For years, plaintiff attorneys and settlement planning professionals have operated under a set of unclear assumptions when it came to liability settlements and future medicals for Medicare beneficiaries. While the rules are still unclear, the Centers for Medicare and Medicaid Services (CMS) indicated that they are set to make some changes to Liability Medicare Set-Asides (LMSAs) on October 1, 2017.
Existing guidelines for LMSAs
Under Medicare Secondary Payer (MSP) provisions, Medicare Set-Asides are not a requirement; they are a recommendation for protecting Medicare’s best interests. Medicare beneficiaries are required to notify Medicare when a claim is made against an alleged tortfeasor with liability insurance (including self-insurance). If the litigation results in a liability settlement, Medicare is within its rights to seek reimbursement for any expenses it has covered that should have otherwise been paid for out of the settlement. If Medicare is billed and pays for any future injury-related medical costs, Medicare may also seek reimbursement should it determine its future interest was not adequately protected.
CMS has yet to provide a framework for reviewing LMSAs as it has for Workers’ Compensation Medicare Set-Asides, making it difficult to determine their necessity and whether the MSA is being funded with the appropriate amount.
What does the new policy mean for your clients?
Earlier this year, CMS issued Change Request 9893 which addresses policies, procedures and system updates required to create and utilize a LMSA and No Fault Medicare Set-Aside (NFMSA) MSP record, similar to a Workers’ Compensation Medicare Set-Aside Arrangement MSP record. It also instructs Medicare Administrative and Recovery Contractors (MACs) when to deny payment for items or services that should be paid from a LMSA or NFMSA fund. The changes are effective as of October 1, 2017.
Here’s the bottom line: as of October 1st, Medicare may begin denying payment for claims if it determines that those claims should have been paid by a liability insurance policy or one of the other primary payers as outlined in the MSP provisions. It is reasonable to assume that the new change request may slow down liability settlements, making it imperative to work with an experienced settlement planning professional. Failure to comply with MSP provisions can result in severe penalties for claimants and their attorneys.
Funding the LMSA with a structured settlement
In addition to determining the necessity for a LMSA and selecting an administration option, claimants will also need to choose a funding option—either a lump sum or a structured settlement. Structured settlements can be a cost-effective method of funding a Medicare Set-Aside: first, a lump sum “deposit” is made in an amount equal to the first expected surgery and/or replacement and two years of annual payments. Remaining funds are then annuitized and divided as annual payments over the course of the claimant’s life expectancy.
If the deposited funds are not exhausted within a given year, they are carried forward to the next period and added to the next deposit. The whole fund, including carry-forwards, must be exhausted before Medicare will pay for any claims-related expenses. If the payment for a given year has been exhausted, Medicare will pay for any Medicare-covered costs related to the injury during that year.
Contact us to learn more about Liability Medicare Set-Asides
If your client is currently receiving Medicare benefits or expects to be in the future, contact Traci Kaas today. Our comprehensive settlement planners will assist you and your client in reviewing Medicare eligibility, determining the necessity for a LMSA, and will help coordinate funding and the review process.