South Carolina Lawyer40

November 2013 41

SMART ActA Ray of Hope on Medicare Lien Issues

By Ken W. Harrell and Melissa A. Fried

Civil rights activist Fannie LouHamer’s tombstone is engraved withher most famous quote, “I’m sickand tired of being sick andtired.” Personal injury attorneys andclients who have wrestled withMedicare on lien issues over the pastfew decades have often felt the sameway. Many attorneys have had toanswer to clients who could notunderstand why it took severalmonths, and sometimes years, toreceive any net proceeds from theirpersonal injury settlement.Attorneys have had to explain totheir clients that they could not geta definitive answer from Medicareon a lien amount, especially in situa-tions where a significant reductionwas being sought on a hardshipbasis. Reportedly, some attorneyshave grown so frustrated withMedicare that they have stoppedaccepting cases for clients who haveMedicare coverage, just as some pri-vate medical practices refuse toaccept patients covered by Medicare.

The Medicare Secondary PaymentAct has caused much confusion andmany headaches for attorneys andbeneficiaries over the years. Whenrepresenting a Medicare beneficiary,

attorneys have always had to consid-er whether Medicare has asserted alien against their clients; however,unlike other health insurance liens,there was no reliable means of deter-mining Medicare’s lien amount untilafter the client’s claim was resolved.Additionally, it took an interminablylong time to receive a lien figure fromMedicare. Calling Medicare directlyand sitting on hold for an hour ormore was commonplace.

In an effort to alleviate much ofthe delay and confusion, PresidentObama signed into law theStrengthening Medicare andRepaying Taxpayers Act, more com-monly referred to as the SMART Act,on January 1, 2013.1 Mary AliceMcLarty, president of the AmericanAssociation for Justice (AAJ),described the SMART Act as “a prac-tical solution that will streamlinethe Medicare Secondary Payer[(MSP)] system to ensure that seniorsand persons with disabilities gettimely assistance and taxpayers arerepaid millions of dollars everyyear.”2 For attorneys representingMedicare beneficiaries, this summaryprobably sounds too good to be true.While time will tell whether that is

the case, the SMART Act appears tobe a step in the right direction. TheSMART Act sets forth six improve-ments to the current Medicare sys-tem, all of which are outlined below.

The SMART Act’s creation of theMedicare web portal

One of the highlights of theSMART Act is the creation of a web-site to process claim information,and, specifically, to help attorneysand claimants determine the finalconditional payment amount priorto settlement.

According to Sec. 201 of theSMART Act, the Secretary of Healthand Human Services (HHS) mustallow individuals to access informa-tion on claims that relate to a poten-tial settlement, judgment, award orother payment. Attorneys must firstobtain their client’s consent beforeaccessing information on the webportal. Medicare is directed to updateinformation on claims and paymentson the Medicare portal no later than15 days after a payment is made onbehalf of a Medicare recipient. TheSMART Act sets forth the type ofinformation that is available to thosewho have access to the web portalPH

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such as provider or supplier names,diagnosis codes, dates of services,and conditional payment amounts.However, as of late September 2013,the only information being shown isthe conditional lien amount and thefinal demand amount.

The SMART Act also establishesprocedures and timing for bothclaimants and Medicare to postinformation to the web portal. First,interested parties “may at any timebeginning 120 days before the rea-sonably expected date of a settle-ment, judgment, award, or otherpayment, notify the Secretary that apayment is reasonably expected andthe expected date of such payment.”3

Once notice is sent by interested par-ties, this begins what the SMART Actrefers to as the “protected period.”4

The protected period gives Medicare65 days to provide interested partieswith a final conditional paymentamount. However, Medicare mayextend this protected period for anadditional 30 days “if the Secretarydetermines that additional time isrequired to address claims for whichpayment has been made.”5

What does all of this mean in

plain English? Shawn Davis, a litiga-tion paralegal for the Joye Law Firmfor more than 10 years, recentlyconducted an in-house seminar forall of the firm’s attorneys and para-legals on the new portal. Whenasked how the new portal was work-ing, Ms. Davis stated:

It’s not perfect but it’s a hugeimprovement over what we usedto have to deal with on theseliens. A lot of the guess-workabout what Medicare had paidfor is gone now because they’redoing a pretty good job of keep-ing the information timely.There are still mistakes madewith unrelated medical costsbeing posted as being due to theaccident injuries, but the portalallows you to challenge thesecharges and so far, Medicare hasbeen responsive when we’vedone that. My advice to parale-gals is to get on the new portaland work with it. With time,hopefully, it will get even moreefficient. It sure beats sitting onthe phone for an hour listeningto Muzak.

Presently, plaintiff’s counselsends a signed Medicare Consent toRelease form to the agency to set upa claim. Within 65 days, Medicaresends their beneficiary and the attor-ney a letter providing a case identifi-cation number. This identificationnumber and the client’s social secu-rity number are used to access theportal. To register to use the portal,go to www.cob.cms.hhs.gov/MSPRP. Once registered, the usermay utilize this same site to requestcase access for a client’s file.

The SMART Act also preventsMedicare from revising the final lienamount after a specific time. If a set-tlement or final judgment is madeduring the protected period, the lastreimbursement amount downloadedby the interested party within threebusiness days before the date of set-tlement, judgment or award “shallconstitute the final conditional[reimbursement] amount subject torecovery …”6 This will allow attor-neys to “lock in” the final lienamount prior to settlement.

Additionally, the SMART Act setsforth criteria for challenging claimedreimbursement amounts. However,

the SMART Act leaves it up toMedicare to “provide a timely processto resolve the discrepancy.”7 A plain-tiff’s attorney who disputesMedicare’s claimed amount must pro-vide documentation explaining thebasis for the dispute and a proposalas to how to resolve it. OnceMedicare receives the documenta-tion, it has 11 business days to agreeor disagree with the dispute raised. IfMedicare fails to make this determi-nation within the 11-day period,then, according to the SMART Act,the beneficiary’s dispute must beaccepted as made.8 However, ifMedicare timely disagrees that a dis-crepancy exists, then it must agree tothe attorney’s proposal to resolve it orprovide documentation for an alter-nate resolution within “a timelymanner.”9 Medicare’s definition ofwhat constitutes a “timely manner”is certainly concerning given theagency’s past track record. If Medicareconcludes there is not a reasonablebasis to remove claims on the state-ment of reimbursement, then theproposal is simply rejected.10 For fur-ther explanation and illustration ofthis process, see Diagram 1.

The SMART Act provides thatMedicare had nine months from thedate of the law’s enactment to issueregulations to comply with theseportal time requirements. This dead-line was October 10, 2013.11

The SMART Act allows more pri-vacy for Medicare beneficiaries.

In an era of identity fraud andcredit protection, it is inevitablethat the SMART Act would followsuit by taking proper precautions toprotect a beneficiary’s confidentialinformation. To ensure the securityof its beneficiaries, Section 204 ofthe SMART Act states that socialsecurity numbers and health identi-fication claim numbers will eventu-ally not be needed for reportingpurposes. The SMART Act states thatthis elimination must take placewithin 18 months of the legislationbeing enacted.12

The SMART Act provides a three-year statute of limitations forMedicare to collect repayments.

The SMART Act allows only

three years for government actionsto recover conditional payments.“An action may not be brought bythe United States under this clausewith respect to payment owedunless the complaint is filed notlater than 3 years after the date ofthe receipt of notice of a settlement,judgment, award, or other payment.…”13 The new statute of limitationsapplies to actions brought on orafter July 10, 2013.14 This provisionis beneficial for attorneys as itallows them to close their caserather than keeping it open, con-cerned about liability to Medicarelong after the claim has concluded.

Many attorneys receive letterstoday from Medicare inquiringabout the terms of settlementsreached years ago. While many of

these letters are more focused onthe existence of a Medicare set-asideaccount in a workers’ compensationcase rather than a conditional pay-ments lien, having a statute of limi-tations in place will force Medicareto be more efficient on lien resolu-tions, and it will give attorneys andclients more peace of mind.

The SMART Act establishes aminimum threshold for collec-tion of payment.

Additionally, the SMART Actestablishes that beginning onNovember 15, 2014, Medicare mustpublish a single monetary compli-ance threshold for liability claims.15

Medicare will not seek reimburse-ment on any case where the judg-ment or settlement amount is below

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The beneficiary notifies Medicare’scontractor that a liability insurance(including self-insurance), no-faultinsurance, and/or workers’ com-pensation claim has been filed.

Any time after Medicare posts its initial claims compilation, the beneficiary may notify the Centers forMedicare and Medicaid Services (CMS) that he or she

is 120 days or less from settlement.

The beneficiary may refresh claims as often ashe prefers, once he has notified CMS that he

is 120 days or less from settlement.

The beneficiary dis-putes claims and CMSresponds within 11days of receipt.

The beneficiary doesnot dispute claims.

Medicare posts itsinitial compilationof claims on theMSP web portalwithin 65 days.

120 Days orless beforeSettlement: The beneficiarynotifies CMS

through the webportal.

8 Days beforeSettlement: The beneficiaryrefreshes claims.

3 Days beforeSettlement: The beneficiarydownloads his or

her Final CPamount.

30 Days or lessafter Settlement: The beneficiary sup-

plies settlementinformation through

the web portal.

CMS issues a FinalDemand Letter

Diagram 1

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this low-dollar threshold. The estab-lishment of a monetary threshold isto prevent Medicare from seekingreimbursement for a claim that maycost Medicare more time andexpense pursuing than the actualvalue of the claim. This thresholdwill be revised on November 15 ofeach year following the initial dateof November 15, 2014.16

This low-dollar thresholdapplies to conditional paymentsthat have been made before settle-ment, and it does not involve thecomplex issue of whetherMedicare’s interests in liabilitycases have to be considered forfuture medical costs. As any work-ers’ compensation practitionerknows, workers’ compensation set-tlements for an injured workerwho is a current Medicare benefici-ary or who has a “reasonableexpectation” of becoming a benefi-ciary within 30 months have toinclude a Medicare set-aside (MSA)component if the claimant’s futuremedical coverage rights arereleased. It is often mistakenly pre-sumed that there are workers’ com-

pensation settlement amountthresholds of $25,000 for a currentbeneficiary and $250,000 for some-one in the “reasonable expecta-tion” category to trigger the MSArequirement. These amounts actu-ally represent workload reviewthresholds for Medicare, as theagency will not review andapprove settlements below theseamounts; it does not mean, how-ever, that workers’ compensationsettlements below these figures donot require an MSA.

Currently, there is a lot of grayarea surrounding what considera-tion must be given to potentialfuture medical costs for a Medicarebeneficiary who receives a liabilitysettlement for personal injuries. TheAAJ and several state trial attorneyorganizations have filed objectionsto Medicare asserting any interest infuture medical costs in a liabilitysettlement because these settlementsdiffer greatly from a workers’ com-pensation settlement. First, workers’compensation laws generally pro-vide for ongoing medical coveragefor a worker’s injuries while liability

defendants have no such obligation.Second, the allocation of a workers’compensation settlement is largelydictated by limitations on what aninjured worker can recover, whileliability settlements includeamounts for intangible damagessuch as pain and suffering. Despitethese objections, Medicare is expect-ed to issue proposed rules before theend of 2013 on how it intends topursue any recovery related to a lia-bility claimant’s future medicalrights. Those rules will not onlyhave a significant impact on thehandling of liability claims forclients that are Medicare recipients,they will also greatly increase theneed of legal representation forthose individuals that have not yethired an attorney.

The SMART Act creates newpenalties for reporting errors.

Prior to the SMART Act, interest-ed parties would incur a mandatorypenalty of $1,000 per day for failingto comply with the reportingrequirements. Now, the SMART Acthas lessened the blow of this penal-

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November 2013 45

ty by changing the language from“shall be subject” to “may be sub-ject to a civil money penalty of upto $1,000 for each day of noncom-pliance with respect to eachclaimant.”17

The SMART Act lays the ground-work for a right to appeal.

Interested parties have theright to appeal a determination ofconditional payments under theSMART Act. However, the SMARTAct does not outline the appealsprocedure and, instead, simplystates, “[t]he Secretary shall prom-ulgate regulations establishing aright of appeal and appealsprocess, with respect to any deter-mination under this subsection fora payment made under this titlefor an item or service for whichthe Secretary is seeking to recoverconditional payments from anapplicable plan. …”18 According tothis section, the right to appealapplies to an attorney, agent orthird party administrator.19

Unfortunately, there is no deadlinefor Medicare to create the appellate

process, but the inclusion of thissection allows attorneys andclaimants to hope that there willbe a means of appellate review inthe near future.

ConclusionEvery profession has its own

unique set of challenges. For trialattorneys handling personal injuryclaims, dealing with Medicare onlien issues has been difficult attimes. Fortunately, the improve-ments made pursuant to the SMARTAct’s implementation provide somerelief for attorneys and their clientsin these cases. Unfortunately, justas relief has arrived for resolvingconditional payment liens,Medicare may soon be openingPandora’s Box by asserting lieninterests for future medical costs inliability cases. We’ll have to staytuned on that issue.20

Ken W. Harrell is managing part-ner of Joye Law Firm, practicing in theN. Charleston office. Melissa A. Friedalso practices in the firm’s N.Charleston office.

Endnotes1 Medicare IVIG Access and StrengtheningMedicare and Repaying Taxpayers Act of2012, Pub. L. No. 112-242, 126 Stat. 2374(Jan. 10, 2013), www.gpo.gov/fdsys/pkg/PLAW-112publ242/pdf/PLAW-112publ242.pdf (hereinafter “SMART Act”).

2 AAJ Response on House Passage of the SMARTACT, www. Justice.org (Dec. 20, 2012),http://www.justice.org/cps/rde/justice/hs.xsl/19942.htm.

3 SMART Act, Sec. 201 (vii)(I).4 SMART Act, Sec. 201 (vii)(V).5 Id.6 SMART Act, Sec. 201 (vii)(III).7 SMART Act, Sec. 201 (vii)(IV).8 Id.9 Id.10 Id.11 SMART Act, Sec. 201(vii)(VI).12 SMART Act, Sec. 204.13 SMART Act, Sec. 205(a).14 SMART Act, Sec. 205(b). 15 SMART Act, Sec. 202(a)(2).16 SMART Act, Sec. 202(a)(2).17 SMART Act, Sec. 203 (1).18 SMART Act, Sec. 201(viii).19 Id.20 For more information on the recovery

process for Medicare claims, please seewww.msprc.info. For information on theMSP system, please see www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Coordination-of-Benefits-and-Recovery-Overview/Medicare-Secondary-Payer/Medicare-Secondary-Payer.html.

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