Volume XXIII, No. 30, November 9, 2011
From the Law Offices of Garan Lucow Miller, P.C.
From the Co-Editors
James L. Borin & Simeon R. Orlowski
SPECIAL ISSUE – MEDICARE AND INSURERS
CONTRIBUTOR – M. SEAN FOSMIRE
This special edition of LawFax deals with a number of developments and issues under the Medicare Secondary Payer program. We encourage clients and carriers to review the previous issues of LawFax addressing these issues. We have collected them for your convenience here.
There are several new developments which will be of interest to no-fault insurers and liability insurers in connection with the Medicare Secondary Payer Program.
1. On September 30, 2011, CMS issued several new alerts and a memorandum. Several of the alerts pertain to MMSEA reporting of payments made to a Medicare beneficiary under either no-fault coverage or liability coverage. The most important of the alerts announced a further extension of the deadlines for reporting payments made in liability cases and adopted, for the first time, a schedule for implementation based on the total amount of the payment made. Under the new extension, payments to Medicare beneficiaries by liability carriers are required to be reported if the payment is made after October 1, 2011, and if the payment is $100,000.00 or more. If a payment meets those criteria, it must be reported in the first quarter of 2012.
Reporting of payments by liability carriers is to be phased in according to the following schedule:
Amount Paid by Report in quarter beginning
over $100,000 10-1-11 1-1-12
over $50,000 4-1-12 7-1-12
over $25,000 7-1-12 10-1-12
all over threshold 10-1-12 1-1-13
(Earlier in September, the MSP recovery contractor announced an essentially meaningless $300 threshold for reimbursement, subject to certain limits.)
As we noted in the December 2008 edition of LawFax, this reporting requirement applies to all payments made to a Medicare beneficiary, even those payments that are unrelated to medical expenses.
2. As we have noted previously in this publication, set-aside arrangements to account for future medical expenses related to an accident are not required in liability cases by either the statute or the regulations adopted by CMS, but it would be very appropriate for a plaintiff in a significant liability case involving future medical expenses to establish a voluntary set-aside and to seek to have it reviewed by CMS in order to protect the beneficiary’s future entitlement to Medicare benefits. In its memorandum issued on September 30, CMS announced that an opinion letter from the beneficiary’s treating physician, to the effect that there are not expected to be any future medical expenses incurred relating to the subject injury, would be acceptable to CMS and make it unnecessary to consider any further steps to “protect Medicare’s interest” in the settlement between the parties. In keeping with its standard practices, CMS would undoubtedly accept such a letter only from a treating physician, not from a non-treating examining physician.
This represents the first official announcement from CMS relating to set-aside arrangements in liability cases and it strongly suggests that some new policy announcements will be coming from CMS on this subject in the future. (See information below, however, on the Sally Stalcup memorandum.)
3. CMS entered into a contract with a new contractor, Provider Resources, Inc., to review set-aside arrangements in workers’ compensation cases, effective July 2011. The date was delayed a few months, however, as a result of bid protests having been filed by disappointed competitors.
These set-aside arrangements will no longer be reviewed by CMS personnel in its regional offices, as was the previous practice. There is no information suggesting that the new contractor will be involved in reviewing voluntary set-asides in liability cases.
4. CMS has also announced that the contract for the MSP recovery contractor, Chickasaw Nation Industries Inc., which ended on September 30, 2011, will not be renewed. CNI had come under a great deal of criticism from members of a Senate oversight committee for its general incompetence and “failure to respond to communications in a timely manner.”
For the present, the recovery work will be handled by Group Health, Inc., the current Coordination of Benefits contractor. CMS plans to integrate the functions of the recovery contractor and the COB contractor. The agency expects to have a contract awarded for the new Medicare Secondary Payer Integration Contractor (MSPIC) by the early summer of 2012. There will undoubtedly be a period of transition, adding to the confusion involved with the administration of the reimbursement plan and the issuance of recovery and reimbursement letters.
5. The MSP Recovery Contractor recently added a self-service telephone line to allow callers to receive updated information on cases. It is remarkable that, in the day of internet connectivity and widespread use of online databases, the outgoing contractor was satisfied to add an automated telephone inquiry system as a new “feature”.
6. On October 21, 2011, the recovery contractor announced a new simple reimbursement option under which a plaintiff who settles a personal injury case for $5,000 or less will pay a straight 25% of his recovery to the contractor as complete satisfaction of any Medicare reimbursement claims. This will be of benefit primarily to those who have had more than $1,000 of their injury-related medical expenses paid by Medicare.
In some cases, a lawyer may recommend settlement for $5,000, even though he believes his client’s case to be worth $10,000 or more, in order to take advantage of the plan, when the medical that has been paid is substantial.
The MSPRC has made no comment about sharing the costs of recovery under this option.
FUTURE MEDICAL EXPENSES IN TORT CASES
Although it has not been posted to the CMS MSP web site, we recently came across a “handout” dated May 25, 2011, and prepared by Sally Stalcup, MSP Regional Coordinator for Region VI, based in Dallas, on the question of how parties in liability cases can ensure compliance with Medicare requirements with respect to future medical expenses. This three-page document begins with a number of disclaimers, including the comment that it does not necessarily apply to any Medicare beneficiary outside of Region VI.
Most of the points made by Ms. Stalcup recapitulate what CMS officials have said in its publications or in their town meeting conferences. A couple of new points, though, are of significance to liability carriers when settling large-dollar claims involving future medical expenses.
1. Whenever any claim is settled or paid, Medicare’s interest must be protected.
2. CMS does not mandate a specific mechanism to meet that obligation. Set-asides are not required, even in workers’ compensation cases, when future medical expenses are included in a settlement or judgment.
3. A set-aside, however, is the “method of choice” favored by CMS because it provides “the best protection for the program and the Medicare beneficiary”.
4. The Act precludes Medicare payment for services when payment for those services has already been made or when payment can reasonably be expected to be paid promptly by insurance. This applies to any future medical expenses that were claimed or released.
5. Whenever a settlement or judgment provides funds for future medical expenses, they are expected to be available to pay for medical expenses related to what was claimed and/or released.
6. The new MMSEA reporting requirements added in 2007 do NOT require a set-aside when there is a recovery for future medical expenses. (Emphasis in original. CMS has had to make this point repeatedly to counter the extensive misinformation that insurers have received from certain quarters.)
7. CMS does have a procedure for reviewing set-aside arrangements in workers’ compensation cases.
8. CMS does not have a similar formal review process for liability cases.
9. Nonetheless, CMS expects the funds to be available, used, and exhausted on expenses that Medicare would otherwise cover.
10. CMS will not recognize an agreed allocation between medical expenses and other elements of recovery in a settlement agreement or even a judgment.
11. CMS will recognize an allocation based on “a court of competent jurisdiction’s order after their review on the merits of the case,” but only for the purpose of determining whether there are future medical expenses expected.
12. CMS will not be bound by a court’s decision on the allocation of the funds between medical expenses and other elements of recovery. [See notes below on this point.]
13. CMS will typically not review set-aside arrangements in liability cases. CMS recommends instead that counsel “consider this issue” and document “their determination as to whether or not their case provided recovery funds for future medicals”.
14. The CMS Regional Offices will review a [limited] number of set-aside proposals in liability cases.
15. The attorney for the plaintiff must (1) determine if the claim involves future medicals and (2) if so, “see to it that those funds are used to pay” for those expenses.
16. The attorney for a defendant must make the same determination under (1), and if so, “make sure their records contain documentation of their notification to plaintiff’s counsel and the Medicare beneficiary that the settlement does fund future medicals which obligates them to protect the Medicare Trust funds.”
17. The defendant must also (of course) report the payment as required under MMSEA.
Point 16 provides the most authoritative recent declaration from CMS as to what it expects from a defendant’s attorney and its insurer when the case that has been settled or the judgment that has been paid includes an award of future medical expenses. Under point 15, the attorney for the plaintiff has an obligation to “see to it” that the money is used for the payment of those medical expenses, so that they do not need to be paid by Medicare.
The attorney for the defendant does not have the same obligation. The attorney for the defendant will satisfy his obligation to properly account for Medicare’s interest if he (1) makes a determination that there are future medical expenses involved in the settlement or judgment and (2) appropriately notifies the attorney for the plaintiff and the plaintiff himself of their obligation to protect Medicare.
Thus, consistent with the positions that it has more indirectly suggested in the past, and consistent what we have advised, CMS emphasizes that it is the plaintiff’s attorney who has the primary obligation of taking the steps that are needed to provide for the use of the funds for medical expenses. The defendant, his attorney, and by extension his insurer satisfy their obligations by providing the appropriate notification and reminder to the plaintiff’s attorney that these obligations must be met.
We have noted in previous LawFax articles cases in which the parties requested the trial court to consider evidence and make a ruling as to an allocation between future medical expenses and other elements of recovery. The Stalcup memo takes the position that CMS will not be bound by such a judicial finding. That is consistent with the position that CMS has previously taken.
Nonetheless, getting an order from the court after an evidentiary hearing still may be a good option in certain cases, particularly where significant dollars are changing hands and when future medical expenses are expected to be significant. In light of the disinclination if not outright refusal by CMS to review a set-aside arrangement in a liability case, the best protection for the plaintiff in a large dollar liability case would be provided by doing either of the following:
1. having a reputable Medicare set-aside consultant review the medical records and calculate a reasonable projection of the future medical expenses and a reasonable fund to cover them – even though it is not reviewed by CMS – or
2. having a determination made by a court after a review of the medical evidence and other available information.
Following either approach, the plaintiff will protect himself from a suggestion that the parties have colluded to get around the rights of Medicare as it pertains to future medical expenses in their lawsuit.
As we have said previously, there is good reason for the defense to cooperate in these efforts at the initiative of the plaintiff.
Those clients who have reviewed our MSP Guide know that we recommend informal responses to the MSP Recovery Contractor in response to a conditional payments letter which includes items that are improper because (1) they go back further than the three-year CMS regulatory time limit or (2) they cover treatments for conditions unrelated to the subject accident. When the letters proceed to the reimbursement demand letter, the no-fault carrier should submit a written response within 60 days. In both cases, including documentation supporting the position is very important.
If those responses do not result in the desired revision to the demand and an agreement to pay, the next step is for the MSPRC to send a Notice of Intent to Refer the debt to the Department of Treasury for collection efforts. At this stage, our recommendation is that the insurer initiate litigation in Federal court, seeking a judicial determination of the legal issues, rather than allow the claim to proceed under the Treasury Department’s collection procedures.
We recently filed such a lawsuit on behalf of one of our carriers. We received an appearance from the office of the U.S. Attorney and a request for a limited extension of time to file an answer, which we readily granted. We sent the AUSA a copy of the submissions and supporting documentation that we had previously provided to the MSPRC. The AUSA consulted with the Office of the General Counsel for the Department of Health and Human Services, and perhaps with CMS personnel, and then advised us that they agreed with the position that we had asserted. After we asked for and received written confirmation of that position from the General Counsel’s office, we dismissed the lawsuit.
Using this approach, we had the benefit of at least two different attorneys as well as (we assume) other CMS personnel, reviewing the submissions and supporting information that had previously been sent only to the MSP Recovery Contractor. The combination of these aggressive efforts, on top of thorough documentation in previous submissions, resulted in an excellent and cost-effective result for our client.
(Please contact Mr. Fosmire if you would like a copy of the MSP Guide.)
MEDICARE ADVANTAGE AND NO-FAULT
Medicare Advantage (MA) plans are commercial companies (primarily health maintenance organizations or preferred provider organizations) which contract with CMS to provide an alternative to Part A and Part B coverage to Medicare beneficiaries. Rather than having CMS pay doctors, hospitals and other providers on a fee for service basis, CMS pays the MA plan a certain dollar amount per beneficiary per year, and then the MA plan pays doctors and hospitals based on its own payment formulas. The Medicare Advantage program is essentially a method to provide more predictability to the Federal government’s costs under Medicare.
Some no-fault insurers may not be aware that an MA plan does not have the same rights as do CMS and its recovery contractor under the Medicare Secondary Payer program. Essentially, the entire MSP program is irrelevant to payments made by MA plans. An MA plan is not automatically secondary to no-fault, as is CMS under the MSP law. Instead, it has only the rights that its contract provides. Some MA contracts provide for a secondary position, similar to the MSP program, by virtue of a clause that exempts them from having to pay when there is other available insurance. Some contracts, by contrast, provide only for rights of subrogation and reimbursement. When they include that language, they may be able to enforce a right of reimbursement as against other available coverage, but only after the claim has been submitted to and paid by the MA plan.
A key point is that the MA plan’s rights, based on contract, are governed by state law, not by Federal law. This was the holding in Care Choices HMO v. Engstrom, 330 F.3d 786 (6th Cir. 2003). Federal pre-emption does not apply. This leads to the conclusion that – for an insured who has elected coordinated coverage – the provisions of MCL 500.3109 and/or 3109a will come into play.
Section 3109 provides that benefits paid under a state or Federal law are to be subtracted from all PIP benefits. Section 3109a permits the insurer to offer an option for coordinated medical coverage (and a deductible) at a reduced premium. By virtue of the decision of the Michigan Supreme Court LeBlanc v. State Farm Mutual, 410 Mich. 173, 301 N.W.2d 775 (1981), Medicare benefits are to be treated under §3109a rather than §3109 for purposes of determining whether the offset will apply to non-coordinated insureds. No Michigan court has addressed the question of whether the same is true for MA plans.
Thus, when the insured has elected coordinated coverage, the statutory priority under sections 3109 and/or 3019a controls, and the MA plan is primary, even for the payment of medical expenses related to a motor vehicle accident. The no-fault policy does not have any obligation to pay those expenses.
NEW DATE FOR TROY BREAKFAST SEMINAR
Based on the pending No-Fault legislation which may or may not have been enacted by late October, Garan Lucow Miller, is re-scheduling the Troy Breakfast Seminar for April 19, 2012.