Archive for the ‘ Liability ’ Category

CMS Issues Alert Regarding Threshold Amount

Russell S Whittle, VP Medicare Secondary Payer ComplianceOn February 18, 2014, CMS issued two Alerts regarding the threshold amount under which the Medicare Secondary Payer Recovery Contractor (MSPRC) would not pursue its right to recover unpaid conditional payments. In addition, CMS modified the Mandatory Insurer Reporting obligations for cases settling under $1000.

Section 202 of the Strengthening Medicare and Repaying Taxpayers (SMART) Act charged CMS with the duty to calculate and publish a single threshold amount for settlements, judgments and awards arising from liability insurance (including self-insurance) for physical based trauma incidents (excluding ingestion, implantation and exposure) no later than November 15 of each year. Cases meeting the threshold would not be subject to conditional payment recovery efforts by Medicare. The calculation was to be reviewed by the Comptroller of the United States before it was published.

Previously, CMS had established a $300 settlement threshold for reimbursement of conditional payments. The $300 reporting threshold and conditional payment reimbursement process began in August 2011.

For 2012, CMS determined that its average cost of collection per Non Group Health Plan case was approximately $335.  This figure was expected to be similar in 2013 and 2014. CMS then analyzed the settlement amount range closest to its $335 cost of collection, which was found to be cases more than $750 and equal to or less than $1000.

Accordingly, trauma-based settlements, judgments or awards totaling $1,000 or less are exempt from conditional payment reimbursement.

The second Alert of the same date clarified the first Alert regarding reporting under Section 111 of the Medicare, Medicaid and SCHIP Extension Act. Effective immediately, settlements, judgments and awards arising from liability insurance (including self-insurance) for physical based trauma incidents (excluding ingestion, implantation and exposure) are not reportable under the Mandatory Insurer Reporting scheme. The MSP User Guide will be amended to reflect the reporting threshold change when it is updated.

There are several questions raised by the Alert. Perhaps most important is whether CMS has altered its Mandatory Insurer Reporting system to incorporate the change in the requirements. At present, Mandatory Insurer Reporting requirements obligate Responsible Reporting Entities to report all settlements, judgments and awards arising from liability insurance (including self-insurance) for physical based trauma incidents in cases whose value exceeds $2000. As of January, 2015, the threshold was scheduled to drop from $2000 to $300.

Gould & Lamb expects that CMS will publish clarification of its Alerts along with technical guidance regarding the changes. Gould & Lamb will continue to monitor developments on these important issues and will apprise you of their practical implications on your Medicare compliance program.

CMS Proposes Expansion of Workers Compensation MSA Re-Review Process

Russell S whittle, Esq VP MSP ComplianceOn February 11, 2014, the Centers for Medicare and Medicaid Services (CMS) published a proposed methodology for the re-review of Workers’ Compensation Medicare Set-Aside Arrangements (WCMSAs). The proposal can be viewed here: http://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Workers-Compensation-Medicare-Set-Aside-Arrangements/Downloads/WCMSA-Re-review-Expansion.pdf.

Comments on the proposal, including those as to timeframe, thresholds and re-review criteria must be sent by March 31, 2014 to WCMSARereview@cms.hhs.gov. CMS will then publish implementation dates and instructions on the use of the new process on its website.

At present, re-reviews of WCMSAs have been limited. There existed no method by which to have CMS reconsider an MSA in a case that had not settled. Once the MSA had been reviewed, CMS would not consider revisiting the case even in instances where the parties had not effectuated a settlement. According to the proposal, CMS will now allow a “broader array” of instances where a re-review will be allowed. Additionally, CMS proposes that a re-review will be completed by the Workers’ Compensation Review Contractor (WCRC) within 30 business days of the re-review request. In order to avoid any suggestion that the WCRC would simply “rubber stamp” its initial determination, CMS proposes that the re-review will be completed by individuals not previously involved in the initial determination.

Re-review Criteria for WMSAs

The Proposal divides re-review criteria into two distinct categories. MSAs will be Re-Reviewed at any time where errors have been made by the WCRC and the submitter and in other situations depending on the contingencies of the case or the calculation of the Set-Aside itself. Those criteria as listed in the Proposal are:

  • Re-review requests can be submitted at any time to the WCRC for the following reasons:
  • A mathematical error was identified in the approved set-aside amount.
  • Original submission included case records for another beneficiary.
  • Re-review can be submitted to the WCRC when the original WCMSA was   approved within the last 180 days; the case has not settled; no prior re-review request has been submitted for this WCMSA; and, the re-review requests a change to the approved amount of 10% or $10,000 (whichever is more) for any of the following reasons:
  • Submitter disagrees with how the medical records were interpreted.
  • Medical records dated prior to the submission date were mistakenly omitted.
  • Items or services priced in the approved set-aside amount are no longer needed or there is a change in the beneficiary’s treatment plan.
  • A recommended drug should not be used as it may be harmful to the beneficiary.
  • Dispute of items priced for an unrelated body part.
  • Dispute of rated age used to calculate life expectancy.

Significantly, CMS has now recognized that the review process is, at times, contrary to state workers’ compensation laws particularly where a statutory provision exists limiting compensable medical care. Instances abound where the WCRC has not considered evidentiary orders or has failed to adhere to its own review policies. In those situations, the Proposal allows a re-review request to be elevated to the CMS Regional Office. No time frame was proposed for Regional Office review, however. Additionally, the placement and language in the Proposal appears to signal that disagreements based on these issues may be discretionary and will not be evaluated via the independent review process.  Court rulings and state statutes are vitally important in the WCMSA process and represent a significant opportunity for stakeholders to legitimately minimize the impact of a set-aside on a claim settlement.  As such, a discretionary review standard seems inconsistent with the desire to abide by state law dictates.

While the core issues cited by CMS are appropriate for triggering a re-review, the 180 day requirement and the 10% or $10,000 threshold may make the intended benefits to stakeholders impractical in Workers’ Compensation cases. The Workers’ Compensation system, by its very nature, is often fraught with delays.  While a 10% or $10,000 difference in a counter-higher determination may be insignificant in a large settlement, it may be meaningful in a relatively small settlement. On its face, the $10,000 threshold can be likened to the CMS practice of forgoing conditional payment recovery in case settling under $300 in the aggregate, which has limited impact on the resolution of claims. If it is assumed that the 10%- $10,000 threshold is a starting point for CMS, it is expected that comments to the proposal would challenge those numbers as meaningless, for the most part. Expanding the criteria for review to cases where a discrepancy in the approved amount exceeds the allocated amount by more than 10% or $10,000 could prove more reasonable.

The re-review process is the first step in a long awaited appeals-type process for workers’ compensation MSAs. While the review of cases that fall under the first category (mathematical errors or unrelated records submission) has been routinely allowed, the second category represents a departure and, perhaps, a philosophical change regarding future care allocation re-reviews and their relationship to workers’ compensation cases and laws. As noted, it is unclear based upon the Proposal itself what type of evidence and argument will be allowed in the re-review process or what kinds of medical documentation will be persuasive regarding issues such as ”harmful” prescription medications or unrelated body parts. It is also unclear whether re-review will be required as opposed to discretionary. Accordingly, the responses to the Proposal will be critical in shaping the parameters of the re-review process and in setting the appropriate thresholds for re-review. Depending on its final iteration, the Proposal can only be seen as a potential welcome change by practitioners, insurers and litigants seeking to satisfy their obligations to the Medicare Trust Fund and their clients. Gould & Lamb encourages comments and suggestions using the link above.

11th Circuit Appellate Court Rules Government’s Lawsuit Untimely

Recently, the United States Court of Appeals for the Eleventh Circuit rendered its decision on United States v. Stricker et al., finding that under the applicable statutory provisions and federal regulations, the government’s action under the MSP Act accrued on October 29, 2003, when $275 million was transferred by the defendants to the plaintiffs’ lawyers. Since the government filed its lawsuit on December 1, 2009, even if the longer six-year limitations period applied, the government’s action was untimely.

For decades, from its chemical plant in Anniston, Alabama, the Monsanto Company and its predecessors—including Pharmacia Corporation and Solutia, Incorporated—allegedly produced polychlorinated biphenyls (“PCBs”), which are toxic pollutants linked to cancer and birth defects. In 1996, thousands of individuals sued Monsanto, Pharmacia, and Solutia (collectively “the PCB producers”) in state and federal courts in Alabama for injuries caused by PCBs.

Eventually, the parties reached a settlement whereby the PCB producers paid $300 million to the plaintiffs in return for their release of liability. More than six years after the PCB producers transferred $275 million to the PCB plaintiffs’ lawyers pursuant to the settlement, but before that money was distributed to the PCB plaintiffs, the government filed suit under the MSPA against the PCB producers, the PCB plaintiffs’ lawyers, and the insurance companies which furnished liability insurance to the PCB producers, seeking to recoup Medicare payments that it had made on behalf of 907 PCB plaintiffs.

The Federal Claims Collection Act provides that when an action is “founded upon a contract,” the government must sue within six years of the accrual of the cause of action. 28 U.S.C. § 2415(a). For actions “founded upon a tort,” the government must file suit within three years of accrual. 28 U.S.C. § 2415(b). As a result, the defendants moved to dismiss the government’s MSPA complaint, arguing that because the underlying cause of action related to a toxic tort claim, the three-

year statute of limitations under § 2415(b) applied to bar the government’s action as untimely. The defendants alternatively argued that, even if the six-year statute of limitations under § 2415(a) applied based upon the contract between the plaintiffs and their attorneys, the government’s action was still barred because the complaint was filed more than six years after the cause of action accrued. The district court agreed with both arguments and granted the motions to dismiss.

The events contemplated by the settlement agreement were as follows:

  • August 20, 2003: The parties agreed to a settlement.
  • August 26, 2003: The PCB producers transferred $75 million to the interest-bearing account.
  • September 9, 2003: The parties signed a written settlement agreement.
  • September 10, 2003: The state court approved the settlement agreement.
  • September 17, 2003: The PCB producers wired the additional $200 million to the interest-bearing account.
  • October 28, 2003: The PCB lawyers certified that 75% of the adult PCB plaintiffs had signed releases.
  • October 29, 2003: The PCB producers paid $275 million to the PCB plaintiffs’ lawyers.
  • December 2, 2003: The PCB plaintiffs’ lawyers certified that 97% of the PCB plaintiffs had signed releases.

On December 1, 2009, the government filed the lawsuit seeking reimbursement of conditional payments it had made.

The had government six years “after the right of action accrues” to bring an action “founded upon any contract express or implied in law or fact.” See § 2415(a). It had three years after the action accrued to bring an action “founded upon a tort.” See § 2415(b). The court found that it need not decide whether the government’s attempt to recoup Medicare payments under the MSPA after a toxic-tort settlement constituted an action founded upon a contract or an action founded upon a tort. Assuming that § 2415(a)’s six-year limitations period applies, the government’s action under the MSPA against the PCB producers, their insurers, and the PCB plaintiffs’ lawyers accrued on October 29, 2003, when the PCB producers transferred the $275 million from an interest-bearing account to the PCB plaintiffs’ lawyers. Because the government filed this lawsuit on December 1, 2009—six years, one month, and two days from when its action accrued—its lawsuit was untimely.

Interestingly, the court briefly mentioned that the recently signed legislation, (although not applicable in this case), clarifies the uncertainty concerning statute of limitations issues for MSPA reimbursement claims. The Strengthening Medicare and Repaying Taxpayers Act establishes a three-year statute of limitations for Medicare to file suit for recovery under the MSPA. See Pub. L. No. 112-242, § 205(a) (2013).

The case seems to answer many questions about the viability of conditional payment recovery actions by the federal government under the Medicare Secondary Payer Act. Medicare’s arguments are typically centered on the very broad language of the Act which, when considered alone, carries no limitations period on actions to recover funds paid by Medicare on behalf of injured Medicare beneficiaries. However, when coupled with The Federal Claims Collection Act, a cogent argument can be raised that the power of the federal government is not without limitations. As the court noted, actions accruing after the passage of the S.M.A.R.T. Act are subject to a three year limitations period. However, for all actions that ripened before the enactment of S.M.A.R.T., the arguments made by the defendants in the Stricker case have now been given deference by the Eleventh Circuit.

MSAs for Liability Cases? – CMS Publishes Timeline for Rulemaking

The Centers for Medicare and Medicaid Services recently published RIN: 0938-AR43 in follow-up to its Advanced Notice of Proposed Rulemaking, originally released on June 15, 2012 (read here). The original ANPRM solicited public comment on a proposed rule regarding  standardized options that CMS was considering making available to beneficiaries and their representatives to clarify how beneficiaries could “meet their obligations to protect Medicare’s interest with respect to Medicare Secondary Payer (MSP) claims involving automobile and liability insurance (including self-insurance), no-fault insurance, and workers’ compensation when future medical care is claimed or the settlement, judgment, award, or other payment releases (or has the effect of releasing) claims for future medical care.” The document provided seven options for satisfying Medicare’s interest when settling future medical benefits as a result of an injury or accident.

According to the Federal Register, 107 comments were received. Considering the importance and far-reaching ramifications of a potential rule to codify and require the parties to consider Medicare in all insurance cases, the number of comments was startlingly low. In fact, the lack of CMS activity with regard to the rule making may signal that the issue was not pressing enough for immediate action. In fact, no response to the comments were addressed or made by CMS until the publication of the RIN. In several public appearances since June of last year, CMS officials refused to discuss the issue, advising that they were “under rulemaking.” While their position is technically incorrect as the rule was simply a proposed notice, CMS nonetheless gave many the impression that activity around the issue was not a priority.

With the release of the RIN, CMS seems to signal that they are prepared to publish a Notice of Proposed Rulemaking which would include liability insurance cases. The deadline for action, however, is listed as “9/00/2013.” Accordingly, we may be able to expect something substantive in the very near future. Presumably, CMS has digested the comments provided by those that bothered to respond. By and large, those comments either questioned the statutory authority of CMS to implement such a rule, or lamented the broken, sometimes incomprehensible workers’ compensation MSA review and approval process.

While the RIN suggests a timeline for action by CMS, it must be remembered that the suggested timeline will not be enforced by any entity other than CMS itself or the Department of Health and Human Services. Considering the slow response that CMS and HHS have exhibited in formulating and releasing Congressionally-mandated regulations to implement the newly enacted Strengthening Medicare and Repaying Taxpayers (SMART) Act, it would not be unusual to see the September deadline come and go without a proposed rule.

Certainly, CMS action on these issues and implementation of a rule requiring injured plaintiffs/claimants to formally consider Medicare’s future interests in any injury or accident case, could fundamentally alter the way claims will be evaluated, litigated and resolved particularly with respect to liability insurance claims. Gould & Lamb will continue to monitor the situation and will provide updates or comment as the situation is further defined. If you would like to discuss these issues, contact your G&L representative or call our corporate office and an executive team member will be glad to assist you.


US House of Representatives Passes SMART Act of 2012

Russell S whittle, Esq VP MSP ComplianceThe United States House of Representatives today passed the Saving Medicare and Repaying Taxpayers (SMART) Act as part of a broader legislative effort. The SMART Bill was attached to House Bill 1845 Medicare IVIG Access Bill which provides for a study on issues relating to access to intravenous immune globulin (IVIG) for Medicare beneficiaries in all care settings and authorizes a demonstration project to examine the benefits of providing coverage and payment for items and services necessary to administer IVIG in the home.

The SMART Bill allows the claimant or applicable plan to notify the Secretary of HHS 120 days before the expected date of settlement, judgment, award, or other payment, and obtain a statement of the reimbursement amount from a website the Secretary will make available. If settlement, judgment, award or other payment is made during such period, then the last statement of reimbursement amount downloaded during such period shall constitute the final conditional amount subject to recovery related to such settlement, judgment, award, or other payment. No later than November 15 before each year, the Secretary is required to calculate and publish single threshold amount for settlements, judgments, awards or other payments for conditional payment obligations from liability insurance (including self-insurance), workers’ compensation laws or plans, and no fault insurance for that year. Each such annual single threshold amount for a year shall equal the expected average cost of collection incurred by the United States (including payments made to contractors) for a conditional payment from liability insurance (including self-insurance), workers’ compensation laws or plans, and no fault insurance.

As for the $1,000 mandatory insurer reporting penalty, the Bill states that insuring entities “may be subject” to a civil money penalty of up to $1,000 for each day of noncompliance. The Secretary must publish a notice in the Federal Register soliciting proposals for the specification of practices for which sanctions will not be imposed, including for good faith efforts to identify a beneficiary. After considering the proposals submitted, the Secretary, in consultation with the Attorney General, shall publish in the Federal Register proposed specified practices for which such sanctions will not be imposed. After considering any public comments, the Secretary shall issue final rules specifying such practices.

The Bill also modifies reporting requirements so that an applicable plan is permitted, but not required, to access or report to the Secretary beneficiary social security account numbers or health identification claim numbers.

In addition, the Bill establishes a statute of limitations by indicating that an action may not be brought by the United States with respect to payment owed unless the complaint is filed not later than 3 years after the date of the receipt of notice of a settlement, judgment, award, or other payment made.

The SMART Bill was described as a bipartisan effort targeted at improving the Medicare Secondary Payer system and to create efficiency and accountability in the MSP Recovery system.

The Bill will now move on to the United States Senate where it could be presented for vote or referred to a committee where it may be reviewed to determine whether it requires additions, deletions or other modifications or whether it can be approved in the form submitted.  Gould and Lamb is actively monitoring and is involved with many legislative bills and committees including the SMART Act  We will continue to follow the Bill’s progress as it moves over to the Senate and will keep our clients informed.  If anyone has any questions please feel free to contact your Gould & Lamb representative directly or the entire executive is available to answer any questions.

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About the Author: Russell S. Whittle, Esq., is the Vice President of MSP Compliance for Gould & Lamb, LLC. In his twenty plus years of practice prior to joining Gould & Lamb, LLC, Mr. Whittle practiced primarily in the area of insurance defense, representing the interests of large insurers and employers in both workers’ compensation and general automobile liability matters.

Gould & Lamb is a global leader of MSA/MSP Compliance Services in the country, serving domestic and international insurance companies, third-party administrators and self-insured entities.