Medicare Set Aside Bulletin

UPDATE ON MEDICARE'S POSITION REGARDING FUTURE MEDICAL EXPENSES IN THIRD PARTY LIABILITY SETTLEMENTS.

In an earlier article, "MEDICARE SET ASIDE ARRANGEMENTS FOR FUTURE MEDICAL EXPENSES IN THIRD PARTY LIABILITY SETTLEMENTS", (Volume #1 of The Medicare Set-Aside Bulletin, February 14, 2005), we reported that CMS recently announced its position that Medicare retains its secondary payer status after settlement of third party liability (TPL) claims, as well as worker's compensation (WC) claims. As discussed in that earlier article, the Medicare secondary payer regulations do not appear to grant CMS the same powers in a TPL settlement as in a WC settlement to determine the reasonableness of an allocation to future medical expenses; or to disregard a TPL settlement that CMS may feel to be an attempt to shift responsibility for future medical expenses to Medicare.

In spite of this, it appeared initially that CMS was going to require submission and review of Medicare Set-Aside Arrangements (MSA's) in TPL settlements meeting the WC review criteria. Now, it appears that CMS is not ready to go quite so far, at least not yet.

CMS' has not yet published policy on this issue in an official written statement. Representatives from the agency have indicated that they are preparing new "Answers to Frequently Asked Questions" (FAQ's) that will hopefully provide guidance on what the agency expects or requires. Those FAQ's are to be published on CMS' web site, but CMS has not stated when this will be.

Until the FAQ's are published, the following guidance, provided very recently by the Medicare Secondary Payer (MSP) Coordinators from two of the CMS Regional offices, is offered:

CMS' position is that we expect any funds that are allocated for future medicals to be spent before any claims are submitted to Medicare for payment and the beneficiary will probably be asked about it on the initial enrollment questionnaire that is systems-generated, but, we are not asking that MSA's be established in theses cases, nor are we reviewing/approving/denying them.

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CMS has no current plans for a formal process for reviewing and approving liability Medicare set-aside arrangements. However, even though no formal process exists, there is an obligation to inform CMS when future medicals were a consideration in reaching the liability settlement, judgment or award as well as any instances where a settlement, judgment or award specifically provides for medicals in general or future medicals.

Thus, CMS currently has no official procedure for review of Medicare Set-Aside Arrangements (MSA's) in TPL settlements and likely would neither review, approve or deny any MSA that a settling TPL plaintiff might choose to submit. However, CMS does require that the parties "reasonably consider Medicare's interests" in TPL settlements. Further, it is necessary to notify CMS of any TPL settlement in which future medical expenses is a consideration or in which there is a specific provision for past or future medical expenses. Medicare will require that any funds which are allocated to future medical expenses in the settlement be spent on injury related medical expenses before any claims are submitted to Medicare.

This leaves the parties to a TPL settlement in much the same situation as settling WC claimants found themselves, at least as recently as 1995. Then, as now, the settling WC claimant was expected to apply the portion of his or her WC settlement allocated to future medical expenses solely to payment of work related future medical expenses before Medicare would cover those items. However, then there was no formal vehicle or process in place to accomplish this. WC claimants were left completely on their own.

Most claimants did not have the experience or sophistication to keep the meticulous records needed to verify proper application of their settlement funds, especially where those funds might take several years to exhaust. Further, most claimants were not equipped to determine which of their medical expenses were of the type normally covered by Medicare or what the proper payment amounts should be. The risk that claimants would make errors in the application of funds from their future medical expense allocations or that they would not keep proper accounting records and receipts was colossal. It was a situation fraught with potentially disastrous consequences for every settling WC claimant, as well as the settling employer and its WC insurance carrier.

This situation gave rise to the invention and use of the first Medicare Set-Aside Trust in 1995 by Denver, Colorado attorney, Susan G. Haines. The original purpose of the Medicare Set-Aside Trust was to provide a structured and safe means for the settling WC claimant to reasonably consider Medicare's interest with the "blessing" of CMS. This continues to be the primary purpose behind today's MSA's.

For the next 5 years at least, it was largely the work of Ms. Haines' firm that resulted in CMS eventually developing an official policy and procedure regarding the use of MSA's in WC settlements. Before the publication of CMS' policy memorandum on July 23, 2001, "Workers' Compensation: Commutation of Future Benefits", there was little guidance from the government regarding its official position on the use of MSA's. Since that time, CMS has published four additional memoranda defining and refining CMS policies and procedures for the use, submission, approval and administration of MSA's. All of CMS' memoranda have been published as FAQ's on CMS' web site: http://www.cms.hhs.gov

Until CMS publishes similar policy regarding future medical benefits in TPL settlements, each plaintiff settling a TPL claim will have to determine a safe means to ensure that his or her future injury related medical expenses will be covered by Medicare. Thus, it is currently advisable in TPL settlements to create and fund some type of arrangement to ensure payment of future medical expenses as part of the terms of settlement. This will be extremely important in the event the plaintiff later receives a denial of benefits from Medicare for future injury related care. The amount with which to fund such an arrangement and the type of arrangement used will depend on the facts of each individual case.

It will also be very important for the plaintiff's attorney to ensure that language is included in the settlement documents allocating a specific amount to future medical expenses; and to properly document the plaintiff's file with a life care plan or some similar expert projection of future medical expenses. This should allow the plaintiff to later demonstrate that Medicare's interests were reasonably considered.

The current position of CMS appears to recognize that the agency's powers are more limited in TPL settlements than in WC settlements. However, what little has been said by agency representatives at this point indicates that CMS has not altogether foreclosed the possibility of requiring submission and review of MSA's in TPL settlements in the future. Unless and until a federal appeals court may determine limits on CMS's powers regarding future medical expenses in TPL settlements, failure to take some precautions to ensure compliance with CMS's current policy in this area could result in a denial of Medicare benefits for future injury-related medical expenses for the settling plaintiff.

BIG NEWS!

The "National Alliance of Medicare Set-Aside Professionals" Launches the First Non-Profit Organization Dedicated to Serving the Medicare Set-Aside Industry!

On February 15, 2005, the National Alliance of Medicare Set-Aside Professionals (NAMSAP) announced its official launching. NAMSAP is the first non-profit organization in the country dedicated to serving professionals in Medicare Set-Aside practice. For complete information about NAMSAP, visit their web site: www.namsap.org

Introducing the Medicare Set-Aside Arrangements BBS! We have created a forum where lay persons, professionals or anyone else may post questions, comments and news about Medicare Set-Aside issues. Please visit, register, log in and share your thoughts, questions and experience! The Medicare Set-Aside Arrangements BBS is located at the following URL:

http://jjcelderlaw.netfirms.com/ElderLawForum/nfphpbb/

We look forward to hearing from you!

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