A year ago we wrote a post saying that the 15% safe harbor payment provision of House Bill 1982 was impractical and problematic. Well, it seems that Senator Bill Nelson (D-FL) has come to the same conclusion. On July 31, 2014, Senator Nelson introduced Senate Bill 2731, the Senate version of House Bill 1982 that drops that controversial provision.
H.R. 1982 allowed a payment of 15% of the settlement to be paid directly to Medicare to satisfy the obligations under the MSP statute. This provision is problematic, in our opinion, because it would be a net loss to the Medicare Trust Fund, it would not allow any unspent claimant monies to be available to the claimants’ beneficiaries upon death, and would be costly to claimants because it would require them to pay Medicare co-pays and deductibles out of pocket right away. Others have pointed out that a law that allows a taxpayer to turn over their money to the US government in exchange for protection from liability could be-unconstitutional.
S. 2731 adds a section that allows the claimant to continue to “elect to utilize professional administration services or to self-administer payments of their Medicare Set-Aside in accordance with existing law”.
It also still allows for an optional payment of the Medicare Set-Aside funds directly to the Medicare Trust Fund in order to obtain “protection from certain liability”. This concept is fraught with some of the same problems as the 15% safe harbor payment. It would not allow the claimant’s unspent MSA funds to pass to their heirs upon death, it could immediately cost the claimant more money because of any applicable Medicare co-pays and deductibles, and it may be unconstitutional. Also, how wise is it for the claimant to transfer his MSA monies to a Medicare Trust Fund that is scheduled to be insolvent in 2030?
The MSA process certainly has some problems. We need to find a way to streamline the process and provide finality and certainty to all parties. But this bill is not the answer.
The bottom line is this: no matter how many changes we make to simplify the process for the settling parties, in the end, if a competent and accountable third party does not professionally administer the MSA funds, MSP compliance is an expensive failure. Why? Because we just cannot expect an average person, who is awarded settlement monies, to administer that money with the knowledge, commitment and discipline required by the complex MSP rules. Lets face it, self-administration, by and large, just does not work and the sad truth is that it results in the vast majority of settlement monies being spent incorrectly with Medicare picking up the tab. The correct solution is one that provides certainty and simplicity for payers, coupled with professional administration in order to protect the claimants and the Medicare Trust Fund.