State Bar of Texas
29
thAdvanced Personal Injury Law Course
Dallas, Texas - 7/10-12 San Antonio, Texas - 9/7-9
Houston, Texas - 9/28-30 Pi-Yi Mayo*
5223 Garth Road Baytown, Texas
*Certified Elder Law Attorney by the National Elder Law Foundation
Nothing in this paper is to be construed as the rendering of legal advice for specific cases, and readers are responsible for obtaining such advice from their own legal counsel. This publication is intended for
educational and informational purposes only.
2013 Copyright, Pi-Yi Mayo, All Rights Reserved
Introduction
Contents of Paper
Law office of Pi-Yi Mayo
FUTURE MEDICAL EXPENSES AND THE AFFORDABLE CARE ACT (ACA NEW CASE LAW Benoit v. Neustrom
SMART ACT
TEXAS MEDICAID: RIGHT OF RECOVERY OR CLAIM MEDICARE’S SUBROGATION CLAIM
PROCEDURE FOR PAYING A CLAIM
MEDICARE SET-ASIDE ARRANGEMENTS OR TRUSTS
Introduction
Medicare Set-Asides in third party liability cases
Law office of Pi-Yi Mayo
Benoit v. Neustrom,
2013 U.S. Dist. LEXIS 55971 (April 17,
2013).
In this case the United States District Court for the Western
District of Louisiana considered the issue of what amount is
necessary to fund a Medicare Set-Aside when the settlement is
less than the projected MSA amount
The case involved a Plaintiff who was an inmate in a Lafayette
Parish correctional facility who suffered brain injury after a
seizure and alleged failure by the authorities to properly
evaluate his condition and provide proper care.
Numbers
Ahlborn v. Benoit
Law office of Pi-Yi Mayo
Net settlement to the client after expenses: $55,707.98
Midpoint range of MSA projections: $ 305,512.50
Net settlement was 18% of MSA projections.
Ahlborn
type calculation :
$17,019.16
Source: specialneedsfirm.com
Amount Court ruled was reasonable for
Benoit v. Neustrom
Declaratory Judgment of a Settlement
Law office of Pi-Yi Mayo
The parties reached a settlement and part of that settlement required the Plaintiff to assume sole responsibility for protecting and satisfying the
interests of Medicare and Medicaid. A Medicare Set-Aside Report was prepared by MedAllocators, Inc. for Shapiro Solutions from a review of the medical records and research related to Benoit's injury claim, diagnosis and medical treatment.
The case was brought before the Court on a Motion for Declaratory Judgment filed by the plaintiff, confirming the terms of a settlement agreement reached with the defendants, calculating the future potential medical expenses for treatment of Plaintiff's alleged injuries in compliance with the Medicare Secondary Payor Act at 42 USC §1395y(b)(2), and representing to the court that the settlement amount is insufficient to provide a set-aside totaling 100% of the MSA.
Benoit v. Neustrom
Service No Appearance by CMS
Law office of Pi-Yi Mayo
The Court required service to be made by the Clerk of Court on the Secretary of Health and Human Services, Chief Counsel of HHS/OGC for Region VI and the Civil Chief of the Office of the United States Attorney for the Western District of Louisiana. After the service, the court received a copy of a letter from the United States Attorney's Office to all parties to this litigation, stating that the United States has a statutory right of reimbursement and
subrogation against any settlement proceeds for past conditional payments made on behalf of Michael Benoit for injuries sustained as a result of the incident that occurred on January 1, 2012. 42 U.S.C. §1395y(b). At that time, CMS's contractor, (Medicare Secondary Payer Recovery Contractor), issued a demand letter in the amount of $2,777.88 for conditional payments made by Medicare specifically for the injuries at issue. The letter stated, “Should the plaintiff accept this determination, payment in the form of a check or money order should be made payable to Medicare.” This was the only reply from Medicare.
The letter made no reference to the MSA allocation issue
Benoit v. Neustrom
Medicare Set-Asides in third party liability cases
Law office of Pi-Yi Mayo
The Medicare Set-Aside Cost Projections ranged from
$277,758.62 to $333,267.02 and the amount of $2,777.88 was
determined to be the amount of the conditional payments made
by Medicare. Medicaid waived any interest in the proceeds as
long as a special needs trust was created. The amount of the
gross settlement was $100,000.00. The fees and costs involved
were $44,293.00 leaving a net recovery to the Plaintiff of
$55,707.98. The Plaintiff proposed an MSA allocation based on
an
Ahlborn
type analysis.
The proposed amount was ten percent
(10%) of the gross settlement proceeds based on the position
that the gross settlement in the case was ten percent (10%) of
the possible recovery if he prevailed on all of the liability issues.
Benoit v. Neustrom
Evidence
Law office of Pi-Yi Mayo
The Court considered the question of the future medical care for Mr. Benoit as a result of the subject accident and the extent to which the Medicare set-aside trust can or should be reduced to account for the financial hardship to the beneficiary.
The MSA allocation prepared by MedAllocators, Inc., with future cost
estimates was considerably larger than the net settlement figure that was also entered into evidence.
Evidence was presented by the defendants on the liability issues, and each expressed their positions that they were preparing motions on those issues when the settlement agreement was reached. Shelia Benoit, wife of the plaintiff, testified regarding the medical problems and financial problems her husband faced.
Benoit v. Neustrom
Medicare’s Position on Settlements
Law office of Pi-Yi Mayo
Other evidence included the position of Medicare that they
recognize allocation of liability payments to non-medical losses
only
when payment is based on a court of competent
jurisdiction's order after review on the merits of the case.
The Court took note that the position of Medicare here was
substantively the same position that Medicare asserted in
Bradley v. Sebelius, 621 F.3d 1330 (11th Cir. 2010)
, an allocation
case in which Medicare sought to recover conditional payments
it had made to or on behalf of a decedent out of settlement
Benoit v. Neustrom
Medicare’s Position on Settlements
Law office of Pi-Yi Mayo
In the
Sebelius
case, the settlement proceeds were inadequate to
meet the value of the survivor's claims and the full Medicare claim.
A lower court determined the amount of the limited settlement
proceeds to be allocated to the medical expense recovery. The
Court of Appeals reviewed Medicare’s position in
Sebelius
and
determined they basically were saying that Medicare’s language
contained in one of its many field manuals was entitled to
deference under
Chevron U.S.A. Inc. V. Natural Resources Defense
Council inc., 467 U.S. 837, 104 S. Ct. 2778, 81 L. Ed. 2d 694 (1984)
.
The Benoit Court went on to review the
Sebelius
reasoning
concerning the public policy considerations of encouraging
settlements in personal injury suits and that the Secretary's
position would have a chilling effect on such settlements
Benoit v. Neustrom
Court Found
Law office of Pi-Yi Mayo
After this review, the Court made findings of fact and conclusions of law some of which included:
• Medicare does not currently require or approve Medicare set asides when personal injury lawsuits are settled. Medicare does not currently have a policy or procedure in effect for reviewing or providing an opinion regarding the adequacy of the future medical aspect of a liability settlement or recovery of future medical expenses incurred in liability cases.
• . . . the specter of a verdict adverse to the plaintiff on liability was quite real.
• Had this lawsuit been tried, Mr. Benoit would have been entitled to recover pecuniary and non-pecuniary damages.
• The parties' agreement to settle this case for a payment of $100,000.00 by the defendants represents a reasonable compromise to avoid the uncertainty and expense which would be incurred if this case were tried.
• The Court finds the estimate of future medical costs set forth in the MSA to be both reasonable and reliable.
Benoit v. Neustrom
Forget
Ahlborn
Law office of Pi-Yi Mayo
At this point, the Court choose not to accept the
Plaintiff’s allocation of the amount of the settlement
that had been based on a theory similar to the
Ahlborn
case. The
Benoit
Court was more aggressive in making
a determination calculating the MSA amount on a
percentage of the net settlement amount to the range
of the MSA allocation entered as evidence in the case,
instead of looking at a ratio of the total case value
versus the net, it looked at the ratio of the MSA
amount to the net.
Ahlborn
Analysis
Medicare Set-Asides in third party liability cases
Law office of Pi-Yi Mayo
Ahlborn
looked at a ratio of the total case value versus the net:
Total Case Value $ 1,000,000.00
Actual Settlement $ 100,000.00
Fees, Costs & Liens $ 44,293.00
Net to Client $ 55,707.00
Set Aside Amount $ 305,512.00
Percentage of Recovery 5.57%
Reduced Set Aside Amount $ 17,019.16
Benoit v. Neustrom
Benoit
Method
Law office of Pi-Yi Mayo
The net settlement proceeds, after reimbursement of
conditional payments to Medicare is $55,707.98. The
mid-point
range
in the MSA projections is $305,512.50. The net settlement
is 18.2% of that figure. Using that percentage applied to the net
settlement proceeds, the sum of money to be set aside in trust
for future medical expenses is $10,138.00. The Court finds that
this amount adequately protects Medicare's interests and should
be available to provide funding for future medical items or
services related to what was claimed and released in this lawsuit
that would otherwise be covered or reimbursable by Medicare.
Benoit v. Neustrom
Benoit
Method
Law office of Pi-Yi Mayo
The sum of $ 10,138.00, to be utilized by Michael Benoit out
of the settlement proceeds to pay for future medical items or
services that would be otherwise covered by Medicare,
reasonably and fairly takes Medicare's interests into account
in that the figures are based on reasonably foreseeable
medical needs, (as opposed to the standard of proof required
by the substantive law that would be applicable if the case
were tried on the merits), based on the most recent
information from the treating physicians, utilizing fee
schedules that would be acceptable to CMS according to the
MSA evaluation.
Benoit v. Neustrom
Medicare Set-Asides in third party liability cases
Law office of Pi-Yi Mayo
The ultimate value of the Benoit case is yet to be determined, but the case does set forth a template that may be useful in cases where the settlement is grossly
inadequate to fund the proposed MSA allocation. The salient points of the case include:
Significant damages and liability issues with limited recovery;
Serving Medicare and allowing them an opportunity to appear and contest the proposed allocation;
Presentation of evidence of the Plaintiff’s financial burden and hardships faced in spite of the settlement as well as all of the specific costs and recovery figures (which means the settlement cannot be confidential);
Determination by the Court that the methodology for calculating the amount of the MSA is reasonable and adequately considers Medicare’s interest.
Introduction
The SMART ACT
Law office of Pi-Yi Mayo
H.R. 1845, aka Smart Act, was signed by President Obama on
Jan 10, 2013
Medicare IVIG Access and Strengthening Medicare and
Repaying Taxpayers Act of 2012
TITLE II—STRENGTHENING MEDICARE SECONDARY PAYER
The SMART Act
Law office of Pi-Yi Mayo
SEC. 201. DETERMINATION OF REIMBURSEMENT AMOUNT
THROUGH CMS WEBSITE TO IMPROVE PROGRAM EFFICIENCY
The claimant or applicable plan may at any time beginning 120 days before the reasonably expected date of a settlement, judgment, award, or other
payment, notify the Secretary that a payment is reasonably expected and the expected date of such payment.
CMS then has 65 days to provide an amount for the bills in the notice. CMS can ask for an additional 30 days for their response. If you check the portal within 3 days of settlement then that is considered the final demand even if the number later changes. If you accept the amount they are claiming then that would be a final demand. There would be no appeal by either party, it is an all or nothing acceptance.
The SMART Act
Law office of Pi-Yi Mayo
SEC. 201. DETERMINATION OF REIMBURSEMENT AMOUNT
THROUGH CMS WEBSITE TO IMPROVE PROGRAM EFFICIENCY
The individual (or representative) must provide documentation explaining
the discrepancy and a proposal to resolve such discrepancy. Within 11
business days after the date of receipt of such documentation, the Secretary shall determine whether there is a reasonable basis to include or remove claims on the statement of reimbursement. If the Secretary does not make such determination within the 11 business-day period, then the proposal to resolve the discrepancy shall be accepted.
In no case shall the process under this subclause be treated as an appeals
process or as establishing a right of appeal for a statement of reimbursement amount and there shall be no administrative or judicial review of the
The SMART Act
Only for Plans (Insurance Co.)
Law office of Pi-Yi Mayo
RIGHT OF APPEAL FOR SECONDARY PAYER DETERMINATIONS
RELATING TO LIABILITY INSURANCE (INCLUDING
SELF-INSURANCE),NO FAULT INSURANCE, AND WORKERS’
COMPENSATION LAWS AND PLANS
The Secretary shall promulgate regulations establishing a right of appeal and appeals process, with respect to any determination under this subsection for a payment made under this title for an item or service for which theSecretary is seeking to recover conditional payments from an applicable plan that is a primary plan which the applicable plan involved, or an attorney,
agent, or third party administrator on behalf of such plan, may appeal such determination. The individual furnished such an item or service shall be
notified of the plan’s intent to appeal such determination. (No timeframe to write regs)
The SMART Act
SEC. 202. FISCAL EFFICIENCY AND
REVENUE NEUTRALITY
Law office of Pi-Yi Mayo
Any settlement, judgment, award, or other payment by an applicable plan arising from liability insurance (including self-insurance) and from alleged physical trauma-based incidents (excluding alleged ingestion, implantation, or exposure cases)
constituting a total payment obligation to a claimant of not more than the single threshold amount calculated by the Secretary under subparagraph (B) for the year involved. (Effective 2014)
The annual single threshold amount for a year shall be set such that the estimated average amount to be credited to the Medicare trust funds of collections of
conditional payments from such settlements, judgments, awards, or other payments arising from liability insurance (including self-insurance) and for such alleged incidents subject to this section shall equal the estimated cost of collection incurred by the
United States (including payments made to contractors) for a conditional payment arising from liability insurance (including self-insurance) and for such alleged incidents subject to this section for the year. Commentators think $300.00 The threshold does not apply to future medical obligations.
The SMART Act
SEC. 204. USE OF SOCIAL SECURITY NUMBERS AND OTHER IDENTIFYING INFORMATION IN REPORTING
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Not later than 18 months after the date of enactment of this sentence, the Secretary shall modify the reporting requirements under this paragraph so that an applicable plan in complying with such requirements is permitted but not required to access or report to the Secretary beneficiary social security account numbers or health identification claim numbers, except that the deadline for such modification shall be extended by one or more periods (specified by the Secretary) of up to 1 year each if the Secretary notifies the committees of jurisdiction of the House of Representatives and of the Senate that the prior deadline for such modification, without such extension,
threatens patient privacy or the integrity of the secondary payer program under this subsection. Any such deadline extension notice shall include
information on the progress being made in implementing such modification and the anticipated implementation date for such modification
The SMART Act
SEC. 205. STATUTE OF LIMITATIONS
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An action may not be brought by the United States
under this clause with respect to payment owed unless
the complaint is filed not later than 3 years
after the
date of the receipt of notice of a settlement
,
judgment, award, or other payment made pursuant to
paragraph (8) relating to such payment owed.’’.
EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply with respect to actions
brought and penalties sought on or after 6 months
after the date of the enactment of this Act.
The SMART Act
Summary of time lines for items within SMART Act
Law office of Pi-Yi Mayo
July 10, 2013 –New statute of limitations for
conditional payment recovery of 3 years begins
October 10, 2013 –CMS implementation deadline for
new conditional payment process with website and
timelines
SOURCE: PMSI –Pharmacy Medical Services and Equipment Settlement Solutions-Webinar www.pmsionline.com
The SMART Act
Summary of time lines for items within SMART Act
Law office of Pi-Yi Mayo
January 1, 2014 –Threshold to not report a claim or have to pay
back conditional payments to begin
July 10, 2014 or later –SSNs and HICNs not required in reporting
–CMS has 18 months after enactment of the SMART act
to implement
One year extensions may be filed if it is creating problems
or hardship
November 15th (annually) – Congress to publish threshold
SOURCE: PMSI –Pharmacy Medical Services and Equipment Settlement Solutions-Webinar www.pmsionline.com
Introduction
Medicare Secondary Payer Manual, revised March 20, 2009 §20 set aside arrangement
Law office of Pi-Yi Mayo
An administrative mechanism used to allocate a portion of
a settlement, judgment or award for future medical and/or
future prescription drug expenses. A set-aside arrangement may
be in the form of a Workers’ Compensation Medicare Set-Aside
Arrangement (WCMSA), No-Fault Liability Medicare Set-Aside
Arrangement (NFSA) or Liability Medicare Set-Aside
Introduction
Law office of Pi-Yi Mayo
Payment under [Medicare] may not be made . . . with respect to any item or service to the extent that:
. . . (ii) payment has been made or can reasonably be expected to be made under a workmen’s compensation law or plan of the United States or a State or under an automobile or liability insurance policy or plan (including a self-insured plan) or under no fault insurance (emphasis added).
42 U.S.C. §1395y(b)(2)(A)(ii). This statue has been in existence since December 1980 and CMS takes the position that any settlement that
extinguishes liability for future medical expenses in a claim against a primary payer represents a situation in which “payment has been made” for an item or service otherwise covered by Medicare. Thus, Medicare should not provide future coverage for those items or services until the payment has been
exhausted on future medical expenses related to the injury. This is true
whether the primary payer is a worker’s compensation plan, an automobile or liability insurance plan, or no fault insurance (including self-insured plans).
CMS requires that its interests as secondary payer be reasonably considered in the settlement of any claim for medical expenses against a primary payer.
Introduction
Medicare Enforcement Rules
Law office of Pi-Yi Mayo
CMS is permitted to recover the full amount of a Medicare
claim even if the amount of the claim exceeds the amount a
plaintiff receives. (42 C.F.R. §411.24(c); This right to full recovery
applies also to settlement agreements lacking a determination or
admission of liability. (42 U.S.C. §1395Y(B)(2)(b)(ii)-(iii).
CMS may seek reimbursement of Medicare claims from the
entire settlement amount (less attorneys’ fees) because the MSP
regulations do not require Medicare to adjust its claim amount
according to the intended allocation of a settlement award.
Introduction
Medicare Set Aside in Personal Injury Cases
Law office of Pi-Yi Mayo
Section 1862(b)(2)(A)(ii) of the Social Security Act precludesMedicare payment for services to the extent that payment has been made or can reasonably be expected to be made promptly under liability insurance. Anytime a settlement, judgment or award provides funds for future medical services, it can reasonably be expected that those funds are available to pay for Medicare covered future services
related to what was claimed and/or released in the settlement, judgment, or award. Thus, Medicare should not be billed for future services until those funds are exhausted by payments to providers for services that would otherwise be covered by Medicare. Sally Stalcup, Region 6, MSP Regional Coordinator, UTSNT 2007 Conference,
Medicare Set- Asides, February 2007.
Introduction
Medicare Set Aside in Personal Injury Cases
Law office of Pi-Yi Mayo
“The fact that a settlement/judgment/award does
not specify payment for future medical services
does not mean that they are not funded. The fact
that the agreement designates the entire amount
for pain and suffering does not mean that future
medicals are not funded.” Sally Stalcup, Region 6,
MSP Regional Coordinator, UTSNT 2007
Introduction
Current Policy from
CMS Regional Office
Law office of Pi-Yi Mayo
Expect any funds that are allocated for future medicals to
be spent before any claims are submitted to Medicare for
payment. The beneficiary will be asked on the initial
enrollment questionnaire that is system-generated.
CMS has no current plans for a formal process for
reviewing and approving liability MSAs. However, there is
an obligation to inform CMS when future medicals were a
consideration in reaching the judgment, award or
settlement as well as any instances where a settlement
specifically provides for medicals in general or future
medicals.
When Do
You
Need to Consider
using
a MSA
Law office of Pi-Yi Mayo
Triage your liability cases and determine which cases have a potential MSA issues:
Is the plaintiff currently receiving Medicare or is there a "reasonable expectation" that the plaintiff will receive Medicare within 30 months? A reasonable expectation of Medicare eligibility will occur if any of the following situations apply:
(a) The individual has applied for Social Security Disability Benefits;
(b) The individual has been denied Social Security Disability Benefits but anticipates appealing that decision;
(c) The individual is in the process of appealing and/or re-filing for Social Security Disability Benefits;
(d) The individual is 62 years and 6 months old (i.e., may be eligible for Medicare based upon his/her age within 30 months); or
(e) The individual has an End Stage Renal Disease (ESRD) condition but does not yet qualify for Medicare based upon ESRD.
No MSA Required
When
Law office of Pi-Yi Mayo
1. Currently, not a Medicare beneficiary or likely to be a Medicare beneficiary within the next 30 months, then probably not an MSA issue. 2. Currently, CMS does not require a written submission for a WCMSA if the total settlement is less than $250,000 and the claimant is not a current Medicare beneficiary. Still must consider Medicare’s interest, but do not need to submit to CMS for approval. For a current Medicare beneficiary, total settlement must be less that $25,000 before no submittal is necessary.
3. Medicare set aside issues do not apply to Medicaid. 4. Damages are not being paid for a personal injury claim.
Options
Law office of Pi-Yi Mayo
Disregard Medicare set-aside issue because
CMS is not enforcing the MSP statute and there
are no rules for guidance (not recommended).
Document file showing that Medicare’s interest
was considered and was reasonably protected:
➤Calculate a set aside amount based on current WC regulations, but
do not submit to CMS for approval;
➤Submit proposed set aside amount to CMS for approval. May need
to create IRC §468B Qualified Settlement Fund if necessary to avoid constructive receipt of funds to plaintiff;
Working with MSAs
Law office of Pi-Yi Mayo
Usually funded with a qualified structured annuity with initial seed money;
Usually administered by a third party administrator;
For the life of the beneficiary;
Used to pay Medical expenses related to the injury that Medicare would reimburse;
Must include prescription drug coverage;
Must provide accountings to CMS;
Cannot pay fees and costs to establish the MSA from set aside amount.
MSA is a countable resource for Medicaid/SSI purposes. If Medicaid/SSI eligibility is required, the MSA must be administered as a subtrust of SNT.
Funding a MSA
Law office of Pi-Yi Mayo
A Medicare Set-aside Arrangement can be established as a
structured arrangement, where payments are made to the
arrangement on a defined schedule to cover expenses
projected for future years. In a structured Medicare
set-aside arrangement, monies are apportioned over fixed or
definite periods of time. In such cases, Medicare will not
agree to cover the beneficiary if there is no verification that
the funds apportioned in the arrangement have been
exhausted. Medicare does not make any payments until
the contractor responsible for monitoring the individual's
case can verify that the funds apportioned to the period,
including any carry-forward amount, have been completely
exhausted as set forth in the Medicare set-aside
arrangement.
Components of an Allocation
Law office of Pi-Yi Mayo
•
Provides lifetime allocation amount
•Social Security/Medicare status
•
Claim notification
•
Comprehensive Medical Summary – details past, current
and future care needs
•
Financial Analysis – a line by line analysis of future care
costs based on established fee structures
Calculating Seed Money
Law office of Pi-Yi Mayo
(1) The seed money for the Medicare Set-aside Arrangement must include an amount equal to the amount of monies calculated to cover the first surgery procedure and/or replacement and two years of
annual payments.
(2) The remainder of the approved amount should be divided by the remainder of the claimant’s life expectancy (or a shorter defined period of time if CMS has agreed to a shorter time period).
(3) Subsequent annual deposits into the Medicare Set-aside Arrangement are to be based upon a set “anniversary date” which cannot be more than one year after the settlement date. In a structured Medicare set-aside arrangement, if funds are not exhausted during a given period, then the excess funds must be carried forward to the next period. The threshold after which Medicare would begin to pay claims related to the injury would then be increased in any subsequent period by the amount of the carry-forward.
Calculating Seed Money
Law office of Pi-Yi Mayo
Example:
A structured set-aside is designed to pay
$20,000 per year over the next 10 years for an individual’s
Medicare covered services. Medicare would begin paying
covered expenses in any given year after this $20,000 is
exhausted. However, in 2012 the injured individual needs
only $15,000 to cover all related expenses. The
administrator would need to carry-forward the excess
$5,000 into 2013. Therefore, in 2013 a total of $25,000 of
Medicare covered expenses would need to be spent for
services otherwise reimbursable by Medicare before
Medicare would begin to cover any accident related
expenses, but only for the balance of 2013. This
forward process continues until the accumulated
carry-forward plus the payment for a given year is exhausted.
Set Aside Example
Calculating Seed Money for MSA’s
Claimant: John Doe
Step 1 Total estimated future medical services covered by Medicare $ 199,130.04 Step 2 Identify cost of first surgery and first procedure/replacement $ -Step 3 Subtract Step 2 from Step 1 $ 199,130.04
Step 4
Divide above by Life Expectancy to get
annual costs LE 44 $ 4,525.68
Multiply annual costs by 2 2 $ 9,051.37
Step 5
Seed money to be deposited upon settlement is equal to the sum of
Steps 2 and 4 $ 9,051.37
Step 6
Subtract seed money from total Set Aside Amount (Step 1) and divide by life expectancy minus 1 to calculate minimal annual deposit for the
balance of claimant’s life. $ 190,078.67
Life Expectancy – 1 1 43 $ 4,420.43
Total Seed Money $ 9,051.37
Medicare Set-Aside Options
Law office of Pi-Yi Mayo
Medicare Set-Aside Trusts (MSATS)
Formal Trust with Trustee
Fiduciary rules apply
Trustee may hire third party administrator
Usually for large accounts or used in combination with
SNT
Medicare Set-Aside Custodial Accounts
Administered by Custodian
Less formal, smaller accounts
Self-administered accounts
Administered by Claimant, no agreement necessary
Same accounting rules apply
MSA Administration Fees
Law office of Pi-Yi Mayo
Since the cost to administer the MSA cannot be paid from
the MSA account, a separate structured annuity is
purchased to fund annual administration fees.
Administrative fees/expenses for administration of the
MSA and/or attorney costs specifically associated with
establishing the MSA cannot be charged to the set-aside
arrangement. The CMS will no longer be evaluating the
reasonableness of any of these costs because the payment
of these costs must come from some other payment source
that is completely separate from the MSA funds.
SCHIP HAPPENS!!!
Why All the Concern About
MSAs for PI Cases Now?
Law office of Pi-Yi Mayo
Section 111 of the Medicare, Medicaid, and SCHIP
Extension Act of 2007 (MMSEA) amended the
Medicare Secondary Payer (MSP) provisions of
the Social Security Act (Section 1862(b) of the
Social Security Act; 42 U.S.C. 1395y(b)) to provide
for mandatory reporting for group health plan
arrangements, liability insurance (including
self-insurance), no-fault insurance, and workers'
compensation.
The New MMSEA Statute Says
Nothing About MSAs
Law office of Pi-Yi Mayo
Despite considerable urban legend to the contrary, the MMSEA statute does not contain any new guidance or requirements related to MSAs.
The MMSEA statute requires Responsible Reporting Entities (RREs) to report certain information regarding settlements with Medicare beneficiaries to the Secretary of Health and Human Services. The sole purpose of Section 111 of the MMSEA is to ensure that settling parties fully comply with the Medicare Secondary Payer requirement – that is, past Medicare payments must be verified and resolved in all liability, workers’ compensation and no-fault settlements.
The New MMSEA Statute Says
Nothing About MSAs
Law office of Pi-Yi Mayo
This new law (to date) has nothing to do with identifying
Medicare-covered future costs of care, which leads to MSA
issues and analysis. At the same time, the fact that the
MMSEA statute says nothing about MSA rules for PI cases
is not legal authority for the proposition that a MSA is not
required in a PI case.
Some commentators believe that CMS will eventually use
this information to determine if future injury related medical
expenses are being paid by Medicare. Prior to MMSEA,
CMS could not track these cases.
Medicare Set- Aside Fund Sub-Account
within SNT
Law office of Pi-Yi Mayo
• MSA is an available resource for SSI/Medicaid eligibility
purposes
• Unless combined with SNT, MSA funds will disqualify
claimant for SSI/Medicaid eligibility
• Must use combination SNT/MSA with payback provision
in trust
Special Needs Trust
Requirements
Law office of Pi-Yi Mayo
Codified at 42 U.S.C. § 1396p(d)(4)(A)
Established by:
Parent
Grandparent
Guardian/Conservator
Court
Beneficiary must be under the age of 65
Pay Medicaid claim prior to funding
Must be for the sole benefit of the beneficiary
Beneficiary must be disabled as defined under Social Security Rules;
Payback provision - Death
Qualified Settlement Funds
Law office of Pi-Yi Mayo
TIME! To handle liens, MSAs, SNTs, allocation between Plaintiffs
Allows Defendant to disengage from litigation quickly Defendant does not have to wait on resolution of allocation issues, liens, trusts, etc.
Economic performance at time of QSF funding= Defendant tax deduction
QSF Administrator can help negotiate allocation, if needed
Helps eliminate Defendant’s risk of insolvency
Plaintiffs can earn interest while awaiting resolution