Medicare Step By Step


Published on

In-depth paper for paralegals regarding Medicare subrogation/liens

  • Be the first to comment

  • Be the first to like this

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

Medicare Step By Step

  1. 1. Medicare: Step-by-Step by Deborah M. Welsh, MPA, NCCP Greenville, North Carolina 27835 October 19, 2007 The purpose of this paper is to provide a practical framework for paralegals assisting attorneys with the processing of Medicare liens incurred by their clients. It will not address the issue of Medicare Set-Asides but information on that topic can be found in the North Carolina Personal Injury Liens Manual, First Edition, edited by Christopher R. Nichols, Esq. and published by the North Carolina Academy of Trial Lawyers this year. This paper begins with a history of Medicare’s right of reimbursement, explains Medicare’s position that it is a secondary payer, discusses the role of the attorney in the process, and then provides a “step-by-step” process that paralegals can use to initiate a relationship with the Medicare offices on behalf of their clients and complete the lien process in an efficient and effective manner. Finally, this paper provides a process by which the paralegal can assist the attorney in requesting a waiver or reduction of the Medicare lien on behalf of the client. History of Medicare’s right of reimbursement In 1965, Title XVIII of the Social Security Act provided for the creation of Medicare and Medicaid, entitlement programs designed to provide medical insurance coverage to persons who receive Social Security retirement benefits or Social Security disability income. Entitlement to Medicare is not affected by a person’s income or assets. Part A is funded through payroll deductions and Part B is funded through monthly premiums which are generally deducted from the person’s monthly Social Security check. A Medicare Trust Fund was established with these funds to provide payments for beneficiaries’ medical care, and in the 1980’s, Congress passed the Medicare Secondary Payer (MSP) law to ensure the Trust would continue to have sufficient funds to pay for this care in the future. I. Medicare As a Secondary Payer Since the program began, Congress has enacted a number of laws making Medicare a secondary payer to other insurance in certain situations. To ensure the solvency of the Trust Fund, payment of medical bills must be made by primary payers if the costs were incurred as a result of an injury on the job or third party negligence. In those cases, Workers’ Compensation and private insurance funds are the primary source of payment in these instances and would not be allowed to shift the costs of medical expenses attributed to their wrongdoing from themselves to tax payers.1 42 U.S.C. 1395y(b)(2) and 1862(b)(2)(A)(ii) of the 1 United States v. Baxter International, Inc., 345 F.3d 866, 875 (11th Cir.2003) 1
  2. 2. Act state 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 (WC) plan, an automobile or liability insurance policy or plan (including a self-insured plan) or under no-fault insurance.” Thus the role of the MSP in particular situations is similar to the coordination of benefits clauses in private health insurance policies. Typically, Medicare should be considered as a secondary payer in the following situations: a. When the beneficiary has a Group Health Plan with provisions for age, disability or end-stage renal disease; b. When the beneficiary has been involved in an accident and no-fault or liability insurance is available; c. When the beneficiary has been injured on the job and is covered by Workers’ Compensation insurance; d. When the beneficiary is enrolled in the Federal Black Lung Program; or e. When the beneficiary receives benefits from the Veteran’s Administration.2 Medicare is also a secondary payer to Medigap3, Medicaid and TRICARE program coverage. The Medicare Coordination of Benefits (COB) program is a centralized office created to investigate and identify other health benefits available to a Medicare beneficiary and to coordinate the payment process to prevent mistaken payment of Medicare benefits if another primary source is available.4 The COB Contractor (COBC) is primarily an information gathering entity who coordinates the payment process to prevent mistaken payment of medical bills by Medicare. The COBC also looks at such documentation as trauma or injury diagnosis codes which alert them that there is a potential for third party liability and the possibility of an MSP situation that warrants development. Information about the COB is located at However, Medicare may pay for a beneficiary’s medical expenses “conditioned upon reimbursement to Medicare from proceeds received pursuant to a third party liability settlement, award, judgment or recovery.”5 Medicare makes this conditional payment when the primary source can be reasonably 2 However, Medicare may pay for covered services for which the VA does not make any payment and may also reimburse veterans VA co-payment amounts charged for VA-authorized services furnished by non-VA sources. See Medicare Benefit Policy Manual, Chap. 16 of Pub. 100-02 (2/23/07) at 3 Effective October 1, 2007, the COBC will assume responsibility for the Medigap claim-based crossover. Detailed information regarding the transition of the Medigap crossover can be found at MLNMattersArticles/downloads/MM5601.pdf. 4 COB Fact Sheets: MSP Laws and Third Party Payers Fact Sheet for Attorneys. 5 Ibid., p.1 2
  3. 3. expected to pay, but it has been determined that the primary payer will not pay promptly. The Centers for Medicare & Medicaid Services (CMS) defines “promptly” as “120 days from (1) the date a claim is filed with an insurer or a lien is filed against a potential liability settlement, or (2) the date the service was furnished or the date of a hospital discharge.”6 When the primary insurer’s payment has been made to the beneficiary, Medicare is entitled to recover what it paid. Liability insurance may include uninsured motorist, underinsured motorist, homeowner’s liability, product liability and medical negligence. Payment may not be made by Medicare if payment can be reasonable expected to be made under a Workers’ Compensation claim, including plans provided under the Federal Employee’s Compensation Act, the Federal Coal Mine Health and Safety Act of 1969 as amended (the Federal Black Lung Program) and the U.S. Longshoremen’s and Harbor Workers’ Compensation Act. These federal programs provide a type of workers’ compensation for federal civil service employees, employees of companies performing overseas contracts with the U.S. government, employees of American companies who are injured in an armed conflict, and offshore oil field workers.7 If Medicare chooses to make conditional payments on behalf of a beneficiary, its lien takes priority over any other lien, interest or judgment proceeds. The statutes regarding the conditional payment and Medicare’s right to reimbursement from the beneficiary’s settlement proceeds are found at 42 U.S.C. §1395y (b)(2). The rules that govern how this statute operates can be found in Title 42 C.F.R. 411.20. The CMS has a right of action to recover its payment from any entity, including a beneficiary, provider, supplier, physician, attorney, state agency or private insurer that has received a third-party payment.8 Medicare’s independent right of recovery was upheld in Zinman v. Shalala, 67 F.3d 841 (9th Cir. 1995) Plaintiff/Claimant, counsel for both parties and the insurer can be held liable for twice the amount of Medicare’s lien if its interests are not protected.9 Medicare’s subrogation rights are superior to any other lien or interest on the proceeds of a damages award, including Medicaid, and apply even when Medicare does not give notice of its claims to the beneficiary, the parties’ attorneys or the liability insurer.10 If the beneficiary is covered by both Medicare and Medicaid, Medicare must be paid before Medicaid. If the amount due Medicare is equal to or exceeds one-third of the gross recovery, Medicaid will not 6 See 42 C.F.R. §411.50(b) 7 Medicare Secondary Payer (MSP) Manual, Chapters 1 and 2. (Rev. 54, 07-21-06) See and 8 See 42 C.F.R. §411.24(g) 9 See 42 U.S.C. §1395y(b)(2)(B)(ii) 10 Henretta, J. Thomas. “Health Care and the Law.” Trial. 38:10 (October, 2002). American Association of Justice. 3
  4. 4. receive any recovery. If the Medicare recovery is less than one-third of the gross recovery, Medicaid can seek reimbursement for the difference up to one-third or for its share of up to one-third of the gross recovery.11 Further, as part of the new Medicare Prescription Drug Improvement and Modernization Act, Medicare will not only screen ICD-9 (diagnosis) codes relative to the injury concerned, they will also screen for any prescription drugs which they deem are associated with that same injury. In some cases, a Medicare Set Aside may be necessary for cases involving substantial future medical treatment needs. II. The Attorney’s Role Given the intricacy of its rules, Medicare does recognize the role attorneys play in assisting it with reimbursement of its conditional payments. Medicare will reduce its lien by the same percentage as the attorney’s contract fee as procurement costs in exchange for the attorney’s efforts, including: a. Representing Medicare’s subrogation interests for payments made to the beneficiary from the date of the injury to the date of the settlement; b. Evaluating the possibility of the beneficiary’s future medical needs; c. Disputing pre-existing and/or non-related payments by correctly identifying relevant ICD-9/diagnoses codes and costs; d. Filing required forms and providing relevant information to Medicare regarding the injury claim and its resolution; and e. Ensuring satisfaction of Medicare’s interests prior to disbursing any settlement proceeds. The Medicare statute itself does not address the subject of attorneys' fees directly. However, regulations specify that Medicare will follow the fund doctrine and reduce its recovery to allow for the costs of procuring the judgment or settlement. 12 Medicare agrees that its recovery will be reduced by that amount provided that attorneys' fees do not appear to exceed the prevailing standards in the area.13 Concurrently, attorneys are also advocating for their clients with regard to the required reimbursement of Medicare’s expenses as follows: 1. Preparing compromise and/or waiver requests and negotiating with CMS for reduction of the Medicare lien. 11 Nichols, Christopher R. North Carolina Personal Injury Liens Manual, 1st Ed., Chap. 2, p.71. NCATL. (2007) 12 42 C.F.R. § 411.37 13 See 2 Medicare and Medicaid Guide (CCH) ¶ 10.200.02, Medicare Carriers Manual, § 3340.6, Medicare Intermediary Manual, § 3419.7. 4
  5. 5. 2. Assisting the administrator’s of a beneficiary’s estate with satisfying any existing Medicare lien; 3. Identifying and disputing non-relevant payments made by Medicare; and 4. Filing required forms and information with Medicare and ensuring the process is completed in a timely manner. III. How to handle a Medicare lien – “Step by Step.” We have had a relatively good response rate from the MSPRC and COBC’s since the centralization of Medicare in October, 2006. An overall change, however, is that we have found that Medicare is reactive and we must be proactive on behalf of our clients. It may help you to know that all documents received by the MSPRC are scanned into their computer system at the Detroit office. Then various COBC’s access the documents via computers from locations across the county. This is why you will see below that we not only call the MSPRC and COBC’s, we also follow up with written communication. Further, there are statutory time limitations in which the MSPRC must respond to your requests, thus, we always send any documents to Medicare via certified mail. When talking to COBC’s, we always keep notes on the date, time and who we speak to in order to maintain continuity of response. This practice also helps us to immediately identify problems with our submissions or puts the responsibility for the delay back into the MSPRC/COBC’s office. The following steps have proven to be effective: 1. Determine whether or not your client has Medicare at the very beginning of your case. During our intake process, we find out if the client is already enrolled, or will soon be eligible for Medicare benefits. If they have Medicare we copy the new client’s Medicare card and get all index information (age, social security number, date of birth, name of spouse, etc.) Copy the Consent to Release Form included with this paper and have your new client fill it out at the intake visit. 2. Send in a Letter of Representation, along with the client’s completed Consent to Release Form to the COB contractor at the following address: Medicare Coordination of Benefits (COB) Contractor MSP Claims Investigation Unit Post Office Box 5041 New York, New York 10274-0125 5
  6. 6. 3. Include in your letter the following information: a. Client’s name; b. Address; c. Date of Birth; d. Client’s Social Security Number; e. Date of Injury; f. Description of Injury,14 including the specific location of the accident; g. The name and address of the liable party and the liable party’s insurance company; h. Potential other insurance sources; and i. The names and address of any attorneys or insurance adjusters involved. 4. Send this letter via Certified Mail/Return Receipt Requested. It is worth the added expense. You get a green card back, signed by a real person, dated the day your letter was received by the COB. 5. CALL THE COB OFFICE at (800) 999-1118. Their hours of operation are 8:00 a.m. to 8:00 p.m. EST, Monday through Friday, except holidays. Technically, you must call all new claims in to the COB. However, we have found that creating a paper trail also helps in the long run. Remember, a letter alone is not sufficient notice to the COB of your representation. A MSP Recovery Contractor (MSPRC) will be assigned and all further written and telephonic communication should go to that Contractor. 6. Ask for and write down the name of the person you speak to. 7. Calendar 10 days from the date you call in the claim. 8. You and your client will receive acknowledgment of your representation. You will also receive a Consent to Release Form which your client must sign and return to the MSPRC before Medicare will communicate with you about his/her case. If you have not received this letter and Release form in 10 days, call the COB office again. By now you should have your green card back 14 If your client has already begun treatment, or has received Emergency care, include the ICD-9 codes on this and all other correspondence to Medicare. Continue to add any new ICD-9 codes to your correspondence as needed. 6
  7. 7. from the Post Office and you will also have the name of the person you spoke to when you initially called in your client’s claim. 9. Return your client’s signed Authorization with a cover letter to the MSPRC via mail to the following address: MSPRC Liability Post Office Box 33828 Detroit, Michigan 48232-3828 Telephone: (866) 677-7220 Fax: (734) 957-0998 Workers’ Compensation claims for North Carolina are handled by the following office: MSPRC WC Post Office Box 33831 Detroit, Michigan 48232-3831 10. FAX YOUR COVER LETTER AND CLIENT’S AUTHORIZATION to the MSPRC office. You will now have a confirmation sheet in your file showing the information was sent to, and received by the MSPRC. 11. Work your case and continue to collect medical records and bills relevant to your client’s case. 12. Once your client has reached MMI/Permanent and Stationary status, prepare a letter to the MSPRC. At your “Re:” line, insert “Client has reached MMI status.” Again, include the discharge/final diagnosis ICD-9 codes in this letter. Include the medical record which evidences the conclusion of your client’s treatment. Ask for their Statement of Payments Paid.15 13. Send the letter and documents via Certified Mail/Return Receipt Requested. 14. CALL the MSPRC and let them know what is coming and why. Ask for the Statement of Payments Paid.16 Take down the name of the person you spoke to. 15 Some attorneys request Statements of Payments Made periodically throughout the pending of the lawsuit. If your client is elderly with a history of multiple disease processes this is a good idea. You will have additional time to separate out relevant vs. continuous non-relevant payments made by Medicare. 16 I have been told by one COBC that they must receive a verbal request for the Statement of Payments Paid and the Final Lien Letter. 7
  8. 8. 15. FAX the letter (without accompanying documentation) to the MSPRC. 16. Calendar 45 days. 17. If you do not receive the Statement of Benefits Paid in 45 days, call the MSPRC. You should have a signed/dated green card, a fax confirmation sheet, and a name of a person you spoke to about the information you previously provided. 18. Once the Statement arrives, go through it and be sure all services paid by Medicare are relevant to your client’s injury claim. Check the date of injury. Check the dates of service and ICD-9/injury codes. Highlight those payments that are not relevant, subtract those payments from the total, and write your adjusted total on the Statement. 19. Provide copies of medical records which back up your adjusted total. Highlight those portions of the medical records which evidence your position. 20. Mail a highlighted copy of the Statement, relevant medical records (if any) which evidence your adjusted total, and a cover letter which contains all of your client’s information, and your suggested final total of Payments made by Medicare via Certified Mail/Return Receipt Requested. 21. FAX your cover letter only (without documents) to the MSPRC. 22. CALL the MSPRC and let them know you either agree with their total of Payments made, or give them your disputed total. Tell them your documents are on the way to them via Certified Mail. 23. Calendar 14 days. 24. If you do not have a corrected Statement of Payments Made from the MSPRC, (or a reason for their disagreement) call them. You should have a signed/dated green card, a fax confirmation sheet and a name of the person you spoke to. 25. Continue to calendar 14 days and call again until you receive a final Statement of Payments made. 8
  9. 9. 26. Your client’s claim should be close to settlement, mediation, arbitration or trial. You will have a pretty accurate idea of the amount of Medicare’s final lien. (Of course, you will not have a DEFINITE lien amount until you receive the Final Lien Letter.) Notify the MSPRC of any upcoming mediation, arbitration or trial dates in writing and by phone. Although the MSPRC will not attend these events, they are entitled to be notified of them. 27. Once your client’s claim has been resolved with the third party, prepare your Settlement Statement, including Medicare’s lien amount. Make sure you have itemized your costs. (Optional: You can also include a copy of your client’s contingency fee agreement indicating the attorney’s fee percentage. This is not required unless there is a question by the MSPRC or if the attorney’s fee exceeds 40%, but since producing any additional documents allows them an additional 45 days to respond, it may be more expedient to do so.) Request a Conditional Payment Letter. 28. Medicare recognizes Procurement Costs related to the attorney’s efforts in recovering/reimbursing Medicare for the conditional payments it has made on behalf of a beneficiary. Medicare will reduce its lien by the same percentage as your attorney’s fee percentage as stated in his/her contract with the client. Here is how to figure that reduction17: 1. Total Amount of Liability Settlement: $ _________ Amount of Medical Payment Settlement: + $ _________ TOTAL Received (Item A) $ _________ 2. Amount of Attorney’s fees $ _________ Other Procurement expenses/costs + $ _________ TOTAL Fees/Costs (Item B) $ _________ 3. (Item B) $ _________ ÷ (Item A) $ ________ = RATIO _________ 4. LIEN x RATIO = $ _________ (Reduction Amount) 5. LIEN - Reduction Amount = FINAL LIEN 17 Courtesy of Attorney Christopher Nichols. This formula can be found on his blog at : 9
  10. 10. 29. Send your Settlement Statement to the MSRPC via mail with a cover letter requesting a Conditional Payment Letter. Include the Settlement Information Form, Release of All Claims, Medicare’s Consent to Release Form, your Contract for Legal Services and copies of all medical charges incurred by your client. Fax your cover letter and all docs to MSPRC. 30. Call the MSPRC and let them know your Settlement Statement is coming and request a final lien/payment letter. 31. Calendar 14 days. The MSPRC has 45 days from the time of notification of settlement to provide a final lien/payment letter. However, we call, write and fax every 2 weeks to be sure our client’s file does not drop out of the system. 32. If you don’t have a Final Lien letter after 14 days, call, write, fax again. You know the deal! 33. Medicare will send the Final Lien/payment letter and will want to know if you agree that their calculation is correct. If you agree, send a check for the amount of the lien to Medicare at the address provided in the letter. You have 60 days from the date the Final Lien/payment letter is sent to reimburse Medicare. If your payment is sent to the wrong address, or is for an incorrect amount, or in the incorrect name, the deadline will not be tolled and the attorney or client could be assessed interest if the corrected check is not sent within that 60 days limit.18 IV. How to Request a Reduction/Waiver of a Medicare Lien Medicare will consider requests for waivers under §1870(c) of the Social Security Act, which is a request based strictly on financial hardship. As a practical matter, Medicare rarely waives its lien, but more often will reduce its lien. A decision by Medicare to reduce its lien is based on the inability of the debtor to pay the full amount within a reasonable time and the inability of the government to collect within a reasonable time when the debtor refuses to, or cannot pay. The criteria used by Medicare when evaluating a request for reduction and/or waiver of its lien is as follows: 1. The beneficiary must be without fault; 2. Recovery would effect financial hardship, and/or 3. Recovery would be against equity and good conscience using the following criteria: 19 18 Nichols, Christopher R. North Carolina Personal Injury Liens Manual, 1st Ed., Chap. 2, p.64. NCATL. (2007) 19 §1870(c) of the Social Security Act 10
  11. 11. a. The degree of financial hardship caused by the recovery; b. The extent the beneficiary’s state in life would be altered; c. Medicare’s recovery amount exceeds the settlement amount; and d. The extent the beneficiary can meet non-covered out-of-pocket accident-related expenses.20 Examples of financial hardship from the Medicare Secondary Payer (MSP) Manual, Chapter 7- Contractor MSP Recovery Rules are attached so that you can read the rationale applied by Medicare for deciding whether to grant a waiver or reduction of their lien. The attorney representing the beneficiary may request a waiver/reduction by completing a CMS/SSA form SSA-632-BK and returning it to the MSPRC.21 The actual decision to waive or reduce Medicare’s lien is made by the CMS office in Atlanta, but all documents sent will be forwarded to the CMS office.22 Keep in mind, however, that Medicare will not consider a waiver request until the client receives the third-party payment.23 The Medicare contractor is required to make a waiver decision within 120 days from the date the waiver request is received. (Needless to say, continue to calendar this date and mail, fax and call in your request to document and preserve that time limitation.) A copy of the SSA-632-BK form is attached and can also be accessed at Please note the types of documentation required by Medicare and plan to spend some time with the client obtaining all of the personal information needed. In many cases, especially if the client is elderly with many underlying conditions, or the settlement funds are outweighed by the amount of medical bills, we complete this form early in the process. Medicare will consider the impact of unforeseen and severe financial circumstances existing at the time of creation of the subrogation claim as well as the impact of out-of-pocket expenses relative to the beneficiary’s resources to meet those obligations. Medicare may grant a full or partial waiver if recovery would have an adverse effect on the beneficiary’s standard of living as it existed prior to the accident/injury/illness.24 However, to avoid interest charges, the amount indicated due to Medicare in the Final Lien Letter should be paid within the 60 day time limit. If a waiver/reduction determination is made in the beneficiary’s favor, Medicare will issue a refund. 20 Medicare Secondary Payer (MSP) Manual, Chap. 7 (Rev. 54, 07-21-06) See 21 50.4.2-Pre-Settlement Negotiations, Compromises and Discussions with Beneficiaries/Attorneys. MSP Manual, Chap. 7: Contractor MSP Recovery Rules 22 Nichols, Christopher R. North Carolina Personal Injury Liens Manual, 1st Ed., Chap. 2, p.65. NCATL. (2007) 23 See 20 C.F.R. §§404.506-404.512. 24 COB Fact Sheets: MSP Laws and Third Party Payers Fact Sheet for Attorneys. 11
  12. 12. V. Conclusion Most paralegals will agree that dealing with Medicare and its lien process is a time-consuming and labor-intensive process. I know of no quick solutions to this problem. However, using the above system has proven to be efficient and effective. Some steps may appear redundant or unnecessary, but they have been developed over time while working on actual client files, talking with MSPRC contractors, and referring constantly to Medicare’s own rules and regulations. The new structure, implemented in October, 2006, has been an improvement over the old system. I have found the majority of COBC’s to be open to questions, ready to give advice, and willing to go to their supervisors when the system is not working as it should. This is why I suggest always asking for the COBC’s name when you are talking to them, and suggest establishing a relationship with them. Once they know that you are willing to work with them to get resolution of these claims, that you are, in effect, an advocate for seeing that the government’s money is being reimbursed once a tortfeasor has been held responsible for payment of medical bills incurred due to their negligence, they are willing to assist you in getting what you need to resolve your client’s lien in a timely manner. 12