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Axiom National MSA Workers Compensation and Liability


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This powerpoint presentation explains the history of Medicare Set-asides and all that surround them.

This powerpoint presentation explains the history of Medicare Set-asides and all that surround them.

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  • We field a lot of questions about this so thought it was worthwhile to make the distinction.
  • I know everybody here already knows this but, there seems to be some confusion about this question. There are really two questions that need to be asked: 1) Do we need an MSA and then 2) does it meet the Submission threshold?
  • This is noteworthy because there exists, I think, an opportunity to make the process of referring an MSA less cumbersome and time consuming, not to mention an opportunity to reduce paper waste. What I mean is often times we receive large volumes of unnecessary and unneeded paperwork.
  • Before we drill down a little bit here, any of the liability folks here utilizing MSA’s routinely, as a matter of course?
  • On the next slide we will take a look at which Regional Offices are, and which are not currently reviewing Liability MSA’s. Essentially at this point it is up to each RO’s discretion.
  • This is an actual case, by the way.
  • Before you go I have your Certificates…
  • Transcript

    • 1. Medicare Secondary Payer Statute, Medicare Set-Asides and MMSEA Section 111 Mandatory Insurer Reporting
    • 2. Overview
      Who We Are
      What is the Medicare Secondary Payer Statute?
      Who We Are
      • Legislation passed in 1981 that makes Medicare secondarily responsible for medical payments stemming from industrial injuries
      • 3. The intent is to assure that carriers are not improperly shifting the burden of the claimant’s medical expenses or future care to the Medicare system
      • 4. MSP statute prohibits Medicare from making payment if payment has been made or can reasonably be expected to be made by the following primary plans: group health plans, worker’s compensation plans, liability insurance(to include self-insurance) or no-fault insurance
      • 5. Pursuant to 1862(b)(2)(B)(ii) of the Act, Medicare has the right to sue and collect double damages
    • Overview
      Who We Are
      Medicare Secondary Payer Statute - continued
      Who We Are
      • In 1999, Medicare conducted an audit and concluded they had paid out 43 Billion dollars in medical expenses that were compensable under worker’s compensation.
      • 6. In 2001, Medicare released the “Patel Memo”, which introduced the Medicare Set Aside(MSA) arrangement as the recommended vehicle for WC primary payers to protect Medicare’s “future interests” in WC settlements.
      • 7. In the event Medicare has made a conditional payment, under MSP primary payers are obligated to reimburse Medicare within 60 days if primary plan has or had a responsibility to do so – settlement, judgement, waiver and release all demonstrate responsibility.
      • 8. Primary payers are also required to place Medicare on “notice” if it is demonstrated that Medicare has made payment for services for which the primary payer should have made payment.
    • Overview
      Who We Are
      Protecting Medicare’s Interests in Settlements
      Who We Are
      • Past Interests – Reimbursement of Conditional Payments/Liens
      • 9. Future Interests – Medicare Set Asides
      • 10. Your Interests – Indemnification and Hold Harmless Agreements
    • Overview
      Who We Are
      Conditional Payments – “Consent to Release” vs. “Proof of Representation”
      Who We Are
      Proof of Representation – The beneficiary has authorized the individual or entity(including an attorney) to act on the beneficiary’s behalf. The representative has no independent standing, but may receive or submit information/requests on behalf of the beneficiary, including responding to requests from the MSPRC, receiving a copy of the recovery demand letter if Medicare has a recovery claim, and filing an appeal(if appropriate) when that beneficiary is involved in a liability, workers’ compensation or auto/no-fault situation.
      • The exchange of information is a two way street.
      • 11. The individual or entity may provide necessary information to or interact with the MSPRC, on behalf of the beneficiary, in order to resolve Medicare’s Recovery Claim.
      • 12. Needed to negotiate liens with CMS.
    • Overview
      Who We Are
      Conditional Payments – “Consent to Release” vs. “Proof of Representation”
      Who We Are
      Consent to Release – The beneficiary has authorized the individual or entity to receive certain information from the MSPRC for a limited period of time. The Release does not give the individual or entity the authority to act on the beneficiary’s behalf.
      • The exchange of information is a one way street
      • 13. The beneficiary has authorized the MSPRC to provide privacy protected data to the specified individual or entity, BUT this does NOT authorize the individual/entity requesting information to act on behalf of or make decisions on behalf of the beneficiary.
      • 14. Needed to make Conditional Payment inquiries with CMS
      Model language for both can be found at
    • 15. Overview
      Who We Are
      Conditional Payments Inquiry – Lien Negotiation Process
      Who We Are
      Step #1: Notify Medicare Coordination of Benefits (COB) of the Claim:
      Send a completed form letter containing (claimant name, DOB, Medicare number, address, gender, Date of injury, insurance carrier, ICD-9 code) to the Medicare COB along with the signed CMS HIPAA form. *** If you are unable to obtain the signed HIPAA form from the claimant, you may still send this letter to notify Medicare of the injury claim but you must have the correct Medicare number prior to doing so.
      You will receive a “Right to Recovery” letter from CMS following notification of the claim. CMS will assign a CMS Case Control number to the claim. Utilize the CMS Case Control number and/or the claimants HICN/Medicare number in all future correspondence with Medicare.
      COBC c/o Coordination of Benefits Contractor  P.O. Box 33849 Detroit, MI 48232-5849
    • 16. Overview
      Who We Are
      Conditional Payments Inquiry – Lien Negotiation Process
      Who We Are
      Step #2: Notify the Medicare Secondary Payor Recovery Contractor (MSPRC) to initiate the Medicare Conditional Payment Lien on the Claim:
      (This step should be completed prior to any settlement negotiations.)
      Send a form letter to the correct MSPRC address. You will need to include the same information as above and specifically request they start the conditional payment investigation and send you any lien information.
      The signed and returned CMS specific HIPAA (Health Insurance Portability and Accountability Act) form must accompany this document for the MSPRC to share any conditional payment lien information with you.
      You will receive an “Estimated Medicare Conditional Payment Lien” in approximately 60 days.
      This document will contain dates of service, ICD-9 diagnostic codes for which the medical treatment was needed, Total Charges, Reimbursed amount, and Conditional Payment amount. The Conditional Payment is the amount Medicare paid for medical services related to this claimant.
    • 17. Overview
      Who We Are
      Conditional Payments Inquiry – Lien Negotiation Process
      Who We Are
      Step #2: Continued
      This document will state “Refrain from Sending Payment at this Time.” This is just an estimated lien amount. You will not send payment to the MSPRC until after the settlement date and until after you receive the Final Conditional Payment Lien.
      Review the lien information to evaluate which charges are related to the DOL injury/illness. If some of the charges are not related to the DOL injury/illness, you should complete written correspondence to the MSPRC with their evaluation and arguments as to why certain charges are unrelated to the DOL. This written communication should be followed up with a phone call 3 weeks to assure it was received and is being processed.
      The MSPRC will periodically send updated “Estimated Medicare Conditional Payment Liens” throughout the life of the file until the claim is settled full and final.
      MSPRC Auto/LiabilityPO Box 33828Detroit, MI 48232-3828Workers' Compensation MSPRC MSPRC WCPO Box 33831Detroit, MI 48232-3831
    • 18. Overview
      Who We Are
      Conditional Payments Inquiry – Lien Negotiation Process
      Who We Are
      Step #3: Settle the Claim Full and Final and Obtain the Final Medicare Conditional Payment Lien:  
      Upon settlement of the claim; send a copy of the final settlement documents or the final settlement amount less procurement costs to both the MSPRC and the Medicare COB to notify them the case has been settled and to request the Final Medicare Conditional Payment Lien:
      The Final Medicare Conditional Payment Lien should be received within 60 days.
      Review the Final Lien request to evaluate which charges are related to the DOL injury/illness. If some of the charges are not related to the DOL injury/illness, you should send written correspondence to the MSPRC with their evaluation and arguments as to why certain charges are unrelated to the DOL. This written communication should be followed up with a phone call 3 weeks to assure it was received and is being processed.
    • 19. Overview
      Who We Are
      Conditional Payments Inquiry – Lien Negotiation Process
      Who We Are
      Step #4: Payment to Medicare:
      • Make the appropriate payments to Medicare regarding the Final Conditional Payment Lien.
    • Overview
      Who We Are
      Medicare Set Asides
      Who We Are
      What are they?
      • Monies set aside from a settlement to satisfy the Medicare Secondary Payer Statute requirements.
      • 20. That portion of the lump sum settlement amount that is to be used to pay for future medical, diagnostic and prescription drug costs that Medicare would otherwise have to pay for.
      • 21. Lump sum settlement amount , per Medicare, includes but is not limited to: wages, attorney’s fees, all future medical expenses(to include Rx) and repayment of any Medicare conditional payments. Also note that any previously settled portion of the WC claim must be included in computing the settlement amount.
    • Overview
      Who We Are
      When is a Medicare Set Aside Allocation required?
      Who We Are
      Per CMS memorandum of July 11, 2005, Medicare’s interests must be considered when settling any Workers’ Compensation case – even if the review thresholds are not met.
      -> This criteria also applies to denied claims.
      MSP applies to cases that are 1) being closed, 2) require future medical care and 3) wherein the claimant is a “qualified individual”.
      Qualified Individual:
      Class 1:
      • Claimant is a Medicare beneficiary at the time of settlement
      • 22. SSDI for 24 months or longer
      • 23. ESRD
      Class II:
      • Claimant has a “reasonable expectation” of becoming a Medicare beneficiary within 30 months of the date of settlement AND
      • 24. Total settlement amount is $250,000 or greater
    • Overview
      Who We Are
      What is Reasonable Expectation of Medicare Enrollment?
      Who We Are
      • Claimant has applied for SSD
      • 25. Claimant has been denied SSD, but anticipates appealing denial
      • 26. Claimant is appealing or re-filing for SSD
      • 27. Claimant is 62 ½ or older
      • 28. Claimant has ESRD, however does not yet qualify as ESRD patient
    • Overview
      Who We Are
      Current Monetary Review Thresholds by CMS
      Who We Are
      CMS’ current review thresholds for WC cases are as follows:
      • (1) The claimant is a Medicare beneficiary at time of settlement and the settlement amount is greater than $25,000 OR
      • 29. (2) The claimant is not a Medicare beneficiary at time of settlement but has a “reasonable expectation” of Medicare enrollment within 30 months of the settlement and the settlement amount is greater than $250,000.
      • 30. Again, “Reasonable expectation” includes, but is not limited to: situations where the claimant has applied for social security disability(SSD); claimant has been denied SSD but anticipates appealing the decision or re-filing for SSD; claimant is 62 years and 6 months old(meaning they will be eligible for Medicare in 30 months based on age); End Stage Renal Disease.
      • 31. CMS is on record as stating that these review thresholds are simply agency “workload review” thresholds and are NOT “safe harbors”. It is CMS’ position that their interests must always be considered and protected.
    • Overview
      Who We Are
      What is Needed to Complete an
      Accurate MSA?
      Who We Are
      • The last two(2) years of medical reports, surgical/operative reports, diagnostic reports and the First Notice of Injury
      Physical Therapy notes, medical bills, etc are NOT needed
      • The last two(2) years of payout history
      • 32. Pharmacy printout for the last two(2) years
      This is critical because 1) CMS is scrutinizing the Rx component of the MSA allocations ever since the June 2009 Memo was issued with respect to AWP, and 2) CMS will require a pharmacy printout if the MSA is to be submitted
    • 33. Overview
      Who We Are
      Is an MSA appropriate in a Liability
      Who We Are
      First, an overview and some background:
      • Despite all the rumors and misinformation circulating about, the new MMSEA statute(Section 111) does NOT contain any new requirements related to MSAs.
      • 34. CMS has published several “user guides” and at no time have they stated MSAs are now required for liability settlements.
      • 35. At this time, there are NO statutory requirements promulgating the use of MSAs, or any other vehicle, in liability settlements.  In fact, the term “MSA” does not appear in any currently enacted statute, and is nowhere defined in any currently enacted regulation.
      • CMS has stated that the set-aside process (whether it is for WC or liability) is: 1) voluntary, not mandatory; and 2) the same as it has been in the past.  No new guidance has been issued by CMS mandating the use of MSAs in liability settlements.
    • Overview
      Who We Are
      Is an MSA appropriate in a Liability
      Who We Are
      Furthermore, there are approximately twelve (12) memoranda from CMS about the use of MSAs in WC settlements and zero (0) memoranda about the use of MSAs in liability settlements.  The reason for the guidance in the WC situations is that CMS is interpreting the MSP statute, namely 42 U.S.C. §1395y(b)(1).  If CMS intended for MSAs to be used routinely in liability settlements, it would issue similar guidance specific to the use of MSAs in liability settlements.
      Perhaps more persuasive to this point is the Congressional Research Service (“CRS”) analysis of the MMSEA statute.  This comprehensive analysis of the new legislation (and its intent) does not mention, at any point, the concept of Medicare Set Asides in liability cases.  Certainly if such purpose (i.e. requiring MSAs in liability settlements) were part of the Congressional intent of MMSEA, one would reasonably expect it would have been in the CRS analysis (after all it would be a rather notable revenue-generating component of such new law if it were a part of it).
    • 36. Overview
      Who We Are
      Is an MSA appropriate in a Liability
      Who We Are
      The fundamental statutory principle requiring settling parties to consider and protect Medicare’s interest in WC settlements already exists and appears to apply to liability settlements as well. 
      The Medicare Secondary Payer (“MSP”) provisions state Medicare is always secondary to WC and other insurance, including no-fault and liability insurance.
      Also, Medicare’s authority to review liability settlements arises under the same statute as does its authority to review WC settlements.
      Furthermore, MMSEA suggests Medicare may now be poised to play a greater role in liability cases, and certainly gives CMS unprecedented visibility into your claims. MMSEA also places an affirmative obligation on liability primary payers to (a) determine if a claimant is entitled to Medicare and (b) notify Medicare of said entitlement as specifically required(quarterly reporting).
    • 37. Overview
      Who We Are
      Is an MSA appropriate in a Liability
      Who We Are
      So, in those specific cases where a definitive allocation for future injury-related medical expenses exists for an injured Medicare beneficiary, the MSA obligation in a liability settlement is relatively clear . An example is a verdict sheet with a future medical expense line item or a settlement release with a definitive allocation for future medical treatment, ie, a surgery contemplated by the parties and specifically listed on the settlement documents to ensure no future liability exists for that specific line item expense. Certain large settlements wherein damage elements other than future medicals are capped (such as pain and suffering) or non-existent (such as other economic damages, like lost wages) may fit this same mold.
      On the other hand, in the majority of settlements where the parties settle liability cases using a broad, general release of all damages and do not specify or otherwise allocate for future medicals, the ability to determine the appropriateness of a MSA becomes much less clear.  When settling a liability case in which payment for future medical expenses is not specifically negotiated, if a general release is implemented that uses broad language (for example, referring to “all claims past and future”), a reasonable approach is to institute a “reasonable person” analysis to determine if a portion of the recovery definitively recognizes future injury-related care.
    • 38. Overview
      Who We Are
      Recommended Approach
      Who We Are
      What we believe to be a sound approach, assuming the claimant is a Class I or Class II individual, is to consider a liability MSA when the settlement either (1) is one million dollars ($1,000,000.00) or more, and/or (2) falls into those lower value case scenarios where the settling parties acknowledge future medical expenses are a component of the settlement.
      Ask Yourselves:
      What are the terms of the settlement?
      How are damages calculated?
      Future medicals considered in determining the settlement value?
      Is there a rational basis for the way funds are allocated?
    • 39. Overview
      Who We Are
      Who We Are
      Do nothing - based on an absence of specific statutory guidance and hope CMS 1) does not find out about it(Remember – MMSEA Section 111) or 2) does not decide at a later date to pursue you.
      Obtain a Liability MSA and do NOT submit to CMS:
      - Anticipates future medical needs/expenses
      - Place in file; shows effort to protect Medicare’s interests; note in settlement documents that Medicare’s interests were taken into consideration
      Obtain a Liability Medicare Set Aside and submit to CMS:
      - May or may not be reviewed *
      - Ultimate show of good faith in terms of taking Medicare’s interests into consideration
      - Specific provisions should be included in the settlement agreement/language :
      a) The projected amount of future medical care should be clearly identified
      b) The plaintiff and attorney should be placed on notice of the intended purpose of the designated funds and that said funds may only be
      used for their intended purpose
    • 40. Overview
      Who We Are
      Regional Offices Reviewing Liability
      MSA’s – Some Are, Some Are Not
      Who We Are
      Region 1 – Boston -> Case by case basis
      (CT, ME, MA, NH, RI, VT, NY, NJ, PA, MD, DE, DC, VA, Wva, PR, U.S. Virgin Islands)
      Region 2 – New York -> Yes
      (NY, NJ, PR, U.S. Virgin Islands)
      Region 3 – Philadelphia -> Yes
      (DE, MD, PA, VA, Wva, DC)
      Region 4 – Atlanta -> Generally No; Case by case basis
      (AL, NC, SC, FL, GA, KY, MS, TN)
      Region 5 – Chicago -> > $250,000
      (IL, IN, MI, MN, OH, WI)
      Region 6 – Dallas -> > $250,000
      (AR, LA, NM, OK, TX)
      Region 7 – Kansas City -> No
      (IA, KS, MO, NE)
      Region 8 – Denver -> No
      (CO, MT, ND, SD, UT, WY)
      Region 9 – San Francisco -> No
      (AZ, CA, HI, NV, Samoa, Guam, Northern Marina Islands)
      Region 10 – Seattle -> Case by case
      (AK, ID, OR, WA) basis
    • 41. Overview
      Who We Are
      Case Study
      Who We Are
      Claimant, a social security recipient (Medicare beneficiary) filed a personal injury action against third parties. He also had an ongoing workers' compensation claim. At mediation, a settlement agreement was reached, as follows:  The third party insurer paid a total of  $125K, out of which $92K went to the claimant, and $33K was paid to the WC carrier, in full satisfaction of the comp lien. Claimant also released all workers' compensation claims against WC carrier. 
      Defense counsel for the third party insurer wanted an MSA done. Because there was an ongoing comp claim, and because the comp claim was being settled along with the liability claim, the mediator also wanted an MSA. Plaintiff's counsel refused, saying that no MSA was required: a) because MSA's aren't required for liability settlements; and b) because the workers' compensation carrier was not paying any additional settlement funds. In the end, plaintiff's attorney agreed to sign a personal "hold harmless, indemnification agreement," and defense counsel and mediator agreed to allow the settlement to be finalized.
      What would you have done? Was an MSA appropriate
      in this case? Would a HH/IA hold water?
    • 42. Overview
      Who We Are
      Who We Are
      CMS Memo of 04/22/03: 
      Question #19:  Does CMS require that a Medicare set-aside arrangement be established in situations that involve both a WC claim and a third party liability claim?
      Answer:  Third party liability insurance proceeds are also primary to Medicare.  To the extent that a liability settlement is made that relieves a WC carrier from any future medical expenses, a CMS approved Medicare Set-aside arrangement is appropriate.  This set-aside would need sufficient funds to cover future medical expenses incurred once the total third party liability settlement is exhausted.  The only exception to establishing a Medicare set-aside arrangement would be if it can be documented that the beneficiary does not require any further WC claim related medical services.  An MSA is also unnecessary if the medical portion of the WC claim remains open, and WC continues to be responsible for related services once the liability settlement is exhausted.
      CMS will not recognize any form of release, hold harmless or indemnification agreement.  Attached is a memorandum from State of New Jersey, Department of Labor to ALL Judges and Attorneys precluding use of Medicare waiver releases in settlements.  As confirmed in CMS memorandum of 04/22/03, question #18, CMS will not acknowledge and/or approve of settlements where parties execute an affidavit, release, or other legal document absolving respondent of future Medicare responsibilities. 
    • 43. Overview
      Who We Are
      Who We Are
      Do we have enough information?
      Remember, MSP applies to cases that are 1) being closed, 2) require future medical care and 3) wherein the claimant is a “qualified individual”.
      Certainly # 1 and # 3 are met. But what about #2?
      In this scenario, we didn’t really know the status of the claimant’s medical condition.  We would want to know if there was documentation from the authorized treating physician(s) that clearly stated the claimant would not need any future care related to the injury.
      If clearly documented no future medical care required = No MSA
      Otherwise a MSA and submission to CMS would be appropriate
    • 44. Overview
      Who We Are
      Strategies for keeping the MSA amount low, while still obtaining CMS approval
      Who We Are
      • Structured Settlements - Set up MSA account using an annuity instead of a lump sum – typically represents 30+% savings versus lump sum, and can help to minimize inappropriate expenditure of funds
      • 45. Use of Rated Age can lower MSA amount(obtained from Structured Settlement broker)
      • 46. Latest medical reports. If proposed future treatment has changed, that cost can be eliminated from the MSA with a new report
      • 47. Drug Utilization Review. Pharmacist /physician identifies areas where changes/reductions are justified – intervention with treating physician if warranted.
      ** Note – April 3, 2009 CMS released a Memo indicating that as of June 1st, 2009, they will begin independently pricing future medication costs by utilizing Average Wholesale Pricing(AWP).  Further, the CMS will not use or recognize any other pricing, discounting or calculation methods when determining the adequacy of the prescription drug amounts in MSA proposals. 
    • 48. Overview
      Who We Are
      MSA Account Funding Options
      Who We Are
      • Funding the MSA using an Annuity:
      - Structured Settlement broker – valuable resource
      - Rated Age – reduces the amount of the MSA
      - Provides more money for claimant’s use
      - Lessens the chance of misuse of the MSA funds
      - Seed money + annual payment
      • Funding the MSA with a Lump Sum:
      -Entire MSA amount is deposited into account upon settlement of claim 
    • 49. Overview
      Who We Are
      MSA Account Funding Options – continued
      Who We Are
      • Seed Money = Amount to cover 1st surgery/procedure and two years annual payout
      • 50. The remaining amount is divided by the claimants life expectancy
      • 51. Subsequent annual deposits are made in the Medicare Set Aside account
      • 52. If the funds are not exhausted at the end of the year then they carry forward
      • 53. If the funds are exhausted during the year then Medicare pays the bills until the next annual payment is deposited into the MSA account
    • 54. Overview
      Who We Are
      Management of the Set Aside Funds
      Who We Are
      • Self Administration
      - Claimant held to same standards and stringent reporting requirements as a professional custodian/administrator
      • Professional Administration
      - Highly advisable if the MSA amount is large; if there is an expectation of significant, consistent future medical treatment; or if there is diminished capacity
      - Custodial Account
      - Administrative fees/expenses cannot be charged to the Set Aside allocation
      • Trust
      - There is no requirement that the Set Aside
      funds be put in a trust
    • 55. Overview
      Who We Are
      Looking Forward in 2011 - Proposed
      MSP Legislation
      Who We Are
      HR 2641: The MSP and WC Settlement Agreement Act of 2009
      Originally filed in 2009, expected to be filed again in 2011
      1) Bill was aimed at excepting certain WC settlement agreements from Section 1862 of the Social Security Act, specifically:
      • Settlements with a present value of $25,000 or less
      • 56. No future medical expenses
      • 57. Settlement agreement that does not limit or extinguish the right of claimant to payment of future medical expenses
      2) Bill also aimed at creating new MSA approval process:
      • Automatic approval unless disapproved
      • 58. CMS has 60 days after receipt of submission to disapprove
      3) Safe Harbor for certain MSA’s:
      • Safe harbor for MSA’s that are 10% or less of settlement
      amount AND settlement does not exceed $250,000
    • 59. Overview
      Who We Are
      Looking Forward in 2011 - Proposed
      MSP Legislation
      Who We Are
      HR 4796: The Medicare Secondary Payer Enhancement Act of 2010
      Negates Conditional Payment reimbursement requirement if settlement less than $5,000(TPOC) OR involving OMR of not more than $5,000
      No requirement to access or submit SSN or HICN
      Establishes statute of limitations with respect to recovery of payments by the United States
    • 60. Overview
      Who We Are
      Who We Are
      Geoffrey Hudson
      Axiom National, LLC
      13046 Race Track Road, #277
      Tampa, FL 33626
      Fax 813-920-6946