The Government Accountability Office (GAO) audits the Medicare Secondary Payer program within CMS

From Feb 2011 through Mar 2012 the Government Accountability Office (GAO) audited and reviewed how the initial implementation of Section 111 mandatory insurance reporting for Non-Group Health Plans (NGHP’s) has affected Medicare savings and the Medicare reimbursement process.  The GAO recently submitted their findings in a March 2012 report to a House Congressional Committee.  The report discusses steps the CMS is taking to address challenges mandatory reporting has caused.  The GAO then gives recommendations to the CMS on how to enhance services to make the MSP system more efficient.

The GAO identified the following problem areas within the MSP process:  

• Poor guidance and communication about the MSP system itself
• There is very little guidance for Liability Medicare set-aside arrangements
• Poor communication with beneficiaries regarding their rights and responsibilities.    

 The GAO is making the following recommendations to the CMS to improve the effectiveness of the MSP:

•  “That the Acting Administrator of CMS review recovery thresholds periodically for appropriateness to ensure that the agency’s recovery efforts are being conducted in the most cost-effective manner possible, and not require NGHP’s to report on cases for which the agency will not seek any recovery.
• To potentially decrease the administrative burden of mandatory reporting for NGHPs, the GAO recommend that the Acting Administrator of CMS consider making the submission of ICD-9 codes an optional component of reporting for liability NGHPs.
• Develop a centralized MSP program website to include links to information about the various parts of the MSP process; 
• Develop guidance regarding liability and no-fault set-aside arrangements; and
• Review and revise the correspondence with beneficiaries, such as letters sent during the recovery process, to ensure that beneficiary rights and responsibilities are more clearly communicated.”

Stay tuned to see if the recommendations take hold.  It will be interesting.

IS A PRE SETTLEMENT COMPROMISE THE ANSWER TO BRADLEY, HADDEN, THE MADE WHOLE DOCTRINE, ETC.? CMS THINKS SO

According to a March 2012 Government Accountability Office (GAO) report that because  ”CMS does not recognize the concept of proportionality in liability settlement situations a disproportionate share of liability settlement amounts may be paid to Medicare”;  No kidding.  As a little background by proportionality they are really discussing a theory similar to a "Made whole or make whole" doctrine. 

The report goes on to state that "CMS officials said that the concept of proportionality is in conflict with MSP provisions granting CMS a priority right of recovery, which entitles Medicare to full recovery for the expenses it paid up to the settlement amount." 

Interestingly enough CMS says there is a process in place to address this concept.  " CMS officials said that Medicare beneficiaries may contact the appropriate CMS regional office prior to settling a case to request a pre-demand compromise in the event that the demand amount would consume the entire settlement. CMS officials told us (GAO auditors) that they do not advertise the availability of this option and do not keep data on how often compromises are requested or granted."

We have utilized this "pre-demand compromise" many times in the past for various issues and now will do so even more in the future.  I hope CMS understand that most liability settlements are a compromise and the plaintiff almost never receives true value for their injuries.  

Coming Soon - The Medicare Secondary Payer Recovery Portal

From MSPRC:

"A new online Self-Service Tool to help manage your Medicare recovery case.

The Centers for Medicare & Medicaid Services (CMS) is in the process of implementing a new web-based tool designed to assist in and accelerate the resolution of Liability Insurance, No-Fault Insurance, and Workers' Compensation Medicare recovery cases. The new tool is called, The Medicare Secondary Payer Recovery Portal (MSPRP).

The MSPRP will give users (attorneys, insurers, beneficiaries, and TPAs) the ability to access and update certain case specific information online. Activities that currently require written communication or telephone calls to the Medicare Secondary Payer Recovery Contractor will soon be able to be done through the portal.

The MSPRP will allow users the ability to electronically perform the following activities:

• Submit Proof of Representation or Consent to Release documentation - Instead of mailing in an authorization, users will be able to upload authorizations through the portal.
• Request conditional payment information - Requesting an updated conditional payment amount or a copy of a current conditional payment letter will be as simple as clicking a few buttons.
• Dispute claims included in a conditional payment letter - Users will be able to view the claims listed on the conditional payment letter and dispute unrelated claims online.
• Submit case settlement information - Users will be able to input settlement information online and upload a copy of the settlement documentation through the portal.

The MSPRP is scheduled to go live in July 2012. Additional details regarding the MSPRP will be shared on this website in the coming months"

Structured Settlement helps prevent ERISA Plan from reimbursement

Clayton Starnes and Kelley Falcon from our office share some views on ACS Recovery Servs. V. Griffin, No. 11-40446 (5^th Cir.), a decision that was handed down a few days ago on April 2, 2012.  Larry Griffin was rendered incapacitated as the result of an auto accident.  The ERISA Plan paid approximately $50,000 in medical bills.   The plaintiff’s attorney secured a settlement of $294,439.82 and arranged for a structured settlement annuity “in an effort to avoid any equitable lien asserted” by the ERISA Plan.  The state court approved the settlement, which provided for the payment of attorneys, some additional medical expenses, and $40,000 to Griffin’s ex-wife’s loss of consortium claim.  The remaining $148,007.68 went into an annuity, which would make monthly payments into a Special Needs Trust for the benefit of Larry Griffin.  The ERISA Plan filed suit against Larry Griffin and his wife, and against the Trust and the Trustee.  The trial court dismissed the claims against all of the defendants and the 5^th Circuit affirmed the dismissal. 

First the court noted that when an ERISA Plan seeks reimbursement from a defendant, a three-prong test will determine whether the relief sought is equitable within the meaning of ERISA: The funds the plan seeks to recover must be 1) specifically identifiable, 2) belong in good conscience to the plan, and 3) are within the possession and control of the defendant beneficiary.

Griffin, the Trust and the Trustee did not dispute that the first two elements had been met.  As to the third element that was disputed, the court held that Griffin neither had possession or control of the funds, as they were in a trust and he had no control over their distribution. The court further held that the Trust and Trustee were also not in possession or control because Hartford Life Insurance Company had actual possession of the annuity.

As for the ex-wife, the court held that as required under the second prong of the test, the funds do not belong in good conscience to the Plan. Because Judith received the funds for loss of consortium as part of her and Griffin’s divorce agreement, it was a claim entirely separate from compensation for medical expenses. Thus the Plan had no right to those funds. 

4th Circuit upholds Ahlborn over contrary North Carolina law

As always thanks to Professor Roger Baron for sending us the following update out of the 4th Circuit:

"The 4^th Circuit Court of Appeals handed down E.M.A. v. Cansler, 2012 WL 956187, yesterday.  In this case, a child sustained serious injuries at birth due to medical malpractice.  The state of North Carolina paid more than $1.9 million in medical bills. The tort recovery was $2.8 million.  The federal trial court, applying North Carolina law as set forth in state statute and as interpreted by the N.C. Supreme court, awarded Medicaid reimbursement in the amount of one-third of the tort recovery or $933,333.33.  This decision holds that North Carolina law, “as applied in this case, fail[s] to comply with federal Medicaid law as interpreted by the Supreme Court in Ahlborn. As the unanimous Ahlborn Court’s decision makes clear, federal Medicaid law limits a state’s recovery to settlement proceeds that are shown to be properly allocable to past medical expenses.”  The case remanded “for an evidentiary hearing at which the district court shall determine the proper amount of DHHS’s Medicaid lien in accordance with Ahlborn …”

California- Paid vs. Incurred update- Sanchez vs. Brooke

Robert Tessier Graciously forwarded this commentary to us:

The Howell v. Hamilton Meats decision continues to create aftershocks both in the judicial and legislative arenas. Two events in the last few weeks are worthy of note, and will be summarized in this post:

The Sanchez v. Brooke case was filed March 8, 2012.  This Sanchez case should not be confused with the Sanchez v. Strickland case decided in November 2011 which held that past medical expenses gratuitously written off were not subject to the Howell reduction. Rather, in this new Sanchez case, one of the issues to be determined was whether past medical expenses which were paid in the workers' compensation system in an amount less than the amount the providers actually billed are subject to reduction under the Howell rationale.  The answer as provided by Division Four of the Second Appellate District, is yes.

The court succinctly stated its ruling as follows:

"Applying the court's reasoning in Howell to this case, we conclude that where an employer is required under the workers' compensation laws to pay in full an injured employee's medical expenses, the injured employee may not recover, as economic damages from a third party tortfeasor, medical fees that the provider is precluded, either by agreement or by law (including the statutory fee schedule), from collecting from the employer.  Because fees that the provider may not collect from the employer under the workers' compensation law do not represent an economic loss for the employee, they are not recoverable in the first instance."

The basis of this ruling is grounded in the statutory scheme found in the California Labor Code. When a worker is injured in the course and scope of employment, her employer is responsible for all medical expenses incurred.  The workers' compensation laws limit a healthcare provider's ability to balance-bill an injured employee for charges the employer does not pay.  Specifically, Labor Code section 4600 prohibits attempts to seek payment from the injured worker for medical treatment above the reasonable fee established by the official medical fee schedule in the workers compensation system.

This statutory scheme allowed the court to conclude that the amount paid under workers' compensation was the payment in full and the plaintiff was not obligated for the balance. Therefore, the Howell rationale applies to reduce the past medical expenses recoverable to the amount paid by workers' compensation, not the amount billed.

The court did remand the case back to the trial court for determination, in light of Howell (which was decided during the pendency of the appeal in Sanchez) of the full amount owed by the employer to the medical care providers under the worker's compensation law.  The amount owed will be the measure of recoverable past medical expenses in the case.

Given the broad and sweeping ruling in Howell, one would have anticipated this result in Sanchez v. Brooke.  While the aftershocks continue in the judicial branch, there is now a legislative attempt to address the impact of the Howell decision.

The Impact of Howell in the Legislature

On February 24, 2012, State Senator Steinberg introduced SB 1528, which would add Section 3284 to the Civil Code as follows:

"SECTION 1.  Section 3284 is added to the Civil Code, to read:

  3284.  (a) To ensure the public policy of all injured persons

being compensated equally, an injured person shall be entitled to

recover the reasonable value of medical services provided without

regard to the amount actually paid. 

  (b) Nothing in this section abrogates the lien rights provided for

in Sections 3040 and 3045.1of this code, or Section 14124.791 of the

Welfare and Institutions Code. This section shall have no effect on

the rights of parties under Section 3333.1 of this code or of public

entities under Section 985 of the Government Code."

As we know, there is a long road ahead for any piece of legislation.  This legislation squarely reverses Howell, and would require evidence of the reasonable value of medical expense at trial rather than the amount paid. Senator Steinberg's rationale for the legislation is as follows:

"Existing law establishes, as a general rule, that compensation is

the relief or remedy provided by law for a violation of private
rights. Existing law provides that a person suffering detriment from
the unlawful act or omission of another may recover damages from the
person at fault.  

This bill would require, in order to ensure the public policy of
all injured persons being compensated equally, that an injured person
is entitled to recover the reasonable value of medical services
provided without regard to the amount actually paid, as specified."

Stay tuned!

Medicare Appeals

Occasionally a Medicare beneficiary may want to challenge a final demand that has been issued by CMS.  The following describes the five levels of administrative appeal that a person may choose to walk down. The first level of appeal is to the Medicare Secondary Payer Recovery Contractor (MSPRC). The second level of appeal is with Maximus, an independent third party.   The third level of appeal is with an administrative law judge.  It is at this level of appeal where we find the most success.  As a rule of thumb each of these first three levels of appeal can take as long as 90-120 days. The fourth level of appeal is before the Medicare Appeals Council and finally the fifth level is with the federal district court.  If you have any questions regarding your appellate rights please give us a call.

US Airways Vs McCutchen 2- 3rd Circuit unanimously approved the traditional notions of equity in this ERISA case

Our friend Roger Baron has  received the following news:

"The 3^rd Circuit denied US Airway’s Petition for rehearing en banc in US Airways vs. McCutchen.  It is expected that the ERISA plan will file a Petition for Writ of Cert in the Supreme Court.  This approval by the entire 3^rd Circuit of the traditional notions of equity in regard to reimbursement claims is very good news indeed.  We are hopeful other circuits will follow suit. This same issue is being presented in the 9^th Circuit in a case scheduled for oral argument in Seattle on February 9."

Thank you Professor Baron and lets hope for great results in the 9th Circuit as well.

US v Hadden- Medicare wins round 2

My good friend Dan Anders recently wrote the following synopsis of the Hadden decision. It shoots down an Ahlborn like pro-rata reduction for Medicare reimbursement like the 11th circuit gave us in Bradley v Sebellius. These conflicting opinions may ultimately let the US Supreme Court decide this issue:

At the end of 2010 we advised the decision in Hadden vs. U.S. was one to watch for in 2011. On November 21, 2011 the U.S. Court of Appeals for the 6th Circuit held Medicare is not bound by principles of comparative fault when asserting its reimbursement rights under the Medicare Secondary Payer Act.

Facts: The Plaintiff, Vernon Hadden, was injured in an automobile accident when he was struck by a vehicle. He asserted to Medicare that he had recovered only 10% of the total damages in the case as another unidentified motorist was 90% at fault. The party which was 10% at fault agreed to a settlement of $125,000 out of which Medicare made a reimbursement claim of $62,338.07. Hadden stated Medicare’s claim should be reduced to 10% of the settlement amount given that was the proportionate amount of legal responsibility of the settling defendant.

Decision: In a 2-1 decision the Appellate Court held in favor of Medicare in that it may be reimbursed for the entire conditional payment amount without regard to any comparative fault principles. The Court stated that when a plaintiff makes a claim for the full extent of his medical expenses as he did in this case and then receives a settlement from a primary plan, i.e. insurance carrier, the parties have demonstrated a “responsibility” under the Medicare Secondary Payer to fully reimburse Medicare. In this case, the plaintiff demanded recovery for not 10% of

medical expenses, but for all medical expenses from the primary plan. In response, the court stated, “And thus a beneficiary cannot tell a third party that it is responsible for all of his medical expenses, on the one hand, and later tell Medicare that the same party was responsible for only 10% of them, on the other.”

In a dissenting opinion, Judge White stated that while it is correct to say that by a primary plan making payment as part of a settlement acknowledges the parties’ responsibility to reimburse Medicare; it does not define the extent of that reimbursement.

Bottom Line: The decision affirms the current state of affairs when it comes to Medicare conditional payment recovery and Medicare’s right to recover its full amount without regard to compromise, comparative fault or other equitable principles. Whether this decision gets appealed to the U.S. Supreme Court remains to be seen. Nonetheless, CMS remains open to pre-settlement compromise requests in certain cases.

If your gross Settlement is less than $25,000, resolving Medicare's past interest may have just gotten easier!

From the MSPRC Website:

"Self-Calculated Final Conditional Payment Amount" Option

The Centers for Medicare & Medicaid Services (CMS) will be implementing an option that will allow certain Medicare beneficiaries to obtain Medicare's final conditional payment amount prior to settlement. This option will be available in February 2012, for certain settlements involving physical trauma based injuries where treatment has been completed. Under this option, the beneficiary or his representative will calculate the amount of Medicare's conditional payment amount using information received from the Medicare Secondary Payer Recovery Contractor (MSPRC), the MyMedicare website, or other claims information available to the beneficiary. The MSPRC will review this amount and, if finding the amount accurate, will respond with Medicare's final conditional payment amount within 60 days. To secure the final conditional payment amount, the beneficiary must settle within 60 days after the date of Medicare's response.

In order to use this option, ALL of the following criteria must be met:

1. The liability insurance (including self-insurance) settlement will be for a physical trauma based injury (the settlement does not relate to ingestion, exposure, or medical implant);


2. The total liability settlement, judgment, award, or other payment will be $25,000 or less;


3. The Date of Incident occurred at least six months before the beneficiary or his representative submits his proposed conditional payment amount to Medicare;


4. The beneficiary demonstrates that treatment has been completed and no further treatment is expected either through a written physician attestation or by certifying in writing that no medical treatment related to the case has occurred for at least 90 days prior to submitting the proposed conditional payment amount to Medicare

Explicit instructions on how to use this process will be posted on the Medicare Secondary Payer Recovery Contractor's website at www.msprc.info by January 15, 2012. CMS will leverage existing processes to the greatest extent possible. This is an initial step to provide beneficiaries and their representatives with Medicare's conditional payment amount prior to settlement. CMS plans to expand this option as it gains experience with this process.