Episode 22: Conversation with Jack Meligan on Personal Injury Settlement Issues

Jack Meligan:

If your attorney just handed you a check and said, “Here, here’s your net part,” and then you find out later that you’ve got to pay the liens out of that, or maybe some were paid, but for instance, maybe the Medicare component was overlooked. Then, obviously, they’re going to be having to shell out some money and they’re not going to be too happy about it. It’s not what you get. It’s what you net.

David Craig – Host:

I’m Attorney David Craig, Managing Partner and one of the founders of the law firm of Craig, Kelley & Faultless. I’ve represented people who have been seriously injured or who have had a family member killed in a semi or other big truck wreck for over 30 years. Following the wreck, their lives are chaos. Often, they don’t even know enough about the process to ask the right questions. It is my goal to empower you by providing you with the information you need to protect yourself and your family. In each and every episode, I will interview top experts and professionals that are involved in truck wreck cases. This is After the Crash.

David Craig – Host:

Well, welcome ladies and gentlemen. Today, on After the Crash, we have Jack Meligan as our guest. I’ve seen Jack speak numerous times, and sometimes we’re at the same conference where we both speak. There’s other times I’ve been in conferences, national conferences, where Jack is speaking and telling lawyers how to protect their clients and also, sometimes, how to protect ourselves. So, I felt like it was extraordinarily important for average everyday folks who happen to be victims of serious wrecks, have suffered catastrophic injuries, or someone in their family suffered a wrongful death, to understand what’s involved in keeping your settlement. There are a lot of great lawyers who help you get settlements, but it doesn’t do you any good to get a good settlement if you can’t keep it. Jack is the founder of a couple different companies, Settlement Professionals Inc., he founded and runs, as well as Plaintiff MSA and Lien Solutions, LLC., and he is an expert in how to deal with what happens after you get the settlement. How do you protect yourself? How do you keep your money? Jack, welcome to After the Crash Podcast.

Jack Meligan:

Hey, thanks for having me, David. My pleasure.

David Craig – Host:

So, Jack, why don’t you start off, just tell us a little bit about yourself, a little bit about what you do for a living, and what got you into this.

Meet Jack Meligan

Jack Meligan:

Well, I started in the financial services industry in 1979 right at the beginning of the financial planning movement, we’ll say.  I ended up with a very successful investment advisory in Portland, Oregon. We ended up having 65 planners spread out all over the West Coast and into Arizona. I and another guy in that firm were responsible for creating the original settlement plans that we wrote for our clients, and we created the software to produce those plans. We were right there on the forefront of that revolution, but in 1985, I became aware of the structured settlement market, and I got very excited about being able to work with attorneys. I had planned to go to law school. I wanted to be a lawyer, although I thought I wanted to be a tax lawyer.

Jack Meligan:

Now, that I have been around trial lawyers and see how exciting you guys’ specialty is, if I’d have been a lawyer, I would hope that I would’ve ended up in the trial work because I think what trial lawyers do is not only exciting, but incredibly beneficial for those of us who have been through the personal injury situations and wrongful death. So, I got involved with a company in California initially, and back then, it was a strange time because in 1985, 1986 in the structured settlement marketplace, everything came from the defenses structured settlement brokers. Those defense people had a really militant attitude, aggressive attitude, that everything had to come through their people, and that the injury victim could not know the cost of an annuity that was funding their settlement, couldn’t know the name of the annuity company, and they couldn’t have their own representative. That all sounded very strange to me, and it got me involved really in this marketplace from the cause, I call it the cause angle.

Jack Meligan:

Our cause was I and the guys I had joined up with in California, we were squarely on the plaintiff’s side, but we were considered pariahs. Besides those two guys and me, there were probably another dozen in the country that were having the same feelings and ideas that we did, and that was that the injury victim should be the one that gets to make the call on whether they’re going to structure their settlement, how much they’re going to structure, what companies they’re going to pick, and which advisors they’re going to pick, advisors that would have a duty to them. At the time, David, what was really egregious was defendants hid the cost of annuities back then, it wouldn’t tell plaintiffs and they would tell attorneys like you, “Well, we can’t tell you the cost. It would be constructive receipt,” and then your client would lose this amazing tax-exempt benefit stream for their client.

Jack Meligan:

And they would force you to go out and talk to a CPA or someone else who could give you a present value number. And really that’s kind of how I got started. I advertised to attorneys that I would tell them what the defense wouldn’t tell them. Then, that really morphed into the idea that this was a marketing idea that I had. I started talking to plaintiff attorneys and saying, “Hey, isn’t it malpractice for you to depend on the defense’s expert when it comes to the arrangements, these financial arrangements? What if something goes wrong? Are you not releasing those people along with everybody on the defense side when you sign the settlement agreement? I think in paragraphs 2.0 or 1.0 of the Release, I think it says you’re releasing all their agents.” So, I got attorneys thinking about the potential malpractice claim, and then we had a big one out of Texas called the Grillo case, and it was a monster. Those attorneys ended up paying, I think, close to 2.5 million, over above their E&O. So, it ruined them. A famous case.

Jack Meligan:

Then, other cases started popping up in New York and in Connecticut, and other places in the country where it became quite evident that even the courts were saying, “Hey, the defense has no duty of loyalty to you. You should have your own expert.” So, from there, things kind of took off for us for people on the plaintiff’s side. In the ’90s, we started seeing a lot more success before that event. I like to call my first few years in the business as my cottage cheese and wheat thins years because that’s what we existed on for the first couple of years, while we fought these battles with the defense and then educated the plaintiffs. We made a lot of headway and started having a lot of success. I wrote an article for Trial Magazine in ’99 that talked about plaintiff’s use of structured settlement specialist, and at the same time, I had advanced a concept that I called Settlement Planning.

Jack Meligan:

It was really the marriage of financial planning was structured settlements, and the idea was none of us should be suggesting, recommending, or pushing a product of any kind without knowing exactly what our client’s needs, goals, wishes, concerns, and fears were. Then, once we had that information in hand, we could design a plan and then suggest suitable investments and annuities that would match up with their needs and also their aversion to risk. At the same time, our national trade association, the National Structured Settlements Trade Association was trying to put all of us plaintiff guys out of business. We got tired of sending our dues in and having them turn around and use it for essentially the bullets that they were aiming at us to knock us out. So many of us quit the NSSTA, and we formed the Society of Settlement Planners. I launched it in Chicago in late 2000, and I was the first president for the first three years.

Jack Meligan:

We’re now 22-23 years into it and have well over 200 members. We created a professional education designation program called the Registered Settlement Planner, and it’s administered through Texas Tech University’s Center for Family Financial Planning. So, we’ve advanced the concept of true settlement planning in these cases, which was, let’s identify what an individual’s needs are. Not everybody needs an annuity. It’s not the answer to everything that everybody needs or wants to do. For many people, it may not be the answer to anything they need or want to do, but there are other options, and settlement planners generally have a wide variety of tools at their disposal to meet the needs of these injury victims and families. So, I’m happy to say that settlement planning has taken off, and yeah, there may be some practitioners out there that use it as a cloak to sell more annuities.

Jack Meligan:

But the practitioners that are doing it at the high level, they have the ability to manage money for clients. They’ve got the ability to use CDs, fixed index annuities, dividend stocks, municipal bonds, a whole plethora of financial instruments to meet the needs of injury victims and their families. The next big development that came along was the revelation that since 1980 Medicare was secondary to all forms of insurance settlements and including self-insurance settlements, and for the longest time, from early ‘86, my first case settlement I worked on, all the way probably until the early 2000s. We had to try to figure out how to preserve settlements for Medicaid beneficiaries, but we didn’t think anything about clients that were on or had gotten onto Social Security Disability and had Medicare.

Jack Meligan:

There was a revelation on a case, a workers’ comp case out of Colorado in late ’99, and the attorneys there suggested to Medicare CMS that perhaps as a way to prevent the Medicare trust fund from being a first payer, that the injured worker could perhaps set-aside funds from their comp settlement and spend down out of that for Medicare allowable services related to their injuries or conditions that were being settled with their employer, and low and behold Medicare CMS thought, “That was a great idea.” So, up sprung this whole industry of Medicare Set-Asides on workers’ comp cases, but it wasn’t until about 2009 when it started to hit our screens here on the liability side. That’s when we became aware that the government was going to issue regulations requiring reporting from defendants settling liability cases. Reporting into CMS as to the size of the settlement, the dollar amount, and the actual injuries that were being settled.

Jack Meligan:

The idea that they’re back in DC, well, is that, “Hey, we’ll monitor this situation, and then when an injury victim, Medicare beneficiaries, treater send in a bill, if it matches up with the ICD, if the International Disease Code, codes on that bill match up with the ICD codes that were part of the settlement, then we can deny payment as we’re allowed to do under the code.” So, that’s how I became involved very passionately in the whole Medicare space because we were encountering cases around the country that after the attorney fees and costs and experts were paid, and then the ERISA health plan liens, and maybe there was a Medicaid lien, and then all of a sudden, now there’s going to be a Medicare lien for past medical. Then, there’s this future medical potential that had to be set-aside. I mean, it was just shrinking the amount of the net settlement to the point where it was really hampering our ability to create a plan that would actually meet the needs of these injury victims.

Jack Meligan:

Part of the issue that I ran into and why we created the Plaintiff’s MSA was, we knew enough to be dangerous, as they say. I knew enough to be in cases and say, “Hey, we got a potential problem here, we better get some advice.” But the companies and the individuals that we called for advice seemed to have the attitude that everybody needed an MSA account, and there was no way to avoid it, and the bigger the better, and that was not what we were looking for.

David Craig – Host:

Before we get into more detail on that, I mean again, I think if you’re a client, if you’re an injured plaintiff and you have a case, people don’t even think about. They think about, and I’ve talked about before and some other podcasts about how important it is to get the right lawyer. There are a lot of lawyers out there who focus on the recovery, “How much money am I going to get my client?” Unfortunately, they don’t think beyond that. Now the good attorneys do, but the thing is that people need to understand, if you’re out there and you’re a client, is that good lawyers spend all their time learning how to be good trial lawyers. We train, we study, we spend, we go to seminars, we learn how to be great trial lawyers.

David Craig – Host:

I really don’t have any interest in learning how to be a great financial planner. It’s not my bailiwick. It’s not in my skillset. So, the good trial lawyers realize that, and they hire people like Jack. So, if you’re a client, you want to make sure that your lawyer, if it’s a big settlement, that your lawyer is hiring people like Jack to consult with, so you can talk to, that you can ask directly, ask questions of, because otherwise you may come out on the short end of the stick, just focusing on, “How much money did I get?” Jack mentioned, there are liens. So, when you get a settlement, the attorney gets paid, the client expenses get paid, unpaid medical bills get paid, but then there are these things that are called liens.

David Craig – Host:

So, your health insurance pays bills, and they typically have a lien. That may be an ERISA lien or just a normal lien, but they’re treated differently. Medicaid, like you said, if you have Medicaid, there’s going to be a lien. If Medicare paid your bills, you’re going to have to pay back Medicare, and all those things can be negotiated and know those things can be taken into consideration, but I’ll give you an example. Recently, I had a client come in here with a significant claim, and they’d been offered policy limits, because it was a horrific case, a horrific injury, they were entitled to the limits, and they had a different lawyer. The lawyer said, “Here, I’m going to take my fee and my expenses. I’m giving you all the money,” and the client knew enough to say, “Well, what about these liens? And what about my future medical bills? And what about this and that?”

David Craig – Host:

The lawyer said, “Look, I don’t know this stuff. I’m just going to give it to you. You figure it out.” The client was like, “Whoa, that doesn’t sound right.” So, another lawyer referred him to me, and we called the lawyer and said, “Hey, we can help you, but you need to take care of this person because people are going to be coming after this person, and they’re going to take everything that’s left if you’re not careful.” The lawyer said, “Well, I don’t do that, and so I just offered to give them the money.” So, the client hired us, we got reductions on all the liens. We protected the client, but I thought, oh my, there’s attorneys out there who don’t know and don’t know how to deal with this stuff.

Getting a Settlement

David Craig – Host:

If you’re the clients out there, you need to be worried about it. You need to be worried not on what’s the gross settlement, but how much are you going to get and is somebody going to try to take it away from you in the future? How are you going to get your future medical bills paid? I would imagine you’ve seen it; you’ve been doing this for so long, and you study this, and you keep up on top of all these cases. What’s going on that there’s probably different levels of knowledge amongst lawyers.

Jack Meligan:

Oh yeah. Listening to you, David, reminded me of a saying that we have, and here it is, it’s not what you get. It’s what you net. You can get a really large settlement, but after all these items are paid for, and these lienholders have become aggressively voracious on wanting to recover a hundred cents on the dollar, and I hear from trial lawyers all the time that they’ve taken a swing at a state Medicaid department or an ERISA plan. They’re being told that the entity is not willing to even reduce for attorney fees or procurement costs. So, it gives those lienholders a free ride. It’s unfortunate.  It’s because of a Supreme Court decision that ERISA plans were enabled to go and change their contractual language to essentially say it was at their discretion as to whether or not they would pay their share of attorney fees. That was too bad. I mean that is the law of the land, but it doesn’t mean that it can’t be negotiated and there are points of leverage. If you’re negotiating these, I’m sure you know what they are.

Jack Meligan:

So yeah, it is surprising that there are attorneys out there that have the position or attitude that you described, but we’ve seen unfortunately, we’ve seen situations with Medicare itself where they’ve written letters to plaintiffs and said we know you had a settlement, and we think you owe us a bunch of money, but your attorney never turned in a settlement sheet, never turned in a final settlement sheet to Medicare CMS. So, it can potentially put a plaintiff in a world of hurt. Because like you said, David, if your attorney just handed you a check and said, “Here, here’s your net part,” and then you find out later that you’ve got to pay the liens out of that, or if maybe some were paid, but for instance, maybe the Medicare component was overlooked. Then, obviously they’re going to be having to shell out some money, and they’re not going to be too happy about it.

David Craig – Host:

I just want people to know, and that’s one of the reasons I did this podcast is to give people information, because I think information’s power. I want people to ask their lawyers, “Okay. So, what should I be worried about? Who do we have to pay back,” and talk to them about it before the settlement, “Who do we have to pay back and who are you using? Should we consult with somebody? Should we have an expert in our corner before we settle? Should we have an expert in our corner to help us walk through this on how we’re going to take care of these liens? How are we going to take care of future medical bills? How are we going to take care of Medicare if there is an issue?  How are we going to structure or invest the money so that we can be taken care of for the rest of our lives?”

David Craig – Host:

That’s one of the things I hope to gain out of my interview with you today is people learn. You don’t have to know everything, but you have to know that there’s an issue. There’s a question that you need to rely upon to get and ask people to give you information.

Jack Meligan:

Yeah. Really good points there. I think that some of the attitude that you’ve described in that instance case that you were just detailing comes from trial lawyers who have internalized but not maybe verbalized to the client that, “I’m your trial lawyer, but I’m not your financial expert. It’s not my wheelhouse,” like you said, “I’m not a Medicare lawyer or an expert, that’s not my wheelhouse. I’m not a tax lawyer.” So, if there’s any tax issues to be considered, and while personal injury settlements are tax exempt, from time to time, there are tax issues that pop up in these cases, and a big one is punitive damages whether claimed initially through a complaint or an amended complaint or actually awarded through a verdict. Either of those situations can be a tax situation that has to be dealt with at settlement or post-verdict.

Jack Meligan:

So, one of the things that I and my partners did is we created, and this is a plug for the attorneys watching, but to solve that particular issue of those three specialties, that trial lawyers aren’t tax, financial, and Medicare. We created the Trial Lawyers Protection Packet, and it’s got the information and form so that trial lawyers can inform their client of their duties, which are, I’m their trial lawyer but I don’t wear these other hats. Then, get the client’s consent that if those issues are going to come up in their case and when they do that it may be necessary to hire outside attorneys or other experts to solve the issue for the plaintiff, for the client. That’s one fix there.

David Craig – Host:

I think that if people watching this, just if nothing else, if they just tell their lawyers, I mean, because the top lawyers are going to have… We’re going to bring people like yourself into a settlement, and so they can give advice. Your lawyer should have their own experts. Just like you said, they should not rely upon the defense ever, never to rely on the defense. So, if your lawyer says, “Don’t worry about it, the defense is going to bring a structure settlement person to the mediation.” Then, you should be like, red lights, sirens should be going off. You should say, “Shouldn’t we have our own?”

Jack Meligan:

Yeah. That’s not enough.

David Craig – Host:

Then, you ask your lawyer, “Please get me somebody. Please get me a consult with somebody.” The good lawyers are going to do that anyway, but those people who don’t do this day in and day out are not, and so are not always. So, I just want them to ask the lawyers, “Hey, look, please get me somebody that I can rely upon to help me make the right decisions.” Now, one of the things that scares me is Medicare and it scares a lot of people, and then I just saw a case come out of Florida on Medicaid. I mean, this stuff is changing all the time. So again, lawyers have to rely upon people like you to help us through this.  Explain to people if Medicare pays, if I’m on Medicare, and Medicare paid, and I have a catastrophic injury, and Medicare pays my bills, first of all, do I have to pay Medicare back if I get a settlement or a verdict from a personal injury case?

Do You Have to Pay Medicare Back if You Get a Settlement or a Verdict from a Personal Injury Case?

Jack Meligan:

Yes. So, Medicare has been secondary to workers’ comp since 1965, when Medicare was first entered into the United States code and amended the Social Security Act, and it was part of Lyndon Johnson’s administration. It was part of the great society, and at the same time that they brought Medicare into being and added it to the Social Security System. We also saw the Voter Rights Act ’64, ’65, two really big things that tremendously changed our country, I think for the better. Then in 1980, they amended the code to say that Medicare was secondary, meaning, Medicare stands behind workers’ comp, and workers’ comp pays first and then Medicare pays second, but they amended the law to say that Medicare was also secondary to all forms of insurance and self-insurance.

Jack Meligan:

That once a primary plan, a primary of insurance plan had paid, then Medicare was precluded from paying for those services that were related to the injuries or conditions that were the subject of the settlement for a period of time. So yeah, that plus Medicaid have been the two of the bigger issues that we’ve had to figure out how to work around, so that we could help plaintiffs hang on to more of this money that you trial lawyers work so hard to eject out of these black hat tortfeasors, these big insurance corporations, and self-insurance. Because really, I mean, going back to what I first said when I first came into this and said, “Here’s a cause to get involved in,” and these poor plaintiffs they’ve already been run over, hurt, malpractice on, and then, they go through the settlement, and they’re told by defendants they can’t have any choices here with regard to the financial experts and the financial instruments that are going to fund their settlement. That’s just not right.

Jack Meligan:

Then, we started running into the Medicaid issue and, I mean, I’ve been at this so long that I predate the special needs trust. I can remember when an attorney in Seattle came up with that idea, floated it in front of Social Security, and the powers that be negotiated that if that particular special needs trust, supplemental needs trust, Medicaid preservation trust, all those names work, but if it had this payback provision language in it, would they allow us then to park a client’s settlement in that trust and have it exempt from counting as an asset against the client for those means tested Medicaid benefits. And low and behold, the powers that be said, “Yes, we’ll do this.”

Jack Meligan:

So that became the tool then for helping our clients hang onto a settlement and their Medicaid benefits. Then, with the Medicare issue, you asked me about, “Does a claimant have to pay back Medicare?” Yes. At the time of settlement, Medicare wants to be paid back for all payments that they made conditionally, it’s called a conditional payment. They made it on the condition that if you recovered from a third party, that you’re going to pay them back. So that process is you have to literally knock on the door at CMS Medicare, and ask them, or that your attorney does, “How much does my client owe you today? We may have a settlement coming,” and Medicare will send the very first conditional payments report. Then, you have to look at that report and determine, is this all related to the injuries that are the subject of this incident or accident or are there preexisting conditions or things that are counted in this conditional payment report from the government that we need to challenge and get out of there?

Jack Meligan:

Then, once that’s been decided, and you work through that situation and you have a settlement, then you ask the government for a final demand, and they will ask your attorney to send in a settlement statement, showing the amount of fees and costs in any other liens. Then, Medicare will actually reduce that conditional payment for, what we call those procurement costs, and then you get your final number. What’s interesting, and one thing that, David, I think a lot of attorneys don’t understand, and I know this because I just had this phone call again this morning from an attorney who said, “I’ve got this settlement and the defense is telling me they’re not going to pay us the money until we can prove to them that our client either doesn’t owe Medicare any money for conditional payments, or that we’re paying them.”

Jack Meligan:

So, tell me, how do I do that? I had to inform him that, “Well, you’ve got to make the first request. Medicare CMS has two weeks to issue the Rights and Responsibilities Letter, and then up to 65 days after that to issue the first Conditional Payment Letter. So, I mean, you’re looking at 79 days potentially delay, and then if you challenge the Conditional Payment Letter to get to the final demand, I mean, you could be another 30 or 60. Beyond that, I mean, you could be out three months or more. That’s why I think settlements can take so much time between an agreed upon settlement of mediation, and then receiving the money, because these issues aren’t handled properly ahead of time. Like you say it’s a good thing for a plaintiff to ask their attorney, “Hey, don’t we need to talk to somebody and get somebody online right now, and get this stuff working so that it doesn’t hold us up from collecting the money?”

David Craig – Host:

Yeah.

Jack Meligan:

Yeah. I think there’s still a big gap in the knowledge out there amongst the trial bar. Another issue too I think that I want to make a comment on, and yes, injury victims need to have their own experts and there’s a lot of us out there across the country, and there’s some really good people all over the country. But how do you tell? How does a plaintiff tell? Well, I’ll give you what I think is a simple tip and that is, any professional settlement planner worth their salt should not start off by asking you, “How much is your net settlement and how much should we structure?” That’s the wrong approach. That would be an indicator that you have a pretender instead of a contender. Really, in my opinion, the first questions from a settlement planner to a prospective client or even to an attorney who is interviewing that settlement planner and thinking about introducing them to their client.

Jack Meligan:

The first question should be, “Okay. From the date of this accident or injury to now, where has your client been getting money to live on? What’s the source of that money? So, has it been workers’ comp? Has it been a disability policy? Have they already applied for Social Security Disability, and they’ve gotten it? I mean, that reveals a lot. So, where’s their money coming from?” And then of course, the related question is, “Okay, and then, who’s been paying their medical bills?” All of the entities. So, we see this all the time. There’s a bad accident, and our clients end up being ambulanced or air flighted into a hospital and they’re comatose for three or four weeks, and the hospital immediately signs them up for Medicaid, because they can’t find their wallet. They don’t know if they have insurance or what they’ve got. It’s kind of a John Doe or a Jane Doe laying there.

Jack Meligan:

So, they bring them in, they admit them, and they immediately start billing state Medicaid. And then, the client wakes up or the family shows up, and they find out, “Oh, okay. Well, geez, he’s employed, and he’s got group health insurance,” and everything then switches off of Medicaid and starts going to group health. Then because of the catastrophic nature of the injuries, the individual is not going to be able to go back to work. So, they apply for Social Security Disability because they were vested in the Social Security System. You have to wait six months of continuous disability to apply, and most people don’t get it the first time they apply, and they’ve got to submit a request for an appeal, a review. Many people get it on the second try, but not everybody, and unfortunately, a lot of people have to hire an attorney and then go in front of administrative law judge, an ALJ, and have a hearing. Then, most people if they’ve gone to that length, I think that you can comment on your experience.

Jack Meligan:

Most people get the Social Security Disability rating at that point and get into SSDI, and once you’ve collected 24 checks from the government, 24 Social Security Disability income checks, then you get your Medicare card. So, now you had group health, you had Medicaid for a month in the hospital, you had group health paying for a while, and now you’re still treating, and your case hasn’t settled. So, your treaters are sending bills to Medicare. You could have all three of those liens by the time you get to the end of a settlement, and we see it a lot. Medicaid, Medicare, conditional payments lien, and an ERISA health plan lien, or a hospital lien to pay. So, although all three of those then have to be dealt with, then we have another issue and that is this whole question about future Medicare. This one is hotly debated and contested.

David Craig – Host:

I think clients need to know, before we start in, that is that most people, they’re shocked when they find out they have to pay back prior medical bills, right? I mean, they’re like, “I don’t understand why do I have to pay that back? I’ve paid into Social Security,” whatever, I’ve heard everything. The reality is you do, but then, they are even more shocked when they find out that they may have to pay back future medical bills that Medicare pays in the future if it’s the same injury that you’re suffering from. So, let’s talk about future medical bills and educate the people about why would you ever have to pay future medical bills out of your settlement that you’re getting today?

Why Would You Pay Future Medical Bills Out of the Settlement You’re Getting Today?

Jack Meligan:

Yeah. We’re passionate about this because it seems patently unfair, David, that we could have insurance, health insurance. It says, “Accident and sickness,” and the contract says, “We will pay if you have an accident or a sickness,” and then there’s this clause that says, “well, except if somebody else caused your injuries, then we’ve got a right to get our money back.” Well, that’s just, I mean, that rubs a lot of us the wrong way. I mean, it just seems so unfair, but it’s typical of insurance companies who, unfortunately, do not have the milk of human kindness running through their veins, and they’re looking for every way that they can to recoup funds, right? It’s created this passion amongst trial lawyers and us as to how we can combat that issue and still get injury victims a fair shake out of this, through aggressive resolution of those liens and beating those lienholders down on their subrogation demands.

Jack Meligan:

But boy, as bad as that makes you feel that you had, you either bought insurance and now it’s not really going to pay off if they want money out of your settlement, or your employer bought it and they want to be paid back. But we’ve been paying into Social Security for years, and now you’re telling me that I got to pay them back. I mean, from talking to plaintiffs, the outrage is palpable. It’s especially egregious when we start talking about the potential that they might have to pay some amount of money out of their settlement for future Medicare allowable expenses. How does that happen? Well, I said it was hotly contested and hotly debated. Unfortunately, there’s not much law, but one law we have says that Medicare is precluded from paying when there’s been a primary plan has paid and our client has had a settlement.

Jack Meligan:

Then, there have been these opinions issued by directors at CMS that say that Plaintiffs shouldn’t bill Medicare if they’ve received a settlement that included some amount of future damages for future medical and that is a component of damages in a lot of our personal injury cases. We’re telling the defendants that here are my client’s medical bills to date, and here’s what the future looks like, how it’s going to be paid is usually not admissible. It doesn’t matter whether it could be paid by Medicare or insurance, but here’s our future medicals. So, Medicare has said, well, hey, if you’re getting that money, you can’t double dip us. You got to spend out of that, and when you have appropriately spent down, then come and see us.

Jack Meligan:

Well, that’s where it ends, and that’s why this is such a hotly contested situation because Medicare literally cuts off the discussion and doesn’t tell us, well, how much. I mean, we compromise the case. We may have asked $400,000 or millions of future damages in the form of future medical, but we reduced the case to settle it. We compromise. So, how do we calculate all this? How do we determine how much Medicare would pay for somebody’s injuries related to this accident through the rest of their life? I mean, that’s a crystal ball issue.  So, really those of us that have come at this, and especially in our company. We decided to come at it from the plaintiff’s perspective, which is, first we don’t like hearing and I don’t think any plaintiff likes to hear that they got to pay attorney and pay costs and pay experts.

Jack Meligan:

They got to pay these liens back, including a past Medicare bill, and now I got to put more money aside for future Medicare. I mean, come on. Where does this end? So, our opinion has been that is this legally required. Well, it turns out it isn’t, you don’t have to put anything aside. Even Medicare has said, and I’m actually quoting, advanced notice of public rulemaking is where I got this, but they identified seven different ways in that original advanced notice of public rulemaking back in 2012 as to how an injury victims could beat this obligation of preventing the Medicare trust fund from being a first payer. One of them was to just simply pay the bills out of their own pocket, as they came due, have other insurance that might pay them. Setting aside an amount of money and self-administering it as claimants are allowed to do is one solution and having professional administration is another.

Jack Meligan:

Really, I say this facetiously, but our clients have the right to say, “I’m not going to do anything unless Medicare comes and knocks on my door.” Now, is that the position that most take? No, but some do. It really comes down to, I think, how people lien about the law. I mean, the law is the law and we’re a country of laws, right? And so, the law says you’re not supposed to double dip. And some people feel pretty strongly, they’re law-abiding Americans and they say, “Hey, I want to comply. I’m a good American. I pay my taxes. I do it on time. And yeah, I don’t think it’s right that I got paid this money. I shouldn’t double dip the system. The system is creaking and out of money and it could collapse. I mean, I don’t want to do that.”

Jack Meligan:

Other people have a different opinion that, “Hey, I’ve paid in all these years, and for various reasons, I’m going to tell Medicare to catch me if they can. I’ll be in Panama if they want to come looking for me,” or whatever their position is. So, we deal with all kinds. I know a lot of attorneys have the opinion that since there is no law requiring a Medicare Set-Aside, then they can just ignore this. I don’t think that’s a very good approach because I do believe the trial lawyers have a duty to at least inform their client and then say, “Hey, I’m not an expert, and let’s get you somebody who can explain it, and then you can make your own decision as to what you want to do.” Then it’s on them, whether they decide to put some money aside or not.

Jack Meligan:

By the way, there’s various ways, besides just thumbing your nose at the United States government, to work around and avoid this issue. So, there is advanced strategies let’s say, that involve work on our side and work on the side of Medicare lawyers who will analyze a plaintiff settlement and give an opinion as to whether they were made whole, and therefore taking into account their injuries and the amount they recovered and the amount of their procurement costs. Whether that future Medicare or lifetime liability is the amount that a Medicare Set-Aside analysis is identified, or is it something lower, including zero. I’ve seen a lot of zero opinions out there. So, there are ways to run around this, and I think many injury victims and attorneys have the opinion of, “I think we should try to be as compliant as we can, and then definitely look for all the potential options that we have to reduce this to the absolute rock bottom dollar that is reasonable and defensible or eliminate it entirely.” That is what’s available out there when the plaintiff finds competent advice from a professional.

David Craig – Host:

Yeah, and I think that people need to understand, I mean, the risk would be if you get older and you have to have a surgery, that’s exactly related to the injury you sustained that you claimed. Are you willing to risk that Social Security that Medicare doesn’t pay for it?

Jack Meligan:

That’s right.

David Craig – Host:

So, it’s a real risk, and some people are just like, “No, my God, I would not want to risk that.” Other people may say, “Yes,” but it’s really, unless you’re making an informed decision, you’re making a dumb decision, in my opinion. So, what you need to do is you’ve got to hire people, or you have to have your lawyer hire people like Jack or other people like him to tell you, so you can make an informed decision. My doctor tells me to quit eating chili cheese dogs and barbecue and quit drinking beer. Now, that’s his job. His job is to tell me what’s going to happen to me if I don’t do that. Now, I choose whether I decide to follow it or not follow it, but it would be stupid for me not to have a doctor tell me what the risks are. That’s the problem I have is when I see lawyers who don’t explain to people what the risks are, and what options you have to protect yourself and to make informed decisions.

Jack Meligan:

Yeah. Agreed, agreed. There’s another point I’d like to make about this process is one of the questions I get from plaintiffs that I’m talking to and plaintiff attorneys who’ve called. It’s an interesting question. After hearing me talk about these issues and there is no law, but there is this law from 1980 and back and forth. The question they posed to me is, “Well, okay. So why would anybody do this? I mean, what’s the real reason? I mean, okay, you got this compliance thing and good Americans in the law, but I mean, why? Is there a more compelling reason or benefit?” And there is one, informed knowledgeable plaintiffs and claimants will decide to create a Medicare Set-Aside, which is an amount of money set-aside to pay future Medicare bills out of, for a couple of reasons, and here they are. One is when that amount of money is exhausted, then by law, Medicare pays all your bills for the rest of your life.

Jack Meligan:

Here’s where this really can factor into an individual’s decision as to what to do about this particular issue, whether to ignore it or to create some sort of a fund, or to seek some additional legal help and get an opinion that helps you avoid it, but you can look at it this way, if you decide to go naked, which means you’re going to self-insure this, like David said, you could be facing a situation where you may have a surgery down the road, on that knee or hip or ankle that was injured in that accident with an 18-wheeler. You could run into a situation where Medicare sees that you had a settlement that it initially included money, that was identified for that left hip or that right shoulder or that right knee. And then, they deny payment to your treater, and then the treater turns around and sends you the bill.

Jack Meligan:

But here’s where it can get a little sticky. Medicare has said that if you have not properly taken steps to prevent the Medicare trust fund from being a first payer, then they can take the position that the entire settlement is available for future medical which means that your liability for those future Medicare bills is uncapped. You’ll never reach the end of it if you have some serious injuries, maybe from a catastrophic accident. You could be upon discovery paying and paying and paying, and you’ll never reach the end, and that is, for many people especially in catastrophic cases, that’s a decision point where they say, “Okay. Let’s take a look then at a Medicare Set-Aside amount professionally recommended by appropriate medical professionals who analyze medical records, and then identify what’s Medicare allowable and compute it out over the rest of an individual’s life, and then maybe we get it reduced by removing doubtful and dubious future medical,” which is stuff that doctors throw into medical reports either because they’re trying to cover their tail, or they’re trying to create future business. One or the other is my opinion.

Jack Meligan:

But we remove doubtful and dubious, and then maybe we got a further reduce through a legal opinion from a Medicare lawyer. Now, we’ve got an amount of money that we set aside, and once that amount of money has been spent down and it’s gone, I like to tell plaintiffs, “Hey, you’re home free.” I mean, if there’s an exhaustion letter that goes into Medicare, they may ask for the ledger, your checkbook, or the administrator’s checkbook to prove that it was spent on Medicare allowable expenses. But once that’s happened, then by law, Medicare covers you forever, and you never have to deal with this issue or put any more money towards it. I think that can potentially, for some of our clients, that can be a much better result than maybe walking out and fearing that Medicare is going to someday come and discover that they had a settlement, and then essentially the sky is the limit on what they’ll end up paying for their Medicare bills because they don’t have a way to cap it. They didn’t have any professional advice.

David Craig – Host:

You mentioned something that Medicare may find out, and I think clients ask that a lot, “Well, how’s the government ever going to find out?” Well, since 2007, it’s been a little bit easier, and so, the government does, I mean, explain a little bit what’s changed and why assuming that nobody’s going to tell the government is wrong.

What Has Changed with Medicare?

Jack Meligan:

Actually, they know, and here’s how they know. That law that you’re citing went into effect January 1, 2012, and it covered cases settled in the last quarter of 2011.  What it required is a report from the settling defendant or self-insured, and that report is called a Section 111 report. It’s a report that goes into CMS Medicare. It includes the amount of the settlement. It includes the injuries that are being settled. At one time, I mean, I had the questionnaire, there were 185 data points in this Section 111 report. It was unbelievable. So, the government gets all this information, and it goes into our injured clients’ common working file, the CWF at CMS. We all have one, whether it ever gets anything in it. It may not get any entries in it until retirement age.

Jack Meligan:

If you’ve been injured and you get onto Social Security Disability, and then receive your Medicare card, they’re going to start putting things in that file earlier. So, this report goes in and what is supposed to happen is Medicare CMS then is supposed to match up medical bills coming in from your treaters, and the codes, the ICD codes on those bills with the codes that were reported at the time of your settlement, and they’re supposed to deny payment. This is another kind of an interesting anomaly if you will, or it’s even somewhat contentious because you would think that with all the reports that CMS Medicare has received since January 1, 2012, that there’d be tremendous enforcement going on, but it’s been scatter shot.

Jack Meligan:

That’s another issue that has raised some concern and maybe on the other angle, some bravado because more than one speaker has said that the Medicare is the most screwed up bureaucracy in the United States government. It’s more screwed up than the IRS and the Veterans Administration. I mean, it’s really hard to fathom, David, how they could have that information for all these years and they haven’t come up with the technology to really enforce it. That doesn’t mean that they’re not going to, and we know they have picked out people and selectively enforced. It’s just not being enforced on everybody. But will they get their act together? Will they get this figured out and start enforcing it? I think that’s the biggest risk. Then, one other thing to consider is once that happens, and Medicare has discovered post settlement that they’ve been paying erroneously for services that they shouldn’t have been paying for.

Jack Meligan:

They got a three year look back or statute of limitations. They can go back three years from discovery and start collecting for bills that they shouldn’t have paid. So that’s another potential liability hanging out there. I mean, this is such a tough area to make decisions about for injury victims, because if you’re making that decision based on what’s going on today, you might be inclined to say, “Well, the heck with them, catch me.” On the other hand, if you’re the kind that says, “Man, I don’t want this hanging over me and I don’t ever want to encounter a situation where I’m being denied payments, and then maybe I don’t have the money to pay those bills, because the money is no longer available. What’s going to happen to me then?”

Jack Meligan:

I mean some people just don’t want to be faced with that, but it puts us as citizens and all of us as potential personal injury victim because let’s face it, we can all be in that position, and many of us have been. It puts us in a really tough spot in terms of what to do.

David Craig – Host:

So, if you’re a victim of a semi, big truck, commercial motor vehicle wreck and you’ve been seriously injured, and you’re getting ready to go through a mediation process or you’re getting towards the end. Let’s say mediation, you’ve gone through the process. In your opinion, when should you involve someone like yourself? I mean, do you wait until after the settlement? Do you do it before the settlement? When should a client expect their lawyer to involve somebody like you? Before or during the negotiations or after?

Jack Meligan:

Definitely before. The earlier, the better. By contacting a highly skilled and knowledgeable settlement planner that has this wide experience to identify these issues which start with the two questions. Where’s your income been coming from, and who’s been paying your medical bills? I mean, that leads to all kinds of other questions that then starts to, we call it a triage call. Once we ask those questions and get the answers, then we ask a couple more questions and pretty soon, we’re identifying where the issues are potentially in the case that can slow settlement and/or slow collecting a settlement once you’ve got an agreement to settle. So, by starting early, you can identify the issues early and begin to identify then the appropriate experts for personal injury clients to be talking to.

Jack Meligan:

I mean, if you’ve identified, there might be a tax issue potential because you’ve claimed for punitive damages. Then you may want to be talking to a tax attorney ahead of time, and a good settlement planner would say, “Hey, we’ve identified this now, let’s get some advice,” so that they can advise on how to word the agreement to settle and the specific language, and the settlement agreement that maybe disclaims those punitives. I mean, there’s a lot to do there. On this Medicare issue, it is the same thing. If it can take 79 to 120 days to get a conditional paper report on a Medicare CMS, then by all means, you need to have somebody on your side that’s going to be querying the CMS portal and getting that information and that process started so that it doesn’t take you 90 days or more post settlement, but you may be within two weeks or so of having a final number.

Jack Meligan:

So yeah, for those reasons, I think that trial lawyers and their clients should be contacting people like us a good 90 days or more before mediation, for the first mediation and identify where these problems, these potential issues, are. We call it a triage call because it ends up with a prescription on how to deal with the issue. It’s just like you’ve gone to a doctor. Here’s what we’ve identified. Okay. So, here’s what we prescribed. Let’s get you a tax attorney. Let’s get you some Medicare advice. Let’s talk about what your options are for replacing your income. Those are all things that can be discussed ahead of time, and I know that there’s some among trial lawyers, maybe even plaintiffs that, I’ve been told that they don’t like to maybe discuss dollar amounts or money before the settlements on the table, maybe it’s going to jinx things. I think you can do everything that we’ve talked about, David, without jinxing the settlement. If a claimant’s worried about it, we keep a box of lucky rabbit’s feet in the office, we’ll mail them one. Change their life.

David Craig – Host:

I think, from my perspective, it can help. I mean, I never force my clients to settle, but I also don’t force them to go to trial. I want them to be informed and empowered to make the right decision. You cannot be informed or empowered to make the right decision if you don’t have all the information. So, I would rather not hide from something, and then try to deal with it after the fact. I would much rather talk about it and just deal with my clients. I mean, I have a very good relationship with my clients, and they trust you over a period of time. And I can’t think of a worst way to go into something, and then not have told them or not advise them or not prepared them. I mean, I don’t want to ever look at mediation as an opportunity to settle. I look at it as an opportunity to inform the other side so that they can reevaluate the claim because they’re probably never going to give me enough money.

David Craig – Host:

I also look at as an opportunity for my clients to continue their learning process of what is the future going to be when I’m gone. When I’m out of the equation, what’s going to happen? How am I going to be taken care of? How much money do I really need to take care of me? I mean, I don’t see how information to your clients is a bad thing. I really believe that we should give as much information as we can. Now, one of the next questions a client’s going to ask when they watch this is, “Oh my God, how much more money is this going to cost me?” I mean, he’s bringing in this expert like Jack, and now all of a sudden, we’re going to have these other experts. How am I ever going to take and pay all these things that I have to pay for? But I’ve got to pay these other experts.

Jack Meligan:

Right. Right. Well, with regard to retaining a settlement planner with this kind of experience, most of us still work on a, what would I call it, I guess a non-obligatory basis which is the new economy, and then the younger people listening to this will identify. It’s about giving away value and earning business back from the value you give. That’s really what’s at play here with the settlement planning profession. I think we could easily charge fees for this kind of work, but it’s evolved really from the beginning that we’re offering value and advice and counsel in all these areas in the hopes that we’re going to prove how valuable we are and develop a relationship with a plaintiff, and that’ll turn into a prospective client. Then, when that happens, and it’s not only our firm, but there are other firms out there in the country that have the capabilities that we have.

Jack Meligan:

They’ve got associations on the lien resolution and the Medicare side, and maybe they’ve got a trust company, money management. Those are all the things that many settlement planners can offer, and those are the things that pay us for our services. So, annuities pay us a commission, some of them that are coming down the pike here are going to pay us trailing fees on an annual basis, that’ll extend out into the future. I think that’s a better way for them to pay anyway, but that’s coming. If you hire a settlement planner’s firm for money management, if they have a registered investment advisory or a trust company, you’ll pay a fee usually around one to 1.5% a year for trust and investment services. That’s another way that we generate and make money. We get paid in these cases. We get paid for the Medicare Set-Aside analysis. We get paid when a client asks us to professionally administer their set-aside.

Jack Meligan:

Those are all the ways that settlement planners get paid, and many, I mean, most of the ones I know will divulge all of that to the injury victim and upfront, and they’ll know it, but it is a common question. Yeah. How do we pay you? And what are we going to owe this guy? But the good news is that generally all of us give away a lot of value on the front end in order to earn the business on the back end, let’s say.

David Craig – Host:

Again, and I like to be open and I’m very straightforward with all my clients, but I think that when you have to spend some money to keep money, those are the people that you invest in because I tell you what, people don’t understand until they’ve been living through this. Everybody has their hands out trying to take your money. I mean, it starts when you first get hurt and the hospital doesn’t want to accept your health insurance. They find out you’re in a wreck, and they want to be paid 100% for the bill and they don’t want to accept a discounted amount. So, from the very beginning, the day that you have a wreck, there’s people out there trying to take advantage of you and take advantage of your case and take your money. Then you got lienholders, and then you have workers’ comp.

David Craig – Host:

If you got hurt on the job driving a vehicle, and someone hits you, you got Medicaid, you got Medicare, you got all these people, and the people that you should be investing in and the people that you should be trusting are the ones that are going to help you figure out, how do I keep this money. There’s nothing more tragic than having a million dollars on a truck, a horrible truck, and have injuries that are worth tens of millions, but there’s no other money there other than a million dollars. The amount of people who will try to take that million dollars away from you, they come out of the woodwork.

Jack Meligan:

That’s right.

David Craig – Host:

So, what you have to do, it’s a lot of times harder to keep the million or parts of the million than it is to get the million. On a catastrophic case, getting the million is not that hard, and I won’t ever accept the million until you have a lawyer who finds out and double checks and looks for every other possible insurance policy, every trailer, I mean, every policy you can imagine. Then once you find out that that’s it, the next step is, I still don’t accept it. I don’t accept it until I start negotiating with everybody that can be negotiated with and say, “Look, I’m not going to take this damn money until you agree to do blah, blah, blah, blah.”

Jack Meligan:

Right.

David Craig – Host:

But people don’t get that, victims don’t understand that they think that it is easy.

Jack Meligan:

Yeah. This comes up more when we’re talking about the costs of analyzing this Medicare issue on the front end with a Medicare Set-Aside analysis which determines does a plaintiff have a problem and how big is it. Then, usually this happens post settlement, but whether or not to retain a Medicare lawyer and get an opinion. So, the concept is return on investment, and what I explain to the injury victim is you may invest with us $2,475 to obtain the initial analysis. You may end up spending or investing another 5,000 or 10,000 for an opinion letter, but if our initial analysis, even with the way that we minimize these Medicare obligations, if that thing was in the hundreds of thousands of dollars, and you spent 12,500 or 15,000, and you saved 185,000, your return on investment makes that a very worthwhile expenditure.

Jack Meligan:

That’s I think what you’re pointing out is it’s the amount you’re investing in the people that can actually help you hang onto more of that net settlement because it’s not what you get. It’s what you net.

David Craig – Host:

Yeah, absolutely, and then, the other thing is I would tell people is don’t be afraid to talk to your lawyers about it. Sometimes it comes out of the fee, sometimes it doesn’t, but don’t be afraid to ask your lawyer. I hire lawyers all the time to give me advice on punitive damages, for example, or the tax consequences I have, and I pay for that. There are certain things that it just comes out of what I do, but that’s up to every lawyer. So, but don’t be afraid, I mean, it’s your case. Talk to them. Ask them the questions. Don’t be afraid to ask people like Jack, what are you going to charge? What’s the investment? What’s the return? Don’t be afraid to ask the lawyer, what are you paying out of this, if anything? Just be informed and ask the questions.

Jack Meligan:

That’s right. Good advice.

David Craig – Host:

Jack, is there anything else you want to add?

Jack Meligan:

I think we’ve covered it all. I can’t think of anything else.

David Craig – Host:

Well, I really appreciate you taking the time. My hope is that when people get to this point in a lawsuit or claim, no matter where they’re at in this country, that they take the time to watch this and learn, and they learn what questions they ask and what things to watch out for. So, thank you so much for being a guest.

Jack Meligan:

Hey, you’re welcome.

David Craig – Host:

I appreciate it.

Jack Meligan:

I think we’ve given them some good advice and some good ideas here on, and boil this down to just a few important questions. I think we’ve accomplished the goal.

David Craig – Host:

Well, I look forward to seeing you the next National Seminar, probably see you down in Texas, if I don’t see you before then. So, thanks a lot, Jack. Take care.

Jack Meligan:

I’ll see you down in Austin. Thanks, David. It’s been a pleasure.

David Craig – Host:

This is David Craig, and you’ve been listening to After the Crash. If you’d like more information about me or my law firm, please go to our website ckflaw.com. If you’d like to talk to me, you can call 1-800-ASK-DAVID. If you would like a guide on what to do after a truck wreck, you can pick up my book, Semitruck Wreck: A Guide for Victims and Their Families. This is available on Amazon, or you can download it for free on our website, ckflaw.com.