Greg Lois joins the faculty of the National Business Institute for a seminar on "Medicare Set Asides in Personal Injury Litigation" to be presented in Newark New Jersey on August 7, 2012.

My topics are:

"Taking Medicare's Interests Into Consideration: Mandatory Insurer Reporting" Overview of the current and projected mandatory insurer reporting landscape as set out by Section 111 of the Medicare/Medicaid, SCHIP Extension Act of 2007

1. The Contextual Background of the Act;
2. Which Entities are Required to Report to the Government;
3. What Information is Necessary for Reporting;
4. The Penalties for Incomplete Submissions or Non-Compliance;
5. The Effects of Reporting on the Litigants and Their Case.

More information, including registration info, to follow.

A particular breed of snake-oil salesman has really gotten under my skin. They call themselves "Secondary Payer Compliance Experts."

In a recent visit to a client in Florida, I found myself defending the New Jersey practice of having the claimant's attorney obtain any necessary Medicare Set-Aside waivers or approvals. The best defense for this practice is that at least it is a reputable attorney doing the advocacy - with an interest in getting the lowest possible set-aside approved.

You see, I am just not convinced that these 'compliance specialists' are strong advocates for cramming down Medicare's alleged interest. They may come up with the lowest possible future medical cost projections to submit to Medicare but where is the advocacy to fight to get that projection approved?

And what happens if Medicare decides later that the Set-Aside was underfunded? These snake oil salesman will be long gone, and even if they are still around, they have no duty to defend you, and no legal liability for the challenged Set-Asides.

The downside to having attorneys obtain the MSA waivers or approvals is that it is slower.

OK. That may be true, but a little delay is a tradeoff I am willing to make for accountability and advocacy.

A new case (U.S. vs. Stricker, decided September 30, 2010) has established the statute of limitations period for a claim under the Medicare Secondary Payer Act.

The Medicare Secondary Payer Act is a Federal statute that enables Medicare to recover money spent during the pendency of a workers' compensation or civil claim ('conditional payments') or will have to expend in the future (depending on the size and type of settlement). Applying the Medicare Secondary Payer Act to the workers' compensation context has been challenging - we have devoted chapters to this subject in our New York and New Jersey Workers' Compensation handbooks).

We previously reported on the Stricker case back in January. In Stricker, Medicare brought actions against the attorneys and insurance carriers involved in a toxic-tort lawsuit. Medicare argued that the attorneys and the corporate defendants had failed to take Medicare'r recovery interests into account and had disbursed the settlement proceeds inappropriately.

In a stunning decision, The United States District Court for the Northern District of Alabama just ruled that Medicare's claims were to be dismissed for failing to file their lawsuit within the applicable Statute of Limitations time periods.

The Federal Court ruled that under the 'Federal Claims Collection Act' ("FCCA") (28 U.S.C. 2415) a three-year statute of limitations applied to the corporate defendants. The Federal judge also ruled that a six-year statute of limitations applied to the attorney defendants (the attorneys who represented the claimants in those cases).

The federal court also ruled that the statute of limitations started running for the corporate defendants "on the date that the settlement was approved by the state Court." In regards to the attorney defendants, the date of accrual for the statute of limitations was the date they received the first settlement payment. The different defendants each had different applicate statutes of limitations because the FCCA treats 'primary payers' (corporate tort defendants) differently than attorneys, who have a 'express contractual agreement' with the Medicare beneficiaries - namely, the attorney-fee agreement between them.

This outcome means that all of Medicare's claims for reimbursement in this case were dismissed. It is also interesting in that the settlement money pool ($300 Million in all) was funded over a period of years (the corporate defendants are scheduled to contribute additional funds to the settlement fund over a period of nine years - in fact they are still paying into the settlement fund (and will continue to pay until 2013).

For carriers and corporate defendants - this means that MSP has a three-year statute of limitations from the date the settlement is approved by the workers' compensation court or state court.

The MSP has been in effect since 1980, and there has been little effort to enforce its provisions in third-party liability cases. Moreover, there has been no indication from CMS that they would seek to exercise their MSP rights retroactively. Indeed, the workers’ compensation example has shown that CMS is not interested in ‘looking back’ to impose MSP responsibility.
We think that the MSP Act applies to third-party liability cases.
Although Medicare has not traditionally enforced its rights under the MSP with respect to third-party liability cases, it is clear that the Act applies to those cases. Lack of enforcement will likely soon change. All insurers, third-party health plans, self-insured plans, and self-administered plans must identify situations where the Plan is or has been primary to the Medicare program. The requirements of the MMSEA including the carrier/self-insured’s duties to identify claimants and provide “such other information as the Secretary may specify” certainly signal the beginning of an enforcement effort by CMS in third-party liability cases.
It is true that there is not yet a “formal” CMS process in place for reviewing settlements in the liability arena as there is in the workers’ compensation world. However, CMS offices in Dallas and Atlanta have begun reviewing third-party liability settlements and granting approvals of set-aside agreements. At a CMS “town hall” meeting - a dial-in telephone conference call - which took place on March 16, 2010, CMS stated that “the obligation of liability settlements to protect CMS for past-due and future medical bills is exactly the same as the workers’ compensation side.” CMS said “[w]here future medicals are a consideration in arriving at a settlement, then appropriate arrangements should be made for appropriate exhaustion of the settlement before Medicare is billed for related services.”

On December 29, 2007 President Bush signed into law the “Medicare, Medicaid and SCHIP Extension Action of 2007” (‘MMSEA’). The MMSEA made changes to the nation’s three major health programs: Medicare, Medicaid, and the State Children’s Health Insurance Program (SCHIP). Section 111 of the MMSEA imposes complicated reporting obligations on self-insured and insurance carriers who settle claims with plaintiffs who have received, or who are qualified to receive, Medicare benefits for the injuries that are the subject of their claims. Specifically, RREs must identify claimants who are Medicare beneficiaries and report data regarding their identities and claim to Medicare.
Liability insurers, self-insured defendants, and defense attorneys must take all steps necessary to ensure their compliance with the reporting requirements imposed by MMSEA Section 111. The MMSEA imposes substantial fines on ‘Responsible Reporting Entities’ (“RRE”) who fail to report qualifying claims. CMS may seek reimbursement from plaintiffs, defendants, carriers, and both the claimants’ attorneys and defense attorneys.
Mandatory reporting was initially scheduled to begin July 1, 2009. This was pushed back to April 1, 2010 and now is set for January 1, 2011. RREs must register with CMS, and should have already done so.
Triggers for reporting requirements include settling a claim with a payee who received Medicare payments. In addition, CMS has set a ‘declining’ table of reviewable claims values: $5,000 in 2010, $2,000 in 2011, and $600 in 2013. In other words, if a RRE is going to settle a claim for $601 in 2013, and the claimant is Medicare-entitled, the settlement must be reported to CMS. Even if the settlement falls below these “threshold” levels, Medicare’s reimbursement rights exist.


Noncompliance can result in fines of up to $1,000 per day per claimant.

During settlement negotiations, RREs and their representatives must take care to determine whether a claimant is a Medicare beneficiary and find out if there is a Medicare lien. The lien must be paid from settlement proceeds before money is distributed to the claimant and must be paid within 60 days of payment to the claimant.

My guide for Complying with MMSEA

Each carrier and self-insured must establish protocols to comply with the Medicare reporting requirements imposed by the “Medicare, Medicaid and SCHIP Extension Action of 2007” (‘MMSEA’). Each carrier and self-insured is left to its own devices to come up with these protocols. We have seen many of our clients turn to vendors to review claims and communicate with Medicare.
My Checklist:
Carriers must determine which claimants are Medicare beneficiaries and those non-Medicare beneficiaries who have a reasonable expectation of entitlement within 30 months of the settlement date.
A claims representative should determine entitlement to Social Security and Medicare as early as possible in the file’s life. Warning flags include: (a) Has the claimant been out of work more than six months (SSD); (b) Has the claimant been off work for 30 months or longer (Medicare); (c) Was it a catastrophic injury?; (d) Is the settlement value over $250,000 (including the cost of medicals paid)?; (e) Does the claimant admit to applying for SSD and getting denied or is the SSD denial on appeal?; (f) Is the claimant aged 62 and six months old or older?; and (g) Does the claimant have end-stage renal disease?
Our rule of thumb is that where the parties negotiate a settlement that terminates the obligation of the self-insured or carrier to pay for future medicals, even if the claimant denies being on Social Security Disability, independent verification should be obtained. A vendor can be used to identify Social Security recipients.
If the claimant is on Medicare but the settlement is less than $25,000 (and forecloses the possibility of the carrier/self-insured being responsible for future medicals) CMS will not review the settlement and either ‘approve’ a proposed set-aside or ‘waive’ Medicare’s set-aside requirement. In such an instance, the carrier/self-insured can prepare their own set aside agreement with the claimant. At settlement, appropriate consent and/or testimony should be obtained from the payee, making sure they understand that the payee must ‘spend down’ the allocable amount with medical bills prior to submitting bills to the compensated injury to Medicare.
One way of verifying that a payee is not on Medicare is to ask for copies of recent pay stubs. If the pay stubs are less than six months old, they cannot be a Medicare beneficiary.

The impact of the Medicare Secondary Payer Act on civil and workers’ compensation litigation is growing. In the next few years we expect that CMS’s enforcement activities will increase. On May 24, 2010, the New Jersey Appellate Court decided a case (Jackson v. Hudson Court) that we believe is the first case in New Jersey focusing on the MSP and a civil claim. In Jackson, the plaintiff sought to have the trial court issue an order allocating the proceeds of her settlement to discharge a Medicare lien. The Court refused to do so - forcing the payee to consider Medicare’s interest in her settlement.

This article (caution - very long!) is a comprehensive guide to handling claims (workers' comepnsation claims and liability matters) in which medicare may have an interest. Read on for my review of this important topic, with flow-charts illustarting the decisions facing the employer/defendant in personal injury/workers' compensation claims. Read More...

1. When must Medicare’s interest be considered?
Medicare’s interest must always be considered whenever:
(A) Medicare has paid for treatment for a disability/injury alleged in the claim petition; and/or
(B) In the closure of a workers’ compensation case the petitioner is Medicare entitled and future medicals for a disability/injury maintained in the claim petition are being foreclosed.

2. When is a petitioner considered “Medicare entitled”?
A petitioner is Medicare entitled if he or she is:
65 years or older (assuming sufficient work quarters); or
On Social Security Disability (SSD) for 24 months or longer; or
Suffering from End Stage Renal Disease (ESRD).

3. Is repaying Medicare for conditional payments (or obtaining a waiver) always required when the petitioner has received Medicare benefits?
Yes. CMS recommends that the process outlined under Question 4 of this memo be initiated as soon as possible for petitioners who have received Medicare benefits. To ensure that a record of any Medicare benefits be established, this process must be initiated in all cases when the petitioner is a Medicare beneficiary. One should also keep in mind that repaying CMS for past /conditional payments Medicare made on behalf of the petitioner is required even when no set-aside allocation review is required. Therefore, pleadings become very important in determining the extent to which past/conditional Medicare payment issues may play a role in resolving a claim. Plaintiffs/Petitioners who allege work injuries or disabilities that clearly cannot be sustained may be subjecting their cases to more extensive CMS/Medicare review and delay for alleged injuries or disabilities that will be found “non-compensable” later in the proceedings. In summary, adequate consideration must be given to the issue of conditional payments in all cases involving a Medicare beneficiary at the time of settlement. This includes cases resolved by Orders Approving Settlement, Section 20 Settlements, Judgments, and Second Injury Fund Awards. As long as the petitioner is a Medicare beneficiary, this issue must be addressed.

Medicare filed a new lawsuit on December 1, 2009 signaling a possible change in the recovery focus - from claimants (Medicare beneficiaries) to insurance carriers who contribute to settlements.
In the past, workers, their attorneys, employers, and even insurance companies have ignored or attempted to evade the fact that workers’ compensation is primary to Medicare. There were undoubtedly some instances in which a worker would go into a hospital for treatment of a work-related problem and show a Medicare card, and the hospital would bill Medicare. At times, no one on behalf of the employer or its insurer went out of the way to tell the hospital that the bill should have been sent to workers’ compensation or to reimburse Medicare after it had paid the bill.
In July 2001 CMS issued a memo to its regional offices. It suggests that under certain circumstances parties to workers' compensation claims should not settle those cases until after CMS has had an opportunity to review the settlement and approve the allocation to future medical expenses. In addition, Medicare asserted a right to repayment for medical expenses for treatments ‘related’ to the workers’ compensation claim but which had been paid by Medicare (“conditional payments”).
Since then, the settlement of workers’ compensation claims in which an employee’s future right to medical treatment is foreclosed and the claimant is Medicare-entitled or eligible have required a Medicare Set-Aside approval (or waiver). As any claims person can tell you, this has dramatically slowed down the closure rate of higher-value ‘lump-sum’ type claims (Section 20s in NJ, Section 32s in NY). At the same time, Medicare has been issuing ‘Conditional Payment Statements’ showing payments made for medical care which Medicare asserts may be related to the workers’ compensation claim - and therefore not payable by Medicare under the Secondary Payer Act. Read More...

The WCB has issued the following statement:

“The Board has been asked about the use of indemnification or hold harmless provisions in Section 32 agreements to protect a carrier or employer from liability of medicare payments related to an established workers’ compensation claim. The Board will not approve agreements containing such indemnification for payments made by Medicare for services provided prior to the Section 32 agreement.”

Workers’ Compensation Law Section 32 (part b1) directs the WCB to disapprove unfair agreements. We expect the WCB to decline to approve Section 32s where there have been conditional payments made by Medicare and the carrier seeks indemnification. (We also think such a disapproval would be appealable under Section 23). Of course, a Section 3 can be ‘silent’ on the conditional payment issues, but we continue to recommend that the payments be addressed at time of settlement.

On September 26, 2009 Medicare issued guidance as to how Set-Aside proposals "could" be submitted to Medicare. We expect that these recommendations will now be 'best practices' for dealing with Set-Aside arrangements. Read More...