Responsibilities Of Defense Counsel Involving Medicare

Question: What are the specific responsibilities of defense counsel in a liability settlement involving Medicare. I represent a hospital and would like to make sure I am covering all the bases when settling a plaintiff's medical malpractice claim. I don't want to rely on the plaintiff's attorney to make sure everything is done correctly. I realize we have to report once the settlement is finalized. I would like to know if you have suggestions for a step by step process to ensure my client does not run afoul of Medicare.

Tennessee Attorney

Answer: Understanding that claims being settled today, for Medicare entitled injured parties, will have to eventually be reported, we offer the following advice. This settlement solution has dual intentions: 1) to provide the insurer with the knowledge that all Medicare compliance obligations are being handled in a compliant manner such that it will not be liable to Medicare post settlement; and 2) to allow the claimant's attorney to receive settlement proceeds in a timely manner once the parties have agreed to the terms of the release. The settlement solution essentially creates a series of affirmative obligations on both sides as conditions precedent and conditions subsequent to settlement.

Conditional Payments:
Reimbursing Medicare for conditional payments (those that were made from date of injury to date of settlement) is a claimant obligation; however, CMS can come back to the payer for reimbursement of conditional payments if they are not satisfied by the injured party. Action steps include the following:

• Claimant should open a tort recovery record with Medicare and request a conditional payment listing ("CPL"); and bring evidence of that to the settlement table
• Indemnification language included in settlement agreement to protect the defense
• Settlement occurs and then the claimant submits the settlement details to CMS along with its procurement costs (case costs and expenses) and requests a final demand.
• Defense pays the settlement to the claimant's attorney with the agreement from the attorney that the net funds will not be paid to the claimant until the reimbursement is completed.
• Final demand is received from CMS.
• Once reimbursed, CMS will provide the claimant with a copy of the final demand and proof that the reimbursement claim has been satisfied.

Obviously, since reimbursing CMS is an affirmative obligation on the claimant, the claimant requires settlement proceeds to handle its obligation in a compliant manner. Defense may be hesitant about disbursing settlement proceeds to the claimant prior to knowing that CMS has been reimbursed for conditional payments made date of injury to date of settlement. The above steps allow CMS to be reimbursed promptly, but also afford the defense a high level of comfort knowing that Medicare compliance obligations linked to settling the claims are being handled in a compliant manner.

Future Cost of Care
Satisfaction of Medicare's future interests is a topic of great discussion currently in the settlement community; however, that discussion is misguided. Insurers are being led astray by certain entities attempting to apply the current law and guidance regarding Medicare Set-aside Arrangements ("MSAs") to the liability context. As it currently stands, the MSA is a tool used in workers' compensation settlements to protect Medicare's future interest. All currently enacted laws and guidance regarding the use of MSAs is specific to the workers' compensation arena, and there is no currently enacted law which mandates the use of MSAs in a liability settlement. In fact, there is not even a statutory definition of the term 'MSA' or 'Medicare Set-aside Arrangement' at this point. In the absence of any currently enacted law or guidance specific to the use of MSAs in a liability settlement, MSAs are appropriate when the following fact pattern exists - that is, a definitive allocation to future medical expenses in the settlement release or a line item for future medical expenses in a jury verdict form, plus a permanent burden shift to Medicare.

Even if MSAs were appropriate in liability settlements today, the insurer/defense do not need to play a role on setting up the MSA. Under currently enacted law, there is no legal liability on the defendant for failing to do so. The current law only provides double damages exposure to an insurer where conditional payment reimbursement obligations exist but were not satisfied. (See 42 U.S.C. 1395y(b)(2)(B)). That responsibility is, and always has been on the Medicare beneficiary's shoulders (where applicable).