm for every case, understanding that formal verification / resolution of Medicare conditional payments remains a plaintiff obligation. To do that, we recommend enhancing your case intake to capture essential information about your client’s government benefits as well as capturing the data points which the RRE will have to report. Capturing this information up front will allow you to start the process of verification / resolution early while simultaneously assisting the settling party responsible for payment to satisfy its reporting obligation by showing that party, at time of settlement, you already started this process. In so doing, you will be moving the case towards settlement as opposed to having these Medicare compliance issues chill the settlement negotiations.

Sylvius von Saucken

Wrongful Death Statue

2010-03-22T17:03:00.001-04:00

Question
In our state, wrongful death awards belong to the family and are not subject to claims of the estate -- and the medical expenses incurred by the decedent prior to death are not part of the measure of damages. I am trying to discuss/communicate with MSCRP to get an acknowledgment that the insurance company can pay the settlement without having Medicare liability. Fax communication with MSPRC regarding this issue is going nowhere. Any pointers?

Answer
If a wrongful death statute does not permit recovering medical damages, Medicare has no claim to the wrongful death payments. When a liability insurance payment is made pursuant to a wrongful death action, Medicare may recover from the payment only if the State statute permits recovery of these medical expenses. Generally, if the statute permits recovery of the deceased's medical expenses, Medicare may pursue its payments, even if the action fails to explicitly request damages to cover medical expenses. Thus, in that event, even if the entire cause of action sets forth only the relatives and/or heirs damages and losses, then Medicare may still recover its payments. When State law permits a full recovery of medical damages but limits the amount of the recovery which is payable to creditors as a result of past medical expenses, Medicare may recover against the entire tort recovery, up to the full amount of past Medicare payments. However, when state law limits the amount of the past medical expenses that may be recovered from the tortfeasor and responsible insurer, Medicare may recover only up to that amount (or the amount of the settlement, if the settlement is less than or equal to Medicare's claim.)

Unfortunately, you will still need to report the case to Medicare and provide them with the documentation advising them they do not have any interest in the settlement based on your state’s WD statute, which includes providing them with a copy of the statute. You might also refer them to their own policy under the Medicare Secondary Payer Manual, Section 50.5.4.1.1- Wrongful Death Statutes, which is where the above instructions are derived.

Sylvius von Saucken

Medicare Conditional Payments & Medicare Set-Asides Issues

2010-03-16T16:17:00.001-04:00

Question
My client has never used Medicare as he is covered under his wife's policy. The insurance company is asking to verify that Medicare will have no future interest or current interest. I went on mymedicare.gov an looked up to see if any payments were ever made under the Medicare Policy and found not a single claim made. I gave that to the adjuster but that was not sufficient. Is there an easy way to get a letter that says no payments and no future interest, so my client can get money?

Minnesota Attorney

Answer
Not to worry because you are not alone in having the insurer asking for this information. What the insurer is looking for is a letter directly from Medicare stating that it has not paid anything in the form of conditional payments (date of injury to date of settlement). It is also looking for information directly from Medicare regarding any future interest that should be satisfied. While Medicare will issue a letter regarding the conditional payments paid, it will not issue a letter about the future interests.

The appropriate way to obtain that letter from Medicare about conditional payments is to establish a tort recovery record with Medicare and request a conditional payment listing. Upon receipt, that can be provided to the insurer as evidence that Medicare has not paid anything. Though Medicare will not issue a letter about any future interests, you are still under the obligation to "consider and protect" Medicare's future interest under the Medicare Secondary Payer statute. To do that, you need to ask and answer the question "Is a Medicare Set-Aside necessary under these case specific facts?" If yes, then determine the proper amount to set aside. If no, then document your file to show how you arrived at that conclusion.

We can assist you with regards to all action steps described above. At your convenience, I would be happy to discuss with you how GFRG can help your client maintain absolute Medicare compliance.

My best,
John Cattie

Medicare Supplemental Insurance - Parts A & B

2010-03-16T09:12:00.002-04:00

Question
Are the Medicare Supplemental Insurances (such as AARP) medical bills included in the subrogation when we pay back Medicare? If not, am I assuming correctly that we are required to contact such insurance provider for their subrogation?

Thanks.
Charleston Attorney

Answer
The MSP Statute is intended to cover reimbursement for Medicare’s program (including Parts A and B). Recent (2003) regulations now may include Medicare Parts C and D. However, supplemental coverage would not be included in your Medicare conditional payment summary, so you are quite correct – you would contact the insurance provided to determine their reimbursement right, noting the Medicare Parts A and B might have covered as much as 75% of many medical bills (depending on the client’s adjusted gross income), but the supplemental coverage would have made co-pay and other payments. For example, the Medicare Part A deductible is $1,100 for 2010. Where your client, as a Medicare beneficiary, would have been responsible for a deductible or co-pay, depending on the terms of the supplemental coverage, this may be the part of the injury-related medical expenses you are looking for.

Sylvius von Saucken, J.D.

CMS Right Of Action To Assert A Claim

2010-03-15T17:19:00.001-04:00

Question
Does Medicare presently have the power to assert a claim against a tortfeasor and / or its liability carrier? The tortfeasor settled a BI claim with a liability carrier. Now they want to withhold payment until the Medicare lien is resolved. I am concerned about its exposure. Should we disburse funds without resolving the Medicare lien, which we have no intention of doing given our and our client's exposure? I was under the impression that the tortfeasor / liability carrier had no exposure to Medicare until July 1, 2010. Am I incorrect in this assumption?

Georgia Attorney

Answer
Yes, 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.

We have seen an increase in the number of liability carriers that want documentation from the plaintiff that Medicare's interest is being protected. It has always been that 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.

The tortfeasor / carrier always had exposure, however since the MMSEA act the defense seemed to have been awakened to the fact that they can be held liable if Medicare is not reimbursed.

CMS has recently issued an extension of the first reporting date from April 1, 2010 to January 1, 2011. Any settlements made on or after October 1, 2010 will be reportable.

Mary Skinner

Settlement Proceeds Question

2010-03-12T14:46:00.002-05:00

Question
Your blog / posting concerning subrogation was most informative. It leads me to a question, if you don’t mind.

My client is receiving $12,000; $3,000 of that is medical subrogated by BCBS. In her Chapter 7 bankruptcy (now discharged) she listed the possible PI claim as exempt property to the maximum we could exempt (about $20,000).

Although we never listed BCBS as a creditor, case law holds that in a no-asset Ch 7, creditors who were not noticed are discharged. (I have a lovely 5th Cir opinion on that.)

This brings me to my question. You wrote:

They can treat the subrogation carriers as creditors in a Ch 7 or a Ch 11; provided however, they put the settlement money into the estate.

“Into the estate” gives rise to my question: does that mean she cannot exempt the medical subrogation money? Is this over and above that $20,000 already “in the estate” and exempted? It would seem that she has already put all possible money into the estate by claiming the $20,000 exemption.

I really appreciate your help and thank you in advance.
Texas Attorney

Answer
Where you have listed the settlement proceeds on Schedule B and exempted it on Schedule C, my position is that provided the $12,000 represents your client’s gross settlement proceeds, you have already included the amount held back for medical subrogation.

If not, what is the client’s gross settlement amount, as that could bear on a determination whether the client identified the assets as belonging to the bankruptcy (Ch 7) estate. If it turns out that combined, the $3,000 subrogation amount is included as part of the exempt amount, I would feel comfortable paying BCBS out of the settlement proceeds exempted from the bankruptcy estate, if there is a contractual requirement to do so (outside of the bankruptcy context).

Sylvius von Saucken

Private Insurance Reimbursement Question

2010-03-11T14:49:00.001-05:00

Question
I recently came across your Longaberger Practice Tip. I represent a PI Plaintiff in a case against a restaurant for an allergic reaction (mushrooms) suffered by my client. I settled the case for $30,000 (about $12,000 are meds) and meds paid by the insurance company. I have received no notice of lien/reimbursement of any sort and I am quite sure that they are not even aware there is a 3rd party claim. Do I need to notify them or can I pass the funds? Thanks.

KY Attorney

Answer
Thanks for the question and I am happy to provide some insight into the matter. While I cannot definitively say what your obligations may by I can tell you what considerations can be taken into account.

First and foremost, as a Kentucky attorney I am sure you are aware of KRS 411.118. While O'Bryan v. Hedgespeth, 892 S.W.2d 571 (Ky. 1995), found (3) to be unconstitutional, it can certainly be argued that the remaining subsections still apply including (2) which requires claimant OR their attorney to notify any parties that are believed to hold subrogation rights by certified mail. GEICO v. Winsett, 153 S.W.3d 862 (Ct. App. 2004). However it is worth noting that it has been held that this statute will not apply to an ERISA plan. Humana Health Plans, Inc. v. Powell, 603 F. Supp.2d 956 (W.D.Ky. 2009).

Second, Kentucky Rule of Professional Conduct 1.15(c) states that “in the course of representation a lawyer is in possession of property in which both the lawyer and another person claim interests, the property shall be kept separate by the lawyer until there is an accounting and severance of their interests. If a dispute arises concerning their respective interests, the portion in dispute shall be kept separate by the lawyer until the dispute is resolved.” The issue here is whether you have received reasonable notice of a just claim. From the facts of your question it would appear that you have not received any notice and thus you arguably have no duty to withhold for BC.

Third, the Longaberger case involved a case where there was clear notice (correspondence back and forth). The Court did not say that identifying such an obligation was the duty or responsibility of the attorney. However, when dealing with an attorney who admitted that he had notice of the plan’s interest as a first priority lien the court was quick to hold the attorney liable. That does not appear to be the case here.

Finally, the client’s interest and decision needs to be considered. While there may not be an affirmative obligation to notify for you, there are certainly going to be contractual consequences for your client, including the potential loss of future benefits and personal liability. These consequences should be discussed with the client. Ultimately the decision needs to be made by you and the client. If the client chooses not to notify it may be a good idea to obtain an informed consent agreement. If the client chooses to notify and you need more information on our lien resolution services, please let me know

Please let me know if you have any questions and I am always happy to discuss.

Michael Russell

Medicare Set Aside Arrangement Terms

2010-03-10T11:34:00.004-05:00

Question
My client is a Medicare beneficiary who suffered a neck injury in a Motor Vehicle Accident. Their auto insurance has paid for treatment to neck thus far. Adverse driver policy limits are $25,000 and case will probably settle for less than that. It is unknown if he or she will need any future neck treatment. How do you recommend we deal with MSA issues in such a small case? Also, can you direct me to a site which shows how to establish an MSA?

Wyoming Attorney

Answer
The Medicare Secondary Payer Act (42 U.S.C. Sec. 1395y(b)) requires that settling parties consider and protect Medicare's interests. However, that statute does not advise us how to properly protect Medicare's future interests. In fact, we do not even have a statutory definition of "Medicare Set Aside Arrangement" or "MSA" at this point. While CMS has provided guidance as to how to protect its future interests in workers' compensation cases (via 12 policy memos to date), it has not provided even a single memo to date about how to protect its future interests in a tort case. Absent any law or guidance on point about how to protect Medicare's future interest in a liability case, absent a definitive allocation to future meds in the settlement release (or a line item for future meds in a jury verdict form), a MSA is not appropriate in a liability settlement. Considering Medicare's future interests rarely means paying Medicare money in the form of a MSA in a liability settlement.

Having said that, you will want to document your file and memorialize how you did consider and protect Medicare's future interest, arriving at the conclusion that a MSA was not appropriate. That documentation can be in several forms, including an MSA evaluation from a neutral third party entity operating in the compliance space or a note from the treating physician indicating that the claimant does not require any future injury-related care that would otherwise be covered by Medicare. With regards to information about how to establish a MSA, I would lead you to Affiance Partners out of Cincinnati, OH. There website is www.affiancepartners.com

I would be happy to discuss your case specific facts with you further at your convenience as well as talk about the MSA obligation in general.

My best,
John Cattie

Medicare Settlement Term Date Question

2010-03-09T16:02:00.001-05:00

Question
If one previously entered into an agreement with Medicare on past and future liens on various cases but the funding of the settlement occurs after 1/1/2010 are these new requirements applicable and will funding be delayed?

Answer
Your answer depends on the settlement terms. Our position concerning conditions precedent to settlement funding is that if the settlement agreement is complete before 1/1/2010, but the timing of payment, as an administrative matter occurs thereafter, that settlement should not be reportable. If, on the other hand, there is the potential of funds reverting back to the paying parties, or there is a condition, such as minor settlement approval, that if not met, would preclude any payment from occurring, in that case, when the final condition precluding payment has been satisfied, you have a reportable event under the MMSEA.

Sylvius von Saucken

Settlements Involving Medicare Beneficiaries

2010-03-08T13:20:00.002-05:00

Question
I settled a medical malpractice case involving a Medicare recipient. No claim has been received from Medicare. The insurance company wants to withhold part of the payment until I clear with Medicare. I understand that the only settlements after Oct. 1, 2010 are to be reported. Is this settlement still subject to a lien?

Puerto Rico Attorney

Answer
Yes, any settlement that involves a Medicare beneficiary must be reported and Medicare's interest protected and reimbursement made for any conditional claims they have made for injury related care.

Under the MSP laws (42 U.S.C. § 1395y(b)), Medicare does not pay for items or services to the extent that payment has been, or may reasonably be expected to be, made through a no-fault or liability insurer or through Workers' Compensation (WC). Medicare may make a conditional payment when there is evidence that the primary plan does not pay promptly, conditioned upon reimbursement when the primary plan does pay. Once the MSPRC has information concerning a potential recovery situation, it will identify the affected claims and begin recovery activities. Insurers/WC carriers (as applicable), beneficiaries, and representatives/attorney(s) are required to recognize the obligation to reimburse Medicare during any settlement negotiations.

The first step in the process of reporting the case to Medicare is to contact the Coordination of Benefits Contractor (COBC) at 1-800-999-1118.

The COB will then establish the record and forward it to the Medicare Secondary Payer Recovery Contractor (MSPRC). Once the case has been established you must send the MSPRC proper proof of representation in order for the MSPRC to release information regarding conditional payments for injury related care they may have made.

Medicare's recovery claim runs from the "date of incident" through the date of settlement/judgment/award. Medicare has both a direct priority right of recovery and subrogation rights based upon Federal law; Medicare's recovery claim is superior to the recovery claims of any other entities.

The reporting of settlements after October 1, 2010 is concerning Medicare, Medicaid and SCHIP Extension Act of 2007, or the MMSEA. The MMSEA statute (42 USC 1395y(b)(8)), the insurance company may have to report certain information to Medicare once a claim is settled. That reporting obligation arises in those cases where the injured individual is a current Medicare beneficiary at the time of settlement. The insurance company, generally referred to as a Responsible Reporting Entity or RRE, faces a $1,000 per day per claimant penalty under the statute if they are found to be out of compliance.

Regards,
Mary Skinner

Medicare Liens

2010-03-08T09:19:00.001-05:00

Question
Thank you for your blog re Medicare liens. I hope I am reading 411.37 wrong. We have a client that has over $100,000.00 in Medicare bills. If we settle for the limits of $50,000.00, then we can only get procurement costs and the balance goes to Medicare? Would there be any money left for the plaintiff? Please tell me that I am reading this section wrong!

California Attorney

Answer
Unfortunately, you are not reading it incorrectly. If Medicare payments equal or exceed the amount of the liability insurance payment, judgment or settlement amount, then Medicare recovers the total amount of the settlement minus procurement costs.

Having said that, there are remedies with the MSP provisions that would allow for reduction of Medicare's reimbursement and enable the client to put some money in their pocket.

Waivers

A waiver can be considered based on Section 1870 (c) of the Social Security Act and 42 CFR 404.501-404.515. A waiver can be requested based on financial hardship due to the accident, or based on equity and good conscience. The request must be made in writing to the lead Medicare contractor only after settlement has been reached.

A waiver may only be considered after settlement has been finalized and proof of settlement has been forwarded to the MSPRC. If the beneficiary is deceased, a waiver can only be requested by a surviving spouse or a legal dependent entitled to benefits under Title II or Title XVIII of the Social Security Act. It should be noted that prompt repayment to Medicare will avoid accruing interest charges. You will retain your right to dispute, appeal, or request waiver of the debt.

Compromises

A compromise can be considered based on Federal Claims Collection Act and 42 CFR 401.613.

1. Litigative risk
2. Inability to pay
3. Cost to collect Medicare's claim will exceed amount of recovery

A compromise can be requested before or after settlement. The beneficiary, spouse, immediate family member, or attorney may request a compromise. If the request is post-settlement, settlement information must be submitted in writing before your request will be processed.

I hope this helps.
Mary Skinner

Medicare Provider Question

2010-03-05T09:54:00.001-05:00

Question
A Medicare client was injured in auto/pedestrian accident and sought medical treatment at a local hospital. The hospital does not file a claim with Medicare. Instead, the hospital files a hospital lien against the injured client. Is the hospital obligated to file this claim with Medicare, or, can the hospital recover the full amount asserted in the statutory hospital lien?

Oklahoma Attorney

Answer
When a Medicare provider of services learns that a beneficiary received services that may be payable by a payer primary to Medicare, the provider is required to pursue payment from the 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 or continue to wait for payment from a future insurance settlement. If the provider chooses to bill Medicare, then it becomes the MSPRC’s responsibility to recover Medicare’s conditional payments if a settlement occurs at some point in the future. The provider of service is not required to send the bill to Medicare if they choose to pursue payment from a possible future insurance settlement.

That being said, a provider may either:

• Bill Medicare for payment and withdraw all claims/liens against the liability insurance/beneficiary’s liability insurance settlement (liens may be maintained for services not covered by Medicare and for Medicare deductibles and coinsurance); or

• Maintain all claims/liens against the liability insurance/beneficiary’s liability insurance settlement.

Additionally,

• If the provider bills Medicare, the provider must accept the Medicare approved amount as payment in full and may charge beneficiaries only deductibles and coinsurance.

• If the provider pursues liability insurance, the provider may charge beneficiaries actual charges, up to the amount of the proceeds of the liability insurance less applicable procurement costs but may not collect payment from the beneficiary until after the proceeds of the liability insurance are available to the beneficiary.

I hope this was helpful.
Mary Skinner

TriCare Subrogation Claim Question

2010-03-04T15:49:00.001-05:00

Question
When a third-party tortfeasor’s personal liability policy limits are insufficient to compensate the victim for his non-medical expense damages (i.e. past and future pain and suffering, physical impairment, disfigurement and lost wages)and pay the government's subrogation claim, whose claim to the homeowner's insurance proceeds have priority? Is this the victim or the governments’ responsibility? Must the victim first be made whole for his non-medical expense damages before the government can he or she recover medical expenses to pay for the victim's medical care? Or can the government deplete the available liability insurance monies in satisfaction of its subrogation claim and leave the victim wholly uncompensated for his non-medical expense damages? In other words, if payment of the government's subrogation claim will leave nothing to compensate the victim for his non-medical expense damages, does the government get it all and the victim get none? How are the answers to these questions different, if at all, if the victim settles with the tortfeasor before Tricare benefits have been paid to the health care providers?

Answer
TriCare derives the authority to assert a subrogation claim under the Federal Medical Care Recovery Act (FMCRA), 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).

Under the circumstances of your question, I would cite the case of Commercial Union Ins. Co. v. US, 999 F.2d 581 (C.A.D.C). The Court here stated that FMCRA is silent as to priority of government's right to recover from tortfeasor medical expenses it incurred on behalf of injured employee over injured employee's right to recover non-medical damages from tortfeasor. The Court also pointed out that 42 USC 2652(c) allows the injured party to recover damages for those damages not covered under FMCRA and giving the government priority would essentially render this section useless. Ultimately the Court held the interpleaded fund would be distributed on ratable basis, such that each claimant received share of fund proportionate to their share of total judgment figure, since FMCRA was silent on question of priority of claimants' rights and since “equity is equality.” While the circumstances of this case may vary from your question, the case certainly provides some guidance.

It is also worth noting that in a case where the injured party pursued the tort claim and the government passively waited for reimbursement, courts have required an equitable reduction in the government’s claim. Mosey v. U.S., D.Nev.1998, 3 F.Supp.2d 113. As a general matter, in our experience, the government is willing to take such matters into consideration and may adjust accordingly so the injured party receives some compensation.

If a settlement took place prior as mentioned in your second question, the priority determination would arguably be the same. Please let me know if you have any questions. Thank you for the question.

Michael Russell

ERISA & Non-ERISA Plan Language

2010-03-03T10:56:00.001-05:00

Question
I have a non-ERISA policy. My client lives in Ohio, therefore, N. Buckeye v. Lawson applies with regard to plan reimbursement language and the make-whole doctrine. The pertinent language is as follows: "We will have the right to be reimbursed to the extent of benefits we paid for the illness or injury if the covered person subsequently receives any payment from any third party. The covered person shall promptly reimburse Golden Rule from the settlement, judgment or any payment received from any third party. We have a lien on all money received by a covered person in connection with the loss equal to the amount we have paid. We have a right to be reimbursed in full regardless of whether or not the covered person is fully compensated by any recovery received from any third party by settlement, judgment, or otherwise."

Does this language satisfy the Lawson requirements and trump the make-whole doctrine? If settlement funds are released to the client, which includes money for the lien, does an attorney in Ohio have any personal liability? I am aware of what Longaberger states for the ERISA plan. Thanks for your insight.

-Ohio Attorney

Answer
Thank you for the question. Before diving into the question, I want to emphasize one point of differentiation between an ERISA policy and a non-ERISA policy. Often we see the mistake of referring to self-funded Plans as "ERISA Plans" and insured Plans as "non-ERISA Plans." In reality, both insured Plans and self-funded Plans are both ERISA-covered. ERISA defines an employee welfare benefit plan as a plan, fund, or program; established or maintained; by an employer, an employee organization, or both through the purchase of insurance or otherwise, for the purpose of providing medical, surgical, or hospital care or benefits or benefits in the event of sickness, accident or disability, for its participants or their beneficiaries. The only exceptions are individual plans, government plans, and religious group plans. 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 an insured plan which can be subject to state insurance law can still be considered to be an “ERISA” plan. Obviously, the policy in question here could be a government or individual policy and thus it would be “non-ERISA”.

With regard to the Lawson case, the Court held that “unless the terms of a subrogation agreement clearly and unambiguously provide otherwise” the made whole doctrine will apply. The Court essentially adopted the federal common law approach. The plan language cited in your question gives the plan to right to reimbursed regardless of whether the covered person is fully compensated. While this language differs from Lawson (irrespective of whether settlement reimburses for all injuries) it is similar if not clearer than the language in Lawson. An argument can always be made but it would seem the language in your case would satisfy the requirements of Lawson.

With regard to personal liability of the attorney there are several factors to consider. First and foremost, Ohio does not have an affirmative notice law which requires your client to notify the insurer. Secondly, Ohio has adopted ABA rule 1.15(e) which states “When in the course of representation a lawyer is in possession of funds or other property in which two or more persons, one of whom may be the lawyer, claim interests, the lawyer shall hold the funds or other property pursuant to division (a) of this rule until the dispute is resolved. The lawyer shall promptly distribute all portions of the funds or other property as to which the interests are not in dispute.” If you have received notice of the insurer’s interest this is certainly a consideration. Finally, an important aspect of the Longaberger case was the fact that ERISA controlled and thus the court did not really analyze the priority of the attorney’s fee lien in comparison with that of the health plan. If this a non-ERISA policy and state law applies then Ohio law would control the priority here.

As a final note, in cases where the insurer or plan has not put you on notice of their interest and funds are disbursed to a client, I would strongly recommend that before releasing funds you sit down with your client and explain to them any contractual consequences which arise from the language of the policy.

I hope you found the response helpful and please let me know if you have any follow up questions.

My Best,
Michael Russell

Does MMSEA Require A Verification Process?

2010-03-02T09:34:00.001-05:00

Question
Does MMSEA require an updated verification process or one that you did earlier (a year ago or so)?

Answer
Great question, especially if there is a client who is not yet a Medicare enrolled beneficiary at the time you start negotiations. CMS (Medicare) advises that the RRE (insurer or self-insured, or payer of the settlement or judgment) needs to update their QUERY right up until a payment event (sign settlement agreement, receive court order) occurs.

Sylvius von Saucken

Social Security Disability Insurance Qualifications For Medicare Set-Asides

2010-03-01T11:53:00.002-05:00

Question
What suggestion do you have when you have an injured worker who will likely qualify for SSDI within 30 months of a Workers’ compensation settlement, has a WC settlement of 110k being negotiated, has a physician who says that knee replacement will be needed, and a claimant who refuses to have knee replacement.....we want to reduce set aside amount.

Answer
The fact that the injured worker will qualify for SSDI within 30 months of the WC settlement does not necessarily mean that a MSA is appropriate. In fact, the 30 month period of time to which you refer is really linked to an injured individual’s “reasonable expectation” of Medicare entitlement, not SSDI entitlement. According to the CMS Policy Memos, a person possesses that “reasonable expectation” if one of the following 5 characteristics are true: 1) he/she has an open, active application for SSDI pending; 2) he/she has applied for SSDI, that application was denied and they anticipate appealing that denial; 3) he/she has applied for SSDI, that application was denied, and they are actively appealing the denial; 4) he/she is at least 62.5 years old; or 5) they possess an End Stage Renal Disease condition but are not yet a current Medicare beneficiary. If the injured individual does not meet the above mentioned criteria and is not a current Medicare beneficiary, then a MSA is not appropriate. In addition, when considering Medicare’s future interests, starting with the question what part of the settlement has been allocated to future costs of care will lead you to the right answer. Starting with what should the MSA amount be, is like the tail wagging the dog – you need to identify the allocation issues first (see 42 C.F.R. §411.46(d)(2)).

Sylvius von Saucken

Query Access System - Is Plaintiff Authorization Required

2010-02-25T14:40:00.001-05:00

Question
I understand that the defendant’s obligation to report is not until after the case settles (and only if it settles). Defendants are allowed (but not required) prior to settlement to access Medicare's Query Access system to find out if the claimant is Medicare eligible. Assuming they need to report at some point in time, the bottom line question is, does the insurance company (defendant) need an authorization signed by my client in order to access the Medicare Query Access System? Several companies are claiming they must have the authorizations signed by our clients before they can get the information from Medicare.

-Ohio Attorney

Answer
The defendant (RRE) does not need a release to obtain the five data points to perform the query function to obtain entitlement information. CMS has stated that their response to the RRE will only tell the RRE entitlement status. It will not provide the RRE with why the injured party is entitled, when the injured party became entitled or the SSDI status. The response will only tell the RRE whether there was a match and that the injured party is entitled or that there was no match.

We have seen many RREs requesting that a release be signed. This is absolutely not necessary for the query function or for the submission process.

My best,
Matt Garretson

Should Defense Urge Clients To Forgo Medicare Covered Treatment?

2010-02-25T11:02:00.001-05:00

Question
I am currently processing a settlement in which the client is a Medicare recipient. Nevertheless, he has never received Medicare covered medical treatment and has none planned. The defendant is insisting on a provision in the settlement agreement stating that the client agrees not to seek Medicare covered treatment for a period of 30 months. Is there anything in the MSP statute that supports this notion? I don't think so, but how should I respond? I cannot advise this man to forego covered treatment just for the convenience of a defense lawyer who does not understand the statute.

Answer
You are correct to believe that the MSP statute does not support the notion that a claimant must agree to forgo any Medicare covered treatment for the 30 month period of time post-settlement simply because the defense misunderstands its Medicare compliance obligations. Instead of having language in the settlement release speaking to a time period in which the claimant may not seek Medicare covered treatment, you should try to keep the release terms couched in currently enacted law under 42 USC §1395y(b) and the associated MSP federal regulations. Furthermore, you should feel comfortable enough to indemnify defense on any future cost of care issues which may arise from Medicare after the settlement. Despite their misguided perception, defense does not have any exposure to Medicare on future cost of care issues. That liability lies with your client and you. Therefore, providing indemnification on that issue provides them with a certain level of comfort while you are not agreeing to any more than the statute would require – that your client verifies and resolves any conditional payment reimbursement obligations.

Colorado Anti-Subrogation Statute Question

2010-02-25T10:21:00.001-05:00

Question
Is anybody sufficiently familiar with Colorado law to know OTOH whether they have an anti-subrogation statute like we do? Just hoping...

Colorado Attorney

Answer
Our firm focuses exclusively on healthcare compliance (we resolve liens for PI attorneys on a broad basis nationwide). From our research, CO does not have anti-subro currently. There has been a bill introduced that may take them in that direction.

See below:

House Bill 10-1168 Introduced

Proposed addition under Insurance Title of Colorado Statutes

Codifies Made Whole and Common Fund
If insurer disputes they must file motion and court decides

Subrogation is prohibited

Third party settlor cannot add insurer as co-payee on any settlement check

The bill introduced in the House seeks to eliminate all subrogation and permit reimbursement ONLY when the injured insured is made whole (fully compensated for injuries and damages). If the insurer disputes the argument of made whole they may motion the court with underlying jurisdiction to decide whether fully compensated. Such motion must be brought within 60 days after the insurer is notified that the recovery is exceeded by the damages. IF insured receives full compensation (made whole) then insurer MUST reduce for proportionate share of fees and expenses. Also any reimbursement MUST be applied to the lifetime cap of the policy.

Hope this helps. My best,
Tate Johnson, Esq.

Do Hospitals Have The Right To Bill Medicare After Four Years?

2010-02-23T15:39:00.001-05:00

Question
My client died four years ago as the result of a hospital's medical malpractice. After the malpractice was committed, my client spent three weeks in the same hospital's intensive care unit before she died. Except for a few tests, the hospital never billed Medicare for the three weeks my client spent in the ICU.

We have just settled the case against the hospital and the doctors, though the release has not yet been signed. Does the hospital (four years after the fact) have the right now to bill Medicare for care in the ICU? Would Medicare have a lien against the proceeds for such care? What, if anything, should be done with regard to Medicare?

Thank you for your help.
Massachusetts Attorney

Answer
Many times when the tortfeasor in a medical malpractice is the hospital itself, they will not bill Medicare nor will they try to collect from the client or the patient. If they haven't billed the client for the ICU stay, there's a chance they are not going to bill the client.

As for Medicare, you should still contact Medicare. While the hospital may not have billed for their charges it is very possible and most likely that the doctors, if they were not a defendant in the case, would have submitted claims for their services. Hence there would be claims out there for which Medicare would seek reimbursement. If there are not any claims out there, then Medicare will provide a discharge for a zero interest. That ensures that you satisfied Medicare's interest and complied with federal statutes.

Hope this helps!

My best,
Elizabeth Vish

Follow up to post on 2/15/2010 - ERISA Employee Health Plan Language

2010-02-22T13:50:00.001-05:00

Question
I appreciate your prompt and concise response. Thanks for the good information. However, it does raise many questions but one in particular that I am stuck on:

You say below that Sereboff holds in part that the Plan must “…………………2) specify that recovery must be limited to a specific portion of said fund.” Many plans I see now a day say that they are entitled to proceeds from a settlement or judgment on a third party matter no matter how that settlement or judgment is described. In other words, they are saying that if your plaintiff/their beneficiary have a PI claim against a third party and there is ANY recovery in that suit or claim, they are entitled to their money. Is there a case out there that says this second part is not met by the plan if the language in the plan is too broad as I have tried to describe above? Juries will sometimes not award all of the medical bills asserted ($40,000.00) and only award a small sum for those damages ($5,000) but give significant damages for pain and suffering ($25,000) and lost wages (25,000). In this type of scenario where the total recovery is $55,000 but only a small portion of the medical bills were recovered are they entitled to recover their entire payout?

Thanks for any input you can give on this.

Answer
That is great a question. First, with regard to the second prong of equitable remedy, there are not any cases which hold that because the plan seeks any and all recoveries it is not seeking a specific portion. Courts have held that this specific portion requirement applies to the amount sought rather than characterization of the recovery. For example, language stating that the plan seeks recovery “up to the amount of benefits paid” or for those “benefits paid” will meet the requirement. Although use of such broad language could arguably be challenged as not being appropriate and equitable such a challenge will not be applied to the equitable remedy requirements of Sereboff.

Second, if a plan’s language limits itself to recovery of medical expenses than such allocations can be useful in combating their reimbursement right. However, as you mention in your follow up, they often include broad and all encompassing rights. Unfortunately, in these situations even a court ordered allocation with regard to damages cannot prevent a plan’s recovery if they have an equitable lien and strong plan language. Allocation among individuals is a different story.

Michael Russell

Medicare Estate Recovery

2010-02-22T11:31:00.001-05:00

Question
Our client is the surviving son of a woman who died in a nursing home after falling several times. We have reached a settlement and the defendant now asserts that Medicare has a lien on the proceeds for all amounts. Medicare might have paid for her stay in the nursing home, as well as for treatment for her repeated falls.

When decedent died, a probate estate was opened, and Medicaid forced the sale of her home to satisfy its interest for payments made. Medicare did not. In Missouri, it is the survivor who makes a claim for the death, and the jury is allowed to consider the loss of consortium, support, care, comfort, etc. The estate of the decedent is NOT the plaintiff, even if a probate estate was opened, as in this case.

Can Medicare now assert a lien against the survivor's interest when they knew or should have known that it had a claim against the estate of the decedent for the care it provided?

Thanks for your assistance!
Missouri Attorney

Answer
Yes. Medicare has a priority right to recovery for any injury related claims they may have paid. According to Medicare's policy MSP Manual 50.5.4.1, "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.

Having said that, unlike Medicaid, who can recover from the estate for all payments made, injury and non injury related. Medicare's seeks reimbursement only for claims that are from the date of injury thru the date of settlement, and only for the injuries attributed to your claim.

Mary Skinner

Is There A Statue of Limitations To Repaying Medicare?

2010-02-17T13:44:00.003-05:00

Question:
I have a PI case in which our client was in a Motor Vehicle Accident in 1995. We settled the case in 2000. Our office was proceeding through the process of getting a final repayment amount from Medicare. In 2001 Medicare quit communications with our office and our client. The attorney who was handling this case refunded the monies we were holding in our trust account to the client in 2004. In August, 2009 both our client and our office received a demand letter from CMS. Is there any kind of statute of limitations with regards to repaying Medicare if they let eight years pass before demanding money?

Arizona Attorney

Answer:
Under the statute of limitations (28 U.S.C. 2415), Medicare has six (6) years and three (3) months to recover Medicare’s claim. The statute of limitations begins at the time Medicare is made aware that the overpayment exists.

Medicare’s overpayment does not come into existence until a judgment award or settlement offer is accepted. It is at the point of settlement that Medicare’s conditional payments are considered to be overpayments. Medicare’s claim come into existence by operation of law 42 U.S.C. 1395Y(B)(2)(B)(I) when payment for medical expenses that Medicare conditionally paid for has been made by a third party payer.

In your situation, the date of settlement was 2000, the clock started ticking on Medicare's SOL when you notified Medicare of the settlement. Considering that you and your client have received a demand letter from Medicare, it must be addressed promptly to avoid collection efforts by Medicare, such as garnishment of your clients Social Security benefits and/or double damages for you.

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.

Having said this, the best way to address the situation is to request a post-settlement compromise of Medicare's interest. When submitting your request, craft a compelling story; provide them with the facts of the case and supporting documentation for your argument. All post-settlement compromise requests must be in writing and sent to the MSPRC Medicare Contractor), they will forward your request to the CMS Regional office. The MSPRC contractor does not have the authority to compromise. The authority to compromise a Medicare claim is reserved exclusively for the CMS home office or regional offices. Any agreement for a compromise settlement under the Federal Claims Collection Act ("FCCA") may not be appealed.

I hope this was helpful. Should you need further guidance please contact me.

Mary Skinner

Use Of MSAs In Workers’ Compensation Settlements

2010-02-16T10:49:00.001-05:00

Question:
I am settling a workers’ compensation case for $100,000 and closing out medicals in a disputed claim. My client is 66 and on Medicare. Is it acceptable to have the Insurer fund a MSA with an amount that they "deem" sufficient (without CMS review) and agree in the settlement documents to supplement the MSA account if CMS later finds that more funds were necessary to be in compliance? Is this sufficiently protecting Medicare's interest?

Answer:
Current law (42 USC 1395y(b)) and guidance about the use of MSAs in Workers’ Comp settlements (via CMS Policy Memos) tells us that settling parties have to properly consider and protect Medicare’s interests at the time of settlement. Those interests are two fold, past interests and future interests. The MSA question arises as part of properly considering and protecting Medicare’s future interests. Unlike handling Medicare’s past interests, where Medicare may seek recovery from any entity that MAKES/RECEIVES a primary payment, when properly considering and protecting Medicare’s future interests, Medicare will only pursue any entity that RECEIVES a primary payment. Based on this, it is the claimant’s (and claimant’s attorney’s) responsibility to ensure that the MSA is properly funded and MSA proceeds are properly spent, not the insurer’s responsibility. While submitting a MSA proposal to Medicare is voluntary, that MSA must still properly consider and protect Medicare’s future interest. If those future interest issues are not handled appropriately, Medicare will look to your client and you, not the insurer.

Under your fact pattern, the insurer would fund the MSA with an amount it deems appropriate, and will agree to supplement that MSA should CMS later find that it was under funded. The penalty for failure to properly consider and protect Medicare’s future interests (i.e., properly funding a MSA when appropriate) is Medicare revoking the claimant’s Medicare card for a certain amount of time until Medicare determines, in its sole discretion, that its future interests have been satisfied. Practically speaking, that means your client would lose Medicare benefits and have to pay out-of-pocket for future care until Medicare restores their benefits.

Overall, I believe setting up the MSA for the amount determined by the insurer to be sufficient may sufficiently protect Medicare’s future interest, but only with the caveat that should Medicare revoke your client’s Medicare card in the future for failure to properly fund the MSA, then the insurer will be responsible for all injury-related medical expenses otherwise covered by Medicare until such time when Medicare restores your client’s Medicare benefits. Because the insurer has no liability to Medicare on these future interest issues, it really has no incentive to ensure the MSA is properly funded. Therefore, it will blindly accept the work product provided by the MSA Allocation house with whom it contracts and then fund the MSA for that amount, whether it is sufficient or not. Therefore, if the safeguard of subsequent funding by the insurer is built into the settlement docs, this may be a sufficient way of considering and protecting Medicare’s future interest. If not, your client may face significant problems with Medicare in the future without the ability to seek additional recovery from the insurer.

A more appropriate method for protecting Medicare’s interests would be for you to seek a plaintiff-oriented MSA Allocation that would provide a more realistic allocation amount for future injury-related care. Since the exposure to Medicare on future interest issues goes directly to your client and you, you should be “driving the boat” on the MSA issues as opposed to the defense. If the insurer is willing to supplement the MSA in the future should Medicare find the original MSA lacking, it should be willing to fund it appropriately from the start.

Hope this helps…
John Cattie

ERISA Employee Health Plan Language

2010-02-15T09:00:00.000-05:00

Question:
We have received a very small judgment in a PI case. There is a no fault medical lien and of course our expenses and fees to be paid per our contract. The ERISA carrier says that they have a lien for the total amount of their payments and it has priority over these liens. What is the priority if any of ERISA carrier's right of reimbursement?

Answer:
An ERISA employee health plan will be governed according to the terms of its plan language. From our perspective as a third-party provider of lien resolution services, the most pivotal step in resolving Private/ERISA liens is the plan evaluation. The language in a plan will dictate the priority, if any, of the reimbursement interest and will identify the scope of that interest.

First, ERISA plans are limited to seeking appropriate equitable relief. 29 U.S.C. 1132(a)(3)(B). An ERISA plan has a right of reimbursement which sounds in equity if the plan language imposes a constructive trust or equitable lien upon a third party recovery. To qualify as equitable the plan language MUST 1) specify that recovery will be made from an identifiable fund and 2) specify that recovery must be limited to a specific portion of said fund. If either of these requirements are not met in the plan language, the plan does not have an equitable right to recovery and thus they do not have a reimbursement interest under ERISA. See Sereboff, 126 S.Ct. 1869 (2006).

Second, ERISA plans which are funded through an insurance provider may be subject to state law defenses through the “savings clause” of ERISA 1144(b)(2)(A) (if the state law is found to regulate insurance). ERISA plans which are self-funded through the assets of the employer or a trust of similar nature will preempt state law but may be subject to federal common law defenses. Whether or not a defense will apply will be controlled by the language of the plan as well. In addition, the plan’s funding status should be identified in the plan language; although this alone should not be relied upon.

Third, as a general matter, the plan language will specifically state what type of priority it possesses.

In conclusion, to properly identify and assess a plan’s interest and what priority such an interest may have it is absolutely necessary to obtain a copy of the Summary Plan Description from the year in which benefits were provided. Under 1024(b)(b), your client has the right to request this and any other document under which the plan is operated or established. The request should be directed to the administrator of the plan and they are required to comply.

If you obtain the plan language I would be happy to give it a quick review and provide my general thoughts on the strength or priority. Thanks.

Michael D. Russell

Medical Providers Billing Settlement Instead of Submitting Claims to Medicare

2010-02-14T15:26:00.001-05:00

Question:
If a provider chooses to bill the liability insurance settlement, rather than submitting the claim to Medicare, does it have to reduce its lien by a pro-rata share of the "procurement costs?" The way the reg reads, it is ambiguous to me. Says they may collect their total charges up to the amount of the settlement less any applicable procurement costs. Does that mean if legal costs are 40% of the total settlement that every provider who chooses to file a lien has to accept a 40% reduction? Or does it mean their lien just doesn't attach to the part of the whole settlement that is going to the plaintiff's lawyer? EG, if a lien is $100,000, the settlement is $1,000,000 and the procurement costs are $400,000, does the provider get to collect $100,000 or $60,000?
Thanks in advance for your input.

-Oklahoma Attorney

Answer:
Here is my understanding: The pro rata offset is applied to the full settlement amount, not the individual provider charge or “lien.” In other words, the providers may collect actual charges from the net proceeds to the client/beneficiary after the pro rata offset has been taken. In your scenario, the provider would be able to collect the actual charges of $100,000. It is important to note that the providers cannot seek or attempt to collect those charges until settlement has been made. Attempting collection prior to settlement is considered “billing the beneficiary” which is not allowed. Hope this helps…

My best,
Matt Garretson

Is A CMS Questionnaire Required?

2010-02-12T09:34:00.002-05:00

Question:
I have been a solo practitioner 1969. I am a member of AAJ and represent plaintiffs in civil cases only. Recently, I received a “CMS questionnaire” from an insurer for the first time referencing the federal law and claiming that the law imposes mandatory reporting requirements on insurers with respect to claimants who receive compensation from liability insurance with respect to medical expenses or a release of medical liability for medical expenses. Basically, the questionnaire asks if the claimant has ever been enrolled in Medicare Part A or B and also whether the claimant has ever applied for Social Security Disability benefits. Is this truly a mandatory requirement now which must be honestly answered for all personal injury claimants before cases can be settled with a liability insurer? Thanks for your help in this matter.

Massachusetts Attorney

Answer:
You are not the only one getting such "CMS questionnaires" from an insurer. The reason you are receiving such a document from the insurer is because under the MMSEA statute (42 USC 1395y(b)(8)), the insurance company may have to report certain information to Medicare once a claim is settled. That reporting obligation arises in those cases where the injured individual is a current Medicare beneficiary at the time of settlement. The insurance company, generally referred to as a Responsible Reporting Entity or RRE, faces a $1,000 per day per claimant penalty under the statute if they are found to be out of compliance, so this obligation definitely has gotten their attention.

Therefore, in an effort to maintain compliance with Medicare, the RRE needs to determine if the injured individual is a current Medicare beneficiary. CMS has set up a Query Access system allowing an RRE to determine an injured individual's Medicare entitlement status based on the electronic submit of limited data. That data is as follows: 1) the person's Medicare number (aka HICN) or Social Security number; 2) the first letter of the person's first name; 3) the first 6 characters of the person's last name; 4) gender; and 5) date of birth. Using this limited information; Medicare will advise the RRE whether that individual is a Medicare beneficiary. If so, the RRE knows it will have to report the settlement. If not, absent contrary information, the case will not have to be reported unless that entitlement status changes to a 'yes' before settlement. If a case is reportable under the MMSEA, the RRE must report at least 50 data points to Medicare, and it can be as many as 131 data points. The RRE will not be in compliance with Medicare unless it reports to Medicare in a timely manner.

With regards to the request for Social Security information, the RRE is trying to determine whether the injured individual may require a Medicare Set Aside (MSA) to be established as a part of the settlement. Due to an abundance of misinformation currently in the marketplace, some RRE's mistakenly believe that the new MMSEA reporting statute obligates them to establish MSAs as a part of the settlement. While currently enacted law requires the settling parties to consider Medicare's interests, the use and propriety of a MSA in a liability settlement is really limited, and should be based on the case-specific facts. For more information about MSAs, I refer you to our MSA White Paper on our website.

To your question about whether is it required that you complete this "CMS questionnaire", I would say that it is not a requirement. However, practically speaking, until the RRE is satisfied that it is Medicare complaint, it will be very reluctant to settle a case, let alone disburse settlement proceeds. We advise plaintiff firms to cooperate with defense on these issues and help them to satisfy their reporting obligations by 1) providing the limited information mentioned above to enable the RRE to determine the injured individual's Medicare entitlement status, and 2) collaborate with the RRE on the data points to be reported to Medicare. We go as far as to suggest stipulating to the data that would be reported to Medicare as a part of the settlement agreement. We have seen that the MMSEA questions have had a chilling effect on the settlement continuum for those parties not willing to cooperate on these Medicare compliance issues. To that end, providing defense with appropriate information which is not overbroad is highly suggested.

For more information about MMSEA compliance, please talk with Marlene Wilson, our Director of MMSEA compliance. She can be reached at (866) 694-4446.

My best,
John Cattie

From Feb. 4, 2010 TTLA Webinar - Medicare Compliance Concerns

2010-02-09T10:21:00.006-05:00

Question:
I enjoyed your informative seminar on Medicare. However; I was not able to get in a question but would appreciate if you could give me your thoughts. Your seminar and materials I have seen from your firm talk about dealing with Medicare through the MSPRC or CMS. We have received a subrogation and/or reimbursement interest letter from INGENIX on behalf of AARP MEDICARECOMPLETE PLUS that they are entitled to the same treatment and rights as Medicare. Is that true? Thanks.

Virginia Attorney

Answer:
Thanks for your question and your kind words. It was my pleasure to attempt to present some clarity with respect to the Medicare compliance questions. Health plans such as AARPMEDICARE COMPLETE PLUS plans are Medicare Part C plans. Although these plans often try to assert the same recovery rights as traditional Medicare Part A or B, Medicare Part C plans, for subrogation purposes, are treated akin to a private plan rather than traditional Medicare. That is because Medicare Part C is not covered within the meaning of the MSP statute (42 U.S.C. 1395y(b)). A very good summary of the laws that do apply to Medicare Part C is contained in the (attachment - click here) U.S. District Court’s ruling in Primax Recoveries v. Yarmosh (U.S.D.C. D. Ct Case No. 3:03CV01931), in which the Court holds that Medicare HMOs are not able to imply a private cause of action to recover funds paid under such plans (through bootstrapping the MSP statute). Instead, the Court held that there is no private cause of action for a Medicare+ Choice HMO (Part C) under the Medicare Part C statute (42 U.S.C. 1395mm(e)(4). Rather, the Court found the HMO’s remedy, if any, is under state contract law. Id., 790; see also Nott v. Aetna U.S. Healthcare, Inc., 303 F. Supp. 2d 565 (E.D. Pa. 2004).

To that end, one must look to the actual plan language itself to determine the plan’s reimbursement rights. Depending on the plan language (which could be strong or weak), the plan may have a right of reimbursement or it may not have a right of reimbursement. Thus, it becomes imperative to review the plan language as opposed to lumping Medicare Part C plans in with traditional Medicare when it comes to reimbursing for injury-related care.

I have copied John Cattie and Michael Russell on this email, each of whom works with me in addressing these issues. Should you have any further questions of John, Michael and/or me, please do not hesitate to ask.

Our best,
Sylvius von Saucken

Time Frame for MSPRC Correspondence

2010-02-08T16:33:00.001-05:00

Question
I have a client who has a large Medicare lien. We settled the case on the premise that a jury would have attributed 30% of fault to our client. After settlement we sent a letter to MSPRC advising of the settlement, our costs and expenses. The lien amount was only reduced by 10% with no reduction for our fees and expenses. I sent a letter of appeal citing the statutes which require reduction for procurement costs. We paid the full amount of the lien under protest to avoid interest charges. I just received a letter advising the full amount of the lien had been paid and the file was closed. I called to ensure the appeal was on file. I was advised the request for "compromise" had been sent to the regional office. She went on to advise that the regional office has no time limit by which these compromise requests must be processed. She also refused to give me any contact information for the regional office. Do you know if there is a time limit on this? I understood I had filed an "appeal" not a "compromise request" do I need to re submit an "appeal"? Any assistance would be appreciated. Thank you.

Kansas Attorney

Answer
Unfortunately, what you are experiencing is not uncommon. Under the current process, all correspondence is scanned in Detroit and put in "buckets" based on how the correspondence is either labeled or the language in the first one or two sentences of the letter.

When the MSPRC miscalculates the final demand amount then a request for "redetermination" must be made. Based on the facts you provided it appears that when you requested an "appeal" the MSPRC labeled your letter as a “compromise" and forwarded it to the Regional Office in Kansas City. The CSR you spoke with at the MSPRC was correct in that there are no time limits associated with a compromise request; however, it has been our experience that it usually takes approximately 30-60 days for a decision.

Although; this is an unfortunate situation all is not lost. I suggest calling the MSPRC again and ask to speak to a supervisor and explain the situation, that you want Medicare to make a "redetermination" of their final demand based on their error of not correctly applying the procurement offset. The MSPRC can and should pull your letter and work it at the MSPRC level, it does not need to be done by the Regional Office. Also request that she expedite your request due to their error. The timeframe for a redetermination decision is 60 days from the date of receipt.

Should you need the contact information for the Kansas City Regional Office, please contact me directly and I will be happy to provide you with it.

Regards,
Mary Skinner

Does a MVA effect SSDI Payments?

2010-02-05T10:21:00.000-05:00

Question
If a plaintiff is receiving Social Security Disability payments as a result of being disabled in a motor vehicle accident, and receives a settlement from the driver of the other vehicle to end the plaintiff's lawsuit, does the SSA have a lien on the lawsuit settlement?

Answer
Section 224 of the Social Security Act (42 U.S.C. 424a) requires that if an individual receives SSDI payments and workers compensation payments during a given month, his/her SSDI payments are reduced by a certain dollar value for that month based on a formula that takes into account work history and other factors for reduction. This statute, however, excludes by its operation and meaning third party settlements because the reduction is intended to avoid double payments to a Social Security Disability Insurance (under Section 223 of the Social Security Act) beneficiary where that person receives periodic payments in the form of SSDI and from a workers’ compensation or similar program. (See excerpt below).

In interpreting these rules, the Program Operation Manual System (POMS) directs SSDI case workers to exclude any third party settlements from these SSDI offset rules.

As a result, liability cases which have no workers’ compensation component to them are not off settable – so there is no SSDI offset for a liability case.

That is not, however, the same as saying there can be no SSDI reduction in a liability case. For example, 42 U.S.C. 1395y(b)(2) (aka The Medicare Secondary Payer Act) provides that Medicare beneficiaries are required to reimburse Medicare for injury-related medical expenses paid by Medicare on a conditional basis for which recovery has been made as part of a third party settlement. In that instance, where the beneficiary and his/her attorney fails to properly resolve Medicare’s statutory claims, SSDI benefits can be reduced as part of a Taxpayer Recovery Offset Program (TROP) initiative.

Overall, SSDI does not have a lien which attaches to liability settlements. As can be seen from a review of the statutes and regulations, SSDI offsets occur in workers’ compensation. cases because of the intent to avoid a payment for lost wages from SSDI, and a duplicate payment for lost wages from workers’ compensation. The same cannot be said of liability cases, in which a different paradigm and rationale for recovery exist. At the same time, any case involving a Medicare beneficiary must be handled with care, as following the MSP Act, plaintiffs’ attorneys have an affirmative duty to verify and resolve Medicare’s conditional payment reimbursement obligations arising from date of injury to date of settlement. Where those obligations are not met, the same fate might await a client’s SSDI payments, albeit for different reasons that SSDI offset.

Please let me know if you have any follow up questions. Thanks.
Michael D. Russell

Medicare Procurement Offset

2010-02-04T09:19:00.005-05:00

Question:
How does Medicare handle expenses when they come off the top? Is there a dollar for dollar reduction or are expenses ignored and only % fee reduction applied?

-Missouri Attorney

Answer:
Medicare will recognize expenses even if they come off the top. The procurement reduction would not be in the form of a dollar for dollar reduction, but rather a pro-rata share reduction. The formula used by Medicare is as follows:

1. Amount of settlement $__________________
2. Medicare payments $__________________
3. Attorney fees $__________________
4. Other procurement costs incurred $__________________
5. Total procurement costs (lines 3 + 4) $__________________
6. Ratio of procurement costs to settlement (line 5 / line 1) _________________%
7. Medicare’s share of procurement costs (line 2 x line 6) $__________________
8. Medicare’s claim to be recovered (line 2 minus line 7)$____________________

It is important to note that if Medicare payments equal or exceed the amount of the liability insurance payment, judgment or settlement amount, Medicare recovers the entire liability insurance payment, total judgment or settlement payment up to the providers’ charges, minus the total procurement costs.

I hope that helps…

My best,
Carol Brown

Is Reduction Fees and Costs, Regulation or Statute?

2010-02-03T10:35:00.004-05:00

Question:
Does anyone know if the 1/3 reduction for fees and costs is by regulation or statute? Someone just told me that Medicare is claiming that it is not automatic and depends of the settlement dollars.

NJ Attorney

Answer:
The procurement reduction is found in 42 CFR 411.37
TITLE 42 - PUBLIC HEALTH

CHAPTER IV - CENTERS FOR MEDICARE & MEDICAID SERVICES, DEPARTMENT OF HEALTH AND HUMAN SERVICES

SUBCHAPTER B - MEDICARE PROGRAM

PART 411 - EXCLUSIONS FROM MEDICARE AND LIMITATIONS ON MEDICARE PAYMENT

subpart b - INSURANCE COVERAGE THAT LIMITS MEDICARE PAYMENT: GENERAL PROVISIONS

411.37 - Amount of Medicare recovery when a third party payment is made as a result of a judgment or settlement.

(a) Recovery against the party that received payment (1) General rule

Medicare reduces its recovery to take account of the cost of procuring the judgment or settlement, as provided in this section, if (i) Procurement costs are incurred because the claim is disputed; and (ii) Those costs are borne by the party against which CMS seeks to recover.

(2) Special rule. If CMS must file suit because the party that received payment opposes CMS's recovery, the recovery amount is as set forth in paragraph (e) of this section.

(b) Recovery against the third party payer. If CMS seeks recovery from the third party payer, in accordance with 411.24(i), the recovery amount will be no greater than the amount determined under paragraph (c) or (d) or (e) of this section.

(c) Medicare payments are less than the judgment or settlement amount.

If Medicare payments are less than the judgment or settlement amount, the recovery is computed as follows: (1) Determine the ratio of the procurement costs to the total judgment or settlement payment.

(2) Apply the ratio to the Medicare payment. The product is the Medicare share of procurement costs.

(3) Subtract the Medicare share of procurement costs from the Medicare payments. The remainder is the Medicare recovery amount.

(d) Medicare payments equal or exceed the judgment or settlement amount.

If Medicare payments equal or exceed the judgment or settlement amount, the recovery amount is the total judgment or settlement payment minus the total procurement costs.

(e) CMS incurs procurement costs because of opposition to its recovery.

If CMS must bring suit against the party that received payment because that party opposes CMS's recovery, the recovery amount is the lower of the following: (1) Medicare payment.

(2) The total judgment or settlement amount, minus the party's total procurement cost.

My best,
Carol Brown

TRICARE Recovery Limit

2010-02-02T11:16:00.003-05:00

Question:
Libby,I enjoyed your seminar today and appreciate your speaking with me afterwards. As I stated, I have the following scenario:

- $400,000 in medical expenses
- $200,000 total available coverage
- 30,000 is the tortfeasor liability limits
- $170,000 is UIM limits
- TRICARE lien claim is $100,000
- VA lien is $67,000

Medicare lien (for amounts spent after SS Disability status) $_____?____

Questions:

1.My research suggests that TRICARE’s recovery is limited to a claim on the $30,000, not bases on $200,000 because the payment was for treatment by a non-military facility. Therefore; they are entitled to recovery only under FMCRA which does not seem to allow liens on UM/UIM benefits (recovery from person liable in tort, or his insurer). Although recovery under 10 USC 1095 would allow recovery of UM/UIM, (recovery from third party payers) that law does not apply since TRICARE's payment was not for treatment at a military facility. My resource, in addition to the plain language, is presentation material from the 2007 UBO/UBU TRICARE Conference. A Cornell Law Institute document also referenced the distinction.

The TRICARE rep has no idea what I'm talking about. Has your office addressed this issue before?

2.Do you have any suggestions about how to deal with all lien holders to best ensure my client gets a good portion of his settlement?

Thanks so much.
Charlotte Attorney

Answer:
Michael Russell, an attorney in our office, recently addressed your first question for another attorney:

I believe the analysis to this question is actually twofold. First and foremost, you are correct in your assertion that the United States does NOT have a right to the proceeds of first party insurance proceeds under the Federal Medical Care Recovery Act [1(a)., 42 U.S.C.A. 2651(a)]. The Court in Government Employees Ins. Co. v. Andujar, 773 F.Supp. 282, held that the United States did not have a direct right to UM proceeds under FMCRA. The FMCRA only gives the government the right to recover from the tortfeasor. In this case neither the injured party nor their insurer, were considered tortfeasors and thus the government did not have a right to recover on any settlement from the Uninsured/Underinsured motorist portion of an auto policy.

While, there is no direct right under FMCRA there MAY be a right under the express terms of the insurance policy and applicable state law. This second prong of the analysis requires an evaluation of the policy itself. If the government can qualify as an "insured" or "third party beneficiary" under the terms of the policy then they will have a right to these proceeds. In the aforementioned Andujar case the Court looked at the specific provisions of the policy. Because it was determined that GEICO's automobile policy could not be interpreted to include the government as an "insured" (policy actually specifically excluded the government from this classification), the Court held that the government could not recover the proceeds under this alternative theory. Thus in your case I would recommend that you obtain the policy for further analysis. If and when you obtain the policy, we would be more than happy to review the express provisions and determine whether the government could be considered an "insured" with potential rights to the proceeds.

For your second question, I consulted with one of our analysts. Medicare is always first. Their recovery right is strongest. They may compromise due to the policy limits or other extenuating circumstances but they will not compromise for the sake of VA and TRICARE. For reductions from VA and TRICARE, the analyst said he has had more luck securing reductions from the VA. He recommends starting there. He said VA and TRICARE each have a compromise process. Ask the caseworker at the VA and TRICARE for a compromise worksheet to fill out. Fill out that worksheet and write a letter (the compelling story I talked about yesterday) describing why you are requesting a reduction and why it's appropriate. In that letter you will need to include the information that is on the worksheet. The caseworkers at VA and TRICARE might have some additional tips...sometimes they can become your advocate.

I hope this helps!
Please let me know if you have any other questions.

My best,
Elizabeth Vish

Tricare Insured Plaintiff

2010-02-01T10:09:00.001-05:00

Question:
Is there a Duty to Notify Tricare before disbursing settlement monies?

Listmates:

I have a client insured with Tricare. My client suffered medical negligence at an army hospital and sought treatment at a private hospital for follow-up reparative surgery. Her medical specials are all from the private hospital and surgeons, only a portion of which was paid by Tricare.

When settling a case with a Tricare insured plaintiff, is Tricare treated as Medicare and Medicaid would be? Namely, before disbursing funds, MUST I notify Tricare before disbursing settlement monies to my client (as compared to the private health insurance company, who, if they do not send a notice of lien, the lawyer has no obligation to notify a private health insurer of suit and settlement monies?

Thanks in advance for your comments
South Carolina Attorney

Answer:
With respect to Tricare's scope of recovery, the U.S. military's rights arise under the Medical Care Recovery Act (42 U.S.C. Sections 2651-53). The MCRA states that when the Federal Government provides treatment or pays for treatment of an individual who is injured or suffers a disease, the Government is authorized to recover the reasonable value of that treatment from any third party legally liable for the injury or disease. The statute provides an independent right of recovery, but only for those payments actually made. (The statute does not contemplate any recovery for future payments to be made. (32 C.F.R. Section 757.14(a) and (d))).

Below is some additional information regarding US Navy reimbursement claims (from a recent opinion letter we prepared):

"...It is significant to note that the Navy's recovery right is NOT initially in the form of a notice of lien, or a claim. Instead, the Navy typically sends a letter to plaintiff's counsel requesting that counsel recognize the Navy's interest, and to take action consistent with protecting that interest by maintaining contact with the Navy's Legal Service Ofice (NLSO), thereby requesting approval before compromising the Navy's interests.

In exchange for plaintiffs' cooperation, the Navy would provide free of charge access to Navy doctors and access to Naval medical records and would not complicate the litigation process by becoming directly involved.

Please note that the Judge Advocate General's ("JAG") designee has limited rights to compromise a claim of more than $40,000 (42 CFR Section 757.19), and that any waiver or compromise involving a claim worth more than $40,000 will require investigation by the JAG office and additional documentation (42 CFR 757.18).

The Navy has no legal right to hire private attorneys to prosecute the Government's claim, but would refer any matter to the Dept. of Justice. 5 USCA Section 3106. Instead, the Navy would rather be a part of the settlement process by using plaintiff's private attorney to ensure that the government's interests are represented in the settlement process. The Navy does not want to be an additional party plaintiff, but wants its rights protected. Please note that the Government will take action to secure its interests (in a separate lawsuit) should "cooperation" from plaintiff and/or his counsel be withheld.

So, the bottom line is that the Navy would likely want (claimant) to do its work, and wants his "cooperation" to protect the Navy's interests in the lawsuit (assuming there are third party tortfeasors).

The one issue that keeps arising is to what extent does the Navy recognize procurement costs. So far, the only time that such costs are noted are when the reimbursement would cause a hardship. There are factors that the Navy's Legal Service Office can review, but those do not necessarily mean that the Navy is willing to compromise the reimbursement amount..."

I hope this helps.

My best,
Matt Garretson
www.garretsonfirm.com

Medicare Endorsement

2010-01-29T11:13:00.006-05:00

Question:
I appreciate your informative website. I note in your 10/26/09 posting that you address two methods of obtaining Medicare's endorsement of a multi-party settlement check. You note that, where the check is sent to Medicare for deposit and refund of net proceeds, Medicare will wait 5 days before sending the refund check. MSPRC advises, however, that it may take up to 10 weeks after deposit of the multi-party check before they are given the go-ahead by CMS to pay the refund. In your experience, are they able to get the refund check turned around in 5 days or should I expect to wait the 10 weeks? Thanks, again, for such a great resource.

Louisiana Attorney

Answer:
If a demand letter has been established on the case, then Medicare’s finance department would be able to apply the remitted check and issue a refund for the balance accordingly. The refund process would take at least the 10 weeks. If the demand has not been established, the check is still deposited but would remain in "unapplied check" status until there is an appropriate record set up in the system. In the later scenario, I would advise that you contact Medicare if the issuance of the check preceded the issuance of a demand. Unapplied checks have been known to sit at Medicare for an extensive period of time as the various departments are not always aware of each other's activities.

It would also be imperative for the Claimant’s Medicare number to be on the check so that it can be applied to the appropriate account. All of their systems are driven by this number and can slow down the process further if not provided.

If I can be of any assistance, please call me and I would be happy to discuss any further questions or concerns.

Carol Brown

Medicare's Name on Check

2010-01-25T15:32:00.005-05:00

Question:
We have a judgement on a jury verdict for millions of dollars. We know of a medicare lien for $9,000 but it may be higher because we do not have a final figure. Defendant wants to tie up the whole check for millions by putting Medicare on it as a copayee. We say we will refuse check and that interest will continue to run on the whole judgement. Are we right? Support for our position. I am aware of Tomlinson decison out of MDFL 2009.

Illinois Attorney

Answer:
Our firm has been seeing this fact pattern more and more in recent weeks. The reason for this increase is because those entities are misunderstanding their Medicare compliance obligations in light of the MMSEA. They believe that, by putting Medicare’s (or Medicaid’s) name on the settlement check, Medicare’s interests (as well as themselves) have been fully protected. This is neither the intent of the MMSEA nor is this the most effective way to protect Medicare’s interests. Putting Medicare's name on the settlement check does not equal absolute Medicare compliance. In fact, there is no legal requirement to put Medicare’s name on the settlement check as a payee. Medicare was not a party to the legal action, merely an entity entitled under the Medicare Secondary Payer Act to be repaid for conditional payments made from date of injury to date of settlement.

You have corrected noted Tomlinson as support for not putting Medicare's name on the check. Tomlinson v. Landers, 2009 WL 1117399 (M.D.Fla.) involved an auto accident case which was being settled for the $100K policy limit where Medicare had made some conditional payments. The defendant added Medicare’s name to the settlement check without discussing this prior with the plaintiff. The plaintiff returned the check, asking that it be re-issued without Medicare’s name on the check. The defendant insisted that it had no choice under federal law (namely 42 CFR 411.24) but to put Medicare’s name on the check. The plaintiff assured the defendant that Medicare would be reimbursed out of the settlement proceeds and agreed to indemnify defendant for any Medicare claims. The defendant refused to remove Medicare as a payee on the check.

The court held that: 1) federal law does not mandate that a primary payer (i.e. the defendant) make payment directly to Medicare; 2) the defendant would not have violated federal law by omitting Medicare’s name from the check; and 3) a primary payer may be liable to Medicare if the beneficiary/payee does not reimburse Medicare for any amounts owed within 60 days. In the end, plaintiff prevailed as the parties failed to reach a meeting of the minds with regard to this issue of reimbursing Medicare and the settlement was rejected.

As a practical matter, we know that Medicare prefers that settlement proceeds not be sent to them until the final claim determination (i.e. final demand) has been calculated. The final demand is that conditional payment amount less procurement cost offset allowed by Medicare in that particular case. This calculation cannot be performed until the final demand is requested from Medicare and this cannot be done until the settlement has been finalized. Thus, putting Medicare’s name on the check is not only unnecessary, but impractical. Tomlinson provides the case law behind the practical reasons for not putting Medicare's name on the settlement check.

John Cattie

8th Circuit Rules on Recovering Funds

2010-01-25T11:54:00.003-05:00

Question:
The facts of the case:
1.Settlement proceeds have been disbursed to client and spent.
2.Attorney fees were deposited in our general account and eventually disbursed for expenses and salaries.

Does the 8th Circuit allow the plan under a constructive trust theory or any other theory to recover anyof the funds? Is it possible to trace such funds?

Missouri Attorney

Answer:
The plan MAY be able to recover such funds from your client and even from yourself. I would first direct you to an article I recently wrote regarding a 6th circuit case. If you go to our website www.garretsonfirm.com and look to the bar on the right you will see an article entitled "What you should learn from the Longaberger case". This article provides some insight into an ERISA situation which may be similar to the facts posed in your question.

First, the plan may have a right to seek recovery from your client. The plan's right will be dictated by the strength of the plan language. If there is strong language, i.e. there are no defenses such as the made whole doctrine and the plan's language creates the right to an equitable remedy, the plan may recover from your client. The plan also may have the right to offset its interest against your client's future benefits.

Second, if the plan provided you with notice and you failed to set aside such funds they may be able to seek recovery for a portion of their interest from you. This was the case in Longaberger.

Third, the fact that funds are disbursed is irrelevant and tracing is not required. An equitable lien does not require tracing or maintenance of a fund in order for equity to allow repayment. In Sereboff, the Supreme Court stated, "Barnes confirms that no tracing requirement of the sort asserted by the Sereboffs applies to equitable liens by agreement or assignment: The plaintiffs in Barnes could not identify an asset they originally possessed, which was improperly acquired and converted into property the defendant held, yet that did not preclude them from securing an equitable lien. Id. at 365, 126 S.Ct. 1869. The focus is on the fact that when those settlement proceeds were received, the plan's equitable interest can vest."

In conclusion, without knowing more facts it is hard to predict the plan's right of recovery. While Longaberger has raised considerable concern among PI attorneys it is important to remember that the facts of that case were very specific. While these scenarios are not common, it certainly does illustrate the importance of taking ERISA liens seriously and properly addressing any claims for which you have received reasonable notice. If you have any additional or follow up questions please do not hesitate to contact me and we can discuss further. Thank you.

Michael D. Russell

TriCare's Right Against Uninsured Motorist Funds

2010-01-08T11:05:00.004-05:00

Question:
Does TriCare have a right of subrogation against Uninsured Motorist funds? I read a 1991 district court case out of Kansas, 773 F. Supp. 282, that appears to say that United States was not entitled under the Medical Care Recovery Act to the proceeds of an automobile victim's uninsured motorist benefits. If that is the case should that fact be verified with the Army through the act out of an abundance of caution?

Tennessee Attorney

Answer:
I believe the analysis to this question is actually twofold. First and foremost, you are correct in your assertion that the United States does NOT have a right to the proceeds of first party insurance proceeds under the Federal Medical Care Recovery Act [§ 1(a)., 42 U.S.C.A. § 2651(a)]. The Court in Government Employees Ins. Co. v. Andujar, 773 F.Supp. 282, held that the United States did not have a direct right to UM proceeds under FMCRA. The FMCRA only gives the government the right to recover from the tortfeasor. In this case neither the injured party nor their insurer, were considered tortfeasors and thus the government did not have a right to recover on any settlement from the Uninsured/Underinsured motorist portion of an auto policy.

While, there is no direct right under FMCRA there MAY be a right under the express terms of the insurance policy and applicable state law. This second prong of the analysis requires an evaluation of the policy itself. If the government can qualify as an “insured” or “third party beneficiary” under the terms of the policy then they will have a right to these proceeds. In the aforementioned Andujar case the Court looked at the specific provisions of the policy. Because it was determined that GEICO’s automobile policy could not be interpreted to include the government as an “insured” (policy actually specifically excluded the government from this classification), the Court held that the government could not recover the proceeds under this alternative theory. Thus in your case I would recommend that you obtain the policy for further analysis. If and when you obtain the policy, we would be more than happy to review the express provisions and determine whether the government could be considered an “insured” with potential rights to the proceeds.

While it may not be necessary to alert the government initially, a proper evaluation of the beneficiary’s automobile policy would help to determine if the government would be able to recover any funds from such a settlement.

Our best,
Jon M. Carmack