Slaying the Three-Headed Dragon of Traditional

Slaying the Three-Headed Dragon of Traditional Medicare: Three
Compliance Obligations Under the Medicare Secondary Payer Statute
By: Zachary B. Young, Esq.
March 13, 2014
Medicare Overview
1. Type A – Inpatient Care
2.Type B – Outpatient Care
3.Type C – Additional insurance
4.Type D – Rx drug coverage (voluntary program)
B. Traditional Medicare – Type A and Type B
1.Governed by Medicare Secondary Payer Statute
2. Type C – governed by Medicare Advantage Act
C. MSP Compliance Obligations
1. Section 111 Reporting
2. Reimbursement of Conditional Payments (aka liens)
3. Future Interests (Medicare Set Asides)
Section 111
A. Does the Medicare claim need to be reported under Section 111?
B. Section 111 refers to Section 111 of the Medicare, Medicaid, and SCHIP Extension
Act (42 U.S.C. § 1392)
1. Deals with electronic reporting of cases
2. Notice and reporting statue
3. Does not deal with liens or future interests
C. Purpose
1. Puts cases on Medicare’s radar
2.Helps the Center for Medicare/Medicaid Services (“CMS”) in their recovery
D. Who is affected?
1. Responsible Reporting Entities (“RRE”)
a. Fact and situation specific
b. Typically the insurance carrier or self-insured
c. May use Section 111 Agents to perform compliance guidelines;
however, RRE remains liable
d. RRE ≠ injured party or injured party’s lawyer
E. How to determine Medicare status?
1. Statute doesn’t tell us how
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2. Statute doesn’t even require plaintiff’s cooperation
3.CMS Query Process System – system that helps RRE/agent to determine
Medicare statute
a. Free to use
b. Only RRE/agent case use the system (even the defense attorney
c. Information Required to Use System
i. SSN*
ii. Name
iii. DOB
F. When do claims need to be reported?
1. Two Triggers
a. TPOC – total payment obligation to the claimant
i. Settlement, judgment, award, or other payment
ii. Case is resolved partially or in whole
iii. Medicals are claimed and resolved
TPOC = $2,000 or more (generally, but refer to Smart Act)
v. Report at time of TPOC
 Report happens one time typically at the end of the
b. ORM – ongoing responsibility for medical
i. Involves reporting of claims when the RRE accepts ongoing
responsibility for medical
 E.g. worker’s compensation actions
ii. Reporting duties
 Report upon acceptance of ORM
 Termination report must be filed with termination of
ORM (i.e. death, settlement, etc.)
G. What must be reported?
1.140+ data fields (e.g. name, TPOC amount, date of TPOC, etc.)
2.Not each of the fields needs to be filled out
Medicare Conditional Payments (Liens)
A. Principles of the MSP
1.Medicare shouldn’t pay for services if another primary payer is available to
2. If a primary payer will not pay promptly, Medicare will make payment on
the condition that it is reimbursed if there is a primary payer with subsequent
demonstrated responsibility
a. Responsibility is established by settlement, judgment, or award (42
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U.S.C. § 1395y)
Repayment Required When…
1.A primary plan, and an entity that receives payment from a primary plan that
reimburse [Medicare] – if it is demonstrated that such primary plan has or
had a responsibility to make a payment with respect to such item or service
2. 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 of admission of liability) of
payment for items or services included in a claim against a primary plan or
the primary plan’s insured, or by other means
Who is at risk? – essentially any party to the claim
1.Parties who make primary payment; and
2.Parties who receive primary payments (i.e. beneficiary, provider, supplier,
physician attorney, state agency or private insurer)
3.In liability cases, they will usually go after the beneficiary of the primary
payment first
Medicare’s Recovery Amount
1.If legal action is not necessary, then the lesser of either the primary payment
(i.e. conditional payment) or the full primary payment that primary payer is
obligated to pay reduced by procurement costs (e.g. settlement amount)
2. However, if legal action is required, there can be a suit for double damages
and Medicare can recover up to double of settlement amount
3. Consequences for not reimbursing
a. Federal action for double damages
b. Interest (11%)
c. Referral to US Treasury if
Challenging/Reducing Conditional Payment Claims
1.Tier 1 Challenges
a. Claims unrelated to injuries
2.Tier 2 Challenges
a. Arguing for reductions based on state law, legal principles, accepted
claim practices principles, etc.
i. Recent case law decisions
ii. CMS’s MSP manual
3.Tier 3 Challenges
a. Plaintiff seeks reduction via waiver, hardship, equity, etc.
How to Obtain Conditional Payment Information
1.Traditional Method
a. Step #1: report existence of claim (fax to Claims Investigation Project
i. This is separate from Section 111 reporting process
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b. Step #2: request conditional payment lien search
i. Medicare will then issue the Rights and Responsibilities Letter
and Conditional Payment Letter
c. Step #3: receive Conditional Payment Letter
d. Step #4: investigate conditional payments
i. Go line by line and make sure that all of the claims are valid
ii. Raise any appropriate challenges
e. Step #5: negotiate
i. Draft rebuttal indicating challenges and items that should be
ii. Medicare will send a second Conditional Payment Letter
iii. Check to make sure that the appropriate items have been
f. Step #6: resolve
i. Request a final demand
ii. You have 60 days to repay after issuance of the final demand
2.Web Based Portal – CMS’ New “MSRPC Portal”
a. Who can use it?
i. Beneficiaries, attorneys, insurers, etc.
b. What can portal be used for?
i. Submit proof of representation form
ii. Submit consent to release
iii. Request conditional payment information
Dispute conditional payment claims
v. Submit case settlement information
G. New Conditional Payment Policies
1.$300 CP Claims
a. CMS has a $300 low dollar threshold policy re conditional payments
i. Elements:
 Must be liability cases
 $300 or less in settlement, judgment, award, or other
 Claimant has not receive and does not expect to
receive any other settlement, judgment, award, or other
2.Fixed Percentage Option
a. Allows certain beneficiary’s to resolve Medicare’s conditional
payment claims by paying 25% of the gross settlement to Medicare
i. Elements:
 Only pertains to physical trauma liability claim;
 Liability settlement is $5,000 or less;
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 Beneficiary must elect this option within the
requirement timeframe and before Medicare has issued
a demand or other request for reimbursement
 Beneficiary has not received or expects to receive any
other settlement, judgment, award, or other payment
related to the incident; and
 Beneficiary must submit proposal to CMS and CMS
must approve
3.Self-Calculation Method
a. Allows beneficiaries in certain limited circumstance to obtain CMS’
final conditional payment amount prior to settlement
b. Elements:
i. Only available to beneficiary or his representative;
ii. Only pertains to liability physical trauma where the settlement,
judgment, award, or other payment is $25,000 or less;
iii. These parties will calculate the conditional payment number
and send their proposal to the MSRPC for approval;
Injury occurred at least 6 months before the proposal is
submitted; and
v. Treatment has been completed and no further treatment is
expected through a written physician attestation or by
certifying in writing that no medical treatment related to the
case has occurred for at least 90 days prior to submitting the
proposed payment amounts
Considering Medicare’s Future Interests (MSAs)
A. Do we need to consider a Medicare set aside for a potential settlement?
B. Controversy?
1.MSA in the liability arena marks the most controversial area of Medicare
obligations because most practitioners argue that there is no statute which
gives Medicare a future interest right
2. There is pressure to amend the statute
3. The only explicit authority is a policy memo put forth by CMS on September
30, 2011
C. CMS Memo
1. Purpose: provide information regarding proposed Liability Medicare Set
Aside amounts related amounts related to liability insurance settlements,
judgments, awards, or other payments
2. Announced policy: just assumes CMS has a right to have their future
interests protected (didn’t give any authority)
i. Don’t have a responsibility to protect future interests if you
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can get a doctor’s note saying that no future medical care is
necessary (good luck!)
ii. When the treating physician makes such certification, there is
no need for the beneficiary to submit the certification or a
proposed L-MSA amount for review
iii. CMS will not provide the settling parties with confirmation
that Medicare’s interest with respect to future medicals for that
“settlement” has been satisfied. Instead, the beneficiary
and/or their representative are encouraged to maintain the
physician’s certification
D. What are the cases saying?
1. Group 1: parties agree that L-MSA is necessary and they go to the court and
ask for a “blessing” regarding set aside since there is no review other formal
review process
a. What happens when L-MSA exceeds settlement?
i. Some courts have applied a proportionate amount of the
settlement to the L-MSA (Benoit v. Neustrom,2013 WL
1702120, (W.D. La. April 17, 2013))
 Assuming that court finds settlement and proposed LMSA are reasonable
b. What if parties agree to settlement but believe that no MSA is
appropriate in this particular case?
i. Court agreed based on the facts and approved settlement
without any apportionment to L-MSA (Sterrett v. Klebart,
2013 WL 812401, (Ct. Superior Court, Feb. 5, 2003))
 CMS would likely disagree with this
2.Group 2: parties unsure if settlement terms include set aside (e.g. parties
never considered issue of set aside)
a. What about a mediation agreement where parties did not consider LMSA?
i. Court says that the mediation agreement did not require set
aside because there was no meeting of the minds on this issue
(Bruton v. Carnival Corporation, 2012 WL 1627729 (S.D. Fl
May 2, 2012))
b. Where the settlement agreement does not contemplate allocation of LMSA then the Court won’t recognize one
3.Group 3: parties seek judicial determination re whether L-MSA is required
a. What happens when parties reach a settlement but are undecided
about whether a L-MSA is required
i. Court says that it cannot render an advisory opinion or write in
terms to the agreement; therefore the settlement is not
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enforceable because the parties have left out a definitive term
of the agreement
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