How the Medicare Secondary Payer Act Affects Insurance Carriers and Self-Insured Entities in Health Care Sponsored by the Health Care Liabilityand Litigation and Regulation, Accreditation, and Payment Practice Groups and the Enterprise Risk Management Task Force Wednesday, February 5, 2014  12:30-1:45 pm Eastern) Presenter: Gary Goldberg, AAI, ARM, AFSB, Providio MediSolutions, LLC, Greenwood Village, CO, ggoldberg@providiomsa.com

Agenda Medicare Secondary Payer Act Review What’s New Conditional Payments & Compliance Processes Future Medicals & Compliance Processes Advanced Strategies Q&A

Medicare: The Basics Enacted in 1965 Federal program providing government-sponsored health insurance to: People 65 and older Disabled people under 65 Linked to Social Security Disability (SSDI) Benefits People with End-Stage Renal Disease

Medicare Agencies & Acronyms Part of the Department of Health and Human Services Administered by The Centers For Medicare & Medicaid Services (CMS) Medicare Secondary Payer Act (MSP) 42 U.S.C. § 1395y Two major contractors deal with MSP: Coordination of Benefits Contractor (COBC) Medicare Secondary Payer Recovery Contractor (MSPRC)

Medicare as a Primary Payer Before 1980, Medicare was primary payer for all claims except those covered by Workers’ Comp, Federal Black Lung benefits, and VA benefits Primary payer = Medicare paid for health care even if another party was responsible In Workers’ Comp cases, Medicare was a secondary payer that only paid after the WC plan paid But…Medicare was far exceeding projected costs

The Start of It All Medicare Secondary Payer Act – 1980 Medicare and Medicaid Amendments of The Omnibus Reconciliation Act of 1980 Was nondescript and basically unenforceable at the time Part of a larger deficit reduction bill Codified at 42 U.S.C. §1395y Does not include Medicaid liens

The Start of it All 42 U.S.C. §1395 y(b) “Medicare shall be secondary to Workers’ Compensation and other insurance, including no fault and liability insurance.” Payment “may not be made under Medicare for covered items or services to the extent that payment has been made or can reasonably be expected to be made under a liability insurance policy plan.” (emphasis added)

2003: Medicare Modernization Act Expanded the MSP to include Self-Insurers Settlement = reimbursement obligation Admission or finding of liability irrelevant Medicare must be reimbursed if Plaintiff “compromised, waived or released” claims for the injury

Also in 2003 42 CFR 411.46 addresses when to consider Medicare’s future interests in a Workers Comp settlement No mention of liability cases May 23, 2003: Medicare publishes memo on how to consider and protect its future interests in Workers’ Comp cases

2007: MMSEA Medicare needed reporting to help give it visibility for enforcement of the MSP in workers’ compensation and liability cases Medicare Medicaid SCHIP Extension Act (MMSEA) = shifted burden of reporting workers’ compensation and liability settlements to the private sector if claimant is entitled to Medicare benefits at the time of settlement “Responsible Reporting Entities” = liability insurers and self- insureds Reporting required when there is a settlement, award, judgment or other similar payment, regardless of an admission of liability Failure to report will result in fines of up to $1,000/day per claimant

MSP Compliance Continuum Conditional Payments Future Medicals Date of Injury Date of Settlement

Medicare Conditional Payments Medicare “Conditional Payments” = past payments from the date of injury through the date of settlement Only applies in situations where the plaintiff was on Medicare prior to or on the date of settlement In cases where plaintiff was on Medicare but states s/he didn’t receive treatment for which Medicare paid, parties should require a $0 final demand letter confirming no conditional payment owed to be safe Sometimes plaintiffs are confused or outright lie but that is not a defense Carriers/self-insureds are primary payers: they are jointly and severally liable even after funds have disbursed

U.S. v. Stricker 11th Circuit Court of Appeals affirmed Alabama District Court ruling, dismissing government’s attempt to collect conditional payments due to statute of limitations $300 million settlement with $69 million in conditional payments at stake Look who the government sued! (everyone) United States v. Stricker (E.D. N.D. Ala. 2009) (No. 1:09-cv-02423-KOB)

Enforcing Conditional Payments The U.S. government can target any party to the settlement Primary Payer (insurance carrier or self-insured) Double damages plus interest (in addition to money already paid to plaintiff) And/or “any entity, including a beneficiary, provider, supplier, physician, attorney, State agency or private insurer that has received a primary payment.”

Payment of Medicare Liens Conditional payment reimbursements should be paid out of gross settlement funds Conflicting case law regarding whether insurer/self-insured can put Medicare’s name on the disbursement check in order to protect itself Clearly document actions and amounts related to conditional payments in the settlement agreement

Lien Resolution as a Sword & Shield

Conditional Payments – Best Practices Insurers & Self Insureds: Revise intake procedures to flag files that may have lien issues TRUST BUT VERIFY Take control of lien resolution for pro se claimants OR before claimant engages counsel Simple Process: Implement screening questions For Medicare liens: Need signed proof of representation For all other liens: Need signed HIPAA form Taking Control of Lien Resolution = Loss Cost Containment

Medicare Advantage Big difference between standard Medicare (Parts A & B) and Medicare Advantage (Part C) Claimants may switch back and forth between standard Medicare and Medicare Advantage In most states, treat Medicare Advantage liens like HMO or indemnity insurance plans In some states (3rd circuit & Southern District of NY), Medicare Advantage plans are considered within the scope of the MSP Trezza v. Trezza, 2012 N.Y. App. Div. LEXIS 9000, 2012 NY Slip Op 9048 In re Avandia Marketing, Sales Practices and Products Liability Litigation, 2012 U.S. App. LEXIS 13230 (June 28, 2012) (Avandia).1

MSP Compliance: A Bad Faith Risk? Dolgos v. Liberty Mutual Porter v. Farmers Insurance Why did Liberty lose and Farmers win? In Dolgos, the insurer delayed payment after receiving a copy of the Final Determination Letter In Porter, Farmers did not possess clear evidence that Medicare had been properly reimbursed or that it had issued a final demand

MSP Compliance Continuum Conditional Payments Future Medicals Date of Injury Date of Settlement

Basic Rules for Future Medicals Workers’ Comp: 42 C.F.R §411.46 (d) Rule: Medicare pays for future injury-related care Exception: If WC award designates dollars for future medicals, that money must be spent down and exhausted before Medicare pays This is the statutory justification for MSAs in WC

New Requirements on the Horizon? No formal rules and regulations yet exist for LMSAs. WC has fewer damage “buckets” How will state-specific damage caps be treated? What about policy limits? What about other factors? But attorneys, insurers, and claimants still have to comply with the MSP 42 U.S.C. §1395y(b)

ANPRM: Will We Finally See The Light? Advanced Notice of Proposed Rulemaking Public commentary period closed in August 2012 CMS will address issue via rules and regulations General Rule: “If an individual or Medicare beneficiary obtains a ‘settlement’ and has received, reasonably anticipates receiving, or should have reasonably anticipated receiving Medicare covered and otherwise reimbursable items and services after the date of ‘settlement’, he or she is required to satisfy Medicare’s interest with respect to ‘future medicals’ related to his or her ‘settlement’ using any one of the following options…”

ANPRM: The Insurance Industry’s Take

Who’s Responsible for Future Meds? Most recent CMS WCMSA Reference Guide (Section 3.0, page 3, WCMSA Reference Guide v1.3)

Future Medicals: Current Guidance MSP = if any portion of the settlement is meant to cover possible future medical expenses that would otherwise be paid by Medicare, Medicare’s interest must be “reasonably taken into account” Treating physician’s note regarding no further treatment satisfies this requirement (CMS Memo 9/29/11) Parties must look at facts in each individual case. MSA is preferred method to protect Medicare’s interest. Medically complex cases and cases with life care plans are particularly well suited for MSA. (Region VI Memo 5/25/2011) MSAs not required (several CMS memos and town hall calls) Providio has other MSP compliance tools that can/should be considered depending on the facts of a each case

MSP Decision Tree For Future Medicals in Liability Cases At time of settlement, is plaintiff on Medicare or Medicare “eligible” within next 30 months?* Medicare eligible = 62 ½ yrs old On Social Security Disability (SSDB) Applied for SSDB Denied SSDB but appealing End stage renal disease Some minors cases Yes Not a CMS requirement, but factors like whether case involves catastrophic injury or life care plan helps the evaluation Medical Complexity of Future Care Complex Not Complex Option 1: MSA Option 2: Other Compliance Tools

Why Would Defense Perform MSA? Customer satisfaction In WC cases, there’s a first party relationship with injured party MSA is best way to protect their future benefits Risk management considerations Case law is unclear Fickle and increasingly broke U.S. government Private cause of action Volume discounts MSAs have become cost of doing business. Classified as ALAE Cost containment: MSA can be used for negotiating leverage Beware the “plaintiff-friendly” MSA provider

Settling The Case Examine settlement language (for both Workers’ Comp and Liability cases) and ensure that it contains wording addressing MSP issues Determine where the lien resolution process stands If liens are not resolved at time of settlement, ensure that reasonable sum is placed in escrow to cover remaining obligations Medicare allows for a common fund doctrine reduction in the lien for plaintiff attorney fees & costs to its proportional share of the overall settlement value

Apportionment Hinsinger v. Showboat Atlantic 2011 N.J. Super.Lexis 96 Is it reasonable to reduce an MSA to allow an offset for attorney fees and costs and to reflect the compromise nature of the settlement? Hinsinger v. Showboat Atlantic 2011 N.J. Super.Lexis 96 Hinsinger had MSA of $180,600. Court reduced MSA by 32.77% for procurement costs Benoit v. Neustrom  2013 U.S. Dist. LEXIS Court determined the MSA amount by using a ratio of net settlement proceeds against the average of 2 MSAs performed

Private Cause of Action in MSP Statute 42 U.S.C. § 1395y(b)(3) The private cause of action is often overlooked, seldom used, and little understood Plaintiff’s bar has not really utilized this…yet ‘Ripens’ at the time of settlement or judgment Allows double damages Defendant can and should obtain a release in settlement agreement Judgment alone does not offer protection Need to account for the true liability exposure Insurer cannot assume that policy limits are the ceiling Credit: Frank Woodside III, Dinsmore & Shohl: The Medicare Secondary Payer Statute: Thirty Years Later, It’s Time to Pay Attention

Using an MSA to Counter Plaintiff LCPs Sword vs. Shield Best suited for catastrophic liability cases Claimant on Medicare or will be within 30 months Aikido instead of boxing

Differences Between LCP and MSA Life Care Plan Medicare Set-Aside Chronological age Usual and customary Prediction of future care is often reliant on recommendations of medical professionals, including IMEs Includes expensive items like attendant care, household modifications, transportation, etc. Rated age WC fee schedule Prediction of future care is reliant on the type of treatment provided in the past & reflected in records. IME opinions not considered Includes only Medicare-covered items

The Impact of Medicare Items in LCP All Subject To Cost Multipliers Rx Durables Physicians

Unbundling the Life Care Plan Items that are injury-related and would otherwise be covered by Medicare (pure MSA items) Items that are non-injury-related and will be covered by Medicare Non-Medicare covered services

Remove MSA-Eligible Items From LCP Apply MSA Cost Reduction Factors: Rated Age No COLA Structured Settlement WC Fee Schedule & Redbook Pricing Rx Durables Physicians Bonus: Protect Medicare!   Use of a rated age instead of a chronological one Segregation into 3 “buckets” Items that are injury-related and would otherwise be covered by Medicare (pure MSA items) Items that are non-injury-related and will be covered by Medicare Non-Medicare covered services For 2.i above, we would use the government-approved process of applying “Redbook” pricing for drugs and Workers’ Comp fee schedule pricing for all other treatment, which would show a big reduction over the “Usual and Customary” used in a Life Care Plan By segregating out the Medicare items (both injury and non-injury related), you can eliminate the inflation adjustment the Life Care Plans apply to those dollars Post-settlement, the plaintiff can further reduce the MSA amount using the apportionment process, which would allow that individual to go back on Medicare even sooner once the MSA funds are depleted An MSA is best funded through the use of a structured settlement, which extends and preserves the MSA for the benefit of the claimant’s estate should he/she pass away Protects all parties (especially the plaintiff attorney) from allegations of not considering and protecting Medicare’s interests.  à Gives them a reason to acknowledge and accept the allocation Via apportionment, the MSA can be reduced even further after settlement

Discussion Gary Goldberg, AAI, ARM, AFSB Providio MediSolutions, LLC 877.253.3120 x 1663 ggoldberg@providiomsa.com