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Medicare Set Asides


        THE RULES SAVE YOUR CLIENT’S MONEY
                           PRESENTED BY

                ...
What is it?

THE RECOMMENDED METHOD TO PROTECT
MEDICARE’S INTERESTS IN A SETTLEMENT IS A
MEDICARE SET-ASIDE ARRANGEMENT (M...
Why do I need a Medicare Set
                   Aside?

MEDICARE IS PRECLUDED FROM PAYING FOR A MEDICARE
BENEFICIARY’S MED...
Why are they precluded ?

   PURSUANT TO 42 U.S.C. §1395Y(B)(2) AND § 1862(B)(2)(A)
   (II) OF THE SOCIAL SECURITY ACT, ME...
Why should we care?

     FEDERAL LAW (42 U.S.C. § 1395Y(B)) NOT
     ONLY ESTABLISHES THAT MEDICARE IS A
     SECONDARY P...
This isn’t just for Workers
                   Compensation?

IN DECEMBER OF 2007 CONGRESS VOTED TO
ENACT THE MEDICARE, ME...
The impact on you and “them”

   THE MEDICARE, MEDICAID AND SCHIP EXTENSION ACT
   OF 2007 BROADENS CMS’ REACH BEYOND WORK...
Your interests. Their interests.


IT IS IN THE BEST INTEREST OF THE CLAIMANT,
THE DEFENDANT AND THEIR RESPECTIVE
COUNSEL ...
Mandatory Insurer Reporting

  THE MEDICARE, MEDICAID, AND SCHIP EXTENSION ACT OF 2007
  IMPACTS THE HANDLING OF WORKERS' ...
Why are they reporting?

  THE PRIMARY GOAL OF MIR IS TO IDENTIFY AND
  ENFORCE MEDICARE'S SECONDARY PAYER (MSP) RIGHTS
  ...
The Plaintiff Attorney

   UNITED STATES OF AMERICA V. PAUL J. HARRIS, UNITED
   STATES DISTRICT COURT, NORTHERN DISTRICT ...
Motion to Dismiss

   THE ATTORNEY FILED A MOTION TO DISMISS AND ARGUED THAT A
   LAWYER, IN REPRESENTING A CLIENT, CANNOT...
Summary Judgment
    SUMMARY JUDGMENT WAS GRANTED ON MARCH 26, 2009.

    THE COURT ADDRESSED SEVERAL ISSUES, INCLUDING A
...
Be aware

ALL PARTIES HAVE SIGNIFICANT
RESPONSIBILITIES UNDER THE MEDICARE
SECONDARY PAYER (MSP) LAWS TO PROTECT
MEDICARE'...
What do we need to know?

THE CLAIMANT IS CURRENTLY A MEDICARE BENEFICIARY AND
THE TOTAL SETTLEMENT AMOUNT IS GREATER THAN...
WHAT DOES “REASONABLE EXPECTATION OF
            MEDICARE ENROLLMENT” MEAN?


 (a) The individual has applied for Social ...
Be smart, use annuities

PAYMENTS OVER LIFE EXPECTANCY

MSA USES FUTURE PAYMENT VALUE NOT PRESENT VALUE

CREATES ADMINISTR...
Annuity MSA Example
   STEP 1 - TOTAL ESTIMATED FUTURE MEDICAL SERVICES AND FUTURE
    PRESCRIPTION DRUG EXPENSES COVERED...
Example Continued
   STEP 5 - SEED MONEY TO BE DEPOSITED UPON SETTLEMENT IS EQUAL TO
    $20,240.03 THE SUM OF THE AMOUNT...
Example Continued

             ANNUITY COST FOR ANNUAL MSA PAYMENT


                          $75,734

                 ...
TOTAL MSA COST
                   ANNUITY VS. CASH
MSA CASH COST:              $174,775.81 (FROM STEP 1)

                ...
I don’t get it.

MEDICARE REQUIRES THAT YOU SET ASIDE THE FUTURE VALUE OF
MEDICAL CARE. IN OUR EXAMPLE: $174,775.81

THEY ...
The rules save your client’s
     money, but only if you use them

MSA SUBMISSION CAN BE “DO IT YOURSELF” OR OUTSOURCED FO...
Tips
KNOW YOUR MSA THRESHOLDS. IS YOUR CLIENT A CURRENT MEDICARE
BENEFICIARY, DO THEY HAVE A REASONABLE EXPECTATION OF BEC...
Questions?



                  WBFAZIO@AOL.COM




wbfazio@aol.com                     07/08/09
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Save Your Client\'s Money With MSA

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How to use Medicare\'s rules to save your client\'s money with a structured Medicare Set Aside.

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Transcript of "Save Your Client\'s Money With MSA"

  1. 1. Medicare Set Asides THE RULES SAVE YOUR CLIENT’S MONEY PRESENTED BY WILLIAM FAZIO COPYRIGHT 2009 WILLIAM B. FAZIO © wbfazio@aol.com 07/08/09
  2. 2. What is it? THE RECOMMENDED METHOD TO PROTECT MEDICARE’S INTERESTS IN A SETTLEMENT IS A MEDICARE SET-ASIDE ARRANGEMENT (MSA). THIS ALLOCATES A PORTION OF THE SETTLEMENT FOR FUTURE MEDICAL EXPENSES THAT WOULD NORMALLY HAVE BEEN COVERED BY MEDICARE. wbfazio@aol.com 07/08/09
  3. 3. Why do I need a Medicare Set Aside? MEDICARE IS PRECLUDED FROM PAYING FOR A MEDICARE BENEFICIARY’S MEDICAL EXPENSES WHEN PAYMENT: HAS BEEN MADE OR CAN REASONABLY BE EXPECTED TO BE MADE UNDER A WORKERS’ COMPENSATION PLAN, SELF-INSURANCE OR LIABILITY INSURANCE POLICY. wbfazio@aol.com 07/08/09
  4. 4. Why are they precluded ? PURSUANT TO 42 U.S.C. §1395Y(B)(2) AND § 1862(B)(2)(A) (II) OF THE SOCIAL SECURITY ACT, MEDICARE IS PRECLUDED FROM PAYING FOR A BENEFICIARY’S MEDICAL EXPENSES WHEN PAYMENT “HAS BEEN MADE OR CAN REASONABLY BE EXPECTED TO BE MADE UNDER A WORKERS’ COMPENSATION PLAN, AN AUTOMOBILE OR LIABILITY INSURANCE POLICY OR PLAN (INCLUDING A SELF-INSURED PLAN), OR UNDER NO-FAULT INSURANCE.” wbfazio@aol.com 07/08/09
  5. 5. Why should we care? FEDERAL LAW (42 U.S.C. § 1395Y(B)) NOT ONLY ESTABLISHES THAT MEDICARE IS A SECONDARY PAYER, BUT ALSO THAT MEDICARE HAS A PRIORITY RIGHT OF RECOVERY OVER ANY OTHER ENTITY TO THE PROCEEDS OF ANY SETTLEMENT. wbfazio@aol.com 07/08/09
  6. 6. This isn’t just for Workers Compensation? IN DECEMBER OF 2007 CONGRESS VOTED TO ENACT THE MEDICARE, MEDICAID AND SCHIP EXTENSION ACT OF 2007 (THE 2007 ACT). PART OF THIS BILL ADDS “TEETH” TO THE CENTER FOR MEDICARE AND MEDICAID SERVICES’ (CMS) ABILITY TO ENFORCE THE MEDICARE SECONDARY PAYER (MSP) STATUTE. wbfazio@aol.com 07/08/09
  7. 7. The impact on you and “them” THE MEDICARE, MEDICAID AND SCHIP EXTENSION ACT OF 2007 BROADENS CMS’ REACH BEYOND WORKERS’ COMPENSATION TO OTHER PLANS SUCH AS LIABILITY INSURANCE, INCLUDING SELF-INSURANCE AND NO- FAULT INSURANCE. THE 2007 ACT REQUIRES ADDITIONAL INFORMATION TO BE REPORTED AND ADDS PENALTIES FOR NON- COMPLIANCE. wbfazio@aol.com 07/08/09
  8. 8. Your interests. Their interests. IT IS IN THE BEST INTEREST OF THE CLAIMANT, THE DEFENDANT AND THEIR RESPECTIVE COUNSEL TO PROTECT MEDICARE AS SECONDARY PAYER AT THE TIME OF SETTLEMENT. wbfazio@aol.com 07/08/09
  9. 9. Mandatory Insurer Reporting THE MEDICARE, MEDICAID, AND SCHIP EXTENSION ACT OF 2007 IMPACTS THE HANDLING OF WORKERS' COMPENSATION, LIABILITY, AUTO NO-FAULT, AND SELF-INSURERS CLAIMS, DEFINED BY CMS AS NON-GROUP HEALTH PLANS (NGHP). INSURERS WILL BE REQUIRED TO REPORT SUBSTANTIAL DATA TO CMS ALSO KNOWN AS MANDATORY INSURER REPORTING (MIR). wbfazio@aol.com 07/08/09
  10. 10. Why are they reporting? THE PRIMARY GOAL OF MIR IS TO IDENTIFY AND ENFORCE MEDICARE'S SECONDARY PAYER (MSP) RIGHTS THROUGH RECOVERY OF CONDITIONAL PAYMENTS AND ENSURE THAT SETTLEMENTS, JUDGMENTS, AND AWARDS ADEQUATELY PROTECT MEDICARE'S INTERESTS. FAILURE TO REPORT IN THE TIME AND MANNER AS SPECIFIED BY CMS CARRIES A $1000 PER DAY PER CLAIM CIVIL PENALTY. wbfazio@aol.com 07/08/09
  11. 11. The Plaintiff Attorney UNITED STATES OF AMERICA V. PAUL J. HARRIS, UNITED STATES DISTRICT COURT, NORTHERN DISTRICT OF WEST VIRGINIA, CIVIL ACTION NO. 5:08CV102 THE UNITED STATES OF AMERICA FILED A COMPLAINT AGAINST AN ATTORNEY REPRESENTING A CLIENT IN A LIABILITY ACTION, TO RECOVER MONEY DAMAGES OWED TO CMS FOR CONDITIONAL PAYMENTS MADE ON BEHALF OF THE CLIENT FOR MEDICAL SERVICES. wbfazio@aol.com 07/08/09
  12. 12. Motion to Dismiss THE ATTORNEY FILED A MOTION TO DISMISS AND ARGUED THAT A LAWYER, IN REPRESENTING A CLIENT, CANNOT BE HELD INDIVIDUALLY LIABLE UNDER 42 U.S.C. § 1395Y(B)(2) WHEN THEY DISTRIBUTE SETTLEMENT FUNDS TO THE CLIENT. THE COURT DISAGREED, AND ON NOVEMBER 13, 2008, ISSUED AN ORDER DENYING THE DEFENDANT'S MOTION TO DISMISS. IT SHOULD BE NOTED THAT THE FAILURE TO ADEQUATELY CONSIDER AND PROTECT MEDICARE'S FUTURE INTERESTS MAY RESULT IN LIABILITY FOR THE ATTORNEY. wbfazio@aol.com 07/08/09
  13. 13. Summary Judgment SUMMARY JUDGMENT WAS GRANTED ON MARCH 26, 2009. THE COURT ADDRESSED SEVERAL ISSUES, INCLUDING A DETERMINATION THAT “THE GOVERNMENT CAN NOW RECEIVE REIMBURSEMENT FOR THE MEDICAL SERVICES PAID FOR BY MEDICARE…AND HOLDS THAT MR. HARRIS IS INDIVIDUALLY LIABLE FOR REIMBURSING MEDICARE. THE GOVERNMENT CAN RECOVER ‘FROM ANY ENTITY THAT HAS RECEIVED PAYMENT FROM A PRIMARY PLAN,’ INCLUDING AN ATTORNEY.” wbfazio@aol.com 07/08/09
  14. 14. Be aware ALL PARTIES HAVE SIGNIFICANT RESPONSIBILITIES UNDER THE MEDICARE SECONDARY PAYER (MSP) LAWS TO PROTECT MEDICARE'S INTERESTS WHEN RESOLVING CASES THAT INCLUDE FUTURE MEDICAL EXPENSES wbfazio@aol.com 07/08/09
  15. 15. What do we need to know? THE CLAIMANT IS CURRENTLY A MEDICARE BENEFICIARY AND THE TOTAL SETTLEMENT AMOUNT IS GREATER THAN $25,000; OR THE CLAIMANT HAS A “REASONABLE EXPECTATION” OF MEDICARE ENROLLMENT WITHIN 30 MONTHS OF THE SETTLEMENT DATE AND THE ANTICIPATED TOTAL SETTLEMENT AMOUNT FOR FUTURE MEDICAL EXPENSES AND DISABILITY/LOST WAGES OVER THE LIFE OR DURATION OF THE SETTLEMENT AGREEMENT IS EXPECTED TO BE GREATER THAN $250,000 wbfazio@aol.com 07/08/09
  16. 16. WHAT DOES “REASONABLE EXPECTATION OF MEDICARE ENROLLMENT” MEAN?  (a) The individual has applied for Social Security Disability benefits;  (b) The individual has been denied Social Security Disability benefits but anticipates appealing that decision;  (c) The individual is in the process of appealing and/or re-filing for Social Security Disability benefits  (d) The individual is 62 years and 6 months old (i.e. may be eligible for Medicare based upon his/her age within 30 months;  (e) The individual has a End Stage Renal Disease (ESRD) condition but does not yet qualify for Medicare based upon ESRD wbfazio@aol.com 07/08/09
  17. 17. Be smart, use annuities PAYMENTS OVER LIFE EXPECTANCY MSA USES FUTURE PAYMENT VALUE NOT PRESENT VALUE CREATES ADMINISTRATIVE MECHANISM FOR PAYMENTS wbfazio@aol.com 07/08/09
  18. 18. Annuity MSA Example  STEP 1 - TOTAL ESTIMATED FUTURE MEDICAL SERVICES AND FUTURE PRESCRIPTION DRUG EXPENSES COVERED BY MEDICARE $174,775.81  STEP 2 - COST OF FIRST SURGERY PROCEDURE/REPLACEMENT $10,874.23  STEP 3 - SUBTRACT STEP 2 FROM STEP 1 $163,901.58  STEP 4 - DIVIDE ABOVE BY LIFE EXPECTANCY (35) TO GET ANNUAL MEDICAL AND PRESCRIPTION DRUG COSTS AND MULTIPLY THE AMOUNT BY TWO. ($163,901.58/35) - $4,682.90 X 2 = $9,365.80 wbfazio@aol.com 07/08/09
  19. 19. Example Continued  STEP 5 - SEED MONEY TO BE DEPOSITED UPON SETTLEMENT IS EQUAL TO $20,240.03 THE SUM OF THE AMOUNTS CALCULATED IN STEPS 2 AND 4 ABOVE ($10,874.23 + $9,365.80)  STEP 6 - SUBTRACT SEED MONEY FROM TOTAL WCMSA (STEP 1) DIVIDE BY LIFE EXPECTANCY MINUS ONE (35 - 1) TO CALCULATE MINIMUM ANNUAL DEPOSIT FOR THE BALANCE OF CLAIMANT’S LIFE $4,545.17  DEPOSIT MUST BE MADE NO LATER THAN ONE (1) YEAR FROM DATE OF SETTLEMENT wbfazio@aol.com 07/08/09
  20. 20. Example Continued ANNUITY COST FOR ANNUAL MSA PAYMENT $75,734 ILLUSTRATIVE PURPOSES ONLY wbfazio@aol.com 07/08/09
  21. 21. TOTAL MSA COST ANNUITY VS. CASH MSA CASH COST: $174,775.81 (FROM STEP 1) ------------------------------ ANNUITY COST: $ 75,734.00 SEED MONEY: + $ 20,240.03 (FROM STEPS 2 & 4) TOTAL MSA COST: $ 95,974.03 USING THE ANNUITY SAVES 45% wbfazio@aol.com 07/08/09
  22. 22. I don’t get it. MEDICARE REQUIRES THAT YOU SET ASIDE THE FUTURE VALUE OF MEDICAL CARE. IN OUR EXAMPLE: $174,775.81 THEY ALSO ALLOW YOU TO FUND THE FUTURE MEDICAL OBLIGATION BY USING AN ANNUITY. THIS IS KNOWN AS A “STRUCTURED MSA.” THE ANNUITY ALLOWS YOU TO GUARANTEE THE FUTURE PAYMENTS AT A DISCOUNT. MEDICARE ONLY CONCERNED ABOUT FUTURE MEDICAL COSTS, NOT THE ANNUITY’S PRESENT CASH VALUE. wbfazio@aol.com 07/08/09
  23. 23. The rules save your client’s money, but only if you use them MSA SUBMISSION CAN BE “DO IT YOURSELF” OR OUTSOURCED FOR A FEE THE MSA WILL REQUIRE MEDICAL UNDERWRITING (RATED AGE). USE ANNUITIES AND GET YOUR BROKER INVOLVED EARLY. THE PROCESS IS TIME CONSUMING. wbfazio@aol.com 07/08/09
  24. 24. Tips KNOW YOUR MSA THRESHOLDS. IS YOUR CLIENT A CURRENT MEDICARE BENEFICIARY, DO THEY HAVE A REASONABLE EXPECTATION OF BECOMING ONE? YOU WILL NEED MEDICAL UNDERWRITING. CONTACT YOUR BROKER EARLY. COMPLETE THE MSA IN-HOUSE OR OUTSOURCE? YOUR BROKER SHOULD BE ABLE TO HELP YOU WITH THIS. MANAGE CLIENT EXPECTATIONS. STRUCTURED MSA SAVINGS WILL BE SIGNIFICANT, BUT COMMUNICATE CASH COSTS UNTIL PROGRAM IS FINALIZED. wbfazio@aol.com 07/08/09
  25. 25. Questions? WBFAZIO@AOL.COM wbfazio@aol.com 07/08/09
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