Without a doubt, the most efficient model to achieve an exceptional Medicare program, which mitigates, reduces, and in some instances eliminates the risks previously discussed, is to build a comprehensive compliance process that relies on automated sequences and triggering events throughout the three steps of current Medicare Secondary Payer (MSP) compliance: Mandatory Insurer Reporting (MIR), Conditional Payment Resolution (CPR), and Medicare Set Aside Allocations, Approval, and Administration (MSA). What follows is part four of a four-part analysis of risks associated with each of the MSP compliance components: Mandatory Insurer Reporting (MIR), Conditional Payment Resolution (CPR), and Medicare Set Asides (MSA). This fourth part focuses on Flagship’s comprehensive MSP compliance program, which we believe to be the most efficient model in achieving 100% MSP compliance.
1. Mandatory Insurer Reporting
In 2007, Congress passed and the President signed into law the Medicare, Medicaid SCHIP Extension Act (MMSEA). Section 111 of the MMSEA amended the Medicare Secondary Payer provisions of the Social Security Act (42 U.S.C. 1395y(b)) to provide for MIR by group health plan arrangements and by liability insurance (including self-insurance), no-fault insurance, and workers’ compensation laws and plans, also known as non-group health plans (NGHP). MMSEA indicated that “effective July 1, 2009, applicable plans, including (1) Liability insurance (including self-insurance); (2) No-fault; and (3) Workers’ compensation laws or plans must: (1) Determine whether a claimant is entitled to Medicare benefits; and, if so, (2) report the identity of such claimant and provide such other information as the Secretary may require to properly coordinate Medicare benefits with respect to such insurance arrangements in the form and manner (including frequency) as the Secretary may specify after the claim is resolved through a settlement, judgment, award or other payment (regardless of whether or not there is a determination or admission of liability).”
Prior to MIR, Medicare had no way to track MSP compliance in auto, liability, no-fault, and workers compensation cases. With the new reporting requirements, vast amounts of data is being provided to Medicare on a regular basis allowing identification and recovery of conditional payments. Such data is also allowing Medicare to become aware of settlements, judgments, awards or payments that may require Medicare’s interests to be considered when future exposure exists. As a result, it is imperative that conditional payments are resolved and an allocation is included in certain auto, liability, no-fault, and workers compensation cases.
Pursuant to the MMSE Act of 2007, entities that are responsible for paying claims to beneficiaries, also known as Responsible Reporting Entities (RRE), must electronically report to Medicare the acceptance of ongoing responsibility for medical care (ORM) related to the claim or upon total payment obligation to claimant, a settlement, judgment, award, or other payment (TPOC) of greater then $750. Because of potential up to $1,000 daily fines per claim, compliance with the specifics of MIR though Medicare Query Function and Claim Input File is paramount.
a. Medicare Query Function
In order to determine Medicare eligibility, a Medicare Query Function may be performed on all claims. Although some RREs only query files in which the claimant has reached age 65, or getting close to settlement, or that have reached judgment, award, or other payment, Flagship highly recommends querying all claims on a monthly basis. This will provide the RRE with early notice of Medicare beneficiary status, allowing it sufficient time to investigate and act on the other two components of MSP compliance, CPR and MSA. Medicare Query Function is accomplished by sending CMS the required “Big 5” data elements: legal first name and legal last name, gender, date of birth, date of accident or incident, and Social Security Number or Health Identification Claim Number.
b. Claim Input File
The Query Function will result in one of two responses from Medicare: (1) “Y” indicating that the injured party is a Medicare beneficiary, or (2) “U” indicating that the Medicare beneficiary status is “undetermined.” A “Y” response requires the RRE to investigate and further provide specific information about the claim in order to protect Medicare’s interests in the case.
Claim Input File required information includes specific information about the Medicare beneficiary (such as name, address, date of birth, and social security number), the accident or incident (such as a description of the accident/incident, alleged injuries sustained), the responsible party or parties (such as name and address of employer/carrier, corporate defendant/insurer, self insured/TPA), medical care associated with injuries sustained from the accident or incident (such as names and addresses of physicians, clinics, hospitals, or other medical providers), representatives of the parties (such name and addresses of plaintiff and defense counsel), and resolution of case (such as settlement date, settlement amount, attorneys fees and costs charged).
c. $1,000 Penalty for MIR Noncompliance
In 2012, Congress passed, and in 2013, the President signed into law the Medicare IVIG (Intravenous Immunoglobulin) Access and Strengthening Medicare and Repaying Taxpayers Act of 2012 (SMART Act). The SMART Act amended the MSP Act to state that applicable plans that fail to comply with the reporting requirements may be subject to a civil money penalty of up to $1,000 for each day of noncompliance with respect to each claimant.
On December 11, 2013, CMS published an advance notice of proposed rulemaking (ANPRM) soliciting public comment on specific practices for which civil money penalties (CMPs) may or may not be imposed for failure to comply with MSP reporting requirements for certain group health and non-group health plans arrangements. CMS has not yet published any proposed or final rules resulting from the comments received.
2. Conditional Payments Resolution
a. Medicare Parts A and B Conditional Payments
In some but not all cases, Medicare may have paid for medical services received by a beneficiary following an injury. Medicare is said to have paid “conditionally” subject to their right to reimbursement from the primary payer at the time of settlement, judgment, award, or other payment.” In addition, 42 U.S.C. §1395y(b)(2)(b) allows for recovery of double damages, plus interest, and costs of litigation against primary payers who fail to reimburse Medicare for conditional payments.
Accordingly, it is critical to identify the proper amount of the conditional payment(s) made by Medicare in any claim and to be certain that Medicare’s subrogation rights have been satisfied. Failure to resolve conditional payments could result in CMS recovering up to the entire settlement amount (minus certain procurement costs) from the Medicare beneficiary and seeking double damages from the primary payer as noted above.
b. The Benefits Coordination Recovery Center (BCRC) and Commercial Recovery Center (CRC)
If as a result of Medicare Query Function, the RRE or Primary Payer learns early in the life of the claim that the claimant or plaintiff is a Medicare beneficiary, then it is highly recommended that the Primary Payer begin the CPR process at that time by asking Medicare’s contractor (BCRC or CRC) for a conditional payment letter (CPL from BCRC) or conditional payment notice (CPN from CRC) and challenging CMS on any entry where it is seeking reimbursement for items that are not related to the injuries or treatment associated with the claim. Depending on the length of time between such efforts and settlement of the claim, the Primary Payer may need updated conditional payment information. After settlement of the claim, the Primary Payer may then seek a final recovery demand letter from Medicare’s contractor.
Upon receipt of the initial determination from the CRC or final demand from the BCRC, the Primary Payer has within 60 days to pay the requested amount or otherwise incur penalties and interest on the unpaid amount. Failure to respond within the specified time frame may result in the initiation of additional recovery procedures, including the referral of the debt to the Department of Justice for legal action and/or the Department of the Treasury for further collection action. As a result, unless appealing the BCRC/CRC request, Flagship highly recommends payment within 60 days of the request date.
c. Medicare Advantage Plans (Part C) and Prescription Drug Plans (Part D)
Medicare Part C, also known as Medicare Advantage Plans (MAP), is a replacement of the original Medicare Part A and B coverage by a private insurance company. Most often, for the same premium cost, MAPs cover items and services normally covered by Medicare and in addition offer drug coverage. Medicare Part D provides medication coverage through Medicare Prescription Drug Plans (PDP), private insurance companies offering varied medication plans for an additional monthly premium. Over the last 5 years, a growing number of Medicare beneficiaries have elected to receive Medicare coverage by contracting to have their benefits delivered by a MAP rather than through traditional Medicare, and have purchased medication coverage through a PDP.
As a result of confusion over whether MAPs and PDPs have the same statutory authority to seek reimbursement of conditional payments, including double damages permitted under the MSP Act, on December 5, 2011, CMS published a memorandum regarding MSP payment subrogation rights for Part C and Part D private carriers seeking reimbursement for payments made for services in which Medicare is a secondary payer. The memorandum made it clear that “CMS’ regulations at 42 CFR § 422.108 assign the right (and responsibility) to collect for these services to MAPs. Specifically, 42 CFR §422.108(f) indicates that MAPs will exercise the same rights of recovery that the Secretary of HHS exercises under the original Medicare MSP regulations in subparts B through D of part 411 of 42 CFR.” The memorandum also indicated that “these same regulations established in 42 CFR Section 411 supersede any State laws and that the MSP regulations at 42 CFR §422.108 extended to PDP sponsors at 42 CFR §423.462. Accordingly, PDP sponsors have the same MSP rights and responsibilities as MAPs.”
On June 28, 2012, the United States Court of Appeals for the Third Circuit published its decision on Humana Medical Plan and Humana Insurance Company v. GlaxoSmithKline, LLC, concluding that “any private party may bring an action under §1395y(b)(3)(A), as it establishes a private cause of action for damages.” As a result, the court found that “private parties like Humana can bring suit for double damages when a primary plan fails to appropriately reimburse any secondary payer. In addition, since 42 C.F.R. §422.108 states that a MAP will exercise the same rights to recover from a primary plan, entity, or individual that the Secretary of HHS exercises under the MSP regulations, the court found that the Medicare Act treats MAPs the same way it treats the Medicare Trust Fund for purposes of recovery from any primary payer.”
Over the last 5 years, several federal district courts and courts of appeal have ruled in the same manner. Therefore, upon settlement, judgment, award, or other payment, Medicare Advantage Plans, like Medicare itself, have begun to assert their right to recover payments made associated with the claim. Thus, Flagship highly recommends that any employer/carrier, defendant/insurer, or self-insured/TPA settling a claim with a Medicare beneficiary investigate the involvement of any Part C Medicare Advantage Plan or Part D Prescription Drug Plan and engage in their lien recovery process to resolve such reimbursement rights.
3. Medicare Set Asides
Although not specifically mentioned in the MSP Act, nor in any of its Code of Federal Regulations, and therefore completely voluntary, CMS has continued to regulate Workers Compensation Medicare Set Asides (WCMSA) through published policy memos, website announcements and alerts, and a review contractor guided by a published and revised Reference Guide. The consistent principle throughout these is that the establishment of a Medicare Set Aside account is designed to relieve Medicare of the obligation to provide future medical care for a beneficiary who requires continued care related to an accident when the beneficiary has been provided a settlement, judgment, award, or other payment. A portion of settlement funds are held in a separate, interest- bearing account and are to be used for Medicare covered accident related future medical services.
To date however, Medicare has not established a similar process for beneficiaries or primary payers to use to meet their MSP obligations with respect to future medicals in auto, liability, and no-fault insurance (including self-insurance) situations. Although no where near as formal a process as in workers compensation, Medicare has provided minimal guidance and policy in establishing that liability set aside allocations are the recognized method of protecting Medicare’s interest in accident cases. In contrast to having a national review contractor, CMS has developed an inconsistent methodology for review and approval of Liability Medicare Set Asides (LMSA), depending on the venue of the claim and availability of manpower at CMS regional offices throughout the country.
On June 8, 2016, and again on October 24, 2017, CMS published an announcement on its website indicating that it would be “considering the expansion of its voluntary Medicare Set-Aside Arrangements (MSA) amount review process to include the review of proposed liability insurance (including self-insurance) and no-fault insurance amounts.” The announcement also indicated that CMS plans to “work closely with the stakeholder community to identify how best to implement this potential expansion.” The announcement also informed that “CMS will provide future announcements of the proposal and expects to schedule town hall meetings later this year.”
As a result, whether a workers compensation case or an auto, liability, or no-fault case, Flagship highly recommends that set aside allocations be completed for Medicare beneficiaries that settle or release future medical benefits or for injured parties who will become Medicare beneficiaries within thirty (30) months of settlement. Failure to do so may result in denial of Medicare coverage and benefits to the beneficiary, continued conditional payment lien accrual, and/or litigation commenced by the beneficiary against the primary payer, or by CMS against the beneficiary, beneficiary’s counsel, or the primary payer.
a. Medicare Set Aside Allocation
Practically speaking, the amount of money placed in a Medicare Set Aside is not negotiable between the claimant, defendant, and insurer. Instead, Flagship uses its allocation process by coming up with claimant’s life expectancy, and then performing in-depth evaluation of the injured party’s medical records to determine the future medical treatment anticipated for the claimant. Next, a review is conducted of Medicare regulations to determine what part of that treatment Medicare would normally cover, as that is the only treatment for which money must be set aside. A projection is then made of the likely expenses for the covered treatment based upon the applicable medical reimbursement fee schedule. This is the amount that should be placed in the MSA.
The analysis necessary in each individual case to arrive at an appropriate amount with which to fund the MSA account is complex. It requires reference to the past medical expense history of the claim (including medical care and treatment, durable medical equipment, hospitalizations, and prescriptions), medical reports and records, life care plans, legal pleadings and court orders, and other detailed information necessary to make a reasonable medical expense projection. Every case is different. Each claimant will have different needs. Each case will require a review of the specific facts and circumstances involved.
b. MSA Allocation Approval by CMS
Involving CMS in the determination of the amount that will be allocated toward future medical expenses is the only way to insure Medicare eligibility after the funds are exhausted. As we have seen in recent years due to escalating prescription costs, since a proposed MSA allocation figure can be rejected by Medicare because it may seemingly attempt to shift claims payment responsibility to Medicare, the only way to truly ensure ongoing and future coverage is to secure CMS approval of the amount before finalizing the settlement. Otherwise, an unrecognized MSA allocation can affect the beneficiary’s eligibility for Medicare services and therefore the primary payers’ responsibilities regarding same.
In order to approve a proposed MSA, CMS must be provided with all of the relevant facts concerning the claimant’s injury and his or her medical treatment. Among many factors, CMS will consider are the beneficiary’s injury or illness, the age of the beneficiary (including an evaluation of whether the beneficiary’s condition(s) would shorten his or her life span, and if so, a life insurance company rated age documentation), prior and future medical needs of the beneficiary due to the injury or illness, as well as of those considered pre-existing in nature, the state law governing how long the insurer is obligated to cover the services related to the injury or illness, whether the beneficiary’s condition is stable or if medical deterioration is foreseen, and the living arrangement of the beneficiary and the level of continued care required.
CMS is not able to review every MSA allocation. For example, in workers compensation cases, due to limited manpower and resources, Medicare has indicated that if the claimant is a current Medicare beneficiary at the time of your settlement, Medicare will review an MSA allocation only if the settlement is for more than $25,000. While Medicare recognizes that there is no statutory basis for the voluntary submission, the stated benefit to the Medicare beneficiary is that once an allocation is approved, future Medicare coverage is assured after the approved allocation has been appropriately exhausted. The primary payer is assured MSP compliance.
If the claimant is not yet a Medicare beneficiary, but can reasonably be expected to become Medicare-eligible within 30 months of the settlement and the settlement is above $250,000, Medicare expects that its interests will be taken into account and strongly encourages all parties involved to consult with Medicare prior to a final settlement. Therefore, if the parties are settling a claim where there is a reasonable expectation that Medicare-covered medical attention will be needed in the future, and the settlement is over $250,000, the parties should make a reasonable allowance for the future projected costs. If such an allowance is not made in the form of an MSA allocation, Medicare may claim the entire settlement amount as an allowance for medicals. And, Medicare will pay no benefits to the claimant for any medical services that may be linked to the injury until the settlement amount is exhausted. As previously indicated, this may create potential exposure in auto, liability, and no-fault situations.
c. MSA Account Administration
Medicare Set Asides may be administered by the claimant. Several stringent guidelines however, must be followed if this option is utilized. In fact, beneficiaries are held to the same standards to which a professional custodian is held with regard to what may and may not be paid from the set aside account. In addition, the same reporting requirements must be met.
Medicare Set Asides may also be administered by professional custodians. Indeed, if the amount of the MSA allocation is significant, or the beneficiary is unable to handle funds, or the expected medical care is lengthy or complicated, it is often advisable to utilize a professional custodian for the administration of the fund. Medical providers may send bills for their services directly to the custodian. The custodian pays the medical bills in accordance with the applicable fee schedule. The custodian is limited, however, in what may be paid from the MSA account with regard to medical expenses. First, the custodian may only pay for treatment that Medicare would usually cover. In addition, the fund must only be used to pay for medical expenses connected with the accident-related injury.
At least on an annual basis, the custodian must send reports to the appropriate Medicare contractor and/or regional office that indicate all of the expenditures from and deposits made into the MSA account for that period of time. When the funds are completely exhausted, the custodian must then forward a report to the appropriate Medicare contractor and/or regional office detailing all expenses paid from the MSA account and all deposits for the life of the fund.
In order to preserve allocated funds from premature exhaustion, improper use or diversion, Flagship highly recommends that either self administration support be provided to the claimant, or a professional custodian be hired to administer the MSA account funds. Both self-administration support and professional administration should be monitored by healthcare professionals and medical cost experts to ensure that the MSA account funds are properly applied and that Medicare annual accounting requirements are satisfied.
The Medicaid program provides medical benefits to aged, disabled, and low-income people. Although the federal government establishes general guidelines for the program, the Medicaid program requirements are actually established by each State. Whether or not a person is eligible for Medicaid will depend on the State where he or she lives. States are required to include certain types of individuals or eligibility groups under their Medicaid plans, but may also include other groups. Because of the different eligibility requirements and benefits available from state to state, it is highly recommended that whenever an employer/carrier, corporate defendant/insurer, self-insured/TPA settles a claim with a Medicaid beneficiary, the parties investigate the matter to determine whether Medicaid has a lien, and if so, assist with reimbursement of same, and whether receipt of settlement funds will affect claimant’s eligibility for Medicaid, and if so, assist with the creation of a Special Needs Trust (SNT) and administration of same.
a. Reimbursement of Medicaid Lien
Section 1902(a)(25) of the Social Security Act, 42 C.F.R. §433.135, requires that States take all reasonable measures to ascertain the legal liability of third parties to pay for medical services furnished to a Medicaid recipient. Pursuant to 1902(a)(25), all states have passed statutory provisions providing state agencies the authority to collect all amounts paid by the state Medicaid system that are determined to be related to a liable third party(ies). Most state statutes around the country require that recipients or their legal representatives, and most recently the employer/carrier, corporate defendant/insurer, or self-insured/TPA, notify the state agency of the existence of any third party settlement, judgment, award, or other benefit.
Under most state laws, the state agency has a statutory lien for the full amount of medical care furnished and paid for by the Medicaid program. Under most state laws, this lien attaches and is perfected automatically when a recipient first receives treatment for which the state agency may be obligated to provide payment under the Medicaid program. Therefore, much like Medicare conditional payments, upon receipt of a settlement, judgment or award, benefits that have been paid by the State must be reimbursed according to State and Federal Law. Failure to repay a Medicaid lien may result in interruption of benefits, and/or litigation. As a result, Flagship highly recommends investigating to determine whether Medicaid has a lien, and if so, assist with reimbursement of same.
b. Special Needs Trusts and SNT Administration
Special Needs Trusts (SNT) provide benefits to, and protect the assets of, physically or mentally disabled persons and still allow such persons to be qualified for and receive governmental benefits, especially Supplemental Security Income (SSI) and Medicaid benefits. Special Needs Trusts are frequently used to receive an inheritance or personal injury settlement proceeds on behalf of a disabled person in order to allow the person to qualify or continue his or her eligibility for SSI and Medicaid benefits.
Special Needs Trusts are often funded with the proceeds of a workers compensation claim or liability insurance settlement. A common feature of SNTs in all common law jurisdictions is that they may be administered either by family members or by trustees appointed by the court. Whether administered by a family member or a professional custodian, the parties must make sure that the SNT is set up to cover the expenses of goods and services that are supplemental to the beneficiary’s basic needs (food, shelter and clothing) such as medications (essential and non-essential) not covered by Medicaid, medical equipment not covered by Medicaid, and medical, nursing and dental care not covered by another source.
The SNT cannot be used to pay for all of claimant’s needs on a regular basis or the trust will count as a resource to the beneficiary, which can affect eligibility for government benefits like SSI and Medicaid. As a result, the trustee must use discretion in making distributions, keeping the beneficiary’s eligibility for government benefits in mind at all times. Consequently, Flagship highly recommends that whenever an employer/carrier, corporate defendant/insurer, self-insured/TPA settles a claim with a Medicaid beneficiary, the parties investigate to determine whether receipt of such settlement funds will affect claimant’s eligibility for Medicaid, and if so, assist with the creation of a Special Needs Trust and administration of same.
In brief, in order to establish the most efficient model to achieve an exceptional Medicare program which will result in consistent, trusted, and manageable MSP compliance, Flagship highly recommends the following:
- Because of potential up to $1,000 daily fines per claim, that compliance with the specifics of Mandatory Insurer Reporting though Medicare Query Function and Claim Input File become paramount throughout the claims resolution process.
- That parties do all they can possibly do to identify the proper amount of the conditional payment(s) made by Medicare in any claim and to be certain that Medicare’s subrogation rights have been satisfied. Failure to resolve conditional payments could result in CMS recovering up to the entire settlement amount (minus certain procurement costs) from the Medicare beneficiary and seeking double damages from the primary payer as noted above.
- That any employer/carrier, defendant/insurer, or self insured/TPA settling a claim with a Medicare beneficiary investigate the involvement of any Part C Medicare Advantage Plan or Part D Prescription Drug Plan and engage in their lien recovery process to resolve such reimbursement rights.
- Whether a workers compensation case or an auto, liability, or no-fault case, that set aside allocations be completed for Medicare beneficiaries that settle or release future medical benefits or for injured parties who will become Medicare beneficiaries within thirty (30) months of settlement. Failure to do so may result in denial of Medicare coverage and benefits to the beneficiary, continued conditional payment lien accrual, and/or litigation commenced by the beneficiary against the primary payer, or by CMS against the beneficiary, beneficiary’s counsel, or the primary payer.
- In order to preserve allocated funds from premature exhaustion, improper use, or diversion, that either self-administration support be provided to the claimant, or a professional custodian be hired to administer the MSA account funds. Both self-administration support and professional administration should be monitored by healthcare professionals and medical cost experts to ensure that the MSA account funds are properly applied and that Medicare annual accounting requirements are satisfied.
- Because of the different eligibility requirements and benefits available from state to state, that whenever an employer/carrier, corporate defendant/insurer, self-insured/TPA settles a claim with a Medicaid beneficiary, investigate and determine whether Medicaid has a lien, and if so, assist with reimbursement of same, and whether receipt of settlement funds will affect claimant’s eligibility for Medicaid, and if so, assist with the creation of a Special Needs Trust (SNT) and administration of same.
About Flagship Services Group
Flagship Services Group is the premier Medicare compliance services provider to the property & casualty insurance industry. Our focus and expertise has been the Medicare and Medicaid compliance needs of P&C self-insureds, insurance companies, and third party administrators. We specialize in P&C mandatory reporting, conditional payment resolution, and set aside allocations. Whether auto, liability, no-fault, or work comp claims, we have assembled the expertise, experience and resources to deliver unparalleled MSP compliance and cost savings results to the P&C industry. To find out more about Flagship, our folks, and our customized solutions, please visit us at www.flagshipservicesgroup.com. To speak with us about any of our P&C MSP compliance products and services, you may also contact us at 888.444.4125 or firstname.lastname@example.org.
About Rafael Gonzalez
Rafael Gonzalez, Esq. is President of Flagship Services Group. He speaks and writes on mandatory insurer reporting, conditional payment resolution, set aside allocations, CMS approval, and MSA and SNT professional administration, as well as the interplay and effect of these processes and systems and the Affordable Care Act throughout the country. Rafael blogs on these topics at Medicare Compliance for P&C Insurers at www.flagshipservicesgroup.com/blog. He is very active on LinkedIn, Twitter, Instagram, and Facebook. He can be reached at email@example.com or 813.967.7598.