Federal Circuit Court Finds Part C Medicare Advantage Plans Have Same Rights as CMS When Seeking Recovery from Primary Payer

On June 28, 2012, the United States Court of Appeals for the Third Circuit published its decision on Humana Medical Plan and Humana Insurance Company v. GlaxoSmithKline, LLC, concluding that any private party may bring an action under §1395y(b)(3)(A), as it establishes a private cause of action for damages. As a result, the court found that private parties like Humana can bring suit for double damages when a primary plan fails to appropriately reimburse any secondary payer. In addition, since 42 C.F.R. §422.108 stated that a Medicare Advantage organization can exercise the same rights to recover from a primary plan, entity, or individual that the Secretary of HHS exercises under the MSP regulations, the Medicare Act treats MAOs the same way it treats the Medicare Trust Fund for purposes of recovery from any primary payer.

Humana, an authorized Part C Medicare Advantage (MA) plan allows Medicare enrollees to obtain their Medicare benefits through private insurers (MAOs) instead of receiving direct benefits from the government under Parts A and B. § 1395w-21(a). CMS pays an MAO a fixed amount for each enrollee, per capita (a “capitation”). The MAO then administers Medicare benefits for those enrollees and assumes the risk associated with insuring them. MAOs like Humana are thus responsible for paying covered medical expenses for their enrollees.

Glaxo manufactured and distributed Avandia, a Type 2 diabetes drug that has been linked to substantially increased risk of heart attack and stroke. Thousands of Avandia patients alleged various injuries resulting from their use of the drug and Glaxo began entering into agreements to settle these claims. By August 2011, when Appellants filed their brief, Glaxo had paid more than $460 million to settle these claims. As part of the settlement process, where a claimant was insured by Medicare, Glaxo had set aside reserves to reimburse the Medicare Trust Fund for payments it made to cover the costs of treatment for the claimants’ Avandia-related injuries.

Glaxo had not, however, included reimbursement of MA plans in the settlement agreements that it had reached with Avandia claimants enrolled in MA plans, even though MAOs had paid the costs of treatment of Avandia-related injuries for these claimants. Humana filed suit seeking reimbursement from Glaxo for the cost of treating its enrollees’ Avandia-related injuries. Humana sought, on behalf of itself and a class of similarly-situated MAOs: (1) damages under the Medicare Secondary Payer Act (“MSP Act”), which provides a private cause of action, 42 U.S.C. § 1395y(b)(3)(A), allowing double damages for failure to reimburse a secondary payer; and (2) equitable relief in the form of an order compelling Glaxo to identify settling Avandia claimants to the MAOs that cover them.

Glaxo filed a motion to dismiss. The District Court heard oral argument on the motion and, granted it. In dismissing the action, the District Court found there was no clear legislative intent to create a remedy for Humana. The District Court therefore found that no implied private right of action existed. Accordingly, the Court did not defer to the CMS regulation that granted MAOs parity with Medicare recovery from primary payers.

On appeal, the court found that the text of the provision sweeps broadly enough to include MAOs and that, even if it determined the statute to be ambiguous on this point, deference to CMS regulations would require it find that MAOs have the same right to recover as the Medicare Trust Fund does.

The Medicare Statute creates two separate causes of action allowing for recovery of double damages where a primary payer fails to cover the costs of medical treatment. When the Medicare Trust Fund makes a conditional payment and the primary payer does not reimburse it, the United States may bring suit pursuant to §1395y(b)(2)(B)(iii). Additionally, a private cause of action with no particular plaintiff specified exists pursuant to §1395y(b)(3)(A) anytime a primary payer fails to make required payments.

The court found that the plain text of the MSP private cause of action lends itself to Humana’s position that any private party may bring an action under that provision. It establishes “a private cause of action for damages” and places no additional limitations on which private parties may bring suit. § 1395y(b)(3)(A). Accordingly, the court held that the provision is broad and unambiguous, placing no limitations upon which private (i.e., non-governmental) actors can bring suit for double damages when a primary plan fails to appropriately reimburse any secondary payer.

The court indicated that, although the MSP Act was enacted before Part C, which created MAOs, private Medicare risk plans were authorized under 42 U.S.C. § 1395mm in 1972, before the passage of the MSP Act. Act of Oct. 30, 1972, sec. 226(a), Pub. L. 92-603, 86 Stat. 1396. Thus, at the time it enacted the MSP Act, Congress was aware that private Medicare providers existed. Had it intended to prevent them from suing under the private cause of action provision, Congress could have done so explicitly. In short, the court found that there is nothing in the text or legislative history of the MA secondary payer provision that demonstrates a congressional intent to deny MAOs access to the MSP private cause of action.

The court also recognized that Congress’s goal in creating the Medicare Advantage program was to harness the power of private sector competition to stimulate experimentation and innovation that would ultimately create a more efficient and less expensive Medicare system. See, e.g., H.R. Rep. No. 105-217, at 585 (1997) (Conf. Rep.) (stating that MA program was intended to “enable the Medicare program to utilize innovations that have helped the private market contain costs and expand health care delivery options”). It was the belief of Congress that the MA program would “continue to grow and eventually eclipse original fee-for-service Medicare as the predominant form of enrollment under the Medicare program.” Id. at 638. The MA program was thus, like the MSP statute, “designed to curb skyrocketing health costs and preserve the fiscal integrity of the Medicare system.” Fanning v. United States, 346 F.3d 386, 388 (3d Cir. 2003).

The court reasoned that it would be impossible for MAOs to stimulate innovation through competition if they began at a competitive disadvantage, and, as CMS has noted, MAOs compete best when they recover consistently from primary payers. Policy and Technical Changes to the Medicare Advantage and the Medicare Prescription Drug Benefit Programs, 75 Fed. Reg. 19678, 19797 (Apr. 15, 2010). When they “faithfully pursue and recover from liable third parties,” MAOs will have lower medical expenses and will therefore be at a disadvantage, unable to exert the same pressure and thus forced to expend more resources collecting from such payers. The court therefore concluded that it was not the intent of Congress to hamstring MAOs in this manner.

The court pointed out that although the legislative history is nowhere explicit that MAOs may bring suit for double damages under the MSP private cause of action or using any other provision, it does make clear that MAOs were intended to enjoy a status parallel to that of traditional Medicare. Under original fee-for-service, the Federal government alone set legislative requirements regarding reimbursement, covered providers, covered benefits and services, and mechanisms for resolving coverage disputes. Therefore, the Conferees intend that the legislation provide a clear statement extending the same treatment to private MA plans providing Medicare benefits to Medicare beneficiaries. H.R. Rep. No. 105-217, at 638. This court saw nothing in the text or legislative history of the statute to imply that Congress did not intend to facilitate recovery for MAOs in the same fashion.

The Supreme Court in Chevron established a two-part test for determining when a federal court ought to defer to the interpretation of a statute embodied in a regulation formally enacted by the federal agency charged with implementing that statute. 467 U.S. at 842-43. First, the court must determine whether Congress’s intent on the issue is clear — if so, it must abide by that intention, regardless of any regulations. If the statute is unclear, that is, “silent or ambiguous with respect to the specific issue, the question for the court is whether the agency’s answer is based on a permissible construction of the statute.” Id. at 843.

CMS “has the congressional authority to promulgate rules and regulations interpreting and implementing Medicare-related statutes.” Torretti v. Main Line Hosps., Inc., 580 F.3d 168, 174 (3d Cir. 2009); see also 42 U.S.C. §1395hh(a)(1) (“The Secretary shall prescribe such regulations as may be necessary to carry out the administration of the insurance programs under this subchapter.”); 42 U.S.C. § 1395w-26(b)(1) (“The Secretary shall establish by regulation standards for MA organizations and plans consistent with, and to carry out, this part.”). Thus, the court concluded that it must accord Chevron deference to regulations promulgated by CMS.

CMS regulations state that an “MA organization will exercise the same rights to recover from a primary plan, entity, or individual that the Secretary exercises under the MSP regulations in subparts B through D of part 411 of this chapter.” 42 C.F.R. § 422.108. The plain language of this regulation suggests that the Medicare Act treats MAOs the same way it treats the Medicare Trust Fund for purposes of recovery from any primary payer. In this circumstance, the court concludes it is bound to defer to the duly-promulgated regulation of CMS.

A recent memorandum from CMS specifically responded to decisions of the federal courts holding that MAOs were not “able to take private action to collection for MSP services under Federal law because they have been limited to seeking remedy in State court.” Ctrs. for Medicare & Medicaid Svcs., Dep’t of Health and Human Svcs. Memorandum: Medicare Secondary Payment Subrogation Rights (Dec. 5, 2011). This memorandum clarified that CMS itself understood § 422.108 to assign MAOs “the right (and responsibility) to collect” from primary payers using the same procedures available to traditional Medicare.

The court therefore reversed the District Court’s dismissal of the complaint, and remanded it for further proceedings consistent with its opinion.

The decision is the latest in what seems to be an ongoing debate within the industry and amongst litigants regarding the rights of Part C plans when compared to those of traditional Medicare. The case distinguishes recent District Court decisions such as Parra v. PaciCare of Arizona, Inc., Civ. No. 10-008, 2011 WL 1119736 (D. Ariz. Mar. 28, 2011) which sought to define the priority rights of MAOs despite CMS regulation. In the Third Circuit there is now no question that MAOs enjoy the right of reimbursement and the ability to pursue that right through the private cause of action.

Some larger questions are presented by the ruling. With traditional Medicare, information regarding a potential recovery is reported through the Mandatory Insurer reporting mechanism. The Medicare, Medicaid and SCHIP Extension Act of 2007 have mandated electronic reporting be completed by RREs or those responsible for payment. The acceptance of ongoing responsibility for medical benefits and the settlement itself are required to be provided. From that information, Medicare begins its recovery efforts against those who failed to protect its interests. However, without an mandate requiring reporting information to extend to Part C plans, it would appear that MAOs must rely on the beneficiary or their representative to advise that a settlement has occurred.  Will CMS now expand the recipients of Mandatory Insurer Reporting to include Part C plans?

Assuming that MAOs now have the same rights as traditional Medicare and that their recovery rights ripen on the fact of settlement, judgment or award, is it permissible to satisfy the lien before settlement? If so, can this be done by the primary payer or by the beneficiary pursuant to the policy of insurance? Clearly, logistical questions abound. For the time being, the law applies only in the Third Circuit. But, if adopted by the other Circuits it appears that CMS will have yet another technical challenge on its hands. Clearly, mindful MAO organizations will now step up their recovery efforts based upon the case.

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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.

The June 28, 2012 decision by the United States Supreme Court on the Affordable Care Act may go down as one of those “Where were you when the ruling was announced?” type of moments. As both a self-proclaimed C-SPAN and political junkie, I followed the debate from the beginning, when President Obama signed into law the Patient Protection and Affordability Care Act of 2010 (PPACA) and the Healthcare and Education Reconciliation Act of 2010 (HCERA), including reading the transcripts of the oral arguments made to the U.S. Supreme Court a few months back.

The reason for my interest was a key provision pertaining to prescription drug plans which, if enacted, will have an affect on Medicare Part-D and, therefore, on Workers’ Compensation Medicare Set-Asides (WCMSA). PPACA § 2502 pertains to the elimination of the exclusion of coverage of certain drugs that traditionally have not been compensable under Medicare Part-D.

Now that the healthcare law has been upheld, beginning in 2013 Medicare Part-D will begin to cover Benzodiazepines and barbiturates used for certain conditions such as epilepsy, cancer, or a chronic mental disorder. Currently, these medications are excluded from Medicare Part-D prescription drug plans.

Benzodiazepines are those medications such as Diazepam (Valium), Clonazepam (Klonopin), Alprazolam (Xanax), and barbiturates and include the commonly used medication Phenobarbital. Although we do not see use of Phenobarbital often in the WC arena, Benzodiazepines are utilized for many conditions in WC, such as anxiety, sleep, and muscle relaxation.

Normally, these medications would not generate any concern as they are typically dispensed as generic and are relatively inexpensive. However, the expansion of Medicare to cover them will have a direct impact on WCMSAs in two ways.

First, individuals may request the brand name Benzodiazepines in lieu of a generic at the time of fill. Average Wholesale Price (AWP) of brand name Valium costs about $3 per tablet and averages 15 times higher than the price of the generic equivalent Diazepam.

Second, although Benzodiazepines are abused less than opioids, there is now the potential for an increase in prescriptions for these medications. Benzodiazepines abuse is commonly seen when there is an established pattern of opioid abuse or with an illicit substance. Therefore, the potential for increased rates of abuse may rise. The WC community is already struggling with overuse of opioid medications and, conceivably, the new coverage could compound the problems the workers’ compensation community is seeing with the abuse of opioids.

These changes are certainly something to keep any eye on. They provide a strong argument for both early intervention strategies and prescription management and requires further close scrutiny on how it may affect the bottom line.

Further information on these and other changes can be found at:

http://www.medicareadvocacy.org/InfoByTopic/Reform/10_04.08.MAandPDChanges.htm

About the Author: William F. Bell, Jr. is the Senior Clinical Pharmacy Specialist for Gould & Lamb, LLC. His primary responsibility is the review of a claimant’s pharmacotherapy regimen and the identification of off-label medications in a Medicare Set Aside Allocation. He has given numerous presentations on the subject of medication management and how it relates to Workers’ Compensation and Medicare Set Aside Claims. Bill has also authored two continuing education articles for the Pharmacist’s Letter, a nationally known education resource for practicing pharmacists.

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.

Continuing Short Term and Long Term Financial Difficulties

The Medicare program has two components. Hospital Insurance (HI) and Supplementary Medical Insurance (SMI).  HI, otherwise known as Medicare Part A, helps pay for hospital, home health, skilled nursing facility, and hospice care for the aged and disabled. SMI consists of Medicare Part B and Part D. Part B helps pay for physician, outpatient hospital, home health, and other services for the aged and disabled who have voluntarily enrolled. Part D provides subsidized access to drug insurance coverage on a voluntary basis for all beneficiaries and premium and cost-sharing subsidies for low-income enrollees. Medicare also has a Part C, which serves as an alternative to traditional Part A and Part B coverage. Under this option, beneficiaries can choose to enroll in and receive care from private “Medicare Advantage” and certain other health insurance plans that contract with Medicare. These plans receive prospective, capitated payments for such beneficiaries from the HI and SMI Part B trust fund accounts.

The Social Security Act established the Medicare Board of Trustees to oversee the financial operations of the HI and SMI trust funds. The Social Security Act requires that the Board, among other duties, report annually to the Congress on the financial and actuarial status of the HI and SMI trust funds. A complete copy of the 2012 report submitted by the Board can be found on the CMS website.

In summary, total Medicare expenditures were $549 billion in 2011. The Board projects that, under current law, expenditures will increase in future years at a somewhat faster pace than either aggregate workers’ earnings or the economy overall and that, as a percentage of GDP, they will increase from 3.7 percent in 2011 to 6.7 percent by 2086 (based on the Trustees’ intermediate set of assumptions). If lawmakers continue to override the statutory decreases in physician fees, and if the reduced price increases for other health services under Medicare are not sustained and do not take full effect in the long range, then Medicare spending would instead represent roughly 10.4 percent of GDP in 2086. Growth of this magnitude, if realized, would substantially increase the strain on the nation’s workers, the economy, Medicare beneficiaries, and the federal budget.

The Trustees project that HI tax income and other dedicated revenues will fall short of HI expenditures in all future years under current law. The HI trust fund does not meet either the Trustees’ test of short-range test of financial adequacy or their test of long-range close actuarial balance.

The Part B and Part D accounts in the SMI trust fund are adequately financed under current law, since premium and general revenue income are reset each year to match expected costs. Such financing, however, would have to increase faster than the economy to match expected expenditure growth under current law.

The financial projections in this report indicate a need for additional steps to address Medicare’s remaining financial challenges. Consideration of further reforms should occur in the near future. The sooner solutions are enacted, the more flexible and gradual they can be. Moreover, the early introduction of reforms increases the time available for affected individuals and organizations—including health care providers, beneficiaries, and taxpayers—to adjust their expectations. Congress and the executive branch must work closely together with a sense of urgency to address the exhaustion of the HI trust fund and the growth in HI, SMI Part B, and SMI Part D expenditures.

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About the Author: Rafael Gonzalez is Director of Medicare Compliance & Post-Settlement Administration. He brings over 20 years of experience in the Workers’ Compensation and Liability insurance industries with a specific focus on Medicare Compliance. Rafael has been responsible for all areas of Medicare Set Aside Allocations (MSAs) including the preparation of MSAs and their approval by the Center for Medicare & Medicaid Services.  At Gould & Lamb, Rafael’s duties include assisting clients with Medicare Compliance issues, specifically on Post-Settlement Administration and client education.

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.

The word Epidemic is defined as “a case of a certain disease exceeding what is expected”. When we hear the word epidemic, we typically think of an influenza outbreak or the West Nile Virus. Unfortunately, we can now officially add the Prescription Drug Abuse Crisis as an epidemic as was recently confirmed by the Centers for Disease Control and Prevention (CDC) at the inaugural National Rx Drug Abuse Summit held in Orlando, FL.

The Summit was very successful in gathering and sharing of information, establishing that we all have something at stake in this epidemic. Whether you are a physician, pharmacist, nurse, claims adjuster, or third party payer, we must all agree that it is our problem and work in order to bring a solution.

Telling statistics from this Summit include:

• 1 death occurs in the United States every 19 minutes which is attributable to prescription medication abuse
• 7 deaths occur in Florida each month from abuse of prescription medications, namely opioids
• Those who abuse opioids will generate costs 8.5 times greater on the US Healthcare system than those who do not
• Prescription drug abuse costs close to $73 billion annually in unnecessary expenses
• Pharmacy robberies are up 86% over the last decade in part due to OxyContin
• 48 states now have some sort of Prescription Drug Monitoring Program (PDMP) in place

In the workers’ compensation arena, I cannot stress enough how education is paramount to fight the problem. Awareness and recognition by adjusters, claims examiners, nurses, pharmacists, physicians, and third party payers can lead to intervention and prevention.

One way all of us can participate is through DEA annual “take-back” day program. This program is designed to allow consumers to properly dispose of unused medication safely and without fear of it falling into the wrong hands. Nearly 900,000 pounds of unwanted or expired medications have been collected at various sites throughout the country as part of this initiative. This year’s event removed a record 176 tons of medication from circulation. More information can be found at:

National Take-Back Initiative

As stated in my last blog, recognition of this problem is a good first step to achieving long-term goals and solutions. Action is required by all of us if we are to curb the rising use of prescription opioids in workers’ compensation. Time will tell if we will be successful in our efforts.

About the Author: William F. Bell, Jr. is the Senior Clinical Pharmacy Specialist for Gould & Lamb, LLC. His primary responsibility is the review of a claimant’s pharmacotherapy regimen and the identification of off-label medications in a Medicare Set Aside Allocation. He has given numerous presentations on the subject of medication management and how it relates to Workers’ Compensation and Medicare Set Aside Claims. Bill has also authored two continuing education articles for the Pharmacist’s Letter, a nationally known education resource for practicing pharmacists.

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.

Nearly15,000 people die each year from overdose of prescription medications (CDC Vital signs 2011). Deaths attributed to prescription drug overdoses are America’s fastest growing drug-related problem and outnumber deaths from both heroin and cocaine, combined. The problem has no boundaries.  Each day, it seems, we hear about another celebrity death from prescription medications. We may even have family and/or friends who have been personally affected by the abuse of prescription medications, especially opioids.

One sobering statistic is that the United States of America represents only 4% of the total world’s population; however, the U.S. consumes close to 80% of the world’s opioid supply. To put that into perspective, the CDC report states that “Enough prescription pain killers were prescribed in 2010 to medicate every American adult around the clock for a month.” Hydrocodone/APAP is routinely in the top five of medications dispensed yearly by pharmacies, accounting for 132 million prescriptions annually. The workers’ compensation arena is not immune to this epidemic, as the use of opioid medications is at an all-time high in the industry.

There have been many blog postings and articles on effective ways to reduce opioid use in workers’ compensation cases advocating education, along with prescription drug monitoring and control. This is a good first step. We have seen REMS introduced as a way to educate physicians, patients, and other healthcare providers on the risks and benefits with these types of medications. Many states have now adopted prescription drug monitoring programs to electronically track prescriptions with the goal to decrease “Doctor shopping” and filling at multiple pharmacies. Recently, the DEA suspended the licenses of a major wholesaler and pharmacy chain due to the excessive quantities of opioids dispensed. As a practicing pharmacist, I applaud states that decide to develop comprehensive prescription drug monitoring programs (PDMPs). This is long-overdue and should prove beneficial moving forward.

Last year the White House released a paper entitled, “Epidemic: Responding to America’s Prescription Drug Abuse Crisis.” The report cited more statistics quantifying the problem and offered four main areas that could help to solve it: Education, Tracking and Monitoring, Proper Disposal of Medications, and Enforcement.  I recommend that you read the report.

Healthcare professionals must be held accountable during this crisis, as well. Physicians have a responsibility to properly prescribe medications and pharmacists have the duty to properly fill those prescriptions, while ensuring that a patient’s health is not compromised and the physician order is appropriate.

The inaugural National Rx Drug Abuse Summit will be held in Orlando, Florida next month. The purpose of this summit is to bring together experts in the healthcare field to discuss this problem and effective ways to solve it.  My next blog posting will report on this conference and the results of it.

There is a long ways to go in workers’ compensation with the prescription drug issue. Recognition of this problem is a good first step to achieving long-term goals and solutions. It is my hope that both awareness and education are instrumental in curbing inappropriate opioid usage which can lead to preventable death.

About the Author: William F. Bell, Jr. is the Senior Clinical Pharmacy Specialist for Gould & Lamb, LLC.  His primary responsibility is the review of a claimant’s pharmacotherapy regimen and the identification of off-label medications in a Medicare Set Aside Allocation.  He has given numerous presentations on the subject of medication management and how it relates to Workers’ Compensation and Medicare Set Aside Claims.  Bill has also authored two continuing education articles for the Pharmacist’s Letter, a nationally known education resource for practicing pharmacists.

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.