In Penelope Stillwell v State Farm Fire and Casualty Co., et al. case (2021 WL 4427081), a plaintiff attempts to impose primary payer status on a liability insurer post-settlement via a qui tam action in federal district court. The U.S. District Court, Middle District of Florida, Tampa Division addressed in this recent decision Stillwell’s complaint under the False Claims Act (FCA) and the MSP Act, the basis of the qui tam action. The essence of the claim against the insurer, State Farm, was that “by failing either to settle for an amount exceeding the expected medical expenses or to provide in the settlement some other mechanism to pay future medical expenses, the insurers failed to discharge their primary-payer responsibility and remain primary payers for post-settlement medical expenses.” US District Judge Steven D. Merryday dismissed the Stillwell’s complaint with prejudice for a failure to state a claim under the FCA and MSP.
The underlying case involved an Indiana state court negligence action for injuries sustained by William Stillwell, a Medicare beneficiary, during a fall. Although the homeowners’ association, property management and landscaping company insurers reached a settlement agreement with the Stillwells for the lump sum of $200,000, the Stillwells refused to execute the settlement documents since the settlement didn’t include a Medicare Set-Aside to cover William’s expected future medical expenses that were estimated to be $700,000. The Indiana trial court’s determination that the settlement was enforceable, was affirmed by the Indiana Court of Appeals. The terms of the settlement agreement reflected the insurers agreement to pay Medicare’s conditional payments directly from the settlement agreement. After the settlement, CMS demanded reimbursement of $29,509.33 in conditional payments after procurement costs were deducted.
After the losses in the Indiana state courts, the Stillwells sued the insurers under the FCA arguing that the insurers failed to discharge their primary payer responsibility since the settlement was less than the estimated future medical expenses. They also argued that the insurers should remain primary payers for post-settlement medical expenses and that their failure to report this responsibility to the Centers for Medicare & Medicaid Services (CMS) caused William’s physicians to falsely bill Medicare. The defendants argued that the Stillwells became the primary payers for post-settlement care after enforcement of the settlement agreement. Challenges to the pleadings were also raised.
In considering these arguments, the District Court noted the lack of CMS rules for post-settlement futures in liability settlements when compared to the rules for workers’ compensation settlements. The District Court’s opinion went out of its way to explicitly point out that “CMS has decidedly avoided regulating private liability settlements that include a Medicare beneficiary.” It declined to impose any such obligations since establishment of such rules belongs to the legislature or executive branches.
Stillwell also argued that the insurers hid their status as primary payers from CMS since they failed to report the Total Payment Obligation to Claimant (TPOC) settlement under their Section 111 Mandatory Insurer Reporting obligation. The Court found no support for this assertion since CMS had notice of the settlement based on the resolution of the conditional payments. Similarly, Stillwell’s claim that the insurers failed to complete Section 111 reporting of an Ongoing Responsibility for Medical (ORM) post-settlement was unfounded since there is no such reporting obligation for liability insurers for post-settlement medical expenses.
The Court also considered Stillwell’s claim that a settling party must consider Medicare’s interests by selecting one of the following mechanisms: the creation of a Medicare Set-Aside, an apportionment of part of the settlement for future medical expenses, a payment of a portion of the settlement into the Medicare Trust Fund or the proposal of an alternative plan to CMS. In examining these options, the District Court noted that there was no law that required the creation of a Medicare Set-Aside to cover future medical expenses in a liability case. Since a party may use the entire settlement to pay for post-settlement Medicare covered treatment, there was also no obligation to apportion funds from the settlement. Regarding Stillwell’s claim that the settlement should have included an amount that covers expected future medical expenses, the Court noted no substantive duty to include this in a personal injury claim settlement. Under the terms of the settlement agreement, the Stillwells became primarily liable for any future injury-related medical expenses. Since the Stillwells were responsible for post-settlement medical care, the insurers had no ORM to report.
The remaining arguments in the case focused on whether Stillwell’s FCA claims sufficiently alleged causation and a conspiracy between the insurers to violate the FCA and submit false claims or statements to Medicare. The Court found the claims were insufficient and warranted dismissal. Although Stillwell prevailed on her argument that her complaint was not a shotgun pleading, her action was dismissed with prejudice for failing to state a claim.
Since William Stillwell died before the second amended complaint under the False Claims Act (FCA) and MSP Act was submitted, his need for any ongoing post-settlement medical care was moot. Rather, it appears that Penelope Stillwell’s FCA may have been motivated by a financial incentive along with a desire to force the Court to provide guidance regarding the consideration of Medicare’s interest in post-settlement injury-related care in a liability settlement.
It is clear that the Stillwells didn’t understand that the settlement of the case would make William the primary payer for any post-settlement injury-related care. Although his estimated future medical treatment would be about $700,000, liability settlements are compromise settlements that involve many more elements of damages than those found in workers’ compensation settlement. In light of this, it would be extremely rare to have a liability settlement include the full value of the estimated future medical care or even include an apportionment in the first place.
A discussion of the MSP Act and its potential impact on a settlement is a proactive way to prevent MSP confusion. Discussing the ramifications of the MSP with injury victims prior to settlement is important to avoid issues such as this and prevent the need to be in a federal district court post-settlement.
Learn more about Synergy’s MSP Compliance Services here.
September 9, 2021
The American Bar Association’s Model Rules of Professional Conduct provide a blueprint for attorneys to follow when representing clients. The first Rule and arguably one of the most important ones, outlines a basic expectation in the client-lawyer relationship. Rule 1.1 states: “A lawyer shall provide competent representation to a client. Competent representation requires the legal knowledge, skill, thoroughness, and preparation reasonably necessary for the representation.” The Comments section of this Rule notes that competent handling of a particular matter includes “inquiry into and analysis of the factual and legal elements of the problem and use of methods and procedures meeting the standards of competent practitioners. It also includes adequate preparation.” American Bar Association (ABA), Model Rules of Professional Conduct, 2020.
An attorney’s failure to make an inquiry into conditional payments is addressed in Forbes v. Benton County Agricultural Society, No. 20-1250, 2021 WL 1907130 (Iowa Ct. App. May 12, 2021). This action came before the Court pursuant to Plaintiff’s appeal of the district court’s order granting a summary judgment to the defendant. The Court of Appeals affirmed the district court’s order finding that the settlement agreement was valid, and that Plaintiff bore the risk of the mistake that was made in the settlement.
The underlying case involved a negligence action filed by Forbes in 2019 against the Benton County Agricultural Society (hereafter Ag. Society) for his fall that occurred while leaving the fairgrounds in August of 2017. The fall resulted in a head injury that required emergency surgery. During the settlement negotiations, the defense attorney extended an initial settlement offer of $10,000.00 noting Forbes’ excellent recovery. She further advised that Forbes’ actual medical bills totaled $2,732.00, for which Tricare had a subrogation interest. She did not believe that Forbes had any out-of-pocket expenses or that medical providers had any additional charges.
Forbes’ attorney made a counteroffer of $12,500.00 to settle the case noting that he would pay the Tricare lien of $2,732.00 from the settlement. The offer was accepted by the defense attorney on the condition that the negligence action be dismissed with prejudice. She also advised that the settlement releases would include provisions requiring Forbes to “satisfy any subrogation interests and liens.” Since Medicare must be provided with information regarding any settlement with a Medicare beneficiary plaintiff, Forbes’ attorney was asked to complete an insurer information sheet for the reporting. He was also advised to request a final conditional payment demand letter from Centers for Medicare & Medicaid Services (CMS). Shortly thereafter, Forbes’ attorney returned the completed information sheet to the defense, advised that he would “get rolling on the clearance letter from CMS,” and requested that the settlement check be payable to his firm.
Defense followed up with Forbes’ attorney regarding the status of the conditional payments since their Medicare inquiry revealed that Forbes was a current Medicare beneficiary. She also advised that her client required the amount of the final conditional payment demand from CMS before the settlement check was issued. Forbes’ attorney responded several weeks later and advised that CMS had identified $25,482 in conditional payments. Since he was surprised by this amount, he assumed that the Ag. Society would rather litigate comparative fault rather than reimburse Medicare for the conditional payments.
In response to Forbes’ assumption that the Ag. Society now wished to litigate the matter, the Ag. Society amended its answer to the negligence action to include the affirmative defense of compromise and settlement. A motion for summary judgment to enforce the settlement agreement was also filed.
Forbes’ attorney objected to the enforcement of the settlement agreement arguing that the agreement was voidable based on a mutual mistake. He also argued that there was no “meeting of the minds” since the defense sought a final demand letter from CMS before the settlement check was issued. The defense countered this by claiming the mistake was unilateral and that Forbes could have investigated the conditional payments prior to making a settlement demand in the case.
The district court granted the summary judgment, finding that there had been a meeting of the minds in reaching the settlement agreement. Although the contract was based on a mistaken assumption by Forbes, the settlement agreement was binding and enforceable.
The Court of Appeals agreed with the district court after considering the facts in the light most favorable to Forbes. In considering Forbes attorney’s argument that there was no “meeting of the minds” about the conditional payment terms, the Court reviewed the various communications between the parties. It noted that Forbes’ offer to settle his case for $12,500 was accepted by the defense. The defense’s requests for additional information to ascertain Forbes’ Medicare status and for the conditional payment clearance letter were acknowledged by Forbes when he returned the information and provided the defense with instructions on where to send the settlement check. These exchanges between the parties do not show any genuine material factual dispute about the agreement that could be litigated.
The Court next considered Forbes attorney’s claim that the settlement agreement was voidable because it rested on the erroneous mutual assumption that the only lien in the case belonged to Tricare and was in the amount of $2,732.00. Although the Court agreed that a mutual mistake may allow the party adversely affected to seek an annulment of the contract, it noted the Restatement Second of Contracts § 154 outlines the exceptions to this principle. According to the Restatement, there are three situations when the adversely affected party should bear the risk of the mistake. In this case Forbes‘ attorney met two of the three exceptions. He met the “conscious ignorance” exception in that he was aware when he agreed to the settlement that he had limited knowledge about the potential Medicare payments. Despite this, he went forward with the agreement and assumed the risk of the mistake. Since he had access to his client’s medical records, he could have investigated the existence of conditional payments.
The second exception allows a court to allocate the risk of the mutual mistake to the adversely affected party. The Court found that the district court was reasonable in assigning the risk of the mistake to Forbes’ attorney since he had the opportunity and the burden to inquire about the status of the medical bill payments given the nearly two-year period between the accident and the negligence suit. The $12,500 settlement agreement was found to be binding and enforceable.
This case serves to highlight the impact of the Medicare Secondary Payer Act on a settlement involving a Medicare beneficiary plaintiff. 42 U.S.C. § 1395 Y(b)(2)(a). An understanding of the relevant provisions and procedures related to conditional payments would have prevented the parties from negotiating on false assumptions. In this case, an inquiry into the final conditional payment amount could have been made through the Medicare Secondary Payer Recovery Portal within 120 days of settlement. The figure could have also been reviewed in advance of final settlement and disputed. Furthermore, when assessing the known liens or reimbursement claims in a case, an amount that seems artificially low given the nature of the treatment should prompt further inquiry into the existence of other liens.
It is also important to note that a conditional payment demand that exceeds the settlement amount should always be reduced by Medicare. If Medicare does not have to take legal action to recover, Medicare regulations state: “If Medicare payments equal or exceed the judgment or settlement amount, the recovery amount is the total judgment or settlement payment minus the total procurement costs.” 42 C.F.R. 411.37(d). If no procurement costs or attorney’s fees are reflected on the final settlement detail documentation provide to Medicare at the time of settlement, Medicare will not reduce the amount of their conditional payment demand. Attorneys should be aware of this should they seek to reduce or waive their fees. This case may also be one that would benefit from a financial hardship waiver or compromise request to CMS.
If MSP compliance issues fall outside of your area of expertise, Synergy’s team is here to serve your needs. We have a deep team of experts that can help make sure you close your file compliantly. Let Synergy be your guide to ensure your client is protected and your practice is safeguarded against potentially devastating government-enforced consequences or mistakes such as the one discussed in this blog post.
July 28, 2021
Introducing “Since You Asked,” Synergy’s first in a series of columns addressing MSP compliance questions in the area of workers’ compensation.
“My client is settling her case and does not know what to do with her Workers’ Compensation Medicare Set-Aside (WCMSA) funds. I’m not quite sure what to tell her. Can you help?”
Proper administration of the WCMSA funds is vital in order to ensure that Medicare will become the primary payer once the WCMSA account is depleted. Because of this, the Centers for Medicare & Medicaid Services (CMS) highly recommends the use of a professional administrator for the funds. In addition, when the WCMSA includes opioids and other “frequently abused drugs”, CMS expects the administration of the funds to be in accordance with CMS’ Part D Drug Utilization Review (DUR) policy. (WCMSA Reference Guide, Version 3.3, 4/19/2021, Section 17 et al).
If your client would prefer to self-administer her WCMSA account, CMS allows for this as long as she is competent. When your client receives the WCMSA funds, she should deposit the funds in a separate interest-bearing checking account that is insured by the Federal Deposit Insurance Corporation (FDIC). The funds should only be used to pay for injury-related Medicare-covered services even if your client is not yet enrolled in Medicare. The funds may also be used to pay for certain costs that are directly related to the WCMSA account. These consist of costs associated with copying documents, mailing fees/postage, banking fees related to the account, and income tax on interest income from the account. The WCMSA funds may not be used to pay for the following: fees for professionals hired to administer the account, any other expenses for administration of the account, attorney costs for establishing the WCMSA, and Medicare co-payments, deductibles, or premiums.
Record keeping is an important part of the proper administration of the WCMSA. Your client should record all of the transactions with the account and keep itemized receipts for each payment that is made from the account. An annual attestation of the appropriate use of the funds should be sent to Medicare’s Benefits Coordination & Recovery Center. Once the WCMSA account is fully depleted, your client should notify the BCRC of the complete exhaustion so that Medicare may become primary. CMS has issued a helpful Self-Administration Toolkit for WCMSAs that details the self-administration process and provides sample documents and letters. The most recent version of the toolkit may be found here.
In the event that your client is also receiving a public income-based benefit, such as Medicaid, it may be appropriate to place the WCMSA in a Special Needs Trust. Synergy’s team of experts is available to guide you and your client through the administration and MSP compliance process.
July 23, 2021
The wait for proposed rulemaking related to Medicare Secondary Payer (MSP) compliance obligations regarding future medical services in liability settlements continues. Although the Department of Health and Human Services issued their initial notification of proposed rulemaking in the fall of 2018, the target date has been moved several times and is currently set for October of 2021. However, focusing solely on the notice of proposed rules will cause a practitioner to overlook the impact of important MSP compliance changes taking place with Section 111 Mandatory Insurer Reporting obligations on settlements.
Current MSP Landscape
By way of background, the MSP Act prohibits Medicare from making payment when “payment has been made or can reasonably be expected to be made under a workmen’s compensation law or plan of the United States or a State or under an automobile or liability insurance policy or plan (Including a self-insured plan) or under no-fault insurance.” (42 U.S.C §1395 Y(b)(2)(a)). The exception to this occurs when payment is not reasonably expected to be made “promptly” or within 120 days of receipt of the claim by the primary payer. If Medicare makes payment in this situation, the payment is conditioned upon the reimbursement of the payment to the appropriate Medicare Trust Fund. A primary payer’s reimbursement obligation to Medicare 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 included in a claim against the primary payer or by other means.” (42 C.F.R §411.22).
MSP compliance has three distinct components to it that should be addressed in connection with a settlement or a judgment. The first component involves conditional payments that were made by Medicare under traditional Medicare Parts A or B plans for injury-related treatment prior to settlement. Conditional payment information is provided by the Benefits Coordination & Recovery Center (BCRC). Once a final conditional payment demand is made, it should either be disputed or paid. A failure to reimburse the Medicare Trust Fund may result in Medicare filing suit directly for double damages against any or all entities that were responsible for reimbursement of the conditional payments.42 U.S.C §1395 y(b)(2)(B)(iii); 42 U.S.C.§1395y(b)3.
As part of the first component, it is also important to be aware of liens that may be asserted by Medicare Advantage Organization plans that provide benefits under Medicare Parts C and/or D. Although these plans are administered by private insurance carriers who enter into a contract with Medicare, their recovery rights are based on the Medicare Secondary Payer Act. Plaintiffs and their representatives should reach out to the Medicare Advantage plans themselves to investigate and resolve their liens since this information is not provided by the BCRC.
The second component involves consideration of Medicare’s potential interest in the future medicals that are released in connection with the settlement. Since Medicare is prohibited from making payment when payment has been made under a liability insurance plan, no-fault insurance plan, or workers’ compensation insurance plan, any settlement that includes a component of future medical damages runs a risk of Medicare denying post-settlement injury-related treatment. One of the triggers for this risk comes from the Medicare beneficiary’s responses to the MSP admission/ outpatient encounter questionnaire that must be completed prior to a provider submitting a bill to Medicare. According to CMS’ Manual System Medicare Secondary Payer transmittal of September 15, 2020, the purpose of the questionnaire is to assist “in the proper coordination of benefits to ensure adherence to Medicare Secondary Payer (MSP) provisions as outlined in section 1862(b) of the Social Security Act.” The questions seek information about whether the treatment is for an injury or illness for which another party may be liable. If it is, the provider must obtain information regarding the accident date and the other carriers. The transmittal memo further notes that “liability insurance is the primary payer only for services related to the liability settlement, judgment, or award.” The risk of post-settlement injury-related treatment denial may be mitigated in a variety of ways depending upon the specific facts of the case and the risk tolerance of the Plaintiff. Since the risk will fall on the Plaintiff, it is prudent for plaintiff counsel to document the MSP compliance discussions in your file.
The third component of MSP compliance is the Section 111 Mandatory Insurer Reporting obligation which serves as an enforcement mechanism for the MSP. It ensures that Medicare remains a secondary payer when a Medicare beneficiary receives a settlement, judgment, award, or other payment from liability insurance, no-fault insurance, or workers’ compensation. Section 111 reporting is completed by a responsible reporting entity (RRE) for the liability insurer, no-fault insurer and workers’ compensation plans and insurers. The RRE must report to Medicare if the plan has an Ongoing Responsibility for Medical (ORM – workers compensation/ Med Pay and Personal Injury Protection (PIP) coverage) in the case and/or the Total Payment Obligation to the Claimant (TPOC – or “settlement”). The current reporting TPOC threshold for settlements involving a Medicare beneficiary is $750.00 in both liability cases involving physical trauma and workers’ compensation cases. RREs must also query the system on a regular basis to identify claimants that become eligible for Medicare benefits while the claim remains open.
Under the Section 111 reporting requirements, the RRE must provide the injury victim’s first name, last name, date of birth, gender, and Medicare Beneficiary Identifier (MBI), Social Security Number, or the last five digits. The RREs must also report ICD diagnosis codes for the alleged illnesses/injuries that are claimed and/or released in the TPOC settlement, judgment, award, or other payment. CMS “encourages RREs to supply as many valid ICD-9/ICD-10 Diagnosis Codes as possible as that will lead to more accurate coordination of benefits, including claims payments and recoveries, when applicable.” (NGHP User Guide, Chapter IV, Version 6.4, June 2021). If the RRE fails to comply with the Section 111 reporting obligations, they may face a penalty of up to $1,000 per day per claim. To date, the penalty provision has never been enforced.
Shifting MSP Landscape
There are two changes in the foreseeable future that are likely to impact the settlement process for Medicare beneficiaries. The first involves the issuance of final rules that clarify when civil monetary penalties (CMP) should be imposed for Section 111 reporting violations. The proposed rules were issued by CMS in February of 2020 followed by stakeholder comments. CMS’ proposed rules contemplate CMP of up to $1,000 for each day of noncompliance for each claim with a maximum penalty of up to $365,000 per claim per year under the following circumstances: when the RRE failed to report within one year of the coverage effective date, date of settlement or establishment of payment obligation or when the RRE provided Section 111 information that conflicts with information provided in response to MSP conditional payment recovery efforts. Smaller CMPs would be assessed on a tiered approach when the reported data was of poor quality. Since the need to formulate regulations regarding the CMPs is outlined in the SMART Act that was passed in 2012, the industry expects the final rules to be issued by the end of the year. This is prompting liability carriers and their RREs to conduct a review of their reporting processes. This enhanced scrutiny is trickling down to settlement terms that contain a slew of overly broad ICD diagnosis codes that will have a negative impact on the Plaintiff once the case settles.
The second change involves the Provide Accurate Information Directly (PAID) Act that was signed into law in December of 2020 and must be implemented by December 11, 2021. The PAID Act requires Medicare to provide liability insurers, no-fault insurers and workers’ compensation plans and insurers with information regarding the Medicare Part C and Part D plans that provided coverage to the Medicare beneficiary injury victim. The RRE’s Section 111 queries will provide the Medicare Part C and D plans contract number, name, plan benefit package number, and plan address. It will also provide the effective dates for the previous three years. CMS issued a Technical Alert and hosted a webinar in June of 2021 to provide details regarding the technical changes that must take place to implement the PAID Act. Once the insurance carriers have access to the specific Medicare Part C and D plan coverage, settlement terms will likely impose additional burdens on the Plaintiff.
Settlement delays may be avoided by the Plaintiff taking charge of the MSP compliance obligations in a case. Synergy’s MSP compliance audit report arms you with documentation from an outside MSP compliance expert that addresses the status of conditional payment reimbursements, the strategy for post-settlement injury-related treatment, appropriate ICD 10 diagnosis codes that should be used by the Section 111 RRE, and MSP compliance settlement terms. By presenting the audit report to the defense, you are in the MSP compliance driver seat. Contact Synergy to learn more about our services.
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July 8, 2021
Most attorneys are well aware of the need to resolve Medicare’s conditional payments in connection with a client’s settlement. This obligation stems from the Medicare Secondary Payer (MSP) Act, 42 U.S.C. § 1395y(b)(2)(A)(ii), which prohibits Medicare from making payment for medical services when “payment has been made or can reasonably be expected to be made under a workers’ compensation law or plan of the United States or a State or under an automobile or liability insurance policy or plan (including a self-insured plan) or under no fault insurance.” 42 U.S.C. § 1395y(b)(2)(B)(ii). When a primary plan has not made or cannot reasonably be expected to make prompt payment for the service, Medicare may make a payment conditioned upon reimbursement of the payment to the appropriate Medicare Trust Fund. A failure to reimburse the Medicare Trust Fund may result in Medicare filing suit directly for double damages against any or all entities that were responsible for reimbursement of the conditional payments. 42 U.S.C. § 1395y(b)(2)(B)(iii); 42 U.S.C. § 1395y(b)(3). Section 111 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA) Mandatory Insurer Reporting obligations require the primary plan’s Responsible Reporting Entity to report any liability physical trauma settlement involving a Medicare beneficiary that exceeds $750.00. This reporting requirement puts Medicare on notice of the settlement.
Once Medicare is notified of the settlement, a final conditional payment sweep will be completed, and a conditional payment demand will be issued. This demand will only address payments that were made under traditional Medicare Parts A and B. If the Plaintiff was enrolled in a Medicare Advantage Plan, conditional payment information must be requested directly from the plan. This step should not be overlooked since Medicare Advantage Plans have the same recovery rights under the MSP Act as traditional Medicare.
The MSP Act and supporting regulations set out limits on the conditional payment amounts that must be reimbursed to Medicare. If Medicare does not have to take legal action to recover, Medicare is only able to recover the lesser of either “the amount of the Medicare primary payment” or “the full primary payment amount that the primary payer is obligated to pay without regard to any payment, other than a full primary payment that the primary payer has paid or will make, or in the case of a primary payment beneficiary, the amount of the primary payment.” 42 C.F.R. 411.24(c)(1). Section 411.37(d) of the regulations provides: “If Medicare payments equal or exceed the judgment or settlement amount, the recovery amount is the total judgment or settlement payment minus the total procurement costs.” If no procurement costs or attorney’s fees are reflected on the final settlement detail documentation provided to Medicare at the time of settlement, Medicare will not reduce the amount of their conditional payment demand. Attorneys should be aware of this should they seek to reduce or waive their fees.
Addressing Conditional Payments in Liability Cases
As a starting point, it is very important to understand that if the Final Demand is not paid timely, interest begins to accrue regardless of appeals or requests to reduce the amount owed to Medicare. There is no tolling of the interest meter while you dispute the amount due. Therefore, it is prudent to make sure that the conditional payment Final Demand is paid timely regardless of how you attempt to reduce the amount owed to Medicare.
The most common method of disputing conditional payments involves a request to remove unrelated charges from the conditional payment demand. The unrelated charges may appear on Medicare’s Payment Summary Form due to a “grouper” error within Medicare’s data collection system. They may also come from comingled billing from the service providers. In cases where the conditional payments are related to the injuries that are being settled, the Plaintiff may end up with very little of a net recovery.
There are two additional conditional payment calculation methods that may be available in certain liability cases. Both the “Self-Calculated Conditional Payment Amount” process and the “Fixed Percentage Option” have specific conditions that must be met before they may be used. The “Self-Calculated Conditional Payment Amount” process is available under the following circumstances: the claim involves an injury caused by physical trauma; the medical treatment was completed at least 90 days before and no further treatment is expected; the total settlement/judgment/award or other payment must be less than $25,000; and the date of the incident must have occurred more than six months prior to the submission of the self-calculated final conditional payment amount. Although the use of this process requires the plaintiff to give up the right to appeal the debt, the plaintiff retains the right to request a waiver of recovery.
The “Fixed Percentage Option” is available for smaller liability settlements. In order to be eligible for this, the following conditions must be met: the liability settlement/judgment/award or other payment must be related to a physical trauma; the total settlement must equal or be less than $5,000; the election of the option must be made within Medicare’s timeframe and prior to the issuance of any conditional payment reimbursement request from Medicare; and there are no other pending settlements, judgments, awards or other payments related to the incident. Additional details regarding the exact processes for both the “Self-Calculated Conditional Payment Amount” and “Fixed Percentage Option” methodologies may be found at the Benefits Coordination and Recovery Center website.
Other options to consider involve payment of the final demand in order to stop the interest on the demand from running (as noted at the start of this section). Once this occurs, the plaintiff may seek a compromise or waiver of the conditional payment debt in order to get Medicare to reduce their conditional payment claim and issue a full or partial refund of the payment. The three statutory provisions that may be used for this are: §1870(c) of the Social Security Act (financial hardship waiver); §1862(b) of the Social Security Act (best interest of the program waiver); and the Federal Claims Collection Act (FCCA) (compromise). The authority to consider beneficiary requests for waivers under §1870(c) of the Act sits with the Benefits Coordination & Recovery Contractor (BCRC), while the authority to waive Medicare claims under §1862(b) and to compromise claims under FCCA, is reserved exclusively to the Center for Medicare and Medicaid Services (CMS). The basis for any waiver request comes from the regulations that provide:
“There shall be no recovery if such recovery would defeat the purposes of this chapter or would be against equity and good conscience.” See 42 U.S.C. § 1395gg(c); 42 C.F.R. 405.355-356; 42 C.F.R. 405.358; 20 C.F.R. 404.506-512; Medicare Secondary Payer Manual, Chapter 7 § 50.
To apply for the “Financial Hardship” waiver, the Medicare beneficiary must file form SSA-632-BK with the BCRC which documents their financial situation. Arguments that may be made in support of this position include showing that the repayment of the conditional payments would deprive the beneficiary of income required for ordinary and necessary living expenses. If someone is dual eligible, meaning they get both Medicaid and Medicare, it is great evidence of financial hardship since people who qualify for Medicaid have very little in the way of assets. That being said, even a 7-figure settlement could still be approved for a financial hardship waiver of the amount owed to Medicare.
The “Best Interest of the Program” waiver request under § 1870(b) of the Social Security Act is made to CMS. This rather vague criteria is nowhere further defined and lies completely at the discretion of CMS. Although this request is separate and distinct from a request for a Compromise under the Federal Claims Collection Act (FCCA), it is beneficial to seek both a request for this waiver and a request for a compromise when seeking a refund from CMS of the amounts the beneficiary has already paid to satisfy the “Final Demand.”
The third and final method for obtaining a refund from Medicare is a Compromise request made to CMS. Authority to grant a Compromise is granted to CMS under the Federal Claims Collection Act (FCCA). 31 U.S.C. § 3711. This section allows Federal agencies the authority to compromise where: the cost of collection does not justify the enforced collection of the full amount of the claim; there is an inability to pay within a reasonable time on the part of the individual against whom the claim is made; or the chances of successful litigation are questionable, making it advisable to seek a compromise settlement.” Medicare Secondary Payer Manual, Chapter 7 § 50.
The resolution of conditional payment reimbursement claims is a time-consuming process. To maximize the plaintiff’s net recovery, it is important to be familiar with the various options for calculating, disputing, and seeking a refund of conditional payments. When addressing conditional payment issues, consider the following best practice tips:
- Confirm the type of Medicare coverage your client was enrolled in from the date of the accident to the date of settlement.
- Make sure the Final Demand is paid within the time period specified in the recovery demand letter.
- Determine if the Self-Calculated Conditional Payment Amount is available in the case.
- Determine if the Fixed Percent Option process is available in the case.
- Determine if the final conditional payment demand should be disputed.
- Provide Medicare with the Final Settlement Details to secure a procurement cost reduction.
- Consider whether a full or partial conditional payment refund may be secured in the case.
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