Practical approaches for solving common Medicare settlement problems.
As if handling insurance claims did not have enough hurdles over which to jump, Section 111 of the Medicare, Medicaid & SCHIP Extension Act of 2007 has imposed new requirements upon claim handlers. Under this federally mandated act, all claims handlers must address the following three requirements before finalizing the settlement of any bodily injury, no-fault, or workers’ compensation claim:
Determine whether a claimant is a Medicare beneficiary.
Protect Medicare’s interests when resolving bodily injury (referred to as a TPOC–total payment obligation to claimant or a bodily injury liability settlement), personal injury protection (PIP), and medical expense claims with a Medicare beneficiary with respect to Medicare conditional payments and future claims-related, Medicare-eligible expenses being considered in settlements (both medical expense and PIP are categorized as an ongoing responsibility for medicals).
Electronically report claims settlements with eligible claimants to the Centers for Medicare and Medicaid Services (CMS).
On this and the following pages, we’ll consider and provide practical solutions to some of the difficulties experienced by claims professionals who are saddled with ensuring compliance on behalf of their associated insurers.
Our industry responsibilities stem from primary payor obligations prescribed through the passing of the Medicare, Medicaid and SCHIP Extension Act of 2007, which amended the Medicare Secondary Payer Act. The law extends to every P&C insurer and to all companies that self-insure risks involving bodily injury, inclusive of workers’ compensation, general liability, auto liability, professional liability, and others as well as to captive insurers and risk pools.
While companies have different methods of reporting losses, either through vendors or through their current claims management systems, it is crucial to limit reporting errors by ensuring that accurate ICD-9 codes, dates of birth, and Social Security numbers are entered and submitted. The earlier information is accepted by CMS, the sooner you can confirm whether or not a person qualifies as a Medicare beneficiary. It is recommended that the claimant’s middle initial be eliminated to reduce errors, and it may be fruitful to conduct a preliminary search through ISO to identify if aliases and/or pre-existing or subsequent claims exist that may impact the level of responsibility for payments. It can take up to 60 days to get a response from Medicare regarding its total payout, so it is extremely important to make certain the claim is reported as soon as possible to prevent delays in the ultimate settlement.
To determine whether an injured party may have become a beneficiary during the course of a claim, or if a formal status response from Medicare has not yet been received, contact a Medicare coordination of benefits contractor at (800) 999-1118, well in advance of settlement to ensure that you will receive Medicare’s final demand and to avoid any associated penalties when Medicare’s interests are not protected. As qualified Medicare beneficiaries are not limited to age 65 years or older and may include persons who have received more than 24 months of Social Security Disability Insurance (SSDI), people of all ages with end-stage renal disease (permanent kidney failure requiring dialysis or a kidney transplant), or recipients of Medicaid, all parties for which an anticipated bodily injury, medical expense, or PIP payment will be made should be reported. A follow-up call to CMS prior to settlement ensures that you can be certain of the injured party’s status in the event that they become a beneficiary during the course of a claim before formal confirmation from Medicare. Further, the monthly query process is not foolproof, as gaps may exist between the date that the information is inputted and the date on which a response is received from CMS.
When encountering an injured party who does not have a Social Security number, make certain to send an affidavit to the party or his representative within 30 days of receipt of the claim, testifying that the claimant does not have a Social Security number. Also, include a cover letter explaining that failure to cooperate can result in a suspension of their Medicare benefits and their attorneys could be subject to collection proceedings.
In order to eliminate unrelated charges from inclusion in the Medicare lien, it is critical to enter accurate ICD-9 codes and to review the final list of medical payouts provided by the Medicare secondary payer recovery contractor in its conditional payment letter. Oftentimes, a claimant’s attorney will attempt to negotiate a settlement off of the unscrutinized list of Medicare expenses. The list can include paid services that are unrelated to the claim and, ultimately, may result in an inflated settlement demand.
Therefore, bill review is crucial to ascertain those charges for which you are ultimately responsible. Submit the reviewed medicals to the claimant’s attorney prior to requesting a formal settlement demand. This will help elicit a demand in consideration of related damages only and will afford the attorney/injured party the opportunity to negotiate the lien down. Request a copy of Medicare’s final demand letter with the negotiated lien so that the check sent to Medicare reflects the actual amount owed.
The responsibility for future medical services can be capped through a signed affidavit from the treating physicians that indicates the treatment for the alleged injury has been completed as of the date of the settlement. Once the affidavit is obtained on settlements where future medical services will not be required, CMS will consider the amount of the settlement within the parameters specified by the physician as satisfying its lien. A copy of the affidavit should be provided to beneficiaries and their representatives, and it should be maintained in the claims file, too.
For settlements of $5,000 or less, the beneficiary can opt to resolve the claim by paying Medicare 25 percent of the total liability insurance (including self-insurance) settlement. This is referred to as the fixed percentage option and does not apply to no-fault insurance or workers’ compensation settlements.
A qualifying settlement must be for a physical trauma and not related to ingestion, exposure, or medical implant. A formal request for the fixed percentage option must be submitted prior to any settlement or payments associated with the incident and prior to receipt of Medicare’s demand letter or other request for payment related to the incident. Model language can be found in the attorney and Medicare beneficiary toolkits at www.msprc.info.
One of the most perplexing settlement bottlenecks occurs when courts fail to assist in the compliance of this federally mandated act. Many claims professionals and defense counsel have faced a brick wall when dealing with claimants’ attorneys who have previously agreed verbally to include Medicare’s interests in the total agreed settlement and rebuke the commitment at the time of settlement. Instead, they utilize the courts to force the carrier or responsible payer to remit the payment or suffer enforcement of interest relative to late payment without Medicare’s mandatory interests being contemplated. A pre-negotiation agreement, executed by plaintiff’s counsel in advance of any settlement negotiations, can be used to address and avoid this situation; this would constitute an acceptance of mutual obligation and constitute an enforceable contract that can be upheld in court.
The penalties for noncompliance with the mandatory requirements of Section 111 of the Medicare, Medicaid & SCHIP Extension Act of 2007 are $1,000 per day of noncompliance for each individual for whom information should have been reported. Therefore, although burdensome, claims professionals must ensure immediate and continued compliance. By following the practical solutions herein for some of the more common reporting and settlement-related challenges presented by Section 111, claims professionals can avoid significant penalties and promptly and efficiently resolve claims when they become ripe for settlement.
For those interested in utilizing a pre-negotiation agreement, contact co-author Christopher Fusco, Esq., for a copy of the contract sample language he recommends. He can be reached at firstname.lastname@example.org.