Jason D. Lazarus, J.D., LL.M., CSSC, MSCC
In the past, trial lawyers never had to worry about whether Medicare would pay for their client’s future care post-settlement. There is cause for concern that this may not be the case in the future. Consider this scenario – you represent a current Medicare beneficiary in a third-party liability case. As part of the workup of the case, you determine the client will need future medical care related to the injuries suffered. This could be determined by either deposing the treating physician or by the creation of a life care plan for litigation purposes. Ultimately, you settle the case. Since the client is a Medicare beneficiary, the defendant will report the settlement under the Mandatory Insurer Reporting law as it is greater than $750.00 in gross settlement proceeds. The defendant puts some language into the release about a Medicare Set-Aside being the injury victim’s responsibility and that they can’t shift the burden. Everyone signs the release and settlement dollars are paid. The file is closed, then forgotten. But what if that course of action triggers a denial of future care by Medicare?
For many years this was not even a concern for trial attorneys and their clients. However, the risk of this occurring is now a very real possibility. In fact, last year, a personal injury victim got this type of notice of denial for injury-related care from Medicare. The service provided was hospital outpatient clinic services under Part B of Medicare. The bill was denied, based upon the notice, because Medicare said “you may have funds set aside from your settlement to pay for your future medical expenses and prescription drug treatment related to your injury (ies).” The denial was related to a 2014 personal injury settlement wherein the Medicare beneficiary was paid money as damages for future injury-related care. Medicare’s position that an injury victim can’t settle their case and shift the burden to the Medicare Trust Fund for injury-related care isn’t new. Medicare has stated this premise over and over. This is just the first time anyone has seen an actual denial.
So, the question going forward is whether this was an isolated denial or actually represents Medicare’s shift to active enforcement of the Medicare Secondary Payer Act’s central premise. While it may provide some comfort to think this is an isolated incident, the reality is that Medicare Set-Asides are clearly a top priority and on the radar for CMS. As noted before in previous posts, there is currently an OMB Rulemaking process going on related to the Medicare Secondary Payer Act and Medicare Set-Asides. The insurance industry, the plaintiff bar, and industry stakeholders are all bending CMS’s ear regarding a future process. It is expected that proposed regulations will be disseminated sometime in the fall of 2019. The question in the interim is, what do you do to protect yourself from a malpractice claim and protect your client from a denial?
Unfortunately, there is no cookie-cutter answer. It is a case-by-case analysis. In some instances, there may be an argument that future medicals aren’t funded at all by the settlement. In other cases, there might be an argument that a reduced amount of future medicals should be set aside to satisfy obligations under the MSP because the case settled for less than full value. There are just too many possibilities to give a simple one size fits all answer. However, what is clear, doing nothing has its risks. For example, the client who received the denial of care likely will face a lengthy appeals process within Medicare that must be exhausted before ever getting to step foot into a Federal district court. In that scenario, the client is going to have to decide between paying out of their own pocket for future care or waiting for the care until exhausting all appeals and prevailing over Medicare.
While the problem created for the client is a serious one if they are denied care, an equally scary proposition for the trial lawyer is their exposure for malpractice claims in this scenario. Let’s assume that the injury victim who got this denial letter was not properly advised of the risks of failing to set aside money, would the trial lawyer potentially face a suit for legal malpractice? The answer is most likely they would. There could be all sorts of arguments made about whether they fell below the standard of care, but in the end, this is a known issue and one that is of the law. Worse yet, a trial lawyer and his/her firm could have Medicare breathing down their necks. While we haven’t see any instances of Medicare pursuing a law firm over failing to set up a Medicare Set-Aside, there are recent examples of law firms being pursued by the Department Of Justice (DOJ) related to other aspects of the MSP and failing to have a process internally to ensure compliance with the MSP. As part of a recent 2019 settlement after the DOJ brought action against a Maryland personal injury law firm, the firm agreed to pay $250,000 to resolve MSP claims and also agreed “to (1) designate a person at the firm responsible for paying Medicare secondary payer debts; (2) train the designated employee to ensure that the firm pays these debts on a timely basis; and (3) review any outstanding debts with the designated employee at least every six months to ensure compliance.” This was the second such settlement in a little over a year.
With these kinds of risks at stake, why do personal injury firms take their chances with the potential for denials of care, malpractice actions and worse yet government action? The answer is pretty simple, there is a lack of clarity of information and education about responsibilities under the MSP by Medicare. It falls upon industry stakeholders to try and make all the parties who are involved in personal injury lawsuits aware of these issues and how to effectively deal with them. So then the question is how do you make sure you are totally Medicare compliant?
Realizing there isn’t a definitive answer related to set-asides, we do have some recommendations:
- Put into place a method of screening your files to determine those that involve Medicare beneficiaries or those with a reasonable expectation of becoming a Medicare beneficiary within 30 months.
- Contact Medicare and report appropriately the settlement to get a final demand.
- Audit the final demand and avail yourself of the compromise/waiver process for conditional payments.
- Consult with client and explain the possibility of loss of future benefits without a Medicare Set-Aside so that an informed decision can be made about available options to consider Medicare’s future interests.
- Identify any potential Part C/MAO liens and resolve those as well.
Start early and do not let the defendant-insurer control the Medicare compliance process. At the outset of your case you have to confirm disability eligibility with Social Security and get copies of all insurance as well as government assistance cards. Make sure you understand who is potentially Medicare eligible such as those who are on SSDI, those turning 65, someone with end-stage renal disease (ESRD), Lou Gehrig’s disease (ALS) or a child disabled before age 22 with a parent drawing Social Security benefits. Collaborate with the other side regarding what is being reported under Mandatory Insurer Reporting laws. Be active in mandating the proper ICD codes to be included in the release to make sure reporting is accurate.
If a client is a Medicare beneficiary, then evaluate with the client the possibility of a set-aside. Discuss with competent experts the proper steps for MSP compliance. Properly word the release if a set aside is being used to make sure the client doesn’t get saddled with inappropriate language or lose itemized deductions. Appropriate planning will avoid a bad outcome.
Medicare beneficiaries must understand the risk of losing their Medicare coverage should they decide to set aside nothing from their personal injury settlement for future Medicare-covered expenses related to the injury. Properly educating the client is key to ensure an informed decision can be made relative to these issues. Beyond education of the client, the most critical issue becomes how to properly document your file about what was done and why with regard to MSP compliance. This part is where the experts come into play. For most practitioners, it is nearly impossible to know all of the nuances and issues that arise with the Medicare Secondary Payer Act. From identifying liens, resolving conditional payments, deciding to set money aside, the creation of the allocation to the release language and the funding/administration of a set-aside, there are issues that can be daunting for even the most well informed personal injury practitioner. Without proper consultation and guidance, mistakes can lead to unhappy clients, or worse yet, a legal malpractice claim.