Decades of continuing silence on the role of Medicare Set Aside (MSA) accounts in liability cases may prove disastrous in the face of the injuries and damages caused by the COVID-19 pandemic. America's aging population is growing, and more people reach Medicare-eligibility every day. Any injuries they suffer due to the virus and its debilitating disease will become an issue for the Centers for Medicare and Medicaid Services (CMS).
Liability Cases Raise Different Issues than Workers Compensation Cases
The challenge is this: any entity - any business, any service provider, and even any individual - could be found liable if something they did or didn't do is proven to have caused a COVID-19 infection in a successful plaintiff. When that plaintiff is also a Medicare recipient or is Medicare-eligible (Beneficiaries), resolving the liability case should also include the establishment of an MSA to ensure compliance with the Medicare Secondary Payer Act (MSP) and to protect CMS from paying for injuries that are rightly attributed to that primary payer.
However, that there are no clear rules in place regarding MSAs in liability cases will create havoc for all entities involved in the issue:
- plaintiffs who want to ensure long-term coverage for lingering, COVID-related injuries;
- defendants who intend to accept their responsibility for causing those injuries, and
- CMS, if it has to pursue primary liability parties who aren't covering the plaintiff's costs.
There’s Not So Much Awareness of MSAs in the Liability Community
Most employers and insurers are aware of the MSP obligations mandated when Beneficiaries are injured on the job (although many entities are looking to limit that liability for workers who contract COVID on the job). However, the general public may not be mindful that those mandates also apply to non-WC cases where a person or entity is deemed responsible for injuries occurring to a Beneficiary outside the workplace setting. The majority of the general public may not have ever heard about the MSP. They aren't aware that the Act requires no-fault and liability insurance to be the primary payer for accidental or 'other situation-related health care services, claimed or released' when the injured party is a Beneficiary. When these cases arise (and they will), those entities grappling with confounding legal concerns will be even more baffled by a lack of CMS guidance on the wisdom of including MSA calculations for the liability lawsuit.
Making things worse are two aspects of the pandemic that are converging ominously:
- the rising number of current and eligible Beneficiaries, and
- the rising number of COVID patients who are also Beneficiaries.
The American Population is Aging
The 'Baby Boomer' generation, those born between 1946 and 1964, is aging, and now numbers more than 52,000,000. In 2011, the first wave of these 'Boomers' hit Medicare eligibility, and the last of them won't cross that threshold for another nine years. Further, of the 52 million, approximately 45 million are retired and drawing their Social Security Benefits. Those who contract the COVID-19 virus and require medical help to recover from it will have to find another healthcare resource to pay for those services. For many, that identity of that resource may only be revealed in the courtroom.
Non-Workers are Beneficiaries, Too
Almost everyone in that older population group has the potential to be a Beneficiary plaintiff:
- As customers and clients - Several classes of senior populations pose unique circumstances in the event of a COVID-19 outbreak:
- Senior homes - The startling number of COVID-19 deaths occurring in nursing homes and assisted living facilities underscores the magnitude of the problem for liability cases: those losses account for as many as 40% of all the COVID-19 deaths in the country. Potentially, each of those deaths also represents a wrongful death lawsuit. Senior home residents who recovered from the disease but still suffer from lingering symptoms are also potential plaintiffs in cases filed against the facility where they contracted the illness.
- Subsidized housing residents - Many seniors live in subsidized housing complexes across the country, and in some cases, apartment management stopped the services that regularly checked in on them. Those stoppages have led to unnecessary deaths, certainly, and caused illnesses to worsen, again impacting the need for long-term healthcare support.
- Participants at public gatherings - despite warnings, many people have elected to gather without masks in public places, such as at the Sturgis Motorcycle Rally in Sturgis, South Dakota, and in the many senior communities in Florida and along the Gulf Coast. When attendees are also Beneficiaries, their only obvious option for medical services may be CMS, but there will also be claims of negligence against the businesses and areas that hosted them. These claims will consequently raise many, many assertions that event participants 'assumed the risk of illness' when they attended, knowing that COVID-19 could be in the vicinity.
- As business colleagues - Most businesses deal with other entities, and long-term relationships tend to be more relaxed. Interactions that never posed threats in the past may be overlooked as potential transmission threats now.
- As personal friends, too - Friends and neighbors, trusted for years, are now only as safe as their last interaction with their friends and neighbors. In those cases where the only resources available to cover long-term medical care are through a lawsuit, even these relationships become vulnerable to a legal challenge.
Still No CMS Guidance on MSAs for Liability Cases
The CMS has promised some form of 'guidance' on using MSAs in liability cases for years. In its Fall 2018 notification, CMS indicated that the new rules would give Beneficiaries better opportunities to manage their future healthcare needs while also protecting Medicare's interests. It suggested the new guidance would be issued sometime in 2019. That didn't happen.
Instead, in 2020, an updated notice stated that the new rule would 'clarify' that it would be the Beneficiary's responsibility to protect Medicare's interest in the liability suit and that more information would be made available by August. August has now come and gone, and still, no word from CMS about the liability MSA question.
The delay is, however, causing its own angst:
- For some, no guidance is good guidance. The ClaimsJournal, an adjunct of InsuranceJournal, asserts that mandating an MSA in every liability suit involved Beneficiaries would be unnecessarily burdensome on the parties within those lawsuits. Their analysis suggests that such a rule would be beyond the scope of CMS's authority and that applying the mandate would dramatically slow the progress of those lawsuits to a swift but fair end. In the interim, Beneficiary health might deteriorate, which would (in the event the parties can't reach a settlement) compel Medicare to assume the responsibility for those costs, as well as the expenses incurred due to the original injury or illness.
- For others, any statement by CMS on liability MSAs is, at this point, will be as confusing as no statement at all. In its proposal, CMS could assert any number of parameters, including who would be responsible for what, where limitations and exclusions might lie, and whether there will be financial thresholds to meet before filing. Those unknowns raise their own questions. Additionally, the CMS proposal should also contain a procedure or process to follow to become compliant. The questions raised by the 'theoretical how' and the 'practical how' are many. Not insignificantly, 'when' these new rules come into play is also a question; it often takes months or years to get all the systems in place, and there's usually a long and significant learning curve required for everyone involved.
Clearly, the process of designing and implementing an MSA strategy for liability cases involving Beneficiaries is complex at the best of times. The COVID-19 pandemic makes these, arguably, the worst of times to be mandating the use of such a complicated tool in an entirely new class of cases. However, the MSP is clear: Medicare is the mandatory secondary payor for Beneficiary healthcare costs caused by a third-party. Failing to clarify that point in any Beneficiary-related liability lawsuit threatens the stability of that case resolution, and/or opens CMS to risk of using Medicare funds to pay for another entity's errors.
What we do know is this:
- The MSP is still the law and applies to any case where the plaintiff is a Beneficiary.
- The large number of beneficiaries who have fallen ill with the COVID-19 virus suggests that at least some of them will file lawsuits against the entities that they believe are responsible for their illness and the costs of the damage it caused.
- Even without CMS's official guidance on the specific liability issue, making an effort to get clearance from CMS for an MSA within the COVID-19 liability lawsuit would be best practice:
There are (most likely) a lot of Beneficiary-related, liability-based lawsuits on the way. Planning now to manage a possible CMS MSA application within them will save all parties time, money, and stress.