Is a MSA required if my client abandons a pending appeal of denial of SSDI prior to settling?

Question: In the event my client abandons a pending appeal of denial of SSDI to the ALJ prior to settling a claim, is a MSA required?

Answer: Thank you for your question. The only time that MSAs are required is when the parties have made that a condition of settlement. The more interesting question is whether an MSA would be appropriate under those facts. And the answer is “perhaps.” Here’s why. The Medicare Secondary Payer statute (42 U.S.C. Sec. 1395y(b)(2)) does not obligate parties to fund Medicare Set-Asides or MSAs. Nor do the regulations enacted in support of the MSP statute. What the law does prohibit is Medicare paying a bill for a beneficiary where payment has already been made under a worker’s compensation plan, an auto plan, a liability insurance plan (including self-insurance) or a no-fault plan. 42 U.S.C. Sec. 1395y(b)(2)(A)(ii).

The one exception to this broad prohibition is known as a conditional payment, which Congress authorizes Medicare to make when a primary plan or payer has not yet accepted responsibility for medicals. 42 U.S.C. Sec. 1395y(b)(2)(B)(i). This conditional payment is made with the understanding that if another primary payer has accepted or later accepts responsibility for those same medicals, Medicare’s recovery right ripens and its conditional payment will be reimbursed to it by the responsible party. 42 U.S.C. Sec. 1395y(b)(2)(B)(ii).

Under the terms of a settlement agreement, a claimant is (generally) given a lump sum of dollars in exchange for a general release of all claims (including future medicals). In the event that the defendant was prepaying any of the claimant’s future medical expenses within the lump sum award, the claimant should make sure to use those dollars for medicals instead of billing Medicare for the same. In the event that Medicare is billed erroneously and makes payment, an overpayment situation is created, allowing Medicare to pursue repayment from the primary payer. In the situation where a settlement has occurred and release is signed where a claimant releases a claim for future medicals against the defendant, the claimant becomes that primary payer of future medicals and Medicare will pursue the claimant for repayment. Thus, the attorney’s obligation is to identify if an award contains dollars for future medicals, if so then how much, and then providing the claimant compliant spend down options which would permit compliance with the MSP Act.

Looping back to your SSDI question, withdrawing the application for SSDI would simply mean that the claimant no longer has any “reasonable expectation” of Medicare enrollment within 30 months of settlement. As such, an MSA or future medical obligation funded in the case would not be reviewable by Medicare according to its current workload review thresholds.

So, while the answer to your question is “No, an MSA is not required”, there remains an obligation to identify if a defendant is prepaying future medicals as part of the settlement award, and then advising the claimant to not bill Medicare for future medicals unless/until that prepaid amount has been spent down and exhausted on future injury-related care otherwise covered by Medicare. Those are best practices for MSP compliance on future medicals in 2016.

We recently released a White Paper titled “Future Medicals in 2016 & the MSP Statute” which fully explains these concepts. Please click here to download: http://web.garretsongroup.com/future-medicals-2016-msp-statute.

 


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