March 25, 2009
Previously published on March 2009
Using the Medicare Secondary Payer Act and the new SCHIP Extension Act (passed in December of 2007), Medicare is bulling its way into workers' compensation and liability settlements. In an attempt to recover conditional payments and not expend future funds in cases where another carrier or self-insured might be liable, these new Medicare requirements are creating a minefield of problems, which could explode during any workers' compensation or liability settlement.
In order to accurately examine the effect of these two statutes, and their possible interplay, some explanation is necessary.
Medicare Secondary Payer Act
The Medicare Secondary Payer Act provided to Medicare the power to collect any "Medicare liens" from any first party carrier or other participant who could pay or receive money in a workers' compensation or liability case. Furthermore, the Act provided that if Medicare has filed suit against any primary payer or recipient, Medicare may receive a 100 percent penalty, in addition to the amount that a payer owes to it.
The Medicare Secondary Payer Act covers all carriers, self-insureds, no fault insurance, and workers' compensation insurance.
SCHIP Extension Act of 2007
The SCHIP Extension Act of 2007 increased Medicare's ability to track these cases because the Act empowered Medicare to require workers' compensation and liability carriers, as well as self-insureds, to report all current claims involving Medicare beneficiaries being paid on July 1, 2009, and continuing. The Act affords to Medicare the right to collect a $1,000 per day fine per person for cases in which the carrier or a self-insured fails to report information about the claimant/plaintiff's identity, social security number, medical condition, date of injury, and date and amount of settlement.
A built in "Catch 22" exists with regard to this information because the Act does not require the claimant/plaintiff to provide to the reporting entity any information; therefore, the claimant/plaintiff controls the flow of the information to the responsible reporting entity. If the claimant/plaintiff refuses to cooperate, then this could place the responsible reporting entity in the unenviable position of not being able to comply with the legislative mandate. An additional practical problem exists with regard to the exchange of information between Medicare and the reporting entity as the proposed website to effectuate the electronic transfer of the information, commencing, May 1, 2009, has not been established.
Recommendations Regarding the SCHIP Reporting Requirements
1. All reporting entities should register with Medicare between May 1, 2009, and July 1, 2009, to avoid penalties. A self-insured should discuss with its broker or TPA how it must meet the reporting requirements. A self-insured, although the responsible reporting party, may designate an agent who may fulfill the reporting requirements.
2. Now is the time to begin to contact all claimants/plaintiffs of record to determine whether they are Medicare eligible. The reporting entity must advise Medicare of any claimant/plaintiff to whom it pays workers' compensation benefits or liability settlement monies and who is Medicare eligible.
3. You may wish to settle as many cases as possible before May 1, 2009, the day on which the reporting requirements take effect.
4. Please note that www.cms.hhsgov/mandatoryinesrep.com is the website at which one may secure the most current information about the reporting requirements. However, also note that the forms on which an entity must report to Medicare all pertinent claimant information are a work-in-progress.
How Will the Medicare Secondary Payer Act and SCHIP Extension Act Impact Workers' Compensation Cases?
The Medicare Secondary Payer and the SCHIP Extension Acts will impact mainly older, unsettled cases. Medicare will now be able to determine the identity of every workers' compensation claimant and the conditions for which he or she receives benefits. Medicare will compare the newly garnered information about the claimant with the information that it has in its possession about the claimant in order to determine whether it is paying for the workers' compensation injury. If Medicare has afforded to the claimant a payment for the same condition, then Medicare will forward to the workers' compensation carrier a letter in which it asks the carrier to repay it. It is possible that the workers' compensation carrier may have large repayment responsibilities for their older claims.
What is the Impact on Settling Workers' Compensation and Medicare's Future Interest?
For workers' compensation cases, the impact of these Acts upon settling workers' compensation cases is negligible because since 2001, the Medicare Set-Aside system has been in place, under which the participants close their cases and bind Medicare and its future interests to the figure that the parties propose as the claimant's future medical costs. As you know, under the Set-Aside procedure, Medicare formally reviews the claimant's future medical costs, and if Medicare approves of the sum, the parties place the sum in a separate account that the claimant taps to pay his medical expenses for his life time. The Set-Aside amount about which Medicare agrees, binds the agency.
How Will the Medicare Secondary Payer Act and SCHIP Extension Act Impact Liability Cases?
The SCHIP Extension Act transforms the landscape of a liability settlement where a Medicare claimant is involved. Liability carriers must now report all settlements involving a Medicare beneficiary. This is compounded by the fact that whether or not a plaintiff is qualified for Medicare is controlled by the plaintiff himself. Aggressive discovery early on in the litigation will be necessary.
Although Medicare was lax in pursuing its liens in the past, that will change now that the agency will have an ability to track all settlements. The Act provides Medicare with a method to track every settlement, maintain the information in an electronic format, and generate conditional payment letters. Thus, even if the parties to a settlement exchange Releases, but Medicare's lien is not paid, the medical portion of the settlement remains outstanding.
This issue is further complicated if there are future medical payments or damages covered by the settlement. Unfortunately, the agency does not have any guidelines in effect to review liability settlements for future payments.
Recommendations to Protect the Interests of All Parties in Liability Settlements
1. Determine immediately when a case or claim is opened whether the claimant is a Medicare beneficiary.
2. If so, determine whether the case involves only past medical payments or also future medical damages.
3. If the case involves only past medical payments, send a letter to the COBC (Coordination of Benefits Contractor) requesting an accounting of Medicare's conditional payments.
4. If the case involves future medical care, determine whether the agency will review the proposed settlement. If so, the agency will establish in writing a Medicare set-aside amount, which is made part of the settlement.
5. If Medicare denies review of the settlement, the parties must establish their own solution. This author suggests establishing a Medicare set aside account as part of the settlement, which would then be monitored by the plaintiff or a trustee.
6. Alternatively, the parties could file a Petition to Approve a private set-aside arrangement, similar to a Petition to Approve a Minor's Compromise. The court would then issue an Order governing how Medicare would be paid via the settlement funds.
Conclusion
The passage of the SCHIP Extension Act now provides Medicare with the power it needs to monitor and involve the agency in the settlements of both workers' compensation and liability matters. Our clients will need to be diligent in establishing a system to track all matters involving a Medicare beneficiary, as well as monitor all claims early on to determine if the Act will be triggered in a particular claim.
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