Nancy R. MogabMogab & Hughes Attys P.C.

Robert HendershotEvans & Dixon, LLC

Christine A. AlsopThe Elder & Disability Advocacy Firm

of Christine A. Alsop, LLC, St. Louis, Missouri

J. Christopher ChostnerSchuchat, Cook & Werner

Julie A. BerkowitzLaw Office of Julie Berkowitz, St. Louis, Missouri

LIEN RESOLUTION ISSUESMISSOURI BAR ANNUAL MEETING

TRIAL TRACK

Medicare was created in 1965

Medicare Secondary Payer Act was created in 1980

Medicare Secondary Payer Act (the MSP)

42 U.S.C. §1395y 42 C.F.R. §§ 411.20 et.seq. Medicare is a secondary payer

The Law

Enforces Medicare’s basic right of recovery and to ensure that

Medicare serves as a secondary payer, whenever possible.

  Section 111: reporting requirements

Medicare, Medicaid and SCHIP Extension Act of 2007 (MMSEA)

CMS is the agency responsible for enforcement of the MSP The Website: http://www.cms.gov/ CMS is short for the “Centers for Medicare & Medicaid Services” CMS is a sub-agency under The U.S. Department of Health and

Human Services ("HHS“)

CMS

CMS has consolidated all activities in support of the collection, management, and reporting of other insurance coverage of Medicare beneficiaries under a single entity, the Coordination of Benefits Contractor (COBC).

The COBC is basically the information gatherer to coordinate benefits of Medicare recipients

Coordination of Benefits Contractor (COBC)

CMS contracted with the MSP Recovery Contractor (MSPRC) in 2006 to consolidate all functions related to MSP recovery

The MSPRC manages all MSP after the COBC completes a record

Once the file is transferred from the COBC to the MSPRC, the claimant will receive a “rights and responsibilities” letter (RAR) signed by the MSPRC

MSP Recovery Contractor

42 USC 1395y(b)(8) and 42 C.F.R. Section 411.25

All settlements, judgments, awards or other payments resolving medical for a Medicare Beneficiary claimant must be reported

Reported by Payer—not Claimant or Plaintiff Penalties for failing to report

Reporting Requirement

In every liability settlement involving a Medicare beneficiary, the parties, including any group health plan or liability insurer, now has three distinct obligations:

1) report the settlement to CMS (the present); 2) resolve any conditional payments (the

past)and 3) provide for payment of future medical

expenses as a term of the settlement, taking into consideration Medicare’s interests (the future).

Each obligation carries its own penalty for failure to fulfill it.

Three Compliance Parts; The Present, the Past and the Future

Know your client Know and understand the benefits that the

client receives: ◦ Medicare◦ SSDI◦ SSI◦ Food Stamps◦ Medicaid◦ Section 8

Intake

A person 65 years of age or older; A disabled person; A person with end stage renal disease.

Individual must be insured; must have sufficient quarters of coverage

Individual who is applying on basis of age who is not insured may pay into the system

Individual who applies for SSDI is eligible for Medicare within 24 months of eligibility

Compassionate Diseases

Who is entitled to Medicare?

• Medicare has the right to recover any conditional payment made against the settlement proceeds of a Worker’s Compensation or third-party liability case.

• Sometimes referred to as a “super lien” because of the broad power CMS has

• From the date of incident to the date of settlement

Conditional Payments

1. When you sign up the client get a copy of their Medicare card, Medicaid card and health insurance cards (prior insurance at time of accident?).

2. Go to www.msprc.info. Click on “Tool Kits”-then “Attorney Tool Kit.”

3. Use the MSPRC forms-even if you have to attach information.

4. Print out model Proof of Representation & Consent to Release Forms-client signs.

EXAMPLE FOR HANDLING A CONDITIONAL PAYMENT

5. Report case (directions in “Reporting a Case” in Attorney Tool Kit).

6. Mail proof of representation and consent to release forms to MSPRC (use Correspondence Cover Sheet).

7. Go to www.mymedicare.gov and create an account for client so you can access claim information with client’s permission.

Conditional Payment Example

8. Keep checking mymedicare.gov for client information, or call automated number to check status of conditional payments.

9. Review for any non-injury related expenses on conditional payment sheet. Prepare documentation to correct non-injury related expenses.

10. Final Settlement Detail Document to MSPRC-attach unsigned settlement statement.

11. Wait 4-6 weeks or more.

Conditional Payment Example

First time CMS sued plaintiffs’ lawyers (but not the plaintiffs), defendants and their insurers for recovery of conditional payments and double damages plus interest under the MSP

Government loses on statute of limitations

On appeal to the 11th Circuit

U.S. v. Stricker, et al., No 09-2423 (N.D. Ala. September 30, 2010)

Medicare reduces its recovery to take into account the cost of procuring the judgment or settlement.

The costs include attorney’s fees, expert witness fees and court costs. In order to properly calculate this reduction, the claimant’s attorney must provide a copy of the fee agreement along with documentation of costs incurred during litigation. 42 C.F.R. 411.37.

Procurement Costs

Bradley v. Sebelius, 621 F.3d 1330 (11th Cir. 2010) A child's loss of parental companionship claim is a property right belonging to the child, not Medicare.

Benson v. Sebelius, 2011 WL 1087254 (D.D.C. 2011), Plaintiff factored his mother’s medical claims into the settlement calculation. The conditional payments were recoverable by CMS.

Medicare and Wrongful Death Cases

Section 1862(b)(2)(A)(ii) of the Social Security, Act [42 USC 1395 y(b)(2)], precludes Medicare payment for services to the extent that payment has been made or can reasonably be expected to be made promptly under liability insurance. 

Medicare has the right to scrutinize any settlement of worker’s compensation case or third-party liability case to determine if its right must be protected against a shift to Medicare of any third parties’ liability as it relates to future medical care.

Unless funds are set aside that will meet the participant’s future medical bills, Medicare will not assume liability for future medical treatment when a third party is responsible.

Medicare Set-Aside (MSA) Arrangements

The law does not require them; it’s merely a device to use to comply with the law.

No definition of “MSA” is in the MSP, its regulations or other law.

MSA is an allocation of settlement proceeds among the various damage components of a settled claim.

Medicare Set Aside

Memo issued July, 2001 (known as the “Patel Memo”) formally introduced the Medicare Set Aside (MSA)arrangement regarding workers’ compensation

(WC) settlements. MSA became an effective means to manage

exposure under the MSP. CMS embraced MSAs as the preferred

means of complying with the MSP and minimizing future conditional payments.

History of the MSA

4/22/03 Memo in WCMSA:◦ The facts of the case demonstrate that the injured

individual is being compensated for past medical expenses only.

◦ There is no evidence that the individual is attempting to maximize the other aspects of the settlement to Medicare's detriment.

◦ The individual’s treating physicians conclude (in writing) that to a reasonable degree of medical certainty the individual will no longer require any Medicare covered treatments.

CMS Guidance

Stalcup is the MSP Regional Coordinator-Dallas, Texas (pertains to AR, OK, TX, NM, LA).

“The Law requires that the Medicare Trust Funds be protected from payment for future services whether it’s a Worker’s Compensation or liability case. There is no distinction in the law.”

There is no formal process for review of liability cases.

Attorneys must decide based upon the facts of their case whether the Trust Fund must be protected.

Sally Stalcup Memo – 5/25/11

Benson is the Acting Director of the Financial Services Group of the Office of Financial Management in Baltimore, Maryland

Where the beneficiary’s treating physician certifies in writing that treatment for the alleged injury related to the liability “settlement” has been completed as of the date of the “settlement,” and future medical services for injury will not be required, Medicare considers its interest, with respect to future medicals for that particular “settlement” satisfied.

When there is such a certification, there is no need for the beneficiary to submit the certification or a proposed LMSA for review. CMS will not provide the settling parties with confirmation that Medicare’s interest with respect to future medicals for that “settlement” has been satisfied.

The beneficiary and/or their representative are encouraged to maintain the physician’s certification.

Charlotte Benson Guidance Memo – 9/30/11

On May 3 of 2012, CMS submitted to the Office of Management and Budget advanced notice of proposed rulemaking (ANPRM) entitled "Medicare Secondary Payer and 'Future Medicals' (CMS-6047-ANPRM).

Solicits comment on options to “clarify how beneficiaries can meet their obligations to protect Medicare's interest with respect to Medicare Secondary Payer (MSP) claims involving automobile and liability insurance (including self-insurance), no-fault insurance, and workers' compensation when future medical care is claimed or the settlement, judgment, award, or other payment releases (or has the effect of releasing) claims for future medical care."

Medicare Secondary Payer and 'Future Medicals‘ Proposed Rule Making

Medicare is not bound by the parties’ allocation of settlement funds

The court can determine whether future medical expenses are likely and the amount of the allocation necessary for a MSA. See, Big R Towing v. Benoit, No. 6:2010cv00538 (W.D. La 2010); Finke v. Hunter’s View, supra, 2009 WL 6326944 (D.Minn.); Schexnayder v. Scottsdale, No. 6:2009cv01390 (W.D. La 2009)

Allocations

Self-Administered Custodial Accounts Special Needs Trust Pooled Trust

Types of Arrangements

SSI Medicaid These “means-tested” benefits could be

jeopardized by the receipt of a settlement. Many recipients of Medicaid have no other form of health insurance. The loss of Medicaid could be devastating.

Other Benefits that Must be Considered

An MSA does not protect other “means tested benefits” and will impact ongoing eligibility.

An MSA should be a sub-trust in a Special Needs Trust.

Summary◦ Two issues; maintaining “means tested benefits”

Dealing with – RSMo. 208.215 - Medicaid Lien; Maintaining “means tested benefits”

Special Needs Trusts Other options

Protecting Other Means Tested Benefits

Third Party (“Tidrow”) Special Needs Trust Self-Settled or Pay Back Special Needs Trust

◦ 42 U.S.C.1396(d)(4)(A) Pooled Special Needs Trust

◦ 42 U.S.C. Section1396p(d)(4)(C)

Special Needs Trusts

The individual must be under age 65 at the time the trust is created and funded

The trust may be established by a parent, grandparent, legal guardian, or a court ◦ See RSMo. §475.092 and RSMo. §511.030

The individual must be disabled (same definition for disability as used for SSDI or SSI)

The Trust must contain pay-back provisions◦ Missouri has special requirements

See RSMo. §475.092 The trust must be irrevocable

Self-Settled or Pay Back Special Needs Trusts

42 U.S.C. 1396(d)(4)(A)

RSMo. §208.215 – Medicaid is entitled to be repaid from the proceeds of the tort recovery.

The lien may be reduced by the trial court. The lien may be deferred if a Special

Needs Trust is properly drafted, approved and funded.

Medicaid Lien

No independent statutory right for subrogation or reimbursement.

§502(a)(3), 29 U.S.C. § 1132(a)(3)◦ A plan beneficiary, participant, or fiduciary may bring

a civil action to “obtain other appropriate equitable relief . . . . to redress such violations or . . .to enforce any provisions of ERISA or terms of the plan.”

Only allows a plan administrator “equitable relief” to “enforce the terms of the plan.”

ERISA EMPLOYEE BENEFIT FUNDS

Great-West Life & Annuity v. Knudson, 534 U.S. 204 (2002)◦ “Appropriate Equitable Relief” in §502(a)(3) only

includes those damages traditionally available in equity.

Sereboff v. Mid Atlantic Medical Services, 547 U.S. 356 (2006)◦ Plan fiduciary may collect money through an

equitable lien if the plan provision obligated the party holding the money to repay the plan.

ERISA Plans: Available Relief

Relief that is not available under ERISA:◦ Monetary relief, even if it is characterized as

restitution.◦ Personal Liability - see Knudson.◦ Statutory Liens.

Relief that is available under ERISA:◦ Subrogation: Fund’s right to stand in the

beneficiary’s place to collect amounts owed.◦ Reimbursement: Fund’s right to collect identifiable

proceeds from a settlement or judgment.◦ Self Help

ERISA Plans: Available Relief

Question 1: Is your client’s health insurance provided by an individual plan?

◦ ERISA only applies to employer sponsored plans (even if employee pays the entire premium).

◦ Does not apply to plans that individuals purchase on their own, away from their employer.

ERISA Qualifying Plans:Three Questions

Question 2: Is your client employed by federal, state, or local government, or the a church?

◦ Federal Employee – FEBHA.

◦ State and local government employees – State Law.

◦ Churches? – Have to review the plan.

ERISA Qualifying Plans:Three Questions

Question 3: Is your client’s insurance provided by a “self-funded” or “insured” plan?

◦ Section 514(b)(2)(A), 29 U.S.C. § 1144(b)(2)(A) “Savings Clause” states retain the power to regulate insurance.

◦ Section 514(b)(2)(B), 29 U.S.C. § 1144(b)(2)(B) “Deemer Clause” self-funded plans are not subject to state insurance regulation.

◦ State Law Applies to “insured plans.”

ERISA Qualifying Plans:Three Questions

ALWAYS REQUEST THE PLAN!

29 U.S.C. § 1024:

◦ Plan administrator must provide “participants and beneficiaries” a copy of the current Summary Plan Description and Plan Document upon written request.

ERISA Plans:Get the Plan Documents

29 U.S.C. § 1102◦ The terms of the Plan, including subrogation and

reimbursement obligations, must be found in the plan document to be enforceable under § 502.

◦ Requires Plans to issue Summary Plan Descriptions.

29 C.F.R. § 2520.102-3◦ Requires SPD’s to provide “a statement clearly

identifying circumstances which may result in disqualification, ineligibility, or denial, loss, forfeiture, suspension, offset, reduction, or recovery (e.g., by exercise of subrogation or reimbursement rights).

ERISA Plans:Get the Plan Documents

CIGNA v. Amara, 131 S.Ct. 1866 (2011).◦ “we conclude that the summary documents,

important as they are, provide communication with beneficiaries about the plan, but that their statements do not themselves constitute the terms of the plan.”

Right of subrogation/reimbursement must be found in the Plan Document.

If right of subrogation/reimbursement is only in the SPD, it is not sufficient.

ERISA Plans:SPD v. Plan Documents

CIGNA v. Amara, 131 S.Ct. 1866 (2011).◦ CIGNA amended a generous defined benefit

pension plan with a less generous “account balance plan” plan.

◦ Promised employees the new plan would “significantly enhance” and create “an overall improvement” for their retirement benefits.

◦ “one advantage the company will not get from the retirement program changes is cost savings.”

◦ Court agreed that CIGNA had misrepresented the new plan to its employees.

“Appropriate Equitable Relief” and Equitable Defenses

What is the Remedy?

◦ The District Court rewrote the plan document so that instead of getting the best of “A” or “B”, each employee got “A” plus “B.” Ordered CIGNA to pay back benefits.

◦ This is “reformation,” a traditional equity remedy.

◦ This is “estoppel” another equitable remedy.

◦ This is a “surcharge” to stop an “unjust enrichment.”

“Appropriate Equitable Relief” and Equitable Defenses

U.S. Airways, Inc. v. McCutchen, 663 F.3d 671 (3rd Cir. 2011).◦ U.S. Airways had a claim for $66,866.◦ McCutchen offered $41,500 (amount adjusted

pro-rata for attorney’s fees and expenses). Held: “appropriate equitable relief must be

something less than all equitable relief.” Relies on Amara to reduce claim to avoid

Plan’s “unjust enrichment.” Cert. granted on June 25, 2012.

“Appropriate Equitable Relief” and Equitable Defenses

CGI Technologies v. Rose, 683 F.3d 1113 (9th Cir. 2012).◦ Rose injured in a car accident, with$1.75 million

damages.◦ Settles for $376,906.84◦ Plan claim for $32,000.◦ Rose refuses to pay, arguing “make whole doctrine,”

and “common fund doctrine.”◦ District court applies the plan as written, and does not

consider any of Rose’s equitable defenses. Held: Relies on Amara and McCutchen and

remands the case for the district court to consider Rose’s equitable defenses.

“Appropriate Equitable Relief” and Equitable Defenses

Wal-Mart v. Shank, 500 F.3d 834 (8th Cir. 2007)◦ “We therefore do not apply common law theories to

alter the express terms of a written plan.”◦ Explicitly rejects the “make whole doctrine” and a

“pro rata” payment argument. Wal-Mart v. Varco, 338 F.3d 680 (7th Cir. 2003).

◦ “It is inappropriate to fashion a common law rule that would override the express terms of a private plan unless the overridden plan provision conflicts with statutory provisions or other policies underlying ERISA.

◦ Expressly rejects the federal “common fund doctrine.”

“Appropriate Equitable Relief” and Equitable Defenses

Mo. R. Prof. Conduct 4-1.15, Informal Opinions 950071, 950164:◦ Where an attorney possesses funds which both a client

and third party claim an interest, and ◦ “the attorney has been involved in an agreement made or

ratified by the client for the third party to be paid from any settlement or recovery,”

◦ “or where the third party has perfected a lien or demonstrated an apparently valid claim on the proceeds such that the attorney may be held personally liable”

◦ Attorney Must: Hold the money for a reasonable time, until the dispute is

resolved; If the dispute cannot be resolved interplead the funds.

ERISA Plans:What’s an attorney to do?

Drury Industries, Inc. v. Goding, 2012 U.S. App. Lexis 18815 (8th Cir. 2012).◦ Attorney liable to plan if:◦ Attorney “agrees with a client and a plan to honor plan’s

subrogation right,”◦ The Attorney is still in possession of settlement funds.

Rose, 683 F.3d at 1118.◦ Attorney engaged in an unlawful transaction is liable to the

plan.◦ n. 2: “an attorney who before adjudication pays himself out

of the disputed funds, effectively reducing the available amount to less than the plan’s claim, would be an appropriate defendant.”

ERISA Plans:What’s an attorney to do?

Questions?