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8 Questions on Medicare Set Aside

1. “What is my risk if my client makes mistakes with his Medicare Set Aside (MSA)?”

2. “What’s the chance that Medicare denies my client’s care because the client misused or misreported Medicare Set Aside funds?

3. “Why can’t my client just find coverage through another private insurance plan?”

Determining the best approach to address MSAs with a client in the settlement process can be a challenge for many plaintiff attorneys. The questions above are common among plaintiff attorneys who struggle to provide comprehensive advice to their clients regarding the regulations and ramifications of the  Medicare Secondary Payer statute (“MSP”).

There are still quite a few attorneys in the workers’ compensation and liability industries who try to find ways to avoid the need for a Medicare Set-Aside (“MSA”) altogether when their clients settle their claims. It is understandable; the MSP regulations are complex, and the guidelines from the Centers for Medicare and Medicaid Services (“CMS” or “Medicare”) restrict how their clients can use the settlement funds – which their clients do not like at all. In addition, most jurisdictions preclude attorneys from taking contingency fees on medical funds allocated for Medicare purposes.

These factors, among others, can lead attorneys to shy away from addressing MSP issues head-on with their clients and, instead, consider risky approaches that may put them in danger of committing malpractice. This article, in consultation with a number of the nation’s prominent plaintiff attorneys, addresses the less clear aspects of MSP compliance and the common questions attorneys have, as well as how attorneys can best protect themselves and their clients as they address these issues.

Protect Your Client’s Benefits

4. “Will Medicare really deny my client’s benefits?”

5. “Show me a case where Medicare benefits were ever denied or Medicare came after the client or attorney for misappropriated MSA funds?”

As Ametros assists attorneys and their clients all the time with Medicare and MSA issues, these questions are posed to us frequently. We see denials of treatment from CMS after settlement daily. The Medicare administrative contractors in charge of approving all Medicare claims have systems in place to automatically deny injury-related treatments for individuals who have MSAs accounts with remaining funds. The contractors are closely monitoring MSA account recipients using the Mandatory Insurance Reporting Section 111 data they receive from insurance carriers for every single settlement that involves a Medicare beneficiary. They match this data with the injured party’s MSA reporting to verify if the MSA has funding to pay, or if Medicare should accept responsibility for payment.

While very few of the MSA accounts managed by Ametros exhaust, when that occurs, Ametros automatically notifies Medicare of the account’s exhaustion. We are often contacted by Medicare to review the treatments that were paid and to determine exactly when the funds were exhausted. In most cases, Medicare requires receipt of this information before it begins providing coverage for any injury-related bills. There can be a number of unique issues that arise after settlement, such as conditional payments, denials, etc., that require specialized attention to be resolved.

See also: Medicare Set Asides: 10 Mistakes to Avoid  

There are no known litigated cases against Medicare for cutting off benefits due to misuse of MSA funds; however, that does not mean that denials of care are not routinely taking place. The ability to deny care and remain the secondary payer is the fundamental right that Medicare established in the federal MSP statute. Most industry experts have seen Medicare increase its commitment to monitoring MSA accounts over the past several years and expect that will continue into the future. In addition to workers’ compensation cases, Medicare has indicated that it plans to also institute a review process for liability cases; it’s a clear sign that, if anything, Medicare is paying closer attention to all settlements.

Here are the facts about MSAs:

There is a federal statute on MSP under Section XVIII of the Social Security Act. 

There are hundreds of pages of information and reference guides from the Centers for Medicare and Medicaid Services (CMS).

There are also hundreds of pages of CMS memos with guidance on how to abide by the statute.

The federal government has made it very clear that it takes MSP compliance seriously. See Ametros’ reference area to review and be able to easily search the substantial documentation Medicare has put out regarding MSP compliance and administration.

The reference guides and memos provided by CMS have some authority, but the authority is not statutory. An attorney could follow all the guidance provided by CMS yet still run some minimal risk of failing to address the regulations under law. Nonetheless, the safest approach is to recognize and consider MSP laws in settlement proceedings, which requires providing thorough client guidance and a qualified advocate, like Ametros, to help the client abide by the guidelines. By doing this, attorneys can show that they did everything possible to protect the client’s Medicare benefits, thus avoiding any successful claim of malpractice.

Insurance Coverage Misconceptions

6. “ But can’t my clients find coverage through another private insurance plan after they settle?”

7.”What about the Affordable Care Act?”

There is a frequent misconception by attorneys that their clients can get insurance coverage elsewhere and thereby not have to worry about an MSA. Although sometimes the injured party may initially be able to get another entity to cover an injury, most of the time insurance carriers are including exemptions for care relating to settled claims. Using another plan may be a good near-term way to save some of the MSA funds, but it may result in confusion over the long term, and the client spending MSA funds to pay for the premiums and deductibles of these new plans will put them out of compliance with Medicare’s guidelines.

Private insurance plans, whether they be Medicare Advantage, Affordable Care Act plans or plans provided through an employer, only last for one year at a time. MSA funds are meant to be used properly for the client’s lifetime. If injured parties believe they can rely on a private plan to cover their injury costs, they have more incentives to use their MSA funds to pay for that plan or for other non-injury related costs. If the private plan they rely upon ceases to exist, increases premiums drastically or starts to deny their injury-related claims, the client will be in a very compromised position. At that point, clients will likely not have a record of what they did with their MSA funds, which will result in Medicare denials if they exhaust their funds. At the heart of the matter, it is risky to assume that a private insurance plan will be in place and available to the injured party for 10, 15 or 20-plus years after settlement.

See also: Get a Grip on Non-Medicare Costs  

Over the past several years, private insurance plans have become much more vigilant on MSP matters. Other insurance entities are becoming increasingly savvy regarding the fact that they should not be the primary payer for these work-related or personal injuries and are finding ways to avoid paying. Medicare is the ultimate backstop for an individual’s healthcare, so if the injured party has misused MSA funds and can’t get coverage, there really is nothing left to assist them with their care. When the client has exhausted funds and cannot find private coverage, he will likely make two calls: The first is to his attorney, the second is to a malpractice attorney.

What Is My Responsibility?

8. “I advised him of the risks; what else am I supposed to do?”

For attorneys who recognize the importance of having their clients thoroughly advised and aware of MSP guidelines, they are off to a good start. Many attorneys give their client an overview of the MSA’s purpose but struggle determining how they can truly protect themselves and their client once they hand their client what can be a sizable amount of money.

Medicare does allow for self-administration of MSAs, but there’s good reason that Medicare recently came out and “highly recommended” professional administration. (See Section 17 of Medicare’s updated reference guide.)

Going through self-administration alone has often proven to be too much of a burden and challenge for the injured party. Medicare seems to have realized that its 31-page Self-Administration Toolkit is just too complicated for the average individual to follow. Attorneys need to consider whether their client understands what is happening and must determine whether the client can realistically handle what is being asked of him for the rest of his life. Or as Medicare puts it: Will the client be a “competent administrator?” Providing a professional administrator to help the client with administration of the MSA funds not only shows good faith to abide by Medicare’s recommendation, but it also helps the injured party save money on medical care, remain compliant and have a resource to rely on so that he is not continually reaching out to the attorney after settlement.

As with all decisions, attorneys should consider what approach sets both their clients and themselves up for success and the most defensible case if there are complications down the road. Taking a little extra time to set up professional administration will save the attorney potential exposure on a number of issues. Also, one should not forget: Typically, carriers are offering to pay for the administration service, so it is no extra cost to the attorney or the injured party.

Plaintiff attorneys take enough risks managing and growing their businesses and fighting for their clients’ rights; there is no need to add to those challenges by risking any potential issues with Medicare.

Medicare Set Asides: 10 Mistakes to Avoid

Medicare Set Asides (MSAs) are a critical component of many settlements. After settlement, the injured party must spend, track and report the MSA carefully according to guidelines provided by the Centers for Medicare and Medicaid (CMS):

  1. Funds will be deposited in a separate interest-bearing account.
  2. All treatments and prescriptions need to be verified as being related to the injury and covered by Medicare.
  3. All expenses, treatments, dates of service and related ICD- 9/10 codes must be tracked annually; reporting must be sent to CMS.
  4. Bills must be paid according to the specific state workers’ compensation fee schedule or “usual and customary” pricing.

Reporting is complex, and, if the injured party fails to report properly, he runs the risk of having Medicare benefits denied. Additionally, paying retail rates for medical treatment can mean he is not abiding by the guidelines and will quickly run out of funds.

For this reason and more, many rely on professional administration services, like Ametros’ CareGuard service, to help manage their medical bills and reporting. Additionally, these services help save the MSA money by securing discounted rates for medical treatments.

Let us describe some of the most common mistakes, so your injured party can make an informed decision about how to best manage settlement funds.

1. Overpaying

When an injured party handles MSA funds on her own, she pays retail prices on drugs, doctor visits, procedures and medical equipment. In most states, Medicare guidelines indicate that the injured person should pay the lower state fee schedule for treatments — even after settlement. However, doctors and providers do not know how to bill at the correct rates. If the injured party does not demand to be billed accurately, she will be overpaying!

We find that, on average, the fee schedule is 55% below what doctors actually bill. Why should someone pay $100 for a doctor visit instead of $45? A professional administrator ensures that the injured person pays the required price on the fee schedule — and, often times, even less.

2. Assuming that, when funds run out, Medicare or private insurance will automatically cover 100% of healthcare costs

The settlement process has many moving parts. Often, we find that injured parties are told that, when their MSA funds exhaust, Medicare or private insurance will kick in and pay for everything. This is a huge misunderstanding. The injured party is responsible for copays and deductibles after funds exhaust.

The injured party also needs to be enrolled in Medicare or private insurance and pay the premiums. If she is enrolled in a plan when funds run out, insurance/Medicare will begin picking up the bills, but she will still need to contribute copays, deductibles or coinsurance. Typically, she is expected to contribute around 20% of medical costs. It is important to have a professional administrator to ensure that an injured party does not overpay on medical expenses and never has to use personal funds once MSA funds are exhausted.

See also: How Medicare Can Heal Workers’ Comp  

3. Failure to enroll in Medicare or personal insurance altogether

Many injured individuals assume that having an MSA means they are on Medicare automatically. This is not the case. The injured individuals still need to enroll in Medicare or private insurance to have coverage if their funds run out. While Medicare Part A (emergency visits) does not require enrollment, parts B (regular doctor visits), C (private Medicare plans) and D (prescription drugs) all have monthly premiums. Medicare requires that they enroll in plans B, C or D. If they do not enroll in a plan, when their MSA funds exhaust, they will have to pay 100% of their healthcare costs.

At Ametros, we also offer extra insurance protection with Medicare supplement plans.

4. Believing that Medicare will play some part in managing the billing of the MSA

After settlement, Medicare will not receive the injured person’s bills and verify information. A professional administrator will do this, but, if the person is managing his funds on his own, it is his responsibility. Many injured individuals wrongly assume their medical bills will go directly to Medicare after settlement, and the MSA is used for copays or deductibles.

This is a dangerous misunderstanding, as Medicare will most likely reject paying for these treatments, and injured parties may be underestimating the true cost. As long as they have funds in their MSA, they are responsible for collecting bills and paying for them IN FULL. Medicare will rely on their annual reporting to see that they did the right thing. Only once their MSA is exhausted will Medicare contribute, and they will be responsible for just the copays.

5. Using MSA funds to pay for medical expenses that are unrelated to the injury or not covered by Medicare

Many view their MSA as a pool of funds they can use for their general medical care related to their injury. In reality, Medicare’s guidelines are very specific. Medicare requires they only use the funds to pay for the entire cost of medical treatments that are 1) related to the injury and 2) would be covered under Medicare. A professional administrator verifies that each medical expense is eligible and will go the extra mile with doctors to document that each treatment and prescription is related to the injury. Our team receives constant questions about whether medical treatments meet both requirements.

It is important that the injured party’s doctor verifies that medical treatments are causally related to their injury — for instance, a knee injury may trigger a hip problem that requires surgery. When the problem is related to the injury and Medicare would cover the treatment, it should be paid for with the MSA. It’s best to document this chain reaction so that, if Medicare has questions, the patient has all records on hand.

It’s equally important to verify that Medicare would cover the expense. Oftentimes, injured individuals are caught off guard that expenses such as transportation and long-term care facilities are not covered by Medicare.

6. Using MSA funds to pay for copays, deductibles, premiums or administrative fees

Medicare guidelines state that MSA funds are not to be used for copays, deductibles, premiums or administrative fees. Some injured individuals purchase Medicare supplement plans for coverage gaps they may run into if their MSA funds exhaust. While this can be a good idea, Medicare does not allow the use of MSA funds to pay premiums for Medicare supplement plans — nor premiums for any other plan (including Medicare Part B, C or D).

Medicare also does not allow the use of MSA funds to pay investment advisers or other administrative services. At Ametros, our fee for professional administration always comes from funds that are separate from the MSA funds.

7. Failure to coordinate with providers and pharmacists on which items to bill to the MSA vs. Medicare or private insurance plan

Staff at most pharmacies and doctors offices have never heard of an MSA, so there is often confusion about billing. An individual managing her MSA is responsible for making sure each bill is paid properly with the MSA funds and for routing unrelated bills to Medicare or an insurance plan. It may sound simple, but often the injured person will visit the pharmacy to pick up medications that should be covered by the MSA, as well as medications that should go to the health insurance company or Medicare.

It’s important to be very specific with healthcare providers and staff to make sure they are separating bills. If the injured person is doing bill administration himself, tracking can be a huge hassle; it’s a challenge to request that the insurance plan reverse bills or try to secure a refund from doctors if bills are routed improperly.

See also: Top 10 Mistakes to Avoid as a New Risk Manager  

8. Mingling MSA funds with other accounts or investments

Medicare requires that funds be placed in a separate, interest-bearing bank account. Oftentimes, injured individuals skip this step. This may not seem like a big deal at first, but, as the account is used for other expenses, it can be a challenge to separate items and produce reporting for Medicare. In addition, depositing MSA funds into a personal checking account means the injured party may use the money incorrectly by accident.

Likewise, while Medicare has not given specific guidance on placing MSA funds into investment vehicles, industry experts agree that Medicare will not step in to cover any losses incurred from placing funds into the stock market.

9. Failing to notify Medicare properly when funds exhaust or replenish (if someone has an annuity)

Medicare must hear from the injured party every time her MSA funds run out and every time she receives another annuity check to replenish the account. If not, Medicare will not be prepared to cover healthcare if she has exhausted her funds and continues to be treated.

Medicare’s self-administration guide has a letter template for every time funds run out and another letter template for every time funds are replenished. Some injured individuals find themselves running out of MSA funds frequently. This means they need to send two letters a year to Medicare (not counting the annual reporting). Another frequent confusion of MSA holders who have annuities is whether they technically “exhausted” their funds because they spent more than their annuity check for that one year.

They only need to report exhaustion to Medicare when their aggregate account balance reaches zero. When their account is out of money entirely, they are required to notify CMS. A professional administrator verifies reporting for fund exhaustion and replenishment; this way, the hassle of keeping Medicare up-to-date is taken care of.

10. Failing to report MSA spending to Medicare annually

The annual attestation is the most basic requirement of the MSA: Medicare expects to hear from the injured party on the anniversary of the injury, every year for the rest of his life. The only exception is if he has notified Medicare that he has no funds remaining and no future annuity checks. As long as he has MSA funds or expected future annuity checks coming, Medicare will count on the report.

Annual reporting to Medicare is the fundamental requirement that MSA holders need to fulfill to ensure their Medicare benefits are protected. Unfortunately, many injured individuals forget the date of their settlement and file their reports late, and some do not file at all. When we take on administering MSAs where injured individuals did not complete their reporting, we usually have to make multiple phone calls, and, often, the injured individual is left waiting for approval for a medical treatment or prescription that Medicare needs to help cover.

At Ametros, we’re constantly encountering new issues with MSA accounts, and our team is always adapting to take the burden off the shoulders of the injured individual. After all, injured parties with MSAs have been through enough; they deserve help so they can settle well and remain on the path to better health.