Category Archives: Medicare

Are You In Compliance? New MMSEA Requirements

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.

Medicare Secondary Payer – The Latest ‘Best Practices’ for Practitioners

Medicare is a Federally-sponsored health care plan that is available to individuals who are 65 or over and to individuals who have received Social Security Disability Insurance (SSDI) benefits for more than two years. This includes a significant number of workers’ compensation claimants. Since 1980, the Medicare Secondary Payer Act (“MSP”) has made clear that if medical expenses could be covered under either workers’ compensation or Medicare, workers’ compensation, and not Medicare, should pay. In other words, Workers’ compensation is primary and Medicare is secondary.

Background

Medicare is administered by the Centers for Medicare and Medicaid Services (CMS). This agency was previously known as the Health Care Finance Administration. CMS delegates some of its work, especially work dealing with the collection of overpayments, to private contractors that vary by region and state.
The MSP seeks to protect Medicare funds by making sure that Medicare does not pay for services when another primary source of coverage – including liability insurance, no fault insurance, and self-insurance, as well as workers’ compensation insurance – is available. Under the MSP, all parties to a settlement are potentially liable to Medicare for reimbursement of medical payments it has made on behalf of a settling claimant.
Medicare’s position, that its coverage is ‘secondary’ to workers’ compensation, was strengthened by amendments to the Act in December of 2003. The amendments came with the “Medicare Prescription Drug Improvement and Modernization Act” which expanded medicare’s power to enforce the MSP through the Center for Medicare and Medicaid Services (“CMS”). The amendments authorize CMS to seek recovery “against any entity, including a beneficiary, provider, supplier, physician, attorney, state agency, or private insurer that has received any portion of a third-party payment directly or indirectly” if the funds were part of a settlement from a primary insurer.
In the past, workers, their attorneys, employers, and even insurance companies have ignored or attempted to evade the fact that workers’ compensation and some civil settlements should be considered ‘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. 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. There were also, undoubtedly, situations in which a worker and an employer agreed to settle a workers’ compensation claim (by way of Section 20) and the worker asked, “What about my future medical expenses?” To which a presumed response was, “Just submit it to Medicare.”
Medicare expenditures represent about 25 percent of the total budget of the federal government. There is tremendous pressure to reduce Medicare expenses. On several occasions in the last few years, Medicare has, for example, arbitrarily reduced the amount it pays doctors by four percent or more. Medicare has been searching for every way it can to control its costs. In 2000 and 2001, studies by the General Accounting Office pointed out that Medicare was losing money by paying for certain services that should have been covered under workers’ compensation. At about the same time (perhaps in response to the GAO), CMS began to more aggressively enforce its right to have workers’ compensation insurers pay Medicare back when required. 2009’s “Affordable Care Act” passed Congress and removed $500 Billion in Medicare funding. That leaves a significant deficit in Medicare’s revenues and will likely provide more motivation for CMS to aggressively pursue reimbursement.
With regard to ongoing care when a worker is currently entitled to workers’ compensation, the situation is fairly straightforward: Workers’ compensation should pay and Medicare should not. The situation becomes much more complicated with regard to settlements. When a worker receives a lump sum (Section 20 or Section 32) and an employer is relieved of its liability for future benefits, in most cases, some of the lump sum is for the payment of future medical benefits. Until that amount is exhausted Medicare should not be expected to pay for medical expenses for the covered condition. When that amount is gone, Medicare should begin paying. The problems concern how to determine how much of a settlement should be allocated for future medical expenses and when is that amount exhausted.

Pre-Approval
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. The memo discusses the circumstances under which the regional offices will “pre-approve” such an allocation. It discusses pre-approval in two categories of cases:
(1) Cases in which the workers’ compensation claimant is currently entitled to Medicare benefits.
(2) Cases in which the injured individual has a “reasonable expectation” of Medicare entitlement within 30 months of the settlement date and the settlement is over $250,000 (Patel 2001, Question 1).

Medicare announced that the ‘threshold’ for reviewing cases was to be set at $25,000. Medicare refuses to provide a pre-approval of set-aside unless the lump-sum payment to the claimant exceeds $25,000. This does not mean that the parties do not have to consider Medicare’s future interest – it just means that Medicare will not review the final determination of the parties. Self-insured and carriers are encouraged to formulate a cost projection for future medicals and allocate a portion of the settlement toward future medical.
After a case is settled, CMS wants the parties to create some form of “set-aside” arrangement in which the funds for future medical expenses that would be covered under Medicare are placed in a trust or deposited in a separate account. Medicare will begin paying medical bills for the work-related condition only when set-aside is depleted and the funds are accounted for.
This has caused considerable difficulty for the workers’ compensation system. If a case is settled for more than $250,000, it is reasonable to devote the time and resources necessary to obtain pre-approval and create some form of set-aside agreement. However, the vast majority of workers’ compensation claims are settled for much smaller amounts. The time and effort that pre-approval and set-asides require is very substantial when compared to the amounts involved. The suggested procedures have served to create a serious burden on workers’ compensation.
An insurance company who fails to make certain that CMS approval has been obtained is on the hook for double the amount of the settlement.

Set-Asides
You should expect your defense team to: Review the medical situation and prepare a defensible estimate of how much of a lump-sum settlement should be allocated to future medical expenses. This is sometimes called a “life care plan.” More foten, we call this Medicare’s “Set Aside.”

1) Obtain pre-approval from CMS of the amount of the settlement that will be allocated to future medical expenses.

Create a Medicare set-aside arrangement. These are sometimes formal trusts, sometimes less formal agreements, that pay or keep track of the expenditure of the portion of the settlement that is allocated to future medical expenses. These vendors have played a significant role in the situation. 
Often, a defense attorney will merely monitor the claimant’s counsel’s progress in achieving the milestones discussed above.
type of closure
Figure 1 shows that the need for a Medicare set-aside arrangement or waiver depends on the type of file closure. The status of conditional payments or payments for medical treatment by Medicare which should have been paid for by the carrier/ self-insured remain the province of Medicare in every case.
The Medicare statute does not allow Medicare to make a payment if a workers’ compensation policy should be the proper primary payer. In the case of a denied claim, the workers’ compensation carrier will not pay for medical treatment. In such cases Medicare pays for the medical treatment conditioned on the premise that the workers’ compensation carrier must reimburse Medicare if the workers’ compensation carrier has or had the responsibility to make primary payment.
must we consider
Figure 2 shows a decision flowchart to be used when a claim has reached settlement. The flowchart first requires and answer to the question: “Has Medicare paid for treatment for the disability/injury alleged in the claim?” The answer to this initial query should be provided by petitioner’s counsel. As experience shows that Medicare is most likely to pay for treatments in occupational claims, which are likely to be denied claims, special attention should be paid when dealing with occupational claims.


If Medicare has provided treatment, then Medicare’s interest must be considered.

If Medicare has not paid for treatment for the disability/injury alleged in the claim petition, then the next query must be reached. Simply put, the type of closure must be known. As shown above, in figure 1, closure reached via Order Approving Settlement does not foreclose the possibility of medical remaining open, as respondent may be required to provide medical treatment to the claimant for the disabilities alleged for up to two years after entry of the Order.
As Medicare will treat the judgment of a workers’ compensation judge as final as to compensability and causal relationship, closure by way of Judgment with dismissal does not trigger a Medicare interest. Closure of a claim by way of Section 20 does foreclose the possibility of respondent paying for future (related) medical treatment. See figure 1. Therefore, and following the decision flowchart found at figure 2, if the claimant is “Medicare Eligible” then Medicare’s interests should be considered.
Figure 2 begs the question: Just what does it mean to be “Medicare Eligible”?
medicareeligible
In other words, “Medicare eligible” identifies any claimant who could receive Medicare benefits currently.
Which in turn, begs the question, Just what is a “Reasonable Expectation” for entitlement to Medicare?
reasonableexpect
As shown in figure 4, a workers’ compensation carrier has a “reasonable expectation” that a claimant will become entitled to Medicare when (1) the claimant has already applied for SSDI, (2) the claimant was denied SSDI but may appeal that decision of denial, (3) Is currently appealing a decision of denial for SSDI, (4) has end-stage renal disease, and (5) is 62.5 years old (and therefore will be entitled to Medicare in 30 months.
This set of fact prerequisites establishing a “reasonable expectation” is not likely to be known by the respondent in a pending workers’ compensation case. Defense counsel should have answers to these questions from our adversary when a lump-sum dismissal is considered.
needwaiver
Figure 5 presents the decision flowchart to be employed and combines the previous concepts together. While the previous flowcharts (see figure 2) identified whether Medicare may have held an interest in the lump-sum closure of a claim, the decision process in figure 5 identifies when Medicare review of a claim is required.

The difficulty for carriers and self-insured is that identifying whether your case meets either the $25,000 or $250,000 threshold (thereby triggered submission to CMS for approval or waiver of set-aside) requires looking at both the amount of indemnity to be paid PLUS the amount of medical. This can be tricky, especially in a workers’ compensation context, where a case can settle, and then be ‘re-opened’ much later (and multiple re-opener claims are possible for one date of loss. In the workers’ compensation context, it is the value of the current settlement, PLUS the prior settlement, PLUS the prior medicals paid (all added together) which equal the total value for the purpose of establishing which threshold applies.
When there is a possibility that Medicare may become responsible for additional (prospective) medical care for an injury or disability which is resolved in New Jersey Workers’ Compensation Court by way of Section 20, Medicare demands that the claimant set-aside money to pay for the future medical costs. If Medicare determines that no set-aside is necessary, then a waiver will be issued.

Best Practices for Dealing with Center for Medicare Services
On September 26, 2009 Medicare issued guidance as to how Set-Aside proposals “could” be submitted to Medicare. This formalized review process should be considered the ‘current’ ‘best practices’ for dealing with Set-Aside arrangements.
Medicare has issued a 38-page ‘checklist’ including sample forms that it ‘recommends’ submitters utilize.
According to CMS, “cases using this or similar format can generally be processed more quickly with fewer errors – resulting in faster determinations at less cost to submitters and the government.” The ‘recommended’ submission form is divided into numbered sections to correspond to the electronic folders in which CMS scans and files documents for review. For submissions by CD-ROM, grouping and naming documents by the CMS conventions is the preferred method of delivery.
CMS recommends the following numbered sections:
Section 05 – Cover Letter;
Section 10 – Consent Form;
Section 15 – Rated Ages;
Section 20 – Life Care/Treatment Plan;
Section 25 – Court/WC Board Documents;
Section 30 – WCMSA Administration Agreement;
Section 35 – Medical Records;
Section 40 – Payment Information;
Section 50 – Supplemental – Additional Information.
Medicare has also instructed that it will respect a judicial determination “after a hearing on the merits.” In other words – CMS will accept fact findings made after significant testimony has been produced. “Sham trials” are to be avoided. A recent NJ case (decided May 24, 2010) arose from a plaintiff demanding the trial court ‘allocate away’ Medicare’s lien (the court declined).

Need More Guidance?
We expect that increased enforcement of the MSP will continue to impact the litigation we are handling.
We are here to help. Over the past several years, we have counseled our clients on Secondary Payer compliance issues. We have also traveled to our clients to present seminars and meet face-to-face to answer your questions. If you would like arrange training for your office call Greg Lois at 201-880-7213 or email contact.

Please review my ‘Frequently Asked Questions’ section on Medicare.

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Medicare Conditional Payment/Set-Aside F.A.Q.

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.

Insurers in the Cross-Hairs: New Medicare Secondary Payer case

Since 2001 Tompkins McGuire has been advising clients on how to comply with the Medicare Secondary Payer Statute; identifying cases where conditional payment statements; Set-Aside Agreement; or waiver must be obtained. The focus has been on making sure that Medicare was apprised of the imminent settlement, reviewed the terms of the settlement (the body parts or systems and the claimant;s (potential) need for future medical treatment, and weighed in on whether a Set-Aside Trust needed to be established. In addition, when Medicare issues a conditional payment statement, demanding repayment of certain medical expenses, we have provided guidance on which of the conditional payments (if any) need to be satisfied.
Previously there was no case in which Medicare sought reimbursement of “conditional payments” directly from insurance carriers contributing to a settlement.
That is no longer the case.
In the recently-filed U.S. Court action (Untied States v. James J., Stricker) Medicare is seeking recovery of conditional payments based upon the Medicare Secondary Payer Statute (MSP). This Complaint seeks recovery from both the liability carriers and the plaintiffs’ counsel.
 In Stricker a class action claim was settled without reimbursing Medicare for conditional payments.
In addition to seeking the conditional payments, interests and penalty, the government is requesting “[the insurers] must give CMS notice of all future payments to Medicare beneficiaries and [the carriers] must ensure before any future settlement payment is made to any claimant that appropriate payment is made to the United States.”
 We think this language signals Medicare’s ultimate goal: to proceed directly against liability carriers for pre and post-settlement Medicare expenses. Our interpretation of the Act has also been that this was possible.

WCB Won't Approve Section 32s with Medicare Indemnifications

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.