Originally published in Course & Scope (January 2012) Newsletter of the Workers’ Compensation Section of the North Carolina Bar Association

Your new client Ralph Kramden, 66, comes to you seeking help. He has a $100,000 Medicare Set-aside Arrangement established after a minor 2005 bus accident at work. The MSA includes approximately $60,000 for a spinal cord stimulator, and Ralph reports that his doctor of the past couple of years says that Ralph is not a candidate for spinal cord stimulation (SCS) on account of the pacemaker that Ralph has had since 2002.

Ralph would really like to access some of the MSA funds. Over the years very little of it has been disbursed, and he has had very little pain and never relied on anything stronger than over-the-counter pain relief.

Upon further research you discover that SCS is indeed contraindicated for patients with pacemakers. In fact, a careful review of the 2007 submissions to CMS shows a significant over-allocation to the MSA. Aside from the issue involving the SCS (or lack thereof) it appears that brand name analgesics (notably Duragesic patches) were used.

Duragesic is a fairly powerful opioid patch that Kramden will likely never use. Further Duragesic use can be addictive, and probably should not be used indefinitely. In keeping with what the initial MSA submitters thought to be acceptable practice, the Duragesic was priced in the MSA over Kramden’s life.  Fortunately, the MSA did reference “Duragesic, or acceptable generic.” You have learned that even if Kramden were using anything stronger than OTC analgesics for pain, a Duragesic generic (fentanyl) is now available at less than two-thirds the price of the Duragesic listed in the MSA prescription drug component.

The entire file leaves you wondering whether the CMS staff are still celebrating over the allocations made to Kramden’s MSA. Maybe hindsight is 20-20. Then you begin to wonder if Ralph has any recourse or right to modify the MSA.

What is galling is that while the entire MSA submission process is voluntary (albeit highly recommended if the case falls within MSA workload review thresholds) Kramden’s case would not even be reviewable had the current review thresholds been in place when CMS reviewed Kramden’s MSA back in 2007.[1] The solution then would have been: Fix it and move on.

The CMS Position: Yes, Yes With Limits, No

CMS takes the position that once an MSA has been reviewed and approved no funds should be released from the MSA for any purpose other than the purpose for which the MSA was established unless CMS approves. Upon discovery of such an unauthorized disbursement, future Medicare reimbursement could be denied until an amount equal to the entire settlement (net of reimbursed conditional payments) has been expended on injury-related expenses. Not pleasant, although a denied claimant would have access to the usual Medicare appeals process.

In an April 22, 2003, policy memo[2] CMS announced that if a treating physician concluded that a beneficiary’s medical condition “substantially improved” a written request together with appropriate supporting documentation could be submitted to the appropriate regional office.

Apparently the April 22, 2003, policy unleashed a workflow avalanche. In Q&A 10 of a July 11, 2005, policy memo CMS backtracked and limited review of revised WCMSA proposals to those submitted five or more years after the initial approval letter and justifying a 25% or more reduction in the then outstanding MSA funds. Ralph would have had a reasonably good chance of submitting a revised MSA proposal, less the SCS, and perhaps less the other analgesics (or at least priced at the generic level).

Unfortunately, effective August 25, 2008, CMS rescinded Q&A 10 of the July 11, 2005, policy memo. In effect, CMS is attempting to “freeze” allocations for future medicals at settlement date levels.

Well . . .Maybe

In spite of the air of finality in the August 25, 2008, memo, there may be a glimmer of hope for Kramden.  Q&A 12 of the July 11, 2005, memo remains in force.

Q&A 12, entitled “Additional Information Submission after WCMSA Case Is Closed” might help Ralph out. The policy reminds readers that “[t]here are no appeal rights stemming from a CMS determination of the appropriate amount of a WCMSA” but that there are “several other options available.”

A submitter who believes that there are “obvious mistakes, such as mathematical errors or failure to recognize” previously paid expenses being included in the allocation is invited to contact the Regional Office issuing the final determination for a correction.

A submitter who believes evidence has been misinterpreted or who disagrees “for some other reason” has a couple of options. If a submitter believes additional evidence not previously considered would warrant a change in the MSA amount, the case may be resubmitted “with the additional evidence” and a request for review to the Coordination of Benefits Contractor (COBC). The request will be treated as a new WCMSA submission.

In the case of Ralph Kramden, it may be worthwhile to consider a re-submission under the foregoing policy. The fact that in 2007 he had a pacemaker that would have medically contraindicated the use of a SCS at the time of the WCMSA submission certainly falls under the heading of “additional evidence not considered at the time of the initial submission.”  Had medical evidence been developed much later that pointed to the avoidance of SCS for pacemaker wearers, though not as strong a case, a submission might still be warranted.

With respect to the Duragesic component, two possible arguments could be advanced. First, Duragesic (or a generic equivalent) should not have been priced for Ralph’s life due to its addictive nature; the correct manner would have been limited to a specific duration (be sure to support this contention with medical records or a physician’s statement). Second (and as an alternative argument), now that a less expensive generic is available, any component remaining for the use of this generic should be repriced. With respect to the latter argument, there is no CMS guidance, but it is certainly worth the attempt.

Finally, CMS acknowledges that a claimant has recourse to the usual Medicare appeals route if payment is denied on the basis that the WCMSA has not been properly exhausted. The rights available to a denied Medicare claim are much more extensive, including eventual recourse to the federal courts. The amount involved, however, would have to be significant in order to justify the loss of Medicare during the appeals process, not to mention the direct costs associated with the appeal.

Summary

Unfortunately, there is no longer a procedure for reducing or eliminating an over-allocated MSA. On the other hand, CMS policy indicates a potential for reconsideration in cases of clear error or the development of new or additional evidence. The likelihood of a successful adjustment, however, is far from certain, and the practitioner and client will be required to consider whether the process is worth the time and effort.

Guest Columnist . . .

Patricia A. Shevlin, MD

At the beginning of every year, most of us try to get organized, make a few resolutions about what we could do better and start new prescription drug plans. One area that is frequently neglected is the medication list.  In an effort to cut down on medication errors, I offer my recommendations to patients about their medications.

1. Keep an updated list of your medications with you. Include the prescription and the non-prescription medications. Before your appointments, review the list by comparing it to the bottles that you have at home. If there is a discrepancy, you should adjust your list. If there is an error or suspected error you will be able to get it corrected by calling the office of the physician who wrote the prescription, or ask at the office visit.  At the appointment or when you get home, add any new prescriptions to your list.
2. Include on the medication list the reason for the medicine, such as diabetes or blood pressure. I think this makes it easier to organize your medications and to realize what to expect if you miss a pill or run out of a medication.
3. To prevent running out of a medication, I strongly recommend a weekly pill container. When you fill this every Saturday or Sunday, you will know in advance when you need to call for refills. No matter how efficient an office or pharmacy is, delays can occur due to electronic transmission errors, fax machine downtime etc.  The sooner you can request a refill, (within the requirements of your insurance company), the better.
4. The weekly medication container is NOT an indication of memory impairment.  Most of us are busy and when we have medications we take at the same time day after day, it is easy to think you have taken a medication when you have not. I remind patients all the time that birth control pills have come in packages with the day of the week written on them for this exact reason. It’s not a problem just for the seniors.
5. Keep the prescription and non prescription medications that you take on an as needed basis separate from the daily medications. The names should be on a separate list or the back of the daily list. The bottles should be in a separate bag. This cuts down on confusion, especially when filling the weekly pill container. It also helps a family member who may be helping you when you are sick and need one of those medications.

You may be asking yourself “Why do I need to do all of this? My doctor has a record of my medications.” First of all, you are the patient and you are responsible for what goes in your body. In addition to your health, it’s also your money that’s at stake here.  Most of us have multiple doctors and all of our medicines are not written in one place. Bringing your list should encourage your physicians to put the entire list into their records. Finally, many patients use multiple drugstores. There are mail order options for daily medications, local drugstores for acute medications and $4 options for some medications.  The possibilities for confusion are endless.  Everybody needs a reliable system.

Dr. Shevlin is a partner in Asheboro Family Physicians of North Carolina, PA

 

 

 

Does your power of attorney have all the muscle that it needs? A flabby, wimpy power of attorney can be dangerous because it may lull you into a false sense of security and leave you susceptible to getting smacked when you thought you were protected.

Often, one of the first documents I ask a new client to show me is a power of attorney. Then I perform what must seem like a strange ritual as I spend 30 seconds feverishly flipping through pages and scanning the document. At that point I either smile and nod or frown and shake my head. I have been looking for specific powers; for muscle.

Last year I discussed the basics of powers of attorney . . . what they are, the different types, and why they are so important. If you are the least bit uncertain, go back and review that post . . . in fact, if you have about 30 minutes grab a note pad and pen and watch the video posted in that article. Then come back here!

Is Your Fiduciary Faithful – Are His Bona Fides In Order?

Under state law, the person making the POA (the principal) and the person authorized to act (the agent or the attorney in fact – they mean the same thing) are said to be in a fiduciary relationship. The word “fiduciary” is based on the Latin “fide” or “faith”. As in simper fidelis or Fidelity Bank or bona fide.

Fiduciaries are governed both by statute and common law (common law is law that is generally agreed upon by all and sort of “just out there”). A fiduciary is subject to a number of rules that are essentially legal applications of practical ideas of diligence, loyalty and fair dealing. In the context of POAs, however, those rules pose some important considerations.

Perhaps primary among those rules is the duty to conserve the principal’s assets for the benefit of the principal and to avoid commingling the principal’s assets with the agent’s assets . . . or, for that matter, to avoid self-dealing (keep your hands out of the cookie jar!).

Those rules are a good “default setting” because they protect the principal from carelessly giving too much power to an unsuitable agent. On the other hand, those rules prohibit gifting.

The Gift That Keeps On Giving

Gifting can be an important authority. As I tell my clients, “by ‘gifting,’ we aren’t talking about birthdays and Christmas, we’re talking about the ability to freely transfer assets out of the name of the principal.” The ability to undertake a series of carefully planned “gifts” can be essential to a sound estate planning or asset preservation strategy.

A North Carolina statute specifically prohibits gifting under a power of attorney if the document is silent as to gifting. If you enjoy looking up such things, look at N.C.G.S. § 32A-14.1. (By the way, Georgia readers, the same is true under Georgia common law.) In other words, a short power of attorney that says “I give my agent full power and authority to do anything and everything I could do for myself” does not authorize gifting if that topic is not specifically addressed.

And that, Dear Reader, is one of the first things I am looking for when I scan a power of attorney and I know the engagement is likely to involve various asset preservation strategies.

Gifting Powers . . . But Not Really

Another problem I often encounter is the North Carolina statutory short form power of attorney. That is a one or two page form. After a general paragraph that appoints a person “to act in my name in any way which I could act for myself, with respect to the following matters as each of them is defined in Chapter 32A of the North Carolina General Statutes” there follows a series of powers for the principal to initial in order to confer the power. The latest version has 17 different powers, including the power to make gifts . . . even to the agent himself or herself.

These are dangerous forms because they lull people into a false sense of security. The danger comes in the words “as each of them is defined in Chapter 32A of the North Carolina General Statutes.” When it comes to gifting, section 32A-2 of the General Statutes says that in the short form the gifting election means the agent may make gifts of the principal’s assets “in accordance with the principal’s personal history of making or joining in the making of lifetime gifts.”

The problem is that not many people have established a “personal history” of gifting the residence or a farm or other substantial assets . . . even to a spouse! Someone with a statutory short form may think she is covered, but a responsible agent may later discover that that is not at all the case.

The principal, of course, is free to alter the common law or statutory law principles that apply to fiduciaries when she has her POA prepared. That is the key to a well-drafted and thoughtful power of attorney.

Problems With Gifting

Many people are understandably nervous about granting gifting authority to an agent, but some limits on the agent can be put in place. For example, an agent may be given unlimited authority to make gifts to a select group of family members as long as the agent secures the written permission of certain other individuals.

Many POAs attempt to control an agent’s ability to gift by saying something like “my agent may make gifts in an amount not to exceed the federal annual gift tax exclusion.” Be careful of this. That language was inserted as an easy way to put some sort of “reasonable” restriction on gifting ability. The federal annual gift tax exclusion currently is $13,000 to as many individuals as the person making gifts wishes to favor. In a POA, however, limiting the ability of an agent to make gifts to that amount can render the gifting authority nearly useless if there are substantial assets that need to be conveyed. For example, a $13,000 limit on gifts can make conveying a residence or large sum of money difficult, if not impossible.

Other Powers To Think Of

In addition to gifting powers, there are a number of other powers that may require specific attention in a well-drafted POA.

• Real Property

Real property law (land and things on the land) tends to be intricate and the law varies greatly from state to state. Often there are many surprises (many not pleasant) in the law that could restrict the ability of an agent to transfer the principal’s interests in real property.

With that in mind, specifically defining in a POA what an agent may or may not do with real property might be wise.

• Retirement Assets

Everything that could be said with respect to real property applies to retirement assets . . . except for the fact that most retirement plans (IRAs, 401(k) Plans, pensions) are controlled by federal law. A good POA will describe what an agent may or may not do with respect to retirement assets.

• Establishing and Dealing With Trusts

Most states have statutes that pertain to whether an agent may establish a trust on behalf of a principal . . . and most of those statutes require the POA to specifically describe what an agent may accomplish on behalf of the principal with respect to trusts if the agent is to have any authority at all.

• The authority should address both revocable trusts and irrevocable trusts.

Keep in mind that establishing a trust and using the principal’s assets might also be an indirect gift. For example, a trust may provide that the principal will receive income for life, and upon the death of the principal the trust will be distributed to other individuals. In that case, trust authorization language should be used together with gift authorization language.

As with gifting, the agent’s authority to establish and fund trusts can be tied to some external authority (perhaps the approval of another individual).

So . . .

Pull out your power of attorney. Is it up to protecting you? Or do you have a wimp on your hands?

Questions?  Leave a comment below and I’ll respond.