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Medicare Set- Aside Arrangements in Workers’ Compensation & Liability Settlements Presented by John J. Campbell, JD, CELA, MSCC © 2009 Law Offices of John.

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Presentation on theme: "Medicare Set- Aside Arrangements in Workers’ Compensation & Liability Settlements Presented by John J. Campbell, JD, CELA, MSCC © 2009 Law Offices of John."— Presentation transcript:

1 Medicare Set- Aside Arrangements in Workers’ Compensation & Liability Settlements Presented by John J. Campbell, JD, CELA, MSCC © 2009 Law Offices of John J. Campbell, P.C. Law Offices of John J. Campbell, P.C S. Ulster St., Ste. 150 Denver, CO (303)

2 Medicare Secondary Payer Requirements Medicare Secondary Payer Statute –42 U.S.C. §1395y Medicare Secondary Payer Regulations –42 C.F.R. §§ and CMS Policy Memoranda & FAQ’s – policy & procedure for WCMSAs

3 Medicare Secondary Payer Requirements Pre-Settlement:Post-Settlement: Conditional Pay-MSA ment /Right of Recovery

4 Medicare Secondary Payer Statute 42 U.S.C. §1395y (2) Medicare secondary payer (A) In general Payment under this subchapter may not be made, except as provided in subparagraph (B), with respect to any item or service to the extent that—... (ii) payment has been made or can reasonably be expected to be made under a workmen's compensation law or plan of the United States or a State or under an automobile or liability insurance policy or plan (including a self-insured plan) or under no fault insurance...

5 Medicare Secondary Payer Statute 42 U.S.C. § 1395y (B) Repayment required (i) Authority to Make Conditional Payment The Secretary may make payment under this title with respect to an item or service if a primary plan described in subparagraph (A)(ii) has not made or cannot reasonably be expected to make payment with respect to such item or service promptly (as determined in accordance with regulations). Any such payment by the Secretary shall be conditioned on reimbursement to the appropriate Trust Fund in accordance with the succeeding provisions of this subsection.

6 Medicare Secondary Payer Statute 42 U.S.C. § 1395y (B) Repayment Required... (ii) Primary plans A primary plan, and an entity that receives payment from a primary plan, shall reimburse the appropriate Trust Fund for any payment made by the Secretary under this title with respect to an item or service if it is demonstrated that such primary plan has or had a responsibility to make payment with respect to such item or service.

7 Medicare Secondary Payer Statute 42 U.S.C. § 1395y (B) Repayment Required... (iii) Action by United States In order to recover payment made under this title for an item or service, the United States may bring an action against any or all entities that are or were required or responsible... to make payment with respect to the same item or service (or any portion thereof) under a primary plan. The United States may... collect double damages against any such entity. In addition, the United States may recover under this clause from any entity that has received payment from a primary plan or from the proceeds of a primary plan's payment to any entity.

8 Medicare Conditional Payments Payments made by Medicare for services that may be responsibility of a primary payer –Applicable to WC, Liability, No Fault Auto Medicare has “right of recovery” for the full amount of any Conditional Payment from primary payer and from any entity who receives payment from primary payer (e.g., providers, claimants, attorneys, etc.) Makes no difference if overpayment occurs before or after settlement

9 Medicare Rights of Recovery Medicare Rights of Recovery have priority over all other private, statutory or government liens and claims Right of Recovery is triggered when payment is made

10 Medicare Rights of Recovery Penalties –Double damages plus interest –Prosecution by Department Of Justice

11 Medicare Rights of Recovery Case Law –U.S. v. Sosnowski, 822 F. Supp. 570, 573 (W.D. Wis. 1993). U.S. v. Harris, Case No. 5:08CV102 (N.D.W.V. Nov. 13, 2008). –U.S. v. Baxter International, 345 F.3d 866 (11th Cir. 2003). MMA of 2003 – –Prompt payment not required –No admission of liability needed –Defines primary payer (self-insured plans) –Legislatively codified Baxter and overturned Thompson v. Goetzman, 315 F.3d 457 (5th Cir. 2002), aff'd en banc, 337 F.3d 489 (5th Cir. 2003). »Brown v. Thompson, 374 F.3d 253 (4th Cir. 2004) –Telecare Corp. v. Leavitt, 409 F.3d 1345 (Fed. Cir. 05/25/2005)

12 Medicare’s Interests In WC & Liability Settlements Medicare will not pay if “payment has been made” by “an automobile or liability insurance policy or plan (including a self-insured plan) or under no fault insurance” for an Item or Service Covered by Medicare -- Medicare retains status as secondary payer, even after a WC or liability settlement; 42 C.F.R. § : CMS authorized to review the "reasonableness" of an allocation for future medical expenses in a WC settlement; CMS will disregard a WC settlement completely if it appears to be an attempt to shift responsibility for future medical expenses to Medicare.

13 Medicare’s Interests In WC & Liability Settlements Medicare will not pay for future injury- related medical expenses until allocation to future medicals in WC or Liability settlement exhausted. If there is no allocation in WC or Liability settlement, CMS will require that the entire settlement be spent on future work-related medical expenses before Medicare will cover those services.

14 Medicare’s Interests In WC & Liability Settlements Arguably, CMS Has No Authority in a Liability Settlement to: –Review reasonableness of allocation; –Disregard settlement if it appears to be “attempt to shift responsibility” to Medicare. BUT … Regional Offices are doing exactly this! AND -- CMS could easily expand regulations if needed

15 Reasonably Considering Medicare’s Interests in WC & Liability Settlements July 23, 2001: "Workers' Compensation: Commutation of Future Benefits” CMS has published ten additional memoranda defining and refining CMS policies and procedures for the use, submission, approval and administration of WCMSA's. All of CMS' memoranda have been published as FAQ's on CMS' website:

16 CMS Policy Memoranda (FAQ’s) Commutation vs. Compromise Criteria for Submission and Review of WCMSA’s No Payment of Administrative Fees or Attorney’s Fees from WCMSA’s Submission through COBC Information Required With WCMSA Submissions Estimated Time for Review (45-60 days) Self-administration Permitted

17 CMS Policy Memoranda (FAQ’s) No Reduction in WCMSA Amount or early termination of WCMSA Payment of Taxes Payments allowed when Claimant not Eligible for Medicare MSA Amount Must Include Future Prescription Drug Expenses Determination of Life Expectancy Use of Rated Ages Pricing of implantable devices

18 CMS Policy Memoranda (FAQ’s) CMS has not yet published policy or procedures for Liability MSAs, but: –Medicare’s Interests Must be Reasonably Considered –COBC must be notified of settlement –CMS ROs may review at their discretion and have been doing so since 2006

19 Reasonably Considering Medicare’s Interests in WC & Liability Settlements CMS “requires” submission and review of the WC Settlement agreement and a Medicare Set Aside Arrangement (MSA) whenever the WC settlement meets the following review criteria: Class 1: The claimant is currently eligible for Medicare and total uncommuted value of WC settlement exceeds $25,000; or Class 2: The claimant is reasonably expected to become eligible for Medicare within 30 months of a WC settlement with total uncommuted value of more than $250,000. These are workload control criteria only. THESE ARE NOT SAFE HARBORS!!

20 Reasonably Considering Medicare’s Interests in WC & Liability Settlements Whether or not to review proposed settlement agreement and MSA in a Liability settlement is completely at the Regional Office’s Discretion; No review criteria specified for Liability MSAs.

21 Reasonably Considering Medicare’s Interests in WC & Liability Settlements Set Aside Amount = Reasonable Settlement Allocations to: –Future Medical Expenses and –Future Rx Expenses For: –Injuries related to the claim which would –Normally be Covered by Medicare –Based on the Claimant’s Life Expectancy (actual or rated age) Determined Based upon MSA Allocation Report, Life Care Plan, IME, etc.

22 Reasonably Considering Medicare’s Interests in WC & Liability Settlements The first Medicare Set Aside Trust was submitted to and approved by HCFA (now CMS) in WHY? –To provide a structured and safe means for the settling WC claimant (and WC carrier) to reasonably consider Medicare's interest with the "blessing" of CMS. The same reasoning applies to both WC and Liability settlements today.

23 Reasonably Considering Medicare’s Interests in WC & Liability Settlements –CMS does not require a formal trust or administration agreement, but use one anyway! –Whether MSA is self-administered or professionally administered: If Improper Distribution, Medicare Will Not Cover Future Medical Expenses Until Refunded and Properly Exhausted

24 Reasonably Considering Medicare’s Interests in WC and Liability Settlements WCMSA’s are Submitted Through The Coordination Of Benefits Contractor (COBC) All WCMSA Submissions Must Include: –Cover Letter With Basic Information; –Rated Age or Other Life Expectancy; –Medical Analysis and Cost Projection – LCP, IEP, Medicare Set Aside Allocation Report, or Physician’s Statement;

25 Reasonably Considering Medicare’s Interests in WC & Liability Settlements –Proposed WC Settlement With Allocations –Set Aside Amount; –Medicare Set-Aside Arrangement (trust, custodial agreement or self-administered), Including Name of Administrator; –Medical Records (at least 2 yrs.); –Claims Payment History; –CMS Approval Conditional Until a Final Signed WC Settlement and Approval Order is Provided.

26 Reasonably Considering Medicare’s Interests in WC & Liability Settlements Liability MSAs are submitted to the appropriate Regional Office if the RO agrees to review; Submissions that substantially follow the requirements for contents of WCMSA submissions tend to be approved more often.

27 Reasonably Considering Medicare’s Interests in WC & Liability Settlements Unique issues in Liability – e.g., comparative fault, state tort damage caps, insurance policy limits, etc. Policies for Liability MSAs are being developed on case by case basis through Regional Offices; Liability MSAs are being treated exactly the way WCMSAs were being treated prior to CMS’ July, 2001 memorandum; Policy memos on Liability MSAs will come – just a matter of time

28 Reasonably Considering Medicare’s Interests in WC & Liability Settlements CMS is increasing efforts to enforce its interests under the MSP statute – CMS Regional Offices would not be able to conduct discretionary review of Liability MSAs unless CMS Central Office authorized this! –Medicare, Medicaid & SCHIP Extension Act of 2007 (MMSEA) Mandatory reporting requirements for WC and Liability insurance carriers effective July 1, 2009 Whenever there is a “payment” carrier must determine whether claimant is eligible for Medicare

29 Reasonably Considering Medicare’s Interests in WC & Liability Settlements Medicare, Medicaid & SCHIP Extension Act of 2007 (MMSEA) – cont. –If claimant eligible, carrier required to report information required by CMS –Civil penalties for failure to report on time -- $1,000 per day per claim!

30 Reasonably Considering Medicare’s Interests in WC & Liability Settlements MMSEA does not say anything about liability MSAs being required effective 7/1/2009 –The requirement to reasonably consider Medicare’s interest in Liability settlements has been in the MSP statute since 1980! –CMS representatives have been stating this position publicly since at least 2005.

31 Reasonably Considering Medicare’s Interests in WC & Liability Settlements MMSEA does say that required reporting entities must provide information required by CMS –CMS is almost finished developing data fields for mandatory reporting –So far, information required includes all information and documentation required for CMS review and approval of WCMSAs –Why gather this information from WC and Liability carriers if not to strengthen CMS’ ability to enforce its interests in WC and Liability settlements?

32 Reasonably Considering Medicare’s Interests in WC & Liability Settlements The MMSEA is clearly designed as an MSP enforcement tool for both WC and Liability! Practitioners not currently considering Medicare’s post-settlement interests in Liability settlements (i.e., through funding of a Liability MSA) are risking significant exposure to liability for themselves and the Liability carrier and unnecessary loss of Medicare benefits to plaintiff.

33 Medicare’s Interests In WC Settlements Best Practices in Liability Settlements: –Use reasonable allocation to fund MSA; –Supporting documentation in file; –Use formal agreement or trust; –Administer as if a WCMSA; –Attempt submission to RO for review in larger settlements

34 CMS Regional Offices Region I: Boston JFK Federal Building, Rm Boston, MA Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, Vermont Region II: New York 26 Federal Plaza, Room 3811 New York, NY New Jersey, New York, Puerto Rico, Virgin Islands Region III: Philadelphia 150 South Independence Mall West Philadelphia, PA Delaware, District of Columbia, Maryland, Pennsylvania, Virginia, West Virginia

35 CMS Regional Offices Region IV: Atlanta 61 Forsyth Street, SW, Suite 4T20 Atlanta, GA Alabama, North Carolina, South Carolina, Florida, Georgia, Kentucky, Mississippi, Tennessee Region V: Chicago 233 North Michigan Avenue, Suite 600 Chicago, IL Illinois, Indiana, Michigan, Minnesota, Ohio, Wisconsin Region VI: Dallas 1301 Young Street, Rm. 714 Dallas, TX Arkansas, Louisiana, New Mexico, Oklahoma, Texas

36 CMS Regional Offices (cont.) Region VII: Kansas City 601 East 12th Street, Room 235 Kansas City, MO Iowa, Kansas, Missouri, Nebraska Region VIII: Denver 1600 Broadway, Suite 700 Denver, CO Colorado, Montana, North Dakota, South Dakota, Utah, Wyoming Region IX: San Francisco 75 Hawthorne Street, 4th Floor, Suite 401 San Francisco, CA American Samoa, Arizona, California, Commonwealth of Northern Marianas Islands, Guam, Hawaii, Nevada

37 CMS Regional Offices (cont.) Region X: Seattle 2201 Sixth Ave, Ms/Rx-44 Seattle, WA Alaska, Idaho, Oregon, Washington

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