Resolving ERISA Liens and Reimbursement Claims in...
Transcript of Resolving ERISA Liens and Reimbursement Claims in...
The audio portion of the conference may be accessed via the telephone or by using your computer's
speakers. Please refer to the instructions emailed to registrants for additional information. If you
have any questions, please contact Customer Service at 1-800-926-7926 ext. 10.
Presenting a live 90-minute webinar with interactive Q&A
Resolving ERISA Liens and Reimbursement
Claims in Personal Injury Cases Maximizing Settlement Awards by Narrowing Claims and Challenging
Unreasonable Charges; Effect of Montanile on ERISA Plan Rights
Today’s faculty features:
1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific
WEDNESDAY, SEPTEMBER 7, 2016
Franklin P. Solomon, Founding Partner, Solomon Law Firm, Cherry Hill, N.J.
David L. Place, JD, Vice President, Director of Lien Resolution Services,
Synergy Settlement Services, Culpeper, Va.
Tips for Optimal Quality
Sound Quality
If you are listening via your computer speakers, please note that the quality
of your sound will vary depending on the speed and quality of your internet
connection.
If the sound quality is not satisfactory, you may listen via the phone: dial
1-866-755-4350 and enter your PIN when prompted. Otherwise, please
send us a chat or e-mail [email protected] immediately so we can
address the problem.
If you dialed in and have any difficulties during the call, press *0 for assistance.
Viewing Quality
To maximize your screen, press the F11 key on your keyboard. To exit full screen,
press the F11 key again.
FOR LIVE EVENT ONLY
Continuing Education Credits
In order for us to process your continuing education credit, you must confirm your
participation in this webinar by completing and submitting the Attendance
Affirmation/Evaluation after the webinar.
A link to the Attendance Affirmation/Evaluation will be in the thank you email
that you will receive immediately following the program.
For additional information about continuing education, call us at 1-800-926-7926
ext. 35.
FOR LIVE EVENT ONLY
Program Materials
If you have not printed the conference materials for this program, please
complete the following steps:
• Click on the ^ symbol next to “Conference Materials” in the middle of the left-
hand column on your screen.
• Click on the tab labeled “Handouts” that appears, and there you will see a
PDF of the slides for today's program.
• Double click on the PDF and a separate page will open.
• Print the slides by clicking on the printer icon.
FOR LIVE EVENT ONLY
RESOLVING ERISA LIENS
AND REIMBURSEMENT
CLAIMS IN PERSONAL
INJURY CASES
STRAFFORD WEBINARS
SEPTEMBER 7, 2016
Franklin P. Solomon • Cherry Hill, NJ
Employee Retirement Income Security Act of 1974
ERISA 6
ERISA Liens?
THERE IS NO SUCH THING AS AN “ERISA LIEN”
• ERISA is silent on liens and creates no
reimbursement rights for employee benefits plans
• Almost every health plan issued as an employee
benefit is subject to ERISA – but some are not.
7
ERISA Coverage
ERISA applies to:
any employee benefit plan if it is established or maintained--
(1) by any employer engaged in commerce or in any industry or activity affecting commerce; or
(2) by any employee organization or organizations representing employees engaged in commerce or in any industry or activity affecting commerce; or
(3) by both.
29 USC Sec. 1003(a)
8
ERISA Exclusions
ERISA specifically excludes from coverage:
any employee benefit plan if--
(1) such plan is a governmental plan ....
(2) such plan is a church plan ....
(3) such plan is maintained solely for the purpose of complying with applicable workmen's compensation laws or unemployment compensation or disability insurance laws;
(4) such plan is maintained outside of the United States primarily for the benefit of persons substantially all of whom are nonresident aliens; or
(5) such plan is an excess benefit plan and is unfunded.
29 USC Sec. 1003(b)
9
“Governmental Plan”
Federal government (e.g., FEHBA, Tri-Care)
State & municipal government
Railroad Retirement Act
Indian tribal government
where substantially all work is in essential governmental
functions, not in commercial activities
29 USC Sec. 1002 (32)
10
“Church Plan”
“Church plan” is a plan maintained by an organization to provide employee benefits if such organization is controlled by or associated with a church.
“Employee of a church” includes an employee of an organization which is exempt from tax under section 501 of the IRC and which is controlled by or associated with a church.
29 USC Sec. 1002 (33)
May include hospitals, nursing homes, schools, colleges, etc.
11
ERISA PREEMPTION
EXPRESS PREEMPTION: ERISA §514
COMPLETE PREEMPTION: ERISA §502
12
ERISA § 514(a): Preemption clause
... [T]he provisions of this subchapter and
subchapter III of this chapter shall supersede any
and all State laws insofar as they may now or
hereafter relate to any employee benefit plan ...
13
ERISA § 514(b)(A): “Savings” clause
... [N]othing in this subchapter shall be construed to
exempt or relieve any person from any law of any
State which regulates insurance, banking, or
securities
14
ERISA § 514(b)(B): “Deemer” clause
Neither an employee benefit plan ... nor any trust established under such a plan, shall be deemed to be an insurance company or other insurer, bank, trust company, or investment company or to be engaged in the business of insurance or banking for purposes of any law of any State purporting to regulate insurance companies, insurance contracts, banks, trust companies, or investment companies.
15
FMC Corp. v. Holliday, 498 U.S. 52 (1990)
Insured plans indirectly regulated by state law regulating the plans’ insurers
Self-funded plans exempt from state insurance regulation; not altered by state law
What’s a self-funded plan?
Look at each plan component
Stop-loss insurance?
16
ERISA § 502: Civil enforcement
A civil action may be brought by:
502(a)(1)(B): a participant or beneficiary to recover benefits due under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify rights to future benefits under the terms of the plan;
502(a)(3): by a participant, beneficiary, or fiduciary (A) to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan
17
Actions Under ERISA 502(a)(1)(b)
Concurrent federal and state jurisdiction
Allows action only by a plan participant or
beneficiary
“to recover benefits due to him under the terms of
his plan, to enforce his rights under the terms of the
plan, or to clarify his rights to future benefits under
the terms of the plan”
18
PLAN SUBROGATION &
REIMBURSEMENT RIGHTS
19
The Insured Plan
Most states have adopted anti-subrogation rules or doctrines precluding reimbursement
Extent of prohibitions varies state to state
MT constitutional protection
NJ prohibited as a function of collateral source statute
NY statute prohibits claims by insurers
PA presumes settlement is full recovery
Many states allow for contracting out of anti-subro doctrines
A few states have not adopted made-whole or other anti-subrogation law
20
The Self-Funded Plan
Form 5500 and Schedule A
Plan Document v. SPD
Cigna v. Amara, 563 U.S. ___, 131 S.Ct. 1866 (2011)
Subrogation v. Reimbursement
Interpreting the contract clause
Plan year and date of injury
Conditional language
Abrogating the made-whole doctrine
6th, 9th & 11th Circuits require explicit language
21
Actions Under ERISA 502(a)(3)
Federal jurisdiction is exclusive
Claims by a participant, beneficiary or fiduciary
Allows only “appropriate equitable relief” to enforce plan terms
US Airways v. McCutchen, 133 S.Ct. 1537 (2013)
Unjust enrichment not a defense to plan contract term
“Background equitable rules” apply if not expressly contradicted by contract term
Made-whole doctrine
Common-fund doctrine
22
“Appropriate equitable relief” 23
Montanile v. Bd. of Trustees, Nat’l. Elevator Industry
Health Benefit Plan, 577 U.S. ___ (2016)
Equitable claim and equitable relief
Equitable liens enforceable only against a specifically
identified fund in the defendant’s possession
Expenditure of identifiable fund on non-traceable items
destroys equitable lien.
What public policy is promoted?
What are the practical consequences?
Requesting Plan Documents
Request must be to Plan Administrator/Sponsor
Statutory responsibility to provide within 30 days
$110/day civil penalty available for non-compliance
29 U.S.C. § 1024(b)(4); 29 CFR § 2575.502c-3
24
What to request?
Plan Document (written instrument pursuant to 29 U.S.C. § 1102) in effect on date of injury;
Any document amending, supplementing, or otherwise modifying the Plan Document;
Summary Plan Description and employee benefits booklet in effect at the time of injury
All documents issued subsequently during any year in which benefits were paid
SPD Wrap Documents
Bargaining Agreement, Trust Agreement, Contract etc. under which Health Plan is established
Trust Agreement or other document establishing funding for the Plan
Annual Return/Report (IRS/DOL Form 5500), including all attached Financial Schedules
Administrative Services Agreement with any Third-Party Administrator for the Plan
An affidavit from the Plan Administrator attesting to self-funded status of the Plan
Complete statement of benefits paid to or on behalf of claimant/beneficiary
Specific plan component(s) paying benefits (e.g., health, dental, vision, AD&D, disability, etc.)
“Stop-loss” or excess/re-insurance coverage (insurer, policy numbers and attachment points)
25
SPD as Plan Document?
Named fiduciary/ies with authority to control and manage operation and administration of the plan
Procedure for establishing and carrying out a funding policy and method
Procedure for allocation of responsibilities for the operation and administration of the plan
Procedure for amending the plan, and for identifying persons who have authority to amend
Basis on which payments are made to and from the plan
29 USC § 1102 - ERISA § 402
26
Issues
Can SPD function as a § 402 Plan Document?
Can SPD include enforceable “terms of the plan”?
Can a Plan Document delegate authority to claims
administrator or SPD?
Do plan amendments affect subro/reimbursement?
27
Third-Party Recovery Clause
subrogation right
reimbursement right
first-priority claim
first-dollar recovery
lien
constructive trust
identified fund/amount
abrogate made-whole
abrogate common fund
conditional language
28
Thank You
FRANKLIN SOLOMON
SOLOMON LAW FIRM, LLC
801 Kings Highway North
Cherry Hill, NJ 08034
856-910-4311
29
Dave Place, J.D.
Vice President, Synergy Settlement Services
Director Synergy Lien Resolution Services
ERISA Tips, Medicare Advantage Nightmare, and
How To Obtain Medicare Refunds
ERISA: Practice Tips
31
Get What You Are Owed! • 29 U.S.C §1024(b)(4) provides list of what the ERISA Plan Administrator must
provide upon request.
• Copy of the latest updated Summary Plan Description (SPD)
• The latest annual report
• Any terminal report
• The bargaining agreement
• The trust agreement, contract, or other instruments under which the plan is established or operated.
• Administrative Services Agreement was subject to the ERISA disclosure requirements as it is a document “that restrict[s] or govern[s] a plan's operation.” Shaver v. Operating Eng'rs Local 428 Pension Trust Fund, 332 F.3d 1198, 1202 (9th Cir. 2003), Hughes Salaried Retirees Action Comm. v. Administrator of the Hughes Non-Bargaining Retirement Plan, 72 F.3d 686, 690 (9th Cir. 1995); Grant v. Eaton, S.D. Miss, Civil Action No. 3:10CV164TSL-FKB; Fisher v. Metropolitan Life Ins. Co., 895 F.2d 1073, 1077 (5th Cir. 1990) Heffner v. Blue Cross and Blue Shield of Alabama, Inc., 443 F.3d 1330, 1343 (11th Cir. 2006).
32
Ask the Correct Party 29 U.S.C §1024(b)(4) is a requirement placed upon the “plan administrator”.
Named on administrative page in SPD. If not named then default is plan
sponsor who will be employer or possibly a union.
The Third Party Claims Administrator (TPA) is NOT the “plan administrator”.
The recovery vendor or agent is NOT the “plan administrator”.
Rawlings, Trover, Optum, Xerox, etc. will NEVER be the “plan administrator”.
33
Don’t Take Yes for an Answer!
• Often the plan administrator is unsophisticated and relies on their TPA or recovery vendors to handle these matters.
• The TPA or recovery vendor may provide some of the required documents, but they almost never provide all that is required by 29 U.S.C §1024(b)(4).
• Documents supplied by bill collectors are entirely self-serving, and
there is no penalty for providing misleading or inaccurate
information to attorneys.
• Accept documents provided, most often the SPD and claims summary.
• The demand for documents itself is burdensome to the plan administrator, their TPA and recovery vendors. Do not let them off the hook.
• They have thirty (30) days to comply or face penalties.
34
Track Penalties
• 29 U.S.C. § 1132(c)(1)(b) • Establish $100.00 per day penalty for failure to comply
• 29 CFR § 2575.502c-1 • Allows for this penalty to be increased to $110.00 per day
• Harris-Frye v. United of Omaha, (E.D. Tenn. Sept. 21, 2015) - Penalty $61,380.00
• Leister v. Dovetail, Inc., No. 05-2115, (C. Dis. Oct. 22, 2009) – Penalty $377,600.00
• Huss v. IBM Medical & Dental Plan, No. 07 C 7028, (N.D Dis.Ill. Nov. 4, 2009)–Penalty $11,440.00
• Law v. Ernst & Young, 956 F.2d 364, 375 (1st Cir. 1992)(affirming penalty of $100 per day)
• Gorini, 94 Fed. Appx. 913 (3rd Cir. 2004)(affirming an award totaling $160,780)
• Kollman v. Hewitt Assoc., 2005 WL 2746659 (E.D. Pa. 2005)($100 per day)
• Freitag v. Pan Am. World Airways, Inc., 702 F.Supp. 128, 132 (E.D. Vir. 1988)($100 per day)
• Tait v. Barbknecht & Tait Profit Sharing Plan, 997 F.Supp. 763 (N.D. Tex. 1998)($100 per day)
• Gatlin v. Nat. Healthcare Corp., 16 Fed. Appx. 283 (6th Cir. 2001)($100 per day)
• Kreuger Intl v. Blank, 225 F.3d 806, 811 (7th Cir. 2000)(affirming $100 per day)
• Brown v. Aventis Pharma., 342 F.3d 822, 825-826 (8th Cir. 2003)(affirming maximum penalty)
• Koegan v. Towers, Perrin, Forster & Crosby, 2003 WL 21058167 (D. Minn. 2003)($100 per day)
• Conger v. Univ. Marketing, Inc., 2000 WL 1818521 (D. Or. 2000)(($100 per day).
35
McCutchen –
The “common fund”
argument
36
“Common Fund” Abrogated?
U.S. Airways v. McCutchen
“[If] the plan is silent on the allocation of attorney’s fees, []in those circumstances, the common-
fund doctrine provides the appropriate default. In other words, if US Airways wished to depart
from the well-established common-fund rule, it had to draft its contract to say so …”
U.S. Airways v. McCutchen, 133 S. Ct. 1537, at 12 (2013)
In explaining why the lower courts should be so unwilling to find unclear plan language abrogating
this longstanding tradition in American jurisprudence the Court wrote:
“The rationale for the common-fund rule reinforces [the] conclusion [that] [t]hird-party recoveries
do not often come free: To get one, an insured must incur lawyer’s fees and expenses. Without
cost sharing, the insurer free rides on its beneficiary’s efforts—taking the fruits while contributing
nothing to the labor.”
U.S. Airways v. McCutchen, 133 S.Ct. 1537 (2013)
37
“Common Fund” Abrogated?
U.S. Airways v. McCutchen
Scalia’s dissent to McCutchen references the fact that at a lower court level all the parties
conceded that the Plan language addressed attorney fees.
“In their brief in opposition to the petition they conceded that, under the contract, ‘a
beneficiary is required to reimburse the Plan for any amounts it has paid out of any monies the
beneficiary recovers from a third-party, without any contribution to attorney’s fees and expenses.’”
U.S. Airways v. McCutchen, 133 S.Ct. 1537(2013) Scalia’s dissent citing Brief in Opposition 5
(emphasis added); See Brief for Petitioner 18, and n. 6; Brief for Respondents 29; Brief for
United State as Amicus Curiae 21.
38
“Common Fund” Abrogated?
The Remand!
“Under the common-fund doctrine ‘a litigant or a lawyer who recovers a common
fund for the benefit of persons other than himself or his client is entitled to a
reasonable attorney’s fee from the fund as a whole.’ US Airways, Inc. v. McCutchen,
133 S. Ct. at 1551 (quoting Boeing Co. v. Van Gemert, 444 U.S. 472, 478 (1980)). ‘[I]f . .
. injured persons could not charge legal costs against recoveries, people like
[McCutchen] would in the future have every reason’ to make different judgments
about bringing suit, ‘throwing on plans the burden and expense of collection.’
Accordingly, McCutchen is entitled to deduct his proportional fees and expenses
that resulted in the recovery of the $10,000.00.
U.S. Airways v. McCutchen, Case 2:08-cv-01593-DSC (emphasis added) (W.D. PA.
March 16, 2016).
39
Montanile
40
Turbo Charged Subrogation Montanile v. Bd. Of Trustees of the Nat. Elev., 577 U.S. ____ (2016)
•Holding
“We hold that, when a participant dissipates the whole settlement on nontraceable items, the fiduciary
cannot bring a suit to attach the participant’s general assets under §502(a)(3) because the suit is not one
for ‘appropriate equitable relief ’.”
•ERISA Plan moved too slow.
“The Board had sufficient notice of Montanile’s settlement to have taken various steps to preserve those
funds. Most notably, when negotiations broke down and Montanile’s lawyer expressed his intent to
disburse the remaining settlement funds to Montanile unless the plan objected within 14 days, the Board
could have—but did not—object. Moreover, the Board could have filed suit immediately, rather than
waiting half a year.”
•Turbo Subro!
“[T]he nature of the Board’s underlying remedy would have been equitable had it immediately sued to
enforce the lien against the settlement fund then in Montanile’s possession.”
41
Cooperate, don’t Capitulate! Montanile v. Bd. Of Trustees of the Nat. Elev., 577 U.S. ____ (2016)
• Montanile executed a “reaffirmation” of the reimbursement language contained with
the ERISA Master Plan.
• Counsel placed the ERISA Plan on notice, both of the ongoing claim and the
eventual settlement.
• Counsel attempted goodfaith negotiations with the ERISA Plan to resolve their
repayment demand.
• When negotiations reached an impasse counsel provided written notice to the
ERISA Plan that funds would be disburse.
• Counsel provided the ERISA Plan with fourteen (14) days to object to the disbursal.
• There is no indication that an objection by the ERISA Plan should be treated as
veto to disbursal. • “Even though the defendant’s conduct was wrongful, the plaintiff could not attach the
defendant’s general assets instead. … “[W]here a person wrongfully dispose[d] of the
property of another but the property cannot be traced into any product, the other . . . cannot
enforce a constructive trust or lien upon any part of the wrongdoer’s property.”.”
42
MAO Plans
43
Medicare Advantage
• Medicare Advantage Plans, sometimes called “Part C” or “MAO,” are offered by
private companies approved by Medicare. The MAO Plan provides all of Part A
(Hospital Insurance) and Part B (Medical Insurance) coverage. MAO Plans may offer
extra coverage, such as vision, hearing, dental, and/or health and wellness programs.
Medicare pays a fixed amount for your care every month to the companies offering
MAO Plans. These companies must follow rules set by Medicare.
• As Medicare Advantage plans are administered by private insurance companies many
of the difficulties that dealing with BCRC or CMS can entail are avoided. Though
these plans arguably have the same recovery rights as traditional Medicare, they are
often much more open to agreements based upon equity and fairness
• MAO Plans use the Medicare Secondary Payer Act as their recovery vehicle. That has
been a hot topic in lien resolution over the past few years but it seems the tide has
turned in favor of the plans after In re Avandia Marketing, Sales Practices and Product
Liability Litigation, 685 F.3d 353 (3d Cir. 2012), called Avandia II.
44
Medicare Advantage – Recovery Rights • The Medicare Secondary Payer Act (MSP) provides for a private cause of action when a
primary plan fails to reimburse a secondary plan for conditional payments it has made.
“there is established a private cause of action for damages (which shall be in an
amount double the amount otherwise provided) in the case of a primary plan which
fails to provide for primary payment (or appropriate reimbursement) in accordance
with paragraphs (1) and (2)(A).” - 42 U.S.C. § 1395y(b)(3)(A).
• 42 C.F.R. §422.108(f) arguably extends the private cause of action to Medicare
Advantage Plans.
“MAOs will exercise the same rights to recover from a primary plan, entity, or
individual that the Secretary exercises under the MSP regulations in subparts B
through D of part 411 of this chapter.”
• Additionally, CMS directors have issued memorandum asserting that:
“notwithstanding recent court decisions, CMS maintains that the existing MSP
regulations are legally valid and an integral part of Medicare Part C and D
programs.” - CMS, HHS Memorandum: Medicare Secondary Payment Subrogation
Rights (Dec. 5, 2011).
45
Medicare Advantage – Lien Resolution
• Medicare Advantage Plans will use the same statutory formula to calculate their repayment as CMS (Centers for Medicare and Medicaid Services).
• C.F.R. 411.37(c)
• Medicare payments are less than the judgment or settlement.
• Add (Attorney’s Fees) and (Costs) = Total Procurement Costs
• (Total Procurement Costs) / (Gross Settlement Amount) = Ratio
• Multiply (Lien Amount) by (Ratio) = Reduction Amount
• (Lien Amount) - (Reduction Amount) = Medicare Demand Amount
• C.F.R. 411.37(d)
• Medicare payments are equal to or exceed the judgment or settlement.
• Add (Attorney’s Fees) and (Costs) = Total Procurement Costs
• (Gross Settlement Amount) - (Total Procurement Costs) = Medicare Demand Amount
46
Medicare Advantage – Attorney Liability “In order to recover payment made under this subchapter for an item or service, the United
States may bring an action against any or all entities that are or were required or responsible … to
make payment with respect to the same item or service … under a primary plan. The United
States may … collect double damages against any such entity. In addition, the United States may
recover under this clause from any entity that has received payment from a primary plan or from
the proceeds of a primary plan’s payment to any entity.”
42 U.S.C. § 1395y(b)(2)(B)(iii)
“CMS has a right of action to recover its payments from any entity, including a beneficiary,
provider, supplier, physician, attorney, State agency or private insurer that has received a primary
payment.”
42 C.F.R. §411.24(g)
• United States v. Weinberg, 2002 U.S. Dist. LEXIS 12289 (E.E. Pa. July 1, 2002).
• United States v. Harris, 2009 U.S. Dist. LEXIS 23956 (N.D. W. Va. March 26, 2009) affirmed,
334 F. App’x 569 (4th Cir. 2009).
• Denekas v. Shalala, 943 F. Supp. 1073 (S.D. Iowa 1996).
47
Medicare Advantage - All Eyes on Florida • In Humana Medical Plan, Inc. v. Western Heritage Ins. Co., No. 15-
11436 (11th Cir. Aug. 8, 2016), the 11th Circuit Court of Appeals affirmed
the U.S. District Court for the Southern District of Florida granting of
Humana's Motion for Summary Judgment and held that Humana's right to
reimbursement for the conditional payments it made on behalf of plan
beneficiary under a Medicare Advantage Plan was enforceable. Additionally,
Humana was entitled to double damages pursuant to 42 U.S.C. §
1395y(b)(3)(A).
• Western Heritage had an obligation to independently reimburse Humana.
Because it didn’t, the Court rule that as a matter of law, Humana is entitled
to maintain a private cause of action for double damages pursuant to 42
U.S.C. § 1395y(b)(3)(A) and is therefore entitled to $38,310.82 in damages.
• The Eleventh Circuit said that placing the $19,155.41 in trust was not the
same as paying the MAO and that the damages “SHALL” be double.
48
Medicare Conditional Payments
Post Final Demand Options
• Appeal
• Financial Hardship Waiver
• Compromise
• “Best Interest of the Program” Waiver
49
2016 Current
Success Rate:
80%
To date, Synergy
has obtained:
$3,007,902.00
in refunds back
from Medicare
since we began
the service in
2014
2016 average
refund is
$27,946.22
50
Appeals APPEAL LEVEL TIME LIMIT FOR FILING
REQUEST
MONETARY THRESHOLD
TO BE MET
I. Redetermination 120 days from date of receipt of
the notice initial determination
None
2. Reconsideration 180 days from date of receipt of
the redetermination
None
3. Administrative Law Judge
(ALJ) Hearing 60 days from the date of receipt
of the reconsideration
At least $130 remains in
controversy. 4. Departmental Appeals Board (DAB) Review/Appeals Council
60 days from the date of receipt
of the ALJ hearing decision
None
5. Federal Court Review 60 days from date of receipt of
the Appeals Council decision or
declination of review by DAB
At least $1 ,260 remains in
controversy.
51
Waiver & Compromise
52
Post Payment of Final Demand
Waiver/Compromise Involves application for a compromise or waiver to both the Benefits Coordination
and Recovery Center (BCRC) as well as the Center for Medicare and Medicaid
Services (CMS)
There are three statutory authorities under which Medicare may accept less than the
full amount of its claim:
1. §1870(c) of the Social Security Act – done by BCRC (Financial Hardship
Waiver)
2. §1862(b) of the Social Security Act – done by CMS (Best Interest of the
Program Wavier)
3. The Federal Claims Collection Act (FCCA) – done by CMS (Compromise)
**If successful, a refund is issued by Medicare**
53
Financial Hardship Waiver
• §1870(c) of the Social Security Act;
• Pay the Final Demand amount and then attempt to obtain a partial
or full waiver.
• Waiver of recovery should not be requested until the case is settled
and Medicare has issued a demand for repayment letter.
• Requests for waiver must be submitted in writing
• Medicare may grant a full or partial waiver if recovery would
negatively affect the beneficiary's standard of living compared to
how it was before the accident/injury/illness.
54
Financial Hardship Waiver “There shall be no recovery if such recovery would defeat the purposes of this chapter or would be against equity and good conscience.”
The Medicare Secondary Payer Manual does provide example situations of financial hardship that would justify a full or partial waiver consideration.
• “The beneficiary has spent the settlement proceeds and the only remaining
income from which the beneficiary could attempt to satisfy Medicare’s claim would be from the money that is needed for the beneficiary’s monthly living expenses;
• Beneficiary income and resources are at a poverty level standard
• An unforeseen severe financial circumstance- For example, waiver would be appropriate if the beneficiary became legally responsible for their grandchildren.”
55
Hardship Letter A Medicare beneficiary seeking a waiver or compromise of Medicare’s interest is required to submit
a Hardship Letter to CMS for use in their evaluation process. Whenever possible this letter should
be written by the beneficiary. The letter needs to express to CMS why repaying Medicare the
amount of their Final Demand is “against equity and good conscience” and has/will create(d) an
“undue hardship”. 1. Facts of Accident
2. Injuries – Physical, psychological, emotional
3. Current Physical, Mental, Emotional state
4. Unrecorded out of pocket expense
a. House Renovation
b. Adult diapers
c. Prescriptions
d. Private nurse or custodial care not paid by Medicare
e. Co-insurance and deductible
f. Accident related dental work
g. Other financial obligations
5. Status of settlement proceeds. Exhausted?
6. Unforeseen financial circumstances---ex. become legally responsible for grandchildren.
7. Degree to which repayment would cause undue hardship
8. Reason why repayment is not justified.
56
Post-Settlement Compromise
• The Federal Claims Collection Act (FCCA)
CMS may suspend or end collection action on a claim when it
appears that no person liable on the claim has the present or
prospective ability to pay a significant amount of the claim or the
cost of collecting the claim is likely to be more than the amount
recovered.
• The cost of collection does not justify the enforced collection of
the full amount of the claim;
• There is an inability to pay within a reasonable time on the part of
the individual against whom the claim is made; or
• The chances of successful litigation are questionable, making it
advisable to seek a compromise settlement.”
57
“Best Interest of the Program” Waiver
§ 1862(b) of the Social Security Act;
A separate and distinct evaluation than a request under §1870(c)
of the Social Security Act (Financial Hardship Wavier) and a
request for a Compromise under the Federal Claims Collection
Act (FCCA)
The Secretary may waive (in whole or in part) the provisions of
this subparagraph in the case of an individual claim if the
Secretary determines that the waiver is in the best interests of the program established under this title
58
Dave L. Place, J.D.
Vice President, Director of
Synergy Lien Resolution Services
911 Outer Road
Orlando, FL 32814
407-279-4811
59