Defendants Must Heed New Medicare Reporting Obligations

We continue this month with our discussion of the expanded reach of the Medicare reporting requirements under the Medicare, Medicaid and SCHIP Extension Act of 2007 (MMSEA), which as of January 2011 is applicable to liability insurers and self-insured entities. As previously mentioned, MMSEA enhances the Medicare Secondary Payer statute (42 U.S.C. 1395y(b)) by requiring defendants and their insurers to determine if a plaintiff is or may potentially become a Medicare recipient, and to report such status to the Center for Medicare and Medicaid Services (CMS) within the Department of Health and Human Services. (An overview of the reporting requirements may be found at www.cms.hhs.gov/MandatoryInsRep/.)

What Must Be Reported?

The first step in reporting to CMS is to register through the Coordination of Benefits Contractor's secure website for online reporting, www.Section111.cms.hhs.gov. RREs will be assigned a quarterly file submission time frame during which they must submit claim input files.

In order to ensure that an appropriate report is made, defense counsel must obtain the plaintiff's first and last name, address, date of birth, gender, Social Security number and possible Medicare Health Insurance Claim Number (HICN). CMS uses the HICN to identify Medicare beneficiaries receiving health care benefits. Specific information must also be reported regarding the applicable insurance plan and the policyholder.

An RRE must report the amount of a settlement or judgment, and whether there is an ongoing responsibility for future payments. With respect to the action and the injuries alleged, the information that must be reported includes the date of injury; the nature and cause of the injury, if applicable; and the ICD-9 or diagnostic code. As new information becomes available, an RRE is responsible for reporting it. It is important for defense counsel to remember that regardless of how a settlement is structured between the plaintiff and the defendant's liability insurer, it is the RRE who is responsible for reporting it to CMS.

In addition, RREs have an ongoing responsibility for monitoring. For example, if the plaintiff was not receiving Medicare benefits at the time an RRE assumed responsibility for ongoing medical payments, the RRE must continue to monitor the status of the plaintiff and report to CMS when he or she becomes entitled to Medicare benefits.

Detailed information about the reporting requirements is available at the CMS website. In addition, CMS has created a “user's guide” to facilitate compliance. The current version, 3.1 (July 24, 2010), can be found at www.cms.gov/MandatoryInsRep/Downloads/NGHPUserGuideV3.1.pdf. Defense counsel ' particularly those new to the concept of Medicare reporting ' should consult these sources early and often.

Getting Information

A practical means of obtaining the necessary information to ensure compliance with the reporting requirements is to request information about the plaintiff's Medicare status through the defendant's initial discovery demands. Much like a demand for collateral source information, a demand for Medicare information could be used to determine whether the plaintiff is receiving Social Security disability benefits or is otherwise entitled to Medicare. Authorizations for medical documents and records where Medicare has paid in whole or in part should also be requested. Any information provided should be reviewed at the plaintiff's deposition.

In addition, the Social Security Administration has approved a specific form, SSA-3288, entitled “Consent for Release of Information,” which authorizes the release of information regarding a person's Social Security benefits and Medicare entitlement. Defense counsel should request that the plaintiff execute this form early in the litigation.

Defense counsel should also request that the plaintiff or the plaintiff's representative provide a “Consent (for Medicare) to Release” form, which authorizes CMS to release information regarding the plaintiff's claim. That form can then be forwarded to the MSPRC along with a letter requesting a copy of the “Conditional Payment Letter,” which will list the payments Medicare has made to the plaintiff that it believes are related to the claim.

In addition, CMS allows an RRE to submit queries to the Coordination of Benefits Contractor to determine whether an individual is receiving Medicare. In order to make such a query, the RRE must supply the plaintiff's name, date of birth, gender and Social Security number.

Upon receipt of the conditional payment letter, defense counsel should review it for “relatedness,” and determine which payments are related to the injuries alleged in the action and which are not. Defense counsel should work with plaintiff's counsel to attempt to reach an agreement in this regard. Unrelated claims should be stricken and the modified conditional payment letter returned to the MSPRC with a detailed letter identifying and explaining unrelated ICD-9 codes, as for example routine medical care or treatment of an unrelated condition. Otherwise, as one commentator put it, the RRE might get stuck with the cost of cancer treatment in a slip and fall case! See “Medicare Compliance: Warning for Companies About Handling Personal Injury Claims,” www.corporatecomplianceinsights.com/2010/consequences-of-non-compliance-with-medicare-secondary-payer-acts/.

Ideally, such a letter of explanation will prompt the MSPRC to send an updated conditional payment letter. If the updated conditional payment letter is not forthcoming within a reasonable time, defense counsel should send follow-up requests. If possible, defense counsel should also attempt to reach an agreement with Medicare as to the amount of conditional payments before entering into settlement discussions or mediation with respect to the underlying claim.

What to Do at Settlement

It cannot be emphasized enough that obtaining the necessary information to report to CMS cannot be left until the time of settlement or judgment. Again, the relevant information should be sought and obtained early in the litigation, and defense counsel's efforts to gather and update the information should be carefully documented ' for the protection of counsel as well as the client. It is also essential, however, to review the information during settlement negotiations, since the plaintiff's status may have changed from the time the action was commenced.

When the defendant or its liability insurer is about to make a lump sum payment to a Medicare recipient, the total payment obligation to the claimant (TPOC) must be reported. The TPOC date is the date when the payment obligation is established, not the date that a check is actually sent. For example, if court approval of a settlement is required, the TPOC date is either the date of the settlement agreement or the date of approval, whichever is later.

A TPOC single-payment obligation is reported only once, regardless of whether it is funded through a single payment, an annuity or a structured settlement. User Guide, ' 11.1. Although currently various thresholds apply so that small payments do not have to be reported, these are being phased out and it is anticipated that in the future, all TPOC payments will have to be reported. In order to report a settlement, defense counsel must send an executed settlement agreement to the MSPRC with a request for a final payment letter. Similarly, if a judgment has been entered, a notice of entry of the judgment should be sent with the request for the final payment letter.

Medicare policy requires the recovery of “payments from liability awards or settlements ' without regard to how the settlement agreement stipulates disbursement should be made.” See Jackson v. Hudson Court LLC, 2010 N.J. Super. Unpub. LEXIS 1111, quoting Medicare Secondary Payer Manual, ch. 7, p. 50.4.4. The user's guide notes that where there are multiple defendants involved in a settlement, an agreement to have one of the defendant's insurer(s) issue any payment to the plaintiff does not shift the reporting responsibility to the entity issuing the payment. All RREs involved in the settlement are still responsible for their own reporting.

Moreover, if there is a settlement or judgment in a case involving joint and several liability ' as for example where a hospital and several doctors are sued ' each insurer must report the total settlement, judgment or other payment, and not just its assigned or apportioned share. An RRE, however, is only required to report the total obligation, and is not required to allocate damages between indemnity and medical payments. See “Medicare Compliance, Version.2010: Mandatory Insurer Reporting where Medicare Is a Secondary Payer,” by Matthew L. Garretson and Sylvius H. von Saucken, The Garretson Firm Resolution Group, Aug. 19, 2010, at www.garretsonfirm.com/garretson/news/?newsID=13.

As noted previously, Medicare is not bound by the terms of a settlement and can recover from an RRE even after the RRE has made payment to the plaintiff. 42 CFR 411.24 (i). Nor is the allocation of fault relevant to Medicare's right to recover from any party. Hadden v. United States, 2009 U.S. Dist. LEXIS 69383 (W.D. Ky. 2009). Moreover, CMS may initiate recovery proceedings as soon as it learns that payment has been made or could be made under Workers' Compensation, any liability or no-fault insurance, or an employer group health plan. In a “worst-case” scenario, if it is necessary for CMS to take legal action to recover from the primary payer, CMS may recover twice the amount to which it would otherwise be entitled, with interest. 42 CFR 411.24(b), (c).

Determining Interest

Medicare's recovery procedures provide that it will not determine its interest until after a settlement, judgment, award or other payments, at which point it will issue a final demand letter regarding the amount that must be paid out of the settlement/judgment. Medicare must be reimbursed within 60 days of the final demand letter, and it is the responsibility of the RRE and defense counsel to make certain that the payment is made. See “Medicare Compliance: Warning for Companies About Handling Personal Injury Claims,” at www.corporatecomplianceinsights.com/2010/consequences-of-non-compliance-with-medicare-secondary-payer-acts/.

Unfortunately, although CMS has been asked to provide guidance as to how the parties can properly protect Medicare's interests, it has failed to give any meaningful guidance to date as to how RREs can protect Medicare's interests when those interests are not determined until after settlement. Accordingly, it may be advisable for defense counsel to require some sort of assurance and/or indemnification from the plaintiff as part of a settlement. Defense counsel may also consider withholding funds from the settlement amount until the final demand is received and then reimbursing CMS directly.

John L.A. Lyddane is a senior partner and trial attorney at Martin Clearwater & Bell. Barbara D. Goldberg, a member of this newsletter's Board of Editors, is a partner at the firm and head of its appellate department. This article also appeared in the New York Law Journal, an ALM sister publication of this newsletter.

We continue this month with our discussion of the expanded reach of the Medicare reporting requirements under the Medicare, Medicaid and SCHIP Extension Act of 2007 (MMSEA), which as of January 2011 is applicable to liability insurers and self-insured entities. As previously mentioned, MMSEA enhances the Medicare Secondary Payer statute (42 U.S.C. 1395y(b)) by requiring defendants and their insurers to determine if a plaintiff is or may potentially become a Medicare recipient, and to report such status to the Center for Medicare and Medicaid Services (CMS) within the Department of Health and Human Services. (An overview of the reporting requirements may be found at www.cms.hhs.gov/MandatoryInsRep/.)

What Must Be Reported?

The first step in reporting to CMS is to register through the Coordination of Benefits Contractor's secure website for online reporting, www.Section111.cms.hhs.gov. RREs will be assigned a quarterly file submission time frame during which they must submit claim input files.

In order to ensure that an appropriate report is made, defense counsel must obtain the plaintiff's first and last name, address, date of birth, gender, Social Security number and possible Medicare Health Insurance Claim Number (HICN). CMS uses the HICN to identify Medicare beneficiaries receiving health care benefits. Specific information must also be reported regarding the applicable insurance plan and the policyholder.

An RRE must report the amount of a settlement or judgment, and whether there is an ongoing responsibility for future payments. With respect to the action and the injuries alleged, the information that must be reported includes the date of injury; the nature and cause of the injury, if applicable; and the ICD-9 or diagnostic code. As new information becomes available, an RRE is responsible for reporting it. It is important for defense counsel to remember that regardless of how a settlement is structured between the plaintiff and the defendant's liability insurer, it is the RRE who is responsible for reporting it to CMS.

In addition, RREs have an ongoing responsibility for monitoring. For example, if the plaintiff was not receiving Medicare benefits at the time an RRE assumed responsibility for ongoing medical payments, the RRE must continue to monitor the status of the plaintiff and report to CMS when he or she becomes entitled to Medicare benefits.

Detailed information about the reporting requirements is available at the CMS website. In addition, CMS has created a “user's guide” to facilitate compliance. The current version, 3.1 (July 24, 2010), can be found at www.cms.gov/MandatoryInsRep/Downloads/NGHPUserGuideV3.1.pdf. Defense counsel ' particularly those new to the concept of Medicare reporting ' should consult these sources early and often.

Getting Information

A practical means of obtaining the necessary information to ensure compliance with the reporting requirements is to request information about the plaintiff's Medicare status through the defendant's initial discovery demands. Much like a demand for collateral source information, a demand for Medicare information could be used to determine whether the plaintiff is receiving Social Security disability benefits or is otherwise entitled to Medicare. Authorizations for medical documents and records where Medicare has paid in whole or in part should also be requested. Any information provided should be reviewed at the plaintiff's deposition.

In addition, the Social Security Administration has approved a specific form, SSA-3288, entitled “Consent for Release of Information,” which authorizes the release of information regarding a person's Social Security benefits and Medicare entitlement. Defense counsel should request that the plaintiff execute this form early in the litigation.

Defense counsel should also request that the plaintiff or the plaintiff's representative provide a “Consent (for Medicare) to Release” form, which authorizes CMS to release information regarding the plaintiff's claim. That form can then be forwarded to the MSPRC along with a letter requesting a copy of the “Conditional Payment Letter,” which will list the payments Medicare has made to the plaintiff that it believes are related to the claim.

In addition, CMS allows an RRE to submit queries to the Coordination of Benefits Contractor to determine whether an individual is receiving Medicare. In order to make such a query, the RRE must supply the plaintiff's name, date of birth, gender and Social Security number.

Upon receipt of the conditional payment letter, defense counsel should review it for “relatedness,” and determine which payments are related to the injuries alleged in the action and which are not. Defense counsel should work with plaintiff's counsel to attempt to reach an agreement in this regard. Unrelated claims should be stricken and the modified conditional payment letter returned to the MSPRC with a detailed letter identifying and explaining unrelated ICD-9 codes, as for example routine medical care or treatment of an unrelated condition. Otherwise, as one commentator put it, the RRE might get stuck with the cost of cancer treatment in a slip and fall case! See “Medicare Compliance: Warning for Companies About Handling Personal Injury Claims,” www.corporatecomplianceinsights.com/2010/consequences-of-non-compliance-with-medicare-secondary-payer-acts/.

Ideally, such a letter of explanation will prompt the MSPRC to send an updated conditional payment letter. If the updated conditional payment letter is not forthcoming within a reasonable time, defense counsel should send follow-up requests. If possible, defense counsel should also attempt to reach an agreement with Medicare as to the amount of conditional payments before entering into settlement discussions or mediation with respect to the underlying claim.

What to Do at Settlement

It cannot be emphasized enough that obtaining the necessary information to report to CMS cannot be left until the time of settlement or judgment. Again, the relevant information should be sought and obtained early in the litigation, and defense counsel's efforts to gather and update the information should be carefully documented ' for the protection of counsel as well as the client. It is also essential, however, to review the information during settlement negotiations, since the plaintiff's status may have changed from the time the action was commenced.

When the defendant or its liability insurer is about to make a lump sum payment to a Medicare recipient, the total payment obligation to the claimant (TPOC) must be reported. The TPOC date is the date when the payment obligation is established, not the date that a check is actually sent. For example, if court approval of a settlement is required, the TPOC date is either the date of the settlement agreement or the date of approval, whichever is later.

A TPOC single-payment obligation is reported only once, regardless of whether it is funded through a single payment, an annuity or a structured settlement. User Guide, ' 11.1. Although currently various thresholds apply so that small payments do not have to be reported, these are being phased out and it is anticipated that in the future, all TPOC payments will have to be reported. In order to report a settlement, defense counsel must send an executed settlement agreement to the MSPRC with a request for a final payment letter. Similarly, if a judgment has been entered, a notice of entry of the judgment should be sent with the request for the final payment letter.

Medicare policy requires the recovery of “payments from liability awards or settlements ' without regard to how the settlement agreement stipulates disbursement should be made.” See Jackson v. Hudson Court LLC, 2010 N.J. Super. Unpub. LEXIS 1111, quoting Medicare Secondary Payer Manual, ch. 7, p. 50.4.4. The user's guide notes that where there are multiple defendants involved in a settlement, an agreement to have one of the defendant's insurer(s) issue any payment to the plaintiff does not shift the reporting responsibility to the entity issuing the payment. All RREs involved in the settlement are still responsible for their own reporting.

Moreover, if there is a settlement or judgment in a case involving joint and several liability ' as for example where a hospital and several doctors are sued ' each insurer must report the total settlement, judgment or other payment, and not just its assigned or apportioned share. An RRE, however, is only required to report the total obligation, and is not required to allocate damages between indemnity and medical payments. See “Medicare Compliance, Version.2010: Mandatory Insurer Reporting where Medicare Is a Secondary Payer,” by Matthew L. Garretson and Sylvius H. von Saucken, The Garretson Firm Resolution Group, Aug. 19, 2010, at www.garretsonfirm.com/garretson/news/?newsID=13.

As noted previously, Medicare is not bound by the terms of a settlement and can recover from an RRE even after the RRE has made payment to the plaintiff. 42 CFR 411.24 (i). Nor is the allocation of fault relevant to Medicare's right to recover from any party. Hadden v. United States, 2009 U.S. Dist. LEXIS 69383 (W.D. Ky. 2009). Moreover, CMS may initiate recovery proceedings as soon as it learns that payment has been made or could be made under Workers' Compensation, any liability or no-fault insurance, or an employer group health plan. In a “worst-case” scenario, if it is necessary for CMS to take legal action to recover from the primary payer, CMS may recover twice the amount to which it would otherwise be entitled, with interest. 42 CFR 411.24(b), (c).

Determining Interest

Medicare's recovery procedures provide that it will not determine its interest until after a settlement, judgment, award or other payments, at which point it will issue a final demand letter regarding the amount that must be paid out of the settlement/judgment. Medicare must be reimbursed within 60 days of the final demand letter, and it is the responsibility of the RRE and defense counsel to make certain that the payment is made. See “Medicare Compliance: Warning for Companies About Handling Personal Injury Claims,” at www.corporatecomplianceinsights.com/2010/consequences-of-non-compliance-with-medicare-secondary-payer-acts/.

Unfortunately, although CMS has been asked to provide guidance as to how the parties can properly protect Medicare's interests, it has failed to give any meaningful guidance to date as to how RREs can protect Medicare's interests when those interests are not determined until after settlement. Accordingly, it may be advisable for defense counsel to require some sort of assurance and/or indemnification from the plaintiff as part of a settlement. Defense counsel may also consider withholding funds from the settlement amount until the final demand is received and then reimbursing CMS directly.

John L.A. Lyddane is a senior partner and trial attorney at Martin Clearwater & Bell. Barbara D. Goldberg, a member of this newsletter's Board of Editors, is a partner at the firm and head of its appellate department. This article also appeared in the New York Law Journal, an ALM sister publication of this newsletter.