By Guest Author Rasa Fumagalli, J.D., MSCC, CMSP-F – Director of MSP Compliance Services
Most attorneys are well aware of the need to resolve Medicare’s conditional payments in connection with a client’s settlement. This obligation stems from the Medicare Secondary Payer (MSP) Act, 42 U.S.C. § 1395y(b)(2)(A)(ii), which prohibits Medicare from making payment for medical services when “payment has been made or can reasonably be expected to be made under a workers’ compensation law or plan of the United States or a State or under an automobile or liability insurance policy or plan (including a self-insured plan) or under no fault insurance.” 42 U.S.C. § 1395y(b)(2)(B)(ii). When a primary plan has not made or cannot reasonably be expected to make prompt payment for the service, Medicare may make a payment conditioned upon reimbursement of the payment to the appropriate Medicare Trust Fund. A failure to reimburse the Medicare Trust Fund may result in Medicare filing suit directly for double damages against any or all entities that were responsible for reimbursement of the conditional payments. 42 U.S.C. § 1395y(b)(2)(B)(iii); 42 U.S.C. § 1395y(b)(3). Section 111 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA) Mandatory Insurer Reporting obligations require the primary plan’s Responsible Reporting Entity to report any liability physical trauma settlement involving a Medicare beneficiary that exceeds $750.00. This reporting requirement puts Medicare on notice of the settlement.
Once Medicare is notified of the settlement, a final conditional payment sweep will be completed, and a conditional payment demand will be issued. This demand will only address payments that were made under traditional Medicare Parts A and B. If the Plaintiff was enrolled in a Medicare Advantage Plan, conditional payment information must be requested directly from the plan. This step should not be overlooked since Medicare Advantage Plans have the same recovery rights under the MSP Act as traditional Medicare.
The MSP Act and supporting regulations set out limits on the conditional payment amounts that must be reimbursed to Medicare. If Medicare does not have to take legal action to recover, Medicare is only able to recover the lesser of either “the amount of the Medicare primary payment” or “the full primary payment amount that the primary payer is obligated to pay without regard to any payment, other than a full primary payment that the primary payer has paid or will make, or in the case of a primary payment beneficiary, the amount of the primary payment.” 42 C.F.R. 411.24(c)(1). Section 411.37(d) of the regulations provide: “If Medicare payments equal or exceed the judgment or settlement amount, the recovery amount is the total judgment or settlement payment minus the total procurement costs.” If no procurement costs or attorney’s fees are reflected on the final settlement detail documentation provided to Medicare at time of settlement, Medicare will not reduce the amount of their conditional payment demand. Attorneys should be aware of this should they seek to reduce or waive their fees.
Addressing Conditional Payments in Liability Cases
As a starting point, it is very important to understand that if the Final Demand is not paid timely, interest begins to accrue regardless of appeals or requests to reduce the amount owed to Medicare. There is no tolling of the interest meter while you dispute the amount due. Therefore, it is prudent to make sure that the conditional payment Final Demand is paid timely regardless of how you attempt to reduce the amount owed to Medicare.
The most common method of disputing conditional payments involves a request to remove unrelated charges from the conditional payment demand. The unrelated charges may appear on Medicare’s Payment Summary Form due to a “grouper” error within Medicare’s data collection system. They may also come from comingled billing from the service providers. In cases where the conditional payments are related to the injuries that are being settled, the Plaintiff may end up with very little of a net recovery.
There are two additional conditional payment calculation methods that may be available in certain liability cases. Both the “Self-Calculated Conditional Payment Amount” process and the “Fixed Percentage Option” have specific conditions that must be met before they may be used. The “Self-Calculated Conditional Payment Amount” process is available under the following circumstances: the claim involves an injury caused by physical trauma; the medical treatment was completed at least 90 days before and no further treatment is expected; the total settlement/judgment/award or other payment must be less than $25,000; and the date of the incident must have occurred more than six months prior to the submission of the self-calculated final conditional payment amount. Although the use of this process requires the plaintiff to give up the right to appeal the debt, the plaintiff retains the right to request a waiver of recovery.
The “Fixed Percentage Option” is available for smaller liability settlements. In order to be eligible for this, the following conditions must be met: the liability settlement/judgment/award or other payment must be related to a physical trauma; the total settlement must equal or be less than $5,000; the election of the option must be made within Medicare’s timeframe and prior to the issuance of any conditional payment reimbursement request from Medicare; and there are no other pending settlements, judgments, awards or other payments related to the incident. Additional details regarding the exact processes for both the “Self-Calculated Conditional Payment Amount” and “Fixed Percentage Option” methodologies may be found at the Benefits Coordination and Recovery Center website.
Other options to consider involve payment of the final demand in order to stop the interest on the demand from running (as noted at the start of this section). Once this occurs, the plaintiff may seek a compromise or waiver of the conditional payment debt in order to get Medicare to reduce their conditional payment claim and issue a full or partial refund of the payment. The three statutory provisions that may be used for this are: §1870(c) of the Social Security Act (financial hardship waiver); §1862(b) of the Social Security Act (best interest of the program waiver); and the Federal Claims Collection Act (FCCA) (compromise). The authority to consider beneficiary requests for waivers under §1870(c) of the Act sits with the Benefits Coordination & Recovery Contractor (BCRC), while the authority to waive Medicare claims under §1862(b) and to compromise claims under FCCA, is reserved exclusively to the Center for Medicare and Medicaid Services (CMS). The basis for any waiver request comes from the regulations that provide:
“There shall be no recovery if such recovery would defeat the purposes of this chapter or would be against equity and good conscience.” See 42 U.S.C. § 1395gg(c); 42 C.F.R. 405.355-356; 42 C.F.R. 405.358; 20 C.F.R. 404.506-512; Medicare Secondary Payer Manual, Chapter 7 § 50.
To apply for the “Financial Hardship” waiver, the Medicare beneficiary must file form SSA-632-BK with the BCRC which documents their financial situation. Arguments that may be made in support of this position include showing that the repayment of the conditional payments would deprive the beneficiary of income required for ordinary and necessary living expenses. If someone is dual eligible, meaning they get both Medicaid and Medicare, it is great evidence of financial hardship since people who qualify for Medicaid have very little in the way of assets. That being said, even a 7 figure settlement could still be approved for a financial hardship waiver of the amount owed to Medicare.
The “Best Interest of the Program” waiver request under § 1870(b) of the Social Security Act is made to CMS. This rather vague criteria is nowhere further defined and lies completely at the discretion of CMS. Although this request is separate and distinct from a request for a Compromise under the Federal Claims Collection Act (FCCA), it is beneficial to seek both a request for this waiver and a request for a compromise when seeking a refund from CMS of the amounts the beneficiary has already paid to satisfy the “Final Demand.”
The third and final method for obtaining a refund from Medicare is a Compromise request made to CMS. Authority to grant a Compromise is granted to CMS under the Federal Claims Collection Act (FCCA). 31 U.S.C. § 3711. This section allows Federal agencies the authority to compromise where: the cost of collection does not justify the enforced collection of the full amount of the claim; there is an inability to pay within a reasonable time on the part of the individual against whom the claim is made; or the chances of successful litigation are questionable, making it advisable to seek a compromise settlement.” Medicare Secondary Payer Manual, Chapter 7 § 50.
The resolution of conditional payment reimbursement claims is a time-consuming process. To maximize the plaintiff’s net recovery, it is important to be familiar with the various options for calculating, disputing, and seeking a refund of conditional payments. When addressing conditional payment issues, consider the following best practice tips:
- Confirm the type of Medicare coverage your client was enrolled in from the date of accident to the date of settlement.
- Make sure the Final Demand is paid within the time period specified in the recovery demand letter.
- Determine if the Self-Calculated Conditional Payment Amount is available in the case.
- Determine if the Fixed Percent Option process is available in the case.
- Determine if the final conditional payment demand should be disputed.
- Provide Medicare with the Final Settlement Details to secure a procurement cost reduction.
- Consider whether a full or partial conditional payment refund may be secured in the case.
Jason D. Lazarus is the managing partner and founder of the Special Needs Law Firm; a Florida law firm that provides legal services related to public benefit preservation, liens and Medicare Secondary Payer compliance. He is also a founding Principal and Chief Executive Officer of Synergy Settlement Services, which offers healthcare lien resolution, Medicare secondary payer compliance services, pooled trust services, settlement asset management services and structured settlements.