Our industry is now two years into the mandated production (liability – one year) of MMSEA Section 111 Reporting. Although we don’t have crystal balls to see into the future, the matters identified below will likely shape changes to MMSEA Section 111 reporting in 2013.

New CMS Contract Strategy
During the June 2012 NGHP Town Hall teleconference, CMS advised of the new contractor’s strategy to combine the coordination of benefits and recovery operations center to handle front end Section 111 and recovery issues. New tools or improvements related to Section 111 processes would not be available, they said, until CMS implements the new strategy. Until CMS issues a public advisory, it won’t be possible to know when it may be employed.

Transition to ICD-10 Coding
HHS announced the final rule delaying compliance with transition to ICD-10 coding from October 1, 2013 to October 1, 2014. CMS has not provided guidance regarding how the transition from ICD-9 to ICD-10 coding will be addressed for MMSEA Section 111 reporting.

The SMART Act
In December 2012, the House and Senate passed the Saving Medicare and Repaying Taxpayers (SMART) Bill and it was signed into law by President Obama on January 10, 2013. Details regarding SMART can be found in Russell Whittle’s blog here. In brief, MMSEA Section 111 reporting will be affected by changes to the standard for the application of civil penalties and requires the Secretary of HHS to set forth circumstances under which sanctions will not be imposed. The Bill also sets forth a statute of limitations indicating that the United States may not bring an action regarding payment owed unless a complaint is filed not later than three years after the date of the receipt of notice of a settlement, judgment, award, or other payment for cases brought on or after the timeframe set out in the legislation. There are many components to this Bill; promulgation and implementation will likely occur over the course of 2013 and beyond.

Mass Tort Claims
Since 2009, CMS has struggled to understand Mass Tort claims and how the industry processes those claims. Attempts had been made to convene a Mass Tort group but to date, guidance regarding timely reporting and compliance has not been forthcoming. Given the current fiscal climate in the United States we may anticipate CMS reprioritizing this matter.
As these or other matters develop which affect MMSEA Section 111 reporting, Gould & Lamb will keep our clients well informed. Should you have questions, please contact your Gould & Lamb Representative or Gould & Lamb MMSEA Compliance Manager.

On August 30, 2012, the Federal District Court of Louisiana, Western District, LaFayette Division, published its opinion in Bessard v. Superior Energy Services, finding that there was no evidence that Mr. Bessard, his attorneys, any other party or any other party’s representative, were attempting to maximize aspects of the settlement to Medicare’s detriment. As a result, the court concluded that to the extent that Mr. Bessard receives confirmation from Medicare of any conditional payments made by Medicare for services provided prior to settlement, Mr. Bessard shall promptly reimburse Medicare for such conditional payments. In addition, Mr. Bessard shall allocate $6,701.00 out of the settlement proceeds for payment of future medical items or services, which would otherwise be covered or reimbursable by Medicare, related to the conditions claimed and released in the case.

Gregory J. Bessard was injured in a workplace accident on June 30, 2009. His case was settled amicably after lengthy negotiations. The defendant agreed to pay the plaintiff the sum of $785,000. The settlement called for Mr. Bessard to assume the obligation for payment of his future medical expenses, which were to be calculated through a MSA.

Although Mr. Bessard was not a Medicare beneficiary at the time settlement was reached, Mr. Bessard was receiving Social Security disability benefits in connection with the injuries sustained in the accident. As a result, various medical reports were accumulated and a MSA was prepared by Gould & Lamb.

Based on the information provided by Mr. Bessard’s treating physicians, utilizing the fee schedule applied in claims brought under the Longshore and Harbor Workers’ Compensation Act, Gould & Lamb determined that Mr. Bessard’s future potential medical expenses that would be covered by Medicare and that were related to the injuries claimed and released amounted to $6,701.00.

Although the parties wanted the MSA approved by CMS for purposes of complying with the provisions of the MSP and the commensurate regulations, the parties were concerned that the settlement could not be finalized and cited the delays associated with obtaining approval from CMS and the possibility that approval may not ever be forthcoming.

In an effort to avoid jeopardizing the settlement and to achieve compliance with the provisions of the MSP, the plaintiff and defendant jointly filed a motion for Declaratory Judgment seeking (1) approval of the settlement, (2) a declaration that the interests of Medicare are adequately protected by setting aside a sum of money to fund Mr. Bessard’s reasonably anticipated future medical expenses related to the injuries claimed and released in the lawsuit, and (3) an order setting that amount aside from the settlement proceeds and depositing it into an interest bearing checking account to be self-administered by Mr. Bessard.

The Court set the matter for an evidentiary hearing and ordered service to be made by the Clerk of Court on the Secretary of Health and Human Services, the chief counsel of HHS/OGC for Region VI, and the civil chief of the office of the United States Attorney for the Western District of Louisiana. By letter dated August 20, 2012 from the office of the United States Attorney for the Western District of Louisiana, the Court was advised that HHS/CMS would not participate in the hearing.

At the hearing, the Court heard testimony from Patricia Kent, staff attorney with Gould & Lamb LLC, who was accepted as an expert in MSA/MSP issues, and who explained how the MSA evaluation was prepared. Although the most recent reports from the physicians treating Mr. Bessard did not state that additional diagnostic testing was necessary or that Mr. Bessard would require future visits with his physicians or additional physical therapy, the standard applied by Gould & Lamb in preparing the MSA was to consider all reasonably foreseeable medical expenditures.

The Court found that the methodology used by Gould & Lamb to calculate the estimated future medical costs, as set forth in the MSA, was both reasonable and reliable. The Court further found based upon MS. Kent’s testimony, that the future services listed in the MSA were reasonably foreseeable, adequately considered Medicare’s interests under the MSP, and the amount set forth in the MSA adequately protected Medicare’s interests.

As the premier and most trusted MSP vendor in the country, this case again highlights the usefulness and benefits of Gould & Lamb’s comprehensive array of MSP services. In addition to Mandatory Insurer Reporting, Conditional Payment Resolution, Medicare Set Asides, Post Settlement Account Administration, Prescription Drug Program, Future Medical Costs Projections, and Life Care Plan services, Gould & Lamb also offers Settlement Language Guide, Settlement Document Review, MSP Exposure Analysis, and Expert Testimony services.

Gould & Lamb provides its clients with Medicare Compliance Services and Programs focused on reducing claim costs and positioning claims for settlement. To this end, Gould & Lamb has prepared a Settlement Language Guide to assist insurers and self insured entities navigate the complex sea of Medicare Secondary Payer compliance. The guide contains language for possible claims settlement scenarios with a description and analysis of possible actions. Once the Conditional Payment or Medicare Set Aside issue has been brought to light, Gould & Lamb will assist with recommending MSP appropriate and protective settlement language. If you have already produced settlement documentation that contains such language, Gould & Lamb will review same and make recommendations on any needed changes, additions, or deletions. Gould & Lamb also offers our clients detailed and specific to the claim analysis of all Medicare Secondary Payer exposure issues that may exist in your case. Gould & Lamb’s extensive and experienced MSP legal team will provide a written analysis, including statutory, regulatory, and case law citations, that outlines any Medicare Secondary Payer exposure and recommends solutions to any discovered potential problems or issues. Gould & Lamb also provides expert advice on MSP issues, available to provide expert testimony on any MSP issue at meetings, mediations, depositions, hearings, trials, or any other event our client deems our expert analysis helpful or necessary.

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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 United States District Court for the District of Oregon, Portland Division recently published its opinion in the case of Oregon State Bar Professional Liability Fund v. United States Department of Health and Human Services and Kathleen Sebelius on March 29, 2012. At issue was whether the Oregon State Bar Professional Liability Fund (PLF), the insurer covering legal malpractice actions against Oregon attorneys, was an “applicable plan” required to report under Section 111 on the Medicare, Medicaid and SCHIP Extension Act as a Responsible Reporting Entity (RRE).

In July of 2010, the PLF wrote a letter to the Department of Health and Human Services requesting a formal opinion that the Reporting Act did not apply to the it. Secretary Sebelius responded by advising PLF that it was a “liability insurer” within the meaning of the Extension Act. The PLF then filed suit requesting a declaratory judgment that PLF was not an applicable plan, that the Secretary acted outside her authority in determining that PLF was an RRE, that the Secretary violated the Administrative Procedure Act in that determination, and that the District Court could review the Secretary’s decision concerning the PLF.

The Secretary moved for summary judgment arguing that the Medicare statutory scheme left no issue of material fact for the trial court. In short, the United States took the position that the Medicare Secondary Payer Act and the federal regulations empowering it were clear that the PLF, as a liability insurer, was subject to Mandatory Insurer Reporting.

In denying the government’s motion, Judge Marco A. Hernandez analyzed the role of professional liability insurance and made what appear to be several leaps of logic regarding its applicability to Medicare Secondary Payer issues and the reporting obligation. The court determined that PLF was, in fact, a liability insurer within the meaning of 42 USC 1395y(b)(2). However, the judge reasoned that because the insurance plan covers claims against attorneys who cause economic damage relating to the provision of legal services and does not cover claims of tortious conduct that result in bodily or emotional injuries the PLF does not become an RRE. Because PLF would “never have primary responsibility” for medical items claimed by a beneficiary, they are excused from the reporting obligation.

Interestingly, the judge acknowledged that a malpractice case “could” involve medical expenses paid conditionally by Medicare. However, he assumed that those injuries occurred as the result of the underlying accident or case being handled by the alleged negligent attorney. The judge failed to recognize that the nature of the malpractice alone could give rise to emotional or personal injuries. He further stated that the PLF does not cover bodily or emotional injuries. A close review of Medicare statutes and policy guidance indicates that insurance coverage is not what Medicare requires to be reported in a settlement involving a Medicare beneficiary but, rather, what is claimed and released in the process. Thus, if bodily or emotional injuries are claimed and released, the reporting obligation is triggered. Based upon a somewhat limited analysis of an automobile accident case, Judge Hernandez determined that the PLF was not the type of plan that Congress intended to saddle with the reporting obligation.

Based on the foregoing, the court determined that the alleged violation of the Administrative Procedure Act and whether the Secretary acted outside her authority were moot.

As of this writing, an appeal has not been filed by the United States. However, I fully expect that the decision will be appealed as the ruling seems to both misconstrue the arguments put forth by the United States and the legislative intent of the MMSEA. Judge Hernandez seems to assume that because he cannot envision a scenario in which Medicare’s interests would be raised by inadequate legal representation that they do not exist. A closer look at the intent underlying the MMSEA and the Medicare statutory scheme suggests differently.

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.

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.

Despite Case Law, CMS Adamant Part C & D Private Carriers Have Same Right of Recovery on Conditional Payments as US and HHS

Resolution of Medicare Conditional Payments remains a concern for all involved. Whether plaintiff or plaintiff’s counsel, defendant, insurer, or defendant/insurer’s counsel, resolution of Medicare Conditional Payments continues to slow the settlement process, and sometimes spoils potential settlement. In addition to governmental entities such as the United States (US), the Department of Health and Human Services (HHS), and the Centers for Medicare and Medicaid Services (CMS), we can now add  Medicare Advantage Organizations (MAOs) and Prescription Drug Plans (PDPs),  Medicare Part C and Part D private carriers, as entities that parties will have to deal with regarding Medicare secondary payment subrogation rights as these private carriers begin seeking reimbursement for payments made for services in which Medicare is a secondary payer.

On December 5, 2011, Danielle R. Moon, J.D., M.P.A., Director, Medicare Drug & Health Plan Contract Administration Group, and Cynthia Tudor, Ph.D., Director, Medicare Drug Benefit and C&D Data Group, of the Centers for Medicare and Medicaid Services published a memorandum to all of the Medicare Advantage Organizations and Prescription Drug Plan Sponsors regarding Medicare Secondary Payment Subrogation Rights for Part C and Part D private carriers seeking reimbursement for payments made for services in which Medicare is a secondary payer.

The memorandum summarizes CMS’ regulations giving MAOs and PDPs the right, under existing Federal law, to collect for services for which Medicare is not the primary payer. The memorandum mentions recent decisions where several courts have challenged Federal regulations governing these collections. Specifically, the memo mentions that several MAOs have not been able to take private action to collect for Medicare Secondary Payer (MSP) services under Federal law because they have been limited to seeking remedy in State court.

Although not specifically mentioned, the memo may have been speaking about cases such as Humana Medical Plan v. Reale, decided on January 31, 2011, by the Federal Southern District Court in Florida, in which the Court concluded it lacked subject matter jurisdiction over Humana’s complaint requesting reimbursement of conditional payments it made. The Court concluded that under 42 U.S.C. 1395y(b)(2)(B)(i), the United States is the only entity vested with full authority to bring an action for reimbursement, not the Secretary. Therefore, the court concluded that because the Secretary does not have the authority to bring such action, Humana did not have the authority either.

In the case, Plaintiffs Humana Medical Plan, Inc. (Humana), was the Medicare Advantage organization that administered Medicare benefits to Medicare beneficiaries who are enrolled in the Medicare Advantage program. In April 2009, Humana paid Defendant Mary Reale (Reale), a Medicare Advantage program participant, certain Medicare benefits in the amount of $19,155.41 to cover Reale’s medical expenses incurred as a result of a slip and fall. Shortly after her fall, Reale filed suit against the Hamptons West Condominium Association and/or its insurer (the “Association”) to recover for her injuries.  The action between Reale and the Association eventually settled for an amount greater than $19,155.41. On May 17, 2010, Humana filed an Amended Complaint against Reale and her attorney, Donna B. Michelson, P.A., alleging that the Medicare Secondary Payer Act, 42 U.S.C. §1395y(b)(2), (MSP), entitled it to receive reimbursement of the $19,155.41 paid to Reale. Defendants argued that the case should be dismissed because 42 U.S.C. §1395y(b)(2) does not grant Humana a private cause of action and, as a result, the Court lacked subject matter jurisdiction.

Humana contended that the Court had subject matter jurisdiction because Humana’s alleged right to reimbursement under 42 U.S.C. § 1395y(b)(2) “present[s] an important and ‘substantial’ issue of federal law.” Section 1395y(b)(2) requires reimbursement to the “appropriate Trust Fund for any payment made by the Secretary . . . with respect to an item or service if it is demonstrated that such primary plan . . . had a responsibility to make payment with respect to such item or service.” 42 U.S.C. § 1395y(b)(2). Humana argued that 42 U.S.C. § 1395y(b)(2), coupled with 42 C.F.R. § 422.108(f), entitled it to reimbursement.

The court disagreed, indicating that a close reading of the federal regulation suggests otherwise. A Medicare Advantage organization, such as Humana, “will exercise the same rights to recover from a primary plan, entity, or individual that the Secretary exercises under the MSP regulations …” However, under 42 U.S.C. 1395y(b)(2)(B)(i), the Secretary’s authority is limited to making payments “conditioned on reimbursement to the appropriate Trust Fund.” Id. The United States is vested with full authority to bring an action for reimbursement, not the Secretary. 42 U.S.C. § 1395y(b)(2)(B)(iii).  Therefore, the Secretary does not have the authority to bring such action.

In order to recover payment made under the subchapter for an item or service, the United States may bring an action against any or all entities that are or were required or responsible (directly, as an insurer or self-insurer, as a third-party administrator, as an employer that sponsors or contributes to a group health plan, or large group health plan, or otherwise) to make payment with respect to the same item or service (or any portion thereof) under a primary plan. The United States may, in accordance with paragraph (3)(A) collect double damages against any such entity. In addition, the United States may recover under this clause from any entity that has authority to bring an action for reimbursement. Humana cannot claim such a right under 42 C.F.R. §422.108(f). Accordingly, the Court concluded Humana failed to bring a claim arising under federal law.

The memorandum however makes it clear that CMS’ regulations at 42 CFR § 422.108 describe MSP procedures for MAOs to follow when billing for covered Medicare services for which Medicare is not the primary payer. According to the memo, these regulations also assign the right (and responsibility) to collect for these services to MAOs. Specifically, §422.108(f) indicates that MAOs will exercise the same rights of recovery that the Secretary of  Health and Human Services (HHS) exercises under the original Medicare MSP regulations in subparts B through D of part 411 of 42 CFR.

The memorandum also indicates that these same regulations established in 42 CFR Section 411 supersede any State laws. Additionally, the MSP regulations at 42 CFR §422.108 are extended to Prescription Drug Plan (PDP) sponsors at 42 CFR §423.462. Accordingly, PDP sponsors have the same MSP rights and responsibilities as MAOs.

Notwithstanding recent court decisions like Humana Medical Plan v. Reale, in which the Court concluded it lacked subject matter jurisdiction over Humana’s complaint requesting reimbursement of conditional payments it made, and therefore finding the United States is the only entity vested with full authority to bring an action for reimbursement, CMS maintains that the existing MSP regulations are legally valid and an integral part of the Medicare Part C and D programs’ ability to recoup payments made for covered Medicare services for which Medicare is not the primary payer. As a result, plaintiff, plaintiff’s counsel, defendant, insurer, and defendant/insurer’s counsel will have to be prepared to deal with Medicare Advantage Organizations and Prescription Drug Plans,  Medicare Part C and Part D private carriers, regarding Medicare secondary payment subrogation rights as these private carriers begin seeking reimbursement for payments made for services in which Medicare is a secondary payer.

Download Gould and Lamb’s Medicare Secondary Payer Compliance and Protocols User Guide

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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.

Medicare compliance issues in liability cases have become increasingly troublesome in recent months. Judging by the volume of questions posed at a recent 2-day educational seminar hosted by Gould & Lamb and based upon the volume of questions asked of the legal team at Gould & Lamb, and what seems a constant stream of issues continuously raised by other Medicare list serves, liability insurance and the Medicare responsibilities at settlement are getting more and more prevalent. While similar concerns exist for workers’ compensation practitioners, it would appear that liability claims handlers, attorneys, and providers are realizing that Medicare’s interests must be protected and that Medicare compliance has a real financial impact on claims.

Workers’ Compensation claims practitioners have been exposed to the Medicare world for about a dozen years. With the publishing of CMS’ “Patel Memorandum” in 2001, adjusters, attorneys, and insurance companies have adopted the Medicare Set-Aside to protect Medicare’s future interests and have incorporated Conditional Payment strategies into case handling in order to avoid Medicare’s recovery rights to past medical payments. In short, Medicare has been a typical part of the resolution of a workers’ compensation case for some time. In contrast, it appears that the liability insurance world is just beginning to discover what Medicare compliance may require.

While it is unclear whether the seemingly new focus on compliance on the liability insurance side is a result of a statutory analysis of the Medicare Secondary Payer (MSP) Act, Medicare guidance, Medicare policy, or jurisprudence, there certainly appears to be heightened awareness of the potential downside of failure to comply given the virtually unlimited reach of the federal government and the MSP Act itself. Perhaps, the increased focus on MSP concerns is related to Medicare’s most recent activity and guidance regarding Conditional Payment recovery and Mandatory Insurer Reporting?

Conditional Payment Recovery Options

Beginning in September of 2011 and thereafter, Medicare, through the Medicare Secondary Payer Recovery Contractor (MSPRC) and within the Mandatory Insurer Reporting structure itself, has begun to publish policy specifically designed to handle liability insurance issues. Gone are the days (and, presumably, the arguments) that Medicare compliance applies only to Workers’ Compensation cases. With regard to Conditional Payments, the MSPRC has established protocols to assist litigants with the lien repayment process in liability claims. In cases that settle for $300 or less, Medicare may consider a waiver of any lien.  In cases that settle for $5000 or less, a fixed percentage may be acceptable to Medicare if certain criteria is met. In cases that settle for $25,000 or less, the parties can self calculate the lien recovery and Medicare will then consider, and perhaps approve, the amount . Significantly, CMS published its first Memorandum specifically directed at Medicare’s future interests in a liability case and how best to protect Medicare’s interests. In the Mandatory Insurer Reporting arena, Medicare has announced that they will utilize the Taxpayer Identification Number provided during data entry to generate lien recovery activity as against specific Responsible Reporting Entities.

Accordingly, virtually all of Medicare’s activity over the last six months has been directed at liability claims and how to account for them in their processes and procedures. Clearly, Medicare recognizes that liability settlements have the potential to bolster the flagging finances of the Medicare system and is beginning to utilize the information provided to them to that end. As the year progresses, we expect more and more guidance regarding the protection of Medicare’s interests in settlements that address the future medical needs of injured parties. Until then, Medicare has begun the process of putting together a methodology for liability cases as opposed to Workers’ Compensation cases which, by the looks of things, has resulted in significant activity amongst liability practitioners.

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.

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.