Challenges in achieving total MSP compliance: Medicare Set-Asides

Randy Haynes continues his series on MSP compliance with the following post. Randy may be reached at rhaynes@mrchouston.com.

Over the past year, most defendants have been so lost in the MMSEA weeds that, only now, are they starting to truly comprehend what MSP compliance really means. Medicare Secondary Payer compliance is comprised of three parts: (1) past conditional payments (Medicare “liens”); (2) MMSEA reporting; and (3) future allocations, including Medicare Set-Aside accounts (MSA accounts). Despite some technical hurdles, MMSEA compliance is fairly straightforward and RRE’s should be finalizing their reporting process by now. There are several approaches to protecting Medicare’s past interest and I have blogged previously on the advantages of starting the process early and seeking the cooperation of all parties. The third piece, protecting Medicare’s future interest, is the trickiest and CMS has been reluctant to offer any guidance.

Let’s start by making an assumption that all parties must take Medicare’s future interest into account when settling a case. We should get past the argument of whether Medicare Set Asides are required in liability cases and focus instead on the actual statute. How can a distinction be made between worker’s compensation and liability settlements? The fact that Medicare has yet to provide any guidance to as to the details surrounding liability “plans” does not negate the fact that the obligation exists.

Payment under Medicare may not be made… with respect to any items or service to the extent that…

(ii) Payment has been made or can reasonably be expected to be made under a worker’s compensation law or under an automobile or liability insurance policy or plan (including a self insurance plan) or under no-fault insurance. (42 U.S. Section 1395y(b)(2)(A) (ii)).

That being said, I am not encouraging everyone to immediately jump on the MSA bandwagon. However, the fact is that parties must have a process in place whereby they memorialize their efforts to consider Medicare’s future interest in all settlements. This is nothing new, but in light of MMSEA reporting, must be incorporated into the settlement process.

Liability settlements are typically much more complicated than worker’s compensation and it makes sense why CMS would sit back and let the industry work out the details. How do you allocate funds for a liability Medicare Set-Aside when you are dealing with comparative negligence? Multiple defendants? Pre-existing conditions? Damage caps? These are not new questions, but don’t expect any concrete guidance from Medicare on the horizon.

Let’s look at an example from the insurance world that occurs every day. A Medicare beneficiary is in an automobile accident. The MRI report indicates a herniated disc and the local surgeon sends a letter indicating the claimant needs surgery. The claimant has $10,000 in past medical and their attorney sends a Stowers demand for the $50,000 policy limit. Based on the possible future surgery, the insurer settles for policy limits. I recently ran this scenario by an elder law authority and was told that a conservative insurer should require an MSA under these conditions. At the very least, the insurer should be seeking the opinion of a qualified third party to document their decision on the appropriateness of an allocation.

It would come as no surprise if Medicare decided to make an example out of a large, well known insurer (or self-insured). How can you protect yourself and your clients?

First, develop a protocol to flag cases meeting a certain criteria for review. I am not suggesting that all cases be reviewed. If you look to the worker’s comp guidelines, only a small percentage of insurance settlements involve a Medicare beneficiary and settlements of over $25,000, and only a percentage of those will include future medical.

If you face a scenario where an allocation is difficult to calculate due to comparative negligence or a policy limit issue, don’t hesitate to send the proposed allocation to your regional Medicare office for review. Despite reports to the contrary, Medicare will review liability MSA’s in certain situations, allowing you to be confident that you have covered all obligations to protect Medicare’s interest.

Medicare Liens and Conditional Payment Notices: Not Just a Plaintiff Problem

The following is Part Two of Randy Haynes’ thoughts on Medicare’s new Conditional Payment Notices policy. Randy Haynes is Director of New Lines of Business for Medical Research Consultants, and our in-house subject matter expert on all things related to Lien Resolution and Mandatory Insurer Reporting. Randy may be reached directly at rhaynes@mrchouston.com.

As reviewed in my previous post, although the Conditional Payment Notice (CPN) is a step in the right direction, it doesn’t solve the lag time between the settlement and issuance of a demand letter. Let’s look again at a typical timeline: a claim settles in November and the RRE reports the settlement to Medicare the following quarter (January). Because Medicare was never notified of the claim prior to settlement, the MSPRC issues a CPN sixty days after the Responsible Reporting Entity reports the settlement (March). The beneficiary has 30 days to respond before a demand letter is issued (April). This scenario still takes five months from settlement to demand letter and this assumes that the MSPRC is able to stay within their stated timeframe.

There is a bill currently before Congress, HR 4796, that would give defendants many of the same rights to negotiate conditional payments amounts currently only available to beneficiaries. This would serve to expedite the process and allow defendants to protect Medicare’s interest at the time of settlement.

Do defendants ultimately share the same goals as the beneficiary? Are they really acting as an advocate for the beneficiary if they are allowed to directly negotiate the Medicare lien? The answer is, probably not. The defendant’s main concern is eliminating any potential Medicare liability.

Once a settlement amount is agreed upon, does the defendant really care how the money is divided between the beneficiary and Medicare? Again, probably not; except to the extent a settlement may become unattractive to the beneficiary if Medicare is taking a larger piece than anticipated.

It is in the interest of the defendant and beneficiary to bring in an independent third party early on to accurately determine Medicare’s interest. Anyone can follow the steps to obtain a reduction for procurement expenses, but few firms have the medical expertise to properly audit a lien for unrelated charges or take advantage of available waivers or appeals.

The benefit to the beneficiary is clear: a proper, timely audit means more money in the beneficiary’s pocket and a quicker disbursement of funds.

The benefit to the defendant may be less obvious, but has the potential to be even greater. An open claim costs money. If a claim remains open for an additional five months pending a final demand, attorney’s fees and associated claim expenses will continue to mount. Delays have the potential of causing the claimant to reject a reasonable offer either because the Medicare lien is larger than the settlement or they are unwilling to wait for the funds to be disbursed.

With an unrepresented claimant, the benefits to the defendant of timely settlement are even greater, as a prolonged settlement will often drive the claimant to obtain representation, potentially increasing the claim’s value, delaying settlement and increasing associated claim expenses.

If the conditional payment amount is known, both sides are in a better position to settle the case, protect Medicare and disburse funds.

While the Conditional Payment Notice will expedite the issuance of a demand letter in some cases, this is not the preferred path for the resolution of a Medicare lien. As January quickly approaches, parties should proactively work together to identify Medicare beneficiaries and began reviewing conditional payment information. Regardless of whether the current bill makes it out of committee, defendants should not take the mistaken position that Medicare liens are only a “plaintiff problem”.

MSPRC expands tool kit, but will it make a difference?

The following post on Medicare’s new Conditional Payment Notices was authored by Randy Haynes, Director of New Lines of Business for Medical Research Consultants, and our in-house subject matter expert on all things related to Lien Resolution and Mandatory Insurer Reporting. Randy may be reached directly at rhaynes@mrchouston.com.

Many in the litigation community fear that settlements will grind to a halt as MMSEA Section 111 Mandatory Insurer Reporting takes hold in January. Will Medicare, specifically the Medicare Secondary Payer Recovery Contractor (MSPRC), create a conditional payment bottleneck as a predicted three million liability settlements are reported in 2011? To prepare for the onslaught, MSPRC has recently unveiled a new tool in the form of a Conditional Payment Notice (CPN). The CPN will be used in place of the Conditional Payment Letter (CPL) in cases where Medicare is first notified of a settlement, judgment or award through Section 111 Reporting.

Under the Medicare Secondary Payer Act (MSP), Medicare beneficiaries and/or their counsel have a duty to notify Medicare of potential claims. If notified early on, the MSPRC has ample time to obtain a list of conditional payments. This has historically been provided to the beneficiary within 90 days in the form of a Conditional Payment Letter (CPL). The beneficiary has the opportunity to audit the CPL for any unrelated charges and request their removal prior to settlement.

It is difficult to say how many liability settlements previously went unreported prior to MMSEA. Many defendants are concerned that they will be unable to protect Medicare’s interest at the time of settlement if the claim was previously unreported and conditional payment information unknown.

Considering this potential complication, how can a defendant protect Medicare at the time of settlement if the conditional payment information is unavailable? Why would a plaintiff settle a case without knowing how big of a piece Medicare intends to take? Will the Conditional Payment Notice speed up the process?

The CPN is MSPRC’s latest attempt to expedite the process for previously unreported claims. A CPN will be issued to the beneficiary and/or their counsel if the MSPRC is first notified of a claim by the Responsible Reporting Entity (RRE) under MMSEA Section 111. The beneficiary should receive the CPN within 65 days from when the settlement is reported and then has thirty days to dispute unrelated charges. If the beneficiary fails to respond within thirty days, a demand letter will be issued for the entire amount of the conditional payments (including procurement expenses). Plaintiff’s counsel should take immediate action once a CPN is received to ensure that potential reductions are not lost.

To illustrate the timing of the conditional payment information, I’ve included two scenarios.

Scenario One: The beneficiary proactively notifies Medicare prior to the settlement process and avoids issuance of a CPN.

A Medicare beneficiary injures their knee in an automobile accident and during the same time period is undergoing cancer treatment. The beneficiary notifies Medicare of the liability claim regarding the knee at the onset of the claim and Medicare begins the process of pulling the related claims or conditional payments. These conditional payments for the knee claim will likely include unrelated charges, related to the cancer treatment or other concurrent medical care. The beneficiary has a right to review these claims and dispute any that they feel are unrelated. This provides the beneficiary with a close approximation of Medicare’s interest prior to any settlement negotiations. The beneficiary then notifies Medicare once the case settles and is allowed an additional reduction for procurement expenses. This amount constitutes Medicare’s Final Demand and must be repaid within 60 days of the receipt of the Final Demand Letter.

Scenario Two: The beneficiary does not notify Medicare, and Medicare issues a CPN following notification of the settlement under the MMSEA Section 111 reporting process.

A claim settles in November and the RRE reports the settlement to Medicare the following quarter (January). Because Medicare was never notified of the claim prior to settlement, the MSPRC issues a CPN sixty days after the RRE reports the settlement (March). The beneficiary has 30 days to respond before a demand letter is issued (April). This scenario still takes five months from settlement to demand letter and this assumes that the MSPRC is able to stay within their stated timeframe.

As you can see, the CPN may speed up the process for previously unreported claims, but still delays disbursement of funds by five-six months. These examples illustrate two important lessons: always report new claims to Medicare in a timely fashion and take immediate action if a CPN is received. Failure to do so will limit any reductions that your client may be entitled to.

We’ll explore more about conditional payments and effective negotiation strategies in our next post.

Some updates and best practices for MMSEA

MRC recently published a new white paper, MMSEA: Act II. Authored by our resident subject matter expert on all things CMS and MMSEA Section 111, Randy Haynes, it does a good job of updating Responsible Reporting Entities, CMS reporting agents, and other interested parties of the recent deadline changes. Just as, if not more valuable however, are the best practices recommendations around queries and data formatting to ensure successful submission to CMS. Also covered are special sections on ICD-9 codes and a compelling argument for beginning the CMS query process as early in the litigation as possible. Now that the "live" input files start date has been pushed to 2011, is your organization taking a breather, or using this time to ensure your reporting process is in place, tested, and ready to go?

Summary of CMS Teleconference on the Revised Dates for Mandatory Insurer Reporting

On February 25, 2010, CMS held a teleconference to provide additional detail in regard to the most recent delay in Mandatory Insurer Reporting. This news was welcomed by many in the industry who still lack the process and technology required to comply with the MMSEA statute. This delay is also quietly welcomed by Medicare, as it allows them additional time to resolve internal software issues that have plagued the reporting process thus far.

Per the latest CMS alerts, initial production files will now be due beginning in January 2011, as opposed to April 2010. All lump sum settlements, or Total Payment Obligation to Claimants (TPOC) will be reportable as of 10-1-10, as opposed to 1-1-10. This will allow Responsible Reporting Entities (RREs) to report a full quarter of data in their initial production file. All Ongoing Responsibility for Medicals (ORMs) assumed must now be reported as of 1-1-10, a change from the previous date of 7-1-09. CMS stated that those RREs already in production status can still report in 2010 if they choose to. These changes can be found in User Guide 3.0, which is now available for download.

ICD-9 Diagnostic and “E” or Event Codes (Field 15) were already scheduled to be reported beginning in 2011 and this will not change. CMS spokesperson, Barbara Wright, stated the ICD-9 codes may be “derived” by the RREs and that it is not necessary to mine the codes directly from medical and billing records. Guidance in regard to ICD-9 codes has been fuzzy and this comment may alleviate some RREs concerns over submitting incomplete codes. Field 57 (description of injury) will still go away in 2011, as ICD-9 code reporting begins.

Additional alerts should be expected prior to 2011, as the intricacies of mass tort reporting are reconciled with the current reporting fields. Fields 58-62 remain not reportable and the issues around exposure dates have yet to be resolved. Currently, there are no mass tort work group meetings scheduled. It is unclear whether CMS will continue to solicit input from the industry before any new changes are announced.

As self-insured payers have prepared for MMSEA, many have been awakened to their duties already in existence under the Medicare Secondary Payer Act. The query process provides a new, inexpensive tool for RREs to determine beneficiary status. RRE’s should continue to query all claimants to determine beneficiary status, even if the current settlements are not reportable under the new timelines. If anyone doubts Medicare’s more aggressive recovery practices, look no further than the December 2009 filing of U.S. vs. Stricker, which cites violations of Medicare Secondary Payer provisions. For the first time, Medicare named all parties in the lawsuit, including insurers, settlement beneficiaries and plaintiff attorneys involved in a 2003 pollution liability settlement (Abernathy vs. Monsanto).

For those RREs that haven’t started testing, now is the time to decide: Do you have the internal resources necessary to self-report or should you enlist a reporting agent to ensure compliance? In either case, don’t wait until October to make a decision. While there really is no incentive to report prior to 2011, RREs should strive to be in production status no later than the third quarter of 2010. This will allow RREs to focus on collecting reportable settlement data in the fourth quarter with the technical challenges of claim file testing behind them. The industry has been granted a reprieve, now it is up to the industry to use this time wisely.

How prepared is your business for disaster?

Does your company’s current disaster recovery plan look something like this?

For companies which store or maintain access to business-critical information, survival depends on the ability to safeguard that information and its access, despite whatever curveballs Mother Nature (or other uncontrollable event) throws their way. During Hurricane Ike in September 2008, MRC’s disaster protocols enabled a seamless transition to an off-site data center and supported ongoing client support even during closure of the main office. As a result, our clients never lost access to their data or their key project contacts, even while the region experienced widespread power outages. Our ability to "weather the storm" was vital to maintaining client confidence in our oragnization. In the following paragraphs, see some pointers on disaster recovery, authored by IT network engineer Sherif Soliman.

Most of us are familiar with terms such as “disaster recovery”, “disaster recovery plan”, or “disaster preparedness”. These preparations and infrastructures are essential elements of a trustworthy operation. After all, how can a prospective client make a responsible buying decision without reasonable confidence that business will continue in case of a service interruption, or a natural or man-made disaster? With that awareness, it is in the interest of even small and mid-sized businesses to document business continuity/disaster recovery plans that will both safeguard operations and preserve client trust. Let’s review one simple approach that can be used in creating and implementing such a plan.

Before we get started, a disclaimer with regard to these suggestions for disaster recovery: simple does not always equal easy, quick and/or inexpensive. Each organization is different, and must determine what level of protection is “good enough”. It is important not to underestimate the effort, time and cost involved in maintaining a DR plan. I like to compare DR planning to purchasing life insurance. With life insurance you hope you never need it, and the right amount is different for everyone. The same is true for a DR plan; each organization has a balance they must find between cost and risk tolerance.

Step 1: Create a team. There should be at least one person from each group or department assigned to this task / effort. All team members should have the available bandwidth to participate meaningfully. And, it is important to identify an individual to assume responsibility for managing the plan, who is capable of doing so even in a stressful situation. The manager must be able to have a bird's eye view of the whole plan but also to understand and manage the details, as well as communicate to the stakeholders in a calm, intelligent way.

Step 2: Perform a BIA (business impact analysis). Identify the key IT processes that support your business. These should fall into three categories:

1. Critical to delivering required service level to customers
2. Required to support business as usual
3. Required to support business functions that have value but are not critical to the customer or important to support the business every day.

As the cost of business continuity is determined, this breakout will support decision making.

People within the organization that fully understand individual or multiple areas of the business are the best sources for a comprehensive BIA. This is not a high level view. The key components of the BIA must address the details required to support the business' processes. Those details are critical to the success of the business continuity/disaster recovery plan. It is also important to validate that contractual requirements can be met.


Step 3: Present a business case to the leadership of your organization. Include the information and findings from step 2. This presentation should also include cost scenarios and any other information that might be needed by management to make an informed decision. Leadership must determine which resources (systems, supplies, technologies, processes, services, vendors, personnel, etc.) will be included in the plan based on financial feasibility and the organization’s overall strategy.

Obviously, the greater the number of resources that will be included in the plan, the greater the cost involved. The amount of and extent to which each resource will be included in the scope of the DR project reflects the risk tolerance of the organization, and should be subject to cost-benefit analysis. Look at ways the disaster resources can be used to support ongoing business, i.e. a sandbox for testing. This enables management to insure the company against potential issues while supporting development of future business opportunities. In this analysis, management should compare the cost of “disaster proofing” a resource with the risk of losing the resource for a period of time. Companies should also include the potential cost of losing a customer if key deliverables cannot be met.

Management must then define the scope and budget for this project. Their support and sponsorship is vital to its success. This step must be completed before moving to Step 4.

Step 4: Write a formal disaster plan. Start with a detailed outline and validate with all the stake holders, including management, that the key components have been identified.

Think “redundancy”, not only in data and servers, but for all resources (systems, supplies, technologies, processes, services, vendors, personnel, etc.). For example, a company may decide to store disaster plans and processes in a SharePoint system; not very helpful in the event that the SharePoint system is down. Similarly, a redundant broadband connection to your operations building will not help if the utility power is out at the operations building. The people factor is also important. More then one individual should be capable of performing any one process.

Beyond contact information, notification and communication protocols and channels, the disaster plan should contain a process for operating without each resource (management, systems, supplies, technologies, processes, services, vendors, personnel, etc.) as identified in the business case. Additionally, it should include a process to recover each resource, most expediently, marked with rankings of priority.

Step 5: Audit. Once the processes are clearly defined, test, test, test. Define the intervals for testing, quarterly or biannually, and what will be tested. Some components may be able to be tested in production but a full test will require downtime. A company commitment to full testing is key to a successful plan.

Step 6: Review and update. New regulations, changes within the organization and opportunities for improvements make it necessary to review and update the plan regularly, biannually at the least.

To learn more, these links are interesting reads:

Disaster recovery: does your management get it? by David Almquist and Lane F. Cooper for BizTechReports.com.

Wikipedia's Disaster Recovery entry.

Also, consider the following books:

Disaster Recovery by Brenda Phillips.
The Definitive Handbook of Business Continuity Management by Andrew Hiles.
The Disaster Recovery Handbook: A Step-by-Step Plan to Ensure Business Continuity and Protect Vital Operations, Facilities and Assets by Michael Wallace and Lawrence Webber.

MMSEA 111 advisory: Start date pushed to January 1, 2011

See this link for updated information from CMS. Summary is below:

February 16, 2010

CMS advises all NGHP RREs that the date for first production NGHP Input Files is changed from April 1, 2010 to January 1, 2011, effective immediately.

NGHP File data exchange testing will continue. All NGHP RREs should now be registered with the COBC, and either in or preparing for file testing status. NGHP file data exchange testing may continue during 2010, as needed.

All NGHP file data exchange testing will be completed by December 31, 2010. NGHP RREs that have completed file data exchange testing at any time are encouraged to proceed to production file data exchange status.

During the week of February 22, on this Website CMS will post the next version of the "Section 111 NGHP User Guide" and a number of Alerts relating to particular NGHP policy issues.

Also during the week of February 22, on this Website CMS will post an alert for NGHP RREs describing the steps those RREs can take to assure their ongoing compliance with the Section 111 reporting requirements.

So what does this mean? Responsible Reporting Entities have been granted a reprieve to enable them to better prepare for the new reporting requirements. We'll give a more thorough analysis of this development and its implications early next week.