By P. Czuprynski
The Medicare Secondary Payer Act (MSP) identifies Medicare is supposed to be second in line for payment if there is a non-group health plan that covers a certain date of incident or claimed medical expenses (i.e. workers’ compensation, liability or no-fault claim).
What this means is if Medicare made payment, but the treatment or date of service is payable under the non-group health plan claim, Medicare should be reimbursed.
This also means that if the date of service is NOT payable under the claim, Medicare should not require reimbursement. This can result in Medicare becoming primary payer for claim related (but unauthorized) charges. For example, Medicare regulation 42 CFR 411.40(b)(2) states that in workers’ compensation claims, Medicare is primary payer for unauthorized providers treatment.
Medicare currently uses the MSP to search and seek reimbursement for dates of services prior to a settlement that closes out medical rights. Also, if a carrier/self-insured has accepted certain conditions associated with a claim, Medicare may collect directly from the carrier/self-insured prior to closure of medical rights.
While this process searches for past payments made associated with a claim, there is very little evidence of Medicare’s MSP administrative processes post settlement.
In pre and post settlement settings, the Medicare Secondary Payer Act provides Medicare with the authority to:
- Deny payment of medical treatment due to another primary plan available; or
- If there is not a reasonable expectation of payment from a primary payer within 120 days, Medicare can make payment and ask for reimbursement from an alleged primary payer.
Denial of Payment: If a medical provider submits a bill to Medicare and Medicare denies payment, Medicare must provide an initial determination regarding the reasons for its denial of payment and opportunity to appeal the denial. This administrative process is like the current conditional payment appeal process.
Pay and Seek Reimbursement: Medical provider submits a bill to Medicare, but in this circumstance, Medicare makes payment and believes another primary payer is available. In this case, Medicare can send an initial determination to the alleged primary payer. The alleged primary payer then has the usual administrative appeal that currently is being used in conditional payments.
How Can This Play Out Post Settlement?
Settlement WITH Future Medical Allocations: Many times, parties to a settlement include a future medical allocation (sometimes referred to as a Medicare Set-Aside). This allocation of money is used for reasonably expected medical expenses post settlement. In these circumstances, a beneficiary will exhaust the funds of the future medical allocation. Once exhausted, the claimant is supposed to send an exhaustion letter to Medicare with an accounting of expenditures. If the allocation is exhausted properly, Medicare is then a primary payer for any further treatment.
In this circumstance, there appears to be a low chance of Medicare denying payment or making payment and seeking reimbursement. This is in part because the medical provider for allocation related medicals should be billing the future medical allocation until exhaustion. Once exhausted, Medicare is then on notice it is the primary payer.
If Medicare denied or sought reimbursement, the parties have the evidence of the allocation and exhaustion to rebut any argument Medicare is a secondary payer.
Moreover, in workers’ compensation claims, federal regulation commands Medicare to make payment after the allocation has been exhausted. See 42 C.F.R. 411.46(d), which states:
- Basic rule. Except as specified in paragraph (d)(2) of this section, if a lump-sum compromise settlement forecloses the possibility of future payment of workers’ compensation benefits, medical expenses incurred after the date of the settlement are payable under Medicare.
- (2) Exception. If the settlement agreement allocates certain amounts for specific future medical services, Medicare does not pay for those services until medical expenses related to the injury or disease equal the amount of the lump-sum settlement allocated to future medical expenses.
Because a future medical allocation is usually created to pay for medical treatment for years post settlement, it also could be years before Medicare would need to decide regarding its secondary payer status. This would place Medicare in a difficult position to obtain medical records prior to and relied in settlement and expert opinion regarding the allocation and its use.
Making it worse for Medicare, their recovery for payments would be limited to the amount of settlement. This means if Medicare made $2 million dollars in payments post settlement, but the settlement was $10,000.00 (including a $2,000.00 medical allocation properly exhausted), the most Medicare should be able to recover is $8,000.00.
What is also important to remember is that Medicare would need to prove that the $2,000.00 was inadequate based upon the knowledge and medical records available at the time of settlement. This would require Medicare to procure medical records and expert witnesses that would be subject to cross examination. Furthermore, the $2,000.00 probably was sufficient based upon the conditions/treatments at the time of settlement. These types of fishing expeditions seem unfruitful and unlikely from Medicare’s current processes.
Settlement WITHOUT Future Medical Allocation: There are many times where parties do not allocate a future medical allocation as a part of settlement and argue that Medicare is primary payer for any charges associated with the settlement, future or past. Medicare regulation 42 CFR 411.46(d) states:
- if a lump-sum compromise settlement forecloses the possibility of future payment of workers’ compensation benefits, medical expenses incurred after the date of the settlement are payable under Medicare.
In this circumstance, Medicare’s regulations state that Medicare must make payment for medical expenses incurred after the date of settlement. There does not appear to be the option for Medicare of denying payment at the outset of receiving a bill.
If Medicare cannot deny payment, the MSP states Medicare can make payment and ask for reimbursement from the primary payer. If due diligence was completed at the time of settlement, there likely will be a reason or evidence explaining why no future medical allocation was provided. This evidence would be used to show Medicare why it is a primary payer. Moreover, Medicare is now in the difficult position of obtaining evidence and expert opinion. Further, Medicare’s recovery could also be limited to the amount of settlement.
The MSP and supporting regulations give Medicare the authority to deny payment or seek reimbursement when it believes another primary payer is responsible. The MSP and regulations that operate this process in post settlement settings, state that Medicare must make payment for medical expenses that are incurred after the date of settlement. Additionally, if there is a medical allocation, Medicare becomes primary payer once that is exhausted.
What is extraordinary about this post settlement process is Medicare is placed in the difficult position of pay, chase and providing an administrative appeal process. Moreover, each settlement will have its own limitations inhibiting Medicare’s ability to prove either an MSA was inadequately funded or that post settlement treatment is the responsibility of another primary payer.
Ultimately, what this means is there appears to be serious barriers for Medicare in requiring reimbursement for treatments after a settlement closes out medical rights. We will keep you posted as we learn more.
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