Pursuant to 42 U.S.C. §1395y (b) (2) (A) (ii), CMS/Medicare is the “secondary payer” in all workers’ compensation, no-fault and general liability claims. Under the Medicare Secondary Payer Act (MSP), CMS has taken the position that they are the secondary payer regardless of liability and they have a statutory right of recovery against all parties, including law firms involved in the claim, related to their past interests and/or future interests.
The Great Debate: “Reimbursement” or “Coordination of Benefits”
Like any law, the MSP and the use of Medicare Set-Asides (MSA) is subject to debate and interpretation. While the use of MSAs in workers’ compensation cases is for the most part well settled, there is little clarity of their use in cases outside workplace injuries.
Some people view the MSP in the context of non-workers’ compensation cases as being only a “reimbursement” statute, where consideration of Medicare’s interests is limited to conditional payments only. In support of this argument, people who subscribe to this line of thinking point out that the asserted powers of CMS amount to nothing more than an unconstitutional “taking” or “tax” on litigation, without statutory support. They also note that none of the regulations concerning the MSP and these types of claims found in 42 C.F.R. §§411.20-54, support the notion of “future medicals.”
On the other hand, the MSP can also be viewed as a “coordination of benefits” statute. In taking this viewpoint, it can be argued that regardless of regulation, the statute applies in all personal injury and workers’ compensation cases. Further, the definition of a “conditional payment” fits cases of both past and future payments made by Medicare related to a beneficiary.
Agency Support for LMSAs
Prior to 2011, CMS policy memoranda were directed at workers’ compensation plans. In May 2011, Sally Stalcup, CMS’s Region VI (Dallas) MSP Regional Coordinator issued a general memorandum regarding Liability Medicare Set-Asides (LMSAs). In this memorandum it was noted that, “Medicare’s interests must be protected; however, CMS does not mandate a specific mechanism to protect those interests. The law does not require a ‘set-aside’ in any situation. The law requires that the Medicare Trust Funds be protected from payment for future services whether it is a Workers’ Compensation or liability case. There is no distinction in the law.”
The memorandum was followed in September 30, 2011, by a statement regarding MSAs in non-workers’ compensation case by Charlotte Benson of CMS/Office of Financial Management.
Judicial Notice of MSAs in Liability Cases?
At this point, there is no controlling published legal decision regarding the use or recommendation of a MSA in non-workers’ compensation cases. Since 2009, there have been numerous cases that discuss the use of MSA in these cases. However, the cases have mainly been used for review and approval of a MSA amount through judicial means.
In Benoit v. Neustrom, acceptance for MSAs in non-workers’ compensation cases gained additional acceptance. In this case, an inmate within the Louisiana correctional system sustained permanent brain injuries resulting from the allegation of prisoner neglect. At the time of settlement, the parties were confronted with the issue of how to consider Medicare’s interests when a MSA allocation exceeded the liability policy limits.
In addressing this issue, the Court recognized equitable principles and the practical barriers to settlement these issues create. There was also an acknowledgement that the MSP compels consideration of Medicare’s interests and specifically cited the Stalcup Memorandum. In balancing these competing factors, the court determined an appropriate MSA based on a variety of case specific factors.
Medicare’s Interests in Non-WC Cases
Successfully navigating the Medicare maze starts with understanding the MSP. It is important to evaluate your personal injury case from the time the initial claim is made, and continuing that process throughout. In addition to evaluating each case on its merits and facts, it is important to evaluate the following:
• Cases where future medical expenses are being considered in the settlement;
• Cases involving a Medicare beneficiary or someone who will be entitled to Medicare in the foreseeable future;
• Catastrophic injury cases such as traumatic brain or spinal cord injuries, multiple amputations or cases involving severe psychological components. Long-term medical care and treatment will be presumed by CMS as necessary in these cases;
• Structured settlements: Medicare generally takes notice of these settlements given that long-term care may be part of the settlement agreement; and
• Any case in which the injured person will certainly require future medical care and treatment for the injury, exposure or ingestion.
Finally, remember to always consider Medicare’s interests, and protect the interests of your client(s).
Conclusions
The issue of Medicare’s future interests in liability cases is a hot button topic that puzzles many attorneys and claims handlers. At this point, there is no general consensus among the federal courts or attorneys as to the need for LMSAs as a requirement or recommendation.
To complicate matters further, the failure of the CMS to promulgate rules or procedures for LMSAs has further muddied the waters. While arguments can be made on both sides of this issue, it is clear that the CMS, and to some extent the courts, are interested in protecting the solvency of Medicare. Although each case needs to be analyzed on its own merits, the consideration of Medicare’s future interests through the use of LMSAs is clearly one tool that you can use to protect your clients from the iron fist of Medicare.
[1] Conditional payments are denied by 42 USC 1395y (b) (2) (B) (ii). Repayment required. A primary plan, and an entity that receives payment from a primary plan, shall reimburse the appropriate Trust Fund for any payment made by the Secretary under this subchapter with respect to an item or service if it is demonstrated that such primary plan has or had a responsibility to make payment with respect to such item or service. A primary plan’s responsibility for such payment may be demonstrated by a judgment, a payment conditioned upon the recipient’s compromise, waiver, or release (whether or not there is a determination or admission of liability) of payment for items or services included in a claim against the primary plan or the primary plan’s insured, or by other means. (Emphasis added)
[1] 2013 U.S. Dist. LEXIS 55971 (E. Dist. La. April 17, 2013)
Author Rebecca Shafer, JD, President of Amaxx Risk Solutions, Inc. is a national expert in the field of workers compensation. She is a writer, speaker, and publisher. Her expertise is working with employers to reduce workers compensation costs, and her clients include airlines, healthcare, printing/publishing, pharmaceuticals, retail, hospitality, and manufacturing. She is the author of the #1 selling book on cost containment, Workers Compensation Management Program: Reduce Costs 20% to 50%. Contact:[email protected].
Editor Michael B. Stack, CPA, Principal, Amaxx Risk Solutions, Inc. is an expert in employer communication systems and part of the Amaxx team helping companies reduce their workers compensation costs by 20% to 50%. He is a writer, speaker, and website publisher. www.reduceyourworkerscomp.com. Contact: [email protected].
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