In 1980, Congress passed the Medicare Secondary Payer Act, which has been codified under 42 U.S.C. §1395y (b)(2)(A)(ii). While the Act remained largely unenforced for years, the increasing cost of health care and burdens placed on the Medicare Trust Fund caused legal practitioners to take note of the Act in the mid-1990s. The Medicare Secondary Payer Act places an affirmative obligation on parties and persons receiving funds from a Medicare primary plan to consider the interests of Medicare in all workers' compensation, no-fault and liability claims.

In the context of workers' compensation plans, the obligations have been easier to understand. This is based in part on the issuance of policy memoranda from the Centers for Medicare and Medicaid Services (CMS),along with regulations codified in the Code of Federal Regulations. As a result, there has been little dispute over the years that when dealing with a Medicare beneficiary, or someone who likely will receive Medicare benefits in the foreseeable future, that something needs to be done to repay or compromise conditional payments, as well as considering Medicare's future interests. This can be accomplished through a Medicare Set-aside Arrangement (MSA) or similar legal mechanism.

In the context of workers' compensation claims, CMS has created a voluntary review and approval process under the following situations:

• If the claimant is a Medicare beneficiary at the time of the settlement and the total settlement amount is greater than $25,000; or
• The claimant is not a Medicare beneficiary at the time of settlement, but the total settlement amount is greater than $250,000 and there is a "reasonable expectation" of Medicare entitlement within 30 months of the settlement date.

There is a "reasonable expectation" of Medicare entitlement where:

• The claimant is 62 years and 6 months old;
• The claimant is receiving SSDI benefits;
• The claimant has applied for or is appealing a denial of a claim for SSDI benefits; or
• The claimant has End Stage Renal Disease (ESRD),even though not currently Medicare eligible.

CMS does caution parties related to cases where the workload review threshold are not met. In doing so, it is stated, "[C]laimants must still consider Medicare's interests in all WC cases and ensure that Medicare pays secondary to WC in such cases."

Notwithstanding the clarity in the context of workers' compensation litigation, this area of law is more complex in no-fault or liability claims. Prior to 2011, all of the CMS policy memoranda setting forth agency policy discussed only workers' compensation claims. The Code of Federal Regulations is also void of specific language regarding these matters. As a result, attorneys are in a legal Catch-22 when it comes to Liability Medicare Set-aside Arrangements (LMSAs).

Over the last several years, there is a growing body of case law that suggests Medicare's future interests in no-fault or liability claims are of importance. In Finke v. Hunter's View,the attorneys for the parties brought a motion before the district court judge hearing the case regarding, among other things, the issue of considering Medicare's future interests.

Since the Finke decision, there has been a significant increase in litigation involving use of the federal courts to comply with the Medicare Secondary Payer Act. In Big R. Towing v. Benoit,a motion was brought in federal court to "determine future medical expenses for purposes of allocating the settlement proceeds taking Medicare's interests into account consistent with the Medicare Secondary Payor (sic) Act, 22 U.S.C. 1395y."

Regarding this matter, the Plaintiff, David Benoit, was injured while serving as a captain aboard a towboat in December 2009. Claims were brought under the Jones Act related to his personal injuries to his back and hip. It was noted that liability and the need for future medical care and treatment were "vigorously contested." Parties have brought similar actions in other jurisdictions, which have virtually been unopposed by CMS.

Since the decision in Big R. Towing, Magistrate Judge Patrick Hanna has been involved in several additional cases where Medicare's future interests are at stake. In one recent case example Judge Hanna determined Medicare's future interests should be scrutinized based on the underlying facts of the case and the overall recovery of the plaintiff/injured party. As a result, he applied the principles of equitable apportionment to Medicare's future interests.   This rationale is a significant departure from prior decisions such as Hadden v. U.S., where the Sixth Circuit Court of Appeals specifically rejected these principles in the context of Medicare conditional payment resolution. It is also inconsistent with numerous statements by CMS regarding well-established agency protocols and interpretations of federal regulations governing these matters.

CMS has also been active in providing agency comment regarding the use of LMSAs. In early 2011, Sally Stalcup, the MSP Regional Coordinator for CMS's Region VI (Dallas) office offered an opinion on the matter, which stated, "Medicare's interests must be protected; however, CMS does not mandate a specific mechanism to protect those interest. The law does not require a ‘set-aside' in any situation. The law requires that the Medicare Trust Funds be protected from payment for future services whether it is a Workers' Compensation or liability case. There is no distinction in the law."The issuance of this policy interpretation was later followed by a more widely circulated memorandum authored by Charlotte Benson on September 29, 2011, which reiterated CMS support for the use of LMSAs.

It is also noteworthy that the U.S. Department of Health and Human Services is in the process of implementing permanent rules regarding Medicare's interests in no-fault and liability claims through an Advance Notice of Proposed Rulemaking (ANPRM), which is titled CMS-6047-ANPRM, Medicare Secondary Payer and Future Medicals. One option under consideration in the ANPRM included the merger of the existing WCMSA submission process to include review of LMSAs. While this ANPRM was withdrawn in 2014, CMS has continued to discuss the issue of future medicals in all injury cases and place interested stakeholders on notice of their rights and responsibilities.

In late 2017, CMS made other announcements that signaled their intent to address the issue of future medical in non-workers' compensation injury claims. This included briefly posting a warning regarding the creation of MSAs in liability and no-fault claims. Although this non-binding memorandum was rescinded, its policy lives on in its system file related to Medicare Administrative Contractors procedures and instructions billers in liability insurance situations and to providers accepting payment from patients with a MSA.

Notwithstanding the current lack of federal regulations regarding no-fault or liability claims under the Medicare Secondary Payer Act, cases such as Hadden and U.S. v. Stricker,suggest CMS is ramping up enforcement efforts of these claims. Attorneys seeking to be proactive on these issues for their client(s) should consider a LMSA or similar legal mechanism in the following instances:

• Cases where a Life Care Plan was included;
• Combined workers' compensation/liability claims;
• Catastrophic injury cases (e.g., amputations, traumatic brain injuries, injuries including a psychological component);
• Settlements that include a structured settlement; or
• Any case in which future medical treatment is expected to continue.

The issue of Medicare's future interests in workers' compensation, no-fault and liability cases is a hot-button topic that dominates our legal community. Regardless of what your position is on the issue of a MSA, it is important to remember that each case needs to be analyzed on its own merits and attorneys should explain all possible adverse ramifications to their clients.