UNCLE SAM IS WATCHING THE MEDICARE SECONDARY PAYER STATUTE

1. UNCLE SAM IS WATCHING! THE MEDICARE SECONDARY PAYER STATUTE PENNSYLVANIA ASSOCIATION OF INDEPENDENT INSURANCE ADJUSTERS November 6, 2009 Jay Barry Harris, Esquire Fineman Krekstein & Harris www.finemanlawfirm.com

2. MEDICARE Federally funded public health plan Administered by Center for Medicare & Medicaid Services (�CMS�) For people over 65 years old, or with end-stage renal disease or certain disabilities Provided coverage to 42.5 million people in 2005

3. MEDICARE Spends $330 billion in benefits Without further reforms, expenditures will increase over next 75 years from 3.2% to 11% of GNP

4. MEDICARE SECONDARY PAYER STATUTE (MSP) Addressed Medicare�s rising costs Medicare payments now conditional Primary plan responsible to reimburse Medicare Eliminated prompt payment requirement, strengthening reimbursement rights from �primary plan�

5. MEDICARE SECONDARY PAYER STATUTE (MSP) Primary plan includes liability and workers� compensation insurers and self-insured entities Required reimbursement within 60 days from beneficiary�s receipt of proceeds from primary plan

6. MEDICARE SECONDARY PAYER STATUTE Enabled Medicare to seek reimbursement from: The Medicare beneficiary The primary plan or Anyone who receives payment from the primary plan

7. NEW RULES � MEDICARE, MEDICAID & SCHIP EXTENSION ACT OF 2007 (MMSEA) Mandatory reporting requirements Insurers, self-insureds and third-party administrators must report all payments made to Medicare Beneficiaries after July 1, 2009

8. NEW RULES Medicare must receive notice of settlements and judgments Primary plan must protect Medicare�s interest Even if claimant has been paid Penalties for non-compliance $1,000 per day per claimant for late reporting Private cause of action with double damages, attorney�s fees and interest

9. RESPONSIBLE REPORTING ENTITIES (RRE) Parties that fund in whole or part a settlement, judgment, award or other payment to a Medicare beneficiary Liability, no fault and workers� compensation insurers, self-insured entities and third-party administrators (TPAs) are RREs Employing an agent to report does not relieve RRE of its responsibility

10. REPORTING REQUIREMENTS Begins January 1, 2010 Includes deductibles if paid to beneficiary Any ongoing payment responsibilities (medical bills, med pay, or gift cards) Exempt from reporting requirement: Payment of $5,000 or less through 12/31/10 Payment of $2,000 or less through 12/31/11 Payment of $600 or less through 12/31/12 No duty to report claim where there is no payment anticipated

11. RRE REPORTING RRE must register with Center for Medicare & Medicaid Services (CMS) by September 30, 2009 Register at: www.cms.hhs.gov/mandatoryinsrep

12. REPORTING TRIGGERED IF RECIPIENT IS MEDICARE BENEFICARY People 65 years or older Receiving social security disability payments for 24 months Diagnosed with end-stage renal disease Ongoing duty to ascertain status

13. OBTAINING INFORMATIONABOUT THE CLAIMANT Claimant�s name Social security number Date of birth Medicare or HSIN number Medicare paid any medical bills related to the claim

14. OBTAINING INFORMATION Claimant not required to respond or give permission to access the claimant�s Medicare information RRE cannot rely on claimant�s response � no safe harbor provision Privacy issues Unfair Claims Practices Act

15. HYPOTHETICAL Claimant 64.5 years old on date of loss Trips and falls breaking his leg Reports the claim one month before birthday Receiving cancer treatments Injuries from fall have not completely healed Unrepresented Desires to settle his claim

16. SETTLEMENT ISSUES Medicare interest must be fully satisfied Regardless of fault, whether medical bills are related to the accident or settlement amount Medicare is owed its monies 60 days after disbursement Failure to meet deadline is the responsibility of all parties involved in the settlement, triggering penalties Cannot �contract� away your responsibility

17. SETTLEMENT ISSUES CMS makes demand only after settlement CMS under no obligation to timely respond Initial determination can take 6 months Settlement delay Drafts may become non-negotiable Claimants may reject settlement Retain counsel and initiate litigation Increased cost of nuisance claims

18. SETTLEMENT ISSUES FUTURE LIABILITIES Not addressed by Act Traditionally insurers not obligated to pay medical expenses Ignore them at your own peril If anticipated, must be addressed in the settlement agreement If not anticipated, CMS can terminate future benefits to beneficiaries

19. ADDRESSINGSETTLEMENT ISSUES Involve Medicare early Obtain consent form from claimant to get conditional payment estimate Request conditional payment estimate Reduce Medicare�s interest Analyze conditional payment estimate for unrelated payments Procurement costs Hardship petition Request payment instruction

20. ADDRESSINGSETTLEMENT ISSUES Satisfy Medicare�s 60 day rule Make disbursement conditioned upon satisfying Medicare�s interest Forward final settlement agreement to Medicare Obtain final statement from Medicare Forward payment to Medicare Court approval of settlement Consent judgment

21. ADDRESSING SETTLEMENT ISSUES Payment Name Medicare on settlement check and send check to Medicare Provide two settlement checks Plaintiff lawyer and claimant Plaintiff lawyer and Medicare Hold the funds until Medicare�s approval Interpleader Court approval of settlement

22. ADDRESSING SETTLEMENT ISSUES Release Name Medicare in the release Submit the release to Medicare for approval Including indemnity language will not negate your responsibility Labeling settlement proceeds to avoid Medicare�s interest will be disallowed Payments to beneficiaries does avoid Medicare�s interest

23. FUTURE PAYMENTS No clear provisions in the regulations Ignore at your peril Medicare set asides Analyze plaintiff�s medical condition Utilize the defense IME Utilize fault concepts Life expectancy Rated ages from life insurance tables Court approval of the settlement Make a good faith effort

24. FUTURE PAYMENTS Follow the worker�s compensation model Not necessary for any settlement less than $25,000 Not necessary for any settlement less than $250,000 for someone who is reasonably expected to be a beneficiary Release issues: Have claimant release any claims should Medicare deny future benefits Clause does not shield you from Medicare

25. TRIAL Special verdicts Distinguish between economic, medical and non-economic damages Distinguish between past and future injuries Join Medicare as a party