Thursday, November 20, 2014
What happens when a Medicare Beneficiary obtains a Personal Injury Settlement?
CMS recently withdrew a proposed rule on Medicare Secondary Payer and Future Medicals. The proposed rule was planned to give guidance on allocations in liability cases. This would be the first official guidance delivered by CMS regarding allocations in liability cases. Prior to this proposed rule, the last guidance was given in a one page memo from 2011.
According to the American Association for Justice, “CMS withdrawing the proposed rule called ‘Medicare Secondary Payer and Future Medicals’ has absolutely no impact on the underlying statutory text—the Medicare Secondary Payer Act; 42 U.S.C § 1395y(b)—that provides the parameters for reimbursing Medicare in Medicare Secondary Payer situations. To the extent reimbursement was required before the rule was withdrawn, reimbursement is still required. The rule being withdrawn has not altered any obligations in the statute.” Linda Lipsen, For All Trial Lawyers: Future Medicals Rule Withdrawn (Am. for Justice 2014), https://www.justice.org.
Lipsen went on to explain that, “[m]edicare was in the process of promulgating and which was poised to become the law of the land would have required that EVERYONE, both Medicare beneficiaries and non-beneficiaries alike, pay in full for all medical care that might be billed to Medicare in the future without taking into consideration whether or not the individual made a full recovery. More specifically, the rule as drafted by CMS stated:
‘If an individual or Medicare beneficiary obtains a “settlement” and has received, reasonably anticipates receiving, or should have reasonably anticipated receiving Medicare covered and otherwise reimbursable items and services after the date of “settlement,” he or she is required to satisfy Medicare's interest with respect to “future medicals” related to his or her “settlement” using any one of the following options outlined later in this [proposed rule].”’ Id.
Lipsen urged that this rule would have a severe impact on ability to recover claims stating “It would have significantly reduced  recoveries and made it impossible for many of them to bring claims at all, because there would have been no recovery after Medicare was paid. Eliminating this hugely unfair rule is highly beneficial to you and your clients.” Id.
What this means for now is that nothing has changed. There is no upcoming medical rule. The lawyer and the claimant are still obligated to protect Medicare’s future interests if you are settling for future medicals. If a party does not protect Medicare’s future interest, an injury victim is at risk of losing the ability to treat their injuries arising from the claim. This means that Medicare could deny paying for a client's future medical care if they fail to appropriately calculate and protect its interest in their settlement.
Medicare Set-Asides and the Medicare Secondary Payer Act
When a third party is responsible for injuring a Medicare-eligible person and Medicare pays for the subsequent medical care, the payment is considered conditional and repayment to Medicare is mandatory. Jeffrey R. Kuchel, Comment, FRUSTRATED SETTLEMENTS: COMMON PROBLEMS and SOLUTIONS in LIABILITY SETTLEMENTS INVOKING the MEDICARE SECONDARY PAYER STATUTES, 73 Mont. L. Rev. 395 (2012). Medicare is normally billed first and compensate for the beneficiary's care, but when another party is liable, Medicare has the right to recover these “conditional payments” from the responsible party pursuant to the Medicare Secondary Payer Act (“MSP”). Id. “Medicare Secondary Payer” is the phrase used when Medicare does not have primary payment responsibility, which is when another entity has the responsibility for paying before Medicare. Medicare Secondary Payer , 2014 CMS, Jan. 30, 2014 available at http://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Coordination-of-Benefits-and-Recovery-Overview/Medicare-Secondary-Payer/Medicare-Secondary-Payer.html (last visited Nov. 12, 2014).
Worker’s compensation insurance, liability insurance, and no-fault insurance claims are all situations where other entities will be the primary payer. Medicare Secondary Payer , 2014 CMS. If someone is entitled to Medicare and they were in an accident where no-fault or liability insurance is involved, no-fault or liability Insurance is the primary payer and Medicare pays secondary. Id. If the primary payer legitimately pays only a portion of the beneficiary's bill, Medicare may make secondary payments to supplement the primary payer's payment. 42 C.F.R. § 411.32.
When someone is entitled to Medicare and they are in a workers’ compensation accident, workers’ compensation is the primary payer. Medicare Secondary Payer , 2014 CMS. Medicare will typically not pay for an injury covered by workers’ compensation. Id. If a claim is denied by workers’ compensation because it is not covered, a claim can be filed with Medicare. Id. Before settling a workers’ compensation case, parties to the settlement should consider Medicare’s interest related to future medical bills and whether the settlement should include a worker’s compensation Medicare set-aside arrangement. Id.
When there are signs that the no-fault insurer, liability insurer, or workers’ compensation plan is not going to pay on time, Medicare might make a conditional payment. Id. A conditional payment is a disbursement Medicare makes for bills another party may have to pay for. Id. Medicare makes this conditional payment so that the recipient will not have to use their personal cash to pay the bill. Id. The payment is “conditional” because it must be refunded to Medicare when a settlement, judgment, or award is made to the beneficiary. Id.
A person who is a Medicare recipient, or soon to be Medicare recipient, involved in accident where other insurance is liable for the bills, must “set-aside” money to look out for the interest of Medicare. “The leading question preceding formation of a Medicare Set-Aside and pursuing authorization thereof include: what is the present and future medical condition of the claimant as opined by a qualified physician to a reasonable degree of medical certainty; and what has been the claimant’s health care usage history associated with the compensable event which will, to medical certainty, continue for a specified time in the future or, if no time is specified, his/her lifetime?” Tamela J. White, David A. Stackpole & , MEDICARE SET-ASIDES and FUTURE DAMAGES CONSIDERATIONS in CIVIL LIABILITY MATTERS, LESSONS LEARNED THROUGH the WORKERS’ COMPENSATION SET-ASIDE PROCESS, [78 ] Def. Counsel J. 429, 433 (2011).
The amount allocated to future medical expenses must be placed in a Medicare Set-Aside account. William L. Winslow, Medicare Set-Aside Requirements, Which Lay Dormant for Two Decades, Have Recently Been Revived in the Workers' Comp Arena. Personal Injury Cases Are Next, but Plaintiff Lawyers Needn't Panic. the Law Is on Their Side, 2008 Am. Ass'n for Just. 57 (2008). If the parties receiving the settlement do not specify what dollar figure signifies “future injury-related medical expenses”, CMS asserts that it will mandate repayment of former medical expenses covered by Medicare and additionally treat the rest of the settlement as cash allotted “to pay the plaintiff's future medical expenses.” Id. Accordingly, the plaintiff will be forced to deplete the full settlement before Medicare coverage is accessible. Id.
Recently, President George W. Bush signed into law the Medicare, Medicaid and SCHIP Extension Act of 2007 (MMSEA). 42 U.S.C.A. § 1395y(b)(8). The MMSEA is the latest legislation strengthening the government's goal of guaranteeing that Medicare is always “treated as the payer of last resort.” Medicare As Secondary Payer, 5 West's Fed. Admin. Prac. 6305 (2014). MMSEA requires that Medicare is alerted of any claims or settlements concerning a Medicare beneficiary where the payer is a workers' compensation or a liability insurer, or a no-fault or self-insurance program. Id.
“A failure to make a timely report can result in penalties, including a fine of $1,000 for each day of noncompliance for each individual for which the information should have been submitted.” William L. Winslow, Medicare Set-Aside Requirements, Am. Ass'n for Just. 57 (2008). If you have a Medicare-Eligible client, it is important to go to great lengths to appropriately report and calculate the future expenditures for all medical services.
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