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

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

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

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

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

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

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

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

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

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.

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.

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.

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.

The United States Court of Appeals for the Sixth Circuit published its ruling in Vernon Hadden v. United States of America on November 21, 2011.  The long awaited decision regarding the extent of Medicare’s reimbursement rights to conditional payments made on behalf of an injured beneficiary was eagerly anticipated.  For the Medicare compliance industry, tort litigants and beneficiaries, the Hadden case brings at least one court’s interpretation of the Medicare Secondary Payer Act and the seeming incongruity between Medicare’s broad right of recovery and the reality of tort settlements and awards.

Hadden, injured in a 2004 accident when he was struck by a vehicle, argued that he had recovered only 10% of the total damages in his case (the remaining 90% were the fault of an unidentified motorist).  Of the $125,000.00 settlement paid by the insured tortfeasor, Medicare claimed a reimbursement right to $62,338.07.  Hadden took the position that Medicare’s reimbursement rights should be reduced as a result of his failure to recover the lion’s share of the damages that resulted from the accident.

Hadden Argued Four Points

Hadden essentially argued four points on appeal from the United States District Court for the Western District of Kentucky at Bowling Green. First, he said, his obligation to reimburse Medicare should be limited to a pro-rata share of the portion of his recovery that represented medical expenses.  Second, he argued that Medicare reimbursement cases should be handled pursuant to other federal and state statutes including the Medical Care Recovery Act, 42 U.S.C. §2651(a) and the Medicaid statute.  He cited the Supreme Court’s decision in Arkansas Department of Health and Human Services v. Ahlborn, 547 U.S. 282 (2006) as authority.  Third he argued that, technically, Medicare’s right to reimbursement as set forth in 42 U.S.C. 1395y(b)(2)(B) was only enforceable pursuant to section iv of the statute when an action was specifically brought. Accordingly, principles of subrogation would preclude action against Mr. Hadden directly.  Last, Hadden said that Medicare should have waived the reimbursement obligation in his case as their recovery was “against equity and good conscience.”

Court’s Findings

The court in affirming the District Court’s order denying the relief Mr. Hadden sought, addressed each argument in turn.

With regard to the position that Medicare should have waived the lien based upon the circumstances of the claim and the amount of settlement, the court found that the Appeals Council and the Administrative Law Judge that reviewed the case had “little to no evidence” that the reimbursement amount would have caused a hardship to the plaintiff. Specifically, Mr. Hadden retained almost $44,000.00 after reimbursing Medicare.

As to the argument that the Medicare Secondary Payer Act can only be enforced by bringing action under 42 U.S.C. 1395y(b)(2)(B)(iv), the court reasoned that 42 U.S.C. 1395y(b)(2)(B)(iii) allows the United States to recover against any entity that receives payment from a primary plan which would include Mr. Hadden. Thus, the Medicare Secondary Payer Act is broad enough to include all parties to a settlement, judgment or award.

The more significant findings were made regarding Hadden’s first two arguments. As to the position taken by the plaintiff that the Medicare Secondary Payer Act and Medicare’s reimbursement rights should specifically recognize the extent to which tort recoveries are reduced by facts including failure to recover the full measure of damages, the court was unsympathetic. Because the Medicare Secondary Payer Act does not, like the state Medicaid decision in Ahlborn, limit recovery to the extent that there is legal liability to pay for care, seeking to engraft the same type of standard whereby the parties legal obligations wherein proportionate fault as is analyzed (as in a Medicaid reimbursement case) is simply not contemplated by 42 U.S.C. 1395y(b)(2).

Perhaps most importantly, the court found that Medicare’s reimbursement rights, as set out in 42 U.S.C. 1395y(b)(2)(B)(ii), includes the “responsibility” to reimburse Medicare from both the beneficiary and a primary plan. Citing the portion of the statute that establishes Medicare’s right to reimbursement despite a determination or admission of liability, the court found that when a beneficiary demands medical expenses from a primary plan to their full extent, he cannot then argue that Medicare should receive only 10% of the total. In short, the court determined that the scope of the responsibility to reimburse Medicare is determined by what has been requested of the third party.  Here, because Mr. Hadden’s arguments were not restricted to a pro rata share of the medical expenses incurred, the court determined that he is then bound by the position taken at the time of the settlement.

Dissenting Opinion

A dissenting opinion was also filed by one of the Judges calling into question the majority’s definition of “responsibility” and arguing that, in reality the majority’s reading of the Medicare Secondary Payer Act is both too broad and impractical in the world of tort litigation.

For the Medicare Compliance industry and Medicare beneficiary tort litigants, the Hadden case seems to suggest that Medicare will not be inclined to consider arguments including a reduced tort award as a means to compromise conditional payment liens. However, the case also appears to suggest that compromise and waiver arguments are still considered viable avenues to reduce Medicare’s ultimate recovery, if properly presented. Whether the case triggers any internal policy or procedural change within Medicare should be known shortly.

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.