Medicare's Reimbursement Claim - The Only Constant Is Change

By Matthew Garretson

Health care liens can disrupt personal injury settlements. Resolving liens can take anywhere from several months to over a year, consuming a firm’s valuable resources. Moreover, ensuring that these reimbursement claims are resolved in the client’s best interest and consistent with the attorney’s obligation requires knowledge of several deep and varied bodies of law and processes. With Medicare in particular, the ongoing evolution of reimbursement policy and practice creates continual challenges for both lawyers and clients in personal injury and workers’ compensation cases. Against this backdrop, this article provides timely updates on three areas: a new policy affecting providers’ ability to “bill” liability insurance proceeds, changes to the Medicare recovery process, and thoughts on preventing problems with Medicare “future interests” in settlements—all essential for those navigating the rough waters of Medicare claims reimbursement.

New Medicare Policy: Providers May Now “Bill” the Liability Insurer/Injured Client

In May 2006, significant changes were made to the Medicare regulations concerning Providers’ ability to “bill” liability insurance proceeds. Medicare Participating Providers may now wait and bill the beneficiary (who may be an eventual payee in a liability settlement) for the actual charges. Previously, Participating Providers were required to bill Medicare, because “billing” (placing a lien) against the expected settlement proceeds was, in effect, the same as billing the beneficiary, which was a violation of the Participating Provider “assignment agreement.”

Effective May 8, 2006, CMS Medicare issued a policy change to the billing procedure for providers, physicians, and suppliers with regard to payment for services where liability insurance is available. [2] Previously, Medicare participating providers, physicians, and suppliers (hereafter referred to as “Providers”) were required to bill Medicare conditionally for injury-related claims and accept the Medicare-approved amount as payment in full if they could not expect payment from the liability insurer within 120 days. Providers could only charge the beneficiary for the coinsurance and deductible amounts. With the policy change, Providers may now pursue payment from the liability insurance policy covering the liable third party/the beneficiary’s liability insurance settlement and they may charge the beneficiary/client actual charges up to the amount of the liability proceeds, less procurement cost.

According to CR 4024, Pub 100-05 Medicare Secondary Payer, Transmittal 49, April 7, 2006, Providers can only bill liability insurance or Medicare. If they pursue liability insurance and the liability insurance will not pay during the “promptly” period, the Provider can: (1) "maintain all claims/liens against the liability insurance/beneficiary's liability insurance settlement" or (2) "bill Medicare and withdraw all claims/liens against with the liability insurance/beneficiary's liability insurance settlement." The memo does not specifically state that a Provider must bill either the liability insurance or the beneficiary's liability insurance settlement, but a reasonable interpretation of the "/" is that it is an either/or situation.

In the event that the Provider chooses to pursue the liability insurer and issue a lien, it may not charge the beneficiary/client any interest, administrative fee, or any costs associated with the filing of the lien. To pursue the liability insurer, on e must assume the beneficiary or the beneficiary’s attorney supplies the Provider with the identity of the liability insurer.

Under the new policy, non-participating Medicare Providers, who are allowed to submit unassigned claims to Medicare, may only pursue the liability insurance for the Medicare limiting charge [3] amount, which is 15% percent above the Medicare-allowed amount based on the Medicare fee schedule for the locality. (Unlike Participating Providers, who must accept assignment of all claims, Non-Participating Providers do not have an agreement with Medicare to accept assignment on all claims or to accept the Medicare-approved amount as payment in full). Non-participating Providers may charge the beneficiary the limiting charge amount at the time service is rendered and the beneficiary will be reimbursed by Medicare.

For non-covered Medicare services (i.e., treatment or services that Medicare determines are not medically necessary, such as ambulance transportation to a doctor’s office, tests/treatment not supported by a proper diagnosis, routine dental care or procedures, cleanings, fillings, extractions, or dentures), Providers may charge the beneficiary/client for actual charges prior to the settlement proceeds being available. This rule applies to both Participating and Non-Participating Medicare Providers.

Waiting for settlement proceeds to be disbursed to the beneficiary/client is not always feasible for the Providers, but under certain fact patterns Providers are choosing not to bill Medicare and are waiting until settlement (especially in high-profile, high-damage liability cases) in an effort to increase their total reimbursement. Providers cannot attempt to collect payment until the client has received the settlement funds.

In addition to this policy change, another new development has taken place in the Medicare reimbursement process, in the form of a move from several regional recovery contractors to one national recovery contractor.

Changes in the Medicare Recovery Process—The Move to a National MSPRC

The change in the Medicare reimbursement protocol outlined below is only one of many examples of how public (Medicare and Medicaid) and private health care agencies are becoming much more assertive. To identify the beneficiaries and attorneys involved in any settlement where the agencies have made payments for injury-related care, the agencies are outsourcing their recovery efforts to private contractors. Without question, these agencies – and their recovery contractors - continue to pour substantial resources into competing for a “share” of your clients’ liability and / or workers’ compensation settlements.

As of October 2, 2006, the Centers for Medicare and Medicaid Services (CMS) have awarded a single contract for a national Medicare Secondary Payer Recovery Contractor (MSPRC) to the Chickasaw Nation Industries, Inc.—Administrative Services, LLC (CNI), a new, national MSPRC. CMS transitioned all Medicare Secondary Payer (MSP) recovery workloads, both Group Health Plan (GHP) and non-GHP, to the new MSPRC (and away from the dozen or so contractors that were handling the MSP recovery effort regionally). The new MSPRC has been focusing its initial efforts on Workers’ Compensation, No-Fault, and Liability cases, including product liability and medical malpractice cases.

What does implementation of the MSPRC mean if you are a beneficiary or the representative of a beneficiary?

For all new MSP initial recovery demand letters issued on or after October 2, 2006, you should respond to the entity that issued the recovery demand letter. Except in a few limited circumstances [4]this will routinely be the new national MSPRC. As the general rules below demonstrate, the regional recovery contractor with which you have had contact in the past will rapidly be fading from the picture.

General Rules:

• The national MSPRC has responsibility for all new MSP recovery demand letters issued on or after October 2, 2006, as well as all subsequent CMS actions on those recovery claims. [5]
• The responsibility for all pending MSP recovery cases in which a recovery demand letter has not yet been issued also will be the responsibility of the new national MSPRC. [6] (Note that a letter providing the amount of Medicare’s conditional payments in connection with a workers’ compensation, liability, or no-fault insurance case is not a recovery demand letter.) This responsibility is in line with the MSPRC’s responsibility for the issuance of all new MSP recovery demand letters issued on or after October 2, 2006.
• Due to systems issues, the former regional Medicare contractors listed below will continue to have responsibility for all further CMS collection actions with respect to MSP recovery claims where the initial recovery demand letter was issued prior to October 2, 2006. This includes responsibility for the "Notice of Intent to Refer Debt to the Department of Treasury," in which a recovery claim is not repaid in a timely fashion. [7]
• Empire—Syracuse, NY or Harrisburg, PA
• First Coast Service Options—Jacksonville, FL
• Mutual of Omaha—Omaha, NE
• Palmetto—Augusta, GA; Columbia SC, or Columbus, OH
• Trailblazer—Denison, TX

The new national MSPRC will have responsibility for all further CMS collection actions for MSP recovery demand letters issued before October 2, 2006, unless the recovery demand letter was issued by one of the former regional Medicare contractors listed immediately above. [8]

Once a recovery claim is referred to the Department of the Treasury, the contractor that issued the recovery demand letter and the notice of intent to refer the debt to Treasury will take no further collection action. Any further correspondence should be directed to the Department of the Treasury (or its contractor if you have received correspondence from an entity under contract to the Department of the Treasury).

Contact Information for the MSPRC:

MSPRC telephone access became available on October 2, 2006. The number for the MSPRC’s dedicated call center is: 1-866-MSP-RC20 (1-866-677-7220), available from 8:00 a.m. to 8:00 p.m. Eastern time, Monday through Friday, with the exception of holidays.

The MSPRC is a rec ov ery contr a ctor. Th e appropr iate contact for reporting workers’ compensation, liability insurance (including self-insurance), or no-fault insurance claims remains CMS’s Coordination of Benefits Contractor (COBC). Initial contact for parties wishing to propose a workers’ compensation Medicare set-aside amount also remains with the COBC. See: http://www.cms.hhs.gov/COBGeneralInformation for further information about t he COBC, includi ng contact information, attorney information, etc. The COBC’s toll-free line is 1-800-999-1118 (TTY/TDD 1-800-318-8782 for the hearing and speech impaired).

The first priority of the MSPRC has been to address previously submitted notices of settlement and to make a formal Medicare demand. This prioritization suggests that CMS understands the need to identify Medicare’s final claim in order to permit disbursement of settlement proceeds on previously submitted settlements. However, it has created a bottleneck with regard to newly settled cases while the MSPRC plays catch up.

The new national recovery contractor is:

MSPRC Liability
P.O. Box 33828
Detroit, MI 48232-3828
Telephone: 1-866-MSP-RC20 (1-866-677-7220)

Practice Tip - Within a couple weeks of contacting COBC on newly settled cases, you should receive a letter from the MSPRC. Keep in mind that the first task of the MSPRC on new submissions is to identify all payments and generate a conditional summary. In this regard, the best recommendation this author has is to utilize a rifle shot approach - When you respond to the MSRPC provide them all the documentation requested along with the exact detail they need to push your case through the bottleneck, including the exact window of time involved (date of injury to date of settlement) and the exact ICD 9 [9] codes related to the injury and settlement.

The conversion to a single, national contractor should modernize and improve the Medicare recovery process. Yet, a change of this magnitude is unprecedented. Despite the best of intentions, expect substantial time delays associated with this extraordinary transition of all of Medicare’s tort recovery cases to a single, national contractor.

Avoiding Medicare Backlash on Settlements—Preventative Maintenance

Helping clients avoid post-settlement Medicare problems requires good communication with the client, attention to detail, and the keeping of accurate records. It may also necessitate the funding of a Medicare set-aside account. Despite the fact that Medicare’s interests are to be protected in any settlement in which Medicare may be involved in paying future medical expenses [10] , there are important distinctions between workers’ compensation and personal injury recoveries that make the enforcement of set asides more practical in the former. Most significantly, workers’ compensation may cover a worker’s lifetime injury-related care without regard to fault, while liability insurance policies generally have dollar limits. In addition, in personal injury claims, doctrines of comparative fault or negligence also may come into play to reduce the amount of damages that are recovered to an amount less than the full value of the injury.

Since it is more apparent in workers compensation settlements that the burden to pay for future medical expenses is being shifted from workers’ compensation carriers to Medicare, the carriers have been in the practice of preparing set-aside allocations/calculations and completing the optional (yet protec tive) step of subm itting th em to CMS for appro val. No doubt the mushrooming supply of MSA “calculation and submission” vendors who provide their specialized service to workers’ compensation carriers have encouraged this practice. The practice in personal injury settlements has been very different because of the myriad, often intertwined categories of damage that comprise a personal injury claim; and, at this time, there is no formal set-aside proces s for li ability s ettlements. Therefore, it is up to you to make a good faith determination of whether the final settlement value was based on a distinct recognition of the cost of future medical treatment. [11]

The Process – Workers’ Compensation. When your client is a) on Medicare (regardless of settlement value) or b) likely to be eligible for SSDI/Medicare within the next 30 months and has a gross settlement of $250,000.00 or greater, it is imperative that the Medicare Coordination of Benefits Contractor (COBC) be contacted at 1-800-999-1118 and informed of your client’s workers’ compensation claim. To assign a recovery contractor, the Medicare COBC will need the client’s Health Insurance Claim Number (HICN), Social Security Number, sex, date of birth, date of injury, and contact person in order to connect the claim with the beneficiary. Written reports can be addressed to:

CMS
Medicare—Coordination of Benefits
P.O. Box 5041
New York, NY 10274-5041

By notifying the COBC, you are providing Medicare with the information they need in order to calculate any conditional payments that may have been made for the benefit of your client. Should your client settle his/her claim, it is then imperative that the assigned recovery contractor is provided with the date of settlement. This will allow the recovery contractor to fully develop the claim from date of injury through date of settlement and ultimately issue a final demand for injury-related care. It is your responsibility to ensure that these past Medicare payments are resolved after the reimbursement claim is audited to ensure that unrelated medical expenses have not been included.

Medicare’s right of recovery extends to both the past and the future [12] Paying Medicare back for conditional payments made for the benefit of your client is not the whole story; if your workers’ compensation client will have future medical expenses as a result of their injury, you are wise, if not obligated, to notify your client of the need to calculate a Medicare set-aside, and it is prudent for you to assist them in doing so. It is important to note that if your workers’ compensation client’s settlement award is greater than $25,000.00 and he/she is a current Medicare beneficiary, he/she should consider seeking CMS approval of their proposed Medicare Set-Aside value. This $25,000.00 threshold is the current workload based recommendation by CMS. Also, if there is a reasonable expectation [13] that he/she will become a Medicare beneficiary within 30 months [14] of the date of the settlement and the settlement is greater than $250,000.00 he/she should consider seeking CMS approval of their proposed Medicare Set-Aside value . Requests for CMS approval should be sent to CMS C/O Coordination of Benefits Contractor, P.O. Box 660, New York, NY 10274-0660.

Again, the thresholds articulated in the preceding paragraph are only CMS workload-review thresholds, not substantive dollar or “safe harbor” thresholds under the MSP law. Medicare’s future interest must be considered in all settlements – Medicare, however, will only “review and ap prove&rdq uo; settle ments that meet the thresholds. Although CMS approval of the set-aside calculation is not mandatory [15] , it helps avoid problems with future Medicare coverage [16] . It also ensures that only a predefined portion of the settlement--rather than the entire settlement--must be spent before Medicare takes over payment again. [17] In this regard, when dealing with high value cases; cases with complex, pre-existing confounding factors; cases involving significant future injury-related treatment and/or medications; and cases involving adversarial or impaired plaintiffs, it is advisable to seek the protection of CMS approval. Conversely, if you are dealing with cases that may involve only an isolated or definable future treatment event, perhaps the costs and delays associated with CMS approval outweigh the benefit.

If CMS approval is not sought, it is imperative to memorialize the comprehensive efforts to properly calculate Medicare’s interest. Examples include complete analysis and allocation by a qualified “MSA” professional/vendor; letters from treating physicians supporting the analysis; and, the proper education of the client regarding the proper use and accounting of the Medicare set aside funds. It is important to note that a Medicare set aside is not necessary when future medical coverage is not being permanently settled or if the client’s treating physician can support that no future injury related care is necessary. If CMS later inquires about the appropriateness of a calculation that was not “pre approved” at the time of settlement, the tenet of reasonableness and notion of “good faith” will be the standards of review. [18]

What about Liability Settlements? In a previous article [19] , this author explored the law and mechanics of Medicare set-asides, including “practice tips” for addressing Medicare’s future interest in liability settlements. Some of the more salient points included:

• The fundamental statutory principle requiring settling parties to protect Medicare’s interests in workers' compensation settlements already exists and appears to apply to liability settlements as well. The MSP provisions say Medicare is always secondary to workers' comp and other insurance, including no-fault and liability insurance . Under the Social Security Act, payment "may not be made under Medicare for covered items or services to the extent that payment has been made , or can reasonably be expected to be made promptly, under a liab ility insu rance poli cy or plan." [20] Also, Medicare’s authority to review liability settlements arises under the same statute as its authority to review workers' comp settlements does. [21]
• Perhaps no new laws or regulations need be promulgated before Medicare extends the reach of set-asides to the liability context.
• When settling a liability case in which you have not specifically negotiated payments for future medical expenses, draft a general release using broad language--referring, for example, to “all claims past and future”--to avoid the assumption that the settlement covers lifetime medical costs. Be prepared to prove that the settlement did not contemplate a specific future medical component--which the parties, acting in good faith, came up with one indivisible sum of money for release of all claims. Make sure your assessment is consistent with key documents such as the complaint, the subsequent procedural aspects of the litigation, and the ultimate settlement agreement.
• If you are settling a liability case that does specify future medical costs and the settlement is of significant value, you should consider addressing both past (conditional) and future interests of Medicare.
• Keep in mind that some liability settlements involving critically injured plaintiffs are so large that CMS may presume the plaintiff is being compensated for future medical expenses (especially if the other elements of damages are capped). Additionally, a Medicare set-aside is certainly prudent if a liability case settles after a verdict with interrogatories delineating future medicals.
• If in good faith, a reasonable person would surmise that an allocation to future medical expenses is part of the settlement, two options exist – i) identify the appropriate allocation and educate your client to ensure that those proceeds are spent down on future injury-related care (for which Medicare would otherwise pay); or, ii) contact the appropriate Medicare regional office, share the fact pattern of the case and see if they would like to review and approve the allocation. Certainly, liability set asides on cases that meet the criteria above are being submitted to regional offices for approval.
• In terms of applying the “good faith” analysis, our group often conducts the following review:
• What was plead & released (indemnity & meds only, specific allocations? etc.)
• Who has been paying for injury related care?
• Will there be future injury related care (treatment, management, drugs)? If not, obtain a treating physician letter
• Is client on Medicare currently?
• Will Medicare now (after the settlement) be absorbing the burden?
• What documentation exists concerning the types of damages being released? (Certainly the settling parties should heavily document th eir files and incorporate language into the sett lement docu ments expla ining how t hey have & ldquo;consid ered Medicare’s interests.” Examples include: Complete analysis and allocation by qualified “MSA” professional/vendor and/or letters from treating physicians supporting that no future injury-related care is necessary or supporting small costs only).

That article concluded with the following admonition which is equally applicable here:

Lawyers must explore and better understand their duty to protect Medicare’s interests while balancing the call to zealously represent clients. They need to improve client-lawyer dialogue about the impact of settlement on a client’s government benefits. Given the risks, it makes sense for lawyers to re-examine their approach to these benefits-related issues.

Client education from the beginning of the case is critical to avoid any misunderstandings or unexpected consequences resulting from protecting, or failing to protect, Medicare’s future interests. The following checklist may help to assure that clients are fully informed. At a minimum, the client should be informed that:

• The Medicare Seconda ry Payor regul ations say Medicare is always secondary to workers' comp and other insurance, including no-fault and liability insurance. Under the Social Security Act, payment "may not be made under Medicare for covered items or services to the extent that payment has been made, or can reasonably be expected to be made promptly, under a liability insurance policy or plan.
• While Medicare’s authority to scrutinize liability settlements arises under the same statute as its authority to scrutinize workers' comp settlements does, currently no formal set-aside process exists for liability settlements. It currently is an “honor system”, based upon standards of “good faith” and “reasonable person”.
• Medicare will not pay for any medical expenses related to the injury after settlement until any portion of the settlement that is specifically allocated to future medical expenses covered by Medicare has been fully exhausted. While such allocation is common in workers’ compensation cases, allocation may or may not be part of a liability settlement.
• If any portion of the settlement has been specifically allocated to future medical expenses, some portion of the settlement may need to be set aside into an account as an adequate representation of Medicare’s interest in the client’s future cost of care.
• A Medicare set-aside allocation amount is determined through the detailed analysis of each particular case. Once this “set aside” amount is exhausted, Medicare becomes the primary payor of Medicare covered expenses for those settlement-related injuries.
• If a specific allocation of damages (to future medical expenses) is part of the client’s settlement, Medicare’s future interest is properly considered by generating an injury-specific estimate of the future course (and cost) of treatment. Further protection is available if the client obtains approval from CMS of the proposed set-aside value. Only when these funds have been exhausted will the client be able to utilize his or her Medicare card for all healthcare-related needs. Again, while such specific allocation is generally part of every workers’ compensa tion settlement, it may or may not be part of a liabilit y settlement.
• If in good faith, a reasonable person would surmise that an allocation to future medical expenses is part of a liability settlement, two options exist – i) identify the appropriate allocation and ensure that those proceeds are spent down on future injury-related care (for which Medicare would otherwise pay); or, ii) contact the appropriate Medicare regional office, share the fact pattern of the case and see if they would like to review and approve the allocation (see discussion below). Certainly, liability set asides on cases that meet the criteria above are being submitted to regional offices for approval.
• Medicare must be notified of any workers’ compensation claim settlement if the client has received, currently is receiving or will be receiving Medicare benefits within the next 30 months. Medicare will only formally review and approve set-asides for settlements that are greater than $25,000.00 for a current beneficiary or greater than $250,000.00 for a client who has a reasonable expectation of becoming a Medicare beneficiary within 30 months. Although CMS approval of the set-aside calculation is not mandatory, it helps avoid problems with future Medicare coverage. It also ensures that only a pre-defined portion of the settlement--rather than the entire settlement--must be spent before Medicare takes over payment again.
• Set-aside money must be used only for injury-specific medical expenses, which Medicare would have paid. Complian ce with all Medicare rules and r egulations is m andatory, including showing Medicare that money in the set aside account was spent properly. The client may opt to either self-administer his/her own set-aside funds or may purchase a plan through a Medicare set-aside administration company to ensure that his/her funds are properly disbursed. If the client chooses to self-administer the funds, it is the client’s obligation to ensure that the funds are used properly. Improper administration of the funds could result in the loss of Medicare eligibility.
• If a Medicare Set-Aside is required, the client must keep and submit, upon request or at year-end to CMS, all of the medical bills and receipts associated with the payment of injury-related, Medicare-approved medical expenses.
• Medicare Set-Aside funds may only be used to pay for pharmaceuticals upon the condition that the CMS/Medicare set-aside proposal accounted for such expenses; otherwise no CMS/Medicare set-aside funds may be used for the purchase of medication.

Plaintiff’s counsel should consider reducing these admonishments to writing and perhaps incorporating them into a signed waiver or acknowledgement letter, as protection against potential future liability.

Conclusion

The question of exactly what duties are imposed upon clients and counsel by Medicare often lacks a clear answer. Whether by policy, process, or legislation, the landscape of Medicare reimbursement and recovery continues to develop and change. In every case, the following questions must be answered:

• Is my client a past or current Medicare beneficiary?
• Do any of the above-mentioned changes impact my client’s case?
• Given the nature of the client’s recovery, is full reimbursement appropriate?
• What defenses, compromises, waivers or offsets are available to my cli ent?
• What is the full scope of my obligation as plaintiff’s counsel?

Unfortunately the system is encumbered with overburdened resources and is ill-equipped to provide clear guidance or timely resolution. Indeed, frequently-changing outsourced contractors perpetuate the problem. For now, following the processes and recommendations outlined in the previous pages will help you successfully chart a course that not only protects the interests of your client and Medicare, but also protects your and your firm’s interests. But, with Medicare, the only constant is change.

[21] Social Security Act §1862, as amended, 42 U.S.C. §§1395y(b)(2), 1395y(b)(5)(d), 1395y(b)(6), amended by Pub. L. No. 109-171, 120 Stat. 4 (2006).