US Court of Appeals Provides Opinion on Michigan Spine and Brain Surgeons v. State Farm

Russell S whittle, Esq VP MSP ComplianceThe United States Court of Appeals for the Sixth Circuit published its opinion in Michigan Spine and Brain Surgeons, PLLC v. State Farm Mutual Automobile Insurance Company on July 16, 2014.  The long awaited decision addresses the Circuit’s view regarding the Medicare Secondary Payer (MSP) Act’s private cause of action provision. At its core, the parties asked the court to determine whether a health care provider that had treated a Medicare beneficiary following an automobile accident could pursue the insurance carrier under the (MSP) where the carrier had denied liability for the accident.

State Farm argued that it was not a “primary plan” under the MSP Act, nor was it a group health plan. Because State Farm was a non group health plan, the MSP action could not proceed, they asserted. The District Court had previously ruled in favor of State Farm on the issue, construing the admittedly confusing MSP Act to require denial of coverage based upon the Medicare eligibility of the injured plaintiff. Michigan Spine and Brain Surgeons argued that the MSP, when read in conjunction with the clear intent of Congress to ensure the fiscal health of Medicare, operated to make State Farm a primary plan and thus a target for recovery from Michigan Spine despite the ambiguity in the statute concerning the MSP application to group versus non-group health plans.

The Sixth Circuit declined to read the MSP statute narrowly, finding that the intent of the MSP statute was to allow providers to recover from liability insurance carriers that make primary payment on behalf of a Medicare beneficiary despite arguments that the insurance companies should not be considered group health plans, subject to the provider’s private cause of action.

The decision, as noted, broadly construes the MSP statute making recovery actions by providers against insurance companies that deny liability more likely, at least in the Sixth Circuit (Kentucky, Michigan, Ohio and Tennessee). It underscores the importance of determining Medicare eligibility and the extent to which an injured party received medical care that may formulate the basis of a private cause from a provider seeking reimbursement for Medicare related expenses following an accident involving no-fault coverage. The case is sure to formulate the basis of reimbursement actions from providers going forward. It is vitally important in the handling of these cases to recognize the potential for MSP actions and to address those issues during the discovery and resolution stages of claims and to ensure that a settled case remains closed.


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About the Author: Russell S. Whittle, Esq., is the Vice President of MSP Compliance for ExamWorks Clinical Solutions (formerly Gould & Lamb). In his twenty plus years of practice prior to joining the company, 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.

Workers Compensation Review Center (WCRC) Changes Position on Development Letters

As a result of Gould & Lamb’s continued advocacy with CMS Central Office, WCRC, and Regional Offices, Workers’ Compensation Medicare Set Aside submitters will see a light at the end of the tunnel.  Based on direct conversations, we anticipate a turn-around in what has been an arduous approval process with repeated development requests that were neither germane nor reasonable.  The WCRC is starting to address the back log that has accumulated since November 2013, has restated their commitment to abide by state specific statutes, and to refrain from seeking unnecessary, and unrelated medical records as part of its review process.   The WCRC has expressed its commitment to expedite review of the backlog for all affected submitters.

Since the publication of CMS’ WCMSA Reference Guide in November 2013, there has been a marked increase in the number of development requests from the WCRC for medical records purportedly to enable the reviewers to accurately price future Medicare costs over a claimant’s life expectancy.  To submitters and other stakeholders, the WCMSA Reference Guide, originally intended to herald a new era of transparency and accountability, , resulted in the WCRC increasing the issuance of development letters seeking medical records dated within six months of the submission or the reopen date — whichever is was later.

No Federal Preemption

The WCRC justification for its expanded request for medical records and the authority on which it relied is the November 2013 WCMSA Reference Guide and its subsequent update.  The assumptions made by the WCRC were:

  • The MSP preempts the state WC law.
  • Even if the claimant treats outside the WC system and the carrier has no obligation to pay for the treatment Medicare is not primary.
  • Even if the claimant is no longer entitled to medical benefits by operation of law, Medicare is still not the primary payer and the employer/carrier should bear the associated costs.

Moreover, the WCRC has asserted that it is doing “an investigation” and is not limited only to the records for treatment of the WC injury but to the claimant’s family doctor medical records, if there are no current records from the WC provider.  This was a firm position until recently and accounted for countless delays in the determination process.  Through Gould & Lamb’s advocacy, we successfully established that CMS and the WCRC must give deference to state specific statutes because there is no federal preemption.   The MSP is a secondary payer law and where there is not otherwise a primary payer, Medicare is absolutely the primary payer.   We continue to advocate with CMS to adopt clear and unambiguous polices so that there is no confusion on the part of the WCRC –the Agency charged with following CMS policies and reviewing submitters Life Care/Future Treatment Plans.  We urge CMS and the WCRC to adopt policies that comport with the public policy of the MSP and the opinions of various U.S. Federal Courts that Medicare stands in the same shoes of the beneficiary and where the state does not require the carrier to pay, then Medicare has no right of recovery or subrogation under any theory of law.

We are pleased to see that the pace of approvals has picked up dramatically and the number of development requests has abated.   We are committed to continuing to work with the CMS, the WCRC, and the Regional Offices to ensure a fair and transparent review/approval process.

For more information or if you have questions, please contact your Gould & Lamb Regional Claims Consultant at 1.866.MSA.FILE (672.3453).

Self Administration Toolkit for WCMSAs

On April 11, 2014 the Centers for Medicare and Medicaid Services added a Self Administration Toolkit for Workers’ Compensation Medicare Set-Aside Arrangements to its CMS.gov website. It can be viewed here.

The resource is designed to aid workers’ compensation claimants in the self administration of their MSA accounts with the proper establishment of, and expenditures from, their WCMSA account. It describes self administration guidelines and procedures including the need to establish an interest bearing account for the funds and explains the payment of medical bills using MSA funds to reimburse providers and annual accounting requirements. It includes form letters to be provided to medical providers and sample transition records for MSA expenditures. Additionally, it explains circumstances where an MSA is temporarily and/or permanently depleted based on lump sum or annuity funding.

The Toolkit is the first comprehensive outline of the compliance obligations that are incumbent upon workers’ compensation claimants after settlement. This guidance suggests that CMS recognizes the failure of most claimants in the proper management of their MSA to ultimately protect their Medicare benefits and those of the Medicare Trust Fund. The guidance advises injured parties regarding the use of Workers’ Compensation state Fee Schedules in reimbursing providers and in properly advising Medicare as to the use of the MSA account. CMS advises that the Toolkit can help in the management of the account and “satisfy Medicare’s interests related to future medical care.” Additionally, it cautions that prior to treatment for a workers’ compensation injury a claimant “must” advise a healthcare provider of the existence of a WCMSA. CMS further suggests that bank statements and tax records should be kept as the documentation may be requested by CMS as proof that the account is administered “correctly”.

The complicated rules and extensive knowledge required to adequately identify the medical bills which are applicable to the Medicare Set Aside account preclude successful management of these funds by most Medicare beneficiaries.  When paired with CMS’ explicit and implicit warnings regarding its future interests and the potential denial of Medicare benefits based upon inaccurate or incomplete evidence of proper exhaustion, the Toolkit may cause alarm for claimants.   CMS further advises that a Medicare beneficiary seek the advice of a professional for assistance with the proper use of the MSA funds when confidence is lacking.

To simplify these requirements and ensure proper exhaustion of the WCMSA, Gould and Lamb Trust Company offers the following services:

Post Settlement Account Administration

High-touch trust and account management.

The Gould & Lamb Trust Company ensures compliance and no loss of benefits through professional administrative services for Medicare Set-Aside, Medical Custodial Accounts, and Special Needs Trust accounts. This service provides dedicated assistance, choices in management of settlement funds, and 24/7 access to account information via a secure web-based portal.

MSA Self-Administration Support Service

  • Low cost alternative to professional administration
  • Offers ongoing access to a dedicated representative offering guidance to properly disburse Medicare Set Aside funds
  • Access to discount prescription drugs, durable medical equipment (DME), outpatient services and case management
  • Assistance with CMS Annual Accounting
  • Resolution of temporary and permanent exhaustion

Professional Medicare Set-Aside (MSA) Administration

  • Preparation of professional administration agreement
  • Establishment of the MSA interest-bearing account
  • Access to discount prescription drugs, durable medical equipment (DME) outpatient services and case management
  • CMS Annual Accounting
  • Resolution of temporary and permanent exhaustion

Medical Custodial Account (MCA)

  • Preparation of professional administration agreement
  • Establishment of the medical account offering discount prescription drugs, durable medical equipment (DME), outpatient services and case management
  • Medical Account Coordination with a Medicare Set Aside account

Special Needs Trusts (SNTs)

  • Trust document preparation and professional trustee services
  • Coordination of asset management
  • Trust administration, including annual accounting to Social Security, Medicaid, the Courts and IRS, as required
  • Access to discount prescription drugs, durable medical equipment (DME), outpatient services and case management


The Global Leader in Compliance

To receive a quote for assistance with Self Administration or Professional Administration of a WCMSA or to learn more about our MSP compliance services, call 1-866-MSA-File and ask to speak with Bobbie Chasco at extension 1022.

CMS Issues Alert Regarding Threshold Amount

Russell S Whittle, VP Medicare Secondary Payer ComplianceOn February 18, 2014, CMS issued two Alerts regarding the threshold amount under which the Medicare Secondary Payer Recovery Contractor (MSPRC) would not pursue its right to recover unpaid conditional payments. In addition, CMS modified the Mandatory Insurer Reporting obligations for cases settling under $1000.

Section 202 of the Strengthening Medicare and Repaying Taxpayers (SMART) Act charged CMS with the duty to calculate and publish a single threshold amount for settlements, judgments and awards arising from liability insurance (including self-insurance) for physical based trauma incidents (excluding ingestion, implantation and exposure) no later than November 15 of each year. Cases meeting the threshold would not be subject to conditional payment recovery efforts by Medicare. The calculation was to be reviewed by the Comptroller of the United States before it was published.

Previously, CMS had established a $300 settlement threshold for reimbursement of conditional payments. The $300 reporting threshold and conditional payment reimbursement process began in August 2011.

For 2012, CMS determined that its average cost of collection per Non Group Health Plan case was approximately $335.  This figure was expected to be similar in 2013 and 2014. CMS then analyzed the settlement amount range closest to its $335 cost of collection, which was found to be cases more than $750 and equal to or less than $1000.

Accordingly, trauma-based settlements, judgments or awards totaling $1,000 or less are exempt from conditional payment reimbursement.

The second Alert of the same date clarified the first Alert regarding reporting under Section 111 of the Medicare, Medicaid and SCHIP Extension Act. Effective immediately, settlements, judgments and awards arising from liability insurance (including self-insurance) for physical based trauma incidents (excluding ingestion, implantation and exposure) are not reportable under the Mandatory Insurer Reporting scheme. The MSP User Guide will be amended to reflect the reporting threshold change when it is updated.

There are several questions raised by the Alert. Perhaps most important is whether CMS has altered its Mandatory Insurer Reporting system to incorporate the change in the requirements. At present, Mandatory Insurer Reporting requirements obligate Responsible Reporting Entities to report all settlements, judgments and awards arising from liability insurance (including self-insurance) for physical based trauma incidents in cases whose value exceeds $2000. As of January, 2015, the threshold was scheduled to drop from $2000 to $300.

Gould & Lamb expects that CMS will publish clarification of its Alerts along with technical guidance regarding the changes. Gould & Lamb will continue to monitor developments on these important issues and will apprise you of their practical implications on your Medicare compliance program.

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.