FEDERAL BAILOUT? MSA STRATEGIES AND DEVELOPMENTS

Transcription

1 FEDERAL BAILOUT? MSA STRATEGIES AND DEVELOPMENTS Presented and Prepared by: Bradford J. Peterson Urbana, Illinois The cases and materials presented here are in summary and outline form. To be certain of their applicability and use for specific claims, we recommend the entire opinions and statutes be read and counsel consulted. Heyl, Royster, Voelker & Allen PEORIA SPRINGFIELD URBANA ROCKFORD EDWARDSVILLE 2009 Heyl, Royster, Voelker & Allen J-1

2 FEDERAL BAILOUT? MSA STRATEGIES AND DEVELOPMENTS I. MEDICARE SET-ASIDE OVERVIEW... J-3 A. Conditional Payments/Medicare Lien... J-4 II. RECENT DEVELOPMENTS... J-4 III. MEDICARE SET-ASIDE STRATEGIES... J-5 A. Physician s Bailout... J-5 B. Settlement/Dismissal Involving Multiple Claims... J-6 C. Zero Allocation... J-6 D. Concurrent Civil Claim... J-7 IV. SETTLEMENT BELOW THRESHOLDS... J-7 V. MANDATORY MEDICARE REPORTING REQUIREMENTS... J-7 A. SCHIP Extension Act... J-7 B. Responsible Reporting Entities... J-8 C. Registration... J-8 D. Triggers to Reporting... J-9 E. Reporting Thresholds... J-9 1. Medical Expenses... J-9 2. Total Settlement... J Closed Cases... J-10 F. Medicare Resources... J-11 J-2

3 FEDERAL BAILOUT? MSA STRATEGIES AND DEVELOPMENTS I. MEDICARE SET-ASIDE OVERVIEW The intent of the Medicare Secondary Payer Statute 42 USC 1395y(b)(2) is relatively straight forward. It provides that Medicare is not required to pay for medical services to the extent that payment has been made or can reasonably be expected to be made under a workers compensation law or plan. See 42 CFR 411. The Medicare Secondary Payer Act is administered by the Center for Medicare and Medicaid Services which is a subdivision of the Federal Department of Health and Human Services. Where future medical care is reasonably anticipated for the work-related injury, a settlement with a Medicare eligible claimant will need to protect Medicare s interests under the Medicare Secondary Payer Act. Where future medical care is reasonably anticipated, Medicare requires that funds for future Medicare covered expenses be Set-Aside to pay for future medical bills incurred as a result of the work related condition. These funds are referred to by the Center for Medicare and Medicaid Services as Set-Aside arrangements. The Set-Aside should be funded in an amount sufficient to pay for reasonably expected, causally related medical expenses for the life expectancy of the petitioner. See CMS Memo (April 22, 2003) Q & A5. If future medical treatment is not reasonably anticipated then a settlement may be reached without an allocation for future medical expenses or a Medicare Set-Aside account. If future medical treatment is not reasonably anticipated, then a written statement from the individual s treating physician should be acquired and state that future medical treatment is not reasonably anticipated. See CMS Memos (April 22, 2003) Q & A20. Set-Aside arrangements may be funded through lump sum payments and/or structured future payments. Similarly, the Medicare Set-Aside account may be either independently administered or self administered. Where self administered, Medicare requires that the claimant comply with formal rules and requirements as to payments from the Set-Aside and accounting for those payments. See CMS Memo (April 22, 2003) Q & A8. Medicare approval for a proposed Medicare Set-Aside is required in two instances. If the claimant is Medicare eligible they are deemed a Class I beneficiary and Medicare approval for the Set-Aside is required where the total settlement is $25,000 or more. CMS states that the total settlement amount for purposes of the threshold includes but is not limited to wages (TTD), attorney s fees, future medical expenses and repayment of any Medicare conditional payments. CMS Memos (July 11, 2005) and (April 25, 2006). If the claimant is not currently Medicare eligible but there is a reasonable expectation of Medicare enrollment within 30 months of the settlement date, then the CMS approval threshold is $250,000. These types of future beneficiaries are referred to as Class II beneficiaries. J-3

4 Where Class I and Class II beneficiaries do not meet the respective thresholds, then Medicare approval is not required for the Medicare Set-Aside. It is important to note, however, that CMS considers these thresholds as work load review thresholds and not safe harbor thresholds. In other words, although Medicare does not require approval for the Set-Aside amount, this does not waive any of Medicare s rights, including enforcement, under the Medicare Secondary Payer Act. A. Conditional Payments/Medicare Lien If Medicare determines the workers compensation insurer will not pay promptly (within 120 days), providers and suppliers may submit claims to Medicare and Medicare will make a conditional payment. This conditional payment becomes a Medicare lien with regard to the pending workers compensation action. The Medicare Secondary Payer Act places a responsibility on insurers to reimburse the government when it has paid conditional Medicare benefits for an injured party. 42 USC 1395y(b)(2)(B)(ii). The term super lien applies to Medicare liens as the insurer is not entitled to notice from Medicare of the conditional payment. Furthermore, it takes priority over other liens. Medicare is subrogated to any right of an individual or entity to recover payment from an insurer for medical bills. 42 USC 1395y(b)(2)(B)(iv). Medicare also has the right to sue an insurer in order to recover benefits they paid out that the primary insurer should have covered. In addition to recovering reimbursement, they may also have a right to collect double damages against the insurer. 42 USC 1395y(b)(2)(B)(iii). As Medicare is not required to give notice of conditional payments, it is incumbent upon insurers and their counsel to identify any claims involving Medicare beneficiaries and in such instances determine whether Medicare has paid any of the medical expenses related to the workers compensation injury. Upon written request, Medicare will perform a conditional payments search and confirm whether Medicare has paid any medical expenses and, if so, identify the amount of their lien. Where Medicare liens exist, the settlement contract should include language identifying the liens and confirming satisfaction of the lien through settlement. Although an indemnification clause would provide a remedy for an insurer, the indemnification clause will not be binding on Medicare. When satisfying a Medicare lien, payments should be made directly to Medicare and not the claimant. II. RECENT DEVELOPMENTS In the last twelve months, CMS has issued additional Memoranda setting forth policy with regard to Medicare Set-Aside accounts. In its Memorandum of May 20, 2008, CMS asserted that the only life expectancy table they would recognize is the CDC Table 1 (All American Tables). This was in response to some vendors relying upon highly conservative life expectancy tables in an effort to reduce the amount necessary to fund the Medicare Set-Aside account. Medicare still J-4

5 recognizes, however, that parties may still calculate a Medicare Set-Aside amount based upon a claimant s rated age. Prior to August 25, 2008, Medicare beneficiaries who had a change in condition such that future medical treatment was no longer anticipated could petition CMS for the release of the Medicare Set-Aside funds to the claimant. This policy changed with the CMS Memorandum of August 25, As of August 25, 2008, early termination of a Medicare Set-Aside account secondary to an improved condition is no longer permitted. The pricing for prescription drugs was addressed in CMS s Memorandum of April 3, The Memorandum provides that beginning June 1, 2009, all Medicare Set-Aside submissions must calculate prescriptions utilizing the average wholesale price. After June 1, 2009, CMS will not recognize any other pricing, discounting or calculation methods when determining the adequacy of the prescription drug amounts in Medicare Set-Aside proposals. Prior to 2008, all of CMS s regional offices participated in the approval process for Medicare Set- Aside proposals. The Center for Medicare Services has since reduced the number of regional offices evaluating Medicare Set-Asides to six. The Chicago Regional Office of CMS still participates in the review and approval of Illinois Set-Aside proposals. Additional regional offices handling the review of Medicare Set-Asides are Boston, Philadelphia, Dallas, San Francisco and Seattle. Regional offices in Denver, Atlanta, Kansas City and New York will no longer be handling Medicare Set-Asides. The Chicago regional office, division for Medicare Set-Asides, can be contacted at (312) III. MEDICARE SET-ASIDE STRATEGIES Several strategies may be considered when handling a workers compensation claim with potential Medicare Set-Aside issues. Careful analysis must be undertaken as to whether the Medicare Secondary Payer Act, in fact, applies to your claim and whether a Medicare Set-Aside account must be established. One must always remain cognizant, however, that the Secondary Payer Act includes enforcement and penalty provisions where it is determined the parties improperly attempt to intentionally shift liability for medical expenses to Medicare. 42 CFR (c)(2) (2006). A. Physician s Bailout On many occasions claims handlers and attorneys overlook perhaps the most straight forward issue in the Medicare Set-Aside analysis. That issue is whether future medical treatment is reasonably anticipated. Oftentimes the analysis can be mired in addressing more complex nuances of the Secondary Payer Act without first assessing whether future medical treatment is, in fact, reasonably anticipated. J-5

6 In many cases involving the most serious injuries, the need for future medical treatment will be a given. In many instances, however, establishing a Medicare Set-Aside account may not be necessary as the possibility of future medical treatment does not meet the standard set by Medicare. The standard is, in fact, whether future medical treatment is reasonably anticipated. The standard is not whether the petitioner might need future medical treatment or whether the petitioner could need future medical treatment. The standard is whether such future treatment is reasonably anticipated. In my practice, I view the reasonable anticipation standard as whether it is more likely than not that the claimant will need future medical treatment. In order to avoid establishment of a Medicare Set-Aside account, a statement from the petitioner s treating physician must be secured and set forth an opinion that future medical treatment is not reasonably anticipated for the condition. When presenting the issue to the treating physician it is best to inquire as to whether future medical treatment is reasonably anticipated, i.e., is it more likely than not that the claimant will need future medical treatment. B. Settlement/Dismissal Involving Multiple Claims Oftentimes we face petitioners who have filed multiple claims for different accidents and resulting injuries. Many such instances may involve some claims that are clearly compensable while others are highly disputed. Furthermore, some of the claims may involve a likelihood of future medical treatment whereas others may not. When presented with such situations, consideration should be given to settling the claim(s) on that case where future medical treatment is not reasonably anticipated. The claimant may have another claim where future medical treatment is reasonably anticipated, but that claim could be dismissed with prejudice without payment of any benefits. Remember, the need for a Medicare Set-Aside is only triggered if there is a settlement closing out the petitioner s future medical rights under the Act. With a dismissal of such claims, there is no settlement involving that claim. Rather, proceeds are paid on the separate claim where future medical treatment is not reasonably anticipated. C. Zero Allocation In claims where a substantial dispute exists as to compensability, one may consider a zero allocation with regard to the Medicare Set-Aside trust. This strategy may prove successful in those cases where substantial evidence exists in support of a defense of non-compensability. It is most likely to be successful where evidence contradicts a causal connection between the alleged injury and the workplace. In such instances, care should be taken to insure that the vendor preparing the Set-Aside allocation is acutely aware of the disputed nature of the claim and the need to acquire a zero allocation proposal. When thresholds are met the zero allocation will be submitted to Medicare for their approval. Again, it will be incumbent upon the vendor to highlight for CMS the disputed nature of the claim and the evidence in support of non-compensability or lack of causal connection. J-6

7 D. Concurrent Civil Claim There are rare instances in which a workers compensation claim can be resolved without payment of future medical or permanent partial disability benefits. One such rare situation arises when the claimant has a concurrent civil action on file for the occurrence leading to the workrelated injury. Thought should at least be given to a possible settlement of the workers compensation case with the only consideration being a waiver of the workers compensation lien. The settlement would not be placed on settlement contracts and approved by the Commission, but rather would be consummated with a written lien waiver and dismissal of the pending workers compensation claim. Compensation for the petitioner s disability and future medical expenses would subsequently be funded through a civil verdict or settlement. A caveat must be noted, however, as the Medicare Secondary Payer Act also applies to liability cases. 42 USC 1395(y). Ultimately the insurers for settling defendants in the civil action would be responsible for protecting Medicare s interests. IV. SETTLEMENT BELOW THRESHOLDS When the need for a Medicare Set-Aside account has been determined, it must then be evaluated as to whether the Medicare Set-Aside will need to be approved by CMS. Settlement thresholds are established at $25,000 for claims involving current beneficiaries and $250,000 for claimants who meet the standard for future beneficiaries. If the settlement value of the claim (including the Set-Aside amount) is near one of these thresholds an effort should be undertaken to get the petitioner to accept an amount below the applicable threshold. The benefit to the petitioner is that he will not have to await receipt of settlement funds pending CMS approval of the Set-Aside. Of course, the benefit for the respondent is a lower overall settlement amount. V. MANDATORY MEDICARE REPORTING REQUIREMENTS A. SCHIP Extension Act The Medicare/Medicaid and SCHIP Extension Act, P.L , 121 Stat. 2492, became effective in December The new statute created mandatory reporting requirements for claims involving Medicare eligible individuals. The statue places specific obligations on group health plans, liability insurers (including self insurance), no fault insurers and workers compensation insurers. These reporting requirements constitute a further effort by Medicare to enforce the Medicare Secondary Payer Act. 42 USC 1395y(b)(2). The reporting requirements will assist Medicare in the enforcement of their liens and further protect Medicare s interests with respect to future medical expenses. Section 111 of the Medicare/Medicaid and SCHIP Extension Act of 2007, contains the new mandatory reporting requirements. Initially, on August 1, 2008, proposed guidelines were published in the Federal Register, Volume 73 at CMS then published through their website a supporting statement for the Medicare Secondary Payer (MSP) Mandatory Insurer J-7

8 Reporting requirements... It must be noted that the supporting statement is a proposed guideline and amendments to the proposals continue. Since August 2008, additional publications and alerts have been published by Medicare with regard to the implementation process for the SCHIP Extension Act. These include the March 16, 2009, Medicare Secondary Payer Mandatory Reporting User Guide version 1.0. The entities responsible for complying with the reporting requirements for 111 are referred to as responsible reporting entities (RREs). Responsible reporting entities include, but are not limited to, workers compensation, auto liability and liability insurers. The information provided through the notice will allow CMS to identify primary payers that Medicare s payments would be secondary to. In addition to Medicare claims processing, the information is also acquired for possible MSP recovery actions and identifying claims where Medicare may, in fact, hold a lien for prior conditional payments. Notification to Medicare will be undertaken by the responsible reporting entity and provided to the CMS coordination of benefits contractor (COBC). Technical aspects of the data submission process will be managed by the COBC. B. Responsible Reporting Entities Responsible reporting entities are defined as follows: In this paragraph, the term applicable plan means the following laws, plans, or other arrangements, including the fiduciary or administrator for such law, plan or arrangement: i. Liability insurance (including self insurance). ii. No fault insurance. iii. Workers compensation laws or plans. 42 USC 1395y(b)(8)(F) Third-party administrators may be contractually assigned to meet the reporting requirements on behalf of insurers or self insureds. Any contractual assignment by the RRE to a third party administrator does not, however, limit the overall responsibility of the RRE for compliance with the Act. C. Registration RREs are required to register with CMS and begin testing prior to June 30, Testing will be undertaken through December 31, 2009, and compliance through the production of data will begin in January J-8

9 D. Triggers to Reporting The responsible reporting entities are to report only with respect to Medicare beneficiaries. If a reported individual is not a Medicare beneficiary or CMS is unable to validate a particular SSN or HICN then the reporting will be rejected by CMS. Triggers to the reporting requirement also vary depending upon the type of primary plan (insurance). For liability cases, the trigger will be the settlement, judgment, award or other payment to a Medicare beneficiary. Claims will need to be reported regardless of whether or not there is an admission or determination of liability. Once again, the obligation to report does not exist if the claimant is not a Medicare beneficiary as of the assigned reporting date. Claims involving workers compensation claimants will have an obligation to report when there is an ongoing payment responsibility for medical expenses. Where the RRE has an ongoing responsibility for medical bills, they must report two events. They must report when that responsibility has been assumed and when that responsibility has been terminated. CMS has indicated the RRE may submit a termination date for ongoing responsibility for medical (ORM) if they acquire a signed statement from the injured individual s treating physician that they will require no further medical items or services associated with the claimed injuries. MMSEA Section 111 Medicare Secondary Payer Mandatory Reporting User Guide version 1.0, March 16, E. Reporting Thresholds 1. Medical Expenses Medicare publications refer to the insurer s ongoing responsibility for medicals (ORM). For liability insurance there is no diminumus dollar threshold for reporting the assumption/establishment of ORM. All such claims will need to be reported. For workers compensation claims the ongoing responsibility for medicals are excluded from reporting through December 31, 2010, when all of these criteria are met: Id. a. Medicals only. b. Lost time of no more than 7 calendar days. c. All payment(s) has/have been made directly to the medical provider. d. Total payment does not exceed $ For Illinois workers compensation claims please note that TTD would be paid after the three-day waiting period. 820 ILCS 305/8(b). If payment of TTD is commenced on the fourth day of the claim, then the claim would not qualify for the exception under subsection (b) above. J-9

10 2. Total Settlement Medicare publications do not refer specifically to the total amount of settlement but rather to the total payments obligations to the claimant (TPOC). See MMSEA Section 111 Medicare Secondary Payer Mandatory Reporting User Guide version 1.0, March 16, Reporting thresholds for liability and workers compensation with regard to the total payment obligations to the claimant are as follows: a. For TPOCs dates July 1, 2009 through December 31, 2010, TPOC amounts of $ $5, are exempt from reporting except as specified in d below. b. For TPOCs dates of January 1, 2011, through December 31, 2011, TPOC amounts of $ $2, are exempt from reporting except as specified in d below. c. For TPOCs dates of January 1, 2012 through December 31, 2012, TPOC amounts of $ $ are exempt from reporting except as specified in d below. d. Where there are multiple TPOCs reported by the same RRE on the same record, the combined TPOC amounts must be considered in determining whether or not the reporting exception threshold is met. For TPOCs involving a deductible, where the RRE is responsible for reporting both any deductible and any amount above the deductible, the threshold applies to the total of these two figures. CMS Alert for Liability Insurance (including self insurance), no fault, and workers compensation, March 20, Closed Cases If an insurer had an ongoing responsibility for medical (ORM) that was assumed prior to July 1, 2009, and continued as of that date then the RRE must report this individual. Medicare recognizes, however, that RREs may not have collected necessary data elements for individuals where responsibility was assumed prior to July 1, For these individuals an extension was allowed until October 2010, to report. This extension only applies where the RRE has accepted ongoing responsibility for medical after July 1, 2009, but the original claim resolution or partial resolution was prior to July 1, If the ORM was assumed prior to July 1, 2009, and the claim was actively closed or removed from current claims records prior to January 1, 2009, the RRE is not required to identify and report that ORM under the requirement for reporting ORM assumed prior to July 1, If, J-10

11 however, this claim is later reopened it then must be reported. CMS MMSEA Section 111 Medicare Secondary Payer Mandatory Reporting User Guide version 1.0, March 16, F. Medicare Resources Resources are available through the CMS website with regard to the SCHIP Extension Act and reporting requirements. These resources include links to the MMSEA 111 User Guide as well as Memoranda regarding implementation of ompensation.asp#topofpage The website contains downloads of User Guide and Interim Record Layout of December 5, Additional information can be found at J-11

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13 Bradford J. Peterson - Partner Brad has spent his entire career with Heyl Royster beginning in 1987, in the Urbana office. He became a partner with the firm in Brad concentrates his practice in the defense of workers' compensation, construction litigation, auto liability, premises liability and insurance coverage issues. In recent years, Brad has become a leader in the field on issues of Medicare Set-Aside trusts and workers' compensation claims. He has written and spoken frequently on the issue. He was one of the first attorneys in the State of Illinois to publish an article regarding the application of the Medicare Secondary Payer Act to workers' compensation claims: "Medicare, Workers' Compensation and Set-Aside Trusts," Southern Illinois Law Journal (2002). Brad is a member of the Champaign County, Illinois State, and American Bar Associations. He currently serves on the Illinois State Bar Association Assembly and has also served several previous terms. He has also been a member of the ISBA Bench and Bar Section Council and served as its chairman Currently, he serves as a member of the ISBA Workers' Compensation Council and is past editor of the Workers' Compensation Section Newsletter. Significant Cases West v. Kirkham, 207 Ill. App. 3d 954 (4th Dist. 1991) Recognized that trial court may find plaintiff contributorily negligent as a matter of law. Propst v. Weir, 937 F. 2d 338 (7th Cir. 1991) Application of qualified immunity for university officials in First Amendment Retaliatory Transfer claim. Public Speaking Medicare Set-Asides and the SCHIP Extension Act Illinois State Bar Association Advanced Workers' Compensation Seminar 2008 Medicare Set Aside Issues and Update 22nd Annual HRVA Claims Handling Seminar 2007 Workers Compensation and Medicare Set Aside Proposals Illinois State Bar Association Hot Topics and Workers Compensation 2005 Aggressive and Successful Workers Compensation Defense Strategies for Today s Industrial Commission 19th Annual HRVA Claims Handling Seminar 2004 Professional Associations Champaign County Bar Association Illinois State Bar Association American Bar Association Illinois Association of Defense Trial Counsel Court Admissions State Courts of Illinois United States District Court, Central District of Illinois United States Court of Appeals, Seventh Circuit United States Supreme Court Education Juris Doctor, Southern Illinois University, 1987 Bachelor of Science (with honors), Illinois State University, 1984 Selected Publications "Medicare, Workers' Compensation and Set Aside Trusts," Southern Illinois Law Journal (2002) "Survey of Illinois Law-Workers' Compensation," Southern Illinois Law Journal (1991) J-13 Learn more about our speakers at