Bar News - December 16, 2011
Business Law & Business Litigation: New Medicare Secondary Payer Act Has Teeth: How to Protect Your Clients
By: Tamara Smith Holtslag and Jennifer L. Rousseau
More stringent requirements and penalties imposed by the Medicare Secondary Payer Act (MSP) could potentially expose your clients to liability for reimbursement payments to Medicare.
The new provisions in the MSP following the enactment of the Medicare Medicaid and SCHIP Extension Act of 2007 (MMSEA) should prompt defense counsel, in particular, to take another look at the reporting requirements for claims involving Medicare beneficiaries. While these requirements were initially scheduled to go into effect in 2010, the Centers for Medicare and Medicaid Services (CMS) have delayed the implementation of some provisions until January 2012. More information. Going forward, counsel can minimize the risk of running afoul of these heightened requirements by following certain practices and considering Medicare’s interests throughout the course of litigation.
While the MSP places the responsibility to protect Medicare’s interest on the plaintiff, defendant and counsel, the stiff penalties associated with the MMSEA’s enhanced reporting requirements place a particular burden on defendants and insurers. It is the responsibility of the defendant, as the potentially liable party and payer to the plaintiff/claimant, to report the required information to the Medicare Coordination of Benefits Contractor (COBC) for a determination of whether the claimant is Medicare eligible.
If the claimant is receiving Medicare benefits, or is eligible to receive benefits, the defendant must report to CMS all settlements, awards, or judgments to the claimant. Thus, this article is particularly germane to the practice of defense counsel; but plaintiff’s counsel should be equally aware of these more stringent reporting requirements. Further, readers should appreciate the breadth and complexity of Medicare compliance and inform themselves of its nuances that are well beyond the scope of this article.
The general purpose of the MSP is to ensure that Medicare does not pay for medical expenses arising from an incident if another party may be liable for the cost of the care. The MSP makes Medicare a secondary payer for these expenses, and the party responsible for the harm the primary payer. Primary payers may include liability insurers, self-insurance plans, no-fault insurers, workers’ compensation plans, and any other party who pays money to an injured Medicare beneficiary.
Through the enactment of the MMSEA, Congress amended the MSP by adding teeth in the form of reporting requirements and steep penalties (42 U.S.C. § 1395y (b)) for failure to comply with them. Consistent with the MSP’s intent to prevent Medicare from paying for healthcare expenses that should really be paid by another responsible party, the MMSEA now requires liability insurers to determine the Medicare enrollment status of claimants and report this information to the Secretary of Health and Human Services. Of note, the penalty to the insurer for noncompliance is $1,000 per beneficiary, per day of noncompliance.
To comply with reporting requirements, defense counsel should seek information from the claimant, at the early stages of the case, to determine whether the claimant is a current Medicare beneficiary or Medicare eligible. This information should include: the claimant’s date of birth (and death, if applicable); Social Security number and/or Medicare Health Insurance Claim Number; whether he or she receives Social Security disability benefits and how long he or she has received them; and whether he or she suffers from kidney disease or end-stage renal disease (thus rendering them Medicare eligible). By obtaining the claimant’s vital personal information, an attorney can and should check the claimant’s Medicare status.
Defense counsel should also make a habit of including a question seeking this information in targeted interrogatories to the plaintiff. Likewise, defense counsel should be prepared to have an informed discussion with plaintiff’s counsel about the MMSEA and MSP and why the information is necessary, as these reporting requirements are still relatively new and unfamiliar to many practitioners.
In the event the case ends in settlement, defense counsel must take Medicare’s interests into account when crafting the settlement agreement and release. When a party pays a settlement to a Medicare beneficiary, the MMSEA requires that the claimant use the settlement proceeds to pay for treatment of accident-related injuries, and that either the Medicare beneficiary or the other party reimburse Medicare for accident-related claims paid by Medicare within 60 days. Defense counsel should always include language in the settlement agreement requiring the claimant to indemnify the defendant for any failure to reimburse Medicare.
More difficult questions arise, however, when settling a case with a claimant who is not a current Medicare beneficiary, but who could in the future seek Medicare benefits for treatment related to the claim.
Consider the following scenario as an example: A defendant settles a case with a 50-year-old plaintiff who fractured his ankle in an automobile accident, requiring surgery and the implantation of hardware. At the time of settlement, he has never received Medicare benefits and may not be eligible for Medicare for more than a decade.
Suppose that 15 years later, however, when he is Medicare-eligible, he requires another ankle surgery to replace the hardware that was implanted as a result of the accident. Do you need to anticipate this and protect your client from potential responsibility for those accident-related medical expenses 10 or more years later?
Under these circumstances, thankfully and as you might expect, the MMSEA does not require the defendant to report the claim to CMS at the time of settlement, as the claimant is Medicare ineligible. However, some commentators have suggested that it is in the defendant’s best interests to report the claim, describe the injuries and submit settlement information to the Medicare Secondary Payer Recovery Contractor (MSPRC), which is responsible for post-settlement medical set-aside monitoring, just the same.
By doing this, the defendant, as a primary payer, can show that it made its best efforts to notify Medicare of the possibility of future medical care so that Medicare does not issue a payment for which the primary payer may become liable to Medicare in the future.
While this conservative approach may not entirely eliminate the risk of future liability, the defendant could raise the defenses of waiver and estoppel if Medicare seeks reimbursement for payments made after the defendant provided notice through the MSPRC, given that Medicare had the information necessary to deny the claim but did not.
The Medicare Set-Aside (MSA) is another option for protecting a client’s interests against future liability to Medicare. An MSA is the amount of money reasonably expected to cover expenses associated with future accident-related medical treatment a claimant may undergo when he or she is eligible for Medicare.
Mandatory MSAs approved by CMS are required for workers’ compensation claims if the claimant: (1) is already on Medicare and the settlement amount exceeds $25,000; or (2) has a reasonable expectation of becoming Medicare eligible over the next 30 months and the settlement amount exceeds $250,000. However, MSAs are not mandated for tort claims, and there are no definite guidelines for structuring an MSA under these circumstances.
While an MSA should not be used in every case, counsel should recognize it as an option and consider it in cases involving catastrophic losses or less sophisticated or pro se plaintiffs. In a case involving a relatively small settlement and only a remote possibility that the plaintiff will require medical care related to the claim at a time when they qualify for Medicare benefits, an MSA may be unnecessary and over-complicate the settlement process.
In sum, defense counsel must always keep compliance with the MMSEA and MSP in mind, and consider Medicare’s interests, from the inception to the conclusion of the case.
Counsel can endeavor to protect their clients from liability for past, present and future reimbursement payments to Medicare, as well as the stiff penalties imposed by the MMSEA, by: (1) immediately securing information from claimants to determine Medicare eligibility and reporting that information to CMS; (2) reporting all payments made to Medicare beneficiaries and claimants who may seek treatment for accident-related injuries after they become Medicare beneficiaries; and (3) considering MSAs as an option as well.
Medicare compliance is a complicated area, and seems to be still evolving. All counsel – for plaintiff, defendant, or insurer – will serve their clients well by thoroughly researching this area and gaining a full understanding of parties’ responsibilities when payment to Medicare-eligible claimants occurs or could occur in the future.
|Tamara Smith Holtslag
|Jennifer L. Rousseau
Tamara Smith Holtslag, an experienced civil litigator, is a partner at Taylor Duane Barton & Gilman. Jennifer Rousseau is an associate in the firm. Smith Holtslag and Rousseau represent clients in New Hampshire, Massachusetts and Rhode Island.