SUBROGATION AND MSAs. Settlement of W/C Claim As Part of Third Party Settlement Commutation/Dollar Contracts, Etc.

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1 MEDICARE SET-ASIDES AND THE SUBROGATION PROFESSIONAL Presented By: Gary L. Wickert, Matthiesen, Wickert & Lehrer, S.C. Russell S. Whittle, Gould & Lamb, LLC GOTOWEBINAR ATTENDEE INTERFACE 1. Viewer Window 2. Control Panel 2 SUBROGATION AND MSAs Settlement of W/C Claim As Part of Third Party Settlement Commutation/Dollar Contracts, Etc. Settlement of Third Party Claim MSAsEffect on Lien andcredit Responsibility For Applying and Funding For MSA Carrier Risk If Nobody Wants MSA Is MSA Necessary If There Is Large Credit? Small Subrogation Claims Arbitration of Claims Involving MSAs 3 1

2 HISTORY OF MEDICARE AND THE MEDICARE SECONDARY PAYER STATUTE Medicare 1965 Center for Medicare & Medicaid Services (CMS) Workers Compensation as Primary Payer for Industrial Accidents Group Health Plans Ignored Medicare Secondary Payer Act 1980 Now Applied To Group Health, Auto, Liability, and No Fault. 42 USC 1395y(b)(2)(A) The United States may bring an action against any or all entities that are or were required or responsible (directly, as an insurer or self insurer, as a third party administrator, as an employer that sponsors or contributes to a group health plan, or large group health plan, or otherwise) to make payment with respect to the same item or service (or any portion thereof) under a primary plan. Prohibits Medicare from making payment for item covered by health plan allows conditionalpayment to extent plan hasn t paid. 4 Thompson v. Goetzman, 337 F.2d 489 (5 th Cir. 2003) Medicare Sought Recovery From Product Liability Settlement Court Said No Tort Settlement Not Subject To MSPA. U.S. v. Baxter, 345 F.3d 866 (11 th Cir. 2003) Medicare Sought Recovery From Breast Implant Settlement Court Said Yes Any Payment Medicare Makes Is Secondary Confusion Existed Each Settlement Fought By Trial Lawyers Medicare Modernization Act 2003 Prescription Part D Program Lesser Known: Medicare Payments Are Conditional With Absolute Right of Recovery and Rights of Set off (Codified Baxter) Expanded Exposure To Recovery Actions Include Beneficiary, Provider, Supplier, Physician, Attorney, State Agency, or Private Insurer United States v. Harris, 2009 WL (W.Va. 2009) CMS Sued Attorney Who Settled Tort Action Found Liable Applies To Lawyers, Defendants, TPAs, and Insurance Companies 5 UNITED STATES V. STRICKER United States v. Stricker, No (N.D. Ala. Sept. 13, 2010) U.S. sued chemical companies, insurers and plaintiffs attorneys involved in $300 million breast implant settlement. (Abernathy v. Monsanto, et. al.) Plaintiff s attorneys distributed $ without reimbursing Medicare. CMS sought reimbursement for double the provisional payments made. Suit filed six (6) years after Abernathy settlement. Defendants moved for dismissal statute of limitations. Case underscores aggressive position CMS will take and need for liability claims handlers to be compliant with MSP. On 9/13/10, judge dismissed claims as barred by the SOL. 3 year SOL began running was date settlement was approved. U.S. may appeal dismissal questioning triggering mechanism of the right to reimbursement. 6 2

3 Medicare and Medicaid SCHIP Extension Act of 2007 (MMSEA) A/K/A Section 111, Mandatory Insurance Reporting (MIR), and SCHIP New Duty To Report All Settlements, Awards, and Judgments Fil Failure To Comply Penalty: $1,000Per Day Form and Manner of Reporting To Be Decided By HHS Secretary Implementation Process Ongoing Subrogation and New CMS Reporting Requirements 7 SCHIP REPORTING (Section 111) Affects all Liability, No Fault, Self, and WC claims. As of 1/1/12, requires reporting of data to CMS quarterly on all open claims involving Medicare beneficiaries and a one time reporting post S/J/A on cases involving Medicare beneficiaries. Mandates that Primary Payers check Medicare beneficiary status on ALL claims li and report quarterly through h asecurewebsite, bi which h is under development. In S/J/A, applicable regardless of whether future medicals are closed. Recent Reporting delay applies only to settlement where there is no ongoing responsibility for medical care. Total Payment obligations are now reportable 1/1/2012. CIVIL MONEY PENALTY FOR FAILURE TO REPORT: $1,000 Per Day Per Claim 8 NGHP MIR TIMELINE Testing of Data Feed To CMS From 1/1/10 To 12/31/10 Ensures 180+ Field Feed Properly Requires Massive Claims System Additions 1 st Live Report Between 1/1/2010 and 3/31/10 $1,000/Day/Claim Penalty Begins MIR Reporting For Qualified Claims Open With ORM As of 1/1/2010 MIR Reporting Will Not Include TPOC Amounts With Close Dates Prior to 10/1/10 9 3

4 SCHIP COMPLIANCE CLAIMS Step 1: On every claim, check the claimant s Medicare beneficiary status during each reporting period (SCHIP requires Primary Payers have knowledge of Medicare status). Step 2: If the claimant is a Medicare beneficiary, report the claim to Medicare as part of the quarterly reporting requirement. Step 3: Medicare will use the reporting to identify any conditional payments and be prepared to research and resolve past conditional payments as Medicare beneficiaries are reported. Note: If Claimant is not on Medicare after Step 1, eligibility status should be rechecked every quarter and just before entering into a S/J/A. 10 SCHIP COMPLIANCE - S/J/As Step 1: When preparing a S/J/A, check the claimant s Medicare beneficiary status (SCHIP requires Primary Payers have knowledge of Medicare status). Step 2: If the claimant is a Medicare beneficiary, begin conditional payment research and resolve past conditional payments prior to or as part of the S/J/A. Step 3: When appropriate, determine the amount you are going to allocate from the S/J/A proceeds to future medical care that is covered by Medicare, and include language and the allocation amount in your agreement with the plaintiff. Step 4: Report S/J/A to CMS with the data required, at least quarterly. Note: If plaintiff is not on Medicare after Step 1, eligibility status should be checked just before entering into S/J/A as beneficiary status may have changed during the months spent negotiating the S/J/A. 11 FUTURE EXPOSURE: LIABILITY MSAs There are no statutory requirements or specific CMS guidance requiring set aside allocations in liability cases. There are no specific statutory requirements requiring set aside allocations in workers comp cases, yet the insurance industry recognizes both the need and underlying mandate to protect the interests of Medicare in cases where future medical benefits are settled assuring Medicare s status as Secondary Payer. CMS will review liability set aside allocations based upon their budgetary constraints and the beneficiary status of the plaintiff. Mandatory insurer reporting will ensure that Medicare will be aware of settlements beginning 1/1/12. Q: Do you need a Medicare Set Aside? 12 4

5 WHAT IS A MEDICARE SET-ASIDE? A Medicare Set-Aside is an account set up to pay future Medicare covered expenses for an injured party that would have been paid by Medicare had the injury NOT been the responsibility of the Primary Payer. 13 LEGAL BASIS OF THE ACT 42 CFR 411 is the Medicare Secondary Payer regulation (MSP). Essence of the Legislative Intent: Medicare will always be a Secondary Payer if a Primary Payer exists. Primary Payers (CFR ): Workers Comp, Liability, Auto No Fault, USL&H, and Jones Act SCHIP Extension Act of 2007 (Section 111) 14 SCHIP/SECTION 111 COMPLIANCE 12/29/2007 SCHIP EXTENTSION ACT Signed Into Law Affects Liability, WC, Self, and No fault Insurance Requires Primary Payers To Report To Medicare; Settlements, Judgments and Awards Involving Medicare Beneficiaries $1,000/Day/Claim Civil Money Penalty For Non Compliance With the Reporting Requirement Testing For MIR Begins 1/1/2010 and Mandatory Reporting Begins 1/1/2011 Allows CMS To Collect Huge Amounts of Primary Payer Data and Seek Recovery For Conditional Payments and Determine If Their Interests Were Protected 15 5

6 PROTECTING MEDICARE The intent of MSP is to reduce federal spending and protect the financial integrity of Medicare. Two Aspects of Protecting Medicare: Right of Recovery For Past Medicare (Conditional Payments, a/k/a Liens) Protection Against Future Exposure (MSA) Payments 16 PENALTIES 42 USC 1395 (Y)(b)(2)(b) Allows the Federal Government To Bring An Action Against Any Responsible Party. Double Damages Plus Interest May Be Collected From the Primary Payer. CMS May Refuse To Recognize Any Settlement Contrary To the MSP. Medicare May Refuse Future Benefits To Claimant For Treatment Related To Alleged Injury. Private Cause of Action (Class Action Lawsuits) 17 IDENTIFYING YOUR MSP EXPOSURE Initial Settlement Evaluation Are You Closing or Limiting Future Medicals? Identify Claimant s Social Security and Medicare Status Is This a Class I Beneficiary? Currently Medicare Eligible Uncommuted Value of Total Settlement Greater Than $25,000 Is This a Class II Beneficiary? Reasonable Expectation Test Uncommuted Value of Total Settlement Greater Than $250,000 Class III? Adequate Consideration In Cases Not Meeting Thresholds Primary Payers Are Obligated Under the Law No Safe Harbors 18 6

7 RECOMMENDATIONS FOR THE SUBROGATION PROFESSIONAL Determine If You Are Settling Or Limiting Future Medical Care If So, An MSA May Be Necessary Assess Risk Determine Whether Your Settlement Is A Reportable Event Under Section 111 If Funds Have Been Dispersed For Medicals If It Resolves Medical Issues As Lump Sum Determine Appropriate Release Language Indemnification Language Is Recommended Identify Primary Payers Identify Liability/Responsibility Allocate Amount Of Damages 19 MEDICARE SET-ASIDES AND THE SUBROGATION PROFESSIONAL Gary L. Wickert, Esq. MATTHIESEN, WICKERT & LEHRER, S.C. gwickert@mwl-law.com Russell S. Whittle, Esq. GOULD & LAMB, LLC russell.whittle@gouldandlamb.com