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Question
On a PI case, since the obligation to repay Medicare in the first instance is that of the client, and since Medicare cannot be paid from our fee, is there any reason we cannot take our fee (and disbursements) from escrow once the insurance cheeck clears and pay ourselves in all cases while awaiting the Final Demand letter? Is there authority in saying this is proper or improper? Thank you. (New York Attorney)
Answer
Attorneys are entitled to take fees on undisputed amounts. Please see our firm's practice tip on the Haro case to support this position. Of course, you will want to make sure you hold back enough proceeds to reimburse Medicare. In order to do this, we recommend you conduct a thorough evaluation of medical bills and take a conservative approach to establishing a hold back. Providers have many months to bill Medicare and the reimbursement amount may increase before receiving Medicare' s final demand. Finally, your client, as well as you, have direct liability for failure to properly consider and protect Medicare's interest.
Previous Question
You posted the following guidance in 2009: In light of the enactment of NY's anti-subrogation law (GOL 5-335 and CPLR 4545), what effect does that have on a Self-Funded ERISA plan's attempt to assert a lien on a personal injury settlement (note: notice of the lien was asserted prior to passage of the legislation?
Previous Answer
ERISA expressly preempts state laws insofar as they relate to employee benefit plans (29 U.S.C. 1144(a)).HOWEVER, under ERISA this preemption does not apply to those laws which regulate insurance, banking, or securities (29 USC 1144(b)(2)(A).This is known as the savings clause. Thus; for a state law to apply, it must be found to regulate insurance. Click here to find a summary piece we distributed after the passing of this new law. We feel that the NY law regulates insurance as we discuss in the piece below. The rub is that if state law regulates insurance (and thus is not preempted) it will apply to insurance companies. Unfortunately, the Supreme Court in FMC Corp v. Holiday, 498 US 52, 61 (1990) held that the "Deemer clause" exempts self-funded plans under ERISA from state laws that "regulate insurance" within meaning of the saving clause, and thus self-funded ERISA plans are exempt from state regulation insofar as that regulation relates to the plans. Thus, a self-funded plan would most likely NOT be affected by the new legislation. Until case law begins to build based upon this new legislation I believe this is the reasonable interpretation.
Question
Has there been any change to this analysis? My client was significantly injured while riding his bicycle when a drunk driver hit him. His New York state employer, a local school district, provides a self-funded medical plan, which paid a significant portion of the medical costs and expenses following the injury. The driver had minimal insurance and was driving a rental car.
Answer
Our position has not changed. New York’s anti-subrogation law applies to any health plan so long as the plan a) does not have a statutory right or b) does not preempt state law (self-funded ERISA). Based on the facts below we would also note that the health plan here (while self-funded) is most likely not an ERISA plan. ERISA specifically exempts employer plans offered by government entities and defines government plan as “a plan established and maintained for its employees by the Government of the United States, by the Government of any State or political subdivision thereof, or by any agency or instrumentality of any of the foregoing.” 29 U.S.C. § 1002(32). As such the state laws of New York will apply to the claim for reimbursement being made by this school district plan. Unless the plan could show a statutory basis for their claim they would be prohibited under NY law.
We hope you find this response helpful and please let us know should you have any additional questions.
Question:
I am looking for suggestions and input from those of you who have appealed Medicare final lien demands. I am about to put together our first one and I would be interested in knowing if there was any argument or perspective which was particularly successful in getting Medicare to back down off the lien number.
Also, if the appeal is unsuccessful, is the client liable for interest which accumulates during the appeal or is the interest suspended during the appeal period?
Thanks in advance,
New Jersey Attorney
Answer:
Essentially there are three paths for administrative relief after a Final Demand. The circumstances of your client will typically drive which remedy should be pursued. The first remedy is an “appeal”. An appeal of a Final Demand amount is typically used in situations where Medicare has included unrelated charges in the final claims pull or where the procurement offset has been incorrectly calculated. The second type of remedy is a “compromise” request. The grounds for a compromise would typically be that the distribution of the settlement proceeds would be inequitable to the plaintiff. The third remedy is a “waiver”. Typically a waiver request is used in situations where the repayment of Medicare will create a financial hardship for the plaintiff or the plaintiff’s dependent(s) (if the plaintiff is deceased). Often times obtaining a favorable result after Final Demand hinges on pursuing the most applicable remedy.
On your interest question, interest will continue to accrue during any post-Final Demand appeal. However, if Medicare finds in favor of your client (fully or partially), they will waive the interest tied to that waiver. We usually recommend paying the Final Demand during any appeal, but that could depend on your unique situation.
I hope this helps.
Question:
I am handling a lawsuit on behalf of a claimant against a self-insured entity. The claimant is enrolled in a Part C plan. The defendant is insisting as a part of settlement (at the last minute) that claimant provide proof that "Medicare has no lien." My understanding is that Medicare would not have a lien because in this circumstance, the secretary pays a premium to the private health insurance company to provide benefits similar to Medicare benefits. If a Medicare HMO, such as private health insurance company, provides benefits, the secretary of the Department of Health and Human Services does not make conditional payments, so the secretary's reimbursement rights under the Medicare Secondary Payer statute would not be applicable. I have, by the way, settled with Humana as to the monies owed to it.
Florida Attorney
Answer:
Thank you for the question. Your understanding is correct so long as the entire time in which your client was receiving injury related care they were covered by the Part C plan. The Part C program allows eligible individuals to elect to receive Medicare benefits through enrollment in private insurance plans. Part C enrollment happens on an annual basis and if your client received benefits under the Part C plan only, Medicare (part A & B) would not have made payment. The only exceptions are cases were the beneficiary was treated at a teaching hospital or received hospice. In these two scenarios traditional Medicare makes payment even though the beneficiary is covered under a Part C plan. Thus under the situation described below it is very possible that no conditional payments were made by Medicare.
I hope you found this helpful and please let me know should you have any additional questions.
Question:
My client was injured in a slip and fall incident. They were treated, at MMI with minimal future expected and with no future surgery of help. The cost for the comp carrier requires a $30,000 set aside, which appears to be excessive. Therefore; I settled a tort claim. The tort defendant's set aside advisor wants to set aside $80,000 additionally in a set aside trust. What should it really be? Thanks so much.
Iowa Attorney
Answer:
Your question is one asked by a lot of plaintiff attorneys these days when settling a case, either in the WC context or the liability context. Based on the Medicare Secondary Payer Act (42 U.S.C. Sec. 1395y(b)(2)) and its associated regulations, we know Medicare Set-Asides (MSAs) are appropriate under certain fact patterns. Based on guidance provided by Medicare, we also know MSAs are not technically "required" and are not always needed when settling every WC or liability case. Therefore, in order to determine what level of compliance is appropriate on the MSA issue, we suggest parties screen each case and determine if an injured person is an MSA candidate based on the case specific facts. If the injured person is not an MSA candidate, then no MSA would be needed and the parties should document their file accordingly. If the injured person is an MSA candidate, then the parties should then assess the matter to determine if the gross recovery (or potential gross recovery) contains dollars allocated to future medical expenses. If there are no dollars allocated to future medical expenses, no MSA is needed and the parties should document their file accordingly. If there is an allocation for future medical expenses, then the parties should value the injured person's future cost of care needs and determine that amount which is Medicare covered. At this point, the lesser of the future cost of care figure otherwise covered by Medicare and the future medical expense allocation in the recovery becomes the appropriate MSA figure. Finally, you would want to educate the injured person as to how to administer the MSA appropriately. By taking these four steps (Screen, Assess, Value and Educate), the parties can then SAVE the Medicare program (relative to future medicals) as well as the injured person's Medicare benefits.
Based on the facts presented to me, I am curious as to how the entities who created the MSA Allocations determined that an MSA was appropriate under these case specific facts (Screening the case) as well as how they determined that there was, in fact, an allocation in the recovery for future medical expenses (Assessing the damages versus recovery). I would not be able to ascertain the future cost of care needs without further examination (and those figures may well be correct). However, without the proper foundation laid as far as determining why an MSA is appropriate in the first place, it's hard to fathom that the MSA Allocation as created here, represents the proper level of compliance on the MSA issue for all parties involved.
I would be happy to discuss the matter further with you at your convenience.
Question:
A client settled a car accident claim for policy limits (very small policy) and now we want to go after her underinsured policy - but I can't get a straight answer from Medicare whether they'll make a claim to those funds. Is this written somewhere?
Thank you!
Colorado Attorney
Answer:
Yes, Medicare can recover from UIM. Under the MSP laws (42 U.S.C. § 1395y(b)), Medicare does not pay for items or services to the extent that payment has been, or may reasonably be expected to be, made through a no-fault or liability insurer or through Workers' Compensation. It is important to note at this point that under 42 CFR §411.50, "liability insurance" means insurance (including a self-insured pan) that provides payment based on legal liability for injury or illness or damage to property . It includes, but is not limited to, automobile liability insurance, uninsured motorist insurance, underinsured motorist insurance, homeowners' liability insurance, malpractice insurance, product liability insurance and general casualty insurance.
I hope this was helpful.
Question
A minor was injured, pays 100% of the Erisa lien. He or she will need future scar revenue 4-5 years later. How is the cost determined for the future part of Medicare lien?
Answer
Good morning and thank you for the question. Subrogation and reimbursement rights for ERISA plans are governed solely by the plan language itself. In this case I would look to the recovery elements that the Plan claims an interest. It appears that we are talking about whether or not a Plan is entitled to receive a credit against future benefits. Generally, a Plan will be entitled to reimbursement only for payments made prior to the time the Plan participant settles UNLESS there is specific language creating a right to this credit or the plan has some type of exclusionary language. Assuming that the original agreement between the ERISA plan and the client was a full and final settlement of the plan's claims which arose as a result of the third party injury, the plan would arguably not have a claim for these post settlement treatments.
- Shell v. Amalgamated Cotton Garment, 43 F.3d 364 (8th Cir. 1994)
o No future credit unless specific language (express clause required)
- Qualls v. BC of Cal., 22 F3d 839 (9th Cir. 1994)
o Exclusionary clause can achieve same result as credit
- Refusal to pay tortfeasor caused injuries unless payment considered advancement and granted lien.
-The language stated that benefits would be ADVANCED ONLY to the extent that the plan retained a lien upon a third party settlement. Because there had been a third party settlement and the lien was satisfied, the plan did not have to advance future benefits.
If a plan does not have crystal clear language it would seem there would not be a reimbursement right for future expenses from the settlement funds. Another thing to consider is the language of the settlement agreement. If the settlement funds were allocated for particular damages it could also affect right to future credit (ex. None of these funds are intended to cover future medical expenses/ claims for future medical are waived hence no reimbursement right). I hope you find this helpful and please let me know if you have any additional questions.
Question
I represent a man who sustained traumatic brain injuries that have rendered him wheelchair-bound and unable to feed himself. His wife's health insurance is an ERISA plan, self-funded to $150,000 per fiscal year, with stop-loss health insurance beyond that initial amount. The $150,000 deductible was paid twice before my client's wife left her job and the ERISA health insurance coverage ended. The insurer is claiming a lien for over $500,000 - despite paying $300,000 with stop-loss insurance paying the rest. The settlement was for the policy limit of just over $1 million. The IRS 5500 reflects that the funding is 'general assets of the sponsor'. The plan has learned from every case from FMC v. Halliday through Sereboff.
Is the plan subject to GOL 5-335 if, as case law suggests, its right is not statutory in itself but instead controlled by the scope of the plan which is a contractual document? Are my options more academic than practical -- leaving me only to negotiate the best resolution and hold my nose while I pay. The Medicaid lien was settled at about an 8% pro rata share, the ERISA provider is looking for more than 100% of what it paid.
Answer
Thank you for the question. If the plan is in fact self-funded (general assets) with strong language then you may be at the mercy of the plan. While I agree with you wholeheartedly regarding the statutory v. contractual right and the application of GOL 5-335, the real problem is ERISA’s preemption clause. ERISA expressly preempts state laws insofar as they relate to employee benefit plans (29 U.S.C. 1144(a)). HOWEVER, under ERISA this preemption does not apply to those laws which regulate insurance, banking, or securities (29 USC 1144(b)(2)(A). This is known as the savings clause and if an ERISA plan is in fact insured you can use state law defenses. See FMC Corp. v. Holiday, 498 US 52 (1990). If the employer plan provides benefits through a contract with an insurance carrier then the plan can be categorized as insured. On the other hand, if benefits are provided by the assets of the employer (in part or in whole) or through a trust, then the plan will most likely be categorized as self-funded.
Thus, if the plan was insured rather than self-funded, there is strong argument to be made that 1) 5-335 is a law which regulates insurance 2) an ERISA plan’s right is based on contract/equity not statute and 3) an insured plan cannot seek reimbursement because of 5-335. Unfortunately here a self-funded plan enjoys preemption and is not subject to the savings clause. See FMC Corp.
The issue I would focus on here is the stop loss issue. While it is well settled that the existence of stop loss coverage does not change the plan’s designation as a self-funded ERISA plan, we believe that the stop loss coverage can change the scope of a plan’s reimbursement right. As a result I would suggest demanding proof that 1. Any funds claimed over the attachment point would be reimbursed to the stop loss carrier and 2. The stop loss carrier had a right to such reimbursement. A stop loss arrangement provides for payment to the plan over certain attachment points. Without such proof there is the threat of unjust enrichment as the plan may receive a windfall from payments previously received from the stop loss carrier and any reimbursement made from your client. So in your example…
- Plan pays 500k in two years
- Attachment point is 150k per year
- Plan pays 500k but is actually reimbursed by stop loss carrier for anything over 150k per year; in effect plan out only 300k
- Require proof that if your client paid more than 300k, the stop loss carrier would receive those
- Don’t want plan to receive windfall (payment from your client and stop loss carrier)
Having settled the third party claim and dealing with a strong self-funded ERISA plan puts you between a rock and hard place. However you have the stop loss issue in this case. As an industry standard, many recovery vendors will agree to a 1/3 split of the gross proceeds. It is certainly not ideal but under the circumstances it may provide some hope. I would also remember that you have a sympathetic client and recovery vendors and plans look at litigation as a last resort.
I hope you found this response helpful and please let me know if you have any additional questions.
Question
My client was injured in an automobile accident and medical expenses were paid by his employer under an ERISA plan. Subsequently, he died from an unrelated cause. I represent his wife as the personal representative of the estate for the injuries sustained in the accident. No claims have been made against his estate from the ERISA sponsored plan and pursuant to the state law all claims are barred based on the statute running. My question when and if there is a limitation for the presentment of an ERISA lien on a decedent's estate? What authority would speak to this limitation?
Answer
Thank you for the question. First let me say that I have seen attorneys successfully use the argument that an ERISA plan did not assert a claim against the estate in time and thus they have no right. Often times such an argument is used to greatly reduce the claim but not as a complete bar (leverage). As a general matter an ERISA plan’s statute of limitation is controlled by state contract law. This period begins when the plaintiff receives the third party recovery.
There is only one statute of limitations found in ERISA and it deals exclusively with a breach of fiduciary duty. ERISA Section 413. Generally under ERISA there are five causes of action (all found under Section 502). The fiduciary duty cause of action is under Section 502(a)(2) but under the facts of your case this cause of action is not applicable. The cause of action which is applicable is ERISA Section 502(a)(3) which provides appropriate equitable relief to enforce any terms of the plan. When an ERISA plan brings an action to enforce its right to reimbursement it does so under this section. Thus there is no specific statute of limitations in ERISA for these types of cases.
When there is a cause of action based on benefits entitlement or other ERISA rights (not fiduciary claim and thus no applicable SOL in ERISA), federal courts have looked to the most closely analogous state statute of limitations. (Miles v. New York State Teamsters Conference Pension & Ret. Fund Employee Pension Benefit Plan, 698 F.2d 593 (2nd Cir. 1983), Advisory Comm. For Stock Ownership $ Trust for Mont. Banc-system, Inc. v. Kuhns, 1996 US App LEXIS 2273, (9th Cir. 1996); Nikaido v. Centennial Life Ins., 42 F.3d 557 (9th Cir. 1994); Administrative Comm. of Wal-Mart Stores, Inc. v. Soles ex rel. estate of Hollander, 2003 WL 21688109 (8th Cir. 2003); Duchek v. BCBS of NE, 153 F.3d 648, 649 (8th Cir.1998).
Additionally, the Supreme Court has told us that when Congress does not provide a SOL for claims arising under federal statutes, a court should normally apply an appropriate state SOL. Reed v. United Transp. Union, 488 US 319 (1989). As mentioned ERISA plans are limited to seeking “appropriate equitable relief”. 29 U.S.C. § 1132(a)(3)(B) aka Section 502(a)(3). This relief must be sought through the enforcement of the terms of its plan. Because ERISA does not say anything more than appropriate equitable relief, the plan language alone controls the right to recovery. Because an ERISA Plan’s right to recovery is controlled exclusively by the terms of a written plan the most appropriate and analogous state statute certainly has to be the contract SOL. BCBS Alabama v. Sanders, 138 F.3d 1347 (11th Cir. 1998).
I hope you found the response helpful. Thanks.