What Is a "Medicare Set-Aside" and When Do You Need One?
Because personal injuries usually don't just go away once the parties settle a lawsuit, Medicare recipients need to set up a...Read more
As described in a companion article, Section 111 of the Medicare, Medicaid & SCHIP Extension Act (MMSEA) requires primary payers to identify claimants entitled to Medicare and report this information to the Centers for Medicare and Medicaid Services (CMS). As noted, the new law does not affect Medicare Set-Asides (MSAs).
However, the advent of the reporting obligation has triggered a discussion among primary payers, attorneys for both plaintiffs and defendants, structured settlement professionals, and special needs settlement attorneys regarding whether MSAs are required in liability cases under preexisting provisions of the Medicare Secondary Payer Act (MSP).
CMS interprets the MSP to include a requirement that Medicare's future interests be considered in a liability case. While there are regulations and established procedures for use in the workers compensation context, CMS has no regulations directly addressing MSAs in personal injury cases. To further complicate matters, treatment of MSAs by CMS varies by region. Some regions review MSA proposals in liability cases and some do not. Some regions will review a proposal if the internal workload permits. However, CMS consistently makes oral statements that: (1) it expects any funds allocated for future medicals to be spent before any claims are submitted to Medicare for payment; and (2) there is an obligation to inform CMS when future medicals were a consideration in reaching the settlement.
As might be expected, there is no clear consensus among professionals who closely follow this issue, including among special needs settlement planners. Some believe that the law does not require MSAs in liability cases, and that it is a disservice to an injured client to advise that an MSA be established. Others are of the opinion that the language and intent of the statute are clear enough and that the potential consequences if CMS later determines Medicares future interests are not reasonably considered are steep; that is, arguably CMS can deny Medicare coverage for injury-related services until the entire amount of the settlement is exhausted. The attorneys involved may also be liable for failure to reasonably consider Medicare's interest.
Approaches Being Used
The following are simplified summaries of a few approaches now being used in liability cases, with the rationale behind each approach.
Do Nothing. Do not set aside funds or notify CMS. Rationale: Congress and CMS haven't provided a clear statutory and regulatory framework. It's the government's job to provide direction. The chances that CMS will ever retroactively enforce an MSA is small. Let them eat cake.
Don't Do an MSA But Provide for the Possibility. Put language in the settlement agreement (and, in cases involving trusts, in the trust document as well) allowing for the possibility of an MSA. Do not submit an MSA proposal to CMS. Rationale: While the chances of CMS retroactively enforcing an MSA are small, there is some risk for the client and the professionals involved, depending on the region.
Estimate the Plaintiff's Future Injury-Related Medicals. Obtain an estimate of future injury-related Medicare covered services using sources such as a doctor's report, claims summaries and a life-care plan. Use this estimate to set aside an amount in an MSA account. Submit/don't submit to CMS. Rationale: There is some argument that CMS's interests must be considered, but there is no requirement to follow CMS procedures applicable to workers' compensation cases. CMS will be hard-pressed later to say that Medicare's interests weren't reasonably considered.
Obtain a Formal Medicare Allocation Report and Submit Proposal to CMS. Request a formal MSA allocation report from an established company and set aside the funds. Send an MSA proposal to CMS, even though in some regions CMS may not review it. Rationale: It will be really hard for CMS to later say Medicare's interests weren't protected. Why take a chance that all of the plaintiff's hard-won proceeds will be vulnerable to medical costs in the future because Medicare won't pay? At least this provides the best shot at a cap.
What the Plaintiff's Attorney Can Do
Stay Tuned. CMS has said that it is working on new FAQs to provide guidance for personal injury cases. Make sure to stay tuned (through ASNP, among other places) to CMS trends and written guidance.
Inform the Client. The client should be informed that the law is unclear and advised in lay terms about options and risks so that he or she can make an informed decision.
Include Language in the Settlement Agreement. No matter what approach is chosen (other than "do nothing"), address the issue in the settlement agreement, and show that Medicare's future interests have been considered.
Coordinate MSA with any Structured Settlement and Special Needs Trust. If there is a formal MSA, or the claimant is advised to be prepared for the possibility of an MSA, if ever required, it will have an affect on any structured settlement and special needs trust. Make sure these aspects of the case are coordinated.
Release. Obtain a release and indemnity from the client or the client's legal representative, indicating that he or she has been advised of the need to consider Medicare's interest.
Consider Involving a Special Needs Settlement Planner. There are attorneys who concentrate in the area of special needs settlement planning. They work with plaintiffs and personal injury attorneys regarding MSAs and can coordinate MSA planning with qualified settlement funds, lien resolution, structured settlements and special needs trusts.