Medicare myths: what every trial lawyer should know about the MSP & liability Medicare set asides.

• Author: Lazarus, Jason D.
• Position: Elder Law

Passage of [section] 111 of the Medicare, Medicaid, and SCHIP Extension Act (MMSEA) (1) in 2007 and its original reporting deadline of July 1, 2009, (2) have caused a tremendous amount of confusion among insurance professionals, lawyers, and settlement planners. As a result of the MMSEA, new discovery is being sought to assist insurers in complying with the reporting requirements. Although the new discovery is proper, some changes attributed to the MMSEA are completely inaccurate. For example, some insurers are insisting on putting Medicare on the settlement check, claiming the "new law" requires it. Another example is the insistence by some insurers that Medicare set asides (MSA) are now required in all liability cases. Neither is true. The simple fact is that the MMSEA imposes a mandatory insurer reporting requirement upon responsible reporting entities (RRE). Centers for Medicare and Medicaid Services (CMS) has created a 224-page manual explaining what is required and defining terms used in the MMSEA. A discussion of all aspects of the MMSEA is beyond this article's scope. This article will briefly delve into the MMSEA to explain the act and its requirements. It will also focus on what the act does not require in an attempt to clear up widespread misconceptions.

Section 111 of the MMSEA

First, what is the MMSEA and what does it require? On December 29, 2007, President Bush signed into law the MMSEA. (3) Part of this act, [section] 111, extends the government's ability to enforce the Medicare Secondary Payer Act. (4) As of April 1, 2011, an RRE (liability insurer, self-insurer, no-fault insurer, and workers' compensation carriers) shall determine whether a claimant is a Medicare beneficiary ("entitled"), and if so, shall provide certain information to the secretary of Health and Human Services when the claim is resolved. (5)

Under MMSEA, the RREs/insurers described above must report the identity of the Medicare beneficiary to the secretary and other such information as the secretary deems appropriate to make a determination concerning coordination of benefits, including any applicable recovery of claim. (6) Failure of an applicable plan to comply with these new requirements will incur a civil money penalty of $1,000 for each day of noncompliance on each claim. (7) A single claimant can have more than one claim, but the penalty is per claim. These new reporting requirements will make it very easy for CMS to review settlements to determine whether Medicare's interests were adequately addressed by the settling parties.

Section 111 and Resulting New Discovery Requests

As a result of the MMSEA and RREs' fear of not reporting promptly and being subjected to fines, many insurers are propounding discovery aimed at securing information to comply with the reporting. The RREs are requesting a Social Security number in order to verify whether a claimant is Medicare eligible. According to CMS, RREs may "submit a query to the COBC [Coordination of Benefits Contractor] to determine Medicare status of the injured party prior to submitting claim information for [section] 111 reporting." (8) The query process is designed to assist RREs in determining whether the claim must be reported. The query must contain the client's Social Security number or Medicare health insurance claim number (HICN), name, date of birth, and gender. The COBC, upon submission of the information outlined above, will respond and indicate whether the individual is a Medicare beneficiary. If the injured party is a Medicare beneficiary, the HICN and other information found in the Medicare beneficiary database will be provided to the RRE. This process is done electronically with HIPAA Eligibility Wrapper software provided by CMS, but the RRE must have the Social Security number or HICN. This is the reason why the new discovery requests are being implemented.

Two recent decisions reinforce the right of a defendant insurer to compel provision of a plaintiff's Social Security number to comply with the mandatory insurer reporting required by [section] 111 of the MMSEA. The first decision is Seger v. Tank Connection, LLC, Docket No. 8:08CV75 (D. Neb. 2010), in which a Nebraska federal court forced the plaintiff to answer an interrogatory requesting his Social Security number and found that the defendant "met its burden of proving the relevance of the requested information." (9) The court went on to say that:

[a]lthough the Extension Act does not require this information be submitted to CMS until after a final settlement or judgment is issued, there is no harm to the plaintiffs in providing the information sooner.

As Mr. Seger will be required to provide the requested information eventually, and as providing the information could reasonably bear on the issues in the case, the court finds Mr. Seger should respond to Interrogatories Nos. 4 and 9 to the extent he must provide identifying information along with either his Medicare Health Insurance Claim Number or his Social Security Number in order that Roundtable's insurance company may comply with the Extension Act.

The second decision is Hackley v. Garofano, 2010 Conn. Super. LEXIS 1669. In Hackley, a Connecticut court followed Seger and found a defendant insurer, USAA, could condition settlement upon provision of his Social Security number. (11) The court said:

[t]hat there is a simple mechanism to assure that Medicare's interests are protected when a Medicare-eligible person receives a verdict or settlement in a personal injury case--the electronic "query process"--is apparent, as is the fact that both that process and USAA's confidentiality policy provide reasonable, albeit not foolproof, assurance that this personal identifying information will not be compromised.... This court, therefore, concludes that it is permissible for USAA to condition its disbursement of settlement funds on the plaintiffs' provision of their Social Security numbers. (12)

MMSEA and Conditional Payments

The stated intent of the new reporting requirements was to identify situations when Medicare should not be the primary payer and ultimately allow recovery of conditional payments. The Medicare Secondary Payer Act (MSP) prohibits Medicare from making payments if payment has been made or is reasonably expected to be made by a workers' compensation plan, liability insurance, no-fault insurance, or a group health plan. However, Medicare may make a "conditional payment" if one of the aforementioned primary plans does not pay or cannot be expected to be paid promptly. (13) These "conditional payments" are made subject to being repaid when the primary payer pays. When conditional payments are made by Medicare, the government has a right of recovery against the settlement proceeds.

Congress has given CMS both subrogation rights and the right to bring an independent cause of action to recover its conditional payment from "any or all entities that are or were required or responsible ... to make payment with respect to the same item or service (or any portion thereof) under a primary plan." (14) Furthermore, CMS is authorized under federal law to bring actions against "any other entity that has received payment from a primary plan." (15) Most ominously, the government may seek to recover double damages via an independent cause of action.

U.S. v. Harris--A Trial Lawyer's Worst Nightmare

The government takes its reimbursement rights seriously and is willing to pursue trial lawyers who ignore Medicare's interest. In U.S. v. Harris, No. 5:08CV102, 2009 WL 891931 (N.D. W.Va. Mar. 26, 2009), affd 334 Fed. Appx 569 (4th Cir. 2009), a personal injury plaintiff lawyer lost his motion to dismiss against the U.S. government in a suit involving the failure to satisfy a Medicare subrogation claim. (16) The plaintiff filed for declaratory judgment and money damages against the...