1. Medicare Compliance Presented by: Christina E. Horton, Esq. 1

2. Medicare Basics Medicare is a health insurance program provided by the federal government for: –People 65 years of age or older; or –People with disabilities under the age of 65 who have been in receipt of Social Security Disability benefits for at least 24 months; or –People with End-Stage renal disease 2

3. The Medicare Secondary Payer Act Under 42 USC 1395(y) and CFR § 411.1-37 Medicare reserves the right to remain a secondary payer in the context of civil claims where a primary payer (plan) exists. 3

4. MSP Defined Primary Plans According to 42 U.S.C. 1395y(b)(2)(A), a primary plan includes: –Liability insurance –No Fault insurance –Automobile insurance –Self insurance –Workers’ compensation insurance 4

5. Medicare compliance areas: Reporting (2007 Extension Act) -Requires a “timely” reporting to the DHHS of a settlement, judgment or award to a Medicare eligible Plaintiff -$1,000 penalty per claim per day for non-compliance Liens -Recovery asserted by Medicare for conditional medical payments made by Medicare pre-settlement Medicare Set-Asides (MSA’s) - Medicare mechanism of having the parties protect Medicare’s future interests through a monetary fund designed to pay for claim-related Medicare covered medical expenses that occur post-settlement -Thresholds? 5

6. Medicare Reporting The 2007 Extension Act requires a “timely” reporting to DHHS of a settlement, judgment or award to a Medicare eligible Plaintiff Enforcement begins on Jan, 1 2009 Same statutory reporting requirement previously published under the MSP $1,000 penalty per claim per day for non-compliance to self-insured or insurance company No published damages against Plaintiff/Plaintiff’s counsel (opposite of MSP generally) 6

7. Addressing Medicare liens Pursuant to the MSP all parties to the settlement are potentially liable to Medicare for pre-settlement medical payments made by Medicare for a Plaintiff’s claim-related treatment To protect Medicare’s statutory rights and the parties from liability, a lien inquiry should be made to determine whether any Medicare conditional payments have been made and need to be repaid. 7

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9. Medicare Set-Asides (MSA) A projection of the Medicare covered medical expenses and Medicare covered prescription drug expenses that a Plaintiff will require for treatment of his claim related injury over the duration of his life expectancy. It is NOT a life care plan or a document regarding ALL the treatment that a Plaintiff may require. It only deals with a “reasonable” amount of Medicare covered medical expenses. 9

10. When CMS approval of an MSA is required for a workers' compensation claim When settling a workers’ compensation claim, an MSA is necessary if the future medical aspect of the claim is being settled and one of the following exists: The injured worker is, at the time of settlement, eligible for Medicare benefits (and the settlement amount is more than $25,000). The settlement amount exceeds $250,000 and the injured worker can reasonably expect to become Medicare eligible within thirty (30) months of the settlement. 10

11. Establishment of Medicare issue in a liability settlement Assess the settling party to establish if he/she is Medicare eligible by: 1.Determining if the are sixty-five (65) or older at the time of settlement 2.Determining if they have been in receipt of Social Security Disability benefits for a period exceeding twenty-four (24) months 3.Establish if there is an underlying workers compensation or longshore action 11

12. Is there a Medicare Set-Aside required in the settlement of a liability action? Yes Recommended No 12

13. YES If you settle a liability claim and there is an underlying workers compensation claim that is also settling then an MSA is required if the following MSA workers compensation review thresholds are met: –The injured worker is, at the time of settlement, eligible for Medicare benefits (and the settlement amount is more than $25,000). –The settlement amount exceeds $250,000 and the injured worker has a “reasonable expectation” to become Medicare eligible within thirty (30) months 13

14. Recommended Medicare has verbalized that MSA’s can be submitted for liability actions in “substantial” settlements. The appropriate Medicare regional office will determine if they wish to process the MSA If they do not process the MSA the parties should get Medicare issued documentation stating that they have declined to process the MSA 14

15. NO If the case does not fall under the published Medicare workers compensation guidelines or the verbalized subjective liability guidelines then no MSA is required However, it is STRONGLY recommended that the parties still document their efforts to address Medicare’s interests in bringing the claim to a resolution through proper settlement language 15

16. Obtaining Medicare Approval Once the MSA is formulated it must be submitted to CMS for Medicare approval if it falls under the CMS review thresholds Turn around time is supposed to be within sixty (60) to ninety (90) days (an incomplete submission will take longer) Medicare will issue a letter approving or counter proposing the proposed MSA amount or a letter stating that they will not process the MSA After approval the parties must provide CMS with Plaintiff’s final settlement agreement and order approving the agreement showing proof of MSA funding. 16

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18. Medicare’s enforcement rights Under the MSP, Medicare has the right to terminate a Plaintiff’s benefits if Medicare’s interest are not considered in a settlement The Centers for Medicare and Medicaid Services (CMS) may also initiate recovery upon learning that payment has been made or could have been made under a primary plan against any and all parties to settlement (42 CFR 411.24(b), (e) and (g) and 42 CFR 411.26). The amount recovery in a Medicare action can be the amount of the Medicare primary payment or; DOUBLE the amount of the payment Medicare made as a primary payer. 18

19. case law example: Baxter The United States v. Baxter International, Inc. 345 F.3d 866 Medicare recovered $11.3 million dollars from a $4.2 billion dollar settlement Re-affirmed that Medicare has a right to remain secondary and to recover money from the primary payer if Medicare was forced to make primary payment Found that the right to remain secondary is not extinguished if the primary payer cannot make “prompt payment” Discussed the right of CMS to expansively interpret their collection rights under the MSP 19

20. US v. Stricker et al. Recently the United States Government, on behalf of the Centers for Medicare & Medicaid Services (CMS), filed a recovery action against defendant corporations, their insurance carriers and plaintiff’s counsel, following an amicable settlement of a liability action. The case, US v. Stricker et. al., CV-09-PT- 2423-E, was filed on December 1, 2009, nearly six (6) years after the settlement agreement was filed in the underlying action on December 2, 2003. The underlying action settled for $300 million dollars in 2003. CMS is asserting that it previously made conditional payments on behalf of 907 of the plaintiffs for medical expenses related to injuries released in the settlement agreement. CMS claimed a right to reimbursement for these conditional payments, plus interest against the defendant corporations as self-insured entities, their insurance providers and numerous attorneys representing the group of plaintiffs. Additionally, CMS asserted double the amount of conditional payments against the defendant corporations and their insurance providers due to the necessity of instigating the lawsuit. This lawsuit reinforces Medicare’s published statutory recovery rights, and should serve as a warning to counsel, insurance carriers and self insured entities as to Medicare’s departure from their prior statements of how they would proceed in collecting on liens in general liability matters. Furthermore, this case illustrates the importance of investigating a Medicare lien early in the life of a claim, so that settlement negotiation may properly account for amounts owed to Medicare. If parties fail to account for a Medicare lien, they may lose their right to appeal the amount of the lien, and as evidenced by this litigation, can face substantial costs years later. Additionally, the responsibility for lien repayment should be unequivocally identified in the settlement agreement and parties should take precautions before releasing payment. 20

21. Case law example: Manning Manning v. Utilities Mutual Insurance Company, Inc. (2001) Second Circuit Named in the New York Times in 1997 as the longest running dispute before the WCB. Claimant found to have standing to bring action as a “private attorney general” to recover Medicare’s lien on Medicare’s behalf. Awarded DOUBLE the amount of Medicare’s right to recovery, which equated to $340,000 post- settlement. 21

22. Recent action Brockovich and Stalley cases (2006 and 2007) MSP suits against healthcare providers for Medicare non-compliance in alleged reported and non- reported medical malpractice claims Dismissed on standing issues –MSP not a Qui tam statute City of Baltimore case will provide standing guidance –Standing based on: Injury in fact Award of workers compensation benefits 22

23. How do the parties protect Medicare’s interest? By verifying SSDI/Medicare entitlement By creating a Medicare Set-Aside (where required) Obtaining Medicare approval of the MSA (where required) Include allocation language in the settlement agreement to show Medicare’s interest have been considered. Performing a Medicare lien verification 23

24. Additional MSA practice points Whether an MSA is formulated and submitted to CMS or not, settlement language regarding Medicare’s interest as the secondary payer should always be included in settlement documents where a case settles with a medical component. However, settlement language should not be used as an MSA substitute. WARNING: You and the Plaintiff cannot stipulate/waive out of Medicare Secondary Payer issues WARNING: Proof of health insurance or VA benefits is also not a viable alternative to protecting Medicare’s secondary payer rights 24

25. Make sure your settlement agreement is properly drafted. The settlement document should: 1.State that Medicare’s interest has been considered. 2.Contain language where the Plaintiff acknowledges his understanding of the Medicare issues. 3.State legitimately that the injured party is not expected to incur any further medical costs covered by Medicare or provide for an amount specifically allocated to cover future health costs attributable to the injury which would be covered by Medicare. 25

26. Burns White Medicare Compliance Services Verification of the SSDI/Medicare benefit status of each Plaintiff A proper reporting of each claim to Medicare pursuant to the 2007 Extension Act A verification of the existence/nonexistence of a Medicare lien in each claim Verification of the correctness of any Medicare lien amount that Medicare is attempting to assert for alleged conditional payments made in relation to the claim. Negotiation of lien reduction or payment for any inappropriate alleged Medicare lien. Coordination of payment for a Medicare lien and lien extinguishment verification. Preparation of a Medicare Set-Aside in anticipation of settlement, judgment or award Exploration of MSA reduction through the use of an age rating and annuity. Submission of a Medicare Set-Aside to Medicare for approval. Settlement language for counsel to document the parties’ compliance with the MSP. 26

27. Any additional questions? Christina E. Horton, Esq. (412) 995-3023 chorton@burnswhite.com 27