Defendants settling personal injury cases with Medicare beneficiaries grapple with a growing and ever-changing set of federal regulations concerning the Medicare Secondary Payer (MSP) program.  On Friday, June 15, 2012, Medicare added to that regulatory checklist with the release of proposed guidelines to address Medicare's recovery of medical expenses incurred after settlement, commonly known as the "Medicare Set-Aside" issue. 

The proposed guidelines request comment on seven methods to address Medicare's interests in medical expenses incurred after settlement 

1. Self-Funding. Under this option, the beneficiary pays for all related future medical expenses until the settlement proceeds are exhausted.
2. Low Threshold Exemption.   Medicare would not pursue recovery of future medicals under certain conditions; most notably, if the settlement was below a threshold amount (as of yet undefined) and the underlying claim did not involve chronic illness or major trauma.
3. Physician Attestation.  Medicare would not pursue future medicals if the beneficiary receives a physician attestation that care related to the injury was completed before settlement.  Alternatively, if the beneficiary receives a physician attestation after settlement, Medicare's future interests would be limited to expenses incurred before the date of the attestation. 
4. Medicare Set Aside (MSA).  MSAs reflect a process by which settlement funds are used to pay for future medical expenses otherwise covered by Medicare. A MSA can take many forms, depending on the circumstances of the settlement, and is not necessarily a formal process or separate account.  Medicare has established processes to review and approve MSAs in the workers compensation context, but not for liability settlements.  The proposal requests input on how a MSA review/approval process in the liability context should be structured.  Current regulations do not require MSAs for non-workers compensation settlements, but they can be a useful tool to minimize the settling defendant's liabilities under MSP regulations.
5. Low Threshold Reimbursement Options.  Medicare currently provides three methods to address recovery of pre-settlement expenses for settlements under $25,000.  These options also address MSP obligations for future expenses. 
6. Upfront Payment.  Medicare proposes a system through which a one-time, upfront payment to the federal government would satisfy Medicare's recovery interests related to future medical expenses.
7. Waiver.  Medicare proposes to extend the existing waiver process to "future medicals."

The MSP program addresses reimbursement to Medicare when a beneficiary receives a personal injury settlement from a third party.  In general, Medicare can target the beneficiary or the settling defendant for reimbursement.  The proposed guidelines suggest that Medicare's MSP reimbursement rights fully extend to post-settlement "future medicals."  Settling defendants should note Medicare's expansive interpretation of the MSP statute in this regard. 

Additionally, Medicare proposes that options 1 – 4 could apply to individuals who will become Medicare beneficiaries after settlement, thus extending MSP considerations in the liability context to future Medicare beneficiaries. 

Although the proposed guidelines lack concrete guidance for addressing future expenses, they highlight options and considerations that can be utilized now, depending on the circumstances of the settlement.  Settling defendants should continue to determine whether, and how, settlements address Medicare's interests with respect to future medical expenses.

Comments to the proposed guidelines (click here for a PDF copy) are due by August 5, 2012 and should be submitted to the Centers for Medicare & Medicaid Services (CMS), which administers Medicare.  Medicare also requests recommendations for other methods to address future medicals.  CMS will issue final regulations after comments are considered.  Nelson Mullins can assist in preparing and filing comments directly with CMS on matters relating to these proposed guidelines, or any other aspect of the MSP program which present problems or concerns in the marketplace.

The Nelson Mullins' National Healthcare, Life Sciences and Litigation Practice Groups routinely advise providers, manufacturers, medical device and pharmaceutical companies on Medicare Secondary Payer reporting and compliance issues relating to products liability litigation, including medical device recalls.   For more information, contact Jim Rogers (803.255.9489), Barry Alexander (919.877.3802), Eli Poliakoff (843.534.4122), or the Nelson Mullins attorney with whom you regularly work.