While each State has its own approach to workers' compensation and personal injury claims, one common denominator is the role of the newly named Centers for Medical and Medicare Services (CMS), formally known as the Health Care Financing Administration (HCFA), and in particular its Medicare Coordination of Benefits (COB) section. The purpose of COB is to enforce federal statutes and regulations in recovering health care payments by the Medicare program during the pendency of an injury claim, or in the alternative, not to make Medicare payments if COB can identify an insurer, self-insurer or defendant who is liable for medical payments. It is no longer enough to for attorneys consider the impact the injury case has on federal benefits such as Social Security Disability, Supplemental Security Income and Medicaid. Attorneys must consider and deal with Medicare issues as part of any settlement.
Medicare’s statutory authority as a secondary payer has been on the books for decades. Since the mid to late 90's, however, CMS has made its presence known on the radar screen of workers’ compensation attorneys, and to a lesser extent, personal injury and medical malpractice attorneys. Although there is very little in the way of actual litigation in this area, the issue has taken on a life of its own to the point that many injury settlements are stalled and fall apart because of misconceptions and flat out ignorance of the law. It is therefore imperative that the bar educates itself as to what is and is not required under federal law.
As they relate to injury claims, the Medicare Secondary Payer(MSP) rules are actually straightforward:
• If Medicare payments have been made for injuries during the pendency of the claim, CMS has a statutory lien that must be satisfied by total reimbursement, or negotiation with CMS;
• If future medical costs are part of a settlement, then Medicare payments will not be made for injury related medical treatment until that portion of the settlement allocated for future medical costs have been used for injury related expenses that would otherwise be covered under Medicare;
• If a service is not covered under an injury claim, payment cannot be reasonably expected promptly, or liability is contested, conditional payment may be made by Medicare;
• If medical services are not related to the injury claim, they will be paid by Medicare, subject to any applicable coinsurance or deductible amount. This holds true before settlement and after any settlement or award for care is made.
How these rules have been interpreted and applied has been the subject of much debate and confusion. Many believe that when a case is settled by a lump sum, and the person is or will be eligible for Medicare within 30 months, the settlement must include a trust to cover future medical needs. There is no legal authority or requirement for a “Medicare Set-Aside Trust.” This is a creation of certain attorneys who have successfully marketed and convinced insurance companies and some attorneys that absent a trust, the company and the attorneys may be pursued by CMS for damages if post settlement medical bills are submitted to, and paid by, CMS. CMS has responded by creating a new bureaucracy within itself (COB) and has issued several policy memoranda, available on its website:
These policies provide guidelines and a mechanism for CMS approval of future medical care settlement allocations that, so far, only address workers’ compensation settlements. Thus, for those who wish a certain degree of certainty before settling, settlement documents may be submitted to CMS. In turn, working with glacial speed, CMS will approve or disapprove settlement proposals pursuant to their published memos.
If CMS approval is required before a defendant will settle, settlement proposals should be sent to:
c/o Coordination of Benefits Contractor
P.O. Box 660
New York, N.Y. 10274-0660
Attention: WCMSA Proposal
The only statutory and regulatory requirement is that the settlement contain an appropriate and adequate allocation for future medical costs that do not shift the burden for care to Medicare. As long as the medical care settlement proceeds represent a reasonable sum based on the evidence, and as long as those funds are first used before Medicare payment is sought, the Medicare Secondary Payment statute and regulations will be satisfied.
Even in cases where liability is contested, if a settlement appears to represent an attempt to shift to CMS the responsibility for payment of medical expenses for the treatment of an injury, the settlement will not be recognized and it will be assumed that the entire settlement was for future medical care. CMS will not blindly accept anything that has been approved by a state judge, but if the language looks reasonable and there is sufficient medical documentation then the probability of CMS second-guessing the settlement document diminishes.
In that regard, the Medicare Fiscal Intermediary Manual Part 3, Sec.3407.6 defers to a reasonable settlement and states: " In general accept a decision by a State WC agency on a contested claim, or a compromise settlement which has been approved by a WC agency, as a basis for applying the WC limitation, except where the settlement did not make reasonable provision under WC of all work related medical expenses . . . where it is clear that an attempt was made to shift responsibility, deny the Medicare claim."
Accordingly, when settling future medical benefits, you must have a rational basis for allocating future medical care. You will need to know which treatment and services Medicare pays and which medical devices, medications and prescriptions they don't, to ensure that all future costs are addressed and allocated. (So far, the regulations do not address Medicare Part C and Medicare Part D benefits.) Remember, you are settling the defendant’s liability for future medical care, so all medical care that would be covered in the case (not necessarily covered by Medicare) is represented by an appropriate allocation. You should be sure to include language in the settlement document which describes the expected nature of all future medical needs, and estimated value. Often this is done by way of a life-care plan. This area of law is in flux and while there has been some litigation, none of the reported cases have resulted in an insurance company, attorneys or beneficiaries to repay CMS for post settlement medical costs. Rather, they deal with pre settlement care that was not reimbursed or otherwise addressed prior to settlement. You should keep up to date by checking the CMS website routinely: http://www.medicare.gov. You should also be aware that current regulations do provide for compromise or waiver of Medicare claims under certain circumstances, generally in hardship situations. None of us, however, want to be the test case.
Just as each injured person’s case is unique, there is no black and white procedure for dealing with CMS in those cases in which current or future Medicare benefits are available to your client. I, for one, do not favor setting up a “Medicare Set-Aside Trust.” Instead, my clients set up a designated account out of which Medicare-covered services are paid. These payments can then be presented to CMS once the allocation is exhausted. Unfortunately, I have had little success in convincing insurance company defense attorneys that we do not require CMS approval before we settle. Therefore, my practice is to agree to a third party vendor’s future medical cost allocation, work backward from there on the settlement amount, have the settlement approved by the Judge and then hold the allocation in my client interest bearing trust account pending CMS approval. Medical treatment costs consistent with the allocation can be paid out of the trust account. Once the approval is made, the account is released to the client to set up his or her own account.
Regardless of the methods you choose, the best practice is to avoid the problem by an appropriate and adequate allocation of future medical costs, and with respect to pre settlement costs, by obtaining the current billings of all medical providers to ensure that any pre settlement treatment paid by, or billed to, Medicare is addressed.
This article is reproduced with the permission of the author, Melissa C. Brown, Esq.