Trial Lawyer Resource Center

November 25-December 2, 2006 - The Consumer Attorneys of California will once again be convening in Maui, Hawaii.  I will be speaking on November 29th on the Growing Role Of Medicare And Medicaid Reimbursement Claims And Liens In Liability Settlements. 

December 9/10, 2006 - The 20th Annual ATLA Weekend with the Stars event will be held at the Sheraton New York Hotel and Towers.  On December 10th, I will be speaking on the Ahlborn Decision - "What Does the Ahlborn Decision Really Mean? Medicaid Reimbursement in Personal Injury Cases after Arkansas Dept. of Health and Human Services v. Ahlborn".

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In May 2006, significant changes were made to the Medicare regulations concerning Providers’ ability to “bill” the liability insurance proceeds. Medicare Participating Providers may now wait and bill the beneficiary (liability settlement) for the actual charges.  Previously, Participating Providers were required to bill Medicare, as “billing” against the settlement proceeds was, in effect, the same as billing the beneficiary, which was a violation of the Participating Provider “assignment agreement”.

Effective May 8, 2006, CMS Medicare issued a policy change to the billing procedure for providers, physicians and suppliers with regards to payment for services where liability insurance is available. 

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Matthew L. Garretson & Sylvius H. Von Saucken

In the recent case Amos v. Commissioner of Internal Revenue, the United States Tax Court stated that "if a settlement agreement lacks express language stating what the amount paid pursuant to that agreement was to settle, the intent of the payor is critical to that determination."  2003 WL 2289795 (U.S. Tax Ct, 2003).  As most personal injury attorney's understand, the correct "intent" is very important to memorialize in your settlement documents because IRC §104 (a) (2) provides that "gross income does not include the amount of any damages (other than punitive damages) received (weather by suit or agreement and whether as lump sum or as periodic payments) on account of personal physical injuries or physical sickness." 

The Supreme Court of the United States summarized the requirements of §104 (a) (2) as follows:

First, the taxpayer must demonstrate that the underlying cause of action giving rise to the recovery is "based upon tort or tort type rights"; and second, the taxpayer must show that the damages were received "on account of personal injuries or sickness." 

In Amos, the Court found that the dominant reason that the Defendant, Dennis Rodman, paid plaintiff the settlement amount at issue was to compensate petitioner for his alleged physical injuries arising from an incident involving the two individuals (Dennis Rodman allegedly lost his cool and had an altercation with Amos while Amos was photographing a Bulls Basketball game).  However, the Court also found that the settlement was in consideration for several other requirements (mainly a confidentiality agreement).  Since the settlement agreement identified those "other requirements" as consideration for the settlement proceeds, the Court determined that the parties did not intend all of the settlement proceeds to be allocated to the component for payment on account of personal physical injuries.  As a result, the Court allocated 80% of the settlement as paid in consideration for the other requirements stipulated in the Settlement Agreement.  The Court's allocation resulted in 20% of the settlement proceeds being (for non-physical injuries) included in Plaintiff's gross income and not exempt from IRC §61 (the general taxing statute).

 

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As Medicare's role in workers' compensation and liability settlements evolves, a lack of clear guidance has left many lawyers perplexed. Know how to protect the interests of both your client and Medicare.

Matthew L. Garretson

Political and popular pressure to preserve the Medicare Trust Fund is mounting. The population of beneficiaries that Medicare is intended to cover--older people and the severely disabled--is on the rise. Statistics about the growing number of retiring baby boomers are now cliché. At least 54 million Americans are disabled and more than 41 million receive Medicare.

 

To reduce Medicare costs, Congress enacted a collection of statutory provisions in the 1980s called the Medicare Secondary Payer, or MSP, statute, largely in recognition that workers' compensation carriers should be the primary source of medical insurance coverage for people injured on the job. The statute says the government serves as a secondary insurance provider when another source of primary coverage exists.

 

Interpreting the statute's requirements, however, can be difficult, and critics say the system is inefficient and the law has not succeeded in substantially lowering Medicare costs. As early as 1990, one U.S. senator commented, "Failure to follow the MSP law is costing the taxpayer billions of dollars," and as recently as 2003, a court was still citing the senator’s statement as relevant.

 

 

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By Matt Garretson & Jason Wolf

 

Prior to New Year’s Eve (December 31, 2005), Medicare’s interest was focused only on the reimbursement of injury-related care in the form of primary physician care and treatment in a hospital. Effective January 1, 2006, Medicare has expanded its reimbursement interests to include prescription drugs (under its Medical Part D Program). We all have been exposed to the massive media coverage over the past few months regarding the new Part D coverage. The punch line to the media message – Part D instantly will make Medicare one of the largest consumers/payee’s of prescription drugs. Undeniably, Medicare’s role continues to evolve and its complex reimbursement interests must be addressed in all liability settlements.

 

Medicare expanded coverage directly translates into expanded reimbursement obligations for you and your Medicare-entitled clients (creating a "bigger bite" of the proverbial apple for Medicare and thereby further eroding your clients’ net proceeds). Not only is the "substance" or scope of the Medicare’s recovery rights evolving, but the "form" of the recovery process will become more complicated as well. Medicare (via the Medicare Secondary Payer Division of CMS) recovers its past "conditional" payments for injury-related physician care and hospital treatment by outsourcing the recovery effort to the Coordination of Benefits office (COB). COB, in turn, appoints one of the approximately two dozen lead contractors (fiscal intermediaries) to your file. Most personal injury practitioners are familiar with this process.

 

The traditional process (COB, lead contractor) was created for the recovery of expenses related to physician care and hospital treatment. Medicare Part D, however, is covered by a new entity - Prescription Drug Plans (PDP). PDP is similar to Medicare managed plans (supplemental and replacement plans) and have a similar yet separate right of recovery than Medicare. Based upon our firm’s discussion with officials with in CMS, it appears that the reimbursement for the Part D coverage (prescription drugs) will be addressed through an additional, separate recovery effort. In other words, the PDP will share the same recovery right as Medicare managed plans and will need to seek recovery on it’s own as opposed to working in concert or inclusive with the traditional Medicare recovery effort.

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Medicaid Reimbursement in Personal Injury Cases after Arkansas Dept. of Health and Human Services v. Ahlborn

Matthew L. Garretson

You have a catastrophically injured client who receives Medicaid benefits. You have settled the case. Due to liability issues or policy limit issues, you believe you’ve gotten your client about 20 cents on the dollar for his true damages. Medicaid wants the entire settlement because it has paid $100,000 more for the client’s medical expenses than you recovered. What now? Ahlborn is a decision capable of creating more confusion and pitfalls than any case in recent history.

It appears that Monday, May 1, 2006, was a landmark day for plaintiffs’ rights in personal injury settlements. On that day the U.S. Supreme Court unanimously affirmed the Eighth Circuit’s decision in Arkansas Dept. of Health and Human Services v. Ahlborn. With this holding, a state’s Medicaid department will be limited to reimbursement from only that portion of a judgment or settlement that represents payment for medical expenses—states are now prohibited from seeking reimbursement for Medicaid costs from settlement proceeds that were intended to cover items other than medical expenses, such as pain and suffering and wage loss. The U.S. Supreme Court held that the federal anti-lien statute prevents states from attaching or encumbering the non-medical portion of the settlement or judgment.

In the slip opinion released May 1, 2006, the Court reasoned:

[t]here is no question that the State can require an assignment of the right, or chose in action, to receive payments for medical care. So much is expressly provided for by §§1396a(a)(25) and 1396k(a). And we assume, as do the parties, that the State can also demand as a condition of Medicaid eligibility that the recipient "assign" in advance any payments that may constitute reimbursement for medical costs. To the extent that the forced assignment is expressly authorized by the terms of §§1396a(a)(25) and 1396k(a), it is an exception to the anti-lien provision. See Washington State Dept. of Social and Health Servs. v. Guardianship Estate of Keffeler, 537 U.S. 371, 383–385, and n. 7 (2003). But that does not mean that the State can force an assignment of, or place a lien on, any other portion of Ahlborn’s property. As explained above, the exception carved out by §§1396a(a)(25) and 1396k(a) is limited to payments for medical care. Beyond that, the anti-lien provision applies."

(Emphasis added).

 

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In May 2006, significant changes were made to the Medicare regulations concerning Providers’ ability to “bill” the liability insurance proceeds. Medicare Participating Providers may now wait and bill the beneficiary (liability settlement) for the actual charges.  Previously, Participating Providers were required to bill Medicare, as “billing” against the settlement proceeds was, in effect, the same as billing the beneficiary, which was a violation of the Participating Provider “assignment agreement”.

 

Effective May 8, 2006, CMS Medicare issued a policy change to the billing procedure for providers, physicians and suppliers with regards to payment for services where liability insurance is available.

 

Previously, Medicare participating providers, physicians and suppliers (hereafter “Providers”) were required to bill Medicare conditionally for injury-related claims and accept the Medicare approved amount as payment in full if they could not expect payment from the liability insurer within 120 days.  Providers could only charge the beneficiary for the coinsurance and deductible amounts.   With the policy change, Providers may now pursue payment from the plan covering the liable third party and they may charge the beneficiary (client) actual charges up to the amount of the liability proceeds, less procurement cost.  Providers cannot attempt to collect payment until the client has received the settlement funds.  

 

In the event that the Providers choose to pursue the liability insurer and issue a lien they may not charge the beneficiary/client any interest, administrative fees or any costs associated with the filing of the lien.

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Tags: Post-Settlement Issues

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