This article was adapted from the book The Art of Settlement, written by Jason Lazarus.
Jim Doe is forty-six. He was injured in a motorcycle accident and lost both of his legs. He worked up until his accident and applied for Social Security Disability after the accident. He was accepted two years ago, and he is a current Medicare beneficiary as a result of qualifying for SSDI. You are about to settle his case for $2 million, gross, and you want to make sure you address Medicare compliance issues.
Unless you want to end up in court later, it’s important to have your ducks in a row.
Disabled clients, especially, need counseling given the likelihood they will be receiving some type of public benefits. To prevent being exposed to a malpractice cause of action, the personal injury practitioner should understand the types of public benefits that a disabled client may be eligible for, and techniques that are available to preserve those benefits. Having this knowledge will help the lawyer identify disabled clients they may want to refer for further consultation with other experts.
Once you’ve already identified someone as a Medicare beneficiary (or someone with the reasonable expectation of becoming one within thirty months), the easiest way to make sure you’re compliant is to follow the acronym “CAD.”
C: Consult
The “C” stands for consult with competent experts who can help deal with these complicated issues. For most practitioners, it is nearly impossible to know all of the nuances and issues that arise with the Medicare Secondary Payer Act. From identifying liens, resolving conditional payments, deciding to set money aside, the creation of the allocation to the release language, and the funding/administration of a Set-Aside, there are issues that can be daunting for even the most well-informed personal injury practi- tioner. Without proper consultation and guidance, mistakes can lead to unhappy clients, or worse yet, a legal malpractice claim.
A: Advise
The “A” stands for advise the client about the available planning vehicles or have an outside expert do so. All lawyers assisting those on Medicare must be knowledgeable when it comes to dealing with Medicare conditional payments as well as Part C/MAO liens. Medicare beneficiaries must understand the risk of losing their Medicare coverage should they decide to set aside nothing from their personal injury settlement for future Medicare-covered expenses related to the injury. It is about educating the client to make sure they can make an informed decision relative to these issues.
D: Document
The “D” stands for document what you did in relation to protecting the client. If the client decides that they don’t want any type of planning, a choice they can make, then document the education they received about the issue and have them sign an acknowledgment. If they elect to do a settlement plan, hire skilled experts to put together the plan so they can help you document your file properly to close it compliantly.
In addition, release language is critical when it comes to the question of documentation of considering Medicare’s future interests. Release language I have seen prepared by defendants/insurers is typically overbearing. Frequently the language cites regulations that are related to workers’ compensation settlements and typically will specifically identify a figure to be set aside. The latter can potentially cause a loss of itemized deductions for the client.
Not only is release language an important consideration, so is the method of calculation of the Set-Aside, potential reduction methodologies, and funding alternatives (lump sum vs. annuity funding). These issues do impact how the release is crafted as well as considerations of whether to submit to Centers for Medicare and Medicaid Services for review and approval (which is rarely a good idea).
CAD in Action
After consulting the proper experts in Jim Doe’s case, you may learn that it makes sense to do a Medicare Set-Aside analysis to document your file regarding what you are doing to deal with the Medicare Secondary Payer Act. The settlement will be reported to Medicare under the mandatory insurer reporting requirements which could trigger a future denial of injury-related care.
It is ultimately up to the client whether to set aside or not, but you need to advise him as to all of his options. You must explain them clearly and fully, so he can make an informed decision.
Whatever decision he makes, your file should be documented about what was done and why. This might be a situation where an argument could be made for a reduced Set-Aside amount based on Ahlborn/Benoit reduction methodologies if the client did want to set aside. It seems likely that here the client would not be recovering their full value of future medical.
Don’t Wind up in Court
The lesson to take away is not to wind up in federal court over compliance issues. Instead, deal with these issues presettlement strategically. If a client is a Medicare beneficiary, discuss with competent experts the proper steps for Medicare compliance. Advise your client about all their options, and properly word the release if a Set-Aside is being used to make sure the client doesn’t get saddled with inappropriate language or lose itemized deductions.
Appropriate planning will avoid a bad outcome or unnecessary trips to federal court.
For more advice on Medicare compliance, you can find The Art of Settlement on Amazon.
