The October 1, 2017 Medicare Secondary Payer (MSP) reimbursement changes

Beginning October 1, 2017, the Centers for Medicare and Medicaid (CMS) will implement a new policy regarding Medicare Secondary Payer (MSP) reimbursements—specifically,liability Medicare set-asides (LMSAs). At the request of CMS, the Medicare Administrative Contractor will begin to track the existence of any LMSAs related to a claim and deny payment for items or services that it deems should be paid from that LMSA rather than being paid for by Medicare. According to CMS, “Liability and No-Fault MSP claims that do not have a MSA will continue to be processed under current MSP claims processing instructions.”

I can not stress how important it is for trial lawyers nationwide to be aware that these changes in Medicare policy are going to generate a lot of additional issues, and potential liability, when injury victims and their lawyers settle claims with a Medicare component. 

Many trial lawyers believed this was a settled issue, but it is vital to note that Medicare's authority in this area has never changed! There has been no change in statutory or regulatory policy. Rather this is a notice of CMS commencing enforcement of a long standing provision in the law allowing for CMS to deny future payments for claims in which a liability settlement was in place. 

While this instruction from CMS does not create an affirmative directive for Medicare beneficiaries, both current and future, to create a liability set-aside (Medicare Set Aside Account), it does indicate that you MUST evaluate and begin to resolve any lien early in the settlement process. 

Further, and possibly of greater importance, is the need to understand the MSP statute even if you are currently contracting out your Medicare Lien Resolution to a third party. The stakes are substantial and you absolutely must make plans for FUTURE Medicare clients at the time of settlement by way of a set aside and determine if funds need to be placed in a MSA account to resolve that liability at settlement. 

It is the opinion of Mark Wahlstrom, at Wahlstrom & Associates, that these changes are going to dramatically impact the settlement process and increase the cost of settlements once trial lawyers understand the importance of including the present value of this possible future liability in their settlement demands and ultimately their settlements. 

If you have questions on how to handle these new MSA and MSP issues, contact your current expert or contact Mark Wahlstrom at Wahlstrom & Associates for a better understanding of the options for staying compliant and protecting both the injury victim and their attorney from future liability.  It is clear that CMS is attempting to shift towards a mandatory LMSA regime and trial lawyers must have a legally sound,and efficient strategy and process in place to deal with this increase demand for Medicare reimbursements. 

Posted on September 27, 2017 and filed under Medicare Set Aside.

Using ABLE Programs and Special Needs Trusts to Help Special Needs Clients. Mary Alice Jackson Explains

The Social Security Act covers the needs of retirees, individuals with disabilities and the elderly. For persons with disabilities, the Supplemental Security Income program (SSI) provides monthly income for individuals who have never worked, or who never paid enough into Social Security, to receive Social Security Disability Insurance benefits (SSDI).  Medicaid provides essential medical benefits.  Both SSI and Medicaid are “means-tested” and require that applicants meet medical, income and asset rules.  In addition, there are strict rules for applicants who give money away to become eligible for these benefits.   Frequently, clients confuse the regulations in the Internal Revenue Code (IRC) with SSI/Medicaid rules.  What is permissible under the IRC Code may create ineligibility for SSI/Medicaid applicants.  For instance, the IRC permits taxpayers to give away up to $14,000 per year each to as many people as they choose.  However, both SSI and Medicaid will impose penalties on applicants who make such gifts.  Now, there is a new program that promotes independence for persons with disabilities, but also overlaps IRC and SSI/Medicaid rules. Austin, TX attorney Mary Alice Jackson explains how these conflicts may be avoided in this report.

The SSI and Medicaid resource limit is $2,000 (excluding a home, car and a few other items). This small amount often results in individuals with disabilities living a life of poverty.  But instead of spending down excess assets, these monies can be used to fund a “special needs trust” (SNT). A trust is a contract with certain terms and conditions, and there are many different types of trusts.  An SNT can accept excess monies, and the funds in the SNT are not counted as assets against the $2,000 limit.  Thus, there is no disqualification from public benefits, and there are funds that can be used for all kinds of needs the individual with disabilities may have.   An SNT provides that an individual with a disability or a third party—a family member, friend, or charitable source —contributes money for the sole benefit of the person with the disability to supplement the beneficiary’s special needs.  Done correctly, the trust assets are not counted when eligibility determinations are made for for public benefit programs. For example, a child for whom a trust has been established is eligible to apply for Supplemental Security Income and Medicaid at age eighteen, and both programs have a $2,000 asset limit for eligibility. If an SNT has been created and the individual applicant has more than $2,000 from earnings or gifts, the excess money can be placed in an SNT and eligibility problems are avoided.


 Mary Alice Jackson

Mary Alice Jackson

Jackson points out that creating and funding an SNT is perfectly legal under SSA regulations and is a great planning option for many individuals.  However, there are two important downsides to the benefit of an SNT:  the beneficiary is dependent on the “trustee,” who legally owns the trust money, and can’t compel the trustee to make any distributions.  For example, a device might be invented that would allow someone who cannot speak to speak using new technology. The SNT funds could pay for such a device. The SNT could also pay for the services of a home health worker to be available daily.  The beneficiary may request these items, but the trustee can refuse the expenditures based on their subjective assessment of the beneficiary’s needs and the available trust assets.  The SNT gives no autonomy to the beneficiary to manage his or her own money,whether or not he or she has mental capacity.   

The newest tool in special needs planning is an “ABLE” account. ABLE stands for “Achieving a Better Life Experience,”, Jackson says. An individual with a disability can have only one ABLE account.  . One difference between an ABLE account and an SNT is that there is no document establishing it. An ABLE account is simply established online with a state agency which invests the funds and makes disbursements.  The account does not have to be established in the state in which a beneficiary with special needs resides. The account investment choices can be reviewed twice a year. In order to spend the money, one sends in a request to the state, often to the comptroller’s office, and the state sends a check. The state does not follow how the money is spent, but the Social Security Administration will care.

Jackson points out that ABLE accounts are another place where state and federal rules may collide. The federal solution was to add a new §529 to the Internal Revenue Code. §529 covers accounts to collect money for education. §529A covers ABLE accounts. “In every state of which I’m aware, it’s the same agency that’s managing both sides of these accounts.” As to who makes the requests for ABLE funds, it is a matter of the beneficiary’s capacity. Beneficiaries with capacity may make their own requests and can spend the money themselves on “qualifying disability expenses,” or QDEs. QDEs include education, technology, companions, assistive devices, travel, clothing, etc. Realistically, Jackson says, it can be almost anything that is of benefit to the person for whom the account was established. If an ABLE beneficiary does not have the capacity to work with money, the request must be made by a parent, legal guardian or someone with an appropriate power of attorney.

There are no restrictions on who can give money to an ABLE account. The limit is that donations may not exceed $14,000 in a calendar year. The $14,000 figure is also tied to the Internal Revenue Code: It is the amount an individual can give away in a year without having to file a gift tax return. Should the amount that can be given annually increase from $14,000, the ABLE rule will change as well.  If the balance of an ABLE account exceeds $100,000, an SSI recipient’s benefits will be suspended, not terminated, until the balance falls below $100,000 again.  

Planning for a person with special needs may involve either or both an SNT and an ABLE account. The two are not  mutually exclusive. For example, someone who can work may want to get a job and put money into an ABLE account and save towards purchasing a car. That person may also have an SNT, funded with other people’s money, as a place for relatives to leave money when they die. One difference between the two is that if an SNT is funded by people other than the beneficiary (known as a “third party” SNT), Medicaid has no claim on the money when the beneficiary passes away.  There is a Medicaid claim when the SNT was funded only with money that was owned by the beneficiary (a “first party” SNT).  Unfortunately, an ABLE account will be liable to repay Medicaid when the beneficiary passes away regardless of who contributed the funds to the ABLE account over the years.  

The area of special needs planning is complex. Interested parties might want to check with Special Needs Alliance website to locate attorneys skilled in this area of practice.

Mary Alice Jackson is the sole shareholder in the firm of Mary Alice Jackson, P.C. in Austin, Texas. Her practice focuses on elder law and special needs planning, including estate planning for individuals with special needs and their families. She is a Fellow of the National Academy of Elder Law Attorneys.   She is also a board member of the Special Needs Alliance and serves on its Public Policy Committee, which identifies priorities for advocacy on the state and federal levels. The Settlement Channel is a featured network of Sequence Media Group.

Posted on August 8, 2017 .

DOL Fiduciary Deadline is coming, what compliance is essential?

The decision earlier this week by Labor Secretary Acosta to not further delay the implementation of the DOL Fiduciary standards on June 9th. This is creating a huge push for compliance guidelines for annuity sales staff, annuity brokers and structured settlement experts. Ok, maybe not the structured settlement experts, they are exempted from just about all suitability and regulatory oversight other annuity purveyors are being held to. That said, these standards will very likely become the defacto expectation regarding duty of care to clients and structured settlement professionals would be wise to immediately adapt their business practices to adhere to them. 

 The future. Photo Credit Shutterstock

The future. Photo Credit Shutterstock

This morning ThinkAdvisor published what I think is a very handy check list of dates, guidelines and duties related to how and where this new Fiduciary Standard is being applied. It is as follows:

  1. Applies to IRAs: The rule applies to investment advice concerning IRAs, ERISA plans, and plans covered by Section 4975 of the Tax Code.
  2. Best interest standard starts June 9: Beginning June 9, financial institutions and advisors to covered plans must provide advice in the retirement investor’s “best interest,” which includes a duty of prudence and loyalty.
  3. BICE compliance starts Jan. 1: The extensive compliance requirements of the best interest contract exemption, which would apply to non-level fee products, are not in force until Jan. 1, 2018.
  4. DOL expects changes by Jan. 1: During the transition period (June 9-Jan. 1), Labor will collect additional information from the industry to determine how compliance practices such as the use of mutual fund “clean shares” should reshape the rule.
  5. Proprietary products with commissions permitted: During the transition period, firms can recommend proprietary products with commissions so long as they satisfy the best interest standard.
  6. Need policies and procedures: Labor expects firms to adopt policies and procedures necessary to ensure compliance with the best interest standard.
  7. Robo-advisors can rely on BICE: Robo-advisors may rely on the BICE during the transition period to ensure compliance with the rule.
  8.  Investment advice narrowly defined: Investment advice, for purposes of the rule, does not include plan information or general financial, investment and retirement information.
  9. Can rely on written representations from intermediaries: The rule does not apply if an independent fiduciary provides written representations (including negative consent) that the fiduciary is a bank, insurance company, BD, RIA, or independent fiduciary managing at least $50 million.
  10. DOL will focus on compliance over enforcement: Labor says it will prioritize compliance over enforcement during the transition period so long as firms work diligently and in good faith to comply with the rule. ( Source:, published 5/26/17)

In short, we are entering a world where a ton of annuity sales used in IRA roll overs by the Fixed Index Annuity markets is being swept into a standard that requires full disclosure of commissions, conflicts and making sure the recommendation is demonstrably in the best interest of the client. There are a lot of effective compliance tools and courses developed for this transition, I strongly suggest structured settlement professionals and structured settlement planners adopt them on the same schedule and be ahead of the curve instead of behind it. 

Posted on May 26, 2017 and filed under Settlement Expert.