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Federal Register – June 15, 2012: Advanced Notice of Proposed Rulemaking (LMSAs)

The Friday, June 15, 2012 Federal Register includes a four-page request for public comment requested by the Department of Health and Human Services’ Centers for Medicare & Medicaid Services.  The comment is requested for potential changes to 42 CFR Parts 405 and 411 and is titled, “Medicare Program; Medicare Secondary Payer and ‘Future Medicals.’ “

The summary for the advanced notice of proposed rulemaking reads:

This advance notice of proposed rulemaking solicits comment on standardized options that we are considering making available to beneficiaries and their representatives to clarify how they can meet their obligations to protect Medicare’s interest with respect to Medicare Secondary Payer (MSP) claims involving automobile and liability insurance (including self-insurance), no-fault insurance, and workers’ compensation when future medical care is claimed or the settlement, judgment, award, or other payment releases (or has the effect of releasing) claims for future medical care.

DATES: To be assured consideration, comments must be received at one of the addresses provided below, no later than 5 p.m. on August 14, 2012.

Why is Medicare Requesting Comment?

This request for comment is essentially made by Medicare and its agents.  Ignore the use of the names HHS and CMS.  Simply consider these organizations as “Medicare.”

The stated purpose is to solicit comment on:

[s]tandardized options that beneficiaries and their attorneys or other representatives will be able to use to resolve MSP obligations related to settlements, judgments, awards, or other payments (hereinafter … “settlement(s)”)  involving future medical care while protecting Medicare’s interest.

More simply, the Advanced Notice is to begin setting up a process for Liability Medicare Set-Asides (“LMSA” or “LMSAs”).  This in turn means Medicare is attempting to recoup more funds to which it believes it is statutorily entitled via subrogation.  We all knew this was coming and we have all feared its arrival.  But this notice is a good thing. It gives us all the opportunity to educate Medicare on how best to set up an LMSA process – if one is possible at all.  We believe an LMSA process is possible, but the LMSA process must be severely limited due to its marked differences with Workers’ Compensation (which already has an MSA system).

To What is Medicare Requesting Comment?

Medicare is requesting comment on:

  1. The definition of:
    1. Chronic illness/condition;
    2. Physical trauma;
    3. Major Trauma;
    4. Future Medical Care; and,
    5. Date of Care Completion;
  2. The use of the Injury Severity Score (ISS) in predictive modeling of injuries and the need for future care;
  3. Seven (7) options for addressing “future medicals” for both Medicare beneficiaries and non-beneficiaries in liability settlements.  Those options are:
    1. The beneficiary pays for all case-related future medical care until his/her settlement is exhausted AND documents it accordingly.  This is known in the industry as the “Poor Man’s MSA;”
    2. A small claim safe harbor (with conditions);
    3. A Doctor’s note that the beneficiary has completed treatment;
    4. A full Liability Medicare Set-Aside (LMSA);
    5. The beneficiary participates in one of Medicare’s conditional payment recovery options (these are all small claim only);
    6. Upfront payment to Medicare; and,
    7. The beneficiary receives a compromise or waiver (where the Medicare lien is greater than 50% of the client’s net settlement).


LRS’s Initial Reactions

This Advanced Notice does NOT mean LMSAs will be mandatory.  But if we do not react appropriately, they could become mandatory in the future.  We are in the process of preparing a formal public comment – this is not that comment.

An unlimited LMSA system with the requirement that Regional CMS offices review and agreeto the LMSA could cripple the personal injury world.  Why?

  1. Preparations of MSAs are expensive, ranging from $2,500-$4,000 for submission;
  2. MSAs are backlogged for Workers’ Compensation, requiring a 9 month wait on top of the normal case litigation process;
  3. The current WCMSA system is based on litigation that separates the different areas of recovery in Workers’ Compensation (medical bills, lost wages, future medicals).  The liability system of settlement rarely separate those areas of recovery and adds non-economic damages (pain and suffering, loss of companionship/consortium, etc.) to the mix.  Medicare’s agencies have fought the idea of allocating settlements without judicial intervention on the merits.  This means you cannot write an order that 15% of the settlement is for future medicals and ask a judge to sign that order.  Medicare will not recognize it.  Instead, Medicare claims the judge must hear testimony for Medicare’s agents to agree with allocations.  Such a system would be unworkable and create massive backlogs in the judicial system.  Further, Medicare might still argue a state court judge has no jurisdiction over it; and,

LMSAs could even cripple the Medicare Trust Fund.  Medicare’s potential requirement of LMSAs would mean a short-term gain for the Medicare Trust Fund.  In the long-term the huge number of smaller liability cases would plummet, leaving Medicare with fewer and fewer recoveries and effectively forcing Medicare to become the primary payer.

Our full analysis of this subject will be available within the next few weeks. We will offer the opportunity to sign our official public comment as a supporter prior to our submission on August 13 (one day prior to the deadline.).

If you would like to include your own comment to be submitted with the LRS comment, or, are interested in signing our comment please contact me at rweiner@lienresolutionusa.com.


Ryan J. Weiner

Managing Partner
Lien Resolution Services
This Blog/Web Site is made available by the publisher for educational purposes only as well as to give you general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand that there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.

About Ryan J. Weiner

Co-Founder of Lien Resolution Services, LLC, a national healthcare lien resolution firm. Our goal is to assist in the fair administration and resolution of healthcare liens on personal injury cases. Please visit our website for more information: www.lienresolutionusa.com.

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