The Remote Brief with Brendon: The Workers’ Compensation Carrier Waives Its Lien and Pays the Beneficiary $0.00 — Is There a Reportable TPOC?
Question:“Brendon – I handle Section 111 reporting for a workers’ compensation carrier, and I have a settlement that has me second-guessing our reporting obligation. The employee, who is a Medicare beneficiary, was badly hurt in an accident that also involved a negligent third party, so there is both a workers’ compensation claim and a third-party liability claim arising out of the same incident. We accepted the workers’ compensation claim and paid roughly $400,000 in benefits (medical, indemnity, and vocational rehabilitation) during the life of the claim. The employee settled his third-party liability case for $3.3M, which the liability carrier paid directly to him and reported as a Liability TPOC. To close out our file, we agreed to settle the workers’ compensation claim on a full and final basis in exchange for a waiver of our subrogation lien — our statutory recovery against the third-party proceeds would have been about $140,000. The key point: we paid the Medicare beneficiary / employee $0.00 in the workers’ compensation settlement. He received money only from the third-party liability carrier. Do we, as the workers’ compensation carrier, have a reportable TPOC under Section 111, and if so, for how much?”
Background and Answer: “Companion claims” — where a worker’s compensation claim and a third-party liability claim arise out of the same accident or injury — are relatively common; unfortunately, these claims tend to cause reporting anxiety because the Medicare beneficiary typically pockets a large sum of cash even though the workers’ compensation carrier may not contribute a single dollar to the workers’ compensation settlement. The confusion is largely born out of the following passage from the Centers for Medicare & Medicaid Services’ (“CMS”) NGHP User Guide:
NGHP User Guide – Chapter III, Section 6.4 – TPOC Reporting
The computation of the TPOC amount includes, but is not limited to, all Medicare covered and non-covered medical expenses related to the claim(s), indemnity (lost wages, property damages, etc.), attorney fees, set-aside amount (if applicable), payout totals for all annuities rather than cost or present values, settlement advances, lien payments (including repayment of Medicare conditional payments), and amounts forgiven by the carrier/insurer.” [emphasis added].
Some insurance professionals coming across this language may assume that the term “amounts forgiven” is broad enough to encompass a workers’ compensation carrier’s subrogation and/or waiver. After all, “amounts forgiven” is not a defined term within the NGHP User Guide, and it may feel as if an amount that is subrogated or waived is similar enough to an amount that is forgiven. However, the analysis does not stop here. CMS provides the following fact pattern in a separate section of the NGHP User Guide:
NGHP User Guide – Chapter III, Section 6.1.11 – Subrogation by an Insurer
· Insurer A pays the claim of its insured under the terms of its contract. The insurer is the RRE and reports the payment.
· Insurer A files a subrogation claim (on behalf of its insured/the injured party) against insurer B.
· Insurer B indemnifies insurer A for the payment it previously made.
· The indemnification payment is not reportable by either insurer.
As you can see, our workers’ compensation subrogation-waiver scenario is the mirror image of CMS’ example above: instead of Insurer B paying Insurer A through subrogation, our workers’ compensation carrier forgoes its subrogation recovery entirely. If an actual subrogation indemnification payment between insurers is not reportable, then the mere waiver of a subrogation right likewise does not generate a reportable TPOC.
Readers will also note that our workers’ compensation carrier paid $400,000 in benefits (medical, indemnity, and vocational rehabilitation) during the life of the claim. These were made during the routine handling of the claim; as such, they are best categorized as Ongoing Responsibility for Medicals (“ORM”) payments, not TPOC. To also report this same $400,000 as a TPOC would effectively be counting the same dollars twice and likely give rise to unwarranted conditional payment recovery efforts from traditional Medicare and private Medicare plans.
Bottom Line: Where a workers' compensation claim involving a Medicare beneficiary resolves with the beneficiary receiving $0.00 from the workers’ compensation carrier, the carrier is reporting ORM for benefits paid during their routine handling of the claim, and the carrier waives its subrogation interest against the third-party recovery, the workers’ compensation carrier does not have a reportable TPOC. The beneficiary’s only recovery — and the only TPOC to report — flows from the third-party liability settlement.While the term “amounts forgiven” remains a slight gray area within current CMS policy, it is at least clear that subrogation waivers are not reportable as TPOC where ORM was otherwise reported.
Sanderson Firm routinely assists our clients in navigating complex MSP compliance questions, including Section 111 TPOC reporting obligations in “companion claims.” If you have a question regarding this article, or a question or idea for a future The Remote Brief with Brendon column, please email Brendon at brendon@sandersoncomp.com.
