The Quest for CMS Guidance on Liability MSAs Continues

The quest for CMS guidance on liability MSAs continues. It was most recently addressed in the Silva v Burwell, 2017 U S Dist LEXIS 195032 ( November 28, 2017) case that was considered by the US District Court for the District of New Mexico.

By way of background, this case arose from a December 2015 medical malpractice settlement agreement between Mr. Silva and the Hospital Defendants. The settlement was intended to compensate Mr. Silva for his traumatic brain injury that resulted from a 2011 medical malpractice incident. Since Medicare had made conditional payments prior to the settlement, the Hospital Defendants wanted Mr. Silva to create a Medicare Set-Aside to cover future medical expenses. They were concerned that CMS would come after the hospitals for future medical expenses that would have been paid by Medicare. Given this concern and Mr. Silva’s reluctance to establish an MSA, the Hospital Defendants wanted Mr. Silva to secure a federal court order finding that no federal law or CMS regulation required the creation of an MSA from the personal injury settlement before the settlement funds were released.

Although Mr. Silva asked CMS to state its position on this, CMS did not respond. The Plaintiff Silva then brought this action under the Declaratory Judgment Act against Defendants Burwell, the Secretary of the US Department of Health and Human Services, CMS and the US Department of Health and Human Services seeking to secure a declaration that no MSA is required. Defendants Burwell et al. filed a Motion to Dismiss arguing that the Court lacked subject matter jurisdiction. The Court agreed and granted the Motion to Dismiss.

In dismissing the declaratory judgment action, the Court reviewed the Medicare Secondary Payer Act and MSAs. It noted that although CMS promulgated regulations “requiring” the creation of MSA accounts in workers’ compensation cases and provided a process for review, Medicare had not established a similar process for liability cases. The Court then looked to see if Plaintiff Silva had standing to bring the action before it. In analyzing the Protocols, LLC v Leavitt, 549 F.3d 1294 (10th Cir.2008) criteria for standing, the Court found that Plaintiff Silva had failed to show that CMS had taken a position contrary to Plaintiff Silva’s interpretation of the MSP obligations. The Court noted that although the Hospital Defendants wanted reassurance and confirmation from CMS on the need to establish a liability MSA in this settlement, there is no federal law or regulation that requires CMS to provide this information. Furthermore, the Court noted that the Defendants Burwell et al. had not taken any action to indicate that they interpret the MSP as requiring MSAs in non-workers’ compensation claims. It also observed that the uncertainty created by CMS’ failure to clarify its position on this was detrimental to the settlement process. Since Plaintiff Silva did not have standing to bring this action, the case was dismissed for lack of subject matter jurisdiction.

Comment:
The Court’s decision fails to appreciate that the MSA is merely a settlement tool intended to prevent a future conditional payment by Medicare. The establishment of an MSA is not “required” by the MSP or supporting Regulations and is a legal fiction. Medicare’s status under the MSP as a secondary payer when a primary payer is available however may make funding an MSA in connection with a settlement a prudent course of action. Since the MSP Act specifically identifies liability plans as a primary plan when “ payment has been made or can reasonably be expected to be made,” Medicare is a secondary payer in these cases as well.

The Court also erroneously noted that CMS had not taken any action to indicate that they are interpreting the MSP to apply to non-workers’ compensation claims. This fails to consider the statements and Alerts that have been issued by CMS on this topic. Section 111 reporting obligations for liability cases also suggest otherwise.

We will continue to keep you advised of further developments.

Join Us on November 7th – Highlights of WCMSA Reference Guide Updates Webinar with Rasa Fumagalli, JD, MSCC

Join us on November 7th, 2017 at 1:00 CST Register here for a webinar that discusses the changes that were made to the updated WCMSA Reference Guide (Version 2.6, July 10, 2017). We will look at the new Amended Review process as well as the expanded state-specific Statute section. CMS’ implementation of the updated Guide will also be discussed.

Rasa Fumagalli, JD, MSCC, NuQuest’s Director of Compliance, holds a law degree from IIT’s Chicago Kent College of Law with an undergraduate business degree from the University of Illinois. Prior to joining NuQuest, she spent over twenty years specializing in workers’ compensation defense work in the Chicago area. Rasa utilizes her extensive experience in handling workers’ compensation cases when consulting with clients about Medicare Secondary Payer (MSP) compliance issues. She is admitted to practice law in the State of Illinois and is an active member of the National Alliance for Medicare Set- Aside Professionals (NAMSAP) organization, serving on the Evidence-Based Medicine, Communications and Liability Committees.

October Updates

Several changes that may impact your settlement approach in workers’ compensation and liability claims are being implemented in October. The changes involve Medicaid recovery, the ability to close out active medical care under the Arizona WCA provisions and CMS’ addition of a liability or no-fault MSA field to its Common Working File. Highlights of the changes are summarized below. Please refer to our earlier blog postings for a more in-depth analysis of the topics.

Medicaid Recovery

Medicaid, just like Medicare, is a secondary payer when a third party has a legal obligation to pay certain medical benefits to a beneficiary under the programs.  Before October 1, 2017, Medicaid’s recovery of its payments from the third party settlement was limited to the portion of the settlement that was allocated for future medical expenses.  With the October 1, 2017, implementation of the Bipartisan Budget Act of 2013, section 202, also known as the Medicaid Secondary Payer Act, Medicaid will now be allowed to recover its costs from a beneficiary’s total settlement. Given the various state reporting requirements relative to Medicaid beneficiaries, whether through data exchanges or intercepts, we can expect an increase in the amount of reimbursement efforts that will be undertaken by states Medicaid departments.  The anticipated decreases in federal contributions to the Medicaid programs will further fuel the recovery efforts.

Medicaid liens should be addressed in settlements and awards.  From a practical aspect, the ability to recover from the whole settlement will put Medicaid in a stronger lien negotiating position. Early negotiation efforts, however, that focus on the uncertainty of potential trial results absent settlement, will increase the ability to secure significant Medicaid lien reductions. A systematic claims’ handling approach for cases involving Medicaid liens, in addition to Medicare and Medicare Advantage liens, is recommended in order to prevent future issues with these entities.

Arizona’s Repeal of Section 23-941.01

Arizona’s repeal of Section 23-941.01 that limited the parties’ rights to settle out future medical care in undisputed claims will take effect on October 31, 2017.  This provision had prohibited the closure of active medical care, such as surgery, in undisputed claims and only allowed the release of future supportive medical maintenance benefits.

The amended Section 23-041.01 provision allows represented employees to settle future medical but requires the settlement to include the following attestation:

  1. “The employee understands the rights settled and released by the agreement and was represented by counsel.
  2. The employee has been provided information from the carrier, special fund or self-insured employer that outlines any reasonably anticipated future medical, surgical and hospital benefits relating to the claimant the projected cost of those benefits and that provides an explanation of how those projected costs were determined.
  3. The employee understands that monies received for future medical treatment associated with the industrial injury should be set aside to ensure that the costs of such treatment will be paid.
  4. The parties have considered and taken reasonable steps to protect any interests of Medicare, Medicaid, the Indian Health Service and the United States Department of Veterans Affairs, including establishing a Medicare Savings Account if necessary.
  5. The parties have conducted a search for and taken reasonable steps to satisfy any identified medical liens.”

When a claimant is unrepresented, the Administrative Law Judge will meet with the claimant to make specific findings regarding whether the above paragraphs are satisfied. Additional requirements and provisions for handling disputed claims are also set forth in the complete amendment.

The repeal will be effective from and after October 31, 2017. (Title 23, Chapter 6, article 3, Arizona Revised Statutes)

As of October 31, 2017, workers’ compensation claims in Arizona may completely close out all future medical rights under certain circumstances. This change presents a new opportunity for final resolution of many workers compensation claims. In order to pursue this, we recommend that the parties secure a future injury-related medical treatment allocation, identify and negotiate liens and fund the future medical allocation in connection with the settlement.

CMS’ addition of a liability or no-fault MSA field to its Common Working File.

As of October 1, 2017, CMS’ Common Working File will now reflect the existence of liability or no-fault MSAs in the system. Medicare Administrative Contractors will be instructed to deny payment of any submitted claims that pertain to the liability or no-fault MSA.

CMS’ addition of a liability or no-fault MSA in its Common Working File further suggests CMS’ interest in offering an eventual review of liability and no-fault MSAs.

NuQuest is available to assist in all types of lien resolution. Our product line also provides a variety of innovative future medical allocations that suit the needs of the claim. Further information is available upon request.

Join Us on July 10th! Proper Administration Webinar

Join us on July 10th, 2017 at 1:00 (CST) Register here for a webinar that addresses the proper administration of an MSA. We will review CMS’ specific guidelines on this issue and address common mistakes that may be made in self-administration. We will also go over tools that may assist in the administration process.

Rasa Fumagalli, JD, MSCC, NuQuest’s Director of Compliance, holds a law degree from IIT’s Chicago Kent College of Law with an undergraduate business degree from the University of Illinois. Prior to joining NuQuest, she spent over twenty years specializing in workers’ compensation defense work in the Chicago area. Rasa utilizes her extensive experience in handling workers’ compensation cases when consulting with clients about Medicare Secondary Payer (MSP) compliance issues. She is admitted to practice law in the State of Illinois and is an active member of the National Alliance for Medicare Set- Aside Professionals (NAMSAP) organization, serving on the Evidence-Based Medicine, Communications and Liability Committees.

Arizona Legislature Repeals Section 23-941.01 limits on closure of future medical in undisputed claims

State workers’ compensation laws define the parameters of an employer’s potential liability in a claim. As such, they play a role in determining the amount of a future Medicare Set-Aside that may be funded in connection with a complete settlement.

Arizona’s legislature recently repealed Section 23-941.01 that limited the parties’ rights to settle out future medical care in undisputed claims.  This provision prohibited the closure of active medical care, such as surgery, in undisputed claims and only allowed the release of future supportive medical maintenance benefits.

The amended Section 23-041.01 provision allows represented employees to settle future medical but requires the settlement to include the following attestations:

  1. “The employee understands the rights settled and released by the agreement and was represented by counsel.
  2. The employee has been provided information from the carrier, special fund or self-insured employer that outlines any reasonable anticipated future medical, surgical and hospital benefits relating to the claim ant the projected cost of those benefits and that provides an explanation of how those projected costs were determined.
  3. The employee understands that monies received for future medical treatment associated with the industrial injury should be set aside to ensure that the costs of such treatment will be paid.
  4. The parties have considered and taken reasonable steps to protect any interests of Medicare, Medicaid, the Indian Health Service and the United States Department of Veterans Affairs, including establishing a Medicare Savings Account if necessary.
  5. The parties have conducted a search for and taken reasonable steps to satisfy any identified medical liens.”

When a claimant is unrepresented, the Administrative Law Judge will meet with the claimant to make specific findings regarding whether the above paragraphs are satisfied. Additional requirements and provisions for handling disputed claims are also set forth in the complete amendment.

The repeal will be effective from and after October 31, 2017. (Title 23, Chapter 6, article 3, Arizona Revised Statutes)