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.

On November 21, 2011, the US 6^th Circuit Court of Appeals rendered its much anticipated ruling on Hadden v. United States, finding that despite receiving only a percentage of his damages, the Medicare Secondary Payer Act required Hadden to reimburse Medicare to the full extent that the government had requested and therefore affirmed the judgment of the District Court, which had previously ruled that Hadden owed $62,338.07 in conditional payments out of the $125,000 settlement he had received from the tortfeasor.

On March 30, 2012, Hadden filed his Petition for Writ of Certiorari with the United States Supreme Court. Hadden challenges the government’s argument that Medicare is entitled to 100% of its outlay, regardless of whether the beneficiary receives a reduced recovery by settling his tort claim for only a portion of his undifferentiated damages, is legally incorrect. Therefore the question presented for the Court whether the government is entitled to full reimbursement under the Act when a beneficiary compromises a tort or other claim and recovers a reduced amount, as the 6^th Circuit Court of Appeals held, or whether the government, like its beneficiary, is entitled to only a proportionate recovery, as the 11th Circuit Court has held.

Hadden argues that the Court should grant the petition and hear the case as there are now conflicting Medicare Secondary Payer Act (MSPA) Circuit opinions, Bradley v. Sebelius, out of the 11^th Circuit, and Hadden v. United States, out of the 6^th Circuit.

Bradley v. Sebelius

On September 29, 2010, the 11^th Circuit Court published its opinion on Bradley v. Sebelius, concluding that the district court erred in upholding the decision of the Secretary because it was unsupported by substantial evidence in the record taken as a whole. It therefore reversed, finding Medicare entitled to the sum of $787.50, as determined by the allocations of the state probate court.

In Bradley, the Secretary refused to accept the probate court’s determination that Medicare should only recover $787.50. Therefore, the estate paid Medicare under protest, perfected its administrative appeal, and exhausted its administrative remedies. The case proceeded as an appeal to the district court from a final decision of the Secretary, wherein the surviving children filed their brief in opposition to the Secretary’s decision, the Secretary filed her brief in support of her final decision, and the case became ripe for district court review.

The district court, adopting the report and recommendation of the magistrate judge, held that the Secretary’s interpretation of the MSP, 42 U.S.C. § 1395y(b)(2)(B)(ii)(2006), and its attending regulations, 42 C.F.R. §§ 411.37(c)(1), (c)(2), (c)(3)(2004), was reasonable. Accordingly, the district court held that Medicare was entitled to reimbursement in the amount of $22,480.89, not $787.50, for conditional medical expense payments paid on behalf of the Decedent. Burke then appealed to the 11^th Circuit.

The 11^th Circuit Court concluded however that the Secretary’s position was unsupported by the statutory language of the MSP and its attending regulations. The Secretary’s ipse dixit contained in the field manual does not control the law. The district court also erred in relying upon the advisory language contained in a field manual as the rationale for its opinion upholding the actions of the Secretary.

Hadden v. United States

In comparison, on November 21, 2011, the US 6^th Circuit Court of Appeals rendered its ruling on Hadden v. United States, finding that the Medicare statute required Hadden to reimburse Medicare to the full extent and therefore affirmed the judgment of the District Court, which had previously ruled that Hadden owed $62,338.07 in conditional payments out of the $125,000 settlement he had received from the tortfeasor.

In Hadden, an administrative law judge found that the plain language of the Medicare statute required Hadden to reimburse Medicare the full amount that Medicare had demanded. The ALJ also found that the reimbursement was not against “equity and good conscience.” The Medicare Appeals Council agreed with each of those findings. Hadden appealed that decision to the district court, which remanded the case back to the Appeals Council. The Appeals Council issued an amended decision in which it again agreed with the ALJ’s findings. The district court agreed with them as well, resulting in Hadden’s appeal to the 6^th Circuit Court.

In its opinion, the 6^th Circuit Court made it clear that it is undisputed that defendant is a “primary plan” and that Hadden is an “entity that received payment from a primary plan” within the meaning of 42 U.S.C. § 1395y. It is also undisputed that Medicare paid for $82,036.17 of medical services rendered to Hadden. Thus, Hadden “shall reimburse” Medicare to the same extent that defendant “had a responsibility to make payment” with respect to those services.

The court pointed out that in 2003, Congress amended § 1395y(b)(2)(B)(ii), making it clear that a primary plan’s responsibility for such payment may be demonstrated by a judgment, a payment conditioned upon the recipient’s compromise, waiver, or release (whether or not there is a determination or admission of liability) of payment for items or services included in a claim against the primary plan or the primary plan’s insured, or by other means. As a result, a beneficiary cannot claim that a third party is responsible for all of his medical expenses on the one hand, and later argue to Medicare that the same party was responsible for only 10% of them, on the other. In his claim against defendant, Hadden did not demand that it pay for only 10% of the medical expenses that he incurred as a result of his accident; he demanded that it pay for all of them. That choice, the court said, has consequences—one of which is that Hadden must reimburse Medicare for those same expenses.

Hadden’s Arguments

In his Petition for Writ of Certiorari, Hadden argues the 6^th Circuit Court of Appeals decision is erroneous on several counts, as it essentially rewrites the MSPA leading to absurd results. Hadden further argues that the majority’s holding contravenes the legislative history and the government’s interpretation of the MSPA. Hadden also argues the Court of Appeals made reversible error by attempting to avoid Ahlborn, the US Supreme Court’s landmark decision limiting a state’s right to reimbursement when claiming a Medicaid lien, by manufacturing a distinction between responsibility and liability. In addition, Hadden further argues that the Court of Appeals’ holding ignores the well-established policy of favoring settlement of disputes, as compared to prolonged and protracted litigation. Last, Hadden argues the MSP Manual is not entitled to deference, as it is not statutory law or regulatory provisions.

In addition to these arguments, Hadden points out that the question presented is one of exceptional importance and therefore one that the Court must hear. Because of the split in the 6^th and 11^th Circuits, Medicare, a uniform federal program, is now being implemented disparately. As a result, Hadden argues the Court must intervene to provide consistency for all Circuits to appropriately administer such reimbursement claims. In addition, Hadden argues that given the number of baby boomers coming into the Medicare program over the next several years, this question will recur frequently. Consequently, this case will provide the Court with an opportunity to clarify the erroneous public policy Court of Appeals’ decision.

Download the MSP Compliance Protocols user guide today!

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.

Denial of Medicare benefits (even non-accident related Medicare benefits) are increasing. A beneficiary may face denial of benefits for medical treatment related or unrelated to a workers’ compensation, liability, or no-fault claim.

Denial of medical benefits that are unrelated to the claimed injury or illness can occur for many reasons. On many occasions bills are improperly submitted by medical providers.  If a bill erroneously documents that the treatment is related to a workers’ compensation/other insurance claim or is not supplied at all, Medicare may deny coverage until the bill is properly resubmitted.  In other instances, incorrect or vague diagnoses codes are provided via reporting pursuant to Section 111 of the Medicare, Medicaid and SCHIP Extension Act of 2007, causing CMS to deny future benefits.

Beneficiaries may also be denied benefits related to a workers’ compensation, liability or no-fault claim.  As required by the Medicare Secondary Payer Act, a beneficiary is responsible for exhausting Medicare Set-Aside funds to cover their future medical expenses which would otherwise be paid by Medicare.  At the time of settlement, it is important to advise the claimant of their obligation to protect Medicare’s interests regarding past and future medical expenses.

The right to appeal decisions denying care or benefits is a five-step process that starts with standard or expedited review by the entity making the original determination, with progression through administrative channels and to federal court, if necessary.  Beneficiaries and Medicare-participating health-care providers can file Medicare appeals when a claim is denied or even partially denied.

So, the question is, what remedy should be offered to the injured party whose benefits have been denied?  In addition to diligence on the part of Responsible Reporting Entities (RREs) including prompt and accurate reporting, confirming CMS records acceptance, and ensuring that misreported information is corrected and resubmitted, injured parties should be advised to utilize the normal appellate process within Medicare regarding denied treatment or benefits.

Although very similar to the Medicare Managed Care Appeals and Grievances as well as the Medicare Prescription Drug Appeals and Grievances process, the original Medicare Part A and B, Fee for Service, process has its own appeals process and procedures.

Appealing Medicare Decisions

Once an initial claim determination is made, beneficiaries (as well as participating providers, physicians and other suppliers) have the right to appeal.  However:

• Physicians and other suppliers who do not take assignments on claims have limited appeal rights.
• Beneficiaries may transfer their appeal rights to non-participating physicians, or other suppliers who provide the items or services and do not otherwise have appeal rights.
• Form CMS-20031 must be completed and signed by the beneficiary and the non-participating physician or supplier to transfer the beneficiary’s appeal rights.
• All appeal requests must be in writing.

Five Levels in the Appeals Process

Medicare offers five levels in the Part A and Part B appeals process:

1. Redetermination by Fiscal Intermediaries, Carriers or Medicare Administrative Contractors

The Centers for Medicare & Medicaid Services (CMS) contracts with private insurance companies (called “carriers” for Part B, “fiscal intermediaries” for Part A, or “Medicare administrative contractors”) to perform many processing functions on behalf of Medicare, including local claims processing and first level appeal adjudication functions.  A redetermination is an examination of a claim by the fiscal intermediary, carrier or Medicare administrative contractor personnel that are from the individual(s) who made the initial determination. The appellant (the individual filing the appeal) has 120 days from the date of receipt of the initial claim determination to respond to the contractor.

The appellant should attach any supporting documentation to their redetermination request. Contractors will generally issue a decision (either a letter or a revised remittance advice) within 60 days of receipt of the redetermination request. The redetermination request should be sent to the contractor that issued the initial determination to file an appeal. A minimum monetary threshold is not required to request a redetermination.

2. Reconsideration by a Qualified Independent Contractor

A party to the redetermination may request a reconsideration if dissatisfied with the redetermination. Section 521 of the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA) included provisions aimed at improving the Medicare fee-for-service appeals process. Part of these provisions mandate that all second-level appeals (for both Part A and Part B) be conducted by qualified independent contractors.  The qualified independent contract reconsideration process allows for an independent review of medical necessity issues by a panel of physicians or other health care professionals. A minimum monetary threshold is not required to request a reconsideration.  However, a written reconsideration request must be filed within 180 days of receipt of the redetermination (a request for a reconsideration may be made on Form CMS-20033).

The request should clearly explain why the appellant disagrees with the redetermination. A copy of the MRN, and any other useful documentation should be sent with the reconsideration request to the qualified independent contract identified in the MRN. Evidence not submitted at the reconsideration level may be excluded from consideration at subsequent levels of appeal unless “good cause” is shown for submitting the evidence untimely.  Reconsiderations are conducted on-the-record and, in most cases, the qualified independent contract will send its decision to all parties within 60 days of receipt of the request for reconsideration.

3. Hearing by an Administrative Law Judge (ALJ)

If at least $130 remains in controversy following the qualified independent contract’s decision, a party to the reconsideration may request that a hearing be conducted by Administrative Law Judge within 60 days of receipt of the reconsideration.

Appellants must also send notice of the ALJ hearing request to all parties to the qualified independent contract reconsideration and verify this on the hearing request form or in the written request. ALJ hearings are generally held by video-teleconference (VTC) or by telephone.  Appellants may also ask the Administrative Law Judge to make a decision without a hearing (on-the-record). Hearing preparation procedures are set by the Administrative Law Judge. CMS or its contractors may become a party to, or participate in, an ALJ hearing after providing notice to all parties to the hearing. The Administrative Law Judge will generally issue a decision within 90 days of receipt of the hearing request.

4. Review by the Medicare Appeals Council within the Departmental Appeals Board, (hereinafter “the Appeals Council”)

If a party to the ALJ hearing is dissatisfied with the Judge’s decision, the party may request a review by the Appeals Council. There are no requirements regarding the amount of money in controversy. The request for Appeals Council review must be submitted in writing within 60 days of receipt of the Administrative Law Judge’s decision, and must specify the issues and findings that are being contested.   In general, the Appeals Council will issue a decision within 90 days of receipt of a request for review (though that timeframe may be extended for various reasons).

5. Judicial Review in U.S. District Court

If at least $1,300 or more is still in controversy following the Appeals Council’s decision, a party to the decision may request judicial review before U.S. District Court Judge.  The appellant must file the request for review within 60 days of receipt of the Appeals Council’s decision.

While there may not be a remedy to stop denials of Medicare and/or medical benefits or treatment, there are certainly steps to mitigate the occurrence. Ensuring prompt and accurate reporting of data, and confirming CMS records acceptance, is a key first step.  In addition, if a beneficiary’s benefits are denied, it is imperative they are advised of the normal appellate process they can use within Medicare.  This combination of initial data being provided along with clear and accurate rules being provided to beneficiaries is critical to protecting future benefits.

About the Author: Christie Britt is the Vice President of Operations overseeing the extensive operations of Gould & Lamb.   She has vast knowledge of Medicare Set Asides and Post-Settlement Administration from an insurance claims perspective. Christie is MSCC certified and has her Green Belt Certification in Six Sigma.  She is also a member of the National Association of Medicare Set Aside Professionals (NAMSAP) and the Workers’ Compensation Claims Professionals (WCCP).

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

When a Responsible Reporting Entity (RRE) submits records for the quarterly claim report to CMS and these records are accepted, where does the data go?  How is it utilized and what potential issues may arise? One assumes that there is a single system or database for this information.  In fact, there are multiple systems involved.

Records submitted and accepted where on-going responsibility for medical (ORM) was assumed results in creation of the injured party’s Common Working File in the Coordination of Benefits Contractor’s (COBC) database. The ICD-9 coding passed in the claim record establishes those medical conditions for which the RRE has authorized or approved on-going medical care or treatment.

Records submitted and accepted that report the event of a Total Payment Obligation to the Claimant (TPOC) indicate the occurrence of a settlement, judgment, award or other payment (intended to resolve or partially resolve a claim). The ICD-9 coding passed in the claim record establishes those conditions claimed and/or released. This TPOC data is passed by COBC directly to an external database with the Medicare Secondary Payer Recovery Contractor (MSPRC).

MSPRC’s Role

The COBC provides notification to MSPRC of the injured party and accident information per the Common Working file within 48 hours. The MSPRC issues a ‘Rights and Responsibilities’ letter to the RRE and injured party within 45 days, notifying of CMS’ rights of recovery regarding its conditional payment lien (CPL). When MSPRC is notified of a TPOC, a demand letter is issued. Following the final demand from MSPRC, should full repayment not be received within 60 days, interest begins to accrue and an ‘Intent to Refer’ letter is issued. If repayment is not resolved within 120 days of the final demand, the unresolved debt is referred to the Department of Treasury for litigation.

Potential Issues

Litigation

Should the injured party not repay the CPL within 120 days post issuance of the final demand letter, the Department of Treasury is empowered to recover double damages, interest and attorney fees.  Per 42 USC 1395 (y)(b)(2)(B) the Federal Government may bring an action against any responsible party, including the RRE.

Disruption of Benefits

Medicare Beneficiaries may contact the RRE or Claims Administrator advising of disruption of benefits.

This disruption may be due to improper ICD-9 coding (too general or incorrect conditions identified). In this scenario, contact with the RRE’s EDI Representative may aide in correction until the RRE’s next quarterly claim input file may be submitted containing the correct ICD-9 coding in an updated record.

Another cause for disruption may be assumption of ORM; COBC may advise the beneficiary that the RRE must close their claim by terminating ORM. This may be accomplished via telephone contact with COBC and subsequent reporting of the ORM Termination Date in the RRE’s next quarterly claim input file submission.   Extreme caution should be exercised to ensure that ORM has truly ended prior to engaging COBC.

Lastly, human error, lack of communication and/or training may result in disruption. Medical providers or the COBC may misinterpret ICD-9 coding or lack appropriate communication and/or training to recognize which medical conditions the RRE had assumed ORM for and/or released pursuant to TPOC.  In this scenario, the RRE or Claim Administrator may only offer the beneficiary the remedy of appealing these denials via the established process with COBC.

Conclusion

MMSEA Section 111 Reporting involves many subsystems and external databases with other government entities and contractors. Data quality, communication and training are critical at all levels to ensure timely reporting and accurate delivery of benefits to the injured party / beneficiary.

Gould & Lamb continues to work with CMS in exchanging quality data and resolution of industry challenges, such as injured party benefit disruption. As the COBC and MSPRC are now the responsibility of the same contractor, there is reason to be optimistic regarding improved processes and performance.

About the Author: John Miano is the Manager of Reporting Services for Gould & Lamb, LLC. His primary responsibility is directing the implementation of CMS Section 111 reporting programs for our clients. He has over 20 years experience in the Property and Casualty Insurance Industry and is currently an active committee member of the International Association of Industrial Accident Board Committees (IAIABC). He is also a former Executive Board Member of the Association of Workers Compensation Claim Professionals (WCCP) and is a Board Certified Workers Compensation claim adjuster (CWC).

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.

Leadership Change at CMS

Don Berwick, the Harvard professor who was tapped by the Obama administration to lead the overhaul of the massive Medicare and Medicaid programs, resigned just months before he was scheduled to leave his post. On November 29, Marilyn Tavenner, a former health official from Virginia, was installed by the administration to head the Centers for Medicare and Medicaid Services (CMS).

The change in leadership comes amid a very interesting series of events that, some would argue, signaled a more reasonable and responsible approach to Medicare’s recovery rights and activity.

Change in Conditional Payment Procedure

CMS recently made changes to the process and procedure of conditional payment recovery in liability cases. As has been widely reported, the Medicare Secondary Payer Recovery Contractor (MSPRC) published on their website an Alert.  The Alert advised that starting September 6, 2011, in the case of a lump sum settlement of $300 or less, Medicare may not recover from that settlement, based on certain criteria. If the beneficiary’s settlement, judgment, award or other payment is related to an alleged physical trauma-based incident, the liability insurance (including self-insurance) settlement, judgment, award, or other payment is $300 or less, the beneficiary has not received and does not expect to receive any other settlements, judgments, awards, or other payments related to the incident and Medicare has not previously issued a recovery demand letter, recovery will not be pursued.

Also, the MSPRC has implemented a new and “simple” fixed percentage recovery option that is available to certain beneficiaries effective November 7, 2011. The Fixed Percentage Option gives beneficiaries who have physical trauma-based Liability insurance (including self-insurance) settlements of $5,000 or less the ability to resolve Medicare’s recovery claim by paying Medicare 25% of the total liability insurance settlement instead of using the current recovery process.

CMS Philosophy Change?

These procedural changes were made in the face of H.R. 1063, the “SMART” Act, followed by the Senate version of the Bill, S. 1718. While the Bill is multi-faceted, it includes a provision requiring CMS to ensure that the government does not spend more money pursuing a Medicare Secondary Payer (MSP) recovery claim than it will actually recover from that claim. A threshold would be set (annually by the CMS Actuary) at the amount of settlement likely to yield a MSP collection at or below the government’s recovery cost. Thus, the recent changes seem to suggest that CMS has determined that recoveries on settlements of less than $300 are not cost effective, nor is negotiating lien recovery on nuisance value settlements. It can be argued that CMS has begun the process of institutional reform that considers the realities of tort litigation while under Dr. Berwick’s leadership. While the efforts seem trivial in the short term, there appears to be evidence that the conditional payment process, at least, was being revamped without the need for legislation. How the change in leadership will effect the process is anyone’s guess. HPreview Changesowever, we may be on the precipice of institutional and philosophical changes at CMS that may make further legislative attempts at change unnecessary.

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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.