Tag Archive for 'MSP Act'

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$300 THRESHOLD ON CERTAIN LIABILITY SETTLEMENTS

Published on September 12, 2011 in Uncategorized. Closed Tags: , , , .

On September 6, 2011, the Medicare Secondary Payer Recovery Contractor (MSPRC) announced that it has implemented a $300 threshold for certain liability insurances cases.  Medicare will not seek recovery against a liability insurance settlement if all of the following criteria are met:

  1. the settlement, judgment, award or other payment is for a Total Payment Obligation to Claimant (TPOC) of $300.00 or less;
  2. the settlement releases a physical trauma-based injury (This does not include alleged ingestion, implantation or exposure-based injuries);
  3. there are no additional settlements related to the same alleged incident; and
  4. a demand issue has not been issued.

The threshold does not apply to no-fault insurance or workers’ compensation settlements.  This is the first time that Medicare has implemented a threshold related to its rights of reimbursement under the MSP Act.  The purpose behind the threshold is to relieve some of the administrative burden for CMS, the MSPRC, plaintiffs and insurers, which suggests that Medicare recognizes some of the concerns with the MSP Act and potential recovery actions.

Click here to see the MSPRC alert.

PENNSYLVANIA STATE COURT INTERPRETS ZALEPPA TO MEAN SETTLING DEFENDANT CANNOT DELAY PAYMENT OF SETTLEMENT PROCEEDS DUE TO ITS POTENTIAL LIABILITY FOR REIMBURSEMENT

Published on September 12, 2011 in Uncategorized. Closed Tags: , , .

In a recent decision by a Pennsylvania state court, the court interpreted the Superior Court of Pennsylvania’s decision in Zaleppa v. Seiwell, 9 A.3d 632 (Pa. Super. Ct. 2010), to mean that a defendant could not delay paying settlement proceeds due to the fact that the plaintiff’s Medicare liens were unresolved. The court interpreted the holding in Zaleppa as follows:

a settling defendant has no legal responsibility to protect the interests of the United States government in respect to the payment of Medicare liens, and [] a settling defendant [is] not permitted to unilaterally attach to the payment of settlement proceeds, any condition seeking to protect the interest of Medicare.

In this case, the defendants refused to disburse the settlement proceeds until the plaintiff either satisfied his Medicare lien or advised the defendants of the amount of the lien owed. The parties’ settlement agreement provided that plaintiff would be responsible for directly paying all liens, including any outstanding Medicare lien. Defendants argued that they were not required to pay plaintiff any portion of the settlement proceeds until plaintiff received a Final Demand Letter from Medicare; otherwise, they could be subjected to penalties, interests, and the risk of double paying the monies. Plaintiff filed an Affidavit of Non-Payment of Settlement Funds pursuant to Pa. R.C.P. 2291 and requested the court to impose sanctions against Defendants for their failure to deliver the settlement funds to Plaintiff. The court denied plaintiff’s request for sanctions.

On September 24, 2010, after Plaintiff received a Final Demand Letter from Medicare, Plaintiff filed a Motion for Reconsideration of the court’s order. On October 22, 2010, the court ordered the defendants to release one-half of the settlement proceeds with interest and required the plaintiff to verify Medicare’s position with regard to any future medical lien. The court mandated that the remaining settlement proceeds remain in an interest bearing escrow account until verification from Medicare was received.

After the Superior Court issued an opinion in Zaleppa on November 17, 2010, plaintiff filed a motion for reconsideration of the court’s order. The court granted plaintiff’s motion and ordered defendants to immediately release the remaining settlement proceeds with the interest accrued, but denied the plaintiff’s request for additional simple interest, attorneys’ fees and costs, and Petition for Contempt/Sanctions. Plaintiff subsequently appealed the court’s refusal to impose sanctions or find defendants in contempt due to defendants’ failure to release the settlement proceeds. The court found that sanctions were not appropriate against the defendants based on a material dispute of the terms of the settlement. The parties had disputed whether defendants would be protected from any responsibility for paying the outstanding Medicare lien. The court explained that because of the uncertainty of the law at the time, namely, whether tortfeasors were liable to Medicare in litigation cases where Medicare payments were involved, it was uncertain whether defendants could be responsible under the Medicare Secondary Payer Act for reimbursing Medicare unless plaintiff paid his Medicare liens. The court held that based upon the legal uncertainties that existed at the time, Defendants acted appropriately and delivered the settlement proceeds to Plaintiff shortly after the Zaleppa decision. The court further explained that defendants acted on “good faith beliefs and justified concerns related to the delivery of the settlement proceeds without assurances.”

After the Superior Court’s decision in Zaleppa, it appears that Pennsylvania courts will not find a defendant’s delay in paying settlement proceeds to be justified where the delay is due to the defendant’s potential risk of a future Medicare recovery action. The decision is contrary to decisions by district courts in other jurisdictions that have held that a defendant’s delay in paying settlement proceeds until it determined the conditional payment amount owed to Medicare due to the insurer’s potential liability for reimbursement of was reasonable. See Wilson v. State Farm Mutual Automobile Insurance Company, No. 3:10-CV-256-H, 2011 U.S. Dist. LEXIS 63430 (W.D. Ky. June 15, 2011). Click here for a discussion of the Wilson decision. In light of the Zaleppa decision, the defendant insurer should pay the plaintiff settlement proceeds less any amount asserted by Medicare. It would also be a good practice to insure that the undisputed portion, if any, of Medicare’s interest is paid. With regard to the disputed portion, the insurer should put those monies in escrow pending a final decision by Medicare. In cases involving a plaintiff who may require future medical services, additional analysis is required.

Date of Decision: June 20, 2011
Mirabal v. Bard Access Systems, Inc., No. 2525, 2011 Phila. Ct. Com. Pl. LEXIS 147 (C.C.P. Philadelphia June 10, 2011).

ONE CMS REGIONAL OFFICE'S POLICY ON LIABILITY MEDICARE SET ASIDES

Published on September 6, 2011 in Uncategorized. Closed Tags: , , , .

While there are no formal guidelines with respect to Liability Medicare Set-Asides (LMSAs), a regional CMS office recently released a memo that addresses the issue. The memo was prepared by Sally Stalcup, MSP Regional Coordinator of the Region VI office, which covers Arkansas, Louisiana, New Mexico, Oklahoma and Texas. Stalcup explains that Medicare’s interests must be protected in settlements involving Medicare beneficiaries but that CMS does not mandate a specific mechanism to protect its interest. Stalcup also notes that the law does not specifically require a “set-aside” in any situation. Stalcup, however, emphasizes that the law requires that the Medicare Trust Funds be protected from payment of future services regardless of whether it involves a Workers’ Compensation and liability case. Stalcup notes that CMS prefers set-asides because they offer the best protection for both Medicare and the Medicare beneficiary.

Stalcup explains that anytime a settlement, judgment or award provides funds for future medical services, it can reasonably be expected that those monies are available to pay for future services “related to what was claimed and/or released in the settlement, judgment, or award.” Therefore, Medicare should not be billed for future services until the funds in the set-aside are exhausted. Medicare’s right of recovery, and the prohibition from billing Medicare for future services, extends to all those services “related to what was claimed and/or released in the settlement, judgment, or award” and not just services related to the actual injury/illness that is the basis of the case.

According to Stalcup, the fact that a settlement, judgment, or award does not specify payment for future medical services does not mean that they are not funded. The only time Medicare recognizes the parties’ allocation of liability payments to non-medical losses is when a court has reviewed the facts of the case and determined that there are no future medical services.

Stalcup explains that attorneys are going to have to decide, based on the specific facts of each case, whether there is funding for future medicals. If so, the plaintiff’s attorney should ensure that those funds are in fact used to pay for otherwise Medicare covered services related to the claim. Stalcup also recommends that defense counsel or the insurer document that they notified plaintiff’s counsel and the Medicare beneficiary that the settlement funds future medicals, which obligates them to protect the Medicare Trust Funds. While CMS does not review or sign off on counsel’s determination of whether there is a recovery for future medical services as a routine practice, regional offices may review submitted set-aside proposals, especially in cases involving a large recovery.

In order to determine what is necessary to comply with the Medicare Secondary Payer Act, counsel must find out whether the case involves a Medicare beneficiary or a plaintiff with a “reasonable expectation” of becoming a Medicare beneficiary within 30 months. If the case involves either of these, there will be a potential Medicare set-aside issue.

CMS TEMPORARILY SUSPENDS THE ISSUANCE OF DEMAND LETTERS

Published on July 26, 2011 in Uncategorized. Closed Tags: , , , .

In a recent alert, the Medicare Secondary Payer Recovery Contractor (MSPRC) announced that the Demand letter for liability insurance (including self-insurance), no-fault insurance and workers’ compensation has been temporarily suspended while the letter is under review.  After the MSPRC receives notice that a settlement, judgment or other payment was reached, it calculates the final reimbursement amount and issues a “Demand Letter.”

The MSPRC has already reviewed the Rights and Responsibilities letter (“RAR”) and recently announced that its review is complete.  Issuance of the RAR is anticipated to resume on June 10, 2011.  After issuing the RAR, the MSPRC automatically generates a “Conditional Payment Letter” (“CPL”) within 65 days. Until MSPRC resumes issuing the RAR, expect delays obtaining conditional payment information.

It appears that as a result of the Haro decision, MSPRC is now reviewing its internal policies and procedures before issuing any more conditional payment demand letters.

Click here to see the alert and updates.

NEW JERSEY SUPERIOR COURT HOLDS THAT SAME STANDARD APPLIES TO MSAs IN BOTH WORKERS’ COMPENSATION AND THIRD-PARTY LIABILITY CASES; ATTORNEYS’ FEES MAY BE DEDUCTED FROM MSA

Published on July 26, 2011 in Uncategorized. Closed Tags: , , , .

As further support that Medicare Set-Asides (MSAs) are necessary to protect Medicare’s future interest in third-party liability cases, the New Jersey Superior Court recently held that there was no reason to apply a different standard to set asides created with money obtained from third-party liability claims than it applies to set asides created with money obtained from workers’ compensation claims.  See Hinsinger v. Showboat Atlantic City, 2011 N.J. Super. LEXIS 96, at *3 (Jan. 21, 2011).  The court explained that the statutory and policy reasons for creating MSAs in both situations are the same: to protect the government from paying medical bills for which the beneficiary has already received money from another source.  Further, the court held that the same regulations and directives that apply to set asides created in workers’ compensation cases apply to third-party liability cases.

The court also considered whether Medicare regulations allow an attorney to recover fees for a judgment or settlement obtained on behalf of a client in a civil suit from the MSA.  After the plaintiff prevailed at trial, the parties settled the matter for $600,000.  Because the plaintiff only recently became eligible for Medicare, Medicare had not yet made any conditional payments.  Therefore, the only issue was the protection of Medicare’s future interest.  In an effort to comply with the Medicare Secondary Payer Act, the parties agreed to allocate $180,600, the amount the jury had awarded for projected actual medical costs, to an MSA.  Subsequently, the plaintiff’s counsel sought permission to withdraw a portion of his fees from the money allocated to the MSA.

The court found that 42 CFR § 411.37, which provides for a pro-rated reduction of attorneys’ fees from the total amount of conditional payments due to CMS, could also apply to funds obtained for future medical expenses obtained in a civil action.  The court reasoned that its decision to apply 42 CFR § 411.37 was in line with general principles of equity due to the fact that plaintiffs’ attorneys work on behalf of Medicare to secure funds to pay future medical expenses Medicare would otherwise pay.  Accordingly, the court held that attorneys’ fees incurred to procure a settlement or judgment may be deducted from the money allocated to an MSA.

It is unclear whether Medicare will provide coverage after the plaintiff’s reduced MSA is exhausted or whether Medicare will require the plaintiff to spend the amount deducted in attorneys’ fees.