Piatt Consulting News Letters

Piatt Consulting publishes news letters on a regular basis (monthly or quarterly) help RREs keep up with the changes to MMSEA Section 111 Mandatory Insurer Reporting and includes editorial comments about how Section 111 reporting relates to Medicare Secondary Payer laws and recovery practices.  Some news letters may also include a special topic of general interest to our community of readers.

Insiders Guide

After Section 111 Mandatory Insurer Reporting was enacted by Congress, it fell to CMS to determine how the new law would be implemented.  The result of those long meetings in hot rooms in Baltimore are the GHP and NGHP User Guides.  As the then Medicare Secondary Payer Recovery Contract (MSPRC) Program Director, I participated in many of the meetings.  My goal at that time was to get data that would make our recovery job at the MSPRC easier.  In this news letter I hope to be able to shed some light on some of the more arcane aspects of reporting as well as tie what we are reporting to the bigger picture -- Medicare Secondary Payer (MSP) laws.

I would also like to share some insights gathered over time about the MSP laws and Health and Human Services (HHS) regulations that implement these laws.  Coupling my experience at the CMS with a great deal of legal research honed by invitations to speak at conferences and consulting engagements with both legal defense and plaintiff firms, I have a developed a more complete picture of how Medicare and the Courts treat the law.

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Articles

In order to reduce the size of the electronic news letter, only the first few paragraphs of some, but not all, articles are included in the actual news letter with links to the articles posted below.  To read the entire news letter please feel free to sign up from one someone may have passed along, or contact us via email to request that you be added to our list  This email address is being protected from spambots. You need JavaScript enabled to view it.

December 2012

Reporting: OIG Section 111 Audits, Thresholds and No-Fault Settlements
MSP: Analysis of H.R. 1063 - Strengthening Medicare and Repaying Taxpayers called the “SMART” ACT
Special Topic: Update with input from MAGI WEST conference attendees

July 2012

Reporting: Medicare issued three alerts about new reporting thresholds
MSP: CMS proposes regulations for Future Medicals (including liability) CMS-6047-ANPRM
MSP: CMS publishes guidance to provides to help stop improper denials (find it here)
Specal Topic: Clinical Trials -- more sponsors are reporting and David Piatt at MAGI West

February 2012

Reporting: Medicare claims are being denied more often: Is it a problem?
MSP: Case Study -- When a workers’ compensation carrier has ORM and there is a separate tort settlement
Special Topic: Medicare Reporting: A Boon to Clinical Trial Sites

September 2011

Reporting: Reporting as self-insured is generally necessay
MSP: The legal implications of reporting ORM
Special Topic: Clinical Trials

October 2011
Special Topic: Flurry of CMS Alerts: What is going on with reporting liability?
MSP: The MSPRC Portal -- Promises of a Brighter Future
MSP: A Brief Note on Liability Set-Asides

November 2011

Reporting. No Fault Settlements

MSP: ORM Reimbursement Demands - Workers Compensation and No-Fault

Special Topic Healthcare Providers may sue insurers under Medicare Secondary Payer

 

After speaking at MAGI WEST and having a chance to discuss Medicare’s Mandatory Insurer Reporting (e.g.,  Section 111 of the Medicare, Medicaid, and SCHIP Extension Act of 2007) with the attendees it became even more apparent that there is a great deal of confusion about a clinical trials sponsor’s requirement to report, what to report and the negative impact on clinical trials sites.

In brief, the reporting requirement applies to clinical trials sponsors because the Centers for Medicare and Medicaid Services (CMS) has found that a Clinical Trial Agreement (CTA) that states the sponsor will pay for injuries arising from the trial must, by law, be primary to Medicare.  In effect, by contract the sponsor is insuring the test subject against injury, make them a de facto insurer and invoking the Medicare Secondary Payer (MSP) statute as a “primary payer.”  The sponsor has to report the injuries to Medicare in the quarter after they arise or the sponsor faces penalties of $1000 per day per unreported beneficiary.

Since the CTA represents a primary plan and the sponsor a primary payer, a clinical trial site must bill the sponsor. Bills inadvertently submitted by the site to Medicare become ‘overpayments’ that must be reported and refunded to Medicare.  If the site neglects to inform Medicare of the overpayment(s) they may face paying out three times the cost of the claim(s) under the False Claims Act.

Strikingly, one of the most provocative outcomes of the conference was that many of the  existing CTAs are contradicted by the MSP statute.  In particular, a CTA that states that the sponsor will pay if another insurance plan will not pay implies that the sponsor’s obligation to pay is secondary to Medicare.  Medicare, by statute, can never be primary when another plan has an obligation to pay.  Sponsors that use this language may face double damages under the MSP statute and clinical trials sites that try to bill Medicare first will find themselves in the same trouble as outlined in the paragraph above.

Perhaps the biggest question at MAGI WEST was: what is a injury?  There was a great deal of debate about the definition of a subject injury, but the majority concluded that a subject injury was an Adverse or Serious Adverse Event (AE or SAE) that was related to the drug or device under investigation.  Sponsors should report related AEs and SAEs.

Finally, it was interesting that the sponsors, though generally unprepared to meet their reporting obligations, saw it as their moral and ethical obligation to pay if their drug or device caused an injury.   They indicated and had no plans to modify there CTAs to preclude payment.  Clinical trial sites were understandably less content as they face changes to their billing processes and for some, difficult coordination efforts involving off site investigators.

According to the CTA, clinical trials sites are required to bill sponsors for related AEs and SAEs if the test subject is enrolled in Medicare or face treble damages under the False Claims Act.  Sponsors are required to report these AEs and SAEs or face Section 111 fines of $1000 per day per unreported beneficiary and risk double damages under the MSP statute.

Reporting -- OIG Section 111 Audits, Thresholds and No-Fault Settlements

Section 111 Audits are coming.  The Health and Human Services (HHS) Office of Inspector General (OIG), which generally focuses on Medicare fraud and improper billing by providers has added auditing Responsible Reporting Entities (RREs) to their list of audits for next year.  Specifically, they stated in their 2013 Work Plan that they will determine whether selected non-Medicare health plans properly reported insurance coverage information under the Medicare, Medicaid and SCHIP Extension Act of 2007, §111 to Medicare as required.

The Centers for Medicare and Medicaid Services (CMS) has often stated that they are more interested in encouraging reporting than levying fines, but the OIG, which has recently made headlines with record settlements against large pharmaceutical companies and busting Medicare fraud rings, may be less forgiving.  Now would be a good time to review your reporting processes to avoid giving the OIG an opportunity to pursue the $1000 per day per day fine per unreported beneficiary mandated under the Section 111.

Providers and pharmaceutical companies should be most concerned about the fines.

Since providers are regularly audited it would be natural for the OIG auditor to audit their Section 111 compliance while they are there.  In addition to the normal reporting requirements, providers should review our article about reporting hospital write-offs If the provider is also engaged in conducting clinical trials then the risk is even greater (see our articles about clinical trial reporting later in this news letter and on our web site at PiattConsulting.

Pharmaceutical firms are at risk because, aside from already being on the OIG radar, Medicare is aware that they have been hesitant to begin reporting.

Thresholds -- Remember that if the most recent TPOC Date is on or between October 1, 2012 and September 30, 2013, and the cumulative TPOC Amount is greater than $5,000, the TPOC(s) must be reported no later than the end of the RRE’s submission timeframe in the quarter beginning January 1, 2013.  Run your queries this month for settlements over $5000.  The next scheduled threshold reduction to $2,000 is scheduled for October 1, 2013.

Reporting No-Fault -- No-Fault insurance should generally be reported as Ongoing Responsibility for Medicals (ORM) equals ‘Y’ (yes), indicating that the insurer is responsible for paying medical claims to providers up to the limit reported under the No-Fault Insurance Limit (field 81).  Once that limit has been met or the insurance otherwise exhausted, then the RRE should report that fact by adding the Exhaust Date for Dollar Limit for No-Fault Insurance (field 82) and terminating their responsibility using the ORM Termination Date (field 92).  If the No-Fault insurer disbursed some of the funds to  the beneficiary, then they should report that as an TPOC / TPOC Date as well.  CMS will seek to recover conditional payments from such a disbursement from the beneficiary.

If the No-Fault insurer settled the case without an obligation to make payments  to providers, then the No-Fault insurer should still report the case as a No-Fault insurance (e.g., not a liability settlement), but set ORM equal to ‘N’ and report the settlement amount under TPOC / TPOC date along with the other data required for reporting  including the No-Fault Insurance Limit (field 81) and Exhaust Date for Dollar Limit for No-Fault Insurance (field 82).

It does neither

A bill was introduced into Congress in 2011 with the goal of improving the Medicare Secondary Payer recovery process.  It was sponsored by a small coalition of insurers, self-insured companies and Medicare Set-Aside (MSA) firms.  The bill bears the unlikely name of Strengthening Medicare and Repaying Taxpayers called the “SMART” ACT for short.  Unfortunately, it does neither.

Overview

H.R.1063 was introduced into the House in March of 2011 and a similar bill, S. 1718, was introduced in the Senate in October 2011.  The bill was an attempt to encourage Medicare to: 1.) respond more quickly to requests for conditional payments; 2.) give insurers the same appeals rights as the ones in place for beneficiaries; 3.) set a minimum reimbursement (e.g., lien) amount; 4.) clearly make reporting penalties discretionary and 4.) require Medicare to come up with a way to implement Section 111 without SSNs or Health Identification Claim Numbers (HICNs).  The bill was reported by committee on September 20, 2012.   Although, Govtrack.us gives it a 34% chance of being enacted, it does appear to have spurred a number of voluntary changes within the Medicare Secondary Payer Recovery Contract (MSPRC).

Medicare responds

First, Medicare added a telephone system that allowed representative to check on cases and request conditional payment information.  Then Medicare added an additional Internet portal allowing representatives simpler access to the data that was originally, and still is, hosted on the MyMedicare.Gov portal.  Both of these moves have greatly enhanced timeliness.

Second, after Medicare’s unfortunate congressional hearing in which it was discovered the Agency routinely mailed out demands for less than two dollars to insurers, CMS published a minimum recovery amount of $300.  We tried to tackle that problem during my tenure as the MSPRC program director.  The bare minimum effort we identified was receiving and processing an unsolicited reimbursement payment.  That cost $25, but Medicare would not budge at that time for even for that small amount.  A more realistic scenario of processing a solicited reimbursement demand takes 20 minutes to generate a CPL, of which 30% are disputed and 2% are disputed twice for an average cost of less than $300 per case.  Although the proposed statute would require the Chief Actuary of the Centers for Medicare & Medicaid Services (CMS) to calculate and publish the single threshold amount annually, it is unlikely the threshold would rise significantly or at all for a long time.

Some work yet to be done

Although the Medicare Secondary Payer (MSP) statute does not provide for a formal appeals process, CMS has had an informal appeals process in place for insurers and their representatives since the time of my tenure.  For example, firms representing insurers are allowed to dispute conditional payment amounts.  That was a start, but not really adequate then and less so now with increased volume of reports of “Ongoing Responsibility for Medicals” (ORM) by all types of insurers.  A primary plan appeals process should be codified in regulation if not statute even if it does adds cost to the program

Should not be controversial

Making the penalties for not reporting discretionary should not upset anyone, including CMS.  They have repeatedly stated it is not their intention to regularly levy the fine, but rather to encourage reporting.

Old problems already overcome

The turmoil surrounding the collection of SSNs needed in order to submit a query for enrollment verification has subsided.  Even the federal courts have upheld the insurers right to collect the data.  Most significantly, changing the query process would be problematic for Medicare and might lead to them dropping the process -- one that RREs rely on to establish due diligence and an audit trail to avoid fines.  CMS had a difficult negotiation with the Social Security Administration to get the process in place and the SSA has not been forthcoming in making any changes.

Another roadblock to passage

Finally, the Congressional Budget Office (CBO) published a report entitled “H.R. 1063 Cost Estimate” on November 9, 2012 stating that the only cost savings may be found when, “Beneficiaries, or their representatives, would be able to query a secure Web site and receive an estimate of Medicare’s conditional payments. That amount would be factored into the settlement between the beneficiary and the insurer, allowing certainty about the amount that will be paid to Medicare out of the settlement funds for conditional payments made to that point.”  Unfortunately, beneficiaries and their representative have had access to this process through MyMedicare.gov since 2009.  Apparently, there are no projected savings and hence, no repaying taxpayers.

The bills are unlikely to become law, but have had a positive effect on improving Medicare’s recovery process.  The MSPRC and Coordination of Benefits Contractor (COBC) save Medicare billions of dollars annually.  They do this for cents on the dollar.  The best way to strengthen Medicare and repay taxpayers would be for Congress to fully fund these two efforts for a change.

Click HERE for the official summary of the proposed House bill  found on the Congressional website.

Advance Notice of Proposed Rule Making (ANPRM) entitled Medicare Program; Medicare Secondary Payer and “Future Medicals”  (CMS-6047-ANPRM)

The Centers for Medicare and Medicaid Services (CMS) plan to publish an Advance Notice of Proposed Rule Making (ANPRM) entitled Medicare Program; Medicare Secondary Payer and “Future Medicals”  (CMS-6047-ANPRM) to solicit comments from the public on potential standardized options to clarify how beneficiaries and their representatives can meet their obligations to protect Medicare’s interest in future medicals.  Significantly, the proposed options encompass both liability, no-fault and workers’ compensation.

A note from the author of this article
First, I would like to compliment Suzanne Kalwa and her team for the very thorough and thoughtful effort that has gone into the ANPRM.  Secondly, the reader should realize that I am not an attorney and do not offer legal advice.  This commentary is based on my personal experiences with CMS as the former Medicare Secondary Payer Recovery Contract (MSPC) Program Director, MSP case law, conversations with plaintiff and defense counsel, large insurers and as a speaker at risk management and attorney conventions.

Introduction

Like many of the HHS / CMS regulations, this proposed rule making has been very well  written and the meaning is both subtle and dramatic.  First, the reader must realize that CMS’s “options” imply, by definition, “a voluntary choice” and therefore are not likely to be subject to the Court’s review.  As one defense attorney called similar suggestions offered by CMS in the past, “They are gloss.”  With that in mind, it is apparent that CMS, frustrated and reticent in the past, has been rather forceful in their response to the industry’s clamor for guidance. The options range from reasonable and welcome to assertions of strict liability in which CMS becomes the arbiter of the special damages (e.g., requiring the settlement to cover all of their future medical costs as they see them).  It is almost as if they would like to say, “Well, you asked for it!” and they would be right.

Only the “General Rule” is probably going to carry any weight in court.

If only it were that simple.

There are serious problems, with dramatic repercussions, that come with the “General Rule”, but before we move on to that subject, it is important that the reviewer not miss the implications of the voluntary options.  First, there are those in the industry that will couch these options as “law” to further their corporate goals as we have seen happen with another piece of gloss, the Patel Memo.  Secondly, CMS, themselves, can leverage some of these options that support enforcement of strict liability without having to defend the underlying assertion (e.g., a payment to a beneficiary allows CMS to impose liability on the insurer / self-insured without a finding of fault, such as negligence or tortious intent).  For instance, since a beneficiary may desire option 3(a) which in itself assumes strict liability, they have a reason to suggest that all payments to a beneficiary be reported under Section 111 Mandatory Insurer Reporting whether they claim or release medicals or not.  I am sure that I have not spotted all of the ramifications of these options, so please feel free to contact me if you find more.

Overview

Insurers will not find many definitive answers

On the face of it, the ANPRM does not address how an insurer can “Protect Medicare’s Interest,” but its subtext goes well beyond that point. The proposed general rule and some options give direction to beneficiaries that they must claim future medicals or face dire consequences.  It casts a shadow over settlements involving non-beneficiaries, because, someday, the claimant may enroll in Medicare. Other options appear more benign and look like an attempt to get the industry to see reason. Either way, these rules play to Medicare’s undisputed strength -- the right to recover from a payment made by an insurer or self-insured entity to a beneficiary arising from injury.

Our Recommendations

First, reviewers should focus very hard on the non-optional element of the proposed rule making; what the ANPRM refers to as the “proposed general rule” (see below).  The “options” may be be portrayed by CMS sometime in the future as “voluntarily chosen” and therefore not subject to the Federal Courts’ jurisdiction.  As anyone knows that has contemplated a suit involving a WCMSA, Medicare is quick to point out that is that it is a voluntary process, guided by the Patel memo, not a law.

“If an individual or Medicare beneficiary obtains a "settlement" and has received, reasonably anticipates receiving, or should have reasonably anticipated receiving Medicare covered and otherwise reimbursable items and services after the date of "settlement," he or she is required to satisfy Medicare's interest with respect to "future medicals" related to his or her "settlement" using any one of the following options outlined later in this ANPRM.”

Second, reject Option 3(a).  It proposes to toss out settlement agreements and the institution of adversarial law to be replaced with CMS’s brand of “strict” liability.

Third, consider the definitions.  There is great risk in the inherent implication that Medicare is going to decide what the future medical costs are independent of the State Courts, Workers’ Compensation Boards and settlement agreements, when they begin to ask for definitions of injuries (e.g. chronic illness). CMS should not insert themselves into resolving the case -- defining the underlying injuries arising from the incident.  If they think someone has shifted the burden of paying medical claims to Medicare -- sue them.  They should be discouraged at every juncture to even start down this path.  On the other hand, the definitions suggested for “Future Medicals” and to a lesser extent “Date of Care Completion” actually seem to soften Medicare’s stance.

Fourth, even though they are options, lacking guidance from regulation or statute, these voluntarily selected options have a way of becoming the industry’s de facto law. Review them carefully.

Fifth, keep CMS honest and ensure each option refers only to those individuals that are enrolled in Medicare, or better yet suggest the “general rule” contain such language.  Medicare Secondary Payer (MSP) provisions as found in section 1862(b) of the Social Security Act only applies to individuals enrolled in Medicare.  At a minimum each option should clearly state it applies to enrollees, or if you want to maintain the status quo propose 30 months before enrollment.  No regulation should be allowed to be interpreted as applying to a child, decades away from enrollment.

Sixth, keep in mind that some of this dovetails nicely with Section 111 Mandatory Insurer Reporting.  For instance, if evidence of a payment (strict liability) is all that matters, then CMS need no longer debate with the industry about whether medicals were claimed and / released.  CMS could demand that every payment be reported and then make up their mind about whether or not they have a right to recover some, or all of the payment and / or sue the insurer for more.

Seventh, consider adding annual payments made under a structured settlement to Option 6(a), The Beneficiary Makes an Upfront Payment in addition to a one-time lump sum payment to Medicare for future medicals. In general, using an annuity greatly reduces the cost to the insurer and the beneficiary would receive the same benefit.

Finally, consider that CMS is sending a message to the industry when they propose so many options of considerably greater impact than the options that maintain status quo.  CMS may be very open to leaving things as they are today, because of the risk inherent on both sides -- greater cost on the side of the insurers and the potential of a Chevron Defense (the court’s interpretation of validity of the regulations based on Congress intent in the guiding statute) tearing down some, or perhaps even many, of CMS’s regulations as unsupported in statute.

Without a carefully considered edit of the proposed rule making, plaintiff attorneys may begin to avoid litigating cases involving Medicare beneficiaries and insurers may find it almost impossible to settle. The only rational response by industry is to endorse Option 1, Option 3(a) and Option 5 to maintain the status quo.  Consider endorsing an edited versions of Option 6(a) -- it looks like a good deal.  Scrutinize Option 6(b) until you are comfortable; it seems useful and potentially harmless, if taken with a grain of salt.  The rest should be deleted or so heavily edited that they no longer resemble any sense of “strict liability.”

The problem as defined by some potential scenarios

It seems the best way to get our point across about where this all may be headed is to create a few potential scenarios.

Scenario One -- A beneficiary is injured in a car accident and the adjuster settles the claim for $25,000.  Past payments made by Medicare that are related to the injury (e.g., Conditional Payments) amounting to $15,000 are reimbursed to Medicare.  The insurer reports the $25,000 settlement to Medicare under Section 111 Mandatory Insurer Reporting.  After settlement, Medicare continues to pay medical claims related to the incident.  Medicare was alerted by the insurer’s report that the beneficiary settled for $25,000.  Their records show the beneficiary reimbursed them for $15,000 and therefore retained $10,000.  Medicare sends a demand for reimbursement to the beneficiary for subsequent bills related to the incident until the $10,000 is exhausted and perhaps beyond.

Under current regulations, CMS is limited to recovery of past conditional payment up to the settlement amount, with this change, the beneficiary failed to file a “proper claim” for future medicals and CMS can try to collect all of their conditional payments from the beneficiary or file a separate action against the insurer.

Note: Alternatively, CMS might consider leaving the ICD 09 codes that define the injury in the Common Working File instead of removing them as they do today.  Medicare could continue to deny payments for claims related to the incident after settlement until the beneficiary passes away.

What is the impact to the insurer?

The impact to the insurer probably depends on how large the difference between the settlement amount and the future medical costs become.  If, for instance, a cracked cervical spine was overlooked in the settlement and subsequently causes paraplegia, the future medical costs could grow to enormous proportions breaking some internal threshold and Medicare may litigate.  At that point, it will not matter whether or not, the insurer intentionally tried to shift the costs of treatment to Medicare.  Per statute, once Medicare successfully wins their suit, they may assert double damages.  If the difference is small, Medicare will probably continue to try to collect from the beneficiary until the beneficiary has pays the $10,000 out of pocket or is referred to Treasury for collections.

What is the impact to plaintiff attorney that represented a beneficiary?

If Medicare either denies claims related to the incident after settlement or seeks reimbursement from the beneficiary for future claims, the attorney may face a charge of malpractice, but CMS may turn its attention recovering the attorney’s fees.

Scenario Two. The case settles for $250,000 and the attorney fees are $100,000.  Past payments made by Medicare related to the injury (e.g., Conditional Payments) amounting to $80,000 are reduced in proportion to the settlement by the attorney fees (e.g.,40% ).  Medicare is reimbursed $48,000.  The beneficiary is left with $250,000 - $100,000 - $48,000 =  $102,000.  Following the same scenario as above, and recognizing that the 40% discount for past claims remains unchanged, once the beneficiary exhausts their $102,000 reimbursing Medicare for medical claims related to the incident after settlement, then Medicare may seek to recover from others that received a payment -- the plaintiff attorney’s fees (see our analysis of US. v Haro).

Mitigation The best defense from these scenarios is a concerted and coordinated effort on the part of the industry to soften the proposed rules.  Even in today’s environment, make sure you take steps to document you considered and paid for future medical costs when the settlement warranted it.  CMS endorses Medicare Set Asides which are cost cost effective as long as you do not invite CMS to determine the future costs by submitting it for approval.

Health and Human Services Regulations behind the scenarios

Today, HHS Regulation § 411.43   Beneficiary's responsibility with respect to workers' compensation and § 411.51 Beneficiary's responsibility with respect to no-fault insurance requires the beneficiary to file a “proper” claim.  The definition of a  “proper” claim is vague, but experience indicates Medicare believes a proper claim to be one that isn’t denied.  Medicare goes on to say, they will not pay for services until the beneficiary has file a proper claim and if the claim is denied, the beneficiary is responsible for taking whatever action (e.g. litigation) is necessary to obtain payment.  The intent is to encourage the beneficiary to seek payment from a source other than Medicare when another source has the perceived contractual obligation to pay.  This approach works pretty well, because no-fault and workers’ compensation carriers do in fact have a contractual obligation to pay.

Encouraging the beneficiary to prove someone willfully or negligently caused an injury is more difficult. There is no paragraph labeled “Beneficiary’s responsibility with respect to liability insurance”  The guiding paragraph is § 411.52   Basis for conditional Medicare payment in liability cases, which states Medicare will pay conditionally, whether or not the beneficiary has filed a claim.  Currently, Medicare entices the beneficiary to file suit by sharing the attorney fees (e.g., reducing their reimbursement amount by a proportional amount of the attorney fees).  With these proposed rules, CMS is adding a new dimension to their efforts to encourage law suits, by putting the beneficiary on notice that, in part from the general rule, “... [the beneficiary] should have reasonably anticipated receiving Medicare covered and otherwise reimbursable items and services after the date of "settlement," he or she is required to satisfy Medicare's interest with respect to "future medicals" related to his or her "settlement... ."

And the beneficiary better do a thorough job, because although § 411.37(d)  limits “... the recovery amount [to] the total judgment or settlement payment minus the total procurement costs.”, if the beneficiary fails to file a proper claim (now including future medicals) under any form of insurance including liability, Medicare can recover the conditional payments from the beneficiary under § 411.24 (l) Recovery when there is failure to file a proper claim.
If CMS is unable to get reimbursed from the beneficiary that received the liability settlement, then they may turn to the insurer or self-insured entity under § 411.24 (i) Special rules, which reads in part “If Medicare is not reimbursed as required by paragraph (h) of this section [reimbursement within 60 days], the primary payer must reimburse Medicare even though it has already reimbursed the beneficiary or other party.”

Insurers will not find any legal comfort in these proposed options.

Insurers are not likely to find any comfort in these proposed options as none of them offer any new or specific guidance about how Health and Human Services (HHS) interprets liability settlements involving future medicals under Medicare Secondary Payer (MSP) provisions as found in section 1862(b) of the Social Security Act (the Act) as they apply to insurers and self-insured entities.
  • CMS has not specifically addressed whether or not “future medicals” are “required” under any particular circumstances or are recoverable directly, or through litigation by CMS from an insurer.
  • In light or recent Federal Court decisions to the contrary, CMS has not addressed how an insurer is to “Protect Medicare’s Interest” by ensuring they can recover a payment from the beneficiary. (See § 411.24 (i) Special rules, which reads in part “If Medicare is not reimbursed as required by paragraph (h) of this section [reimbursement within 60 days], the primary payer must reimburse Medicare even though it has already reimbursed the beneficiary or other party.”)
CMS does not address the question of whether or not Medicare has the right to insist insurers protect their interest.  Instead, they are using the same approach that led to the Patel Memo: CMS addresses the issues as if they were only of concern to the beneficiaries, rather than the industry as a whole.

CMS Gathers all Future Medical Issues under One Paragraph

Today, CMS’s assertion that statute provides that “Medicare remains the secondary payer until the "settlement" proceeds are appropriately exhausted,” is documented under Subpart C -- Limitations on Medicare Payments for Services Under Workers’ Compensation (see § 411.40).  It appears that rather than spread such language across Subpart D -- Limitation on Medicare Payment for Services under Liability and No-Fault, (see § 411.50), CMS appears to be on the path to combine all future medical regulations under a an overarching general rule:

“If an individual or Medicare beneficiary obtains a "settlement" and has received, reasonably anticipates receiving, or should have reasonably anticipated receiving Medicare covered and otherwise reimbursable items and services after the date of "settlement," he or she is required to satisfy Medicare's interest with respect to "future medicals" related to his or her "settlement" using any one of the following options outlined later in this ANPRM.”

Focus your comments here and remember MSP applies to enrollees not those destined to one day become enrollees.  Either strike out “an individual” or change it to “can reasonably be expected to enroll in Medicare within 30 months, or better yet, 120 days.”  To avoid the scenarios given at the beginning of this article, consider striking or modifying “or should have reasonably anticipated receiving” as vague and requiring the beneficiary to draw conclusions beyond their ability that may contradict the agreement, judgment or award.  Consider the word “knowingly” -- implying intent.

CMS Requests Comment on Legal Definitions.

CMS coined many new terms of art when they implemented Section 111 Mandatory Insurer Reporting including Total Payment Obligation to Claimant (TPOC) and Ongoing Responsibility for Medicals (ORM) that were helpful in understanding what CMS desired.  They also caused some problems by expanding upon long standing definitions, such as what they considered No-Fault insurance and singled out different insurance types for special treatment, like JPAs.  The industry has two options when they offer criticism about CMS’s proposed language for future medicals: 1. Help them find a long-standing, non-controversial terminology or 2. Let them define their own terms of art, but help to carefully craft its definition.  Based on my experience with Section 111, I would recommend that using the latter approach for two reasons:  1. Perhaps not surprisingly, the industry has trouble presenting a united front and juxtaposing viewpoints add to the confusion and 2.  It is much more important to help Medicare clearly state their position should the proposed regulation comes under the scrutiny of the court.

We suggest that none of the terms of art involving definition of injuries are relevant given the language of the proposed general rule of future medicals.  Specifically, CMS defines future medicals as “... a "settlement" [that] received, reasonably anticipates receiving, or should have reasonably anticipated receiving Medicare covered and otherwise reimbursable items and services after the date of "settlement... ".”  Rather than dwell on the definition of injury, it would be better, especially in the case of a liability settlement, to concentrate on  the terms of the settlement -- was there an allocation of settlement funds designated for future medical claims?  Suggest they be removed.

So, leaving aside the injury definitions, the most important definition is:
  • Future Medical Care ("future medicals"): means Medicare covered and otherwise reimbursable items and services that the individual/beneficiary received after the Date of "Settlement." This definition specifically applies to items and services related to the individual/beneficiary's settlement, judgment, award, or other payment.
Conspicuously missing from this definition is the oft asked question of “relatedness” of the injury to the incident.  CMS usually states that Medicare statutes forbid payment of claims for injuries related to the incident; here CMS addresses the relatedness to the settlement.  This looks like a win.  In the past insurers where left with the impression that CMS thought they were the arbitrator of “relatedness” -- a notion reinforced by the common practice of disputing medical claims on MSPRC Conditional Payment Letters.

Also conspicuously missing is the “claimed or released” language common in Section 111 reporting.  Medicare’s stance that they have in interest in settlements that “claim or release medicals” is supported in statute and therefore not subject to the Chevron Defense.  Here CMS softens their position and simply states “items and services related to the ... settlement.”   The key to this definition, is does it really include only those injuries that were addressed by the settlement, or is can it be tweaked while still avoiding the problematic general release language?  Everyone wants to avoid CMS’s assertion in US vs Stricker that the signed general release allowed them to file a claim for civil damages that includes all medicals paid by and to be paid by Medicare, not just those that were actually related to the incident (e.g. exposure to PCBs).

The other important definition is the “Date of Care Completion.”
  • Date of Care Completion: means the date the individual/beneficiary completed treatment related to his or her "settlement." The individual/beneficiary's treating physician must be able to attest that the individual/beneficiary has completed treatment and that no further medical care related to the "settlement" will be required.
This definition is essentially the same as the one used under Section 111 Mandatory Insurer Reporting minus the nod to State statues that limit insurers’ exposure.  Under Section 111, it allows an insurer (usually a no-fault policy or workers’ compensation plan) to report termination of their responsibility to pay for medical costs arising from the incident if the treating physician agrees.

Options should only apply to enrolled beneficiaries

The plain language of Sec. 1862. [42 U.S.C. 1395y(2)(B) “Conditional payment.—(i) Authority to make conditional payment.—The Secretary may make payment under this title with respect to an item or service if a primary plan described in subparagraph (A)(ii) has not made or cannot reasonably be expected to make payment with respect to such item or service promptly (as determined in accordance with regulations). Any such payment by the Secretary shall be conditioned on reimbursement to the appropriate Trust Fund ...” (emphasis added).  Clearly, Medicare is only the primary payer for an individual enrolled in Medicare.  Medicare will not pay claims, even conditionally, for an individual that is not enrolled in Medicare.  How can one interpret the MSP law meant to prevent Medicare from paying when another plan is primary, when Medicare would have never paid to begin with?

Further, it doesn’t mean they can recover a past payment made to a beneficiary after they enroll. HHS regulations under § 411.21 Definitions A “Conditional payment means a Medicare payment for services for which another payer is responsible,...”, a “Primary payer means, ... any entity that is or was required or responsible to make payment with respect to an item or service (or any portion thereof) under a primary plan... and a “Primary plan means, ... a group health plan or large group health plan, a workers' compensation law or plan, an automobile or liability insurance policy or plan (including a self-insured plan), or no-fault insurance.”

In case you see a loop hole in which a beneficiary or a trust can be called “self-insured.”  Consider the Federal definition of self insured:  See Sec. 1862. [42 U.S.C. 1395y] (b)(2)(A) in part, “An entity that engages in a business, trade, or profession shall be deemed to have a self-insured plan if it carries its own risk (whether by a failure to obtain insurance, or otherwise) in whole or in part.” (emphasis added).

If an individual settles their case before they enroll, the remains of their settlement after they enroll does not meet the definition of a primary plan -- hence any payments cannot be construed as “conditional” and CMS can have no right to “reimbursement.”  If Medicare cannot make conditional payment, CMS has no grounds to suggest that someone that is not enrolled in Medicare should protect their interest in future medicals, even if they pose it as an option (e.g., voluntary choice).

Unfortunately, the insurance industry has interpreted CMS’s willingness to approve Medicare Set Asides for individuals that “voluntarily” submit them for review that are expected to enroll in Medicare within thirty (30) months as a cut-off for the de facto “law”. 

In summary, language implying a cut-off for consideration is conspicuously missing from the general rule and not defined in every option.  Some options leave the door wide open to interpret the them as applying to any individual that would reasonably be expected to enroll in Medicare sometime in the future.  Even though, these options are voluntary and may not have the force of law, they should be couched in such a way as not to provoke panic in the industry.  “Individuals” should be universally struck out or, barring that, limited to those expected to enroll within a certain amount of time.  I would suggest 120 days, the amount of time it takes the MRPRC to generate a Demand letter.

Strict liability

Medicare’s assertion of strict liability is contradicted in the following statute:

Sec. 1862. [42 U.S.C. 1395y] (b)(2)(A)(ii) Repayment required.—A primary plan, ... shall reimburse the appropriate Trust Fund for any payment made by the Secretary under this title with respect to an item or service if it is demonstrated that such primary plan has or had a responsibility to make payment with respect to such item or service. A primary plan’s responsibility for such payment may be demonstrated by a judgment, a payment conditioned upon the recipient’s compromise, waiver, or release (whether or not there is a determination or admission of liability) of payment for items or services included in a claim against the primary plan or the primary plan’s insured, or by other means.” (emphasis added).

The plain language of the law states that the responsibility to reimburse conditional payments is demonstrated by the plan’s payment for items and service paid for by Medicare that were included in the claim against the insurer or the defendant.  It does not say that a payment demonstrates that the plan has to pay for all of the items and services paid for by Medicare.

Brief review of the beneficiary’s options.

“Medicare is considering the options listed in this section of the document for developing efficient and effective means for addressing "future medicals." ... We [CMS] request comment on the feasibility and usability of all of the options. We also request proposals for additional options for consideration.”

These options are important to the an insurer, because they define how a beneficiary will approach his case and what the potential fall out may be if Medicare’s interest is not protected. They are important to the Plaintiff’s Bar because they could face accusations of malpractice if their client’s Medicare benefits are suddenly unavailable and they do not have the funds to pay for treatment of their medical condition or the attorney might lose his fees to Medicare’s direct right of recovery from a payment.

They are important to the industry because some may couch these options as “law” to further their corporate goals and because CMS can leverage some of these options to collect data to enforce “strict liability” without having to defend this assertion.  For instance, since the beneficiary may desire option 3(a) which implies strict liability, they have a reason to suggest that all payments to a beneficiary be reported under Section 111 Mandatory Insurer Reporting whether they claim or release medicals or not -- in contradiction to existing statute and regulations.

Option 1. The individual/beneficiary pays for all related future medical care until his/her settlement is exhausted and documents it accordingly.

Review.  Option 1, in our opinion, is the best option, yet only makes sense if limited to beneficiaries. It is Medicare’s offer to maintain the status quo.

Option 2. Medicare would not pursue "future medicals" if the individual/beneficiary's case fits all of the conditions under either of the following headings:

The amount of liability insurance (including self-insurance) "settlement" is a defined amount or less and the following criteria are met:

a. The accident, incident, illness, or injury occurred one year or more before the date of "settlement;"
  • The underlying claim did not involve a chronic illness/condition or major trauma;
  • The beneficiary does not receive additional "settlements;" and
  • There is no corresponding workers' compensation or no-fault insurance claim.
b. The amount of liability insurance (including self-insurance) "settlement" is a defined amount or less and the following criteria are met:

  • The individual is not a beneficiary as of the date of "settlement;"
  • The individual does not expect to become a beneficiary within 30 months of the date of "settlement;"
  • The underlying claim did not involve a chronic illness/condition or major trauma;
  • The beneficiary does not receive additional "settlements;" and
  • There is no corresponding workers' compensation or no-fault insurance claim.
Review. Option 2 is unacceptable.  Instead of relying on the language of the proposed general rule: “... Medicare beneficiary obtains a "settlement" and has received, reasonably anticipates receiving, or should have reasonably anticipated receiving .. "future medicals" related to his or her "settlement"” (emphasis added).  Here, CMS appears anxious to step up to deciding the case themselves.  Written in the contrary, they propose that if  “The underlying claim ... involve[s] a chronic illness/condition or major trauma “ they may pursue recovery, rather than relying on the interested parties that settled the case as envisioned by Congress when they passed the law (e.g., the beneficiary and their representative).

Secondly, Medicare would seem to have no grounds to pursue “future medicals” if the settlement was over a threshold, but “the underlying claim did not involve a chronic illness/condition or major trauma."  The first and only touchstone should be a payment was received for future medical care.

Third, the underlying MSP law only applies to enrollees both options should be limited to enrollees (as Medicare paradoxically realizes in the fourth bullet of option (a) beginning with “The beneficiary... “) or if the reviewer wants to be magnanimous, limited to an individual that can reasonably be expected to enroll in Medicare within 30 months, or better yet, 120 days -- the amount of time it takes for the MSPRC to issue a demand.

Finally, Medicare should exercise their independent right to pursue “future medicals”  only if they suspect someone has intentionally shifted the burden of medical payments to Medicare.

Option 3. The individual/beneficiary acquires/provides an attestation regarding the Date of Care Completion from his/her treating physician

In part:

a. Before Settlement -- Medicare's recovery claim would be limited to conditional payments it made for Medicare covered and otherwise reimbursable items and services provided from the Date of Incident through and including the Date of Care Completion

Review. This option reflects today’s process and is reasonable.

b. After Settlement -- Medicare would pursue recovery for related conditional payments it made from the date of incident through and including the date of "settlement." Further, Medicare's interest with respect to future medical care would be limited to Medicare covered and otherwise reimbursable items and/or services provided from the date of "settlement" through and including the Date of Care Completion

Review.  Not acceptable and not reasonable.
The second option “After Settlement” is not acceptable -- note how the language of the first sentence changes between the two options.  The second states that Medicare would pursue recovery (e.g., take action) to recover all the payments it made to make the beneficiary well (conditional payments) until the beneficiary fully recovers.

First, the settlement may not be large enough to cover the past claims, regardless of any future claims.  Today, § 411.37(d)  limits “... the recovery amount [to] the total judgment or settlement payment minus the total procurement costs”, this option appears contradict the existing regulation. The funds allocated by the settlement for past and future medicals may well run out before the Date of Care Completion.

Fundamentally, liability assumes a tort.  It is not a contract to treat injuries arising out of work, like a workers compensation plan, or a no-fault plan that covers an individual that was not at fault in a car wreck.  Although strict liability is sometimes found in mass torts, under common law a tort is subject to proof of willfulness, negligence, culpability and other factors which are not black and white. Very often, the claimant may be partially at fault (driving while intoxicated) and therefore CMS should abide by the language of the settlement agreement.  The claimant by their own hand having played a part in their incident must shoulder the responsible for paying the rest.

CMS should recognize the unpredictable nature of a tort settlement, agree to adhere to the language of the settlement, while highlighting the dire consequences already enshrined in law for those insurers that would attempt to fraudulently shift the responsibility of medical payments to CMS.

Option 4. The Individual/Beneficiary Submits Proposed Medicare Set-Aside Arrangement (MSA) Amounts for CMS' Review and Obtains Approval.

Review.  Option 4 is not acceptable.  It puts CMS instead of the State courts, Workers’ Compensation Boards and Agreements in charge of resolving the case.  Further, approval by CMS does not automatically imply immunity from future civil action by CMS Approving the MSA does not join CMS in the decision.  Finally, is apparent from the current WCMSA process, it adds unnecessary costs and adds a significant time delay.

Option 5. The beneficiary participates in one of Medicare's [existing] recovery options.

Review.  Option 5 seems reasonable.

Option 6. The Beneficiary Makes an Upfront Payment.

a. If Ongoing Responsibility For Medicals was imposed, demonstrated or accepted and medicals are calculated through the life of the beneficiary or the life of the injury.

If ongoing responsibility for medicals was imposed, demonstrated or accepted from the date of "settlement" through the life of the beneficiary or life of the injury, we may review and approve a proposed amount to be paid as an upfront lump sum payment for the full amount of the calculated cost for all related future medical care. This option would generally apply in workers' compensation, no-fault insurance situations or when life-time medicals are imposed by law. In effect, this option may be used in place of administering a MSA if we have reviewed and approved a proposed MSA amount. We solicit comment on how to develop this process, the efficacy of it, and whether it would be utilized.

Review.  Yes -- a win for all parties -- assuming that in the first sentence the ongoing responsibility for medicals “was imposed,” by an entity other than CMS.  For instance borrowing from the option 6(b), change the wording to say “ongoing responsibility for medicals was imposed on by State laws, demonstrated by or accepted by the defendant”  For clarity, change “the life of the beneficiary or the life of the injury” to “the life of the beneficiary or the life of the beneficiary’s injury”.  Also, consider adding the option of annual payments made under a structured settlement.

b. If Ongoing Responsibility for Medicals was Not Imposed, Demonstrated or Accepted.

If a beneficiary obtains a "settlement," our general rule stated previously applies to the "settlement," and ongoing responsibility for medicals has not been imposed on, demonstrated by or accepted by the defendant, the beneficiary may elect to make an upfront payment to Medicare in the amount of a specified percentage of "beneficiary proceeds." This option would most often apply in liability insurance (including self-insurance situations, primarily due to policy caps. For the purposes of this option, the term "beneficiary proceeds" would be calculated by subtracting from the total "settlement" amount attorney fees and procurement costs borne by the beneficiary, Medicare's demand amount (for conditional payments made by Medicare), and certain additional medical expenses the beneficiary paid out of pocket. Such additional medical expenses are specifically limited to items and services listed in 26 U.S.C. 213 (d)(1)(A) through (C) and 26 U.S.C. 213 (d)(2). The calculation of beneficiary proceeds does not include medical expenses paid by, or that are the responsibility of, a source other than the beneficiary.

Review.  This option is reasonable and will probably do a lot to streamline the process with one caveat -- it must be exercised only when a beneficiary “has received, reasonably anticipates receiving ... "future medicals" related to his or her "settlement"”.  CMS should request some documentation or attestation to that effect, before the option can be exercised.  Otherwise, unscrupulous insurers or attorneys would turn into a “tax” on all settlements simply as a way to avoid any doubt as to whether or not the beneficiary “should have reasonably anticipated receiving “ future medicals and the beneficiary would be left with a inappropriately deflated settlement.

About Piatt Consulting -- Piatt Consulting was formed by the former Medicare Secondary Payer Recovery Contract Program Director, where he directed CMS’s nation reimbursement efforts -- lien resolution.  He participated in the development of the Section 111 reporting requirements and acted as an honest broker between the insurance industry and CMS to help establish definitions and limitations within the reporting law.  Mr. Piatt is the majority owner of Medicare Consul Services LLC, which provides Section 111 reporting software and reporting agents, as well as Piatt Claims Resolution LLC which provides lien resolution and medicare set aside services.