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Louisiana Federal Court Finds No MSA Necessary in Product Liability Case Where Treating Physicians Say No Future Medical Needs Related to Claim

By , January 27, 2015 2:32 pm

Stethoscope and GavelOn January 10, 2015, the United States District Court for the Western District of Louisiana, Alexandria Division, published its opinion on Berry v. Toyota Motor Sales, concluding that no MSA is required in this product liability matter based on the most recent information from CMS, and Mr. Berry’s treating medical providers opinions indicating no future medical care needed as a result of the accident. The Court finds Medicare’s interests have been adequately protected in this settlement based on the fact that Medicare provides no other procedure by which to determine the adequacy of protecting Medicare’s interests for future medical needs and/or expenses in conjunction with the settlement of third party claims, and a strong public interest in resolving lawsuits through settlement.

The case stems from a product liability lawsuit against Toyota Motor Sales (TMS) arising out of a July 16, 2010, single vehicle accident in which plaintiff Rocky D. Berry (Berry) allegedly sustained injury when he drove his 1997 Toyota Corolla off the roadway on US Highway 84 in Natchitoches Parish. Toyota denied liability and contested damages. The case was set for trial for August 11, 2014; however plaintiff and TMS engaged in negotiations and on or around July 30, 2014 reached a confidential agreement to settle plaintiff’s claims against TMS, pending adjudication by the Court that no MSA is required and that the interests of Medicare have been adequately protected.

Mr. Berry was receiving Social Security disability benefits prior the date of the subject accident and continues to do so, and part of the consideration for the settlement agreement is that Mr. Berry will be responsible for protecting Medicare’s interest, if any, under the Medicare Secondary Payer statute, 42 U.S.C. 1395y. Medicare made some payments for medical treatment received by Mr. Berry as a result of the accident. Medicare paid a total of $781.26 in conditional payments on Mr. Berry’s behalf, and required Mr. Berry to repay $447.02.2 That amount was paid, and on October 22, 2014 the Centers for Medicare and Medicaid (CMS) acknowledged payment and declared its file on the matter to be closed. Medicare has therefore been reimbursed for all payments that it made for Mr. Berry’s treatment in relation to the subject accident.

Mr. Berry’s current treating physician — Stephen Katz, M.D. — evaluated Mr. Berry’s current and future medical needs and set out his opinion in an affidavit dated November 25, 2014. It is Dr. Katz’s opinion that Mr. Berry has completed his course of treatment for injuries relating to the subject accident. Dr. Katz does not reasonably anticipate that Mr. Berry will require further treatment for his back injuries relating to the subject accident in the future.

Mr. Berry’s treating dentist — David Carlton, III, D.D.S. — evaluated Mr. Berry’s current and future dental needs and set out his opinion in an affidavit dated November 25, 2014. According to Dr. Carlton, Mr. Berry has completed his course of treatment for injuries relating to the subject accident and is no longer being treated by him. Dr. Carlton does not reasonably anticipate that Mr. Berry will require further treatment for his jaw injuries in the future.

Based on the evidence presented, including the evidence from Mr. Berry’s treating medical providers and correspondence from CMS, the Court believes that there is no need for a MSA as part of the settlement of this case. The Court finds that Medicare has been reimbursed for all conditional payments that it has made for Mr. Berry’s accident related treatment and, as it is not reasonably anticipated that Mr. Berry will receive any further accident related treatment in the future, Medicare will not be called upon to pay for any accident related treatment in the future.

The finding that there is no requirement for a MSA for future accident related treatment which may be covered by Medicare, and which is related to what was claimed and released in this lawsuit, reasonably and fairly takes Medicare’s interests into account in that it is based on reasonably foreseeable medical needs, the most recent information from CMS, and Mr. Berry’s treating medical providers. Since Medicare provides no other procedure by which to determine the adequacy of protecting Medicare’s interests for future medical needs and/or expenses in conjunction with the settlement of third party claims, and since there is a strong public interest in resolving lawsuits through settlement, the Court finds that Medicare’s interests have been adequately protected in this settlement within meaning of the Medicare Secondary Payer Statute.

Consistent with Helios’ protocol in all liability set asides and future costs projections, this case illustrates how litigants can properly take Medicare’s interests into account in liability claims. Communicating with CMS, resolving conditional payments, and obtaining treating physicians’ written medical opinions regarding no future medical needs related to the claim are the essential components. Whether an auto case, medical malpractice matter, or product liability cause of action, speak with us on how to adequately protect Medicare’s interests in such liability claims.

Pennsylvania Bankruptcy Court Finds MSA is a Trust, Allows Claimant to Keep Funds, Away from Creditors

By , January 20, 2015 1:00 pm

Stethoscope and GavelOn January 5, 2015, the United States Bankruptcy Court for the Middle District of Pennsylvania published its opinion on In Re: Jesus Arellano, concluding that property traceable to a pre-bankruptcy petition lump sum workers’ compensation settlement award may be claimed as exempt resources. The court also finds that the WCMSA established a trust for the benefit of medical providers since the express intent of the settlement agreement was to create a fund to pay for medical treatments and prescription drugs related to the work-related injury. By finding that the WCMSA funds were to be held in trust for the benefit of providers of medical services related to the workers’ compensation claim, the court determines that the WCMSA is not property of the bankruptcy estate and may not be administered by the Bankruptcy Trustee for the benefit of creditors. Therefore, the court rules in favor of exempting all proceeds from the settlement agreement and all property acquired with these proceeds.

In 2010, Jesus Arellano (Debtor) sustained a broken hip at work in Maryland. Thereafter, he filed a workers’ compensation claim. On December 1, 2011, Debtor entered into a settlement agreement with his employer whereby Debtor would receive a lump sum payment of $225,000. In addition, $72,741.88 was paid to Debtor as a Medicare set aside for Debtor’s need for future treatment for his injuries.

In January 2012, Debtor deposited both the lump sum settlement and the Medicare set aside in his bank accounts. Debtor admitted that he used to funds to make several purchases – a 2005 Ford F-150 for $17,000, real property located at 3587 Cannon Lane, York PA 17408 for $85,000, and real property located at 3887 Cannon Lane, York PA 17408  for $86,000. On November 1, 2012 Debtor sold the 3887 Property to his brother through an installment agreement for $90,000. Under the terms of the sale, Debtor’s brother is obligated to make payments of $1200 per month, which includes principal and interest at 5.5 percent, until the balance is paid in full in June 2020.

Debtor filed a Chapter 7 bankruptcy petition on March 8, 2014, claiming as exemptions  the 3587 Property, the 3887 Property, funds in 2 checking accounts established from Debtor’s workers compensation pay-out, and the Ford F-150 under 11 U.S.C. §522(d)(11)(E).

On April 30, 2014, the Trustee filed an objection to Debtor’s exemption claim asserting that §522(d)(11)(E) did not authorize Debtor to exempt property that was the proceeds of a workers’ compensation claim. On May 22, 2014, Debtor responded to the Trustee’s objection asserting that the property could be exempted under §522(d)(11)(E) and that the property claimed was reasonably necessary for Debtor and his dependents.

A hearing on the Trustee’s objection was held on September 25, 2014, at which time the issues were identified as follows: 1) whether funds or property traceable to the proceeds of a lump sum workers’ compensation settlement received prepetition may be claimed as exempt under §522(d)(11)(E); and 2) if the funds and property may be exempted, whether they are necessary for the support of Debtor and his dependents.

The Trustee based his objection on a decision rendered in 2001 by Judge Thomas in the case of In re Michael, 262 B.R. 296 (Bankr. M.D. Pa. 2001). The facts in In re Michael are similar to the facts here. The debtor received a lump-sum settlement after sustaining a work-related injury prior to filing his bankruptcy petition. On his schedule of exemptions, the debtor listed the proceeds of the settlement as exempt under 11 U.S.C. §522(d)(11)(E). Judge Thomas upheld the trustee’s objection to the exemption claim holding that workers’ compensation claims could not be exempted under §522(d)(11)(E), but must be exempted under §522(d)(10)(C). Judge Thomas cited the analysis of the court in In re Williams, 181 B.R. 298 (Bankr. W.D. Mich. 1995), and adopted the majority view that “workmen’s compensation awards, and the tracing of those awards into certain specific items, are beyond the scope of 11 U.S.C. §522(d)(11)(E).”

To avoid the injustice of finding that workers’ compensation awards paid in installments could be exempted, but those received in a lump sum could not, the bankruptcy court in In re Sanchez, 362 B.R. 342 (Bankr. W.D. Mich. 2007) decided to give the issue a fresh look. In Sanchez, Judge Hopkins looked at the plain meaning of the statute and concluded that workers’ compensation awards may be exempted under §522(d)(11)(E) if the award is traceable to a payment that is intended to compensate the debtor for the loss of future earnings and is reasonably necessary for the support of the debtor or the debtor’s dependents.

The court here agrees with the conclusion of the Sanchez court that §522(d)(11)(E) unambiguously exempts “a payment in compensation of loss of future earnings of the debtor,” including lump sum workers’ compensation payments, without restricting such payment to tort-type actions. The court therefore concludes that §522(d)(11)(E) provides a basis upon which property traceable to a pre-petition lump sum workers’ compensation settlement awarded for the loss of future earnings to the extent that the lump sum is reasonably necessary for the support of a debtor and the dependents of a debtor may be claimed as exempt.

In addition, part of Debtor’s workers’ compensation settlement was a Medicare “set aside” (WCMSA) payment. WCMSA is a “financial agreement that allocates a portion of a workers’ compensation settlement to pay for future medical services related to the workers’ compensation injury, illness, or disease.” The Center for Medicare and Medicaid Services provides that a claimant “can ONLY use a WCMSA to pay for medical treatment or prescription drugs related to his or her workers compensation injury, and ONLY if the expense is for a treatment or prescription Medicare would cover. This is true even if he or she is not yet a Medicare beneficiary.”

The court therefore concludes that the WCMSA provided as a result of Debtor’s settlement agreement established a trust for the benefit of medical providers. The express intent of the settlement agreement was to create a fund from which Debtor was to pay for his medical treatments and prescription drugs related to his work-related injury. Even though the agreement did not specifically state that Debtor is to hold the funds as trustee for the benefit of his medical providers, no such words are needed in order to create an express trust. The subject matter of the trust is the WCMSA of $72,741.88. The parties to the settlement agreement were competent to create the trust, Debtor was capable of holding the funds as trustee, and entities providing medical services to Debtor were named beneficiaries of the trust. Thus, all the requirements necessary to create a trust have been met in the settlement agreement.

By finding that the WCMSA payment was to be held in trust for the benefit of providers of medical services related to Debtor’s workers’ compensation claim, the court finds that the WCMSA is not property of Debtor’s bankruptcy estate and, as such, may not be administered by the Trustee for the benefit of creditors. The court therefore rules Trustee’s objection to Debtor’s exemptions under 11 U.S.C. §522(d)(11)(E) is overruled.

Does this case open up any liability for payers? If, in fact, MSAs are a trust for the benefit of medical and prescription providers, doesn’t the trustor, the payer funding the trust, have a fiduciary responsibility to the medical and prescription vendors providing such benefits/services? If a medical or prescription vendor provides benefits/services to the claimant, but the MSA trustee is unable to pay because funds were misused, does the medical or prescription vendor have a cause of action against the trustor, the original primary payer? At Helios, because of our extensive national resources and country-wide market strength in pharmacy, medical services, and durable equipment, our MSP compliance products, specifically our MSA professional administration services, not only take this potential liability into account, but solves it. Contact us to find out how.

Louisiana Appellate Court Agrees Claimant Committed Fraud, Forfeits All Future Benefits, Including Medicare Set Aside Annual Structured Funds

By , January 12, 2015 11:03 am

Stethoscope and GavelOn December 23, 2014, the Louisiana Court of Appeal, 1st Circuit, published its opinion on Shropshire v. Anco Installation, finding that because claimant deliberately misrepresented the facts of his settlement negotiations for the purpose of obtaining additional benefits, all workers’ compensation benefits, including future settlement monies and Medicare set aside funds, are forfeited.

Mr. Shropshire was employed by ANCO. He alleged he suffered permanent injuries in an accident on October 23, 1998, while in the course and scope of his employment with ANCO. ANCO disputed whether an accident occurred and whether Mr. Shropshire was unable to perform the duties of his occupation.

In June 2010, Shropshire, ANCO and its workers’ compensation insurer entered into a compromise agreement, “Joint Petition for Authority to Compromise Workmen’s Compensation Claim.” The Order of Approval was signed by the workers’ compensation judge (“WCJ”) on June 25, 2010. The documents included language that recited Mr. Shropshire was to receive $5,381.00 per month for twenty-six years “to settle the future medical aspect part of the claim.” Other documents however reflected that the payment was to be $5,381.00 per year, not monthly.

Neither ANCO nor its insurer ever paid Mr. Shropshire $5,381.00. In July 2012, Mr. Shropshire filed a Form 1008 Disputed Claim for Compensation with the OWC seeking a monthly payment, to which he alleged he was entitled. ANCO and its insurer answered, asserting that the payment of $5,381.00 per month was a typographical error and that the Order should be amended to reflect payments due of $5,381.00 per year.

The matter came for hearing before the OWC in February 2014. The WCJ found the payments per month to be a typographical error and amended the Order of Approval to substitute the word “annually” in place of the word “monthly” everywhere the word “monthly” appeared in the settlement agreement and Order of Approval dated June 25, 2010. The WCJ also held that Mr. Shropshire willfully made false statements and representations for the purpose of obtaining additional benefits, in violation of La. R.S. 23:1208. Accordingly, the WCJ voided the annuity set up to pay the settlement and relieved third parties and their assignees from further obligation to pay Mr. Shropshire.

The WCJ addressed two issues at the trial on the merits: (1) the amendment of the Order of Approval judgment due to a typographical error; and (2) fraud pursuant to La. R.S. 23:1208.

First, the WCJ had to decide whether the settlement agreement and Order of Approval contained a typographical error; that is, whether the structured payments for Mr. Shropshire’s medical benefits were to be made monthly or annually. After hearing from the witnesses and considering the documentary evidence in the record, the WCJ held that “considering all the evidence, especially the Medicare Set Aside information, and the testimony of the witnesses, it was clear to the Court there was an error in the settlement documents and the payments were agreed to be paid annually, not monthly.”

The WCJ, pursuant to La.C.C.P. art. 1951, which provides that a modification of a judgment can be made at any time to alter the phraseology of the judgment, but not the substance, or to correct an error of calculation, amended the June 25, 2010 settlement agreement and Order of Approval to substitute the word “annually” in place of the word “monthly” everywhere the word “monthly” appeared in those documents. This court concludes it is unable to say the WCJ erred in determining the settlement agreement and Order of Approval contained typographical errors, as the WCJ’s ruling is reasonable and supported by the record.

Next, the WCJ had to decide whether Mr. Shropshire committed fraud pursuant to La. R.S. 23:1208. Section 1208 forbids any person from willfully making false statements or representations to obtain workers’ compensation benefits. La. R.S. 23:1208(A). Upon a determination of fraud by a WCJ, a person in violation of Section 1208 forfeits any right to workers’ compensation benefits. La. R.S. 23:1208(£). To this extent, the WCJ found “Mr. Shropshire’s testimony totally unbelievable, failing to contain any element of truth in this regard. The Court was clearly convinced Mr. Shropshire fabricated the story about an additional settlement negotiated between him and Mr. Maher for the purpose of obtaining benefits clearly unsupported by any other documentation. Mr. Shropshire attempted to convince the Court his deposition testimony was falsely transcribed as well.”

As a result, the WCJ found he deliberately misrepresented the facts of his settlement negations for the purpose of obtaining additional benefits, as it was very clear from the medical records, all records surrounding the settlement negotiations, including a notation in Mr. Shropshire’s own handwriting, as well as Mr. Maher’s testimony, he would never have remotely been entitled to $5,000 a month in medical expenses. Due to Mr. Shropshire’s deliberate misrepresentation of the settlement negotiations, the WCJ concluded all workers’ compensation benefits were forfeited from the date of the deposition, August 13, 2013 forward.

Based on the record, the Court here is unable to say the WCJ erred in determining that Mr. Shropshire committed fraud pursuant to La. R.S. 23:1208, as the WCJ’s ruling is reasonable and supported by the record. As a result, based on the foregoing, the February 24, 2014 final judgment of the Office of Workers’ Compensation is affirmed.

As this case clearly shows, Medicare Set-Aside work is not done simply because the parties have settled the case and funds have been disbursed. At Helios, given our superior medical, pharmacy, claims, and legal expertise, MSA post-settlement work not only includes professional administration of MSA account funds, or assisting the Medicare beneficiary with self administration, but also includes post-settlement legal issues, billing disputes, fee schedule discrepancies, annual accounting to CMS, temporary and permanent exhaustion of MSA funds, and assistance with any remaining funds in the MSA account after claimant’s death.

CMS Publishes Self Administration Toolkit for WC Medicare Set Asides

By , January 9, 2015 12:42 pm

Insurance LawOn March 21, 2014, CMS published its first Self Administration Toolkit for Workers Compensation Medicare Set Aside Arrangements (WCMSA). CMS had previously provided significant leadership on WCMSA administration matters through the several Policy Memos and Reference Guide it had published over the preceding 14 years. However, this was their first attempt at focusing on self administered WCMSAs, providing suggested or recommended letters and forms to be used throughout the process.

On January 5, 2015, CMS published a new, amended version 1.1 of the Self Administration Toolkit for WCMSAs. The Toolkit is broken down into 14 sections: Introduction, Setting Up the WCMSA Bank Account, How Your MSA is Funded, Using the Account, What to Tell Your Health care Providers, reviewing and Paying Your Bills, Keeping Records, Annual Attestation, Reporting Changes, Inheritance, Where to Get Help, Letters and examples, and Glossary.

Section 1, Introduction, makes it clear that a Medicare beneficiary may self administer his or her WCMSA. If so, the Toolkit will help him or her manage the account appropriately, satisfy Medicare’s interests related to future medical care, and assure Medicare will pay for future costs when the WCMSA is exhausted or depleted.

Section 2, Setting Up the WCMSA Bank Account, indicates that the beneficiary must deposit the WCMSA money in its own account, separate from any other accounts he or she may have. The account must be an interest bearing account, insured by the Federal Deposit Insurance Corporation (FDIC).

Section 3, How Your WCMSA is Funded, provides that the WCMSA may be funded either lump sum or structured. If structured, the first check should cover the first 2 years of treatment. All monies, whether paid lump sum or structured, should be deposited into the WCMSA account.

Section 4, Using the Account, outlines what medical and prescription expenses can be paid out of the WCMSA account. As has been communicated by CMS previously, WCMSA account funds can only be used to pay for medical treatment and prescription drugs related to the WC injury that are Medicare covered.

A beneficiary may also use the WCMSA account to pay for cost of copying documents, mailing fees and postage, any banking fees related to the account, and income tax on interest income from the account.

A beneficiary may not use the WCMSA account to pay for fees for trustees, custodians, or other professionals hired to administer the account, expenses for administration of the WCMSA, attorney costs for establishing the WCMSA, and Medicare co-payments and deductibles.

Section 5, What to Tell Your Health Care Providers, advises the beneficiary to notify his or her health care providers about the WCMSA so that such providers bill the beneficiary directly, and the beneficiary is then able to pay such bills out of the WCMSA account.

Health care providers may bill for medical care at full actual charges, or work comp fee schedule, depending on how the WCMSA was set up. Prescription medications should be billed based on Red Book Average Wholesale Price.

If a health care provider bills Medicare for work related treatment, the health care provider is responsible for refunding any payments received from Medicare for bills related to the treatment of the work comp injury. Such bills may then be paid to the health care provider from the WCMSA account.

Section 6, Reviewing and Paying Your Bills, reminds beneficiaries that they should review health care provider bills to make sure they are billing only for those items and services related to the WC injury and covered by Medicare.

Section 7, Keeping Records, makes it clear that the beneficiary needs to keep clear and accurate records of everything done with the WCMSA account, as these records will be used to determine if account funds were spent properly.

It is recommended that the beneficiary keep track of transaction date, check number, health care provider name, date of service, description of service, amount paid, deposit amount, and account balance.

Although beneficiaries should keep itemized receipts or proof of each payment, bank statements, and tax records, he or she will not submit these annually unless Medicare request such proof.

Section 8, Annual Attestation, requires the Medicare beneficiary to send an attestation every year, no later than 30 days after the anniversary date of the WC settlement, to Medicare Benefits Coordination & Recovery Center (BCRC) stating that the WCMSA funds were used appropriately.

The attestation must include the total spent for medical services, the total spent for prescription drugs, grand total of expenditures, total of interest income the account earned, and the balance of the WCMSA account at the end of the calendar year.

When the WCMSA account has no money left in it and there are no further deposits expected, the account is depleted or exhausted. Within 60 days of such depletion, the beneficiary must send the BCRC a final attestation letter indicating that the account has been completely exhausted. If Medicare is satisfied that the WCMSA funds have been spent appropriately, Medicare will pay for future treatment related to the work injury.

Section 9, Reporting Changes, reminds beneficiaries that if they move, he or she should send the new address to the bank that holds the WCMSA funds. If beneficiaries do not feel confident administering the WCMSA, they may seek advice from a lawyer or organization, or may appoint a representative to administer the account.

If for whatever reason Medicare entitlement is lost, the WCMSA funds may not be released, as such funds may be only be used to pay for future medical care related to the claim until exhausted.

Section 10, Inheritance, indicates that if death occurs before the WCMSA account is exhausted, the estate must pay for medical services provided before death so long as such expenditures are related to the work comp claim and are Medicare allowable. If there is money left after all bills are paid, the funds may be distributed according to the last will and testament, the settlement agreement, or state inheritance laws.

Section 11, Topics Unique to Structured WCMSA Accounts, provides that if there are structured funds left at the end of the year, such funds must remain in the account and carried forward to the following year, so that the beneficiary will then be able to use all funds to pay for medical care related to the WC claim.

If there is excess money any year thereafter, those funds must be carried forward too, on an ongoing basis, until all funds accumulated over the beneficiary’s life are appropriately used up, or inherited upon beneficiary’s death.

If however funds run out before the next structured payment or deposit is received, the beneficiary must send an attestation letter to the BCRC indicating that the account is temporarily depleted. The beneficiary should communicate this to his or her health care provider so they can then send the outstanding bills to Medicare until the next annual deposit to the WCMSA account is received.

If not yet a Medicare beneficiary, but have other insurance, the beneficiary should submit such bills to that insurance to pay for the WC injury until the WCMSA is funded again. If there is no other insurance, the beneficiary will have to pay out of pocket for such bills until the WCMSA is funded again.

Section 12, Where to Get Help, provides telephone numbers and web sites to assist beneficiaries with this process.

Section 13, Letters and Examples, offers sample documents and letters on all components of the WCMSA administration process, including letters for medical providers, pharmacy providers, lump sum annual attestation, exhausted lump sum account, structured annual attestation, temporary exhaustion structured attestation, permanent exhaustion structured attestation, and transaction record.

Section 14, Glossary, introduces terms and definitions commonly used or found throughout the WCMSA administration process.

The toolkit can be found at http://cms.hhs.gov/Medicare/Coordination-of-Benefits-and-Recovery/Workers-Compensation-Medicare-Set-Aside-Arrangements/Downloads/Self-Administration-Toolkit-for-WCMSAs.pdf. Accurate and proper administration of WCMSA funds is key to the success of the MSP program. It is clear, based on these latest attempts by CMS, that administration of WCMSAs is becoming a more significant component of the larger and always evolving and complex landscape of MSP compliance. As a result, adherence to these rules is highly encouraged.

29106aeRafael Gonzalez is Vice President of Strategic Solutions at HELIOS in Tampa, Fl. HELIOS is a national leader in MSP settlement solutions, including Mandatory Insurer Reporting, Conditional Payment Resolution, and Medicare Set Asides. HELIOS is the only national MSP compliance company providing pharmacy, medical providers, and durable medical equipment services as part of its MSA Professional Administration program services, thereby offering comprehensive, total-care solutions that mitigates risk and controls costs throughout the lifecycle of the claim. You may contact Rafael at rafael.gonzalez@helioscomp.com, or at 813.612.5592.

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