My client received a personal injury settlement. Is an MSA required in third party liability cases?

The Medicare Secondary Payer Act (MSPA) was passed in 1980. The Act provides that Medicare is a secondary payer and makes a conditional payment if payment has not been made or cannot be expected to be made promptly by a group health plan, Workers’ Compensation (WC) plan, liability insurance, or no-fault insurance. Conditional payments are made by Medicare subject to repayment when a primary plan makes payment. The MSPA covers past payments and future payments. Medicare has been asserting its right to reimbursement for past payments for many years, and is becoming increasingly more sophisticated in this regard.

With respect to future payments, Medicare, or CMS, made little effort to collect until it issued what is called the “Patel Memorandum” in 2001. The Patel Memorandum and a series of subsequent memoranda spelled out CMS requirements where future payments may be required. This series of memoranda only applies to WC cases. It must be understood that a Medicare Set-Aside Arrangement is never required. The statute simply states that, “Medicare’s interests must be considered.” The idea of the MSA quickly became a safe harbor. An amount of the projected future medical expenses is calculated by a company with experience in this field and is submitted to CMS for approval. CMS can accept the figure or adjust it upward. There is no appeal from the CMS decision. Ideally, the fund is then set aside with a professional custodian. An MSA can be self-administered, and in very small cases this makes sense. The problem with self-administered MSAs is that the client has no idea what Medicare would cover or how much the coverage would be; thus the client is not really in a position to administer the set-aside correctly.

The question then arises as to whether an MSA is required in a third-party liability case. The Special Needs Alliance polled each of the 10 CMS Regions and asked a series of questions. Overall, all regions indicated that the MSPA applies in third-party liability cases with respect to future payments. What is clear is that some regions are more aggressive in enforcing this requirement than others. All regions are understaffed and tend not to enforce the requirement, except in rare cases. However, each region, including New York and Philadelphia, indicated that while they are shorthanded and cannot enforce the requirements of the statute, the law nevertheless stands and it is not safe to ignore it. In the absence of further guidance, the WC guidelines should be followed.

If there are future medical bills and an MSA is not established, the client could lose Medicare benefits. This could result in a malpractice case against the personal injury attorney. CMS also has a right to recover its claims from any entity, including the client or the personal injury attorney that has received a primary payment. This means that if the personal injury attorney deposits monies in the firm’s trust account and then makes distribution to the client, the personal injury attorney may be liable.

Despite that an MSA is often not required, many defense lawyers and insurance companies want some evidence to this effect. Begley Law Group (BLG) has issued Opinion Letters to the effect that an MSA is not required in a given case. In certain situations, lawyers from BLG have had to testify in court regarding this.

To learn more, visit the Begley Law Group website at www.begleylawgroup.com.