Medicare Update: Obtaining Conditional Payment Amounts Before Settlement, the Fixed Percentage for Low-value Settlements, and the Repayment Threshold
By: Vicki M. Smith
Settlements involving Medicare beneficiaries may have become a little easier. A new procedure implemented in February 2012 allows a beneficiary to obtain a conditional payment amount from Medicare before settlement is reached in certain circumstances. Additionally, satisfying Medicare’s right to recover in low value settlements has been simplified. If the settlement is $300 or less and meets certain other conditions, Medicare will not seek to recover its lien, or if the settlement is $5,000 or with less, also with some conditions, Medicare’s reimbursement can be satisfied by paying 25% of the recovery.
Obtaining Conditional Payment Amount Before Settlement
As of February 12, 2012, the Centers for Medicare & Medicaid Services initiated a new procedure where Medicare beneficiaries can self-calculate a conditional payment amount from Medicare before settlement in certain situations. Hopefully, this will reduce the unknowns that have plagued settlements involving Medicare beneficiaries.
The Medicare Secondary Payer Act, 42 U.S.C. §1395y requires reimbursement of all Medicare benefits paid relating to a personal injury. While reimbursement of the benefits is mandatory and carries significant penalties if Medicare’s reimbursement rules are not strictly followed, historically, Medicare would only provide a final pay-off amount after the parties reached settlement. A Medicare beneficiary could obtain an approximation for Medicare’s lien but that amount was subject to change in the final demand letter. Now, under certain circumstances, beneficiaries can obtain the final demand amount from Medicare up to 60 days before settlement.
The following conditions must be met for Medicare to provide the final demand amount before a settlement is reached:
- The claim and settlement must be for an injury caused by physical trauma. The settlement cannot involve or relate to injuries caused by exposure, ingestion or medical implant.
- The beneficiary’s medical treatment for the injury must be completed with no further treatment expected. Treatment must have been completed at least 90 days before the beneficiary submits the proposed conditional payment amount to Medicare. These requirements are proven to Medicare by providing either a physician’s written confirmation or, if the beneficiary did not seek medical treatment for the injury, a written certification by the beneficiary.
- The total settlement, judgment, award or other payment cannot exceed $25,000.
- The date of the incident must have occurred at least six months before the beneficiary submits the self-calculated final conditional payment amount to Medicare.
When these conditions are met, a beneficiary can submit the self-calculated conditional payment amount to Medicare (via the Medicare Secondary Payer Recovery Contractor (MSPRC)) for approval. The request must include: Medicare’s Payment Summary Form (received with the Conditional Payment Letter) with notations as to whether each claim on the Summary Form relates to the case being settled, a list of additional claims not included on the Summary Form, an explanation for disputed claims, the beneficiary’s self-calculated conditional payment amount, the settlement amount, a description of the injury, certification that the beneficiary met the above eligibility requirements, the physician’s confirmation or beneficiary’s certification relating to the need for future medical treatment described above, and the signatures of the beneficiary and the attorney or representative. The MSPRC provides model language for the request at http://www.msprc.info/forms/Self-Calculated%20Conditional%20Payment%20Amount%20Model%20Language.pdf.
Within 60 days of the submitting the request, the MSPRC will send a letter to the beneficiary with its response. If the self-calculated conditional payment amount is approved, the settlement must occur with 60 days of the date of the letter and the beneficiary must send proof of the settlement to the MSPRC.
For more information about this procedure, see the MSPRC website at http://www.msprc.info/forms/SelfCalculatedFinalCP.pdf.
Paying a Fixed Percentage for Settlement of $5,000 or Less
In an effort to streamline Medicare’s reimbursement rights, Medicare adopted an option for beneficiaries to elect to pay 25% of their recovery as full satisfaction of Medicare’s right to reimbursement in limited situations.
A beneficiary may take advantage of this Fixed Percentage Option when all of the following circumstances apply:
- The settlement, judgment, award, or other payment is from liability insurance or self-insurance. This option is not available to workers’ compensation or no-fault settlements.
- The settlement, judgment, award, or other payment must be for an injury caused by physical trauma and not related to exposure, ingestion or medical implant.
- The total settlement amount does not exceed $5,000.
- The beneficiary chooses this option within the required timeframe and before Medicare issued a final demand letter or made any requests for reimbursement.
- The beneficiary has not received and does not expect to receive any other settlements, judgments, awards or other payments related to the incident.
If the above conditions are met, a beneficiary can avoid the traditional, and longer, reimbursement process with Medicare and can satisfy Medicare’s reimbursement claim by paying Medicare 25% of the total liability insurance settlement. However, a beneficiary’s right to appeal the fixed payment amount or request a waiver of the amount is waived once the option is elected. There are other advantages and disadvantages to selecting this option that should be considered. To learn more about the Fixed Percentage Option, see the MSPRC website at http://www.msprc.info/forms/Fixed%20Percentage%20Option%20Information.pdf.
The Repayment Threshold
If the settlement of a liability insurance claim, including self-insurance claims, is $300 or less, the MSPRC will not seek recovery against the settlement, judgment, award or other payment. But, there’s a catch – this threshold applies only if the following conditions are met:
- The settlement, judgment, award or other payment must be related to a physical trauma-based incident. The threshold does not apply to claims involving ingestion, implantation or exposure.
- Liability insurance or self-insurance must be involved in the settlement, judgment, award, or other payment.
- The total amount of the settlement, judgment, award, or other payment is $300 or less.
- The beneficiary has not received and does not expect to receive any other settlements, judgments, awards, or other payments related to the incident.
- Medicare has not issued a recovery demand letter.
- The insurer or self-insurer has not paid and is not continuing to directly pay the beneficiary’s medical bills.