Question
Can you take an attorney fee off of a Workers' Compensation Medicare Set-Aside? The injured worker settled his Workers' Compensation case in 2005 with open medical benefits. There is a WCMSA for $35,000 that Medicare has approved. Can we take 20% of that as a fee?

Tennessee Attorney

Answer
Great question and one that is commonly asked by those of us that would like to be paid for the work we do. Before addressing your specific question, let me note that the MSA figure is a subset of the gross settlement amount, and attorneys are entitled to take their fee based on the gross settlement amount (depending on the terms of their retainer agreement, of course).

Now, specifically addressing whether you are entitled to take a fee from the MSA approved amount itself, we can look to the CMS Policy Memoranda for guidance. In the CMS Policy Memorandum dated May 7, 2004, sent to all Associate Regional Administrators, CMS addresses the question of administrative fees and attorney costs specifically associated with establishing Medicare set-aside arrangements. This memo included CMS' new (and presently enacted) policy:

"Administrative fees/expenses for administration of the Medicare set-aside arrangement and/or attorney costs specifically associated with establishing the Medicare set-aside arrangement cannot be charged to the set-aside arrangement... For example, if the settling parties submit a MSA proposal to CMS that claims that the injured individual will need $50,000 worth of work-related medical expenses that would otherwise be reimbursable under Medicare and the settling parties claim that it will cost $10,000 in administrative and attorney fees in order to both administer and establish the MSA, then CMS will only evaluate/judge the reasonableness of the $50,000 figure.

CMS will not evaluate whether or not the $10,000 in administrative and attorney fees are reasonable nor will CMS permit the settling parties to add that $10,000 amount to the $50,000 MSA amount. Therefore, if CMS approves that proposal for a $50,000 MSA, the settling parties' $10,000 in administrative and attorney fees cannot be charged to or against the MSA of $50,000 because CMS considers those costs to be a separate issue for the settling parties to negotiate."

So, in summary, any money used to establish a MSA cannot be used to pay for the administrative costs nor the attorney fees required to establish or administer the MSA. Since the MSA is a subset of the gross recovery amount, the attorney is entitled to take a fee. However, those proceeds must come from another part of the recovery other than the MSA as the only appropriate use of MSA proceeds is to pay for future injury-related care that would otherwise be covered by Medicare.

Hope this helps,
John V. Cattie, Jr., Esq.

Question
Mother, father and two children were in a serious accident. Mother has catastrophic injuries. Her bills exceed $175,000. The auto insurance policy limits are $25,000 per person and $50,000 per accident. Medicare has not paid any money for the mother's treatment at this point, but she has applied and will be on Medicare in August of this year at which time it is expected that Medicare will pay future costs relating to the accident.

I have two questions. First, am I correct that we are not required to report the settlement to Medicare, if we settle before October 1, 2010 according to your February 25, 2010 advisory?

Second, from your August 18, 2009 article on Medicare Set-Asides in liability settlements, my sense is that a $25,000 settlement in which future medicals are not specified, where the plaintiff has $175,000 in past medical, substantial pain and suffering, substantial past and future lost wages and other damages would not require a Medicare Set-Aside. Is this correct? My plan is to use the practice tips outlined in your August 18, 2009 article to convince defense counsel that a set aside is not required unless things have changed since August of 2009.

The mother also has an auto products defect case on file, but this is a long way off from settlement or trial.

Thanks for your assistance.
Texas Attorney

Answer
To answer your first question, the reporting to which you refer deals with defense reporting of the settlement to Medicare for MMSEA Section 111 purposes. This is different than the plaintiff reporting the settlement to Medicare as a part of verifying/resolving any conditional payments made by Medicare from date of injury to date of settlement. Let's assume your client becomes entitled to Medicare as of August 1, 2010. For MMSEA Section 111 purposes, if the case settles prior to October 1, 2010 and is to be paid in a lump sum (i.e., TPOC) as opposed to containing an ongoing responsibility to pay future meds (i.e., ORM), then defense does not have to report. However, if the settlement contains ORM, then the trigger date for those settlements is January 1, 2010 and defense would have to report for MMSEA Section 111 purposes. If the case settles on or after October 1, 2010, defense has to report, no matter whether the settlement is for TPOO or has ORM.

If the case settles on or after August 1, 2010, you would also have the obligation to verify and resolve any conditional payments made by Medicare from date of injury to date of settlement. Therefore, there are two aspects to Medicare reporting, one from the defense and one from the plaintiff and depending on when the case settles and the terms of the settlement determines who has to report.

With regards to your second question, the obligation to consider and protect Medicare's interests includes protecting its future interests. That means, you should ask and answer the question "Is a MSA appropriate under these case specific facts?" You are correct in your deduction that, based on your case specific facts, a MSA would not be appropriate and the guidance in the August 2009 MSA White Paper is as good today as the day it was published. Please let me know if you have additional questions.

My best,
John Cattie

Question
I have an 82 year old client who has a Medicare replacement policy with Healthnet of the Northeast. The client suffered a full rotator cuff tear in a MVA but it is very unlikely that surgery is needed. Causation is an issue. Insurance carrier wants language in the release that the client agrees to pay any future medical expenses from the settlement and that the client agrees not to submit any bills to Medicare for payment. The carrier claims that this is required under the Social Security Act. I have never encountered this before and am unsure as to how I should advise my client regarding signing this. Any guidance is appreciated.

Connecticut Attorney

Answer
Certainly, your fact pattern is one commonly encountered these days due to the vast amount of misinformation promulgated towards the insurance community regarding Medicare compliance under the Medicare Secondary Payer ("MSP") Act. Because of their new reporting obligations under Section 111 of the MMSEA (Medicare, Medicaid and SCHIP Extension Act of 2007, found at 42 USC Sec. 1395y(b)(8)), insurance companies want to ensure that Medicare will not chase them for reimbursement of any interest, either past (represented by conditional payments made by Medicare from date of injury to date of settlement) or future (represented by payments made by Medicare for injury-related care post settlement). In their zeal for satisfying Medicare's interests, they often miss the forest for the trees.

Essentially, the carrier is insisting that, instead of billing Medicare for future injury-related care, a Medicare Set-Aside ("MSA") be established to pay for future injury-related care. Nowhere in currently enacted law or guidance from CMS are we told that a MSA must be established as a part of our third party liability settlements. The obligation under the MSP Act is to "consider and protect" Medicare's interests, both past and future. Many insurance companies fail to understand that considering and protecting Medicare's interests does not always mean that you pay Medicare money. In fact, in the third party liability context for MSAs, it rarely means that. What it does mean is that the settling parties should be documenting their files to show what steps have been taken to consider and protect Medicare's future interests, including MSA evaluations, letters from treating physicians indicating exactly what care the injured individual will require, and other items.

Another concept most insurance companies do not realize yet is that the obligation to consider and protect Medicare's future interests falls on the claimant as opposed to the defense. In short, the obligation to satisfy Medicare’s future interests via a MSA or any other vehicle is the responsibility of the claimant and claimant’s attorney, not the defendant. As support for that position, we can look to the federal regs at 42 CFR 411.46, which contains no language placing liability on the defense (unlike 42 CFR 411.24). Furthermore, evidence exists on the CMS website under the Intro to WC tab of the WCMSA site. See: this CMS page. If we look at the Future Medical Services portion in the final paragraph, we see that Medicare asserts that the liability to consider and protect Medicare’s future interests extends to those entities that RECEIVE a primary payment (as opposed to liability for conditional payments made date of injury to date of settlement as promulgated under 42 CFR 411.24 whereby Medicare may recover its conditional payment interest from any entity that MAKES/RECEIVES a primary payment).

To sum up, the insurance community appears to be receiving misinformation about Medicare compliance, and requires a re-education as to the appropriate scope of their obligations. For starters, I would forward to them our MSA White Paper supporting the proposition that MSAs are rarely appropriate in the liability context, and when they are appropriate, they are plaintiff oriented obligations to handle. Further, share with them the language of the CMS website about Future Medical Services. These tools should make the insurer more comfortable with the notion that it does not face exposure to Medicare on these future interest issues. Finally, I make myself available to you for a conference call to discuss these issues.

Sylvius von Saucken, Esq.

Question
My client has never used Medicare as he is covered under his wife's policy. The insurance company is asking to verify that Medicare will have no future interest or current interest. I went on mymedicare.gov an looked up to see if any payments were ever made under the Medicare Policy and found not a single claim made. I gave that to the adjuster but that was not sufficient. Is there an easy way to get a letter that says no payments and no future interest, so my client can get money?

Minnesota Attorney

Answer
Not to worry because you are not alone in having the insurer asking for this information. What the insurer is looking for is a letter directly from Medicare stating that it has not paid anything in the form of conditional payments (date of injury to date of settlement). It is also looking for information directly from Medicare regarding any future interest that should be satisfied. While Medicare will issue a letter regarding the conditional payments paid, it will not issue a letter about the future interests.

The appropriate way to obtain that letter from Medicare about conditional payments is to establish a tort recovery record with Medicare and request a conditional payment listing. Upon receipt, that can be provided to the insurer as evidence that Medicare has not paid anything. Though Medicare will not issue a letter about any future interests, you are still under the obligation to "consider and protect" Medicare's future interest under the Medicare Secondary Payer statute. To do that, you need to ask and answer the question "Is a Medicare Set-Aside necessary under these case specific facts?" If yes, then determine the proper amount to set aside. If no, then document your file to show how you arrived at that conclusion.

We can assist you with regards to all action steps described above. At your convenience, I would be happy to discuss with you how GFRG can help your client maintain absolute Medicare compliance.

My best,
John Cattie

Question
My client is a Medicare beneficiary who suffered a neck injury in a Motor Vehicle Accident. Their auto insurance has paid for treatment to neck thus far. Adverse driver policy limits are $25,000 and case will probably settle for less than that. It is unknown if he or she will need any future neck treatment. How do you recommend we deal with MSA issues in such a small case? Also, can you direct me to a site which shows how to establish an MSA?

Wyoming Attorney

Answer
The Medicare Secondary Payer Act (42 U.S.C. Sec. 1395y(b)) requires that settling parties consider and protect Medicare's interests. However, that statute does not advise us how to properly protect Medicare's future interests. In fact, we do not even have a statutory definition of "Medicare Set Aside Arrangement" or "MSA" at this point. While CMS has provided guidance as to how to protect its future interests in workers' compensation cases (via 12 policy memos to date), it has not provided even a single memo to date about how to protect its future interests in a tort case. Absent any law or guidance on point about how to protect Medicare's future interest in a liability case, absent a definitive allocation to future meds in the settlement release (or a line item for future meds in a jury verdict form), a MSA is not appropriate in a liability settlement. Considering Medicare's future interests rarely means paying Medicare money in the form of a MSA in a liability settlement.

Having said that, you will want to document your file and memorialize how you did consider and protect Medicare's future interest, arriving at the conclusion that a MSA was not appropriate. That documentation can be in several forms, including an MSA evaluation from a neutral third party entity operating in the compliance space or a note from the treating physician indicating that the claimant does not require any future injury-related care that would otherwise be covered by Medicare. With regards to information about how to establish a MSA, I would lead you to Affiance Partners out of Cincinnati, OH. There website is www.affiancepartners.com

I would be happy to discuss your case specific facts with you further at your convenience as well as talk about the MSA obligation in general.

My best,
John Cattie

Question
What suggestion do you have when you have an injured worker who will likely qualify for SSDI within 30 months of a Workers’ compensation settlement, has a WC settlement of 110k being negotiated, has a physician who says that knee replacement will be needed, and a claimant who refuses to have knee replacement.....we want to reduce set aside amount.

Answer
The fact that the injured worker will qualify for SSDI within 30 months of the WC settlement does not necessarily mean that a MSA is appropriate. In fact, the 30 month period of time to which you refer is really linked to an injured individual’s “reasonable expectation” of Medicare entitlement, not SSDI entitlement. According to the CMS Policy Memos, a person possesses that “reasonable expectation” if one of the following 5 characteristics are true: 1) he/she has an open, active application for SSDI pending; 2) he/she has applied for SSDI, that application was denied and they anticipate appealing that denial; 3) he/she has applied for SSDI, that application was denied, and they are actively appealing the denial; 4) he/she is at least 62.5 years old; or 5) they possess an End Stage Renal Disease condition but are not yet a current Medicare beneficiary. If the injured individual does not meet the above mentioned criteria and is not a current Medicare beneficiary, then a MSA is not appropriate. In addition, when considering Medicare’s future interests, starting with the question what part of the settlement has been allocated to future costs of care will lead you to the right answer. Starting with what should the MSA amount be, is like the tail wagging the dog – you need to identify the allocation issues first (see 42 C.F.R. §411.46(d)(2)).

Sylvius von Saucken

Question:
I am settling a workers’ compensation case for $100,000 and closing out medicals in a disputed claim. My client is 66 and on Medicare. Is it acceptable to have the Insurer fund a MSA with an amount that they "deem" sufficient (without CMS review) and agree in the settlement documents to supplement the MSA account if CMS later finds that more funds were necessary to be in compliance? Is this sufficiently protecting Medicare's interest?

Answer:
Current law (42 USC 1395y(b)) and guidance about the use of MSAs in Workers’ Comp settlements (via CMS Policy Memos) tells us that settling parties have to properly consider and protect Medicare’s interests at the time of settlement. Those interests are two fold, past interests and future interests. The MSA question arises as part of properly considering and protecting Medicare’s future interests. Unlike handling Medicare’s past interests, where Medicare may seek recovery from any entity that MAKES/RECEIVES a primary payment, when properly considering and protecting Medicare’s future interests, Medicare will only pursue any entity that RECEIVES a primary payment. Based on this, it is the claimant’s (and claimant’s attorney’s) responsibility to ensure that the MSA is properly funded and MSA proceeds are properly spent, not the insurer’s responsibility. While submitting a MSA proposal to Medicare is voluntary, that MSA must still properly consider and protect Medicare’s future interest. If those future interest issues are not handled appropriately, Medicare will look to your client and you, not the insurer.

Under your fact pattern, the insurer would fund the MSA with an amount it deems appropriate, and will agree to supplement that MSA should CMS later find that it was under funded. The penalty for failure to properly consider and protect Medicare’s future interests (i.e., properly funding a MSA when appropriate) is Medicare revoking the claimant’s Medicare card for a certain amount of time until Medicare determines, in its sole discretion, that its future interests have been satisfied. Practically speaking, that means your client would lose Medicare benefits and have to pay out-of-pocket for future care until Medicare restores their benefits.

Overall, I believe setting up the MSA for the amount determined by the insurer to be sufficient may sufficiently protect Medicare’s future interest, but only with the caveat that should Medicare revoke your client’s Medicare card in the future for failure to properly fund the MSA, then the insurer will be responsible for all injury-related medical expenses otherwise covered by Medicare until such time when Medicare restores your client’s Medicare benefits. Because the insurer has no liability to Medicare on these future interest issues, it really has no incentive to ensure the MSA is properly funded. Therefore, it will blindly accept the work product provided by the MSA Allocation house with whom it contracts and then fund the MSA for that amount, whether it is sufficient or not. Therefore, if the safeguard of subsequent funding by the insurer is built into the settlement docs, this may be a sufficient way of considering and protecting Medicare’s future interest. If not, your client may face significant problems with Medicare in the future without the ability to seek additional recovery from the insurer.

A more appropriate method for protecting Medicare’s interests would be for you to seek a plaintiff-oriented MSA Allocation that would provide a more realistic allocation amount for future injury-related care. Since the exposure to Medicare on future interest issues goes directly to your client and you, you should be “driving the boat” on the MSA issues as opposed to the defense. If the insurer is willing to supplement the MSA in the future should Medicare find the original MSA lacking, it should be willing to fund it appropriately from the start.


Hope this helps…
John Cattie

Posted by John Cattie

Question:
I have an MSA question regarding WC. Is it appropriate for our client to spend her MSA funds for related medical care while out of the country, specifically, Greece? Your thoughts would be greatly appreciated.

Answer:
Great question! To my knowledge, CMS has not shared with the general public whether it is appropriate to spend MSA proceeds outside the US versus inside the US. Medicare’s concern is that its future interest is being protected. We know that the only approved use of MSA proceeds is to pay for future injury-related care otherwise payable by Medicare. There are two notable exceptions – any bank charges or postage can be paid out of the MSA. Since we know what MSA proceeds should be spent on, my thought is this: if the expenses being paid out of the country are 1) injury-related and 2) otherwise payable by Medicare, then so long as annual accountings are being kept and it can be shown that the proceeds spent abroad were indeed for injury-related care otherwise payable by Medicare, then the expenditures are proper. The location these proceeds are spent should have no bearing on whether the expenditures were appropriate. I hope this sheds some light on the situation.

My best,
John Cattie

Posted by Sylvius von Saucken

Question:
What has anyone's experience been deducting from the set aside fund a court approved attorney's fee at the time of approval on a one-time basis?

Answer:
According to the CMS memos (specifically 5/7/2004), admin fees and/or attorney costs specifically associated with establishing the MSA cannot be charged to the MSA. Practically speaking, the only proper use of MSA proceeds is to pay for future injury-related care otherwise covered by Medicare. There are two notable exceptions – any bank charges or postage can be paid out of the MSA. We have even asked CMS (with no answer yet) whether tax preparation electronic filing charges are properly paid out of an MSA. We asked the question because the standard is similar to tax law “everything is NOT payable from the MSA unless specific rules exist to the contrary."

My best,
Sylvius

Posted by John Cattie

Question:
I have a case where they are considering using a structured settlement for a claimant who is on SSDI and not on Medicare yet. What if she spends the seed money in the first year? Will Medicare pay her medical before she is eligible for Medicare? I would think not. Would this case have to be approved by CMS even if it did not fall within the threshold for them to pay? How would a structured settlement protect the claimant if they would not pay? Can the seed money be more than 2 years of medical expenses to protect the claimant in this case? Has anyone had a case that was similar to this?

Answer:
When an MSA is established using an annuity, it is to be funded every period with a predetermined amount of money. CMS tells us in its memos about MSAs and Workers Comp settlements that, for any given period where the MSA proceeds for that period have been exhausted, it is proper to bill Medicare for injury-related care received that would otherwise be covered by Medicare for the duration of the given period.

At the end of the given period, the annuity funds the MSA again, and then the claimant would use MSA proceeds again. However, if the MSA contains a balance at the end of a given period, those funds roll over into the next period and are counted as a portion to be exhausted prior to being able to bill Medicare again.

You are correct in thinking that Medicare will not pay for injury-related care until the claimant becomes Medicare-eligible. However, the memos also tell us that the MSA may be used to pay for injury-related care otherwise covered by Medicare prior to the claimant becoming entitled to Medicare. Approval of a WCMSA proposal is not required. In fact, in certain situations, when the gross settlement fails to achieve the workload review thresholds, CMS will not review it.

My interpretation is that the seed money must be a minimum of 2 years plus costs of first contemplated surgery. I see nothing in the memos which would prohibit the seed money being more than this amount.I hope you find this helpful.

Please contact me if you would like to discuss MSAs further.

My best,
John Cattie

Posted by Karen Sanning

Question:
I have a set-aside from a workers' comp injury and don’t quite understand all the rules. I recently was in an accident and re-injured myself. I need to have surgery in the same area from the previous injury. Because of this I won’t need to use my set-aside money because the other person’s insurance company has to pay for my new injury and surgery. If I don’t ever have to use the set-aside money who gets to use it?

Answer:
The world of Medicare Set-Asides can be very complex; however you are correct in your assumption that since your new injury is the result of a third party injury, your MSA is not responsible for payment of any claims resulting from this injury. With that being said, your inquiry as to what happens to the funds that are currently in your MSA should you not use them is very valid.

Previously, The Centers for Medicare and Medicaid Services (CMS) allowed for a 25% reduction of the total dollar amount of the MSA should a claimant's condition improve after 5 years (CMS memo dated July 11, 2005), but in the August 25, 2008 CMS memo, they have rescinded that decision and require that the MSA fulfill the original requirements regarding the dollar amount assigned and the life expectancy of the claimant. This means your funding must stay intact and cannot be reduced.

-Karen Sanning

Posted by Matthew Garretson and Elizabeth Vish Schad

Question:
What types of fees are incurred in administering a MSA?

-Recent Seminar Attendee

Answer:
Administration fees can vary by provider and the level of service. Our sister company, Affiance Partners specializes in such administration and offers two Medicare Set-Aside administration options. The Custodial Account Service includes an Affiance Identification Card, future injury related expenses validated and paid through account, all required maintenance, reports and CMS compliance provided for life of account and toll free telephone support for a set up fee of $1950 and $750 annually with 3% COLA. The Self Administration Option includes detailed self-administration accounting instruction, toll free telephone support, workbook to track medical expenses paid from MSA, review of workbook prior to submitting to CMS for compliance for $750.

Posted by John Cattie

Question:
Can an uninsured employer elect to just pay the injured employee’s palliative care/pain management on an ongoing basis and, therefore, avoid the hassles and expenses of setting up a MSA? Or is it required to do a MSA no matter what?

Employer in my case thinks that it can pay on an ongoing basis, but it doesn’t think that it can put together a large lump sum. Of course there is the question of whether the employer will always be around and solvent during the employee’s relatively long life expectancy. Please advise at your convenience.

-Indiana Attorney

Answer:
An uninsured employer can certainly choose to keep meds open and continue to pay those on an ongoing basis. If this is to happen, then an MSA would not be necessary as there would be no permanent burden shift of future care obligations to Medicare. I would be happy to elaborate further on a call if you wish.

Posted by Matthew Garretson

Question:
I just learned of this animal today. It provides for fines and what appears to be attorney liability if funds are not set aside out of settlement proceeds for future medical expenses to be incurred by a plaintiff who is receiving Medicare at the time of settlement or who may be receiving it within 30 months of settlement. It is based on the Medicare, Medicaid and SCHIP Extension Act of 2007. How does this work?

-Wisconsin Attorney

Answer:
There is a lot of misinformation about this issue out there. The difficult issue here is that there is the Medicare Set Aside ("MSA") industry that is trying to drive clients towards MSAs as a result of Section 111 of the MMSEA. Having listened to the first 5 town hall teleconferences with CMS (starting Oct. 1, 2008 and ending on January 28, 2009) concerning MMSEA application, it is clear that MMSEA does NOT equal MSA. In fact, the sole purpose of Section 111 is to close a perceived loophole in conditional payment reporting. This (to date) has nothing to do with future costs of care. Section 111 modifies 42 U.S.C. Section 1395y(b) by adding a new para. (8), which creates the concept of "Responsible Reporting Entities". But those MSA vendors who are drumming up business by stating that these new reporting requirements extend to future Medicare covered expenses is to blatantly ignore the import of the rest of 42 U.S.C. Section 1395(y)(b), which addresses CMS' recovery rights for medical payments made on a conditional basis when the plan provider or other insurer has not promptly made such payments.

This issue crystallizes when you consider the statutory history of MSP. On Dec. 5, 1980, the MSP statutes as we know them today were modified to take into account these subrogation issues. It was not until 23 years later, under Section 301 of the Medicare Modernization Act, when Congress added (and the President signed into law on Dec. 8, 2003) enforcement provisions to the MSP statute, focusing compliance on plaintiffs' attorneys and their Medicare entitled clients. Now, 4 years later, on Dec. 29, 2007, Congress closed the loop with Section 111 of the MMSEA by placing a reporting obligation on defense insurance carriers. Note that for plaintiffs and their attorneys, the obligation is to "verify and resolve", but for defendants, the sole obligation is to verify. Simply put, CMS is merely stating that when the law says that it is meant to be a secondary payer, they mean it. Section 111 does not reach to future costs of care issues, and is not intended to.

Instead, it is intended to address the other half of the reporting obligation when two parties agree to settle their differences, and from date of injury to date of settlement, CMS has been making payments for injury-related medical expenses on a conditional basis.

Posted by John Cattie

Question:
How do CMS WCMSA review contractors review submitted MSAs?

Answer:
On 12/19/08, CMS posted “Operating Rules” on its website in an effort to share more information with the workers’ compensation industry and workers’ compensation MSA submitters. These Operating Rules, though partially redacted, provide insight to how CMS WCMSA review contractors review submitted MSAs.

With the Operating Rules as guidance, we share one MSA submitter’s story to illustrate the fluidity in this area of law. A worker’s compensation claimant settled a case for $250,000 or less and was not then a current Medicare beneficiary, but would become one in February 2009. An MSA evaluation was provided, but the submitter doubted its reviewability based on prior CMS guidance which indicates these types of cases do not need CMS approval. Upon review, the CMS review contractor deemed this MSA reviewable because it was greater than $25,000.

Prior to the Operating Rules this would be a curious result. According to the Operating Rules, “if a TSA (Total Settlement Amount) is between… $25,001 and $250,000, the case is eligible for review only if the claimant is entitled to Medicare according to the WCCCS (Workers’ Compensation Case Control System) before the PSD (Proposed Settlement Date).” Upon further review of the definition of PSD in section 3 of the Operating Rules, CMS defines it as the later of COBC receipt date plus 120 days or a certain redacted pricing date plus 3 months. Because the MSA submitter received a letter from the COBC dated 12/8/08, the claimant would be eligible for Medicare before their defined PSD, making the MSA reviewable. Note that this is a change to how CMS approval is determined for WCMSAs, but does not change the fact that an MSA evaluation is needed where, due to settlement, there is a permanent burden shift of future injury-related care over to Medicare.

The morale of this story is that the CMS review thresholds provided by the Patel Memorandum are not static. As CMS has told us in the past, the review thresholds are subject to adjustment and may be modified at any time.

Posted by Matthew Garretson

Question:
Mr. Garretson – I had the pleasure of listening to your presentation with regard to Medicare Set-Asides last August in Montana. In follow up, I would appreciate a few minutes of your time to respond to the following questions.

We are negotiating settlement of a client’s future medical benefit entitlement relative to a work comp claim. A set-aside has been calculated and approved through CMS, with funds reserved specifically for conservative treatment to include prescription drugs, follow appointments with the treating physician, etc. The set-aside amount was calculated with use of a WC fee schedule (for provider care) and wholesale pricing (for pharmaceuticals). The set-aside provisions specify that expenses are to be paid in accordance with the fee schedule and wholesale pricing used to calculate the set-aside amount. As the basis for our dispute, the necessity of a particular (and costly) medical procedure is at issue.

My questions are as follows:

(1) If our client self-administers his set-aside account, how does he pay medical expenses based on fee scheduled or wholesale prices if billed at “retail” prices for expenses incurred?; and

(2) If the medical procedure at issue is determined to be necessary by a treating physician post-settlement, will Medicare pick up the cost as they have signed off on they have signed off on the set-aside and the procedure was not considered in the assessment of future treatment (Medicare has approved payment for such procedures)?

I understand you are extremely busy, and I appreciate any insight you can provide us into these issues. Thank you for your time, and I hope all is well.

-Montana Attorney

Answer:
Your questions are ones we are asked on a regular basis. Both are very good questions. My response to both follows:

If your client chooses to self-administer his MSA, to ensure that he receives the benefit of paying only the appropriate workers compensation fee schedule amounts, we recommend that he directs his providers to the section of the CMS approval document which specifically states: The proposed settlement agreement provides for future medical expenses to be paid based on the workers’ compensation fee schedule for the state of Montana. Therefore, the WCMSA is approved to pay providers, physicians and suppliers based on the workers compensation fee schedule in effect for this state for future medical expenses that would otherwise be reimbursable by Medicare. (This statement is usually found on page 3 and the second paragraph). We recommend that your client contact his providers to address this situation prior to receiving treatment to avoid any confusion. Usually providers abide by the CMS document and welcome the payment at time of service. Obtaining the fee schedule can usually be done by contacting the state of jurisdiction worker’s compensation office, via internet or even asking the provider.

The issue of obtaining prescription medications at the worker’s compensation rate may prove to be more difficult. Usually pharmacies are not as willing to bargain regarding price, so it may take some effort of your client’s part to be able to achieve this. Networking with a cost-containment company would prove beneficial should they run into problems in this area.

Your question regarding a procedure which is determined to be medically necessary by the provider - but was not included in the MSA allocation - and its ability to be paid for by the MSA is a great question. When the allocation was prepared, it is simply a “snapshot in time” of anticipated injury related medical care. If an unexpected infection, delayed wound closure or some unforeseen condition should develop, as long as it is determined to be injury related and a Medicare approved service, it can be paid for by the MSA. Usually a note from the provider relating this service to the injury provides enough documentation in the eyes of CMS.

I hope that you found my answers informative, but should you have any additional questions, please feel free to contact me again.

Posted by Matthew Garretson

Question:
I thought I was quite secure in my understanding that the Medicare Set Aside rules ONLY apply to workers compensation recoveries. I have argued the matter before, and haven't had to challenge my mind on this for awhile.

However, after checking the statute and confirming the above opinion as statutorily sound, I have learned from an esteemed colleague that CMS has indeed asserted a Set-aside requirement out of a completed settlement in a non-workers’ compensation matter. The attorney who is dealing with this tells me he has spoken with the CMS rep, and has cited the statute and reg to her, and they still assert entitlement to this abomination. Have I been wrong? Is there some right to set aside in our med mal cases, etc.? If so, there may be a hell of a lot of changes I need to make in my demands or case selection.

-Missiouri Attorney

Answer:
I sent the message below in response to a Medical Malpractice Listserv posting related to this topic last month. It might be helpful:

It would be very rare that a Liability Medicare Set Aside (LMSA) would be required under those facts. The Medicare Set Aside obligation is unique as it applies to a liability settlement as opposed to the traditional application in a workers’ compensation (“WC”) settlement. A WC settlement (with its two distinct components - indemnity and medical damages) has a definitive shift of future health care obligation (from the carrier to Medicare) which carries a clear obligation to protect Medicare’s interest in cases involving a plaintiff entitled (or soon to be entitled) to Medicare. In WC settlements involving Medicare beneficiaries, federal regulations provide that the obligation for work-related injury medical expenses should not be shifted to Medicare from the responsible party. Accordingly, a portion of a Medicare beneficiary’s workers’ compensation settlement must be set aside to pay for the beneficiary’s future work related injury and / or illness. Federal regulations also provide that Medicare will not pay for any medical expenses for the work-related injury or illness until the amount allocated to future medical expenses is exhausted. Medicare has a formalized guidance and protocol established for workers’ compensation settlements to ensure the agency’s interests are protected. Formalized guidance and protocol, however, is not available for liability settlements.

Satisfying Medicare’s interest for future injury-related care in liability settlements has a myriad of variables which don’t exist in WC (economic and non-economic damages, derivative claims, and other factors confounding recovery including, but not limited to caps, and policy limits). These factors make it much more difficult for the Centers for Medicare & Medicaid Services (CMS) to determine the amount allocated for future medical expenses. The only liability cases wherein Medicare contends that it is clear an obligation exists is a case involving a Medicare beneficiary where there is a defined judicial allocation for future medicals (i.e. an interrogatory / verdict sheet with a definitive allocation for future medicals). These cases are obviously the exception and not the norm. More commonly, liability cases settle with a broad, general release. When we evaluate such cases, we employ the appropriate standard of “properly considering Medicare’s interest.” The determining factors include:

• Is the Client currently entitled to Medicare?
• Was it a pure Liability case? Was there any workers compensation component?
• What was plead & released (indemnity & meds only, specific allocations? Etc.)
• Has the settling parties properly satisfied Medicare’s conditional payments (date of injury through date of settlement?
• Who has been paying for injury related care?
• Will there be future injury related care (treatment, management, drugs)? (If not, obtain a treating physician letter)
• Will Medicare now (after the settlement) be absorbing the burden?
• What documentation exists concerning the types of damages being released? (Certainly the settling parties should heavily document their files and incorporate language into the settlement documents explaining how they have “considered Medicare’s interests.” Examples include: Complete analysis and allocation by qualified “MSA” professional / vendor and / or letters from treating physicians supporting that no future injury-related care is necessary or supporting small costs only)
  

Based upon the facts you provide (and assuming the liability settlement is below $1M in gross recovery), at face value your case does not look like an LMSA candidate. Of course, the appropriate measures need to be taken to reimburse Medicare for past injury-related care and I recommend that you memorialize in your file the internal evaluation in regards to the necessity of an LMSA. Also, given the clients age, I am also mindful of Medicare’s limited coverage of nursing home care – Certainly your client may exhaust the settlement proceeds on the nursing home care and may need to explore alternative nursing home coverage via Medicaid or other programs.

As a final note, for cases in which the above analysis does trigger a concern in a liability case, we typically gather the necessary case detail to generate a neutral damages / recovery evaluation. This evaluation produces a determination identifying the appropriate (if any) future medical allocation (FMA). At this point, we perform a future cost of care analysis (FCC) which will identify the injury-related care for which Medicare would otherwise pay. We then recommend the liability Medicare set aside of the lesser of the two numbers. Furthermore, we evaluate and provide a recommendation as to the need to pursue Centers for Medicare & Medicaid Services (CMS) approval. Again, such cases are the exception and not the norm.

I hope this information is helpful.

Posted by Matthew Garretson

Question:
I need some advice. Here is my situation. I represent a lady (80 years old) who was given a medication to which she had a known and documented allergy. She has a terrible reaction, suffers multi-organ failure and a mini-stroke. She spends a week in the hospital and is discharged to a nursing home where she will live the rest of her life. I have reached a settlement with the doctor who prescribed the medication and the case is pending against the pharmacy that dispensed the medication.

I have a conditional payment letter from Medicare claiming $7,000. What happens if Medicare is paid the final amount of its claimed lien but the client suffers complications from the mini-stroke (i.e. - falls and breaks a hip) a year or more from now and is readmitted to the hospital and incurs bills of $50,000 which are paid by Medicare? Does the client (and my firm) risk Medicare coming after us for more money to pay these future bills which "might" be related to the negligence/original injury and settlement? Should all of the settlement proceeds go into a Medicare Set Aside Trust? Thanks for any and all suggestions.

-Virginia Attorney

Answer:
It would be very rare that a Liability Medicare Set Aside (LMSA) would be required under those facts. The Medicare Set Aside obligation is unique as it applies to a liability settlement as opposed to the traditional application in a workers’ compensation (“WC”) settlement. A WC settlement (with its two distinct components - indemnity and medical damages) has a definitive shift of future health care obligation (from the carrier to Medicare) which carries a clear obligation to protect Medicare’s interest in cases involving a plaintiff entitled (or soon to be entitled) to Medicare. In WC settlements involving Medicare beneficiaries, federal regulations provide that the obligation for work-related injury medical expenses should not be shifted to Medicare from the responsible party. Accordingly, a portion of a Medicare beneficiary’s workers’ compensation settlement must be set aside to pay for the beneficiary’s future work related injury and / or illness. Federal regulations also provide that Medicare will not pay for any medical expenses for the work-related injury or illness until the amount allocated to future medical expenses is exhausted. Medicare has a formalized guidance and protocol established for workers’ compensation settlements to ensure the agency’s interests are protected. Formalized guidance and protocol, however, is not available for liability settlements.

Satisfying Medicare’s interest for future injury-related care in liability settlements has a myriad of variables which don’t exist in WC (economic and non-economic damages, derivative claims, and other factors confounding recovery including, but not limited to caps, and policy limits). These factors make it much more difficult for the Centers for Medicare & Medicaid Services (CMS) to determine the amount allocated for future medical expenses. The only liability cases wherein Medicare contends that it is clear an obligation exists is a case involving a Medicare beneficiary where there is a defined judicial allocation for future medicals (i.e. an interrogatory / verdict sheet with a definitive allocation for future medicals). These cases are obviously the exception and not the norm. More commonly, liability cases settle with a broad, general release. When we evaluate such cases, we employ the appropriate standard of “properly considering Medicare’s interest.” The determining factors include:

• Is the Client currently entitled to Medicare?
• Was it a pure Liability case? Was there any workers compensation component?
• What was plead & released (indemnity & meds only, specific allocations? Etc.)
• Has the settling parties properly satisfied Medicare’s conditional payments (date of injury through date of settlement?
• Who has been paying for injury related care?
• Will there be future injury related care (treatment, management, drugs)? (If not, obtain a treating physician letter)
• Will Medicare now (after the settlement) be absorbing the burden?
• What documentation exists concerning the types of damages being released? (Certainly the settling parties should heavily document their files and incorporate language into the settlement documents explaining how they have “considered Medicare’s interests.” Examples include: Complete analysis and allocation by qualified “MSA” professional / vendor and / or letters from treating physicians supporting that no future injury-related care is necessary or supporting small costs only)
  

Based upon the facts you provide (and assuming the liability settlement is below $1M in gross recovery), at face value your case does not look like an LMSA candidate. Of course, the appropriate measures need to be taken to reimburse Medicare for past injury-related care and I recommend that you memorialize in your file the internal evaluation in regards to the necessity of an LMSA. Also, given the clients age, I am also mindful of Medicare’s limited coverage of nursing home care – Certainly your client may exhaust the settlement proceeds on the nursing home care and may need to explore alternative nursing home coverage via Medicaid or other programs.

As a final note, for cases in which the above analysis does trigger a concern in a liability case, we typically gather the necessary case detail to generate a neutral damages / recovery evaluation. This evaluation produces a determination identifying the appropriate (if any) future medical allocation (FMA). At this point, we perform a future cost of care analysis (FCC) which will identify the injury-related care for which Medicare would otherwise pay. We then recommend the liability Medicare set aside of the lesser of the two numbers. Furthermore, we evaluate and provide a recommendation as to the need to pursue Centers for Medicare & Medicaid Services (CMS) approval. Again, such cases are the exception and not the norm.

I hope this information is helpful.

Posted by Mary Skinner, Matthew Garretson

Question:
Matthew - You have been very helpful in your posts about Medicare, and I wonder if I might ask your input on a matter I am handling. I have a case with serious injuries and serious liability problems. I have a firm offer and want to ask Medicare to compromise. I don't think a full waiver is likely (the offer is $500K and the Medicare payments are about $148K). What is the process for asking for compromise (i.e., whom do I contact and what information do they need?)? Also, are they doing anything at this point in auto cases on future set asides? I have heard they really are only doing them in [workers compensation] at this point. My [client] has no plans for future care at this point, and it seems doctors have done what they can. Thanks for any pointers or info you can provide.

-Minnesota Attorney

Answer:
In those situations where a beneficiary has received a firm binding settlement offer, Medicare may enter into pre-settlement discussions regarding compromise of Medicare's claim against that firm binding settlement offer. A beneficiary has no further appeal rights if CMS and the beneficiary agree to a compromise. Mary Skinner, our manager of Medicare services may be able to provide you with information regarding the forms and contact info for requesting compromise.

With respect to set asides, you are correct; they are generally only required in WC settings. It is a very rare fact pattern wherein I would suggest a set aside for a liability case. You can find further detail in an article I recently published, Medicare’s Reimbursement Claim — The Only Constant Is Change. Hope this info helps.

-Matt Garretson

All pre-settlement compromise requests must be in writing and sent to the MSPRC (Medicare Contractor), they will forward your request to the CMS Regional office. However, due to the backlog that the MSPRC is currently in, I recommend that you also send your request directly to the Regional Office for the state that your client lives in. I will provide you with the address of the regional office where you need to send the request if you provide me with the state that your client resides in.

When submitting your request, craft a compelling story. Provide them with the facts of the case, the injuries your client sustained, the effect the injuries have had on your client financially (out of pocket expenses, such as non-covered medicals, home renovations, etc.) and their quality of life prior to the injury and after. Also, advise them what your client would use the settlement proceeds for should they compromise their lien. Medicare believes strongly in equity for equity, so if you were to reduce your fee or absorb some of the case expenses Medicare would look more favorably on your compromise request. If possible, provide any evidentiary documentation to support your request. Should you have any questions regarding the above information please contact me.

-Mary Skinner