Beyond Structured Settlements

SSP 2008 Annual Meeting - 2

The Society of Settlement Planners (SSP) hosted its 2008 Annual Meeting in Washington, D.C. on March 5-7.  Approximately 75 persons attended the SSP meeting including settlement planners, special needs attorneys and annuity provider representatives. Under direction from 2007 SSP President Anthony Alfieri and Program Chairperson Jack Meligan, SSP's 2008 educational program matched the high standards of previous SSP programs.

During SSP's business meeting, SSP members:

• Adopted the "Standards of Professional Conduct for Settlement Planners"; and
• Elected new officers and directors .
  
  • SSP elected Greg Maxwell as 2008 President and Joseph Tombs as SSP Vice President.
  • SSP Directors include: Richard Bishop; Charles Derenne; Paul Lesti; Tim Nay; and Richard Risk.
  • Nay, the first-ever President of NAELA, is also the first-ever special needs attorney to serve on SSP's Board of Directors.

SSP's Educational Program

• Ethics
  • The SSP Code of Ethics (titled: "Standards of Professional Conduct for Settlement Planners") represents a multi-year SSP project initiated and managed by SSP Director and attorney Richard Risk.
    • Carl A. Pierce, distinguished professor of law at the University of Tennessee and a reporter for the latest revision of the American Bar Association's Model Rules of Professional Conduct, assisted SSP with this ethics project.
    • Pierce introduced drafts of SSP's Code of Ethics at both the 2007 and 2008 SSP Annual Meetings.
  • Frank Johns, a leading special needs attorney and settlement planning ethicist, also advised SSP on its Code of Ethics. Johns, an SSP member, delivered SSP's featured dinner address. Johns' comments focused on ethical considerations for judges, plaintiff attorneys and trustees when selecting a structured settlement or settlement planning professional. Johns' 2008 SSP presentation also featured his proposed Request for Proposal (RFP) for settlement planners. Johns first introduced his ideas for a settlement planner RFP at the 2007 Advanced Elder Law Institute.
• Tax Panel
  • Organized by structured settlement attorney and moderator Richard Risk, SSP's Tax Panel has become the best tax discussion in the structured settlement industry.
  • In addition to Risk, SSP's 2008 tax panel participants included:
    
    • Jody J. Brewster, Tax Partner with Skadden Arps Slate Meagher & Flom;
    • Glenn F. Mackies - Tax Partner at Deloitte & Touche.
    • Michael J. Montemurro - Branch Chief at the Internal Revenue Service responsible for Income Tax and Accounting;
  • The SSP tax panel addressed several topics with single claimant 468B receiving the most attention. The structured settlement industry is waiting for written guidance from the United States Treasury Department as to whether IRC section 468B applies to single claimant cases. SSP's tax panel provided a detailed look at these single claimant 468B issues:
    • The language in IRC section 468B and existing regulations;
    • Technical and policy Issues created by the language;
    • Technical and policy arguments for and against single claimant 468B funds;
    • Impact of economic benefit on single claimant and multiple claimant 468B funds;
    • Defining single claimant and multiple claimants within IRC section 468B.
• Government Benefits -SSP devoted three presentations to government benefit issues.
  • Medicaid
    • David Lillesand, a national leader among social security and special needs trust attorneys, dropped a bombshell on the structured settlement industry at the SSP meeting.
    • Based upon Lillesand's discussions with Social Security officials including Ken Brown, Lillesand declared "inoperative" Nancy Veillon's January 31, 2006 letters to attorneys Roger Bernstein and Jay Sangerman representing the National Structured Settlement Trade Association (NSSTA).
    • NSSTA's letters from SSA are inoperative, according to Lillesand, because:
      • NSSTA's letters from SSA do not represent meaningful authority inside the SSA. POMS yes. Letters no.
      • NSSTA's letters predate (by one week), and fail to address or consider, the Deficit Reduction Act of 2005.
    • Lillesand said he expects the SSA to issue new POMS within the next few weeks.
    • However, the new POMS will not address structured settlements. Lillesand stated "The SSA Office of General Counsel will not approve structured settlement POMS at this time".
    • Lillesand and Ken Brown of the SSA will be featured speakers at the ASNP 2008 Annual Meeting March 27-29 in New Orleans.
    • Lillesand's 2008 SSP presentation focused on the "life or death" issue of Medicaid insurance for disabled persons - plus the challenges and risks for special needs attorneys who recommend annuities as funding and investment options.
    • Lillesand's SSP presentation, and his excellent supporting SSP paper, define serious immediate challenges for structured settlement and settlement planning professionals.
    • Lillesand's proposed solution:
      
      • A collaborative (multi-trade association) initiative focused on annuities and government benefits.
      • And specifically for Medicaid and structured settlements:
        
        • Convince SSA to draft POMS favorable to annuities and structured settlement annuities.
        • Incorporate the January 31, 2006 NSSTA letters into the POMS.
  • Medicare
    • SSP offered two presentations about Medicare.
      • One titled "Medicare Compliance - Medicare Set Asides (MSA) - Beware of the Medicare Super Lien" featured Paul K. Isaac and Benjamin M. Basista.
      • The other titled "Nuts and Bolts of Medicare Set Aside Arrangements" featured Douglas L. Shaw and Marge George-Ratz of Medivest.
    • For this author, neither SSP  Medicare presentation focused satisfactorily on annuity issues related to Medicare Set-Aside arrangements.
    • Request for future SSP and NSSTA presenters about Medicare Set-Aside arrangements:
      • Summarize in your presentations CMS Policy Memoranda addressing structured settlement annuities - especially the CMS October 15, 2004 Policy Memorandum;
      • Context the CMS structured settlement policy memoranda within Medicare legal authority generally;
      • Identify any Medicare legal authority that updates or supersedes the October 15, 2004 CMS Policy Memorandum;
      • Identify the issues, opportunities and risks for settlement planners and structured settlement professionals.
      • Recommend strategies to advance the use of annuities as part of developing government benefit legislation and regulations.
• Secondary Life and Annuity Markets
  • SSP's panel discussion titled "What Settlement Planners Need to Know about the Secondary Markets" expanded previous trade association discussions about structured settlement transfers (aka factoring).
  • This author moderated the SSP secondary market panel discussion which featured:
    • Rhonda Bentzen - a secondary market intermediary who is an honorary member of SSP and serves as Chairperson of SSP's Membership Committee.
    • Stephen R. Harris - a partner at Drinker Biddle & Reath who represents annuity providers;
    • Earl S. Nesbitt - the Executive Director of the National Association of Settlement Purchasers (NASP) who represents factoring companies.
  • The SSP secondary market discussion offered multiple informative perspectives on this controversial topic. It also included questions by SSP members to Nesbitt for NASP members focused upon:
    • Alleged predatory advertising by factoring companies;
    • Alleged improper use of the term "structured settlement" by factoring companies;
• Nesbitt promised to communicate SSP's concerns to NASP members.
• Legislation and Litigation Update
  • 2008 SSP President Greg Maxwell provided a summary of recent legal developments impacting settlement planners and structured settlement professionals.
  • 2007 SSP President Anthony Alfieri updated a tax analysis of sexual abuse cases.
• Case Studies - SSP offered three presentations about settlement planning advice and developments.
  • Professor Joseph Tombs introduced the "Tombs' Dissipation Index" as a settlement planning tool;
  • Jack Meligan and Michele Whitmore analyzed multiple settlement planning scenarios and recommended settlement planning techniques and tools.
  • Ward Zimmerman moderated a panel discussion about negotiation tactics featuring Charles Derenne, Michele Whitmore and Jack Meligan.
• Internet Marketing
  • Mathew Hayes provided insights and strategies to improve SSP member email marketing.
  • Hayes' SSP presentation paralleled Mark Wahlstrom's marketing presentation at the NSSTA 2008 Winter Regional Meeting;
  • In this author's opinion, Hayes and Wahlstrom should expand their Internet presentations to include emerging web 2.0 technologies and tools such as blogs, wikis and podcasts.
    

For prior S2KM coverage about:

• SSP - see this S2KM blog post.
• Web 2.0 - see this S2KM blog post
• Deficit Reduction Act of 2005 - see this S2KM blog post
• Medicare, etc. Extension Act of 2007 - see this S2KM blog post.
• Secondary Life and Annuity Markets - see this S2KM blog post.

Patrick Hindert, S2KM's blog author, is a member of SSP.

Addendum 03132008

S2KM's original post above failed to report two important events from the SSP meeting:

• David Synder - SSP honored Snyder as a founding member of the Society of Settlement Planners and historic leader among settlement planners and structured settlement professionals.  Snyder recently announced the sale of his former company Delta Settlements to Michael Upchurch.
• AAPD Leadership Gala dinner - The 2008 AAPD Gala was even better than advertised and raised more than $1 million.  Both SSP and NSSTA members attended. NSSTA was an event sponsor.

Medicare, Medicaid, and SCHIP Extension Act of 2007

S2KM's first blog post of 2008 provides an addendum to Structured Settlements in 2007 and highlights the "Medicare, Medicaid, and SCHIP Extension Act of 2007" (Extension Act) which President George W. Bush signed into law on December 29, 2007.

For structured settlement and settlement planning professionals, the Extension Act may prove to be the most important long-term strategic development of 2007.

Beginning July 1, 2009, Section 111 ("Medicare Secondary Payer") of the Extension Act requires liability insurers (including self-insurers, no-fault insurers and workers compensation insurers) to:

• Determine Medicare status for all claimants; and
• Report all claims involving a Medicare beneficiary to CMS (the federal administrative agency responsible for administering Medicare and Medicaid) when those claims are resolved.

If the reporting for any claimant is not done in a timely manner, the Extension Act authorizes the Department of Health and Human Services (through its agency CMS) to enforce a civil penalty of $1000 per day. These information requirements and penalty provisions provide the basis for expanded enforcement by CMS of the Medicare Secondary Payer (MSP) statute, which has heretofore been limited to workers compensation claims. The anticipated result: fundamental changes in how most personal injury claims are evaluated, negotiated and settled.

Congress enacted the MSP statute in 1980 to curb the rising cost of Medicare. The 1980 provisions require insurers to pay for medical services rendered to Medicare beneficiaries leaving Medicare to provide benefits only as a "secondary" payer. Medicare may make conditional payments for medical services if payment by a primary payer cannot reasonably be expected to be made promptly in which case the primary payer must reimburse Medicare.

In applicable cases, CMS will not recognize a settlement that does not protect Medicare's interests. Because Federal law has precedence over state laws and private contracts, Medicare has a direct right of action against entities who are responsible for making payments (insurers) and entities who receive proceeds from the primary payer (claimants; attorneys; consultants; medical providers). Medicare is entitled to double damages plus interest if the primary payer knew or should have known of Medicare's interest and paid the claimant anyway.

Despite existing MSP legislative authority, CMS did not begin to enforce the MSP requirements until 2001. Since 2001, CMS' enforcement of the MSP rules has been restricted to certain categories of workers compensation cases. For such cases, CMS has issued a series of policy memoranda to be used by contractors and CMS regional offices in evaluating proposed settlements to determine whether the amount allocated for future medical expenses is reasonable.

Medicare set-aside arrangements (MSAs) have emerged as the standard administrative and funding mechanism to allocate settlement money for future medical expenses that would otherwise be covered by Medicare. Neither CMS nor the Code of Federal Regulations defines the specific types of funding arrangement that are acceptable for MSAs. However, trusts and custodial accounts are the primary funding alternatives.

Current MSA funding and administrative requirements are the same regardless of the type of funding and whether the funding is professionally administered or self-administered:

• The claimant cannot use any moneys from the MSA allocation until the claimant becomes a Medicare beneficiary;
• The MSA assets are held in an interest-bearing account;
• The MSA can only be used for Medicare-covered expenses;
• No claims for services can exceed the workers compensation fee schedule unless state law permits and CMS approves;
• MSA accounting must be reported to the CMS Regional Office annually until the MSA funds are exhausted;
• Legal fees and administrative costs cannot be charged to the MSA.

Structured settlement annuities are permitted in MSAs provided they meet rules CMS has identified in a series of policy memoranda. See especially the CMS October 15, 2004 policy memorandum which also includes rules for calculating discounts and inflation. Structured settlement proposals that are part of an MSA arrangement must be approved by CMS.

In summary:

• Existing MSP and MSA rules create responsibilities and potential penalties for all parties and participants in settlements involving future medical expenses that would otherwise be covered my Medicare;
• CMS has focused its preliminary enforcement of these rules on workers compensation cases.
• The Extension Act requires information and provides penalties that will allow CMS to expand enforcement of MSP and MSA rules to liability cases beginning July 1, 2009;
• Structured settlement and settlement planning participants should recognize the likelihood they will need to adjust and integrate their own funding products, work products, documentation and work processes to satisfy the MSP rules and MSA requirements.

For additional information about the Medicare Secondary Payer statute and Medicare Set-aside Arrangements, see

• Release 41 of "Structured Settlements and Periodic Payment Judgments; and
• S2KM's prior blog post about the National Alliance of Medicare Set-Aside Professionals (NAMSAP).