Frank C. Kilcoyne, CSSC

Rules for Liability MSAs?

In the last few years, anyone who has settled a liability case with even a whiff of Medicare floating around it has been wondering what the client’s obligations might be to the Centers for Medicare & Medicaid Services (CMS). Just how does one go about considering “Medicare’s interests” in a tort settlement? Are there any clear rules or even guidelines to steer by? Nope. The only rule that everyone can agree on is that there are no rules. CMS has no formally published rules on what the parties must do when settling a liability tort claim - but that does not mean they haven’t tried.

Back in August 2013, they filed a Notice of Proposed Rulemaking with the Office of Management and Budget (OMB). But then in October of this year, they suddenly withdrew it. Apparently, based on the feedback they received during the period for public comment, it was not yet ready for prime time. But could it be instructive to see what was in those rules, as maybe a window into their thinking?

The Proposed Rules are listed in the Federal Register / Volume 77, Number 116 / dated Friday June 15, 2012 and they represent “bureaucrat-ese” at its worst.(1) If you wade in a paragraph or two you can see why these proposed rules sparked plenty of “public comment”.

Both the American Association for Justice (“AAJ”) AND the American Insurance Association (“AIA”) opposed these rules, offering lengthy memoranda articulating the many problems they foresaw in implementing such rules in the liability environment. Just for sport, I provide the full text below:

A. CMS Proposed General Rule - If an individual or Medicare beneficiary obtains a ‘‘settlement’’ and has received, reasonably anticipates receiving, or should have reasonably anticipated receiving Medicare covered and otherwise reimbursable items and services after the date of ‘‘settlement,’’ he or she is required to satisfy Medicare’s interest with respect to ‘‘future medicals’’ related to his or her ‘‘settlement’’ using any one of the following options outlined later in this Advanced Notice of Proposed Rulemaking.

Option 1. The individual/beneficiary pays for all related future medical care until his/her settlement is exhausted and documents it accordingly. The beneficiary may choose to govern his/her use of his/her settlement proceeds himself/herself. Under this option, he/she would be required to pay for all related care out of his/her settlement proceeds, until those proceeds are appropriately exhausted.

Option 2. Medicare would not pursue ‘‘future medicals’’ if the individual/beneficiary’s case fits all of the conditions under either of the following headings:
A. The accident, incident, illness, or injury occurred one year or more before the date of ‘‘settlement;’’ The underlying claim did not involve a chronic illness/condition or major trauma; the beneficiary does not receive additional ‘‘settlements;’’ and there is no corresponding workers’ compensation or no-fault insurance claim.
B. The individual is not a Medicare beneficiary as of the date of ‘‘settlement;’’ nor do they expect to become a beneficiary within 30 months of the date of ‘‘settlement.’’ There is no corresponding workers’ compensation or no-fault insurance claim.

Option 3. - The individual/beneficiary acquires/provides an attestation regarding the Date of Care Completion from his/her treating physician.
A. Before Settlement—Medicare’s recovery claim would be limited to conditional payments it made for Medicare covered and otherwise reimbursable items. As a result, Medicare’s interest with respect to ‘‘future medicals’’ would be satisfied.
B. After Settlement—Medicare’s interest with respect to future medical care would be limited to Medicare covered and otherwise reimbursable items and/or services provided from the date of ‘‘settlement’’ through and including the Date of Care Completion.

Option 4. - The Individual/Beneficiary Submits Proposed Medicare Set-Aside Arrangement (MSA) Amounts for CMS’ Review and Obtains Approval.

Option 5. - The beneficiary participates in one of Medicare’s recovery options. Before CMS issues a demand letter, the beneficiary or his/her representative may participate in one of three recovery options, which allows the beneficiary to obtain Medicare’s final conditional payment amount before settlement. The three recovery options are as follows:

$300 Threshold—If a beneficiary obtains a ‘‘settlement’’ of $300 or less, Medicare will not pursue recovery against that particular ‘‘settlement.’’

Fixed Payment Option—When a beneficiary obtains a ‘‘settlement’’ of $5,000 or less, the beneficiary may elect to resolve Medicare’s recovery claim by paying 25 percent of the gross ‘‘settlement’’ amount.

Self-Calculated Conditional Payment Option—When a beneficiary anticipates obtaining ‘‘settlement’’ of $25,000 or less, the beneficiary may self-calculate Medicare’s recovery claim. Medicare would review the beneficiary’s self-calculated amount and provide confirmation of Medicare’s final conditional payment amount.

Option 6. - The Beneficiary Makes an Upfront Payment. CMS may review and approve a proposed amount to be paid as an upfront lump sum payment for the full amount of the calculated cost for all related future medical care.

Option 7 - The Beneficiary Obtains a Compromise or Waiver of Recovery. If the beneficiary obtains either a compromise or a waiver of recovery, Medicare would have the discretion to not pursue future medicals related to the specific ‘‘settlement’’ where the compromise or waiver of recovery was granted.

With even these tortured rules now withdrawn, how do the parties go about “considering Medicare’s interests” when settling a liability case? For all practical purposes, the answer remains the same: craft a settlement which honestly anticipates the need for accident-related future medical care and provide funding for that care. Basically, you must avoid being found to have intentionally shifted future costs to Medicare and away from a primary responsible party.

How do you do that? Call me, Frank C. Kilcoyne, CSSC at 800 544 5533 or email me at frank.kilcoyne@jmwsettlements.com. I am here to help.

(1) Federal Register / Vol. 77, No. 116 / Friday, June 15, 2012 / Proposed Rules. Page 35917
Link: http://www.gpo.gov/fdsys/pkg/FR-2012-06-15/pdf/2012-14678.pdf Accessed 11/19/2014\