Tag Archive for: LMSA

CMS Provides Notice Regarding LMSA Regulations/Guidance

CMS Provides Notice Regarding LMSA Regulations/Guidance

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Once again, the Centers for Medicare & Medicaid Services has provided an indication that while regulations and/or guidance is on its way regarding the protection of Medicare’s future interests for liability and No Fault settlements, the proposed rule regarding these have been moved to August 1, 2020 or perhaps further into the future (again). Technically, the information indicates that the Notice of Proposed Rule Making would “clarify existing Medicare Secondary Payer (MSP) obligations associated with future medical items services related to liability insurance (including self-insurance), no fault insurance, and worker’s compensation settlements, judgments, awards, or other payments. Specifically, this rule would clarify that an individual or Medicare beneficiary must satisfy Medicare’s interest with respect to future medical items and services related to such settlements, judgments, awards, or other payments. This proposed rule would also remove obsolete regulations.” The information is also indicating that regulations CMS determines to be obsolete will be removed. See the disclosure published in the Spring 2020 Federal Register Unified Agenda here.

Many in the MSP compliance industry believe that while the regulations and guidance could be focused on clarifying both the need to protect Medicare’s future interests and the way to protect those interests for each of the Non Group Health Plan (NGHP) primary plan types (Liability, Self-Insurance, No Fault, and Workers’ Compensation), it seems more likely that this particular group of regulations and/or guidance will focus primarily on liability and No Fault settlements. This is because both regulations and guidance have already been published specific to protecting Medicare’s future interests in Workers’ Compensation settlements in both the Code of Federal Regulations and via the Workers’ Compensation Medicare Set-Aside Arrangement – WCMSA Reference Guide Version 3.1.

Regulations regarding this issue would be promulgated by CMS to appear in 42 CFR 405 and/or  42 CFR 411 and would apply to the Medicare Secondary Payer Act (MSP) found at 42 U.S.C. 1395y(b).  The removal of obsolete regulations could apply to any of the NGHP types.  The MSP, as governing federal law, applies to all of the NGHP types listed above, prohibits Medicare from paying when a primary plan’s funds are used to compensate an injured individual as a result of an injury, and provides extraordinary remedies to allow Medicare to recover payments it has made (called conditional payments) when it pays for an injured party’s medicals without regard to the dates of service for those payments.

Take Aways
  • Considering and protecting Medicare’s past interests has become the industry standard and quite honestly a “no brainer” for all NGHP settlement types – liability, self-insurance, No Fault, and Workers’ Compensation.
  • Whether the announced guidance comes this August or not, doesn’t it make sense to help ensure that Medicare’s future interests are protected in accordance with existing federal law, i.e. the MSP?
  • Helping to ensure that Medicare is not prematurely billed for injury related futures for any settlement type is the right thing to do and helps protect the Medicare Trust Funds.

Count on Medivest to help guide you through some of the complexities associated with MSP compliance.



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Liability Medicare Set-Asides (LMSAs) – A Glimpse into the Future

Liability Medicare Set-Asides (LMSAs) – A Glimpse into the Future

Last week, the National Alliance of Medicare Set-Aside Professionals (NAMSAP) released a bulletin by Tom Stanley, co-chair of NAMSAP’s Liability MSP Advisory Committee, describing what he learned in a private meeting with the Centers for Medicare & Medicaid Services (CMS) in April 2018. In the meeting, which focused solely on liability Medicare Set-Asides (LMSAs), CMS representatives indicated that there will be an 18-month timeframe before rolling out a LMSA review program. Also, similar to the choice of whether to submit a Workers’ Compensation Medicare Set-Aside allocation report (WCMSA) for review by CMS for Workers’ Compensation claim resolutions that meet CMS established monetary and Medicare eligibility thresholds[1], the choice of whether to submit a LMSA to CMS for review under the new program would also be voluntary.

Other points brought up by CMS for LMSAs are paraphrased below:

• Denial of services for the affected body parts/injury is considered a “primary enforcement mechanism.”
• The injured party must receive something free and clear through judgment, settlement, award, or other payment (“Settlement”).
• Review of a LMSA would not occur until a Settlement has been reached.
• That a LMSA (and presumably the administration of the money set aside) is exclusively the responsibility of the plaintiff and that defendants, and their insurers, are not a “target” of CMS with respect to LMSAs.
• CMS would publish a LMSA Reference Guide.
• Individuals meeting the “eligibility” threshold for LMSAs would remain the same as the current WCMSA system – those Medicare beneficiaries or injured parties who have a reasonable expectation of Medicare enrollment within 30 months.
• There is no projected change in the law and pursuant to the Medicare Secondary Payer statute (MSP)[2], Medicare’s interest must be considered in every claim.
• A workload threshold of above $250,000 is anticipated – “NO SAFE HARBOR”. This level is analogous to the above $25,000 workload threshold for WCMSAs.
• For Settlements above $250,000 and up to $750,000, CMS review/approval would be available and encouraged by CMS. CMS would apply “a formula” to determine the LMSA amount. Starting with the total Settlement amount, CMS would subtract certain expenses and apply a discount factor to the total Settlement.
• Settlements above $750,000 would be presumed to fund all future medicals (considered full commutations) and for those cases, CMS would recommend the preparation of traditional LMSAs.

We have explained in the past that the creation of a Medicare Set-Aside (MSA) is not required by law for any type of case. However, in the Stalcup Memo[3], CMS provided its interpretation of the MSP by saying “[t]he 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.” Furthermore, while clarifying that a MSA allocation report is not mandated by CMS, the Stalcup memo announced that “[s]et aside is our method of choice and the agency feels it provides the best protection for the program and the Medicare beneficiary. The long-awaited LMSA review process may have been delayed (prior hints from CMS were that LMSA reviews might start as early as July 2018) due to a realization by CMS that reviewing LMSAs will be a huge undertaking with many factors to consider.

Take Aways from Meeting on LMSAs:

• When the injured party receives something (free and clear) through Settlement etc., that payment triggers the need to evaluate and protect Medicare’s interests.

• If you don’t consider and protect Medicare’s future interests at the time of Settlement and take steps to not prematurely bill Medicare, Medicare can deny payment for those body parts claimed and/or released by Settlement.

• Plaintiff counsel should take steps to educate themselves and their clients on all aspects of MSP compliance and formulate strategies to reasonably consider Medicare’s interests when Settlements fund future medicals and injured clients fall within the Medicare eligibility “window”.

• CMS should seek help from stakeholders in the MSP compliance community, the judiciary, and financial analysts to examine historical data to consider developing more than one formula to be able to reasonably address varying liability case types and differing legal and factual scenarios.

• The percentage of the net Settlement proceeds a beneficiary will receive as a ratio to the full value of the case after deducting procurement costs, attorney’s fees, and Medicare liens etc. can vary greatly and should be taken into consideration.

• There are many reasons liability cases may settle for less than full value including questions of causation, policy limits in place, and percentages of fault that can vary by state, under theories of applicable comparative negligence, contributory negligence or some hybrid thereof.

• The idea that CMS may now consider evaluating apportioned LMSA allocations and taking some of the factors leading to reduced Settlement values into consideration when reviewing LMSAs seems to be a step in the right direction.

[1] The current WCMSA threshold is for Workers’ Compensation claims with a judgment, settlement, award, or other payment (“Settlement”) above $25,000 for current Medicare beneficiaries and above $250,000 and for those with a reasonable expectation of becoming enrolled in Medicare within 30 months of the Settlement.

[2] 42 U.S.C. §1395y(b)(2) et seq.

[3] Sally Stalcup, MSP Regional Coordinator, Region VI (May 25, 2011 Handout).

MSA Reviews to Increase for Liability, No-Fault and WC MSAs

MSA Reviews to Increase for Liability, No-Fault and WC MSAs

On March 1, 2018, the Centers for Medicare & Medicaid Services (CMS) announced a 2018 Workers’ Compensation Review Contractor Transition Webinar will take place this Wednesday, March 7th, 2018.  The webinar, hosted by CMS, will introduce Capitol Bridge, LLC (Capitol Bridge), the contractor that will assume the responsibility of the Workers’ Compensation Review Contract (WCRC) functions including review of various Medicare Set-Aside proposals (MSA reviews)[1], effective March 19, 2018.

The webinar format will include opening remarks and a presentation by CMS concerning the transition and hopefully, more details about the scope of the contract, followed by a question and answer session with the audience.

Date: Wednesday, March 7, 2018 Start time: 1:00 PM ET

Registration and webinar login URL: Or Conference call number: 877-251-0301 Conference ID: 9369188

The announcement can be seen here.

We previously announced the request for proposal (RFP) for this contract on our blog. According to the original RFP, this contract may include long-awaited expansion of MSA reviews beyond Workers’ Compensation MSAs (WCMSAs), to include reviews of Liability MSAs (LMSAs) and No-Fault MSAs (NFMSAs).  The contract value for review of MSAs was increased from last year’s 6 million dollar a year figure, to 60 million dollars a year, likely due to the contemplated increase in the number of MSA reviews and expanded scope of the reviews described in the RFP.  We also previously referenced CMS’s amended WCMSA Reference Guide, Version 2.6 that announced CMS’s statement that professional administration is highly recommended for MSAs.  That reference guide also updated some MSA review and re-review procedures that could add some additional work to the MSA review process for Capitol Bridge.

The new WCRC change includes centralization of all MSA reviews, so instead of CMS Regional Offices (RO) handling reviews of LMSAs on a discretionary basis, the ROs will likely provide final approval of the WCRC contractor’s recommendations for all types of MSAs now.  In 2005, CMS pulled the review of WCMSAs from the regional offices and handed that responsibility to one of the predecessor WCRC contractors.  This new change in procedure for review of more MSAs including some LMSAs, could improve consistency of all types of MSA reviews. It’s hard to say yet how smooth the process will be or the expected timing for the various MSA reviews.  The webinar may help clear up some of these questions.

Capitol Bridge is scheduled to receive 60 million dollars per year for the one-year contract with four renewal options for one year each.  The RFP’s Statement of Work gave notice that there could be anywhere from 600 to 11,000 LMSA reviews a year.  Arch Systems and Ken Consulting competed with Capitol Bridge for this contract and previously protested the bid award.  The bid protest was denied on December 12, 2017, paving the way for CMS to move forward with Capitol Bridge.

History of WCRC MSA Reviews:

There has never been a requirement to submit any type of MSA to CMS for review.  CMS has had a voluntary review process for WCMSAs since the early 2000’s.  Around 2003, a WCRC was awarded by CMS for review of voluntarily submitted WCMSAs according to threshold dollar amounts.  The current threshold amounts for CMS to review WCMSAs are $25,000 for settlements involving injured beneficiaries on Medicare at the time of settlement, or $250,000 for settlements involving injured parties who have a reasonable expectation of becoming Medicare beneficiaries within 30 months of the date of settlement (applicable claimants).  Around 2005, CMS centralized the review of WCMSA proposals with the WCRC contractor providing recommendations to the respective CMS Regional Office (RO) regarding whether proposed MSA amounts adequately protected Medicare’s interests, as a secondary payer under the Medicare Secondary Payer statute (MSP)[2].  The procedure has been for the WCRC contractor to either agree with the proposed WCMSA amount, or recommend a higher amount or a lower amount to the CMS RO. The CMS RO has usually followed recommendations from the WCRC contractor, and for those WCMSAs that were approved, would provide the submitter an approval letter.

Liability MSAs have been a bone of contention in the MSP stakeholder community for a long time and settling parties have had to read between the lines of the law and regulations, sometimes arguing whether regulations intended for workers’ compensation matters should be applied to liability claims.  Parties and even courts have looked to CMS and its memos, such as the Stalcup Memo[3], for guidance on how to adequately protect Medicare’s interests for applicable liability claimants’ LMSAs.  Questions have persisted as to whether LMSAs could be reviewed, would be reviewed, were recommended, or were even required.  There is still no law or regulation mandating or directing the method of review of LMSAs and to date, there are no threshold dollar amounts relating to LMSA reviews.  The decision of whether to review a LMSA has traditionally been left to the discretion of each CMS RO and some ROs have routinely declined to review any LMSAs.


Will there be dollar thresholds for the new MSA types under consideration?  How many new LMSA reviews will Capitol Bridge be able to perform over the next year?  Once a process is implemented for LMSA reviews, will this encourage liability settlements and provide clarity to settling parties?  How will Capitol Bridge address differences in case valuation between liability and workers’ compensation cases?  Workers’ compensation claims do not take into consideration comparative negligence or depending on jurisdiction, contributory negligence; factors that can reduce, or even bar recovery in liability claims, depending on the jurisdiction and facts involved.  Claimants considering settlement of workers’ compensation cases often follow strict statutory procedures in order to obtain settlements, but do not have to consider insurance policy limits or statutory caps on future medical expenses like plaintiffs in personal injury cases.  Will apportionment of LMSA amounts now follow an Ahlborn methodology in the absence of CMS regulations directly on point?

CMS’s larger contract for WCMSA reviews and prospective foray into a stepped-up LMSA review procedure announced in June of 2016 and again in October 2017, is coming to fruition.  Over the coming years, we will most likely see more formalized guidance develop for review of LMSAs and perhaps at some point, new regulations governing the area as well.  Through its new Commercial Repayment Center (CRC) contractor, Performant, CMS seems more focused on enforcement of the Medicare Secondary Payer statute (MSP) and recovering conditional payments for medical care related to workers’ compensation, liability and no-fault claims.  This is a good thing for the Medicare Trust Funds and U.S. taxpayers.  Expanding and formalizing a voluntary review process for LMSAs seems to be another logical step to fulfill the intent of the MSP in protecting Medicare’s interests.

[1] MSA allocations are reports, based on prior medical treatment records and expenses, that estimate future injury-related Medicare allowable medical expenses for an injured party (future medical expenses).  The funds covering those projected future medical expenses are referred to as MSAs and mean not only the projected costs (often in the form of a MSA allocation report) but also the arrangement whereby those funds are set aside in an account to be used solely for those applicable future medical expenses.  A (Medicare) Set-Aside Arrangement is defined by CMS in its Medicare Secondary Payer Manual to be “[a]n administrative mechanism used to allocate a portion of a settlement, judgment or award for future medical and/or future prescription drug expenses.  A set-aside arrangement may be in the form of a Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA), No-Fault Liability Medicare Set-Aside Arrangement (NFSA) or Liability Medicare Set-Aside Arrangement (LMSA).”

[2] 42 U.S.C. 1395y(b) et. seq.

[3] See Sally Stalcup, MSP Regional Coordinator, Region VI (May 25, 2011 Handout); See also, Schexnayder v. Scottsdale Ins. Co., 2011 WL 3273547 at 5 (W.D. La. 2011) (adopting policy from the Stalcup memo in Court’s findings of fact).

LMSAs Not Required By Law, Federal Court Confirms

LMSAs Not Required By Law, Federal Court Confirms

What Happened:

Silva v. Burwell[1] is a federal trial court case from late November 2017 in which the plaintiff, Silva, asked a federal court to declare whether a liability Medicare set-aside (LMSA) was required after funding of a proposed state court medical malpractice settlement had been conditioned upon getting such federal court confirmation.  The only unresolved issue was how future medical bills were to be handled because all of Medicare’s conditional payments for past medical expenses had been reimbursed by plaintiff as contemplated by the Medicare Secondary Payer provisions of the Social Security Act, often referred to as the Medicare Secondary Payer statute found at 42 U.S.C. Section 1395y(b) et seq. (MSP).

The state court defendants felt a LMSA was legally required and were concerned that Medicare might seek reimbursement for payments incurred post-settlement for treatment of the medical malpractice injury.  The plaintiff disagreed, arguing that there was no requirement under the law for LMSAs. Plaintiff pointed out that review thresholds by the Centers for Medicare & Medicaid Services (CMS) for MSAs exist only in the workers’ compensation context and do not extend to liability/personal injury settlements. Plaintiff asked CMS to set forth its position whether some portion of personal injury liability settlement funds must be set aside to cover “unknown, unspecific future medical expenses.”[2]

With such a non-specific question, it is not surprising that CMS did not respond. However, even if plaintiff had asked CMS for its position regarding known specific future medical expenses, the result would likely have been the same, as CMS doesn’t require Medicare set-asides (MSAs), doesn’t require submission of MSAs, and doesn’t have a practice or procedure for reviewing LMSAs like it does for workers’ compensation Medicare set-asides (WCMSAs).[3]  To satisfy a settlement condition and in an attempt to get funds released, plaintiff filed a declaratory judgment action in federal court against CMS and the former Secretary of the Department of Health and Human Services (Secretary) asking for several confirmations, including that no LMSA was required to pay plaintiff’s future medical expenses.

During an analysis of the MSP and whether there was a requirement for LMSAs, the court referenced CMS’s 2012 notice of proposed rulemaking[4] concerning potential regulatory clarification on LMSAs and pointed out that CMS never followed up on the notice.[5]  The Silva court then correctly determined that “no federal law or CMS regulation [currently] requires the creation of a MSA in personal injury settlements to cover potential future medical expenses.”[6] The Silva court shared the Sipler[7] court’s public policy concern that requiring apportionment of future medical expenses in personal injury settlements would discourage settlements due to being burdensome.[8] The court added that the repeated failure of CMS to clarify an official position on whether it requires LMSAs generally, or in specific cases when requested by personal injury litigants, was also proving burdensome to the settlement process.[9]

Result of the case:

The court then went through a “case or controversy” analysis to determine whether the plaintiff had standing for the court’s review.  A plaintiff who has not sustained an “injury in fact” will not have standing.  In this case, because there was a) no conflict between the law as it exists, and the way business was being done, b) not a sufficient likelihood that the government would seek reimbursement in the future (from plaintiff or defense) for failing to create a MSA in the liability case, and c) no requirement for CMS to confirm whether a LMSA was required, there was no injury in fact.  The lack of a duty by CMS to respond to plaintiff’s request was also described as preventing the case from being ripe.  Because there was not a sufficient injury and the matter was not ripe for review, the case was dismissed for lack of subject matter jurisdiction.[10]

Take Aways:

  • The law is clear.  No LMSA is required.  While the Silva court did not mention that CMS may potentially begin reviewing LMSAs as early as July 1, 2018, a change in procedure by CMS to review some LMSAs would still not change the law as it stands.
  • CMS has guidelines for reviewing WCMSAs and while CMS, via the Stalcup Memo, set forth CMS’s policy that a “set-aside” is its method of choice, the Stalcup Memo also made clear that “the law does not require a ‘set-aside’ in any situation.”[11]
  • The Stalcup Memo stressed the need to protect the Medicare Trust Funds if based on the specific facts of a case (and regardless of the type of case), there is funding for future medicals.[12]
  • While the Silva case did not clear up the law, it did not necessarily make it more confusing. Federal cases concerning the ripeness for review of LMSAs or performing review of LMSAs have remained in district courts. Unless a split emerges at the federal Circuit level, the US Supreme Court will not rule on the issue.  Liability cases are dependent on the facts and so are the questions about treatment of LMSAs.
  • Therefore, it will be up to CMS to propose and follow through with regulations governing LMSAs. A change in policy by CMS could be helpful for parties and courts, but won’t guarantee consistency. There are cases where federal district courts have reviewed LMSAs.  For example, in Schexnayder v. Scottsdale, a federal court agreed to review a LMSA and decided that parties to the liability settlement had adequately protected Medicare’s interests after CMS failed to review the LMSA.[13] Other federal district court cases have reviewed liability settlements and approved amounts to be set aside in LMSAs[14], or otherwise evaluated and determined that Medicare’s interests had been reasonably considered and protected.[15]
  • The Silva case highlights the time, expense and legal obstacles associated with trying to get clarification/confirmation from courts in the area of MSP compliance.
  • When medical expenses are implicated, it may be more productive for parties to invest their time and effort into accurately predicting and documenting what future Medicare allowable medical expenses are likely to be incurred instead of risking the time and expense of federal court review, and running the risk of a dismissal for lack of subject matter jurisdiction like in Silva, or an increase in the LMSA amount, like in the Welch v. American Assurance case cited in the endnotes.
  • What is required when future medicals are “in play” in liability (including self-insurance) settlements? The Stalcup Memo advised 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.”[16] Therefore, parties need to consider and protect the Medicare Trust Funds. Often, a LMSA is the best choice. There may be other options that could be considered if well documented and properly executed during administration.

[1] Silva v. Burwell, 2017 Westlaw 5891753 (D. New Mexico 2017).

[2] Id. 2-3.

[3] Sally Stalcup, MSP Regional Coordinator, Region VI (May 25, 2011 Handout); See also, Schexnayder v. Scottsdale Ins. Co., 2011 WL 3273547 at 5 (W.D. La. 2011) (adopting policy from the Stalcup memo in Court’s findings of fact).

[4] Medicare Program; Medicare Secondary Payer and “Future Medicals,”77 Fed. Reg. 35917-02, 35918 (June 15, 2012).

[5] Silva v. Burwell, 2017 U.S. Dist. LEXIS 195032 (D. New Mexico 2017) at 6 citing Aranki v. Burwell, 151 F. Supp.3d 1038, 1040 (D. Ariz. 2015).

[6] Id. at 11 citing Aranki v. Burwell, 151 F. Supp.3d 1038, 1040 (D. Ariz. 2015); Sipler v. Trans Am Trucking, Inc., 881 F. Supp.2d 635, 638 (D. NJ. 2012)(holding “no federal law requires set-aside arrangements in personal injury settlements for future medical expenses.”).

[7] Sipler v. Trans Am Trucking, Inc., 881 F. Supp.2d 635, 638 (D. NJ. 2012).

[8] See id. at 13.

[9] Id.

[10] Id. 12-13.

[11] Sally Stalcup, MSP Regional Coordinator, Region VI (May 25, 2011 Handout) at 1.

[12] See id. at 3 (“. . . 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”).

[13] Schexnayder v. Scottsdale Ins. Co., 2011 WL 3273547 at 5 (W.D. La. 2011).

[14] See e.g. Benoit v. Neustrom, 2013 WL 170220 (W.D. La. 2013) (determining that there was an obligation for a LMSA); Cribb v. Sulzer Metco (US) Inc., 2012 WL 4787462 (E.D. NC 2012) (approving a $4,500 LMSA); and Welch v. American Home Assur. Co., (S.D. Miss. 2013) (increasing amount of LMSA over the amount recommended by Medicare Set-Aside expert in combo liability and WC case).

[15] See Finke v. Hunter’s View, Ltd., 2009 WL 6326944 (D. Minn. 2009)(LMSA not necessary after court determined that liability settlement amount was a significant compromise of the overall value of the claim, with a plaintiff who was not a Medicare beneficiary, would not become eligible for Medicare benefits within the foreseeable future, was covered under his spouse’s health insurance policy, and when Medicare would be reimbursed for conditional payments and not be billed in the “reasonably anticipated future.”)

[16] Sally Stalcup, MSP Regional Coordinator, Region VI (May 25, 2011 Handout) at 3.


CMS Announces Potential Upcoming LMSA Reviews

The Centers for Medicare and Medicaid Services (CMS) confirmed yesterday that they are considering expanding their voluntary Medicare Set-Aside review process to include Liability Medicare Set-Asides (LMSAs) and no-fault insurance MSAs.

Here is the announcement as it appeared on the CMS website:

“June 8, 2016 – Consideration for Expansion of Medicare Set-Aside Arrangements (MSA)

The Centers for Medicare and Medicaid Services (CMS) is considering expanding its voluntary Medicare Set-Aside Arrangements (MSA) amount review process to include the review of proposed liability insurance (including self-insurance) and no-fault insurance MSA amounts. CMS plans to work closely with the stakeholder community to identify how best to implement this potential expansion. CMS will provide future announcements of the proposal and expects to schedule town hall meetings later this year. Please continue to monitor this website for additional updates.”

This announcement is big news in the Medicare Set-Aside community, but not completely unexpected. In June 2012, CMS published an Advanced Notice of Public Rulemaking (ANPRM) in the Federal Register, seeking public comment on implementing formal LMSA reviews. The ANPRM received dozens of comments, including one from Medivest. However in October 2014, CMS withdrew its proposal because it failed to gain approval from the Office of Management and Budget (OMB). At that time, CMS said that they would revisit LMSAs at a later time. It seems that time has come.

As we contemplated in an April 2016 blog, it looks like the delay in the WCRC contract bid, was in fact, caused by CMS considering expanding into LMSA reviews.

We will keep you informed as further developments unfold.


LMSA Issue Ties Settlement in Knots

The strange world of Liability Medicare Set-Asides (LMSAs) just got a little stranger with this case from Ohio where the twists and turns from the dueling sides read like an episode of the 80’s TV show “Knots Landing”.

Tye v. Upper Valley Medical Center  began with a 2010 medical malpractice claim against multiple parties associated with the medical care of Mr. Tye.  A mediation conference occurred on July 21, 2012 and a few weeks later, on August 6, 2012, a court issued an order that the matter was “conditionally dismissed without prejudice until such time as a final dismissal entry with prejudice is filed”.  We find out later in this opinion that there were two unresolved issues at the mediation:

  1. Plaintiffs were to decide whether they wanted to structure any portion of the settlement, and
  2. The parties were to jointly determine what amount, if any, needed to be set aside to protect Medicare’s interest.

On October 1, 2012 the Tyes filed a “Motion of Plaintiffs for Post-Settlement Interest,” claiming that they wanted interest added to the settlement because the matter was settled at the July 21, 2012 mediation conference and no money had been received. They also claimed that a Medicare Set-Aside was not agreed to.  A motion battle then followed.

The defense shot back on October 16, 2012 with a motion requesting the “Court to order Plaintiffs to establish a Medicare Set Aside account out of a portion of the settlement funds”.   They asserted that they had the matter examined by their outside consultant who determined that an LMSA was necessary in this case.  Strangely, also attached to this defense motion was a letter from the Tyes attorney which made a counter argument, claiming that they were a “neutral third party” and that a they “(do) not recognize Mr. Tye as an MSA candidate since a permanent burden shift of responsibility to pay for injury-related medical expenses from the tortfeaser to Medicare is not expected.”  Although Mr. Tye had been a Medicare beneficiary since 2004, it appears that this attorney thought Medicare would not likely have to pay for future injury related medical expenses because Mr. Tye’s past injury related medical expenses had been paid by his wife’s employer’s private health insurance.

On October 23, 2012 the Tyes opposed the motion, asserting that that there was no federal statute mandating MSAs and that the defense had incomplete and incorrect facts.

Motions and hearings continued for months.  Finally, on October 22, 2013 the trial court determined that an LMSA was unnecessary and that the post-settlement interest should run from November 8, 2012, the date that the court determined that an LMSA was not necessary.

On June 27, 2014, the Court of Appeals determined:

  • That a written settlement agreement between the parties does not exist
  • That the trial courts decision that a LMSA was not required in this case would be upheld
  • That post settlement interest would accrue on the $287,500 cash portion of the settlement from July 21, 2012, which was the date of the mediation.


 What a mess we have right now with LMSAs.  Settlements are being delayed and settling parties are running to court to get a judge to decide on this issue of LMSAs because they can’t decide.  But, doesn’t everyone in the MSA industry know by now that MSA’s are not required?  I’m not a lawyer, but if the law does not require LMSAs, how can a judge require them in a settlement?  The structured settlement is also not required by law either.  It must be agreed upon in the negotiation and settlement process.   Isn’t it the same with the LMSA?

That being said, the MSA account has been used effectively in the workers’ compensation arena for over a decade and has become a standard of practice in that industry.  Medicare is serious about enforcing the Medicare Secondary Payer (MSP) Statute, protecting the Medicare Trust Fund and cutting off a claimants’ Medicare benefits if they fail to protect Medicare’s interests.  Furthermore, Congress enacted Mandatory Insurer Reporting law in 2007 to assist the Center’s for Medicare and Medicaid (CMS) in enforcing the MSP for both workers’ compensation and liability settlements.  So, the settling parties should stop arguing about an LMSA being required (because it’s not) and work together to understand and take care of any joint responsibility they may have to protect Medicare’s interests under the MSP statutes.

How will all of this work itself out over time?  Will Medicare eventually come out with new formal regulations, in the near future that will work well for all parties?   I don’t know, but to quote Shakespeare:

O time, thou must untangle this, not I.

It is too hard a knot for me to untie!



Cribb v. Sulzer Metco U.S., Inc: Federal Court Approves $4,500 LMSA

On September 5, 2012, the U.S. District Court for the Eastern District of North Carolina approved a liability settlement and the establishment of a $4,500 Liability Medicare Set-Aside.  Because Medicare does not currently require or approve Medicare Set-Asides when personal injury cases are settled, the litigants felt it necessary to go to federal court for certainty that they complied with their obligations under the Medicare Secondary Payer (MSP) provisions.  After paying an undisclosed amount of attorney’s fees to go to court, the parties got the certainty they were looking for.

Reading cases like this makes me wonder if I’ve tumbled down the rabbit hole with Alice and landed in Wonderland.  There should be a better way for settling parties to obtain some certainty that they are complying with the MSP Statute than having to spend the time and money to go to federal court.

Click here to view Cribb v. Sulzer Metco U.S., Inc


Sipler v. Trans Am Trucking, Inc.: Liability Medicare Set-Asides are not Required.

On, July 24, 2012, a U.S. District Judge sided with the plaintiff in a personal injury case, Sipler v. Trans Am Trucking, Inc., granting a motion to exclude Medicare Secondary Payer language added by the defendant without prior agreement, and enforce the settlement.  Trans Am Trucking wanted language added to the agreement that stated Jeffrey Sipler would not seek to have Medicare pay for his future injury related medical care, and that he would establish a Medicare Set-Aside.  The plaintiff objected and filed the motion with the court to enforce the settlement without it.

U.S. District Judge Dickinson Debevoise, from the District of New Jersey, ruled in favor of the Plaintiff.  Judge Debevoise stating that according to the Medicare Secondary Payer Statue, the Plaintiff may not seek payments from Medicare to the extent they were provided for by his health insurance and/or his settlement.  However, “no federal law requires set-aside arrangements in personal injury settlements for future medical expenses”.  He went on to say that,  “to require personal injury settlements to specifically apportion future medical expenses would prove burdensome to the settlement process and, in turn, discourage personal injury settlements”.  He summarized, “the parties in this case need not include language in the settlement documents noting Mr. Sipler’s obligations to Medicare or fashion a Medicare set-aside for future medical expenses”.

It seems to me that the take-away from this ruling is that this judge was not going to force the parties to add language to a settlement agreement, absent prior agreement among the parties, especially when that language is not required by law.

To view the Sipler v. Trans Am Trucking ruling, click here.


CMS-6047-ANPRM – CMS Seeks Public Comments on Liability MSAs

An Advanced Notice of Public Rulemaking (ANPRM), CMS-6047-ANPRM, from the Centers for Medicare and Medicaid Services (CMS) was published in the July 15, 2012 Federal Register.  This notice is likely a response by CMS to numerous requests for guidance that clarifies how to resolve obligations regarding “future medicals” in liability settlements under the Medicare Secondary Payer (MSP) statute.

Since 2001, CMS has a recommended a formal, yet voluntary, Medicare set-aside (MSA) arrangement for workers’ compensation settlements to satisfy obligations under the MSP statute.   According to a recent Government Accountability Office report, the MSA program saved the Medicare Trust Fund approximately $1.1B in 2011.

CMS is now soliciting public comment on whether and how Medicare should implement a similar process for liability insurance settlements.  In addition, CMS is requesting comment on some proposed definitions and outlined options.   Their goal is to “ensure that the process related to ‘future medicals’ is understandable, efficient, and reflects industry practice, while protecting Medicare beneficiaries and the Medicare Trust Funds.”

Medicare is considering seven options for addressing “future medicals”.  Options 1-4 would be available to Medicare beneficiaries and those who are not yet beneficiaries.  Options 5-7 would be available to beneficiaries only.

  1. The beneficiary pays for future medicals out of the settlement funds, until exhausted, with random CMS audits.
  2. Medicare would not pursue future medicals if certain conditions are met including relating to the amount of the settlement, the type of injury, the injured persons Medicare status, etc.
  3. The injured person provides an attestation regarding the Date of Care Completion from his/her treating physician.
  4. The individual/beneficiary submits a Liability MSA for CMS’ review and approval.
  5. The beneficiary participates in one of the three new Medicare recovery options regarding a $300 threshold, a fixed payment option or $25,000 or less self-payment option.
  6. The beneficiary makes an upfront payment to Medicare.
  7. The beneficiary obtains a compromise or waiver of recovery and Medicare would have the discretion to not pursue future medicals.

CMS is requesting comment on the feasibility of all of these options, as well as any additional options.  Comments must be received within 60 days.

It is anticipated that the next step, after reviewing comments from this ANPRM, will be for CMS to publish proposed regulations, which will prompt another public comment before becoming final.  A flood of comments from a host of interested parties is expected.


Medicare Implements $300 Threshold for Liability Settlements

On September 6, 2011, the Medicare Secondary Payer Recovery Contractor (MSPRC) announced that Medicare has implemented a $300 threshold for certain liability cases.

The announcement states that Medicare will not recover against a beneficiary’s lump sum settlement, judgment, award or other payment if the following conditions are met:

  • The beneficiary’s settlement, judgment, award or other payment claims/releases a physical trauma-based incident/injury/accident/illness. (This does not include alleged ingestion, implantation or exposure-based incident/injury/accident/illness).
  • The beneficiary obtains a liability insurance (including self- insurance) settlement, judgment, award, or other payment for a Total Payment Obligation to Claimant (TPOC) of $300 or less.
  • There are no multiple settlements, judgments, awards or other payments for the same underlying claim, which total more than $300.
  • A demand has not been issued.

The MSPRC protects the Medicare Trust fund, under the authority of the Medicare Secondary Payer (MSP) Act, by identifying and recovering Medicare conditional payments that Medicare made when another entity had primary responsibility.

This is an important development because this is the first time that Medicare has announced a threshold for conditional payment recovery. It seems that this threshold is in response to a similar position in the widely supported SMART bill that it is not cost-effective for Medicare to pursue very low dollar conditional payment recoveries. The need for a threshold was also mentioned in recent congressional hearings.

To view the MSPRC announcement click here
To view the previous Medivest blog regarding the SMART Bill click here
To view the previous Medivest blog regarding congressional hearings click here

Superior Court of New Jersey Allows Attorney’s Fees to be Taken from LMSA

Superior Court of New Jersey Allows Attorney’s Fees to be Taken from LMSA

In Hinsinger v. Showboat Atlantic City, an opinion reached in January 2011 but not published until late May 2011, the Superior Court of New Jersey held that a portion of a Medicare beneficiary’s attorney’s fees associated with procuring settlement may be deducted from a Liability Medicare Set Aside (LMSA) account in determining the amount of money to be set aside for injury-related, otherwise Medicare allowable, medical expenses.  Interestingly, Judge Rochelle Gizinski also addressed several different issues pertaining to MSAs that could have far-reaching effects on the settlement community.

First, and arguably the most significant, Judge Gizinski opined that the workers’ compensation federal regulations and the workers’ compensation CMS memos apply to liability MSAs.   This is a first, as far as we know, and could possibly have a major impact for liability settlements in the future.  The court justified this position by stating, “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.”

Second, the court continued on to determine that an attorney can recover a portion of their fees obtained on behalf of a client in a third-party liability case directly from the Medicare Set Aside itself.   The opinion provides an analysis of the wording found in 42 CFR § 411.37, which outlines allowable deductions from MSAs when the recovery is sought from the party that received the primary payment.  The court felt that 42 CFR § 411.37 was unclear as to whether or not the regulations apply only to recovery funds already paid by Medicare (conditional payments), or to funds obtained for future medical expenses.  However, based on the language in the regulation and the headings themselves, the court found that 42 CFR § 411.37 could apply to funds awarded for future medical expenses as it does to conditional payments.

Third, the opinion also referenced the May 7, 2004 CMS memo entitled “Medicare Secondary Payer- Workers’ Compensation (WC)-INFORMATION.”  This memo specifically prohibits administrative expenses or attorney costs associated with the establishment of the MSA from being taken out of the account.  The court found that since it already established that the rules and regulations created in workers’ compensation situations also apply to set asides created in other situations, then this memo should also apply to third-party liability settlements as well.  Interestingly, the court held that this directive applies only to attorney’s fees specifically associated with the establishment of the trust, and does not apply to attorney’s fees incurred in the procurement of funds in a civil suit.

The court held that its decision to apply 42 CFR § 411.37 to funds obtained in a civil action and placed within an MSA was also consistent with the general principles of equity.  Allowing Medicare to avoid paying its fair share of expenses incurred in the procurement of a settlement, judgment, award or other payment would unfairly force a claimant to pay for those fees (resulting in a smaller amount of net proceeds) and would discourage Medicare beneficiaries from filing claims against liable third parties when they have a legal right to do so.

CMS has traditionally remained silent when pressed for clarification on issues related to liability MSAs, and in some instances, workers’ compensation MSAs.  Courts across the country have been left to their own devices to determine a fair and equitable way to consider Medicare’s interest in their cases.  The court’s decision in this case, along with others (see Haro v. Sebelius and Bradley v. Sebelius), may not be what CMS had in mind when issuing what little guidance they have offered up.  On the other hand, the personal injury settlement community has clearly begun to police itself, which could very well have been CMS’s plan all along.  The liability settlement community is calling for additional directives from CMS, and if CMS continues to remain silent on the issues then they can expect the courts to continue making their own interpretations.



Article Addresses Potential for Third Party Liability MSAs

We recently came across an article written by Judge Richard L. Gilbert, who is a retired judge in Sacramento, California. His article offers an informative and thoughtful commentary on the current issues surrounding MSAs in Third Party Liability cases. We found this article highly enlightening, and the article is being reposted here with Judge Gilbert’s permission.

Medicare “Set-Aside” Requirements in Third Party Liability Cases
Panic: No/Prepare: Yes