Medicare does not seek recovery directly from Insurers - The Medicare Secondary Payer Recovery Contractor (MSPRC) is responsible for recovering "overpayments" "conditional payments" or as some in the industry call them "liens." The MSPRC also recovers "mistaken payments" (see our November 2011 News letter for a description of mistaken payments:  ORM Reimbursement Demands) from GHP insurers acting on behalf of their covered employers and workers' compensation carriers or other insurers that accept ongoing responsibility for paying for medical claims (reported as Ongoing Responsibility for Medicals or ORM).  The MSPRC recovers settlements from beneficiaries, not insurers.  The MSPRC follows the money.

Statutes may support recovery from insurers in a civil suit. The MSPRC does not pursue insurers, but in 2009 Medicare's attorneys tried to recover from plaintiff attorneys, insurers and their defendants through the civil courts (see US vs Stricker).  The action was triggered by the failure by Stricker et al (a plaintiff attorney firm) to report a mass tort settlement, which cost Medicare the opportunity to pursue recovery from the claimant - beneficiaries. Stricker, unfortunately, was dismissed by the court based on expiration of the statute of limitations before Medicare's right of recovery was decided.  Reporting under Section 111, Mandatory Insurer Reporting should prevent that particular situation from occurring again.

Medicare does not require Liability Set-Asides - Medicare's requirement is that funds allocated in a settlement for "future medicals" must be properly expended by the beneficiary on medical claims related to the injury before Medicare will once again pay primary.  Medicare does not require that a workers' compensation or liability settlement MSA be set-up, reviewed or approved by Medicare. Insurers acting in an abundance of caution, may wish to get an MSA to avoid being the possibility Medicare may seek recovery in a civil action (e.g. US vs Stricker).

Facts to Consider

Fact One:  There are no statutory or administrative laws requiring set-asides.

Fact Two:  The Code of Federal Regulations § 411

§ 411 is the guiding administrative law behind the Medicare Secondary Payer provisions and Medicare Set-Asides are tenuously based on  § 411.46 Lump-sum payments:

"(a) Lump-sum commutation of future benefits. If a lump-sum compensation award stipulates that the amount paid is intended to compensate the individual for all future medical expenses required because of the work-related injury or disease, Medicare payments for such services are excluded until medical expenses related to the injury or disease equal the amount of the lump-sum payment."

and is applied to workers' compensation only. There is no similar provision for Liability and No-Fault.  However, if a liability litigation results in future medicals, the plaintiff attorney should include that fact when they report settlement of the case to Medicare.

Fact Three:  The Medicare Set-Aside approval is a voluntary process.  Medicare's review is not a formal process.  The Administrative law above only requires that future medicals be spent down before Medicare will pay primary and an MSA does not substantively change that requirement.

Fact Four:  If a Workers' Compensation set aside is not established, Medicare will simply not pay for related care until that lump sum has been spent down.

When challenging proponents of liability set-asides with these facts, they often reply, "That may change."  There can be no rational or logical response to such an assertion.  Yes, it is a fundamental fact of the universe that things change -- when things change you adapt.  Spending money and resources for what may never happen is the province of the risk manager.  In assessing that risk, the best advice I can offer is to take into account your source of information -- their experience, knowledge and motivation.

The following excerpts from recent CMS teleconferences are added for reference:

Moderator: John Albert
03-24-09/11:30 am CT
Confirmation #1872111
Page 61
Barbara Wright: Liability set-asides; both of them, worker’s comp and liability neither one of them has ever been required to participate in a CMS review process.
(Roy Franco): Okay.
Barbara Wright: Nonetheless they’re based on the same underlying statutory language which is that Medicare is not supposed to pay if payment has been made. And to the extent a settlement, judgment award or other payment takes into consideration future medicals then that settlement, judgment or award should be appropriately expended for those future medicals.
Found at http://www.cms.hhs.gov/MandatoryInsRep/Downloads/MMSEA111March24NGHPTranscript.pdf