When it comes to lawyers for injured parties, defense lawyers, and insurance claims professionals, Medicare is probably causing more ulcers than it has ever paid to cure. Under the rubric that “all persons must protect Medicare’s interests,” insurers and lawyers on both sides are being told by people who have a vested financial interest in doing so that when a liability personal injury case is resolved by judgment or even settled, a Medicare Set-Aside (MSA) account should be established. This is a groundless position, and MSAs are not required as a means of protecting Medicare’s interest for future medical bills. In fact, I believe that insurers who utilize MSAs in an attempt to “safeguard Medicare’s interests” for future medical costs are putting their companies at risk of increased litigation costs and possible extra contractual (bad faith) exposure.
Alternatives to Liability MSAs
There are ways to indicate that the insurer has attempted to protect Medicare’s interests that can be utilized without the expense and complications involved in the MSA process.
The most typical and most efficient way for a liability insurer or self-insured resolving a personal injury suit with a Medicare beneficiary to proceed is to be sure to include appropriate hold harmless/indemnity provisions in the settlement agreement and release documents. For example, the documents should include statements to the effect that the plaintiff beneficiary and his or her counsel acknowledge and agree upon the following:
- The beneficiary is or was Medicare eligible.
- The parties have taken reasonable steps from the beginning of the personal injury suit to comply with the MSP provisions.
- The beneficiary and his or her counsel are aware of Medicare’s interest in the settlement to the extent Medicare has made or will make any conditional payments for medical services or items received by the beneficiary.
- The beneficiary and his or her counsel have provided the information to the released parties and their counsel and insurer(s) necessary to comply with the Section 111 mandatory reporting program.
- The beneficiary and his or her counsel have notified Medicare of the accident, injury, or illness giving rise to the suit and resultant settlement.
- The beneficiary and his or her counsel will, within 60 days of receipt of a final demand letter from Medicare, reimburse Medicare for any conditional payments related to the accident, injury, or illness as required by the MSP provisions.
- It is the responsibility of the beneficiary and his or her counsel to reimburse Medicare for any conditional payments made by Medicare on behalf of the beneficiary.
- Any and all conditional payments, liens, claims, and subrogated interests asserted by or on behalf of Medicare have been or will be resolved and satisfied prior to distribution of any of the settlement funds to the beneficiary.
- The settlement funds will be held without distribution to the beneficiary or anyone else until Medicare’s claims have been satisfied or waived.
10. The beneficiary and his or her counsel will obtain a full satisfaction and release or waiver from Medicare regarding all of its claims.
The proposed SMART Act would, in part, amend the existing MSP Act to include provisions setting forth a clear, required process to obtain a “final demand” letter from Medicare within a reasonable time before a settlement, judgment, or award is expected. During this reasonable pre-settlement time period (120 days), the Medicare beneficiary, the liability insurer, or the self-insured could make a written request to Medicare for a demand letter which is to be produced in 65 days. If Medicare does not timely provide this final demand letter, the beneficiary or insurer would need to send a second request. If this request does not receive a response from Medicare within 30 days, absent exceptional circumstances justifying the failure to respond, Medicare would be barred from collecting any of the conditional payments it makes from the parties, counsel and insurer(s) involved. The SMART Act would also provide that CMS must draft regulations that would provide a right of appeal if the settling parties disagree with Medicare’s “final demand” or if they believe that Medicare has made a mistake in calculating that demand.