2017 National Conference on Special Needs Planning and Special Needs Trusts MEDICARE SECONDARY PAYER ACT AND MEDICARE SET ASIDES: AN UPDATE

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1 2017 National Conference on Special Needs Planning and Special Needs Trusts MEDICARE SECONDARY PAYER ACT AND MEDICARE SET ASIDES: AN UPDATE Susan K. Tomita Albuquerque, NM

2 MEDICARE PROGRAM (1) are over the age of 65, (2) are on Social Security Disability Income or Disabled Adult Child benefits, (3) have End Stage Renal Failure (ESRF) or (4) have Amyotrophic Lateral Sclerosis (ALS/Lou Gerhig sdisease).

3 MEDICARE PROGRAM Not needs based Medicare Set Asides not required to have pay back unless also need to qualify for needs based benefit

4 MEDICARE SECONDARY PAYER ACT Medicare a secondary payer to: (1) a group health plan based on either their own or a spouse s current employment (2) auto and other liability insurance (3) no fault liability insurance (4) workers compensation

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6 PATEL MEMORANDUM July 23, 2001 CMS memo to Worker s Compensation Insurance Industry Compliance with the MSP statute required in workers compensation cases whenever the settlements foreclosed future medical expenses.

7 Medicare, Medicaid and SCHIPP Extension Act of 2007 (MMSEA) Reporting requirements on insurance companies and other payers. Allow CSM to identify situations in which Medicare is secondary payer. Address problems with inconsistent reporting. Slow the depletion of the Medicare Trust Fund.

8 Strengthening Medicare and Repaying Taxpayers (SMART) Act. Eliminated reporting requirements for very small settlements After January 1, 2015: Settlements over $1,000.00

9 MSAs in Liability Cases To do or not to do? That is the question.

10 MSAs in Liability Cases No statute or regulation requiring MSAs in Liability Cases. Requirement that one reasonably consider Medicare s Secondary Payer status. 42 U.S.C. 1395y(b)(2).

11 Sally Stalcup, MSP Regional Coordinator, Region VI (May 2011) If there was/is funding for otherwise covered and reimbursable future medical services related to what was claimed/released, the Medicare Trust Funds must be protected.

12 Benson Memorandum (Sept. 2011) Acting Director of Financial Services CMS Office of Financial Management First policy memorandum regarding Liability Medicare Set Asides (LMSA) No need to submit LMSA if treating physician certifies in writing that treatment has been completed as of the date of the settlement and no future medical services for injury required.

13 Advanced Notice of Public Rulemaking (CMS June 2012) Sought public comment on how to implement an MSA process for liability settlements. In October 2014, CMS withdraws proposal because it failed to gain approval from the Office of Management and Budget (OMB).

14 US Dept. of Health and Human Services (2014) No current plans for a formal process for reviewing and approving LMSA. However, obligation to inform CMS when future medicals were a consideration in reaching the Liability Settlement, judgment, or award as well as where liability judgment or award specifically provides for medicals.

15 June 8, 2016 CMS Website Announcement Announced that again considering expanding its voluntary MSA review process to include LMSAs and no fault insurance MSAs.

16 February 2017 Change Request Requires changes to be implemented by October 1, 2017 to the common working file in anticipation that the Centers for Medicare & Medicaid Services (CMS) will establish two new set aside processes: Liability Medicare Set Aside Arrangement (LMSA) and a No Fault Medicare Set Aside Arrangement (NFMSA).

17 Aranki v. Burwell, (D.Ariz. 2015) medical malpractice case whether Medicare Set Aside required in a non workers comp case CMS did not respond

18 Aranki v. Burwell, (D.Ariz. 2015) not ripe for review no federal law mandates CMS to decide whether Plaintiff is required to create an MSA

19 Aranki v. Burwell, (D.Ariz. 2015) There may be a day when CMS requires the creation of MSA s in personal injury cases, but that day has not arrived.

20 Sipler v. Trans Am Trucking, Inc. (D.NJ. 2012) no federal law requires liability set aside burdensome to the settlement process discourage personal injury settlements

21 Big R Towing v. Benoit (W.D. LA 2011) set aside for future medical expenses in a liability case appropriate.

22 Early v. Carnival Corp, (SD FL 2013) no legal requirement for liability MSA would not render an advisory opinion whether necessary

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24 FOR Handwriting on the Wall MMSEA Informal pronouncements CMS proposing review More and more PI lawyers doing it February 2017 Change Request

25 AGAINST little formal guidance from CMS when formal guidance given unlikely retroactive.

26 Garretson Resolution Group 2016 Best Practices Guide identify the amount of compensation for future medicals ensure Medicare is not billed until that amount is exhausted.

27 MSA NOT EXPLICITLY REQUIRED REASONABLY CONSIDER MEDICARE S INTEREST

28 MSAs: GUIDANCE FROM WORKERS COMP

29 MSA Not Necessary Only being compensated for past medical expenses; No evidence unfair to Medicare No longer require any Medicare covered treatments

30 REVIEW THRESHOLDS Receiving Medicare settlement over $25, Medicare reasonably expected within 30 months settlement is over $250, Workload thresholds not safe harbor

31 FUNDING If lump sum, no reduction for present value. Structure can be used to reduce amount needed to fund. Most MSAs of substantial value funded with a structure.

32 If Funded with Structured Annuity Initially Fund with Lump Sum equal to: (1) Anticipated costs for two years (2) Cost of the first major surgery.

33 Other Rules Set aside for claimant s lifetime No reduction for other sources of payment such as Medicaid or VA. Costs of administration cannot be paid from the MSA (use separate structure)

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35 Liability vs. Workers Comp Differences between liability and Worker s Compensation settlements liability limits and comparative fault issues inappropriate to fully fund an MSA when plaintiff receiving fraction of damages

36 Sipler v. Trans Am Trucking, Inc. Worker s Comp: recovery on the basis of a rigid formula Tort Cases: noneconomic damages not available in workers comp. victim s damages are not determined by an established formula.

37 Who is Liable?

38 CMS s Sources of Recovery Any entity, including a beneficiary provider, supplier, physician, attorney, State agency or private insurer that has received a primary payment.

39 CMS Can Recover Regardless of fault Regardless of agreement between the parties re: responsibility for Medicare. No safe harbor for a party who already paid.

40 Attorney Liability? If settlement monies deposited into an attorney s trust account, attorney arguably received a primary payment and can therefore be sued by CMS to recover Medicare s claim.

41 U.S v. Harris (N.D.W.VA 2009) CMS request for summary judgment granted. Plaintiff s counsel ordered to pay the judgment plus interest for conditional payments not reimbursed

42 Other Sanctions Medicare may refuse to pay for injury related medical expenses until the entire award has been expended. May jeopardize medical care.

43 Dual Eligibles Medicare is primary payer vs. Medicaid Assumption that Medicaid will pay if Medicare doesn t not true especially for prescription medications.

44 The Role of the Special Needs Planner

45 Counseling the Client Thoroughly explain the issues Empower client to make the risk assessment him/herself. Different people have different risk tolerances

46 Strongly consider MSA Heavily dependent on Medicare for injury related medical expenses Settlement is significant OR amount in the judgment or settlement specifically allocated to future medical expenses.

47 Approval of MSA Submit to CMS? Seek court approval?

48 February 2017 Change Request Anticipation of more definitive guidance regarding LMSAs Establish a review process Third party contractors review, negotiate and approve MSAs in Workers Comp cases

49 Drafting Medicare Set Asides

50 Drafting Medicare Set Asides If the client is receiving SSI or other needs based governmental benefits that consider resources, the MSA must be imbedded within a 42 U.S.C. 1396p (d)(4)(a) or (d)(4)(c) trust.

51 Clients Over 65 Cannot do 42 U.S.C. 1396p (d)(4)(a) trust. Some states do not allow funding of 42 U.S.C. 1396p(d)(4)(C) trusts after age 65

52 July 11, 2005, CMS memorandum Medicare set aside arrangements are not subject to any special treatment under Medicaid resource rules. These funds should be evaluated to determine if they meet the legal definition of a resource for Supplemental Security Income (SSI), and therefore Medicaid, purposes, i.e., cash or other assets that an individual owns and could convert to cash to be used for his or her support and maintenance.

53 Williford v. North Carolina Department of Health and Human Services, 792 S.E.2d 843 November 15, 2016, North Carolina Court of Appeals Medicare Set Aside account not a countable resource for purposes of determining the recipient's eligibility for Medicaid

54 Worker s compensation commission order approving the settlement agreement setting up the MSA was a legally binding agreement, it precluded the recipient from using the funds for her general support and maintenance, and if she used the funds for her general support and maintenance, she could be held in contempt. Therefore not a countable resources for Medicaid purposes.

55 DeWhit Graham v. Louisiana Department of Health and Hospitals (3 rd Judicial District, Lincoln Parish) MSA not countable resource where beneficiary had no access to the MSA account had no control over the account since third party administrator and the remainder after death would revert to Worker s Comp Insurer.

56 Might best position over 65 client for preservation of Medicaid benefits by Having a court order which both creates the MSA and restricts the uses to which the MSA may be applied Having a professional administrator administer the MSA, and Including a mandatory Medicaid pay back after the death of the beneficiary.

57 Determining the Amount to Fund MSA. Requires detailed knowledge of what Medicare will pay. A large portion of cost often prescription medications must determine when generic brands may be available to reduce such costs.

58 Administering Medicare Set Asides.

59 Majority of MSAs are self administered by the Medicare recipient Benefits of professional administration Self settled d4a trust Administering MSAs

60 Administering MSAs Often professional Trustee will serve but contract with MSA Administrator to administer the MSA portion of the trust. The MSA Administrator holds the MSA portion of the trust and is assigned any structured settlement payments that will fund the MSA.

61 Administering MSAs Often professional Trustee will serve but contract with MSA Administrator to administer the MSA portion of the trust. The MSA Administrator holds the MSA portion of the trust and is assigned any structured settlement payments that will fund the MSA.

62 Practical Administration

63 Practical Administration Admin issues insurance card Medicare recipient gives to providers when receives services. Bills sent directly to Admin who sorts out which bills should be paid by the MSA and which forwarded on to Medicare to pay.

64 Practical Administration If due to unanticipated costs MSA depleted in any given year, the excess bills sent to Medicare. Medicare will pay the excess bills (if MSA adequately funded and administered) until the next structured settlement payment is received after which the MSA will resume paying injury related medical bills.

65 Practical Administration When totally depleted, accounting to Medicare and Medicare will resume payment if MSA adequately funded and administered. If funds left after death, to estate of beneficiary

66 Conclusion MSAs not presently mandated by federal stat or regs in liability cases But increasingly clear that Medicare s interests in regard to future meds need to be reasonably taken into consideration in liability claims.