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|Settlements and Medicare in Workers’ Compensation Claims Handling--The difficult part.|
By Anthony Santos - October 13, 2016
When resolving any workers’ compensation claim involving medical treatment, the parties are required by federal law, pursuant to the Medicare Secondary Payer Act (MSP) 42 U.S.C. 1395y (b)(2), to consider Medicare’s interest with regard to the settlement of the medical portion of the claim. The intent of the MSP is to prevent settling parties from shifting the responsibility for payment of medical expenses from a primary payer to Medicare.
Everyone in the industry knows the difficulties settlement by Compromise and Release entail with Medicare and CMS (Centers for Medicare Services) issues. Several years ago, an emphasis was placed on Compromise and Release agreements and Medicare. It became mandatory, by the majority of the carriers, that all settlements via C&R must have a Medicare Set Aside agreement (MSA).
To those that have been involved in this business for a long time, we never cared or worried about Medicare. Then, a lawsuit over conditional payments was brought in a civil case. A case was settled without taking Medicare’s interests into consideration. What? Who cares about that. Let’s settle and close the case. Remember those days? Yes, a long time ago it seems.
Conditional payments? What are those, you ask. Simply put, conditional payments are medical treatment services that Medicare pays for if the primary insurer does not pay promptly (i.e. delayed cases). Per the CMS website, it states, in part… “Under the Medicare Secondary Payer law (42 U.S.C. 1395 y (b)), Medicare does not pay for items or services to the extent that payment has been or may reasonably be expected to be, made through a no-fault or liability insurer or through a workers’ compensation entity.” In laymen’s terms, this means Medicare should not bear the responsibility for providing treatment for an injury that is the responsibility of another party or their insurance carrier. Defendants have to either obtain a MSA or include some language that we believe covers defendants exposure should Medicare decide to pursue recovery. Well, that may not be good enough anymore.
If CMS determines that your MSA or protective language did not fully take Medicare’s interests into consideration, then your MSA is deemed insufficient and Medicare can take credit for the full amount of the settlement. For example, you have a 52-year old employee with accepted industrial injury. You have a $100,000.00C&R, PD equals $62,000.00 and your MSA is $25,000.00 (balance is the extra buy out for misc costs of alleged penalties, part D expenses, etc). A few years later, the applicant applies for and is granted Medicare. He/she seeks treatment for the same body part included in the C&R. Medicare (CMS) decides that the MSA is undervalued and they do not accept it. In this scenario, CMS gets to take credit for the full amount of the settlement, not the MSA amount, as they believe the settlement did not take their interests into consideration. The applicant now has to show receipts for treatment at $100,000.00 versus the $25,000.00 the MSA once represented. The applicant can then sue his-her attorney and the carrier for not informing him of his rights properly. MSA’s are common practice in the workers compensation and often times unreasonable delay cases where CMS approval has been requested.
Recently the 11th Circuit U.S. Court of Appeals released a case that discussed conditional payments made by a third party (private health care) that provided what essentially amounts to “Part C”, non covered Medicare services, called Medicare Advantage Plans (MAPS). These are policies that are provided by private carriers that are well known to everyone… Health Net, Anthem, AARP, etc.
It has been determined by appellate courts that third party carriers can now assert a lien against the settlement, regardless if you knew they had made conditional payments. It doesn’t matter if settlement has already been approved and paid, or you did not receive notice from the third party carrier or the applicant. They can pursue reimbursement from the carrier, not the applicant or his attorney. They can also assert “double damages”. While this involved a civil case and not workers compensation, the basic rule is if Medicare is not reimbursed by the beneficiary or other party within 60 days of payment, the primary plan (comp carrier) must reimburse Medicare regardless if they reimbursed the beneficiary or other party. 42 C.F.R. § 411.24(i)(1).
In this case, Humana paid for medical treatment, the applicant stipulated that there was no Medicare lien and settlement was approved. Thus, indemnification language will not protect the carrier from reimbursement rights from a MAP but they could pursue a civil action against the applicant. Here is a link to the case for review: http://media.ca11.uscourts.gov/opinions/pub/files/201511436.pdf
In summary, after reviewing this case, it should be a mandatory practice by all adjusters or defense attorneys who prepare a C&R, to include language that is a “hold harmless” type agreement for any potential “Part C” coverage provided a private carrier. A proof of representation or consent to release must be signed by the applicant and sent to CMS for release of conditional payment information. If there is a concern about potential conditional payments, err on the side of caution and confirm no payments were made, through Medicare. Here is a link to the CMS website, specifically outlining language that should be used on your form. https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Beneficiary-Services/Medicares-Recovery-Process/Downloads/Consent-to-Release-Model-Language-.pdf
by Anthony Santos; all rights reserved by adjustercom and Lonce LaMon, copyright by adjustercom and Lonce LaMon.