The US Centers for Medicare & Medicaid Services (CMS) has long taken the position that insurers, Medicare beneficiaries and others have an obligation to "protect Medicare's interests" under the Medicare Secondary Payer (MSP) laws with respect to claims involving liability insurance (including self-insurance), no-fault insurance, and workers compensation insurance (collectively, non-group health plans) when future medical care is claimed or a settlement, judgment, award, or other payment (for convenience, each a "settlement") releases (or has the effect of releasing) claims for future medical care. Future medical care is defined by CMS in this context as medical items or services provided after the date of settlement.

For years, affected parties have been asking CMS for guidance regarding the nature of such obligation to "protect Medicare's interests" and the steps that would be sufficient to fulfill such obligation. The absence of such guidance has presented a significant risk factor for Medicare beneficiaries, insurers and self-insurers. This risk is particularly acute for Medicare beneficiaries who could lose their future Medicare coverage for some period of time after settlement if Medicare determines that program interests have not been adequately considered.

Advance Notice of Proposed Rulemaking

On June 15, 2012, CMS posted in the Federal Register an Advance Notice of Proposed Rulemaking (Notice) seeking comments on how Medicare beneficiaries (and other individuals) can meet their obligation to "protect Medicare's interests" with respect to non-group health plan claims when future medical care is claimed or the settlement releases (or has the effect of releasing) claims for future medical care. This Notice marks an important step forward, as it reflects CMS' intent to publish regulations addressing how insurers and others may protect Medicare's interests, as well as CMS' willingness to solicit stakeholder input.

Among other things, CMS is soliciting comments on (1) whether and how Medicare should implement a Medicare set aside (MSA) process in the liability context, (2) certain proposed definitions (such as "chronic illness/condition," physical trauma," and "major trauma") and (3) options set forth in the draft Notice.

Most interestingly, CMS asserts that:

if an individual or Medicare beneficiary obtains a 'settlement' and has received, reasonably anticipates receiving, or should have reasonably anticipated receiving Medicare covered and otherwise reimbursable items and services after the date of 'settlement,' he or she is required to satisfy Medicare's interests with respect to 'future medicals' related to his or her 'settlement' [using any of seven potential options].

77 Fed. Reg. 35917, 35919 (June 15, 2012). Options 1 through 4, below, would be available to Medicare beneficiaries as well as individuals who are not yet Medicare beneficiaries. By contrast, Options 5 through 7 would only be available to Medicare beneficiaries. The options are as follows:

Option 1: The individual/Medicare beneficiary pays for all related future medical care until his/her settlement is exhausted and documents this accordingly. Although included as an option, there appears to be a low likelihood that Medicare beneficiaries would ever elect this option since they would receive no practical value from having pursued and settled their claims.

Option 2: Medicare would not pursue "future medicals" if the individual/Medicare beneficiary's case fits certain specified conditions.

These include the following:

  • Option 2A: The amount of the liability settlement is at or under a set amount (as yet undefined) and all of the following criteria are met:
    • The accident, incident, illness or injury occurred one year or more before the date of settlement;
    • The underlying claim did not involve a chronic illness, condition or major trauma;
    • The Medicare beneficiary does not receive additional settlements; and
    • There is no corresponding workers' compensation or no-fault insurance claim.
  • Option 2B: The amount of liability insurance settlement is at or under a set amount (also as yet defined) and all of the following criteria are met:
    • The individual is not a Medicare beneficiary as of the date of settlement;
    • The individual does not expect to become a Medicare beneficiary within 30 months of the date of settlement;
    • The underlying claim did not involve a chronic illness/condition or major trauma;
    • The Medicare beneficiary does not receive additional settlements; and
    • There is no corresponding workers' compensation or no-fault insurance claim.  

At present, it is unclear what dollar benchmark would be used. It is also unclear from the CMS proposal in Option 2A what level of confidence a Medicare beneficiary and/or others would have that CMS would not later pursue recovery (for instance, based on a differing interpretation of a "chronic illness").

Option 3: The individual/Medicare beneficiary acquires/provides an attestation regarding the "Date of Care Completion" from his/her treating physician. Under this approach, the individual/Medicare beneficiary's treating physician would need to attest that he or she has "completed treatment and that no further medical care related to the 'settlement' will be required." If the attestation was completed prior to the settlement, then all "future medicals" would be satisfied. If the attestation was completed "after settlement," then "Medicare's interests with respect to future medical care would be limited to Medicare covered and otherwise reimbursable items and/or services provided from the date of 'settlement' through and including the Date of Care Completion." Based on insurer experience under the MSP mandatory reporting process in seeking to obtain similar physician statements to document an absence of on-going responsibility for medicals (ORM), it is unclear how willing physicians would be to make such attestations and what exposure the attestations might create for the attesting physicians.

Option 4: The individual/Medicare beneficiary submits a proposed Medicare set aside amount for CMS review and obtains approval of the same. CMS currently has a voluntary Medicare set aside process in the Workers' Compensation context and this Option is a natural extension of such existing process to the liability and no-fault contexts. The workers' compensation MSA process is not without its operational and other challenges. Among other things, CMS is seeking comments on whether the process for liability MSAs would be the same as or similar to the process used in the workers' compensation context and whether review thresholds should be established.

Option 5: The Medicare beneficiary participates in one of Medicare's "recovery options" prior to issuance of a demand letter. At present, these recovery options relate to (1) settlements below the $300 threshold, (2) use of a fixed payment option, or (3) self-calculation of the conditional payment amount. This Option would allow various mechanisms to be used to satisfy Medicare interests with regard to "future medicals." CMS is seeking, among other things, suggestions on how to improve these existing options for addressing CMS recovery rights.

Option 6: The Medicare beneficiary makes an upfront payment. CMS is considering two sub-options, as follows:

  • Option 6A: If ORM was imposed, demonstrated or accepted from the date of "settlement" through the life of the beneficiary or life of the injury, CMS may under this option review and approve a lump sum amount for the full amount of the calculated costs for all future medicals. This would, in effect, allow the beneficiary to pay Medicare, rather than having to establish and administer an MSA to protect Medicare's interest in future medicals.
  • Option 6B: If ORM was not imposed, demonstrated or accepted by the defendant, the Medicare beneficiary may elect to make an upfront payment to Medicare in the amount of a specified percentage of "beneficiary proceeds." Beneficiary proceeds would be calculated by subtracting from the total settlement amount attorney fees and procurement costs borne by the beneficiary, Medicare's conditional payment demand amount and certain additional medical expenses paid out of pocket by the beneficiary. While creative, this option, as proposed, raises many administrative and operational questions and challenges.

Option 7: The Medicare beneficiary obtains a compromise or waiver of MSP recovery rights from CMS. This approach would appear to extend the existing CMS compromise and waiver of recovery rights process to expressly encompass "future medicals."

Although far from perfect, the Notice affords stakeholders an important opportunity to provide feedback to CMS on its various proposed options as it shapes its policy with regard to protecting Medicare's interests with respect to "future medicals." CMS also requests proposals for additional options for consideration. (Given that numerous courts over the past year have agreed to adjudicate the adequacy of a proposed MSA amount to provide certainty, we would not be surprised if commenter's suggest that CMS recognize this as another "option," to the extent a court is willing to undertake such process).

With all of the various questions raised by the CMS options, and the ability to introduce alternatives, the opportunity to comment should not be squandered. Comments to the Notice must be submitted by 5 p.m. on August 14, 2012.