As of October 1, 2017, the Centers for Medicare and Medicaid (CMS) has implemented a new policy regarding Medicare Secondary Payer (MSP) reimbursements and what are known as liability Medicare set-asides or LMSA’s. At the request of CMS, the Medicare Administrative Contractor will begin to track the existence of any LMSA’s related to a claim and deny payment for items or services that it deems should be paid from that LMSA rather than being paid for by Medicare. According to CMS, “Liability and No-Fault MSP claims that do not have a MSA will continue to be processed under current MSP claims processing instructions.”
What does this mean? Medicare’s authority in this area has not changed, nor has there been any statutory or regulatory change. However, this new policy will likely generate confusion and raise additional issues when liability cases for Medicare eligible clients are settled. It is important to understand that this new policy does not affirmatively create a new mandate for Medicare beneficiaries to create a liability set-aside.
Under Medicare Secondary Payer (MSP) provisions, Medicare Set-Asides are not a requirement; they are a recommendation for protecting Medicare’s best interests. Medicare beneficiaries are required to notify Medicare when a liability claim is made against a defendant with liability insurance. If the litigation results in a settlement, Medicare will expect reimbursement for any expenses it has covered that should have otherwise been paid for out of the settlement. If Medicare is billed and pays for any future injury-related medical costs, Medicare may also seek reimbursement should it determine its future interest was not adequately protected.
It is important that Medicare’s interests be considered when a liability case is settled. When Medicare has paid some of the medical expenses it is mandatory, and Medicare has to be reimbursed. If the settlement includes money for future medical care, the situation is more complicated. In those cases where the client is Medicare eligible, a LMSA may be appropriate, and perhaps recommended. In any event, in all cases, Medicare’s interest should be carefully considered if the settlement includes any money for future medical expenses. At minimum, clients should be advised that Medicare could decide that some future medical expense was caused by an injury for which the client has already received compensation, and that Medicare would refuse to pay for it.
CMS has yet to provide a framework for reviewing LMSAs as it has for Workers’ Compensation Medicare Set-Asides, making it difficult to determine their necessity and whether the MSA is being funded with the appropriate amount. For the time being, liability settlements will have to be evaluated on a case-by-case basis.