This article has been published in "The Advocate", a monthly publication of the Arizona Association for Justice/Arizona Trial Lawyers Association, February 2010 issue, @2010 by Steven J. Bruzonsky, Esq.
MORE ON MEDICARE SET-ASIDES PERSONAL INJURY & MEDICAL MALPRACTICE
(This is an update of "Liens Corner" articles published March and April 2009 concerning Medicare Set-Asides in Worker's Compensation cases, and whether Medicare Set-Asides are required for personal injury or medical malpractice claims which do not involve Worker's Compensation work-related injuries.)
The Centers for Medicare & Medicaid Services (CMS), through use of written Memoranda and by posting website (http://www.cms.hhs.gov/) information, has formally "encouraged" (some might say "strong armed") the use of Medicare set-asides (MSAs) for all Worker's Compensation (WC) claims involving either an award of future medical expenses or a lump sum payment which considers future medical expenses; and CMS has also mandated set-asides in certain WC claims.
CMS certainly could issue new MSP Memoranda, if deemed practical, to provide for MSAs in non-WC personal injury or medical malpractice cases. The language of the Medicare MSP statute, 42 U.S.C. § 1395y(b)(2) "Exclusions from Coverage and Medicare as Secondary Payer" is broad enough to require set asides or credits for future accident-related medical care, in lieu of that care being paid by Medicare. The first CMS MSA Memo, for WC injury claims only, was issued in 2001 and was ignored for about five years before any WC carrier took it seriously. Even then many WC carriers tried to avoid the MSA process by including hold harmless indemnity language in settlement agreements. MSA is now institutionalized for WC injury cases. To date, I am not aware of any legal challenges to MSAs in WC cases, including the contention that regulations must be properly promulgated with Federal Register notice and comments as opposed to MSP Memoranda.
To date, Medicare hasn't implemented any formal procedure, regulation or even Memoranda to require MSAs in non-WC personal injury or medical malpractice cases. CMS Memoranda and the CMS website are silent with no discussion of MSA's for non-WC personal injury or medical malpractice cases.
Once you pay the "final" lien amount, Medicare issues a "General Release" "which waives Medicare's right to chnge the amount of money it is accepting in satisfaction of its claim, and precludes Medicare from later asserting a claim against any outstanding amount not included in the satisfaction." MSP Manual, Chapter 7, § 220.127.116.11
Here in Arizona, we are in the San Francisco Region, Division of Medicare Financial Management, CMS. In November 2008, after I inquired regarding the subject of non-WC personal injury and medical malpractice MSA requirements if any, Tom Bosserman, of that office, advised me by e-mail that CMS "has no current plans for a formal process for reviewing and approving liability Medicare set-aside arrangements", though he went on to state that "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 Liability settlement, judgment, or award specifically provides for medicals in general or future medicals."
On July 3, 2002, Tom Bosserman wrote to Sally Hart, Center for Medicare Advocacy in Tucson, the following: " - - - You had requested documentation verifying that Liability insurance is primary to Medicare for accident-related medical services between the Date of Accident and the Date of Settlement, and that Medicare becomes the primary payer for accident-related medical services after the Date of Settlement. I have been unable to locate any formal Memorandum that addresses this issue. However, it has been longstanding Medicare policy that Medicare is the primary payer for accident-related medical services obtained after the Date of Settlement. The only exception to this policy would be if a Liability settlement, judgment, or award specifically includes an allocation or designation for future accident-related medical services. In such a situation, the Liability insurance would remain the primary payer for accident-related medical services until such allocation or designation is exhausted. - - -"
The American Association for Justice Leaders Forum issued "Emergency Medicare Set Aside Information", dated August 11, 2009, which discusses the following:
(1) During the March 24, 2009 Section 111 Mandatory Insurance Reporting (MIR) Town Hall teleconference, Barbara Wright, CMS' Acting Director of the Division of Medicare Debt Management, stated that the MSA process is totally separate from the mandatory insurance reporting (MIR) process, that they don't anticipate changing their routine recovery process; that WC injury cases use a formal review process which makes MSAs recommended; and that liability "does not have the same formal review process although our regional offices will consider review of proposed liability set-aside amounts depending on their particular work load and whether or not they believe significant dollars are at issue." (Transcript pg. 24).
(2) CMS has issued several Alerts explaining Section 111 MIR, which do not include any intent to require MSAs for non-WC liability claims, including "The new Section 111 requirements do not change or eliminate any existing obligations under the MSP statutory provisions or regulations." (CMS Alert 2/23/09).
(3) The Congressional Research Services analysis of Section 111 reiterates that it is a reporting requirement and makes no mention of the need for MSAs in non-WC liability cases.
CMS gave a presentation on Medicare liens at the June 2009 Arizona State Bar convention, and the slide show presented states that the 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 Liability settlement, judgment, or award specifically provides for medicals in general or future medicals." Submitting a MSA proposal to CMS in a non-WC injury claim is a waste of time because it will not be reviewed nor approved, which CMS admitted at that seminar.
If you Google "Medicare Set Asides" you will find some articles promoting the use of MSAs in non-WC injury cases. Every such article that I have found "comes from a company that is part of the MSA cottage industry that did not even exist until about five years ago, and is now actively engaged in major self-promotion and expansion of that industry. " [quoting Arizona Association for Justice/Arizona Trial Lawyers (AAJ/AzTLA) member Joel Friedman]. Keep in mind that Medicare will have its hands full processing many more Medicare lien claims once the newly required Mandatory Insurance Reporting (MIR) becomes effective on January 1, 2010. (See my September 2008 "Liens Corner" article for a discussion of Medicare's MIR process.) For the foreseeable future, Medicare will be too busy implementing MIR and processing lien claims to worry about trying to set up a new process for MSAs in non-WC personal injury and medical malpractice claims. Whereas currently the state industrial commissions approve MSAs as part of WC settlements and awards, there is no such institutionalized process on non-WC personal injury and medical malpractice claims. Non-WC personal injury and medical malpractice claims often involve substantial questions concerning pre-accident medical condition and whether future care would have been necessary regardless of the accident, and future medical costs may be difficult to even estimate. There may be comparative negligence considerations. Or there may be insufficient insurance policy limits to cover all damages. Is there any doubt that for Medicare to come up with a procedure to institutionalize MSAs for non-WC personal injury and medical malpractice claims, that Medicare would need to add substantial additional staff and develop a complex procedure for determining accident-related future medical costs.
Since MSAs are clearly not required for non-WC personal injury or medical malpractice claims, why pay to set up a MSA for a non-WC injury claim when such is not currently required?
Attorney Friedman suggests that when accident-related future medical costs already have been or can fairly easily be estimated (I would add to that if by chance the settlement agreement or judgment specify an award for future medical costs) that you might want to consider setting up a fund to pay for the future medical expenses. A bank account with a debit card could even be set up for this purpose.Whether the client uses those funds to pay future accident-related medical costs is then the client's decision. In any event, the funds will be there should Medicare refuse to pay.
A special thanks to AAJ/AzTLA members Joel Friedman and Frank Verderame for their assistance as I wrote this article.