House Passes Measure to Delay ICD-10 Transition

STOP THE PRESSES… Possible Delay in ICD-10 Transition

By voice vote on Thursday, March 27, the House approved another temporary (one-year) fix to prevent steep cuts in Medicare’s physician reimbursement scheduled to take effect March 31. It now moves to the Senate which is expected to take action within the next few days. The draft legislation does not address the problems with the Workers’ Compensation Medicare Set-Aside approval process. However, there is language that speaks to a possible delay in the ICD-9 to ICD-10 transition, which could impact the MMSEA Section 111 mandate for reporting ICD-10s.  Other key inclusions include a two year delay in the provision overturning two U.S. Supreme Court decisions that prevented state Medicaid agencies from recovering 100 percent of their medical payments from the proceeds of liability settlements involving Medicaid beneficiaries and at least a one-year delay Medicaid mandated that providers move from ICD-9 coding to much more complex ICD-10 coding which will have a significant impact on insurers data reporting and bill payment functions.

CMS Issued Alert

It was only on this past Tuesday, March 25, 2014, that the Centers for Medicare and Medicaid Services (CMS) published an Alert regarding ICD-10 Diagnosis Codes, which further tightens the list of acceptable codes for Mandatory Insurer Reporting (MIR) purposes.

ICD-10 codes beginning with the letter “Z” are related to factors influencing health status and contact with health services, and are considered invalid for MIR.  This includes all 19 Diagnosis Code fields as well as the Alleged Cause of Injury, Incident or Illness field.

MIR ICD-9 Codes for Free

The Alert also clarifies the use of ICD-10 codes beginning with the letters V, W, X and Y.  These codes are related to external causes of morbidity and mortality, and may only be populated in the Alleged Cause of Injury, Incident or Illness field, as long as they are not on the list of excluded codes in the NGHP User Guide.  Additionally, these V, W, X and Y codes are invalid for use in the 19 ICD-10 Diagnosis Code fields.

Gould and Lamb has applied the appropriate quality audits, alerts, and metrics to ensure our customers are compliant with the transition.  Should you have any questions regarding this or any other topic related to MIR, please contact your MMSEA Compliance Manager or our Reporting Services Department at mirservice.support@gouldandlamb.com or 866-672-3453 ext. 1122.

Additional details on the bill can be found here.

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.

Despite State Court Order, NJ Federal Court Finds Plaintiff Responsible for Conditional Payments

On June 12, 2013, the United States District Court for the District of New Jersey published its opinion in Taransky v. Sebelius, finding that the Court lacked subject matter jurisdiction over Ms. Taransky’s “due process” and “proportionality” claims, as Ms. Taransky failed to administratively exhaust these claims. Additionally, the Court concluded that despite state trial court’s order on a stipulation allocating settlement recovery to non-medical expenses, Ms. Taransky received payment from a “primary plan” responsible for payment of her medical expenses that had been covered by Medicare. As a result, Ms. Taransky is required to reimburse Medicare $10,121.15 pursuant to the MSP Act.

This case arose from a trip-and-fall accident that occurred on November 7, 2005 in Mount Laurel, New Jersey. Ms. Taransky was injured and, as a result, the federal Medicare program paid $18,401.41 in conditional payments.  Ms. Taransky sued the owners and operators of the shopping center on October 26, 2007, seeking damages for her personal injury losses. On October 26, 2009, Ms. Taransky settled the claims against these tort defendants in return for a lump-sum payment of $90,000.00.

Following the settlement, Ms. Taransky’s counsel filed a “Motion to Adjudicate Allocation of Settlement Proceeds” in the Superior Court of New Jersey, in Burlington County, that included a proposed order stating that “no portion of this recovery obtained by plaintiff in this matter is attributable to medical expenses or other benefits compensated by way of a collateral source.” In addition to the proposed order, Plaintiff’s counsel filed a “certification,” in which he stated that “New Jersey law does not permit a plaintiff’s tort recovery of losses (such as medical expenses) that have been compensated by way of collateral sources of benefits, such losses were not considered in settlement negotiations between the parties to this action and are not part of any recovery that may be obtained.” The state court entered the proposed order on November 20, 2009.

On December 8, 2009, the Medicare Secondary Payer Recovery Contractor, on behalf of the Centers for Medicare and Medicaid Services (“CMS”), sent Ms. Taransky a letter request that she reimburse Medicare $10,121.15. She disagreed and on January 4, 2010, Ms. Taransky sought redetermination from the Medicare Secondary Payer Recovery Contractor. The request was  denied by letter dated March 30, 2010. Ms. Taransky again sought redetermination of Medicare’s reimbursement decision, which a “Qualified Independent Contractor” affirmed via letter dated October 15, 2010. Ms. Taransky then proceeded before an Administrative Law Judge (“ALJ”) by way of telephonic hearing on March 9, 2011.

Ms. Taransky made the following arguments before the ALJ: (1) under the Medicare Secondary Payer Manual, Chapter 7, § 50.4.4, “the only situation in which Medicare recognizes allocations of liability payments to non-medical losses is when payment is based on a court order on the merits of the case” and that Medicare must defer to the state court’s allocation order because through its order, “the state court issued a decision on the merits of the case in which it allocated no part of the settlement to medical expenses or other benefits by way of a collateral source”; (2) the New Jersey Collateral Source Statute (“NJCSS”) “prohibits a plaintiff’s tort recovery from including any insured loss, apart from worker’s compensation and life insurance benefits” and as such, the Medicare payments were a collateral source and a New Jersey court would be legally prohibited from including them in any verdict; (3) Medicare is obligated to abide by the state court’s order; and (4) “reimbursement would be inequitable and that it would be unfair for Medicare to be ‘made whole’ for its expenditures from the already inadequate compensation received by the Beneficiary.”

The ALJ analyzed and rejected those arguments in its opinion issued April 15, 2011, finding that the state court’s order was not “on the merits” of the case, as it was issued pursuant to a stipulation of the parties and Medicare is therefore not required to defer to the state court’s order. Further, the ALJ determined that the NJCSS does not apply to conditional Medicare benefits. Therefore the Collateral Source Statute does not affect the Beneficiary’s legal obligation to reimburse Medicare. Thus, the ALJ rejected Ms. Taransky’s arguments and determined that she was liable for repayment of Medicare’s conditional payments.

Ms. Taransky appealed the ALJ’s determination to the Medicare Appeals Council (“MAC”), who rendered its decision on May 11, 2010, finding “no error in the ALJ’s decision.” Accordingly, the MAC adopted the ALJ’s decision “in its entirety” and added a discussion of a then-recently decided case, Mason v. Sebelius, No. 11-2370, 2012 U.S. Dist. LEXIS 40592, 2012 WL 1019131 (D.N.J. Mar. 23, 2012) (Simandle, J.) In addition, the MAC made a factual finding that “the $90,000 settlement in this case and the accompanying release of all claims against the defendants included compensation for medical expenses already paid for by Medicare with conditional payments.”

On July 16, 2012, Ms. Taransky filed the instant lawsuit, through which she asserted claims for “declaratory judgment and injunctive relief,” “violation of due process rights under the Fifth and Fourteenth Amendments to the Constitution,” and “for unjust enrichment.” Ms. Taransky also sought relief on behalf of a “class of all other persons similarly situated who had obtained tort recoveries subject to New Jersey law and were subjected to improper claims for reimbursement of Medicare out of their personal injury recoveries.”

On November 7, 2012, Defendants moved the Court to dismiss Ms. Taransky’s Complaint, or, in the alternative, enter an order of summary judgment in favor of Defendants. The Court heard oral argument in this matter on May 13, 2013. The Court’s findings are as follows:


1. Subject Matter Jurisdiction and Proportionality


In bringing their motion to dismiss under Federal Rule of Civil Procedure 12(b)(1), Defendants asserted a factual challenge to the Court’s subject matter jurisdiction over Ms. Taransky’s claim “for violation of due process rights under  the Fifth and Fourteenth Amendments to the Constitution.” Defendants contended that 28 U.S.C. § 1331 does not confer jurisdiction over these claims that arise under the Medicare Act, and because Ms. Taransky has failed to pursue these claims through the Medicare administrative process, the Court does not have subject matter jurisdiction.

Plaintiff argued that her due process claims are properly before the Court because the basis for her constitutional claims “is not the adverse CMS administrative decision nor even the availability of the CMS administrative process per se,” but that “CMS administrative procedures fail to address the issue of its systemic disregard for the limits of statutory authority” and renders “those administrative procedures fundamentally flawed.” In contrast, Defendants direct the Court to Mason v. Sebelius, No. 11-2370, 2012 U.S. Dist. LEXIS 40592, 2012 WL 1019131 (D.N.J. Mar. 23, 2012), where Judge Simandle concluded that the claim was “one ‘arising under’ the Medicare act and the third sentence of § 405(h) therefore deprives the Court of federal question jurisdiction.” The Court agreed with Judge Simandle’s reasoning that this “due process” claim arose under the Medicare Act. Further, Ms. Taransky had ample opportunity to channel her constitutional claim throughout the administrative process, and she had not shown otherwise. Accordingly, the Court granted Defendants’ motion to dismiss Ms. Taransky’s Due Process claim.

Ms. Taransky argued for the first time before the Court that, under Arkansas Dep’t of Health & Human Servs. v. Ahlborn, 547 U.S. 268, 126 S. Ct. 1752, 164 L. Ed. 2d 459 (2006), Defendants’ entitlement to reimbursement should be “limited to the amount actually recovered by a beneficiary in respect of medical expense, or, where no such allocation is made, a proportionate share of the recovery.” Defendants contended that this argument was not properly before the Court because Plaintiffs failed to administratively exhaust the claim. The Court agreed. Its review of the administrative record reveals that Plaintiff did not raise her Ahlborn / proportionality claim during the administrative process, yet, for the first time, asked the Court to limit Defendants’ entitlement to Medicare reimbursement. Because Plaintiff had not administratively exhausted the claim as required under Section 405(g), it was not properly before the Court and the Court therefore lacked jurisdiction to consider it.


2. Medicare Reimbursement Claims

Defendants next sought dismissal or an entry of summary judgment on Plaintiff’s fully-exhausted claims for  “Declaratory Judgment and Injunctive Relief” and “Unjust Enrichment,” through which Plaintiff challenged the Medicare Appeals Council’s decision to uphold Medicare’s reimbursement claim. Specifically, Ms. Taransky sought from the Court a “reversal of the MAC decision; a judgment relieving her of liability to reimburse the Medicare program to that portion of her tort recovery representing the primary plan’s demonstrated responsibility for medical expenses covered by the program; and a refund of all monies improperly paid to defendants in respect of the Medicare reimbursement claim.” Ms. Taransky also asked for relief on behalf of a “class of all other persons similarly situated who had obtained tort recoveries subject to New Jersey law and were subjected to improper claims for reimbursement of Medicare out of their personal injury recoveries.”

Defendants asserted that they were entitled to an entry of summary judgment upholding the MAC’s decision and they again point to Judge Simandle’s opinion in Mason v. Sebelius, No. 11-2370, 2012 U.S. Dist. LEXIS 40592, 2012 WL 1019131, (D.N.J. March 23, 2012), which, as previously discussed, confronted many of the issues raised in this case. In Mason, Judge Simandle engaged in a thorough review of the MSP, the NJCSS, and New Jersey case law and ultimately found that the New Jersey Supreme Court would likely conclude that conditional Medicare benefits subject to reimbursement are not a collateral source under the NJCSS and therefore does not apply to exclude conditional Medicare benefits from a tort settlement or judgment.

The Court found that the MAC and ALJ properly addressed the issue of the state allocation order. The MAC adopted the ALJ’s decision in its entirety, including the ALJ’s conclusions with regard to the state court’s allocation order. In rendering its decision, the ALJ addressed Ms. Taransky’s attempt to apply the Medicare Secondary Payer Manual, Chapter 7, § 50.4.4 to her case, as she did again in arguing the instant case before the Court. This section provides, in relevant part, that “[t]he only situation in which Medicare recognizes allocations of liability payments to nonmedical losses is when payment is based on a court order on the merits of the case.” Ms. Taransky asserted, as she does here, that “through an Order to Adjudicate the Allocation of Settlement Proceeds, the state court issued a decision on the merits of the case in which it allocated no part of the settlement to medical expenses or other benefits compensated by the way of a collateral source” and Medicare must therefore recognize this allocation.

However, the ALJ properly rejected this argument, reasoning that, “on the merits’ means, a court order delivered after a court has heard and evaluated the evidence and the parties’ substantive arguments.” The ALJ determined that the state court’s order “was not made pursuant to a determination by a court of any substantive issue with respect to a primary negligence suit, including determinations regarding fault or damages” and “[i]nstead, the Order was issued pursuant to a stipulation of the parties” and “the Beneficiary cannot cancel out her legal duties through a stipulation with a third party.” Here, the Court found that the ALJ properly reached its conclusion that the state court’s order, entered upon a stipulation of the parties, did not constitute a “court order on the merits of the case” as contemplated under Chapter 7, § 50.4.4 of the Medicare Secondary Payer Manual. Accordingly, this conclusion, coupled with the MAC’s factual determination that the settlement included compensation for medical expenses already paid for by Medicare with conditional payments, which this Court must regard as “conclusive” under Section 405(g), lead the Court to affirm the MAC’s decision.

This case illustrates the fundamental principle that Medicare’s interests cannot be stipulated away by the parties to tort litigation. It reinforces Medicare’s rights as paramount despite judicial approval of settlement documentation. Additionally, it seemingly settles the issue regarding Medicare benefits as a collateral source in New Jersey, holding that conditional Medicare benefits subject to reimbursement are not a collateral source and therefore cannot apply to exclude conditional Medicare benefits from a tort settlement or judgment.

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.


Mandatory Insurer Reporting in 2013 – Changes Ahead?

John Miano 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.