Conference Report on “The Experts Weigh In”

By Tom Hagy

Kicking off HB’s seminar on Sept. 21, 2010 in Los Angeles, attendees heard from three experts: Will Shapiro, The Plaintiff’s Resource of Austin, Texas; John Cattie of The Garretson Firm Resolution Group Inc., and Tom Blackwell of Gould & Lamb from Bradenton, Fla. In case you could not attend in person or via webcast, here is how it went.

Shapiro opened the session with background on the impetus behind the reporting rules. “Not a lot people paid attention to the statute,” he said, “because Medicare didn’t have tracking or teeth in place, so not that many bothered to comply.” All of that changed in 2003 when President Bush signed the Medicare Modernization Act. The attorney, defendant, casualty carrier or injured parties have duties to inform, satisfy and make Medicare the first payee of the lawsuit, or face double damages. “And the law doesn’t distinguish between plaintiff and defense attorney by the way,” he cautioned.

Is the reporting system at Medicare improving?

Medicare was so inundated that when you tried to get lien amounts, it was common to wait 18 to 24 months. “It was a nightmare” Shapiro said, “and really slowed down settlements.” He said things are still slow but improving, and he expressed hope that the system will continue to become more efficient.

Continuing his look back at what drove the new rules, Shapiro pointed out that CMS was receiving reports of about only 35% of all claims beneficiaries brought against third parties. The Government felt it was right to target insurance carriers as “the people with the money.” Medicare now hopes get reporting up from 35% to 85%, he said. Shapiro traced for the attendees what he called an “evolution of fear” as the requirements have became more stringent, put in place, simply, because “no one paid attention before.”

Garretson’s Cattie had a recommendation for plaintiff attorneys who want to help the process. “It is important for the plaintiffs’ community to understand that their colleagues on the other side of the table face some significant changes to the way they are handling claims and settling cases. It would behoove the plaintiff community greatly if they would take that into account, collaborate with the defense on certain reporting points . . . and implement a formalized process in their firm for the verification and resolution of conditional payments such that Medicare compliance obligations are being handled in a timely and compliant manner.”

Pay & Chase

“The process was broken before,” Cattie said. The MMSEA was intended to be an effective alternative to the “pay and chase” approach and a justified focus on the proper party who should have been paying for injury-related care to begin with.

Depending on the situation, Cattie said there are 50 or 131 data points, e.g. date of birth, first name, last name, and gross settlement amount. “[That is] a lot of information which the RRE may not have at their fingertips,” Cattie said. “We say it’s better to collaborate on what data is to be reported. Plaintiff attorneys are already reporting to Medicare. Now, starting with insurer reporting, [Medicare] will start getting reporting from the defense to see if the parties are agreeing to what claims are being settled. After review they can close [the file], but if the two files don’t match, that common working file will remain open.” Even if mistaken, if it looks like there are additional conditional payments out there for which they should be reimbursed – they “will be chased” by Medicare.


Shapiro posed the question: Will the reporting include whether the claimant is on SSDI? “If the client is receiving SSDI but not receiving Medicare benefits yet, will they have to report?”

Receiving or applying for SSDI is a path to eligibility for Medicare benefits, Cattie explained. If someone applied for SSDI or is even receiving SSDI, that doesn’t necessarily mean they are a current Medicare beneficiary. The MMSEA reporting obligation only deals with those individuals who are current Medicare beneficiaries, he said. So if someone is settling a claim on Oct. 15, 2010, and on SSDI, and they are going to become Medicare entitled as of Dec. 1, 2010, but not yet on Medicare, then that settlement is not reportable under the MMSEA, he said.

Cattie concluded with this practice tip for the defense community: “Be able to demonstrate that the resolution process has already started. By doing this, you are going to alleviate a lot of the fear and anxiety that is going to be in your colleague across the table.”

Tom Blackwell of Gould & Lamb started his portion of the presentation with the impact on insurers. “Carriers are used to a lot of reporting on the state level,” he said. “It’s when we get to our clients, the self-insured entities, the high deductibles [and the] the SIRs, where a lot of confusion is being generated.” He said there are some who are acting as self-insureds to protect their comp rate and paying outside of policy parameters. But, he warned, “If you are paying a claimant outside of your policy, make sure that you are identifying that to the carrier. Because if it’s happening outside the policy, whether you have a deductible program or not, Medicare is going to expect a report from you because a carrier is not going to report those settlements.”

What’s a Settlement?

“Anything of value is a settlement,” Blackwell said. If a healthcare provider is writing off services, depending on how those write-offs occur, “they could be considered TPOCs or total payment obligations to the claimant. It’s actually addressed in the user guide.”

“There is a point where it’s beneficial in certain settlements to identify what portion of the proceeds are for future medical,” Blackwell explained. The idea behind Medicare set aside is that by identifying the portion of the proceeds that are for future medical and related to the alleged injury, you are prohibiting Medicare from attaching to the entire settlement amount. “Without that identifier,” Blackwell said, “Medicare has the right to assume that the entire proceeds are for future Medical payments and that the claimant could be forced to offset all proceeds from that settlement, inclusive of attorneys fees, which would probably leave the attorney open for an action as well as the carrier.”

Clarify What the Money’s For

“SCHIP and MIR will force compliance in settlements. While I agree that Medicare has said their intention is not to look at this information with regards to enforcing their MSP rights in terms of adequate consideration of their future interest, why wouldn’t they? The information is there,” Blackwell said. “They know the settlement has occurred. They know how much the claimant has gotten and the settlement amount. It just makes sense that if claimant has run out of money five years after the settlement, then there’s an indication that maybe the allocation, if there was one or wasn’t one, was inadequate in terms of providing that claimant with future care. And depending upon the settlement language that you have in your agreements, that could leave you open to future exposure under the MSP.”

“I strongly advocate,” Blackwell said, “in every settlement, that there is Medicare compliance language so that issue has been addressed. If we’re settling a nuisance value claim where there is no future medical, where’s the harm in saying there is no future medical associated with this, and zero dollars of these proceeds are for future medical? By stating that we know that Medicare is going to accept the fact that it’s a zero dollar settlement. At that point, Medicare has a burden to prove that you are trying to shift the burden to them.”

Liability Allocations

There is absolutely no defined promulgated policy from Medicare with regards to producing an allocation in liability. “Most of our carriers are being conservative and careful,” Blackwell told the audience. “They are looking at certain dollar value settlements and coming up with internal thresholds that involve Medicare beneficiaries and not producing an MSA but a future-care projection related to the injury, and using that as an identifier for what portion of settlement proceeds are for medicals. Putting that into the settlement language, hopefully, will keep Medicare from attaching to the entire settlement should the claimant spend that money incorrectly.”

With regard to mandatory insurer reporting, Blackwell noted some important dates. “When Medicare extended the reporting to Jan. 1, 2011, they also changed the retroactive look-back date to open claims as of Jan. 1 of 2010. So we’re only looking at claims that were open and pending as of Jan. 1, 2010. If you haven’t made a payment on a claim since before Jan. 1, 2010, that’s not a reportable claim until such time as you make another payment.”

“Once we determine how many claims we have open as of Jan. 1, 2010, then we need to look at ‘Did we accept medical responsibility?’ If we do have ongoing medical responsibility, that is a reportable claim – period. We are going to send that into Medicare and let them know that you did accept ORM at some point during the life of the claim. Claims that settle before Oct. 1, 2010, we will not report the total payment obligation to Medicare.”

In workers’ compensation all of your open claims in which you’ve accepted ongoing medical responsibility will be reported to Medicare as having ORM at some point during the life of the claim, he said. “When you settle the claim and, say we settle in September, at that point we will show that ORM terminated but we will not report to Medicare that there was a total payment obligation made to the claimant. They won’t know the amount.”

Blackwell continued that, “In liability, we’re typically making only one report based on the fact that most liability claims are denied until settlement judgment or award. If it settles through payment after Oct. 1, 2010, we’re going to report to Medicare what the total payment obligation is. A lot of my clients right now are actively pushing settlements, so they can get through a lot of this before Oct. 1. It makes sense.”

“Contested exception files are simply files in which you’ve denied all aspects of responsibility or liability associated with an alleged injury,” Blackwell explained. “If that’s the case, you will not report that claim until such time that you make payment. Sometimes never. Every claim can be reportable.”

With regard to verifying Medicare status, Black well said “there is absolutely no way for anybody to know whether your claimant is on Medicare or not regardless of age or employment status. Short of running a query or doing a standard Medicare verification that’s about the only way you can do it.”

Writing the Check

One audience member asked: “Can you put Medicare on the check and go home?”

Plaintiff attorney Shapiro said that if a defendant settles a claim for $500,000 and writes the check payable to the plaintiff attorney, the claimant and to Medicare, the defense attorney obviously complied with Medicare’s interest. “From a plaintiff’s perspective,” he said, “let me tell you what the problem is. First, Medicare does not legally have a lien until settlement. Two, the plaintiff attorney, in the best interest of their client, can get a procurement offset for attorney’s fees and expenses after settlement. So if Medicare’s lien is $100,000, according to the CFR, attorneys fees are a third and expenses are 7%, you can get that lien reduced from $100,000 to $60,000, so Medicare’s interest certainly was not the half a million. It wasn’t the $100,000 in the conditional letter. It’s $60,000 which is what their final demand is. Medicare does not want you to put their name on the check if you don’t have that final demand. [When you know] what their final lien interest is – that’s when you should write a check to Medicare.”

And the problems do not stop there, Shapiro said. If the plaintiff attorney and claimant sign the check and send it to Medicare, MSPRC cannot sign it. Weeks later, once they can open the envelope, the check goes to the Justice Department, then to the Treasury Department, then the check is deposited. During that time the case may settle and a final demand will be established. More time will then pass as Treasury executes its process. “It could take up to six months to get that check into their trust account if Medicare goes on the check. So are you compliant? Yes. Does Medicare want you to do that? Absolutely not,” Shapiro said.

Medicare wants you to wait until settlement and until you get that final demand – what the actual lien is. “And if you want to feel more comfortable, then maybe cut two checks, one for the claimant and one for the plaintiff attorney,” Shapiro said. He added that “Medicare doesn’t want money for future exposure. They want the claimant to protect their future exposure by self-administering those funds.”

Cattie noted a case rendered by the U.S. District Court for the Middle District of Florida on Aug. 24, 2009 – Tomlinson v. Landers (2009 U.S. Dist. LEXIS 38683) – where the defense put Medicare on the settlement check. The judge rejected the settlement because the parties failed to agree on an essential term of the settlement: Who is to be paid?

(Editor’s Note: Here’s a direct quote from Tomlinson: “Contrary to Defendant’s assertion, MCIC [the insurer] would not have violated federal law if it omitted Medicare from the settlement check. MCIC’s decision list Medicare as a payee on the settlement check may have been in MCIC’s best interest; however, MCIC was not required by federal law to include Medicare on the settlement check. The fact the parties were in dispute over this issue supports Plaintiffs’ argument that there was never a meeting of the minds regarding the manner in which payment was to be tendered to Plaintiffs.”)

Withdrawing Medicals

“Can a plaintiff withdraw a claim for medicals?” another audience member asked.

Shapiro said Medicare can always audit your file. “If you agree that a settlement is for pain and suffering, Medicare will only abide by that if a court orders that all of the settlement is for pain and suffering with merit. Medicare will 99 times out of 100 abide by that. Sometimes they will still go back and question whether it was with merit. So if both sides have a life-care plan and you’re arguing for future medicals then you really can’t withdraw. Well, you can, but you could get hammered. They could audit your files and say you should have protected our future exposure.”

Monitoring Set Asides

“Who is responsible for monitoring the distribution of the set aside funds?” another participant asked.

“In 95% of the claims the claimant is actually responsible for administering the Medicare set aside allocation fund,” Shapiro explained. “It’s call self-administration. They have about 6 or 7 duties they have to adhere to. They have to report on an annual basis to Medicare all the expenditures, they have to report exhaustions, they have to spend the money correctly, [and] they also have to pay the money at the correct fee schedule. The bottom line: The worse thing that could possibly happen to a claimant is to be given a Medicare set aside to administer themselves but it is the common practice. You could also pay somebody to administer it.”

Regarding distribution of the MSA, “I recommend that the plaintiff attorney cut two checks to the client,” Shapiro said, using the memo line on the second to state that the payment is for Medicare set-aside funds.

When You Can’t Get the Info

A question was raised around problems RREs sometimes have in getting private information from claimants, such as Social Security numbers.

Cattie answered: “Plaintiff attorneys want to protect certain confidential information such as SSNs, but the problem with that is this: MMSEA reporting will not be effective unless such data points are being reported to Medicare. I am encouraging plaintiffs to provide that information to the defense, but understandably sometimes they are hesitant to do so.”

“One solution,” Cattie continued, “may be to provide that information in the form of a limited HIPAA – [stating] that the information is to be used only for purposes of coordination of benefits.”

Last year Medicare said the use of Social Security numbers is a reasonable and justifiable use of that information as an exception to the federal privacy laws when used in situations such as Medicare reimbursement, Cattie explained.

“However,” he said, “if you get down to it and the RRE is absolutely unable to get that information from the plaintiff’s attorney, there is a form that can be filled out and submitted to Medicare that says that information was not provided, that ‘we don’t know if the claimant was on Medicare or not.’ The important thing from the RRE perspective is that if you go down that road . . . you must show that you made good faith efforts at obtaining that Social Security number from the claimant.”

Conditional Payment

“What information does the Conditional Payment Letter provide? Is it a final lien amount?” asked an audience member.

“The conditional payment letter is not a final lien amount,” Shapiro said. “It could potentially give all of the claims that Medicare paid back to the date of incident whether they are related to the lawsuit or not. So what the plaintiff attorneys normally do is audit those conditional payment letters and petition for unrelated charges. So if it’s a motor vehicle accident, the claimant has cancer, chemotherapy charges could have been included on that conditional payment letter. So it’s conditional, it’s the lien amount, i.e. conditional to settlement. Then at settlement you would notify Medicare of the gross settlement amount, attorneys fees, expenses and settlement date, and they will provide you with the final demand letter which is the conditional amount plus if the client has ongoing services less attorneys fees and expenses and hopefully anything that is unrelated – sometimes that’s a little sticky also.”

“With regard to the set aside, is the client paying the full price to the physician or Medicare rates since it’s a cash payment?” an attendee asked.

“In [workers’] comp cases, normally the allocation is priced at 80% of the state’s usual and customary fee schedule or the state’s workers’ comp fee schedule,” Shapiro said. Blackwell added that “We use worker’s comp fee schedule, flat out. When we allocate for a workers’ comp claim we do the fee schedule for that jurisdiction. The drugs are priced out at Actual Wholesale Price. So that’s where your drivers are. In the drugs.”

And, one final audience question: “If a claim settles on Oct. 2, 2010, but we don’t have to report until Jan. 1, 2011, can we process the settlement check or do we have to wait until Jan. 1, 2011?”

“Process it now,” Blackwell said.