Close

1.877.725.2467 info@medivest.com

Archive for category: Professional Administration

Why You Should Not Ignore Medicare’s Interests in Your Liability Settlements

Why You Should Not Ignore Medicare’s Interests in Your Liability Settlements

Protecting Medicare’s interests in a settlement is a legal requirement. In 1980 Congress enacted the Medicare Secondary Payer Statute (42 U.S.C. 1395y(b) or MSP), giving Medicare rights as a “Secondary Payer”. While the MSP does not specifically state how a party should protect Medicare’s future interests, the MSP law prohibits Medicare from making a payment where there is a primary payer involved but provides one exception for what is known as conditional payments. Medicare may make a payment under certain circumstances when a primary payer is involved such as a liability carrier or self-insured, and the primary payer has not yet demonstrated its payment obligation by settling a case or paying a judgment. These payments are called conditional payments because the Medicare payment is conditioned upon being reimbursed by the primary payer. The right to reimbursement is a direct statutory right of the U.S. for recovery of conditional payments, that carries steep interest assessments over 10% for demands not paid within 60 days and when left unpaid, can lead to recovery of double damages in litigation. The MSP also provides a right of subrogation where the U.S. is subrogated to the rights that Medicare beneficiaries have. It is important to know that along with the rights of the U.S. under traditional Medicare, which encompasses Medicare Part A and Part B, Medicare Advantage Plans also known as Medicare Advantage Organizations (Medicare Part C), and Medicare Part D Prescription Drug Plans, may assert a private cause of action under the MSP against primary payers and in some cases, those who receive payment from primary payers.

The MSP outlines what plans are deemed primary to Medicare. These plans or types of insurance are auto insurance, liability insurance including self-insured plans, workers’ compensation and no-fault insurance. Collectively, these are referred to as Non-Group Health Plans or NGHP. Medicare’s interests in a settlement applies not only to past payments (think Medicare liens) but to future medicals as well. When describing conditional payments and the right of the government to reimbursement, the MSP does not distinguish between pre-settlement conditional payments and post-settlement conditional payments. Therefore, Medicare’s rights to recovery may apply to post-settlement conditional payments anytime Medicare is prematurely billed for injury related medicals after settlement. In the Workers’ Compensation context, the policy of the Centers for Medicare & Medicaid Services (CMS), as the agency that runs Medicare, traditionally has looked to the employer or insurance carrier for the employer as the debtor for reimbursement of conditional payments arising prior to settlement. In the liability context, the Medicare beneficiary is considered the debtor for conditional payments. Because the MSP allows recovery from both the primary payer and any person or entity that receives payment from a primary payer such as the contingency fee of an attorney being paid from settlement proceeds, attorneys need to be aware of how to protect not only their clients but themselves from collection actions under the MSP.

Completing a Medicare lien investigation and reimbursing Medicare for past payments related to a claim is what most parties will do to consider Medicare’s past interests in a case. However, the most frequently overlooked piece when settling a liability claim is determining how much of the settlement money is being paid to compensate for future medicals and of that amount, how much of that would ordinarily be covered by Medicare. In other words, some trial attorneys may look at all the available damages when proceeding with a case but may not realize that they should also demonstrate a consideration of Medicare’s future interests regarding the future medicals. The repercussions of not addressing Medicare’s future interests in a case could result in Medicare denying payments for case related medical items, services, and/or expenses. This is Medicare’s primary enforcement mechanism post settlement. If done properly, actions taken during the representation of the injured plaintiff (whether enrolled in Medicare at the time of the representation or not) will help ensure that the injured Medicare beneficiary will have funds available to get the treatment they need and future Medicare entitlement for case-related body parts. Protecting Medicare, and the Medicare beneficiary, is a long-term play.

There are several options regarding how to consider Medicare in a settlement. The options will largely depend on the details of the case and there is not a single method that can be applied across the board. The Medicare Set-Aside (MSA) allocation is used frequently on workers’ compensation claims as a method to estimate Medicare’s future interests in a case. Medicare has offered guidance and put in place a voluntary submission process by which they will review MSA allocations that meet certain workload review threshold categories and will issue an approval (or counter approval) on the proposed amount. CMS, as the sub agency under DHHS that runs the Medicare program, publishes a WCMSA Reference Guide that outlines the format for MSA allocation reports and what information should be provided to have the MSA reviewed. Even though there is a well-established process for review of WCMSAs, there is no law requiring the completion of a MSA allocation on a WC case or any case.

As of July 2019, Medicare has avoided setting up a formalized process for review of liability MSAs and has not issued formal guidance or regulations regarding liability MSAs. It is this lack of guidance or a formalized process (like there is in WC) that has led many to believe they do not need to be concerned with Medicare’s future interests in a case. The general approach is to determine whether Medicare made conditional payments pre-settlement and if so, pay the pre-settlement Medicare lien (or negotiate it to satisfactory resolution), and close out the case. This approach is only the first step in adequately addressing and protecting Medicare’s interests. If you only consider Medicare’s past interests, you are placing you and your clients at risk.

Medicare will actually be aware of the case and the associated injuries. They are tracking this information via the MSP’s Mandatory Insurer Reporting (MIR) provision that comes out of Public Law Section 111 and is most commonly known as Section 111 reporting. Section 111 reporting is codified in the MSP under 42 U.S.C. §1395y(b)(8) and establishes MIR for either ongoing payment obligations or total payment obligations demonstrated by payments made by auto insurance, liability insurance including self-insureds, workers’ compensation plans or insurance, or no-fault insurance. If payment of over $750 is made regarding a claim of an individual who is a Medicare beneficiary, the primary payer (source of funds) is required to electronically report the amount of the payment, the date of the payment, the name of the Medicare beneficiary, date of the incident, and all the medical codes associated with the claimed injury (sometimes referred to as the Big 5), and a huge number of other data fields to Medicare. The information becomes integrated into what is known as the common working file for that Medicare claimant. Medicare places electronic markers for the claimant and for the medical codes (ICDs and CPTs) associated with the claimed injury. This information is ultimately used to “track the case” to ensure that Medicare is reimbursed for past payments (liens) and to help Medicare avoid making payments for future medical care related to the case for which it is not the primary payer. Medicare uses this information to monitor the file, check for unpaid liens, and notify parties of discrepancies. The MSP initially described penalties of $1000 per day per claim but was later amended in 2012 with the SMART Act and now describes financial penalties of “up to $1,000 per day per claimant” for noncompliance of any primary payer. CMS has not yet promulgated regulations regarding exactly how civil money penalties will be assessed and whether there will be safe-harbors for bona fide errors associated with the reporting process.

The Office of Management and Budget (OMB) provided indications in December of last year that CMS will be providing two Notices of Proposed Rulemakings (NPRMs) related to the enforcement of the MSP. Each are scheduled to be issued no later than September 2019. While the first could relate to any NGHP cases, because WC already has both regulations in the Code of Federal Regulations addressing Workers’ Compensation cases as well as a Reference Guide concerning WCMSAs, and no-fault claims don’t typically have future obligations, many in the industry have surmised that this first rulemaking will address protecting Medicare’s future interests in liability cases and putting back on the table the adoption of regulations or at least guidance (like a LMSA Reference Guide) on a possible review and approval process with workload review thresholds for CMS review of Liability Medicare Set-Asides (LMSAs). The second NPRM that is scheduled for the same time period will relate to the civil monetary penalties associated with non-compliance with Section 111 reporting. Once these two NPRMs are released, the best practice compliance behaviors for parties on both sides of liability cases should become even more clear.

Medicare’s primary enforcement mechanism regarding protection of Medicare’s future interests and the Medicare Trust Funds is denial of payments for medicals related to compensated third party injuries. However, what happens when Medicare’s computer system doesn’t catch a body part or claim previously compensated in a third-party settlement? Anytime and every time Medicare pays for those injury related medicals when it should not have, those conditional payments accrue as a growing collection action on behalf of Medicare. Our company has seen demands for payment that have included requests for reimbursement of post settlement medicals. We have also seen an uptick in recovery actions by the Department of Justice concerning collection of conditional payments. In March of 2019, a law firm in Maryland agreed to pay $250,000 to resolve a Medicare conditional payment demand on a case where the firm had already disbursed net settlement proceeds to its client. Last June, it was a law firm in Philadelphia that reached settlement with the Department of Justice to reimburse Medicare for conditional payments that were not paid out of trust and had already been disbursed to the client. Just because a plaintiff’s medicals might have been paid for by Medicare after a settlement in the past, does not mean that Medicare won’t deny those items or services in the future, or that it won’t demand repayment when it determines it made conditional payments. Imagine what could happen if Medicare began searching every single payment it makes and brushing that payment up against every settlement over $750 reported by insurance carriers. This is the future and could lead to some eye-popping dollar figures related to parties and legal representatives that failed to pay past Medicare liens and regularly fail to prevent future Medicare liens.

We should also not lose sight of the fact that if an injured individual does not set aside funds for injury related Medicare covered medicals and settlement funds are no longer available, that individual may not be able to get the treatment they need. Sadly, we often see that the MSA funds are the only funds remaining after about five years following a settlement. On a positive note, if MSA funds are exhausted and exhausted properly with the attestations and accounting that CMS likes to see, Medicare will typically step in and become the primary payer for those case related items going forward. Even though there is no law requiring the preparation of a MSA allocation, it is the safest and most conservative approach that can be taken. The injured party will obtain a detailed report outlining anticipated future medical care costs that are normally covered by Medicare. Along with a non-qualified report that typically comes along with a MSA allocation, you will have a better economic picture of all items, services and expenses reasonably expected in the injured plaintiff’s future. Obviously there will often be cases with such significant injuries and accommodations to living and transportation that could also benefit from an evaluation by an economist to take inflation into consideration and Life Care Plans that examines case management costs and some other costs that may not be evaluated in a MSA to help round out the best evidence to build your client’s case.

With a healthy respect for the extraordinary reach of the MSP, if the MSA funds administered are the total amount of funds projected in a LMSA and CMS is notified of the settlement and the amount of the MSA (different from asking CMS to review a LMSA), chances are less likely that there will either be a denial of the payment of post settlement injury related Medicare covered medicals after proper exhaustion or that post-settlement conditional payments would ever arise. Of course, when LMSAs are apportioned, questions abound whether Medicare may ever demand exhaustion of a full projected MSA versus an apportioned dollar amount that takes various factors into consideration of why a liability case may settle for less than full value. We could receive some indication of answers once regulations are promulgated regarding liability futures. However, in the meantime, a MSA allocation offers valuable protections regardless of whether an apportionment is calculated, because the MSA helps limit the extent of Medicare’s reach into a settlement. Without it, the default position taken by CMS for liability cases is that without a plan for future care, the entire settlement will be treated as the amount compensated for as future Medicals. Therefore, CMS would look for the entire value of the settlement to be exhausted in payment of future Medicals before Medicare would pick up coverage for that injury. Contemplating the MSA allocation in the settlement and making sure MSA funds are spent according to Medicare guidelines via professional administration is the safest and most conservative approach that can be taken to not only protect Medicare’s interests in a case, but to protect an attorney and their client from collection actions by CMS, helping to provide peace of mind for your injured clients.

The Road to Settlement Funds Mismanagement is Paved with Good Intentions
by

The Road to Settlement Funds Mismanagement is Paved with Good Intentions

It is perhaps cliché to say that life is made up of the decisions you make. But, overused maxims tend to communicate common truths, hence their ubiquity. Decision-making is mainly about choosing one of two or more options to achieve the most desirable outcome. Some decisions are straightforward and obvious. Many are not. Still more are tied up in the tension between what we want to do and what we should do. Values, discernment, and even willpower all factor into the process.

Decisions about money are among the most consequential. It therefore reasons that decisions involving large sums of money are highly consequential. Injury settlements are a prime example of how poor decision-making can produce unfortunate, even disastrous outcomes for both the injured and their families. Really no different than the lottery winner whose sudden wealth turns into debt and insolvency within a brief period, so the injured person who receives a cash settlement of any size is often just as unprepared and soon makes decisions that cannot be undone. Money, once spent, cannot be unspent.


“Where There Is No Vision, the People Perish”

Many people have very good intentions from the outset, but good intentions are not enough. General goals without specific plans to reach those goals will usually fall short. So, what are the missing plans that can cause settlement funds mismanagement?

  • a plan to get the most value out of every dollar spent
  • a plan to use the money for what it was intended
  • a plan to ensure the funds are insulated from poor decision-making

This type of planning helps set priorities and leads to the details needed to help the plan succeed. It is really no different than the priorities considered in good personal finance planning. Some settlement beneficiaries get this, but many do not. That’s because this is a problem common to almost all of us. Most of us do not fund our retirements as we should, do not save as we should, and often do not limit our spending as we should. Any bonuses we receive evaporate quickly. We live up to our means and, some how, when we receive a raise, we then live up to that new limit again. And for individuals with injuries who may not be able to work or whose treatment costs exceed expected costs over their lifetime, mismanagement of a fixed settlement amount will likely result in considerable hardship for the injured and their family.


The Advantages of a Professional Custodian

Once one considers how important it is to have a detailed plan for competent management of  settlement funds, the use of a professional custodian begins to make a lot of sense. Vesting a professional custodian with the responsibility for settlement funds decisions addresses the major problems created by the introduction of a large sum of money into an injured person’s finances.

We’ll look at the advantages of a professional custodian, but first, let’s consider the major factors that often negatively affect the decision-making process for a beneficiary handling their own funds:

  • Lack of Expertise – Inability to seek or negotiate for the best price on products and services due to a lack of knowledge about fee schedules, rates, coordination of benefits, medical billing department practices and policies, and negotiation.
  • Dependence on Willpower – Decisions are at the mercy of the beneficiary’s self-control.
  • Outside Influences – Life circumstances, or the needs or even manipulation of family members or friends creates pressure to spend imprudently.

 

Again, these are pitfalls relatively common to all of us. It is easy for emotion and even rationalization to play into spending decisions. This is why there is certainly wisdom in building a wall around all or at least portions of a settlement to protect the funds and beneficiary alike.

Consider how a professional custodian’s decision-making process addresses the issues we’ve discussed:

  • Professional Expertise – Knowledge and experience in reviewing and repricing claims down to applicable fee schedules, and negotiating reductions in claims where possible.
  • Limited by Agreement – Discretion in spending decisions is limited by agreement. The custodian is not permitted to use the funds in any fashion not explicitly contemplated by the contract. Emotionality is factored out of the decision-making process.
  • Contingency Planning – In the event of specific circumstances, special exceptions can be planned for and facilitated.


Custodial Arrangements: Not just for Medicare Set-Asides

Medicare set-aside accounts, which are created as mechanisms to comply with federal law by protecting Medicare from paying when it should not, and which contain funds specifically limited to the Medicare allowable and injury-related expenses, are commonly administered by a professional custodian (or “professional administrator”). But, other settlement funds should be placed with a professional custodian as well. It’s also worth mentioning that the best way to ensure that settlement funds are used according to the dictates of a settlement is to place those funds with a third party that is bound to comply with the terms that establish their custodianship.

At Medivest, we frequently receive calls from beneficiaries who are interested in seeking some flexibility in how their professionally administered funds are spent. The most common reason for this request is that they have already spent their remaining settlement funds and the monies under our company’s charge are all that remain. It is not difficult in those circumstances to surmise what would have happened with those custodial funds had we not been “in the picture.”

As example has shown time and again, managing large sums of money is not a simple task, and requires proper planning ahead of time to prevent problems down the road. In each settlement, it makes sense to consider using a professional custodian if concerns about fund mismanagement are warranted. Medivest has been providing custodial services to injured beneficiaries for over twenty years. We’ve helped thousands of  individuals spend their settlement funds in a strategic and prudent manner in order to help stretch those funds to their benefit and the benefit of their families. If you have questions about how to integrate a custodial arrangement into a settlement, please do not hesitate to contact us.

How to Use a Medicare Set-Aside Allocation (and, how NOT to)
by

How to Use a Medicare Set-Aside Allocation (and, how NOT to)

Administering Medicare Set-Aside (MSA) funds properly is a daunting task for most. Nuance in the Medicare formulary, ignorance about MSAs in the provider’s billing department, and complexity in medical coding all conspire to frustrate even the most diligent and well-meaning of beneficiaries. Truly, the successful MSA custodian has to be part educator, part negotiator, part coding wizard, and part accountant.

Conflated Ideas

In this area of compliance, it is not surprising that misunderstandings abound. One common misconception involves what can actually be paid for from a MSA account. This mistake sometimes has its origin in the failure to understand the MSA allocation report’s actual purpose. It probably does not help that the term “MSA” is sometimes used to describe both the funds in a MSA account and a MSA allocation report (“MSA allocation” or “MSA report”).

The properly prepared MSA report’s value lies in its final dollar amount. Medicare is given consideration through the establishment of an amount of money to be used to treat the injury, thereby shielding Medicare from premature payments on behalf of the beneficiary. This is necessitated by the fact that, by law[1], Medicare is secondary to workers’ compensation and liability injuries, pre and post-settlement. The amount established in the MSA allocation is intended to be spent prior to Medicare becoming primary. But also, the settlement is able to establish a limit to how much of the settlement proceeds must be isolated for the sole purpose of stepping in front of Medicare. According to the latest version of the Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA) Reference Guide, where no arrangement is made for how future medicals shall be paid, Medicare may consider the entire settlement as primary[2].

An Estimate, not a Formulary

The mistake is in a literal application, not of the MSA report’s final dollar amount, but of the itemized detail of medical services and medications. It is common for a beneficiary, those counseling them, or those settling with them, to believe that only the specific items listed in the MSA report are covered by the MSA funds. It’s imagined that the beneficiary, when paying their bills, will reference the MSA allocation to determine whether a given medical expense is listed there, and if not, arrange to have it paid by other means. But, the MSA allocation is not an injury-specific formulary of allowed items any more than it is a prescription for care.

In actuality, anyone who has written a MSA allocation or administered MSA funds for a relatively short period of time knows that, at its best, the MSA allocation report is an educated guess. Moreover, the stock MSA allocation, if written to the government’s review standards, may project treatments in frequencies that would not ordinarily be expected, ballooning its amount, or completely ignore the inflationary nature of healthcare costs over time, deflating the final amount below reality’s expectation of the future. (That back x-ray costs $65 today. Do you imagine it will cost that in 10 or 15 years?) In the end, the final number is recognized as an adequate consideration of Medicare’s interests, but a supposition unlikely to hit future costs with absolute accuracy.

Consider all of the ways that actual injury expenses could differ from those in the MSA allocation report. Take prescription drugs as an example. A drug priced into a MSA report references a single NDC (National Drug Code), but that particular drug may have dozens of codes, representing different manufacturers, doses, forms, etc. It’s very likely your corner store pharmacy is going to fill your drug under a different code, and different price. The other corner store pharmacy right across from your corner store pharmacy may use still another code and price. A drug prescribed to treat a condition may become ineffective or create side effects undesired by the beneficiary and/or the prescribing physician. It is not uncommon for a physician to drop one medication in favor of another, or add or remove medications. This all changes the spend.

Also, the Medicare formulary changes annually. Something covered by Medicare today may not be covered in the future, and just because an expense was contemplated in a MSA report, it does not mean that the MSA funds should continue to cover it if that particular expense is no longer covered by Medicare. In summary, a beneficiary’s needs may change over time and the MSA allocation report is not designed to and cannot contemplate all of those changes at the time it is prepared.

What to Pay

So, what is actually to be paid from MSA funds? The answer is any and all Medicare allowable, injury-related expenses incurred on or after the date of settlement until the MSA funds are properly exhausted. Administration is all about stepping in front of Medicare to prevent any payment by it for injury-related expenses until MSA funds are gone. This is not accomplished by checking expenses against the list in the MSA allocation report. It is about identifying injury related expenses that Medicare would otherwise pay for and paying them at rates consistent with or below the applicable fee schedule. It is inaccurate to say that Medicare is responsible for any injury-related expenses not specifically contemplated by the MSA allocation. Such an assumption (though made more frequently than you may expect), if resulting in payments by Medicare for the injury while MSA funds still exist, represents an unlawful shift of burden to Medicare that may prompt a request for reimbursement if discovered.

In the event that real life is more expensive than the MSA report expected, what then? Medicare will assume primary responsibility for the injury’s Medicare allowable expenses once the MSA funds have been spent, provided those funds are spent properly. They will do this annually, in the case of temporary exhaustions, or from the point of permanent exhaustion onward. The key is the ability to demonstrate that the funds were spent according to the Centers for Medicare & Medicaid Service’s (CMS) guidelines. And what if the MSA report seems to have expected more expense than is actually realized? CMS wants those funds to remain in the MSA account in the event one of those unforeseen complications, hospitalizations, or changes in treatment comes along.

In conclusion, a MSA allocation is a valuable resource to any administrator of MSA funds to understand at a glance the nature of the injury and any co-morbid conditions that are specifically excluded. However, it should be used for what it was intended, namely, to arrive at an amount. Understanding the proper use of the MSA funds is critical to administering the funds correctly. A beneficiary who uses their MSA allocation report as a litmus test for what the MSA account can and cannot pay for may end up draining other settlement funds unnecessarily or end up shifting the burden to Medicare prematurely. Ultimately, improper administration places the beneficiary’s Medicare benefits at risk, as Medicare has the right to suspend benefits until it has recovered payments that should have been made by other primary funds.


[1] Medicare Secondary Payer Statute, 42 U.S.C. §1395y(b) a/k/a the MSP.

[2] See Section 8.1 titled Review Thresholds, Example 2 –“Not establishing some plan for future care places settling parties at risk for recovery from care    related to the WC injury up to the full value of the settlement.”

Does Self-Administration Ever Make Sense?
by

Does Self-Administration Ever Make Sense?

Injured parties receiving lump sum settlements tend to spend their settlement money quickly. This quick spend risk is often described as dissipation risk. Statistics in a personal injury practice guide by The Rutter Group indicate that somewhere between 25 and 30% of accident victims spend all settlement money within two months of receiving the funds and that up to 90% of accident victims use all settlement proceeds within five years[1]. It would, therefore, seem prudent for attorneys representing injured parties to caution their clients about the quick spending tendency and to discuss ways to reduce that risk. One method to help reduce dissipation risk is the use of structured settlements with regular tax-free annuity payments, discussed in footnotes 4-6 of a prior blog article. Another option is using a professional administrator for payment of medical needs through Medical Custodial Accounts (MCAs) or via Medicare Set-Aside (MSA) accounts specifically designed to protect Medicare’s Trust Funds by preventing premature billing of Medicare for future injury related Medicare covered medical items and services (future medicals).  MSAs, which can and are often funded via structured settlement arrangements, are most often considered when the injured party is a Medicare beneficiary or has a reasonable expectation of becoming one within 30 months of judgment, settlement, award or other payment (settlement) (30-month Medicare window[2]), and the settlement compensates future medicals that would ordinarily be covered and reimbursable by Medicare.

The Centers for Medicare & Medicaid Services (CMS) suggests in section 17.0 of its Workers’ Compensation Medicare Set Aside Arrangement (WCMSA) Reference Guide, currently in Version 2.8, that WCMSAs “should be administered by a competent administrator” and provides examples such as a professional administrator, a representative payee, the claimant, etc. Other than cases with traumatic brain injuries for which a court may render a person legally incompetent, the question becomes whether there should be a minimum level of competence for a person to be deemed capable of self-administering a WCMSA or a Liability MSA (LMSA).

CMS explains the administration process in section 17.5 of the WCMSA Reference Guide. Requirements for administration are summarized by CMS as follows:

• Claimants should submit annual self-attestations, just as professional administrators would.

• WCMSA funds must be deposited into interest-bearing accounts separate from any personal savings or checking accounts.

• WCMSA funds may only be used for medical services and prescription drug expenses related to the workers’ compensation injury that would normally be paid by/otherwise reimbursable by Medicare.

• CMS provides some examples of care/items that Medicare does not pay for including acupuncture, routine dental care, eyeglasses or hearing aids, and suggests that claimants get a copy of the booklet entitled “Medicare & You” for a more detailed list of non-Medicare covered items.

• CMS cautions that “if funds from the WCMSA are used to pay for services other than Medicare-allowable medical expenses related to medically necessary services and prescription drug expenses, Medicare will not pay injury-related claims until these funds are restored to the WCMSA account and then properly used up.”

• Even if a person is not a current Medicare beneficiary, the requirements and prohibitions are the same as if the injured party were a Medicare beneficiary.

• While whether to submit a WCMSA to CMS for review is voluntary, Claimants that lose Medicare entitlement after such CMS approval, “. . . are not entitled to release of WCMSA funds if they lose their Medicare entitlement. However, the funds in the WCMSA may be used for medical expenses specified in the WCMSA until Medicare entitlement is re-established or the WCMSA is exhausted.”

Are the above bullets easy to understand and follow? Does the WCMSA Reference Guide language clearly explain what is expected? Even if a person can understand what they are reading, are injured parties likely to comply with the described procedures?

Regarding WCMSAs, The National Council on Compensation Insurance, Inc. (NCCI) published a February 2018 research brief updating its 2014 study on WCMSA reviews. According to the 2018 NCCI brief, approximately 98% of all WCMSAs (from the study’s 11,000 MSA data sample between 2010 and 2015) were self-administered.

Shouldn’t CMS want to try to plug this 98% administration compliance hole? CMS has “highly recommended that settlement recipients consider the use of a professional administrator for their funds”, does that language go far enough to protect the Medicare Trust Funds, one of which (covering Medicare Part A hospital insurance) is on track to be exhausted in 2026, three years earlier than projected just a year ago?

Are injured parties flying blind when self-administering their MSA funds? How does the dissipation risk described above affect injured parties’ decision-making process? There is an entire industry devoted to helping injured parties consider and protect Medicare’s interests in accordance with the Medicare Secondary Payer Act[3] and that keep up with CMS policies on WCMSAs, LMSAs, and administration. Regardless of whether CMS might ever mandate professional administration, insurance carriers and attorneys for injured parties should want competent and professional compliance partners to dispute and negotiate Medicare conditional payment reimbursements, estimate future injury related Medicare covered medicals, and above all else, to help injured parties competently administer their Medicare Set-Aside funds.

After all, should injured parties really be the ones making payments, coordinating benefits and/or negotiating bills? Can they really be expected to keep up with the detailed accounting and  reporting expected by CMS? CMS has shown a rekindled interest in both review of WCMSAs and LMSAs with the increased scope of work and dollar amount of its awarded WCRC Contract and in its recoveries of conditional payments. Because best in class administrators provide network discounts for Durable Medical Equipment and Prescription Drug pricing through Pharmacy Benefit Managers (PBMs), professional administration can help ease the burden of MSP compliance and save injured parties money.

Take Aways:

• Professional administration should be thoroughly discussed with injured parties by their attorneys. After all, lawyers are not only attorneys, but “Counselors at Law”.

• Insurance carriers and their attorneys should see also see value in minimizing MSP exposure.

• Even when outside the commonly referred to 30-month Medicare window, when future medicals are in play, parties to a settlement should strongly consider the use of a professional administrator, regardless of whether the primary driver is to coordinate and negotiate bills, or to reduce dissipation risk.

• The need for professional administration becomes even more apparent when the injured party is within the 30-month Medicare window, now combining the advantages of wiser spending with reduced MSP exposure.

• Allowing non-competent individuals to self-administer MSA funds turns a blind eye on our nations’ at-risk Medicare Trust Funds.

• MSP enforcement by CMS regarding past medicals will likely continue to proceed via the conditional payment recovery process. MSP enforcement by CMS regarding future medicals will likely be addressed through denial of Medicare coverage for injury related medicals when beneficiaries ignore the law or don’t keep accurate records of their Medicare covered medical spending.


[1] The Rutter Group, “California Practice Guide: Personal Injury” Chapter 4.

[2] CMS workload thresholds established for suitability of review of WCMSAs, as listed in the current WCMSA Reference Guide, have one tier for claimants who are Medicare beneficiaries and one for claimants with a reasonable expectation of becoming enrolled in Medicare within 30 months of judgment, settlement, award or other payment.

[3] 42 U.S.C. §1395y(b)(2) et. seq.

 

by

Is Your Claimant Competent To Administer Their MSA?

An evaluation of competence should take place by the settling parties before Medicare Set-Aside (MSA) monies are given to a claimant to self-administer. Unfortunately, everyday in cases all over America, large amounts of money are turned over to injury victims to self-administer their own MSAs with no evaluation of competence whatsoever. Why? Because it is not required. What happens if a seriously injured person does not manage this money properly and fails to follow all the complex rules? They are at risk to lose their Medicare insurance benefits and the Medicare Trust Fund loses money. Allowing incompetent, injured claimants to self-administer their own MSAs is truly a lose-lose situation for the claimant and for the Medicare Trust Fund.

 

Medivest Benefit Advisors proposed to CMS to update the language in their WCMSA Reference Manual to address the claimant, as administrator, be competent. In the May 29, 2014 version of the WCMSA Reference Manual, CMS took Medivest’s suggestion and updated the language of section 17.1.

17.1 Administrators
WCMSAs should be administered by a competent administrator (a professional administrator, the representative payee, the claimant, etc.) When a claimant designates a representative payee, appointed guardian/conservator, or has otherwise been declared incompetent by a court; the settling parties must include that information in their WCMSA proposal to CMS.

Subscribe to the Medivest blog at www.medivest.com/medivest-blog/ to receive future updates.

 

© Copyright 2016 Medivest Benefit Advisors, Inc. www.medivest.com
877.725.2467
by

A Call for Medicare Set-Aside Reform

Currently, CMS focuses its post-settlement, MSP enforcement on the proper calculation of the Workers Compensation Medicare Set-Aside (WCMSA) amounts by paying about $5 Million per year to a contractor to review about 29,000 WCMSA arrangements. That contract is currently being sent out for competitive bids. But, as we mentioned in our previous blog, we think there is a better way to achieve the goals of MSP compliance.

First, it’s important to understand that the primary objective of the Medicare Secondary Payer (MSP) statute is to prevent Medicare from paying medical bills that insurance settlement money is supposed to pay for. Medicare Set-Aside (MSA) accounts are commonly used to protect Medicare from paying certain post-settlement medical bills by setting aside future medical treatment settlement monies in a separate bank account to be used later to pay those related medical bills.

However, about 95% of MSA money is “self-administered” by the injured person and the sad truth is that the majority of that money is being misspent, leaving Medicare to pick up the tab. The bottom line is that is does not matter how much cost, effort, expertise or scientific precision is poured into the MSA cost projection calculations. In the end, if a competent, accountable, neutral third party does not administer that money, MSP compliance fails.

For that reason, it seems to me that there is a much better, more common sense approach, to MSP compliance that would help the MSA industry and save billions of dollars for the Medicare Trust Funds:

1. MSA Professional Administration should be encouraged – If CMS were to recommend professional administration, require a self-administering claimant to attest to his/her competence and allow the professional administration fees to be paid from the MSA funds, professional administration would expand and Medicare would save billions of dollars.

2. Limit CMS MSA reviews – Most laws in the U.S. are not enforced by a comprehensive pre-audit, because it’s too expensive. CMS should adopt a more IRS-like model to reviewing WCMSAs, by publishing more detailed MSA compliance rules and then greatly reducing the number of WCMSAs that are reviewed to a fraction of what they are reviewing today. This would free up resources and would not affect accuracy of the calculations because the MSA compliance industry would comply with CMS’ published rules.

3. Encourage Structured Settlements – Currently, CMS allows MSAs to be funded by either structured settlement annuity payments or a lump sum payment, or a combination of both. However, structured settlements save more money for Medicare because the MSA account is funded by future periodic payments that make it much more difficult for an injured, self-administering, claimant to misspend. In addition, structured settlements are tax-free to the claimant and save money for the payer. CMS and the structured settlement industry should work together to find a way to increase the use of structured settlements with MSAs because it benefits them both.

Medicare Set-Aside Monies Misappropriated by a Family Member – A Case for MSA Professional Administration

This sordid tale began in the 1990’s when Stephen Hubanks suffered a back injury while employed as an appliance serviceman.  A few years later he hurt his back again and was determined to be permanently and totally disabled, and unable to work.   As a result, he began receiving $1,200 per month in Social Security Disability Insurance (SSDI) payments and $1,400 per month in disability insurance from Met Life.

By August 2006, Stephen had developed a drug addiction.  While he was in jail he signed two power of attorney forms giving his half sister, Sabra Jouett, authority over all of his business and personal affairs, including all banking and financial transactions.  A joint bank account (Joint Account) was then opened with both Stephen and Sabra as authorized signers.  In February 2007, Stephen pled guilty to various criminal charges and was incarcerated in an Oklahoma state prison.   During the time Stephen was in prison, monthly disability checks totaling $116,551.24 were deposited in the joint bank account.  In addition, a settlement of the second workers’ compensation claim resulted in net proceeds of $93,793.99 plus a Workers’ Compensation Medicare Set-Aside (WCMSA) of $19,971.24 being deposited into the Joint Account and additional monthly WCMSA payments of $4,703.00 for 22 years.

Each month, Sabra emptied the Joint Account within a day or two of the disability income deposits and bought items for her own use including furniture, children’s clothing, a BMW, a Porsche, a pool table, a Carnival Cruise, and cheerleading expenses for her daughter.  One particular instance of note saw Sabra transfer $40,000 into the Joint Account to pay debts and personal loans to family members just one day after the settlement funds were deposited into the account.

Shortly after the $40,000 transfer, Sabra told Stephen that she had taken all of his money.  Although Stephen was very upset, he did not overtly react, because he was still incarcerated and feared being put into solitary confinement.

Sabra’s spending spree continued with Hubanks’ money ($82,000 of which was used to purchase a house) until he was released from prison in October 2010.

After being sued by Stephen, Sabra and her husband filed a bankruptcy case seeking to have any obligations they owed to Stephen discharged.  A judgment was entered in favor of Stephen in the amount of $229,109.23, and the judgment amount was not discharged in the bankruptcy case.

Needless to say, Stephen clearly made a serious mistake in whom to trust to handle his finances while he was in prison.  However from an MSP standpoint, there is another complication when it comes to the Medicare Set-Aside.  The Centers for Medicare and Medicaid Services (CMS) reserves the right to audit how the WCMSA was spent, and if it was used to pay for items other than Medicare-allowable, injury-related medical and prescription drug expenses (such as sports cars), Medicare may not pay for injury-related claims until those funds are restored to the WCMSA.  Based on the documented expenditures in this particular case, it is possible, and quite likely, that Stephen could lose his Medicare benefits until the funds are replenished.

This case is a textbook example that makes clear the benefits of using a professional administration company, like Medivest, to protect settlement funds from inappropriate dissipation.  Medivest will make sure all MSA funds are safely protected in FDIC insured investments, and only spent as directed by Medicare rules thereby preserving the claimant’s Medicare eligibility.  Additionally, because Medivest averages about a 40% reduction in costs paid for services, the principal is better preserved as well.  Medivest would have also recommended establishing a “custodial fund” for the non-MSA settlement monies to be held for the benefit of the claimant, so that all of his settlement funds would have  been protected until he was released  from prison.

Professional administration is truly a win-win in a situation like this, and should always be considered in every Medicare Set-Aside settlement situation.

Medicare Set-Aside Self Administration and “Life Lessons From The Lottery”

Last week, I presented at a conference where my  presentation focused, in part, on why I believe the concept of self-administration of Medicare Set-Asides (MSAs) is flawed because it assumes most people are capable of properly managing large sums of money in accordance with complex rules and requirements. To my surprise, Don McNay, best selling author and the country’s leading authority on why so many lottery winners run through their money so quickly, was the guest dinner speaker. I purchased a copy of his new book, Life Lessons from the Lottery, and read it with great interest on the flight back to Florida.

In his book, he describes many tragic stories of lottery winners whose lives were devastated because they received a large sum of money.  Jack Whitaker’s life completely came unraveled after winning $315 million in a Powerball jackpot.  He was arrested for drunk driving and assault, his granddaughter died of a drug overdose, he was accused of writing $1.5 million in bad checks to an Atlantic City casino, and his wife (who said she wished they had torn up the lottery ticket) divorced him.  Amazingly, prior to winning the lottery, Mr. Whitaker was a successful, self-made millionaire and by all accounts, was in a stable marriage and was considered a loving father and grandfather.

Don McNay refers to a 2009 article in Sports Illustrated titled, “Why Athletes go Broke”, that stated that after two years of retirement, 78 percent of former NFL players go bankrupt, get a divorce or are under financial distress. Within five years of retirement, an estimated 60 percent of NBA players are broke.

Abraham Shakespeare won $16.9 million in the Florida lottery. After years of legal problems, his body was found buried five feet deep under a concrete slab in the back yard of an acquaintance.  Police reported that all the money was gone within three years.

So, why do so many lottery winners blow through their money so quickly?   One reason, says Don McNay, is that about 98 percent take the money in a lump sum payment instead of periodic payments.  Most of those that take a lump sum run through it all within just a few years.  Social Security, defined benefit pension plans, and many other programs pay out money over time.  As Don McNay explains, if you take lottery winnings in annual payments over, say 25 years, and make mistakes that lose you that money in the first year, you have 24 more opportunities to get it right. Other reasons that lottery winners lose their money so quickly, says Don McNay are: family, friends, bad advisors and lack of knowledge.

We have a very similar situation with Medicare Set-Asides where about 95% of claimants self-administer their MSA funds.  Many of these injured individuals suddenly have a large sum of medical settlement money deposited into their bank account.  They often have the same issues that lottery winners have: lack of knowledge, bad advisors, and family and friends.  However, many times they also have serious injuries like brain damage, cognitive impairment, back injuries, paraplegia or quadriplegia and are on serious narcotic pain medications.  In addition, the rules that must be followed to properly manage a Medicare Set-Aside are very complex.

The objective of a Medicare Set-Aside is to save money for the Medicare Trust Fund by making sure that the MSA monies are spent first, before Medicare pays.  We expend a lot of cost, effort, review and expertise in the cost projection process. However, in the end, if a neutral, competent and accountable third party does not administer the money, MSP compliance is most often an expensive failure.

Coordinating the Use of Special Needs Trusts and Medicare Set-Asides to Protect Government Benefits

Today, the Medivest Blog presents a guest post from Stephen W. Dale, Esq., LL.M.:

Steve Dale here, from The Dale Law Firm, PC in Pacheco, CA. My practice specializes in Estate Planning for families with special needs. In many of our cases we deal with personal injury settlements. A large portion of those clients receive government support, such as SSI, SSDI, Medicare and Medicaid and therefore both Special Needs Trusts (SNTs) and Medicare Set-Asides (MSAs) are a consideration.

The Relationship between SNTs and MSAs. It is our role to help our families to protect those benefits by setting up a system of support that addresses both their immediate and long term needs in a way that adheres to the complex rules and restrictions of federal, state and local regulations and to advise them on changes in funding and regulations. We also work to help our clients understand and address MSAs. These actions are especially important in today’s atmosphere of budget cuts and benefits reductions.

Protecting Benefits:  Part of the duties of an estate planning attorney when working with settlement awards is to look at what kind of benefits are essential for that particular plaintiff. If maintaining needs based benefits such as SSI, Medicaid and In-Home Support Services (IHSS) are essential, then, in all likelihood, a SNT is needed. In addition, if the plaintiff also needs to protect their Medicare benefits then an MSA is needed and the MSA needs to be placed inside the self-settled SNT.

Administration:  Where as an MSA can generally be self-administered, it cannot be self-administered if it is inside a special needs trust.  For the plaintiff that is trying to preserve their needs based benefits self-administration would cause the funds to be considered a resource. Because of the complex rules in the administration of an MSA it is absolutely essential to have an MSA administrator who is experienced and committed to keeping up with the law. It creates a situation where you have two tiers of rules that you must pay attention to.  First, what is appropriate to protect Medicare’s interest and second, how you can accomplish that without the distributions becoming an income or resource for these needs based benefits.

While many trustees of special needs trusts are very familiar with making distributions in a manner that preserves needs based benefits, few are familiar with the distribution specifics that Medicare pays for. Medivest provides the structure and knowledge base that fulfills those needs and we utilize them often.

by

Medicare Set-Aside (MSA) Account Administration: When To Call In the Professionals

Posted by Douglas M. Brand, CSSC
CEO & President, Medivest Benefit Advisors, Inc.

Many times, one of the last of many difficult decisions to be made in the settlement process is how to administer the Medicare Set-Aside (MSA) monies. Unfortunately, this decision is perhaps the least understood of all the MSA issues. How does each choice protect the interests of Medicare, the claimant, the insurance company, and the lawyers? What are the risks and exposures involved? How do I decide what path to take or how to advise my client?

First of all, you have three basic choices to consider: (1) professional administration, (2) give assistance to the claimant via a self-administration kit, purchased from a professional MSA company or (3) let the claimant administer the funds without assistance.

Professional Administration

A professional administration company, like Medivest, will ensure that all the complex rules established by the Centers for Medicare and Medicaid Services (CMS) for administering MSA’s are complied with. For example, they will establish an interest bearing bank account, pay only Medicare allowable and injury related medical bills, communicate with medical providers, complete all the required accounting to CMS, make sure that all bills are paid according to the required fee schedules. They will also provide phone support and comprehensive transparent accounting to the claimant. Professional administration companies preserve and protect the settlement money and prevent “dissipation risk” (a fancy term that essentially means the risk of money being spent on things other than what its intended for).

Why does all this CMS compliance matter, post-settlement, to anyone except the claimant, you might ask? Well, as it turns out it matters a lot to all parties to the settlement. Medicare can suspend the claimant’s Medicare benefits if the monies are not spent according to the strict CMS guidelines. That could be devastating to the injured person who needs medical care. Not taking Medicare’s interest into consideration, as required by the Medicare Secondary Payer (MSP) Statute, could be a basis for a claimant’s potential claim against the attorney for negligent representation. Also CMS has the right to audit the injured person’s settlement and the Medicare Secondary Payer (MSP) Statute gives strong recovery rights against the defendant (double damages incurred by Medicare plus interest) if it finds it’s interest was not properly considered.

So, in what situations should professional administration be considered? Essentially, CMS requires professional administration if the injured person is mentally or physically incapable of managing the account or complying with the CMS administration requirements, has been declared legally incompetent, or has been assigned a representative payee by the Social Security Administration and the representative payee elects not to serve as administrator of the MSA. Professional administration is recommended for most large settlements and when the injured person has very serious medical conditions, lower education level, or any personal issues that put the funds at-risk. Sometimes professional administration is the “right thing to do” because it provides the claimant peace of mind from the stress of self-administration and dissipation risk.

There are fees associated with professional administration and, unfortunately, CMS does not allow them to be paid from the settlement funds. Therefore, they have to be negotiated at settlement. However, in many cases the cost savings from professional bill review practices will more than offset the fees. Also, funding the fees with a structured settlement annuity can offset the cost of the fees.

Self-Administration With a Kit

A Self-Administration Kit may be appropriate in those cases where the claimant is competent to administer their own MSA account but needs some support from a professional administration company. This kit provides valuable tools to assist the claimant including: a detailed do-it-yourself manual, unlimited phone support and some even provide bill review services and a lifetime pharmacy/DME discount program. The average cost of these kits is about $750-$1,000 per year.

Self-Administration Without a Kit

MSA self-administration is not a simple undertaking. It involves complex compliance with government rules and regulations, accounting expertise and discipline. Additionally, it puts many injured parties in the untenable position of not being capable of complying with Medicare’s requirements while being threatened with the loss of Medicare benefits if they don’t. It should be used sparingly and only in those cases with low dollar settlements or with competent claimants who don’t need any assistance from a professional.

It is important to understand and plan for the MSA administration issues early on in the settlement process because it is a key component to the entire settlement.