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Satisfying Medicare Requirements in Personal Injury Claims.

By: Vicki M. Smith

Medicare law creates pitfalls for claimants, lawyers, and insurers handling claims involving personal injuries. Those pitfalls may turn into liability for significant fines if the parties fail to follow the Medicare requirements. Beginning January 1, 2011, personal injury claims from Medicare-eligible claimants are required to be reported to Medicare. Further, Medicare is entitled to 100% recovery of the benefits it paid during treatment for the injury and will seek reimbursement from any settlement or payment for the claim. Failure to comply with the reporting or reimbursement requirements can result in a $1,000 daily fine per claimant, interest, and double damages. This article discusses the new Medicare law, its role in personal injury litigation, and Bodyfelt Mount LLP's plan to assist our clients and insurers to comply with the law. For further information, see 42 U.S.C. 1395y, 42 CFR § 411.21 et seq. (2009), and the webpage for the Centers for Medicare and Medicaid Services (CMS), the federal agency that oversees Medicare, at http://www.cms.hhs.gov/MandatoryInsRep/.

What claims must be reported?

The Medicare law affects only claims by those who are Medicare-eligible or reasonably expected to be Medicare-eligible within 30 months. It is important to verify whether a claimant received benefits from Medicare beyond just looking at the claimant's age because age is not the only factor to determine whether a claimant is Medicare-eligible. Individuals who are at least 65 years old are eligible for Medicare. An individual who is reasonably expected to be eligible, within the meaning of the reporting requirements, may be 62½ years old. Also eligible are people with certain disabilities who qualify for Social Security Disability Insurance benefits, who have permanent kidney failure and require kidney dialysis or transplant, or who have Amyotrophic Lateral Sclerosis (Lou Gehrig's disease). A claimant must also be a citizen of the United States or a legal permanent resident in order to be eligible for Medicare.

To determine whether a claimant is a Medicare beneficiary, a reporting entity should submit a query to the Centers for Medicare and Medicaid Services through its website. The query must include the claimant's name, social security number, date of birth, Medicare Health Insurance Claim Number, and gender. The CMS has 14 days to respond to the query.

Only claims involving personal injury must be reported to Medicare. Those claims may arise in personal injury actions, toxic tort actions, or employment claims involving medical expenses. There are limited exceptions to the types of claims that must be reported. Claims arising out of exposure to a substance that occurred and ended before December 5, 1980 are excluded from the reporting requirement. Also, there are minimum reporting thresholds that must be met before payments to a claimant need be reported. The thresholds decrease with time. In 2011, the total amount of payments to a claimant of $5,000 or more must be reported. In 2012, all payments totaling at least $2,000 must be reported, and that limit drops to $600 in 2013. In 2014, all total payments to a claimant must be reported.

While the first settlement reporting date is January 1, 2011, reporting entities will be required to report settlements that occur on and after October 1, 2010, as well as cases that are initiated on or after January 1, 2010 where the reporting entity assumes ongoing responsibility to pay medical expenses (these latter cases generally involve workers' compensation claims).

Who must report?

Any entity that makes a payment to a Medicare beneficiary on a settlement, judgment, award, or of items or services included in a personal injury claim must report the claim and may be liable for Medicare's reimbursement. These entities may include insurers, self-insured entities, certain categories of insured entities, and employers administrating workers' compensation plans. The Medicare law's definition of a self-insured entity differs from the definition that is commonly used in litigation. Medicare considers any "entity that engages in a business, trade or profession shall be deemed to have a self-insured plan if it carries its own risk (whether by a failure to obtain insurance, or otherwise) in whole or in part." 42 U.S.C. 1395y(b)(2)(A).

What to report and when?

If a claimant is entitled to Medicare benefits, the reporting entity must report information about the claim and claimant to Medicare once the claim is resolved. The parties have 60 days after the claim is resolved to reimburse Medicare. There are many categories of information about a claimant that needs to be reported to Medicare. A reporting entity should visit the CMS website to complete the report and electronically submit it to the CMS. Failure to report can result in a $1,000 per day fine per claimant.

If payment is made to a claimant and Medicare is not reimbursed, Medicare can bring a legal action against the claimant and the reporting entity. The reporting entity may be held liable to reimburse Medicare even though it has already paid the claimant for the same expenses that Medicare seeks reimbursement.

Reporting is required even if there is no admission of liability, as is the case with most settlement releases. A disclaimer of liability in a release signed by the claimant does not satisfy the reporting requirement. The law requires reporting if medical expenses are claimed or released. Therefore, the parties must still fulfill the reporting requirements even if they agree that a settlement or payment does not include paying medical expenses.

How does the law affect handling and settling claims?

Changes to the law place the burden of determining whether a claimant is Medicare-eligible on the reporting entity. Although the reporting entity can ask the claimant directly, the reporting entity cannot rely on the claimant's response. To avoid fines and damages, a reporting entity should verify with the CMS whether a claimant is a Medicare beneficiary and continue to check the claimant's status with Medicare. The reporting entity has an ongoing duty to ensure that a claimant does not become a Medicare beneficiary before resolving a claim and a reporting entity can resubmit the claimant's information to CMS once a month. When a claimant is a Medicare beneficiary, the reporting entity should report payments promptly to Medicare.

Settling cases with Medicare beneficiaries will be more difficult. Medicare is looking for 100% reimbursement of the benefits it paid, regardless of a claimant's comparative fault. That puts the claimant in a difficult position because the claimant cannot expect to recover all damages due to his comparative fault and yet the claimant will seek a settlement amount that will fully reimburse Medicare, pay attorney fees, and leave some amount for the claimant.

Also, Medicare will generally not issue a final demand letter to a claimant setting forth the claimant's payment responsibility until it receives notice that the claim is resolved. However, the claimant can learn an approximation for Medicare's lien on the CMS website. Another pitfall for the claimant is when he asserts that some of the Medicare benefits paid do not relate to the injury for which the claimant received payment from the reporting entity. Negotiating with Medicare will take time.

To finalize the settlement and to protect itself, the reporting entity needs to know precisely how the settlement funds will be disbursed and ensure Medicare's reimbursement. It is imperative that these discussions take place during settlement negotiations and are memorialized in settlement documents. A reporting entity may try to negotiate that the settlement check be issued with Medicare as a co-payee along with the claimant and the claimant's attorney. Claimant's counsel will likely object to this because, again, negotiating and dealing with Medicare can take a significant amount of time. Alternatively, the parties may agree to enter into an enforceable settlement, report that settlement to Medicare, and defer payment on the settlement until the claimant receives Medicare's final demand letter. Then, the reporting entity can issue a check to Medicare directly to satisfy its reimbursement and a separate check to the claimant and the claimant's attorney.

A third option is to set aside funds sufficient to satisfy Medicare's reimbursement in an escrow account. Once the claimant receives the final demand letter, the escrow account will pay Medicare and provide any remaining funds to the claimant. The settlement documents should specifically state who is responsible to satisfy any amount of the Medicare lien that is not satisfied by insufficient funds in the escrow account. The reporting entity needs to ensure it is entitled to a copy of the escrow's payment to Medicare and a copy of the letter from Medicare confirming its lien has been satisfied.

Is a Medicare Set-Aside necessary?

A claimant's future medical needs relating to the claim must also be discussed during settlement negotiations because the parties need to prove to Medicare that Medicare's interest was considered in the settlement. The surest way of showing the parties considered Medicare's interest is by setting up a Medicare Set-Aside ("MSA"). A MSA is a pre-determined amount of money set aside to be used for a claimant's future injury-related medical and drug needs. MSAs are not yet required for liability cases, however, they are required for worker's compensation claims and it may be a matter of time before they are required for liability matters too.

If the claimant and reporting entity decide that a MSA is not necessary for a particular claim but there will be future medical expenses arising out of that claim, the parties should include language in the settlement documents identifying a specific amount of settlement funds to be set aside for paying future injury-related medical expenses. The settlement documents should also clarify the parties' agreement that the claimant is the primary payer of the set aside amount before Medicare has to start paying medical bills. The amount set aside for future medical expenses should be a reasoned amount and may be based on a life care plan, medical cost calculation, or other justifiable calculation.

In summary, reporting entities should have some system in place to confirm whether personal injury claimants are Medicare eligible or are Medicare recipients through the CMS. Settlement negotiations with Medicare recipients should include a discussion of how to reimburse Medicare and specifically identify the funds to be set aside to repay Medicare. Finally, promptly report any payments to a Medicare recipient to avoid any fines.

What Bodyfelt Mount LLP is doing to assist with compliance.

To help determine whether a claimant is a Medicare beneficiary, Bodyfelt Mount LLP will inquire as to a claimant's social security number, birth date, Medicare Health Insurance Claim Number, any information regarding any payments or benefits at any time by Medicare, whether the claimant has a history of kidney disease, and whether the claimant has ever received or applied for Social Security Disability Benefits. These inquiries will be made during discovery requests so as to provide the earliest notice possible to our clients. We will also stringently review a claimant's medical bills and invoices to watch for any indication that Medicare paid those bills.

We will discuss the Medicare issues raised in this article with our insurer and self-insured clients. When we have some indication that a claimant may be Medicare-eligible or a Medicare recipient, we will immediately bring that information to the attention of our clients and follow up with our clients to determine the result of the CMS queries. Upon resolution of a claim, we will also remind our clients to report the claim to Medicare.

At the beginning of settlement discussions, we will inquire as to whether the claimant is willing to sign a consent form allowing us to obtain the conditional payment estimate from the CMS. If so, we will obtain the conditional payment estimate. Also during settlement discussions, we will explicitly discuss with the claimant's counsel how Medicare will be reimbursed, whether any amount should be set aside to pay future medical expenses, and that the claimant is responsible for any outstanding amounts owed to Medicare. When we reach an agreement with the claimant's counsel about reimbursement and set-aside amounts, we will include that information in the final settlement agreement or release.

The settlement agreement or release will also indicate that any disbursement of settlements funds is conditioned on satisfying Medicare's lien. We will further include in the settlement agreement or release an indemnity provision requiring the claimant to indemnify the released parties (our clients) for any failure to satisfy Medicare's lien. Although, we should note this latter provision provides no protection against Medicare's remedies but may provide a cause of action against the claimant.

 

Satisfying Medicare Requirements in Personal Injury Claims pdf.

“Proof of Loss” Expanded to Include Verbal Notice of Loss

By: Heather Bowman

The Oregon Supreme Court’s interpretation of “proof of loss” broadened dramatically with the decision in Parks v. Farmers Ins. Co. of Oregon, 347 Or 374, ___ P3d ____ (December 24, 2009) (available at http://www.publications.ojd.state.or.us/S055403.htm).  In Parks, the court held that telephone conversations between insureds and their agent constituted a proof of loss for purposes of starting the six month period for claiming attorney fees pursuant to ORS 742.061.

ORS 742.061 permits an insured to recover attorney fees if the insured files suit to recover under an insurance policy and the insured’s recovery exceeds the amount of any tender by the insurer “if settlement is not made within six months from the date proof of loss is filed with the insurer.” An insured can also recover attorney fees under this statute when seeking personal injury protection (PIP) benefits if the insurer has not, within six months of the date of filing a proof of loss, accepted coverage and consented to submit the case to binding arbitration on the issue of benefits due the insured. The statute also allows attorney fees to an insured seeking uninsured or underinsured motorist (UM/UIM) benefits if the insurer has not, within six months of the date of filing a proof of loss, accepted coverage and consented to submit the case to binding arbitration on the issues of the liability of the insured and the damages due the insured.

In Parks, the insureds contacted a Farmers agent twice by telephone to report damage to a rental home caused by a methamphetamine lab. Ms. Parks initially called to ask if Farmers could assist with the costs of decontamination of the property. Ms. Parks told the agent about a police seizure and quarantine of the house, the address of the house, and contact information for the decontamination contractor hired to repair the house. The Farmers agent instructed Ms. Parks to call back if she got more information. A month later, Mr. Parks called the same agent and reported his current repair costs and future estimates. The agent did not refer Mr. Parks to the Farmers’ claims hotline or tell him how to file a claim. There was no further contact between insurer and insured until almost one month later, when the Parkses filed suit against Farmers for breach of their duties under the insurance policy. The case settled just short of six months from the date the Parkses filed suit and the Parkses filed a petition for attorney fees pursuant to ORS 742.061, arguing that the dates of the telephone calls with the Farmers agent served as filing proof of loss.

The term “proof of loss” is not defined under the statutory scheme. Farmers argued that the term requires a writing, noting particularly that ORS 742.053 requires an insurer to provide forms of proof of loss at an insured’s written request. The court instead looked to the “functional interpretation” of the term. In previous decisions, the court held that the purpose of proof of loss was to permit an insurer to estimate its obligations, taking into account an insurer’s obligation to investigate and clarify uncertain claims. Proof of loss can be “any event or submission which places the insurer on notice.” In Parks, the court held that the insureds' telephone calls to the agent were sufficient to provide Farmers with adequate notice to allow it to ascertain its obligations regarding the claim.

Although Parks does not specifically examine proof of loss in the PIP or UM/UIM context, the holding will apply in that context. Accordingly, in first party, PIP, or UM/UIM claims, insurers should treat the initial contact from an insured reporting a claim as starting the six month time period for attorney fees. If settlement is desired, an offer should be made within six months of initial contact from the insured to avoid the risk of attorney fees. Given the court’s recent trend favoring plaintiffs in these disputes, treating an insured’s initial contact regarding a claim as the proof of loss would not be overly cautious.

Medical Bills Written Off by Medicare Are Still Recoverable by Plaintiff

In White v. Jubitz Corporation, 347 Or 212, ___ P3d ___ (October 15, 2009), the Oregon Supreme Court answered the question whether plaintiff may recover from defendant the total amount of the medical providers’ reasonable charges or whether his recovery must be limited to the amount that Medicare paid to those providers. The court held that plaintiff is entitled to recover the full amount.

In this case, plaintiff was injured when the stool he was sitting on collapsed. Plaintiff sought medical treatment and incurred expenses of $38,977. However, plaintiff qualified for Medicare. Medicare paid plaintiff’s providers $13,400 and, according to federal law, the providers accepted that sum in full for their services and wrote off the remaining balance.

At trial, the jury awarded plaintiff $37,600 in economic damages. The defendant then moved for a reduction of the verdict because plaintiff only had to reimburse Medicare what it paid — $13,600 — and owed nothing further to his medical providers. In essence, the defense argued, plaintiff was receiving a windfall. The trial court, and ultimately the Oregon Court of Appeals and Oregon Supreme Court, held that plaintiff was entitled to receive the full amount incurred despite the write off. The reasoning behind this decision was based upon an Oregon statute, ORS 31.580(1)(d) — the so-called collateral source rule — which prevents a deduction for “federal Social Security benefits.”

The court explained that ORS 31.580 applies only to civil actions where a party is awarded damages for bodily injury or death. In those actions, the statute permits, but does not require, a trial court to deduct from a plaintiff’s award of damages those benefits that a plaintiff receives from a third party. However, the statute also imposes limitations and does not allow any deduction for four sets of benefits: (1) benefits that the plaintiff is obligated to repay; (2) life insurance or other death benefits; (3) insurance benefits for which the injured person paid premiums; and (4) retirement, disability and pension plan benefits, and federal Social Security benefits. In the present case, the court determined that plaintiff would have been entitled to recover and retain the jury award of $37,600 if he had not been an eligible Medicare beneficiary, and his status as such does not permit a different result.

One justice dissented, arguing that neither plaintiff nor Medicare incurred more medical costs than the Medicare statutes permitted. As a matter of state law, the only economic damages arising from plaintiff’s injury were the medical costs for which plaintiff was liable and for which Medicare reimbursed his providers. As such, the dissenting justice would hold that plaintiff cannot recover economic damages for medical costs for which no one was ever liable.

Equitable Doctrine of Judicial Estoppel Applied

 

Under Oregon law, the equitable doctrine of judicial estoppel may preclude a party from taking a position in one judicial proceeding that is inconsistent with the position that the same party successfully asserted in a different judicial proceeding. The application of judicial estoppel depends on the existence of three predicates: (1) a benefit; (2) obtained in a different judicial proceeding; (3) by means of asserting a position inconsistent with a position asserted in a later judicial proceeding.

In Hallberg v. City of Portland, 230 Or App 355, 215 P3d 866 (August 19, 2009), the Oregon Court of Appeals affirmed the trial court’s decision in granting summary judgment for the City of Portland based upon the doctrine of judicial estoppel. There, Hallberg had been employed by the City as a housing inspector. After inspecting residential real property and citing the homeowner with various violations, the house went into foreclosure and Hallberg himself purchased it. The homeowner sued Hallberg. Hallberg requested that the City defend and indemnify him, but the City rejected the tender on the basis that the lawsuit did not arise out of an act or omission in the performance of Hallberg’s duties and that any work-related conduct associated with Hallberg’s purchase of the house amounted to malfeasance in office. The City ultimately fired Hallberg for his actions. Hallberg then asserted a cross-claim against the City for indemnity. In the meantime, Hallberg moved for summary judgment on the homeowner’s claims against him, arguing that his [Hallberg’s] offer to buy the house was not made in the course of his job. The court agreed with Hallberg’s motion and granted it, dismissing all claims against him with prejudice. The homeowner appealed and the Ninth Circuit affirmed. Subsequently, Hallberg sued the City to recover his expenses in defending the homeowner’s claims. The City moved for summary judgment arguing that Hallberg’s claim for indemnity must fail because Hallberg’s conduct that led to the homeowner’s claim did not occur within the performance of his employment. The trial court agreed and granted summary judgment in favor of the City. In response, Hallberg appealed. Hallberg asserted that there were issues of fact about whether the circumstances that caused the homeowner’s alleged damages were traceable to Hallberg’s actions within the scope of his employment. After analyzing the doctrine of judicial estoppel, the Oregon Court of Appeals found that all the necessary predicates were present and affirmed the trial court’s judgment for the City.

What Amount of Evidence is Sufficient to Survive a Motion for Directed Verdict?

The Oregon Court of Appeals addressed this issue in the employment context in Herbert v. Altimeter, Inc., 230 Or App 715, 218 P3d 542 (September 9, 2009). In this case, plaintiff had been employed as a truck driver. After experiencing various physical symptoms during a long delivery trip, plaintiff saw her physician who diagnosed carbon monoxide poisoning. Plaintiff attributed the exposure to an exhaust leak in her truck. Plaintiff brought the issue to her employer’s attention and was terminated within a few days. Plaintiff filed a complaint against her former employer alleging four claims: retaliation for complaining about unsafe working conditions, retaliation for invoking the workers’ compensation system, retaliation for requesting a reasonable accommodation under the disability discrimination statutes, and perceived disability discrimination. The case went to trial and the trial court granted defendant’s motion for directed verdict at the close of plaintiff’s case-in-chief, and dismissed plaintiff’s complaint. Plaintiff appealed, asserting that the jury could reasonably have found in her favor on all four counts based upon the evidence presented. The Court of Appeals agreed and reversed and remanded for further proceedings.

The court reminded the parties that to prove that an employee was terminated on unlawfully discriminatory grounds, it is sufficient in Oregon for the plaintiff to show that the unlawful motive was a substantial and impermissible factor in the discharge decision. Plaintiff’s prima facie burden in an employment discrimination case is so minimal that it is virtually impervious to a motion based on evidentiary sufficiency. With this backdrop, the court examined the evidence presented in the context of each of the four claims. On the OSHA retaliation claim, the court found sufficient circumstantial evidence that defendant had an impermissible retaliatory motive because she was terminated just days after she complained about an unsafe working condition that was affecting her health. Additionally, there was evidence that the employer was unhappy about the mounting repair costs to her truck. This was sufficient, according to the court, to avoid a directed verdict on this claim. Note that there is no prerequisite here for plaintiff to actually make a complaint to OSHA.

Similarly, with regard to plaintiff’s claim of workers’ compensation retaliation, the court found sufficient evidence that plaintiff invoked the workers’ compensation system even though she did not file a workers’ compensation claim. It was sufficient that plaintiff put her employer on notice that she suffered an on-the-job injury. The court found that a jury could reasonably infer that the employer perceived that plaintiff would report an injury.

On plaintiff’s claim of retaliation for requesting a reasonable accommodation for a disability, the court found that plaintiff’s request to drive a different truck constituted a request for a reasonable accommodation under the disability statutes. The court further found that whether plaintiff had a disability or not was beside the point because the statute protects from retaliation an employee who seeks benefits or accommodations even if the employee proves not to be disabled. Accordingly, the court rejected the employer’s contention that plaintiff’s lack of disability defeated this claim.

Finally, the court examined plaintiff’s claim of perceived disability discrimination and found sufficient evidence that the employer regarded plaintiff as substantially impaired in the major life activity of employment. As a result, the court concluded that a jury could reasonably draw inferences from the evidence to defeat the motions for directed verdict on all four claims. The case was reversed and remanded.

Around the Water Cooler

Join us in welcoming Diana Fedoroff, our newest attorney. Diana graduated from Lewis & Clark Law School in 2008. During law school, Diana clerked for the Oregon Department of Justice in the Natural Resources Section and was the Editor in Chief of the Lewis & Clark Animal Law Review. Before joining Bodyfelt Mount, Diana practiced at another local firm, where she focused on insurance defense and environmental litigation.

Molly Jo Mullen has been appointed to the Multnomah County Arbitration Commission. Ms. Mullen, along with Richard Lee, Deanna Wray, and Pam Stendahl, serves as an arbitrator on the Multnomah County Circuit Court panel. Ms. Mullen also serves as an arbitrator for Columbia and Washington County Circuit Courts. Additionally, Mr. Lee serves as an arbitrator on the Clark County Superior Court panel.

Deanna Wray participated in a panel presen-tation on Electronic Discovery at the Oregon Association of Defense Counsel (“OADC”) Fall Seminar on November 6, 2009.

Vicki Smith will be serving as Chair of the OADC New Lawyers Practice Group.

Molly Jo Mullen has been nominated to serve as a director for the OADC.

Ms. Mullen was also a speaker at the October 30, 2009 CLE sponsored by OLI entitled “Tips and Traps for the Civil Litigator.”

Bodyfelt Mount has been “Recycle at Work Certified” by the City of Portland Bureau of Planning and Sustainability. This certification recognizes the firm’s efforts in its recycling practices and reduction of waste.

Bodyfelt Mount is pleased to once again participate in the KGW Holiday Toy Drive.