WHAT IS THE PLAINTIFF'S ATTORNEY TO DO?
(Last Update 03-26-09)
In late 2007 an amendment was made to the Medicare Secondary Payer Statute (MSP). Section 111 of the Medicare, Medicaid, and SCHIP Extension Act (MMSEA) requires providers of liability, no fault and workers' compensation insurance to report information regarding claims to the Centers for Medicare and Medicaid Services (CMS). The new rule takes effect July 1, 2009.
The new law has triggered discussion among primary payers, attorneys for both plaintiffs and defendants, structured settlement professionals, and special needs settlement attorneys regarding how the new law affects Medicare Set Asides (MSAs) in liability cases. Among the questions being asked are whether MSAs will now be required, or, if not, whether parties should nevertheless be concerned about a higher level of scrutiny by CMS under the existing provisions of the MSP.
With all of the confusion regarding MSAs in the context of a liability case, what is the plaintiff's attorney to do? Unfortunately, in the absence of regulations or written guidance from CMS, there is no tidy blueprint to follow. Further, there is no clear consensus among professionals who closely follow this issue, including among special needs settlement planners.
I. What Do We Know For Sure?
Reporting Obligation. The law does require primary payers to (a) determine if a claimant is entitled to Medicare, and (b) report to CMS, using the process that is now being developed. CMS has indicated that it will issue a memo in the next few months to resolve some of these questions about the process for reporting.
Settle Conditional Payment Claims. There remains an obligation to settle conditional payment claims; that is, reimburse Medicare for payments for services for which the primary payer was responsible during the pendency of the case.
MSAs Not Specifically Required by Amendment. Section 111 requires reporting by primary payers, but does not itself specifically require MSAs to pay for future medical costs in liability cases.
CMS Wants You To Do The Work. CMS interprets the existing MSP to include a requirement that Medicare's future interests be considered in a liability case. It has no regulations regarding MSAs and no procedure to review MSAs in personal injury cases. However, it consistently makes oral statements that: (1) it expects any funds allocated for future medicals to be spent before any claims are submitted to Medicare for payment, and (2) there is an obligation to inform CMS when future medicals were a consideration in reaching the settlement. In other words, CMS wants claimants and their lawyers to do the work, without any written guidance.
Chances of Review by CMS. The chances that CMS will later retroactively review liability cases that are settled at this time and in this region are small.
Potential Consequences. If CMS later determines Medicare's future interests were not reasonably considered, then the potential consequences for failing to do so are steep. CMS can deny Medicare coverage for injury-related services until the entire amount of the settlement is exhausted. The attorney may also be liable for failure to reasonably consider Medicare's interest.
II. Range of Opinion about Best Approach
As might be expected, there are a range of opinions among those who have studied this issue about the best approach. Following are simplified summaries of the various approaches now being used, with the thinking behind each approach.
Do Nothing. Congress and CMS haven't provided a clear statutory and regulatory framework. The chance of CMS ever retroactively enforcing an MSA is miniscule. Let them eat cake.
Don't Do An MSA But Provide for the Possibility. Put language in the settlement agreement (and, in cases involving trusts, in the trust document as well) allowing for the possibility of an MSA. While the chances of CMS retroactively enforcing an MSA are very small, there is some risk for the client and the professionals involved. Do not submit to CMS.
Estimate the Plaintiff's Future Medical that is Medicare Related. Obtain an informal estimate as described above, but limit it to future injury-related Medicare covered services. Use this number for an "informal" MSA. Submit/don't submit to CMS. CMS will be hard pressed to say later that Medicare's interests were not reasonably considered.
Obtain an MSA from a MSA Allocator. Do a formal MSA allocation and set up the MSA. Send to CMS, even though in some regions CMS will not respond, or will respond with a letter saying it will not review and that it reserves all rights. It will be really hard for CMS to later say Medicare's interests were not protected. Why take a chance that all of the plaintiff's hard won proceeds will be vulnerable to medical costs in the future because Medicare won't pay? At least this provides a cap.
III. What the Plaintiff's Attorney Can Do.
Start Early To Gather Information. Begin early in the case to develop the information necessary to resolve conditional payments and assist the defendant in its reporting obligations.
Stay Tuned. Clarification will be forthcoming from CMS regarding the MMSEA reporting requirements. Also, CMS has said that it is working on new FAQ's to provide guidance for personal injury cases. Make sure that you are tuned in to CMS trends and written guidance.
Make sure that the Client is Informed. The client should be informed that the law is unsettled and advised in lay terms about options and risks so that he or she can make an informed decision.
Include Language in the Settlement Agreement. No matter what approach is chosen (other than "do nothing"), address the issue in the settlement agreement, including detailed provisions that show that conditional payments will be reimbursed and that Medicare's future interests have been considered.
Coordinate MSA with any Structured Settlement and Special Needs Trust. If there is a formal MSA, or the claimant is advised to be prepared for the possibility of a MSA, if ever required, it will have an effect on any structured settlement and special needs trust. Make sure these aspects of the case are coordinated.
Release. Obtain a release and indemnity from your client or the client's legal representative, indicating that he or she has been advised of the need to consider Medicare's interest.
Hire a special needs settlement planner. There are attorneys who concentrate in the area of special needs settlement planning. They work with plaintiffs and personal injury attorneys regarding MSAs, and can coordinate MSA planning with qualified settlement funds, lien resolution, structured settlements and special needs trusts.
Fitzwater Meyer is experienced in special needs settlement planning, and can assist you with MSA questions as well as conservatorships, court approval of settlements, lien resolution, special needs trusts and other settlement planning matters.
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and is subject to change. It should be used for general purposes only and should
not be construed as specific legal advice by Fitzwater Meyer, LLP, or its attorneys.
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