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.


Future Considerations for Controlled-Release Oxycodone

Oxycodone CR is a slow release opioid narcotic currently indicated for use in moderate and moderate-to-severe pain. When initially released to the market, the indicated use was for pain management in cancer patients and for control of postoperative pain. As the use of controlled-release Oxycodone expanded, problems with addiction and abuse escalated.

In an effort to bring the use of Oxycodone CR under more effective control, H.R. 1366 cited as the “Stop Oxy Abuse Act of 2013” was introduced March 21, 2013 “to direct the Commissioner of Food and Drugs to modify the approval of any drug containing controlled-release (CR) oxycodone hydrochloride, to limit such approval to use for the relief of severe-only instead of moderate-to-severe pain, and for other purposes”. The introduction of the bill followed a petition filed by Physicians for Responsible Opioid Prescribing (PROP) calling for the FDA to modify opioid labeling such that future approval would exclude the term “moderate” from an indicated use for non-cancer pain. As such, approval for use would be limited to severe pain only within this population. However, the bill does not restrict the drug’s use to non-cancer pain but, rather, seeks to limit approval for use to “severe-only pain” for any patient population.

If H.R. 1366 passes, it will operate to remove use of the controlled-release oxycodone drugs for management of any form of moderate pain type diagnoses as an approved indication by the FDA. The prescribing of Oxycodone CR for “moderate” or “moderate-severe” pain would then be considered an “Off Label” use. Within the world of Medicare Set-Aside, provision of controlled-released Oxycodone for such diagnoses would be excluded from the plan of care. Any continued use of Oxycodone CR would require medical documentation and diagnosis of “severe” pain.

Appeal of Denied Medicare Benefits

Christie Luke Vice President OperationsDenial 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.

Changes at CMS May Signal Different Approach

Russell S whittle, Esq VP MSP ComplianceLeadership 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.

Click Here to Download the MSP Compliance Protocols User Guide from Gould and Lamb
Download Gould and Lamb’s Medicare Secondary Payer Compliance and Protocols User Guide

Download the MSP Compliance Protocols user guide today!


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.