Kelly on Malpractice

How many of you are having trouble getting MSPRC, the Medicare Secondary Payer Recovery Contractor, to respond to your request to compromise or reduce its lien in order to settle your case? Take a number and stand in line. My experience is that they don’t respond at all. This causes serious problems in the settlement process. Insurance liability carriers have been wary ever since SCHIP was enacted. SCHIP makes us all Medicare trustees for subrogation claims / liens. Insurance liability carriers are concerned that they are exposed in the event the lien with Medicare is not satisfied. They may not pay the settlement until they have proof in writing that Medicare accepted the reduced lien. This has caused some mediations to break down and some settlements to be delayed for months.

Suppose you are fortunate enough to have a medical malpractice case that can be settled. You are tabulating the value of the case, which includes an assessment of any subrogation interests. The subrogee is Medicare. You compare the amount of proven reasonable and necessary expenses with Medicare’s itemization of benefits. You find that the sum of Medicare’s subrogation claim / lien is less than the sum of medical expenses caused by the malpractice. In fact, there is a substantial difference between the itemization sent by Medicare and your special damages summary. This happens frequently in medical malpractice cases because there are healthcare expenses that the patient would have incurred even if the malpractice had never occurred. Medicare’s lien exceeds the proven damages sometimes by a factor of 10 dollars to every 1 dollar. You highlight the subrogation expenses and compute a sum which represents the related medical expenses, i.e., the true amount of the lien. You then reduce the lien and prepare a new damages summary for Medicare. You even get the defendants and mediator to agree to the reduced lien. Now, you need to get Medicare on board. I used send a letter with a waiver provision stating that if MSPRC does not respond within 60 days, then the parties will assume that Medicare has no objection to the proposed reduction. I hope this less than desirable solution worked because I have accepted payment on cases under pain of a hold harmless / indemnity provision for the defendant in the settlement agreement. There is relief in the form of a better option that I want to share with you.

On May 6, 2011, Assistant U.S. Attorney Robert Trusiak signed the Medicare Secondary Payor Protocol for the Western District of New York.  This one page document, titled Western District of New York Medicare Secondary Payor Protocol, describes the voluntary application process for settling parties to seek review of a Liability Medicare Set-aside Arrangement (“LMSA”) proposal.  While not an official policy of the Centers for Medicare and Medicaid Services (“CMS”), the process sets forth a roadmap for the review of LMSA proposals.  This protocol also serves as one of the federal government’s first attempts at addressing the questions surrounding LMSAs.

Resolution Prerequisites. The application for MSP compromise concerning payment for future medicals expenses/services related to resolution of the tort claim may be made to the U.S. Attorney’s Office for the Western District of New York only under The following circumstances:

1. CMS must have been notified of the pending liability claim;

2. CMS must have been notified of the resolution of that liability claim; and

3. The Medicare Secondary Payer Recovery Contractor (“MSPRC”) must have issued a letter regarding conditional payment reimbursement obligations, indicating those have been resolved or provide adequate assurance to that effect.

The Application for MSP Compromise Requirements

If a case/claim meets the prerequisites for filing the application for MSP compromise for future medicals/services related to resolution of the tort claim as set forth above, the application must contain the following information:

1. A copy of the MSPRC letter stating the matter concerning repayment for historical medical items and service related to the tort was reviewed and resolved or provide adequate assurances to that effect;

2. The LMSA proposal;

3. An agreed copy of the settlement agreement subject to completion of the MSP obligations; and

4. A joint statement from the applicants that warrants the following:

a. The value of the agreed settlement equals or exceeds $350,000;

b. The claimant is a Medicare beneficiary as defined under 42 C.F.R. §400.202;

c. CMS had been requested to approve the LMSA, but the applicants had not received any substantive response for at least sixty (60) days from the date of the letter to CMS; and

d. An affidavit from the preparer of the LMSA that it is true and correct based on the Medicare beneficiary’s medical records and the injuries being released as well as in conformance with the WCMSA submission checklist as published by CMS.

Once submitted to the U.S. Attorney’s Office for the Western District of New York, the U.S. Attorney may seek additional information from the applicants.  This may include, but not be limited to, a request for an additional LMSA.  Upon receipt of all required information, the U.S. Attorney will issue a release, compromising the LMSA obligations related to the claim resolution.
 
This Medicare Secondary Payer Protocol is available for single event liability cases, but not mass tort liability cases.  Importantly, this is a voluntary process and not CMS policy at this time.  This protocol can provide additional reasonable assurances that settlements have properly taken into account Medicare’s status as a secondary payer.  However, the parties must have taken some initial action, including ensuring that past payments made have been properly addressed, as well as providing proof that the parties requested CMS approval of the LMSA but have not received any response.  In those circumstances, the U.S. Attorney’s Office for the Western District of New York is willing to assist.

I hope this will help us all in resolving liens and thereby expediting settlements. It is a welcome development to all of us who recognize that in the absence of express direction from CMS, any MSA compliance program should have a speedy validation component.  I will continue to monitor LMSA developments and will report any future developments to the settlement community.  For more information about this announcement and other MSP compliance services, including conditional payment reimbursement, MSA services and MMSEA Section 111 reporting, check with the Garretson Resolution Group at www.garretsongroup.com, which is where I learned of this development.