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

1. Medicare Secondary Payer Statute, Medicare Set-Asides and MMSEA Section 111 Mandatory Insurer Reporting

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

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.

9. Future Interests – Medicare Set Asides

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.

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 CMSModel language for both can be found at www.msprc.info

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.

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.

22. SSDI for 24 months or longer

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

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.

32. Pharmacy printout for the last two(2) yearsThis 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

34. CMS has published several “user guides” and at no time have they stated MSAs are now required for liability settlements.

36. Overview Who We Are Is an MSA appropriate in a Liability Claim? Who We Are However 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 Claim? 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 Options 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 Discussion 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 Discussion 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

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.

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

56. No future medical expenses

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 Highlights 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 Questions? Who We Are Geoffrey Hudson Axiom National, LLC 13046 Race Track Road, #277 Tampa, FL 33626 1-888-826-6496 813-600-0704 Fax 813-920-6946 www.axiomnational.com ghudson@axiomnational.com