1. 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,

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

3. 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

4. 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)

5. 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

6. 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

7. 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)

8. 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

9. Also in 2003
42 CFR 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

10. 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

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

12. 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

13. 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 KOB)

14. 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.”

15. 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

16. Lien Resolution as a Sword & Shield

17. 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

18. 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 (June 28, 2012) (Avandia).1

19. 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

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

21. Basic Rules for Future Medicals
Workers’ Comp: 42 C.F.R § (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

22. 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)

23. 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…”

24. ANPRM: The Insurance Industry’s Take

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

26. 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

27. 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

28. 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

29. 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

30. 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

31. 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

32. 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

33. 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

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

35. 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

36. 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

37. Discussion Gary Goldberg, AAI, ARM, AFSB Providio MediSolutions, LLC
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