HEALTH CARE OBLIGATIONS WHEN SETTLING A PERSONAL INJURY CASE
FEDERAL, STATE AND PRIVATE
Under the laws of most states, when a plaintiff receives a personal injury settlement, he or she must use part of that settlement to pay back whoever paid for the medical care needed to treat the injury, whether it’s the government, your employee health plan, or your health insurance company. These health care “liens” or “reimbursement obligations” are now a part of almost all personal injury settlements. Yet many plaintiffs are not aware that they may have such obligations when they settle their personal injury case. Courts, defendants, and health care providers are placing stronger emphasis on satisfying health care liens related to a personal injury settlement. Laws and regulations, and the healthcare coverage policies that interpret them, often place the burden on the plaintiff to verify whether or not a health care provider has a lien and, if so, to resolve it. Therefore, as a plaintiff, you should take a few moments to make sure you understand your health care benefits, your obligations and your rights. Doing so will ensure that your personal injury claim best serves you by proactively evaluating and resolving the health care provider’s interest in the most efficient and favorable fashion as well as providing for your continued access to good quality health care.
What is a Lien?
We often think that healthcare coverage is meant to pay for all of our medical needs, no matter what the cause. However, the concept behind health care liens in personal injury settlements is that the responsible/negligent party should pay the medical bills. Therefore, regardless of your past premiums, co-pays or deductibles, if a third party (i.e a “defendant” in a personal injury claim) is liable for your injury, that third party ultimately should pay for your medical bills, not your health care provider. Most healthcare plans, whether provided by the government (federal or state programs) or by your employer, create their right to a claim or lien on any settlements when you originally became entitled and accepted coverage. This right of recovery is disclosed within the plan documents, but many individuals are not be aware of this or even think about it because most never foresee themselves a victim of a personal injury event.
A health care provider’s lien is typically focused solely on injury-related medical expenses paid for from the date of the injury through the date of settlement.
What are the Different Types of Health Care Providers?
As mentioned above, any health care plans’ right of recovery is disclosed in the plan documents. The first order of businesses is to have a strong grasp of the type(s) of coverage you currently receive or expect to rely upon in the future. Within the U.S., there are numerous ways for obtaining health care coverage. This document describes three of the most prevalent: Medicare, Medicaid, and private health insurance. Medicare is the federal government’s healthcare program, it provides healthcare for those 65 or older or those under 65 who are disabled, suffering from permanent kidney failure, or diagnosed with Lou Gehrig’s disease. Medicaid is the state government’s needs-based healthcare program. Each state administers its own program; therefore the laws for each program may vary. For the government programs, reimbursement obligations or liens arise from statutes. This occurs as soon as a recipient of government (state or federal) healthcare receives the first dollar of coverage. Private insurance is administered by many different insurance companies. Most Americans on private insurance get their coverage through their employer. For this type of insurance, lien obligations arise out of a pre-existing contract between the client and health plan.
This settlement planning guide focuses on clients who are settling a personal injury case and who are entitled to Medicare. Section One addresses liens related to settlements and Section Two addresses the expanding “future” set aside obligation related primarily to workers compensation settlements.
Medicare: What Is It and What Are the Rules?
Medicare is known as an entitlement program since you are entitled to Medicare if you have a sufficient work history (e.g. you have worked up to 20 out of the 40 work quarters, depending on age), and you therefore have paid a sufficient amount of Social Security tax into the system. As stated above it is the federal government’s health care program, and it provides healthcare benefits for those individuals age 65 or older or those under age 65 who are disabled , suffering from permanent kidney failure, or diagnosed with Lou Gehrig’s disease. Medicare does not pay for long-term care, but does pay for a portion of major medical expenses and hospitalizations and covers many prescription drugs.
For those who are disabled and meet the criteria, they often begin receiving Medicare two years after being approved for any kind of Social Security disability (SSD) benefit (other than Supplemental Security Income discussed below). The SSD system was created to provide disability insurance for injured workers and their families. Once a worker (who has paid a sufficient amount into the Social Security system) is unable to engage in substantial gainful employment for a period of at least 12 months, they are eligible for SSD.
If you meet the criteria above, Medicare may be responsible for providing your primary health care coverage. Under certain circumstances, Medicare will pay for your injury related care when another party is responsible. If you are able to recover from the party responsible for your injury, you must repay Medicare for the injury-related care. (Medicare technically refers to their reimbursement right as a “reimbursement claim” because they have a priority right to reimbursement that is stronger than any other lien. However, for the purposes of this educational document we will refer to Medicare’s right of recovery generically as a lien). Federal law requires all parties to “consider Medicare’s interests” in third party settlements where Medicare has paid “conditionally” for injury-related care.
1 The term “conditional payments” describes the injury-related payments Medicare made after your injury when another party was responsible for having caused that injury. Because it is a conditional payment, if money is received in a personal injury or medical malpractice settlement, Medicare must be paid back from your settlement prior to distributing any settlement proceeds to you.
1 Under Section 1862(b)(1) of the Social Security Act (42 U.S.C. §1395y(b)(1)), payment may not be made under Medicare for covered items or services to the extent that payment has been made, or can reasonably be expected to be made promptly, under a liability insurance policy or plan (including a self-insured plan). 42 U.S.C. §1395y(b)(1), amended by Pub. L. No. 109-171, 120 Stat. 4 (2006).
Enactment of the Medicare Modernization Act of 2004 placed the obligation on you and your attorney to inform Medicare of any possible situation where Medicare made a “conditional payment.” Medicare is not required to send notice of their reimbursement claim to you. Rather, you or your attorney will need to request a conditional payment summary.
Types of Medicare Programs
Medicare offers several program options. The choices vary from the services covered to the service providers. People who are eligible for Medicare commonly choose the Original Medicare Plan or a Medicare Advantage Plan. The Original Medicare Plan is a fee-for-service plan managed by the federal government. Most people on the Original Medicare Plan have a combination of Part A and Part B. Recipients of Original Medicare have the option of adding a Medicare Prescription Drug Plan (Medicare Part D) and purchasing a Medigap policy. Medicare Advantage plans are an HMO or PPO that can provide Parts A, B and D coverage.2
Below is an overview of the most common plan
1) Medicare Part A covers inpatient hospital care. Medicare Part A is offered to those who paid Medicare taxes while working. For most, it is not necessary to pay a monthly premium for the coverage. Others who have not paid Medicare taxes can buy Part A coverage. Medicare Part A is available for medically necessary blood, home health services, hospice care, hospital stays and skilled nursing facility care when recipients meet certain conditions.3
2) Unlike Medicare Part A, Medicare Part B is optional and requires those people who enroll to pay a monthly premium.4 Additionally, co-payments and deductibles may apply to these services. Medicare Part B covers services that Medicare Part A does not such as outpatient care, doctors’ services and other medical services. It covers services that are medically necessary and some preventive services.5
3) Part C – Medicare Advantage Plans. Medicare Advantage Plans are offered by private companies and approved by Medicare. Members of Part C plans are still on Medicare. Medicare Advantage Plans provide the same coverage as Part A and Part B. Many also provide extra benefits and Part D prescription drug coverage. Types of the Medicare Advantage Plan include: Preferred Provider Organization (PPO) Plans, Health Maintenance Organizations (HMO) Plans, Private Fee for Service Plans (PFFS), Special Needs Plans and Medicare Medical Savings Account (MSA) Plans. Members of Medicare Advantage Plans do not need Medigap and cannot be enrolled on Medicare Part D.6
2 CMS's booklet, Medicare & You 2007, is available at http://www.medicare.gov/Publications/Pubs/pdf/10050.pdf (accessed Jan. 3, 2007).
3 Id. at pg. 7-9
4 Effective January 1, 2007, Part B premiums are determined by income. Most people who enroll (“enrollee”) will pay the standard monthly premium ($88.50 in 2006.) Those with income of $80,000 individually and $160,000 jointly will be required to pay a higher premium. If the enrollee receives Social Security, railroad retirement or federal civil service retirement benefit checks, Part B premiums will be subtracted from those checks. If an enrollee does not receive the above mentioned government benefits he or she must pay the premiums to the government.
5 Specifically, those services include but are not limited to: ambulance services, clinical laboratory services, diabetic supplies, doctor services (not routine physical exams, with the exception of the Medicare enrollment physical), emergency room services, eyeglasses, flu shots, hearing and balance exam, kidney dialysis services & supplies, mammograms, physical therapy, prosthetic/orthotic items, tests, transplant services and urgently needed care.
6 Id. at. 33-40
4) Part D – Prescription Drug Coverage. Medicare Part D offers prescription drug plans from private companies which are approved by Medicare. Prescription Drug Coverage is optional and members wish to receive the benefits are required to pay a monthly premium. Prescription Drug Coverage is available through Medicare Part D or through Medicare Advantage Plans. Different plans have different options based on cost, drug coverage and convenience.7
5) Medigap Policy or Medicare Supplement Insurance. A Medigap policy, or Medicare Supplemental Insurance, is health insurance sold by private companies to fill in the gaps of the Original Medicare Plan. Medigap policies only apply to Original Medicare Plans. Some Medigap plans include prescription drug coverage. Recipients cannot have Medigap prescription drug coverage and Medicare prescription drug coverage at the same time. Twelve plans, subject to federal and state laws, are available. 8
Do All of These Medicare Plans Have Liens?
Part A & B coverage is managed through the federal government’s Medicare Secondary Payer (MSP) Department’s Tort Recovery Division. Part C is handled by private, independent providers. Part D tort recovery is yet to be defined however will be plan-specific as all Part D coverage is managed by private, independent Prescription Drug Plans (PDP).
LIABILITY SETTLEMENTS – Reimbursement of Injury Related Care Expenditures
What is my Obligation in a Liability Settlement?
In a liability settlement, Medicare seeks recovery for all injury-related care expenditures from date of injury to date of settlement.
How Long Does it Normally Take to Resolve a Medicare Lien?
The entire process can take as long as six months. The first task is to establish a case with Medicare’s tort recovery department and seek a listing of all expenditures. This listing will assist in determining which charges are related to the injury. When addressed early in the litigation, Medicare’s claim can be satisfied inside 45 days from date of settlement.
Why Does it Take So Long?
There are several reasons it takes a long time to resolve Medicare liens. First, the private contractor that handles the lien recovery for Medicare must go out and find all the medical expenses that have been paid on your behalf by the Part A and Part B providers for the services listed above. Complicating matters, in certain situations your medical providers have up to 25 months to bill Medicare after providing medical services to you. Then, someone must review all of the expenses for which Medicare is claiming a right of reimbursement to make sure that a) they occurred sometime between the date of injury and date of settlement and b) that they are truly related to the injury for which you have settled your case. All of this means that it can take a great deal of time to get a lien resolved with Medicare.
7Id. at. 43-46
8 Id. at 29-30
What Can I Do to Speed Up the Process?
Provide your attorney all the information they request to manage the resolution process. Do not duplicate efforts by contacting Medicare directly as this will lead to significant delays.
You should sign up for and access your Explanation of Benefit (EOB) through MyMedicare.gov. Keep an accurate journal of all the medical treatment you receive that is related to your injury, including the name of the provider and the date and type of service. Then, monitor to make sure your treatment history is accurately reported on the EOB.
Can I Challenge or Appeal Medicare’s Lien?
Plaintiffs who are Medicare beneficiaries have the right to appeal Medicare's lien amount. Any appeal request must be made in writing on special forms. Appeal decisions are generally based on the financial hardship that repayment would cause the plaintiff / beneficiary (such as the impact of unforeseen severe financial circumstances as well as the impact of out-of-pocket medical expenses and your ability to meet those obligations). In order to make the determination, a waiver form is sent to the beneficiary, requesting information on monthly income and expenses.
Does Medicare Have to Pay Any of The Attorney Fees & Costs Associated with My Settlement?
Medicare will offset its lien by a proportionate share of the necessary “procurement costs” incurred in obtaining the settlement. Procurement costs refer to those costs typically incurred pursuing a personal injury claims (e.g., court costs, attorney’s fees, other case expenses). This procurement offset is only applicable if you recover from a liable third party. If you receive payment from your automobile, medical, or no-fault insurer, this offset will not apply.
What Happens If I Ignore Medicare’s Lien?
Once a final lien amount is agreed upon, it must be paid within 60 days. If Medicare’s demand for payment is ignored, it will be referred to the U.S. Treasury department for collection. If you do not respond to the US Treasury’s collection request, your government checks (benefits) will be offset.
What, If Anything, Must I Do to Preserve My Medicare Coverage After a Settlement?
Because SSD and Medicare are entitlement programs, your award generally should not affect your eligibility for these programs. Appendix 1, however, contains some information about Medicare Set Asides that may apply in limited circumstance. These considerations are especially important if you are also settling a workers compensation claim at the time that you are settling your personal injury claim.
What Can Be Done To Ensure the Most Favorable Result?
Your attorney and his or her firm dedicate their time to maximizing any settlement you may receive. However, the rules surrounding healthcare liens concern a different area of the law requiring a different focus. Both private and governmental healthcare liens constitute a complex field with potential impact on future health care coverage for you and your family.
The Garretson Law Firm’s dedicated staff has a sound knowledge of these developing laws and legal processes and can help resolve these matters in your best interest. The Garretson Firm’s experience helps to provide you with the best result, maximizing your recovery and protecting your health benefits.
What Does This All Mean to You, the Plaintiff?
As mentioned, you may have obligations to a governmental healthcare program or your employee health plan if it has paid for medical care resulting from your injuries. The Garretson Firm helps both you and your attorney to satisfy these obligations, to protect your healthcare coverage, and to resolve any lien in your best interests to help maximize your settlement.
Conclusion
1)
Your attorney has taken all the above mentioned issues into account and has committed to securing the most favorable results for you. These efforts include having the resources with the appropriate skills to both evaluate your health care provider’s right of recovery and satisfy their interest in the most efficient and favorable fashion. By providing you with these materials, it is evident that your attorney is committed to making sure you are aware of the obligations associated with your health care plan. Please be aware the firm has a formalized means of addressing these issues and we ask that you do not duplicate the efforts as it could lead to significant delays.
2)
We trust you find this guide beneficial and that it provides you a peace of mind that your attorney has taken into consideration your best interest in both securing the best results in your settlement and your continued access to quality health care.
3)
If you do not already utilize all of the tools available online, you may want to consider logging on to My Medicare.com.
WORKERS COMPENSATION SETTLEMENT – EXPANDED OBLIGATION
How to account for shifting the burden of Future Cost of Care from Workers Compensation to Medicare
Medicare “Set Aside” Requirements
This section contains the following checklist designed to help assure that you are fully informed about Medicare set aside requirements.
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The Medicare Secondary Payer regulations say Medicare is always secondary to workers' comp and other insurance, including no-fault and liability insurance. Under the Social Security Act, payment "may not be made under Medicare for covered items or services to the extent that payment has been made, or can reasonably be expected to be made promptly, under a liability insurance policy or plan.
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While Medicare’s authority to scrutinize liability settlements (to determine if some portion must be “set aside” and spent down on future injury-related care) arises under the same statute as does its authority to scrutinize workers' comp settlements, currently no formal set-aside process exists for liability settlements. It is an “honor system,” based upon standards of “good faith” and the “reasonable person”.
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Medicare will not pay for any medical expenses related to the injury after settlement until any portion of the settlement that is specifically allocated to future medical expenses covered by Medicare has been fully exhausted. While such allocation is common in workers’ compensation cases, allocation may or may not be part of a liability settlement.
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If any portion of the settlement has been specifically allocated to future medical expenses, some portion of the settlement may need to be set aside into an account as an adequate representation of Medicare’s interest in your future cost of care.
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A Medicare set-aside allocation amount is determined through the detailed analysis of each particular case. Once this “set aside” amount is exhausted, Medicare becomes the primary payer of Medicare covered expenses for those settlement-related injuries.
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If a specific allocation of damages (to future medical expenses) is part of your settlement (which is a rare occurrence in a liability settlement), Medicare’s future interest is properly considered by generating an injury-specific estimate of the future course (and cost) of treatment. Further protection is available if you obtain approval from the Centers for Medicare and Medicaid Services (CMS) of the proposed set-aside value. Only when these funds have been exhausted will you be able to utilize your Medicare card for all healthcare-related needs. Again, while such specific allocation is generally part of every workers’ compensation settlement, it may or may not be part of a liability settlement.
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If in good faith, a reasonable person would surmise that an allocation to future medical expenses is part of a liability settlement, two options exist – i) identify the appropriate allocation and ensure that those proceeds are spent down on future injury-related care (for which Medicare would otherwise pay); or ii) contact the appropriate Medicare regional office, share the fact pattern of the case and see if they would like to review and approve the allocation (see discussion below). Certainly, liability set asides on cases that meet the criteria above are being submitted to regional offices for approval.
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Medicare must be notified of any workers’ compensation claim settlement if you have received, currently are receiving or will be receiving Medicare benefits within the next 30 months. Medicare only will formally review and approve set asides for settlements that are greater than $25,000 for a current beneficiary or greater than $250,000 for a client who has a reasonable expectation of becoming a Medicare beneficiary within 30 months. Although CMS approval of the set-aside calculation is not mandatory, it helps avoid problems with future Medicare coverage. It also ensures that only a predefined portion of the settlement--rather than the entire settlement--must be spent before Medicare takes over payment again.
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Set-aside money must be used only for injury-specific medical expenses, which Medicare would have paid. Compliance with all Medicare rules and regulations is mandatory, including showing Medicare that money in the set aside account was spent properly. You may opt to either self-administer your own set-aside funds or may purchase a plan through a Medicare set-aside administration company to ensure that your funds are properly disbursed. If you choose to self-administer the funds, it is your obligation to ensure that the funds are used properly. Improper administration of the funds could result in the loss of Medicare eligibility.
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If a Medicare Set-Aside is required, you must keep and submit, upon request or at year-end to CMS, all of the medical bills and receipts associated with the payment of injury-related, Medicare-approved medical expenses.
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Medicare Set-Aside funds only may be used to pay for pharmaceuticals upon the condition that the CMS/Medicare set-aside proposal accounted for such expenses; otherwise no CMS/Medicare set-aside funds may be used for the purchase of medication.
