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CLASSIC LIST

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On October 13, 2022, in a surprise move, CMS withdrew its Notice of Proposed Rulemaking (“NPRM”) pertaining to the protection of Medicare’s future interests in liability and other Non Group Health Plan (“NGHP”) settlements, judgments, awards, payments, or other arrangements (“Settlements”) without any official or unofficial comment.  Many people in the Medicare Secondary Payer Compliance industry felt that this NPRM, most recently announced in 2018 and continued for several years, was finally going to add CMS’s clarifying “take” on how it would suggest settling parties reasonably consider and protect Medicare’s future interests in liability Settlements and that CMS would issue regulations or guidance specific to Liability Medicare Set-Asides (“LMSAs”).

 

The most recent 2018 iteration of the NPRM was designed to address protection of Medicare’s future interests in any NGHP Settlement, including removing what it considered obsolete regulations.  For the past several years, stakeholders in the MSP compliance community have been waiting and speculating how such regulations could be devised to account for all the convoluted factors that exist in liability claims while adding clarity to steps CMS might suggest to be taken to protect Medicare’s interests in liability settlements.

 

Earlier in 2022, there had been a stakeholder meeting as well as a letter from the MARC coalition urging CMS to not move forward with the NPRM.  It seems that the MSP compliance stakeholder community once again rallied and provided enough reason to give CMS pause.  Some have called into question whether the MSP as enacted, gives CMS authority to issue regulations regarding liability futures, and some court decisions discussing liability MSAs and the need for an exhaustion of administrative remedies prior to a court of competent jurisdiction being able to review a LMSA proposal, may have also contributed to CMS’s decision to not move forward with this NPRM at this time.

 

The argument follows if federal courts have determined it is premature to review proposed LMSAs due to the failure of a party to exhaust their administrative remedies with CMS, then how could CMS insert its own administrative review process via guidance or regulation, unless the MSP were amended to provide for that authority.  Examples of court cases discussing these issues, include Silva v. Burwell, 2017 WL 5891753 (D. N.M. 2017); Sipler v. Trans Am Trucking, Inc., 881 F.Supp. 2d 635 (D. N.J. 2012); Bruton v. Carnival Corporation, 2012 WL 1627729 (S.D. Fla. 2012); Abate v. Wal-Mart Stores East, L.P., 2020 WL 7027481 (W.D. Pa. November 30, 2020); and Stillwell v. State Farm, et. al., 2021 WL 4427081 (M.D. Fla., September 27, 2021).

 

TAKE AWAYS:

  • The MSP still forbids Medicare from making payment when a primary plan is in place meaning if there is a Settlement from a NGHP plan including from a liability carrier or self-insured defendant, Medicare has a statutory lien right under the MSP to recover its conditional payments minus procurement costs and can charge high interest and potentially even double damages for non-compliance.
  • If a current Medicare beneficiary settles a liability case, they should be informed about the MSP and a plan for future care should be set in place.  The federal law is clear that conditional payments could arise prior to or after a settlement, so a risk tolerance cost benefit analysis should be performed between attorney and plaintiff as to the best steps to ensure Medicare is not prematurely billed.
  • Medicare has the right under the MSP to deny payment for injury related future Medicare covered medicals (items, services, and expenses, including Prescription Drug Expenses).  Will it?  We have seen times when it has flagged liability cases even while a liability claim or portion of a liability claim is pending (often because it believes the matter was settled but it was only settled with one of several defendants/carriers).  While CMS does not seem to regularly do this, the goal for an attorney representing an injured plaintiff is to provide a settling plaintiff with enough information to make an informed decision regarding what is the best course of action for them and to document what decision was made after such informed consent was provided.
  • Only two federal circuits (3rd and 11th) have held Medicare Part C – Medicare Advantage Plans (MAPs) to have identical recovery rights as traditional Medicare under the MSP.  However, those MAPs still have contractual subrogation rights, and attorneys representing Defendants, as well as attorneys representing their plaintiff clients, should evaluate whether any MAP plan or Medicare Part D – Prescription Drug Plan (PDP) have a subrogation/lien interest to be reimbursed for pre-settlement payments that were compensated by the Settlement.
  • Each attorney should provide their clients with enough information to help them assess their risks and to determine if denial of injury related future medicals or the potential for recovery of future conditional payments by Medicare is a risk they are willing to take.  There are a wide range of products being offered to address MSP exposure and to protect Medicare’s interests in liability settlements based on the varying risk tolerance levels of your client.  Count on Medivest to help you spot these intricacies so you can deliver prudent advice to your clients.

 

As background, the Medicare Secondary Payer Statute, found at 42 U.S.C. Section 1395y(b)(2), or most commonly known as the MSP, is the federal law enacted in 1980 that amended the Social Security Act and its Medicare specific amendments to make health plans other than Workers’ Compensation to be primary to Medicare.  Workers’ Compensation plans were primary to Medicare from Medicare’s enactment into law in 1965.  The MSP was Congress’ mandate to Medicare and The Centers for Medicare & Medicaid Services (“CMS”), the subagency that administers Medicare, forbidding Medicare from making payments when a primary plan was in place to promptly make payment.  The primary plans are liability including self-insureds (and automobility BI), No Fault, and Worker’s Compensation and are known as the Non Group Health Plans (NGHP) to be distinguished from Group Health plans that offer health care insurance.  While No Fault claims and Workers’ Compensation claims are typically paid immediately upon a claim being filed and accepted for Ongoing Responsibility for Medicals (“ORM”), liability carriers rarely accept responsibility to make payments early on in the life of a liability case.  Liability carriers may choose to offer a settlement but almost never accepts liability.

 

Because the regulations under the MSP define prompt payment as within 120 days, the MSP also allows Medicare to make payments for medical services when a Medicare beneficiary will be compensated by a defendant in a liability case or their/its primary plan carrier under the condition that Medicare be able to recover those conditional payments it made that were claim related and compensated by a settlement, judgment, award, or other arrangement (collectively, “Settlement”).  The MSP makes the primary plan Defendant, and any person or entity who receives a part of the Settlement proceeds, jointly and severally liable for repayment of conditional payments.  The law also allows for interest and potentially double damages against liable people and entities that fail to make payment promptly.

 

The payment by any NGHP plan is what triggers the MSP’s recovery rights under the law regardless of whether liability is accepted or not.  The protection of exposure to the MSP’s recovery rights is also commonly referred to as protecting Medicare’s past and future interests in a Settlement.  Protecting Medicare’s past interests in a settlement includes providing notification of a claim and checking with CMS to determine whether it is claiming any payments it has made from the date of an injury up to the date of settlement are conditional payments to be reimbursed.  Plaintiff attorneys typically provide this type of notification or hire third parties to confirm whether there are any conditional payments and then report settlement details to obtain a discount from the conditional payment amount and obtain a demand from CMS reflecting a deduction for pro-rated fees and expenses allowed under the regulations to the MSP.

 

The regulations to the MSP include some regulations that are generally applicable to any of the NGHP plans and some that are specific to Workers’ Compensation claims and Settlements.  CMS has never promulgated regulations that are specific to liability claims or No Fault claims and Settlements.  CMS has also issued guidance regarding the protection of Medicare’s future interests in Workers’ Compensation claims and Settlements via its Workers’ Compensation Medicare Set-Aside Arrangement (“WCMSA”) Reference Guide, now in version 3.7 issued June 6, 2022.

 

In 2012, CMS issued a Notice of Proposed Rulemaking regarding the protection of Medicare’s future interests in settlements intended to extend from the already regulated area of Workers’ Compensation (“WC”) Settlements to the other NGHP areas and even solicited comments from the MSP stakeholder community.  After many entities pointed out the extreme differences between liability claims and WC claims such as issues of comparative or contributory negligence, the fact that liability claims often contain awards for Pain and Suffering, Loss of Enjoyment of Life, Loss of Consortium for married plaintiffs, etc., CMS ultimately withdrew that NPRM in 2014.

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On Jan 11th, 2022 Centers for Medicare & Medicaid Services (CMS) updated its WCMSA Reference Guide to include information related to non-submit MSA products and how it views them in terms of exposure for Medicare. Then on March 15, 2022, CMS updated its Reference Guide again.  We blogged about each updated guide here: WCMSA Reference Guide Version 3.6 Updates of Significance.
In the Workers’ Compensation arena, there are a number of MSA products that do not adhere to standard CMS methodology for preparing a Medicare Set-Aside allocation as outlined in the WCMSA Reference Guide. Since these products do not follow CMS methodology, submitting these types of products for approval will typically result in CMS countering higher to an amount aligned with CMS methodology standards. If a non-submit MSA product is used in WC settlements, CMS has indicated it will not step in and become the primary payer once the MSA funds have been exhausted unless the beneficiary can prove the MSA was properly funded and that all of the MSA funds were used in accordance with CMS guidelines. If CMS determines that the MSA was underfunded, it has indicated it will or at least may deny payment for case related, Medicare covered items, services, and expenses, up to the Medicare beneficiary’s net settlement amount.
The recent WCMSA reference guide updates demonstrate that Medicare believes some non-submit WCMSA allocation reports are potentially shifting the burden of payment for future medical items, treatment, and prescriptions to Medicare.  While non-submit WCMSAs that meet workload review thresholds are not automatically deemed to not protect Medicare’s interest, it seems that CMS has created a presumption of this unless the injured worker can show otherwise.  In comes solid allocation methodology and perhaps more importantly, the professional administrator, offering tools and assistance to show that both the amount was reasonable and that the money set aside was properly exhausted.
Why is this important for liability settlements? In the liability arena, CMS has yet to issue any new guidelines with respect on to how to handle liability settlements for a Medicare beneficiary.  The May 25, 2011, Stalcup Memo from a CMS Regional Office in Texas indicated that there should be no difference between how Medicare’s interests would be protected between liability and Workers’ Compensation.  It indicated that “The law requires that the Medicare Trust Funds be protected from payment of future services whether it is a Workers’ Compensation or liability case.  There is no distinction in the law.”  The Stalcup Memo announced that “CMS does expect the funds to be exhausted on otherwise Medicare covered and otherwise reimbursable services related to what was claimed and/or released before Medicare is ever billed.”  It further cautions that “each attorney is going to have to decide, based on the specific facts of each of their cases, whether or not there is funding for future medicals and if so, a need to protect the Trust Funds.”
The new WCMSA Reference Guide has indicated that unless a prior memo is specifically referenced in the Reference Guide, it should not be relied upon.  However, the Federal Statute, The Medicare Secondary Payer Statute, 42 U.S.C. Section 1395y(b) has itself not ever made a distinction between liability and Workers’ Compensation settlements and prohibits Medicare from making payment for any injuries compensated by a primary plan a/k/a Non Group Health Plan payment (including payments, settlements, judgments, awards, or other arrangements).  Even though CMS has not promulgated specific regulations in the Code of Federal Regulations (CFR) for liability settlements and has not yet issued specific guidelines for liability settlements, liability is one of the primary plans outlined in the MSP statute that are considered primary to Medicare (Liability Insurance Including Self-Insureds (with the sub-set Automobile specifically mentioned in the CFR, No Fault, and Workers’ Compensation). In the Hinsinger v. Showboat Atlantic City, 420 N.J. Super. 15, 18 A.3d 229 (2011) case, the Superior Court of New Jersey found. . .
              “. . . no reason to apply a different standard to set asides created with money obtained from third-party liability claims than it applies to set asides created with money obtained from workers’ compensation claims. The statutory and policy reasons for creating both of them are the same:  to protect the government, and the Medicare system in particular, from paying medical bills for which the beneficiary has already received money from another source.”
The court reasoned that in the absence of specific liability regulations concerning the MSP, it was appropriate to analyze the regulations geared toward WC.  This would seem like a reasonable starting point for CMS as it relates to futures.  Of course, liability cases have different types of damages that can be awarded, most notably non-economic damages that are not awardable in WC cases.  Causation issues and percentages of liability can limit the recovery for plaintiffs in liability cases with specific percentages being parsed out/negotiated in states with pure comparative negligence.  Lastly, plaintiffs in liability can often argue that they were not Made Whole when the injuries and damages are present but the at fault party’s funding is limited by low policy limits.
These factors have not yet been addressed in any regulations or current guidance by CMS.  However, when a WC settlement may not be reviewed by CMS because it is outside CMS workload review thresholds, CMS takes the position that parties must still consider Medicare’s interests in the settlement.  Currently, liability settlements are still not being reviewed by CMS even though CMS had included reviews of liability MSA’s in a prior Request for Proposal when searching for its last WCRC MSA review contractor.  Therefore, it makes sense that for liability settlements, parties should still be considering Medicare’s interests and especially so, when the settlement involves a Medicare beneficiary or one with a reasonable expectation of becoming a beneficiary within 30 months of the settlement.  The WCMSA Reference Guide could contain part of the puzzle in helping an injured party being compensated for future medicals in planning their future care.
As of May 25, 2022, CMS has neither issued regulations nor new guidelines with respect to protecting Medicare’s interests when liability settlements compensate for future medicals covered by Medicare.  CMS needs to provide such a roadmap if it is serious about protecting the Medicare Trust Funds for future generations.  Because the MSP law itself sets the standard for the protection of Medicare, and the law and its regulations enable Medicare’s ability to deny payments and/or make conditional payment recovery, does it really make sense to ignore planning the injury related future care of your client even when the regulatory agency has been slow to act?
Each attorney should provide their clients with enough information to help them assess their risks and to determine if denial of injury related future medicals or the potential for recovery of future conditional payments by Medicare is a risk they are willing to take.  There are a wide range of products being offered to address MSP exposure and to protect Medicare’s interests in liability settlements based on the varying risk tolerance levels of your client.  Count on Medivest to help you spot these intricacies so you can deliver prudent advice to your clients.

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