June 02, 2011

What Is New With Conditional Payments?

June 02, 2011

Portman v. Goodson, et al.; Sullivan v. Farm Bureau Mutual Insurance Company of Michigan No. 2011 U.S. Dist. LEXIS 19491; 2011 U.S. Dist. LEXIS 35817

What is new with Conditional Payments?

  • Case Law
  • MSPRC Policy

A previous Alert advised that MSPRC suspended issuance of conditional payment information while it reviews the implications of the recent Haro v. Sebelius decision.  As an update, MSPRC has now announced that it will resume issuing Rights and Responsibilities letters on June 10, 2011.  As of the date of this update, however, MSPRC has not yet announced when it will resume issuance of demand letters.

We are all aware that federal law provides Medicare with great power to obtain reimbursement of any conditional payments made on behalf of a work-related injury.  In addition to the Haro case, two other recent cases have provided insight into Medicare’s statutory right to reimbursement.   In Portman v. Goodson, et al., 2011 U.S. Dist. LEXIS 19491, and Sullivan v. Farm Bureau Mutual Insurance Company of Michigan, 2011 U.S. Dist. LEXIS 35817, federal courts in Kentucky and Michigan have confirmed that Medicare, or a private individual, cannot obtain reimbursement under the Medicare Secondary Payer Act until certain conditions are met.

First, and fairly obviously, Medicare cannot seek reimbursement for a payment until Medicare has, in fact, made a payment on a claimant’s behalf.  Secondly, once such a payment has been made, there must be a determination that the insurer was responsible for making that payment.  In other words, there must be a showing that the insurer was “primary” and Medicare was “secondary.”  The courts noted that a determination of whether the insurer was actually responsible to make any payments cannot be made until a case proceeds to judgment or settlement.   Thus, it is only after the underlying case is brought to resolution that Medicare’s statutory right to reimbursement is effective.

Despite that fact that Medicare’s right to reimbursement does not formally accrue until the time a case is resolved, it remains best practice to address potential Medicare issues at an early stage of every case.  Early requests for information can help lessen the impact of the delays caused by MSPRC and CMS.

What if my case does not meet a Review Threshold?

In our April alert, we included a refresher on Review Thresholds.  Our purpose was to reacquaint with the work level Review Thresholds established by the Centers for Medicare and Medicaid Services (CMS).  Then, by way of a Memorandum dated May 11, 2011, CMS re-affirmed that the submission of a workers’ compensation Medicare Set-Aside to CMS was only the recommended process for ensuring that the future interests of Medicare are properly considered.  That policy Memorandum also included the following language:

There are no statutory or regulatory provisions requiring that a WCMSA proposal be submitted to CMS for review.

CMS and Medicare have also made it abundantly clear that the interests of Medicare must be considered in every workers’ compensation settlement that includes a closure of future medical rights. Well known are the advertised penalties when a settlement does not adequately consider the future interests of Medicare. The work level Review Threshold does not constitute a substantive safe harbor dollar threshold. More problematic from a planning perspective is what to do when a case clearly does not meet a Review Threshold.  The focus shifts to what obligations the parties may have under the Secondary Payer Act to ensure that Medicare’s future interests are properly protected.

There can be no universal approach when addressing Medicare’s interests in a “non‑threshold” workers’ compensation case.  CMS has not provided guidance on the issue and parties are required to essentially develop their own protocol for considering when and how to protect Medicare’s interests.

Medicare’s future interests are not necessarily implicated in every non‑threshold situation.  More commonly, a non‑threshold protocol becomes important when an individual has more severe injuries, has a high settlement amount, has a proximity to entitlement to Medicare benefits, and with deference to Social Security status.

Not every situation that falls short of a Review Threshold is suited to a non-submitted medical allocation. A balance is struck between taking Medicare’s interests into consideration and ensuring that the settlement remains financially beneficial. As Certified Medicare Set-Aside Consultants, we utilize the guidelines established by Medicare in its Criteria for Determining Whether a Lump Sum or Structured Settlement Sufficiently Takes into Account Medicare’s Interests (7/23/01 Memo Q5) document in conjunction with our expertise in Workers’ Compensation law to protect you from future inquiry by Medicare, while remaining budget conscious.

A future medical allocation in the workers’ compensation settlement that otherwise does not meet a Review Threshold should be implemented when:

  1. The case involves a Medicare beneficiary but the total settlement is under $25,000.00.  Recall our prior newsletter on how to accurately arrive at a Total Settlement figure.
  2. An individual is not a Medicare beneficiary but one of the prongs of the second general Review Threshold is met ($250,000.00 settlement or reasonable expectation).  Note this situation is defined to implicate only one of the prongs; in other words, not a case meeting a work level threshold.

While these are two examples*, they represent the core of the necessary protocol forwhen to develop a medical allocation that considers Medicare’s future interests.  Next is how to protect Medicare’s, and your, interests.

The “how” part is necessarily case-by-case. With training and experience, we have come to learn what Medicare expects, what they want to see, and the reasoned form the allocation should take. In summary, we can afford the required peace of mind in non-threshold cases.


The timeliness of review and approval is a paramount concern when submitting a Workers’ Compensation Medicare Set-Aside (WCMSA) proposal to the Centers for Medicare and Medicaid Services (CMS).  If a case has not settled prior to approval, indemnity benefits may continue during the WCMSA review period.  In the recent past, we expected to receive acknowledgment of receipt of our submitted proposals from CMS within one month of submission.  We generally received approval within 60 days thereafter.  We expected the review and approval of submitted WCMSA proposals to take approximately 3 months from the date of submission.

CMS isbacklogged with submitted WCMSAs and the time for review approval has greatly increased. CMS’ acknowledgment letter still states that most reviews are complete within 45 – 60 days.   Although CMS still sends the acknowledgment letter nearly one month after the submission, we have found that it is taking nearly six months thereafter for approval.  We recently received a group of approved WCMSAs that were submitted in November of 2010.  Therefore, we estimate that the timeline for approval has increased from 3 months from the date of submission to 7 months.  At Wiedner & McAuliffe, Ltd., we call CMS on the 45th day after receipt of the acknowledgment letter andat leastevery two weeks thereafter to ensure our cases are moving.

A Success Story

A longtime client sent Dan Simones of our office a $313,000.00 MSA estimate prepared elsewhere.  Dan reworked the estimate and made a submission to CMS.  The result was a CMS-approved MSA that saved the client over $224,000.00.

Legislative Reform

The theme of this Alert appears to be, albeit unfortunately, that the Medicare landscape continues to create unnecessary delays and confusion on all fronts.  Calls for legislation to reform the Medicare Secondary Payer Act, and make the process more reasonable for parties to litigation, have become frequent.  Several legislative proposals have been initiated to address various concerns regarding practical difficulties with the Medicare Secondary Payer Act.  These proposals include, among many others, requirements for CMS to produce information more quickly, and addressing the absence of an appeal procedure for an unreasonable MSA determination from CMS.  We monitor all bills that make any significant advances in the federal legislature, and update our readers accordingly.

Our Team

Attorneys Robert Smith, Dan Simones and Tim McNally hold Medicare Set‑Aside Consultant Certified (MSCC) credentials.  In addition to lawyers working on Medicare issues, we have a full staff trained in all aspects of Medicare Secondary Payer Law compliance.

Innovative allocations: From allocations in settlements that do not meet CMS Review Thresholds to formal WCMSA submissions. Rather than develop a life‑care plan, we utilize legal analysis and challenge CMS policy to ensure that CMS approves the most conservative WCMSA that adequately considers Medicare’s interests.  We have a proven track record of allocations that protect our clients from future inquiry by Medicare, while saving them thousands of dollars on unnecessary and/or unrelated future medical costs.

Legal Review of Set‑Aside Estimates Prior to Submission

Conditional Payment Resolution

Legal Issues Related to Section 111

Civil Litigation/Case Resolution and Medicare