March 12, 2020
B. Josh Pettingill
This article highlights why a Medicare Set-Aside (MSA) should be viewed by all settlement parties as an insurance policy – nothing more, nothing less. Medicare Secondary Payer Compliance is not a scare tactic, nor is it something to be disregarded. Rather, addressing the MSP by analyzing the need for an MSA is simply an insurance policy for the players involved in the resolution of the liability claim where future medicals are funded for a Medicare-eligible plaintiff.
When you think of insurance, what is the first thing that comes to mind? It is peace of mind, security, or some perceived guarantee of safety. When you think about the flip side of this, words like uncertainty, risk and anxiety immediately spring up. This type of anxiety is what injury victims deal with every single day when resolving their personal injury case. They are faced with a host of unknowns about the future. Will I ever be able to return to work? Is this enough money to take care of my medical needs? Am I going to have health insurance? The list is endless.
Anecdotal evidence suggests that the biggest determinant in deciding whether to settle a workers’ compensation case was availability of health insurance – was it going to be there for them when they settled and were medical needs going to be met? In other words, claimants want assurance that their health insurance was not going away or going to be interrupted. There is a proper approach to handling the MSA issue. It starts with adopting the viewpoint that an MSA is an insurance policy for not only the injury victim but for EVERYBODY involved in the resolution of a personal injury case.
Insurance for the Plaintiff
While it is true there are currently no regulations or laws that mandate a Medicare Set-Aside, it does not mean there will be no consequences if a plaintiff attempts to shift the burden to Medicare for future, accident-related care. It is very clear from Medicare’s public statements that the agency believes that set-asides are the best mechanism to protect the program from paying for injury-related care when future medical costs are funded by a settlement. If the plaintiff does nothing to consider Medicare’s future interests, then Medicare could take the position that the entire settlement is the “MSA” and must be spent down on accident related care before Medicare starts to pay again.
Best practice is to determine an amount to be set aside based on all the facts of the case at the time of the settlement. Once the plaintiff spends down the MSA funds appropriately for accident-related care, then their medical insurance (Medicare benefits) will never be disrupted. Once the set-aside account is exhausted, an injury victim gets full Medicare coverage without Medicare ever looking to the remaining settlement dollars to provide for any Medicare-covered health care. It is like an insurance deductible in the sense that once the funds have been spent down appropriately, Medicare will then kick in and start to pay again. If the plaintiff were to pass away prematurely, then the MSA funds remaining in the account would go to the plaintiff’s beneficiaries. It is comparable to life insurance in that regard. It should also be noted the MSA account is oftentimes funded with a structured settlement to further reduce the present value cost to fund the MSA obligation. The annuity payments can also be guaranteed to continue to the plaintiff’s beneficiaries if the plaintiff were to pass away.
Insurance for the Plaintiff Attorney
From the plaintiff attorney’s standpoint, having a discussion with the plaintiff about the potential implications of failing to protect the Medicare Trust Fund is an insurance policy against potentially getting sued for legal malpractice. Although, there are no examples of a plaintiff’s attorney being sued by a former plaintiff because their Medicare benefits were cut off or they were denied benefits, we have seen firsthand the threat of this happening on numerous occasions. You cannot force your client to do a Medicare Set-Aside, but you can certainly be pre-emptive in bringing in the appropriate MSP compliance experts to discuss the issues with the plaintiff. The best time for that discussion to take place is in the beginning stages of the case so there are no surprises when it comes time for a resolution. We are frequently asked, “when is the appropriate time to bring Synergy into the case?” The answer is: as soon as you have identified a Medicare-eligible plaintiff.
Plaintiff attorneys should educate their clients early in the negotiation process about the possibility of an MSA and document appropriately as to the decision to move forward with an MSA, or not. If they opt for doing an MSA, the attorney has at least educated the client on the risks and insulated themselves against any future legal malpractice suit and/or bar complaint. More importantly, a trial lawyer can be confident that the client will be protected from ever losing their future medical coverage.
Insurance for the Defendants
Having a properly calculated MSA that can be defended will alleviate any warranted or unwarranted concerns the carrier may have concerning Medicare compliance. From the carriers’ perspective, one way the MSA can be presented to the plaintiff is if Medicare happens to audit their file, CMS does have the statutory authority to deny making payments on their behalf, either temporarily or indefinitely until Medicare’s interests have been properly considered. Instead of presenting the MSA in a threatening, fear-inducing manner to which there will most certainly be a negative reaction by the plaintiff’s side, the MSA can be presented as a means to give the plaintiff peace of mind that their health insurance will not be disrupted.
Defendants and insurance carriers alike can be assured that if Medicare ever audits the plaintiff’s common working file that they have done everything possible to adequately consider Medicare’s future interests. In fact, you have gone above and beyond what your obligation regarding Medicare’s future interests.
Insurance for All Parties
A Medicare Set-Aside is a tool that an injury victim can utilize to preserve Medicare benefits by setting aside a portion of the settlement money in a segregated account to pay for future Medicare-covered items. Once the set-aside account is exhausted, the injury victim gets full Medicare coverage without Medicare ever looking to the remaining settlement dollars to provide for any Medicare-covered injury-related health care. If a set-aside is recommended and the client refuses to implement one, the file should be properly documented regarding this issue; but always remember the MSA is always the best method to properly consider Medicare’s future interests. If an MSA is prepared for a liability case, the goal should always be the same post-settlement: get the lowest MSA amount possible while making sure all parties are protected.
As CMS continues to work towards establishing formal guidelines for Liability MSAs, all settlement parties to a personal injury case must take a more hands-on approach to the issue. The MSA is not an issue to be ignored but also not one to be forced upon the plaintiff either. It is time to take a step back and change our way of thinking about Medicare Set-Asides; not as a burden or a barrier to settlement but as something that can make a significant difference in the lives of plaintiffs and as an insurance policy for all the settlement parties.
For more information about liability MSAs click HERE or if you would like to sign up for a complimentary CLE on liability MSP compliance issues, please go to https://www.synergysettlements.com/synergy-cle/.
Sally Stalcup, MSP Regional Coordinator (May 2011 Handout). See also, Charlotte Benson, Medicare Secondary Payer – Liability Insurance (Including Self-Insurance) Settlements, Judgments, Awards, or Other Payments and Future Medicals – INFORMATION, Centers for Medicare and Medicaid Services Memorandum, September 29, 2011.
Once the MSA funds have been spent down, a final accounting ledger is sent to Medicare along with a copy of the MSA report to show what was done.
Using the structured settlement is usually a 40%-60% cost savings.
The structured settlement payments are done through a guaranteed contract with a life insurance company.
CMS has made it clear that the defendant’s job is to report Medicare beneficiaries under the Section 111 reporting requirement.