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

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

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

Federal Circuit Court Finds Part C Medicare Advantage Plans Have Same Rights as CMS When Seeking Recovery from Primary Payer

On June 28, 2012, the United States Court of Appeals for the Third Circuit published its decision on Humana Medical Plan and Humana Insurance Company v. GlaxoSmithKline, LLC, concluding that any private party may bring an action under §1395y(b)(3)(A), as it establishes a private cause of action for damages. As a result, the court found that private parties like Humana can bring suit for double damages when a primary plan fails to appropriately reimburse any secondary payer. In addition, since 42 C.F.R. §422.108 stated that a Medicare Advantage organization can exercise the same rights to recover from a primary plan, entity, or individual that the Secretary of HHS exercises under the MSP regulations, the Medicare Act treats MAOs the same way it treats the Medicare Trust Fund for purposes of recovery from any primary payer.

Humana, an authorized Part C Medicare Advantage (MA) plan allows Medicare enrollees to obtain their Medicare benefits through private insurers (MAOs) instead of receiving direct benefits from the government under Parts A and B. § 1395w-21(a). CMS pays an MAO a fixed amount for each enrollee, per capita (a “capitation”). The MAO then administers Medicare benefits for those enrollees and assumes the risk associated with insuring them. MAOs like Humana are thus responsible for paying covered medical expenses for their enrollees.

Glaxo manufactured and distributed Avandia, a Type 2 diabetes drug that has been linked to substantially increased risk of heart attack and stroke. Thousands of Avandia patients alleged various injuries resulting from their use of the drug and Glaxo began entering into agreements to settle these claims. By August 2011, when Appellants filed their brief, Glaxo had paid more than $460 million to settle these claims. As part of the settlement process, where a claimant was insured by Medicare, Glaxo had set aside reserves to reimburse the Medicare Trust Fund for payments it made to cover the costs of treatment for the claimants’ Avandia-related injuries.

Glaxo had not, however, included reimbursement of MA plans in the settlement agreements that it had reached with Avandia claimants enrolled in MA plans, even though MAOs had paid the costs of treatment of Avandia-related injuries for these claimants. Humana filed suit seeking reimbursement from Glaxo for the cost of treating its enrollees’ Avandia-related injuries. Humana sought, on behalf of itself and a class of similarly-situated MAOs: (1) damages under the Medicare Secondary Payer Act (“MSP Act”), which provides a private cause of action, 42 U.S.C. § 1395y(b)(3)(A), allowing double damages for failure to reimburse a secondary payer; and (2) equitable relief in the form of an order compelling Glaxo to identify settling Avandia claimants to the MAOs that cover them.

Glaxo filed a motion to dismiss. The District Court heard oral argument on the motion and, granted it. In dismissing the action, the District Court found there was no clear legislative intent to create a remedy for Humana. The District Court therefore found that no implied private right of action existed. Accordingly, the Court did not defer to the CMS regulation that granted MAOs parity with Medicare recovery from primary payers.

On appeal, the court found that the text of the provision sweeps broadly enough to include MAOs and that, even if it determined the statute to be ambiguous on this point, deference to CMS regulations would require it find that MAOs have the same right to recover as the Medicare Trust Fund does.

The Medicare Statute creates two separate causes of action allowing for recovery of double damages where a primary payer fails to cover the costs of medical treatment. When the Medicare Trust Fund makes a conditional payment and the primary payer does not reimburse it, the United States may bring suit pursuant to §1395y(b)(2)(B)(iii). Additionally, a private cause of action with no particular plaintiff specified exists pursuant to §1395y(b)(3)(A) anytime a primary payer fails to make required payments.

The court found that the plain text of the MSP private cause of action lends itself to Humana’s position that any private party may bring an action under that provision. It establishes “a private cause of action for damages” and places no additional limitations on which private parties may bring suit. § 1395y(b)(3)(A). Accordingly, the court held that the provision is broad and unambiguous, placing no limitations upon which private (i.e., non-governmental) actors can bring suit for double damages when a primary plan fails to appropriately reimburse any secondary payer.

The court indicated that, although the MSP Act was enacted before Part C, which created MAOs, private Medicare risk plans were authorized under 42 U.S.C. § 1395mm in 1972, before the passage of the MSP Act. Act of Oct. 30, 1972, sec. 226(a), Pub. L. 92-603, 86 Stat. 1396. Thus, at the time it enacted the MSP Act, Congress was aware that private Medicare providers existed. Had it intended to prevent them from suing under the private cause of action provision, Congress could have done so explicitly. In short, the court found that there is nothing in the text or legislative history of the MA secondary payer provision that demonstrates a congressional intent to deny MAOs access to the MSP private cause of action.

The court also recognized that Congress’s goal in creating the Medicare Advantage program was to harness the power of private sector competition to stimulate experimentation and innovation that would ultimately create a more efficient and less expensive Medicare system. See, e.g., H.R. Rep. No. 105-217, at 585 (1997) (Conf. Rep.) (stating that MA program was intended to “enable the Medicare program to utilize innovations that have helped the private market contain costs and expand health care delivery options”). It was the belief of Congress that the MA program would “continue to grow and eventually eclipse original fee-for-service Medicare as the predominant form of enrollment under the Medicare program.” Id. at 638. The MA program was thus, like the MSP statute, “designed to curb skyrocketing health costs and preserve the fiscal integrity of the Medicare system.” Fanning v. United States, 346 F.3d 386, 388 (3d Cir. 2003).

The court reasoned that it would be impossible for MAOs to stimulate innovation through competition if they began at a competitive disadvantage, and, as CMS has noted, MAOs compete best when they recover consistently from primary payers. Policy and Technical Changes to the Medicare Advantage and the Medicare Prescription Drug Benefit Programs, 75 Fed. Reg. 19678, 19797 (Apr. 15, 2010). When they “faithfully pursue and recover from liable third parties,” MAOs will have lower medical expenses and will therefore be at a disadvantage, unable to exert the same pressure and thus forced to expend more resources collecting from such payers. The court therefore concluded that it was not the intent of Congress to hamstring MAOs in this manner.

The court pointed out that although the legislative history is nowhere explicit that MAOs may bring suit for double damages under the MSP private cause of action or using any other provision, it does make clear that MAOs were intended to enjoy a status parallel to that of traditional Medicare. Under original fee-for-service, the Federal government alone set legislative requirements regarding reimbursement, covered providers, covered benefits and services, and mechanisms for resolving coverage disputes. Therefore, the Conferees intend that the legislation provide a clear statement extending the same treatment to private MA plans providing Medicare benefits to Medicare beneficiaries. H.R. Rep. No. 105-217, at 638. This court saw nothing in the text or legislative history of the statute to imply that Congress did not intend to facilitate recovery for MAOs in the same fashion.

The Supreme Court in Chevron established a two-part test for determining when a federal court ought to defer to the interpretation of a statute embodied in a regulation formally enacted by the federal agency charged with implementing that statute. 467 U.S. at 842-43. First, the court must determine whether Congress’s intent on the issue is clear — if so, it must abide by that intention, regardless of any regulations. If the statute is unclear, that is, “silent or ambiguous with respect to the specific issue, the question for the court is whether the agency’s answer is based on a permissible construction of the statute.” Id. at 843.

CMS “has the congressional authority to promulgate rules and regulations interpreting and implementing Medicare-related statutes.” Torretti v. Main Line Hosps., Inc., 580 F.3d 168, 174 (3d Cir. 2009); see also 42 U.S.C. §1395hh(a)(1) (“The Secretary shall prescribe such regulations as may be necessary to carry out the administration of the insurance programs under this subchapter.”); 42 U.S.C. § 1395w-26(b)(1) (“The Secretary shall establish by regulation standards for MA organizations and plans consistent with, and to carry out, this part.”). Thus, the court concluded that it must accord Chevron deference to regulations promulgated by CMS.

CMS regulations state that an “MA organization will exercise the same rights to recover from a primary plan, entity, or individual that the Secretary exercises under the MSP regulations in subparts B through D of part 411 of this chapter.” 42 C.F.R. § 422.108. The plain language of this regulation suggests that the Medicare Act treats MAOs the same way it treats the Medicare Trust Fund for purposes of recovery from any primary payer. In this circumstance, the court concludes it is bound to defer to the duly-promulgated regulation of CMS.

A recent memorandum from CMS specifically responded to decisions of the federal courts holding that MAOs were not “able to take private action to collection for MSP services under Federal law because they have been limited to seeking remedy in State court.” Ctrs. for Medicare & Medicaid Svcs., Dep’t of Health and Human Svcs. Memorandum: Medicare Secondary Payment Subrogation Rights (Dec. 5, 2011). This memorandum clarified that CMS itself understood § 422.108 to assign MAOs “the right (and responsibility) to collect” from primary payers using the same procedures available to traditional Medicare.

The court therefore reversed the District Court’s dismissal of the complaint, and remanded it for further proceedings consistent with its opinion.

The decision is the latest in what seems to be an ongoing debate within the industry and amongst litigants regarding the rights of Part C plans when compared to those of traditional Medicare. The case distinguishes recent District Court decisions such as Parra v. PaciCare of Arizona, Inc., Civ. No. 10-008, 2011 WL 1119736 (D. Ariz. Mar. 28, 2011) which sought to define the priority rights of MAOs despite CMS regulation. In the Third Circuit there is now no question that MAOs enjoy the right of reimbursement and the ability to pursue that right through the private cause of action.

Some larger questions are presented by the ruling. With traditional Medicare, information regarding a potential recovery is reported through the Mandatory Insurer reporting mechanism. The Medicare, Medicaid and SCHIP Extension Act of 2007 have mandated electronic reporting be completed by RREs or those responsible for payment. The acceptance of ongoing responsibility for medical benefits and the settlement itself are required to be provided. From that information, Medicare begins its recovery efforts against those who failed to protect its interests. However, without an mandate requiring reporting information to extend to Part C plans, it would appear that MAOs must rely on the beneficiary or their representative to advise that a settlement has occurred.  Will CMS now expand the recipients of Mandatory Insurer Reporting to include Part C plans?

Assuming that MAOs now have the same rights as traditional Medicare and that their recovery rights ripen on the fact of settlement, judgment or award, is it permissible to satisfy the lien before settlement? If so, can this be done by the primary payer or by the beneficiary pursuant to the policy of insurance? Clearly, logistical questions abound. For the time being, the law applies only in the Third Circuit. But, if adopted by the other Circuits it appears that CMS will have yet another technical challenge on its hands. Clearly, mindful MAO organizations will now step up their recovery efforts based upon the case.

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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 September 6, 2011 the Medicare Secondary Payer Recovery Contractor (MSPRC) published a Beneficiary Alert on the website (www.msprc.info).  The Alert advised that in liability cases (not workers’ compensation cases or no-fault cases), where a settlement, judgment or award is $300.00 or less, Conditional Payment Recovery will not be pursued by Medicare. They explained that two conditions must be satisfied in order to avoid Medicare’s recovery attempt:

• First, the settlement, judgment or award must be based on physical trauma.
• Second, no other or additional settlements can be reached that are related to the same alleged incident.

Significantly, the MSPRC identified that the threshold includes settlement, judgments or awards where an insurer has paid or is paying medical bills. Thus, liability must be denied and the aggregate settlement must be $300.00 or less. Further, if a demand letter has already been issued by the MSPRC in a case, the threshold would not apply.

As a practical matter, it appears that the threshold will have little affect on litigated claims with attorney representation. Clearly, most liability cases easily exceed the threshold value. More importantly, however, the setting of any threshold seems to signal a more reasonable approach to Medicare recovery efforts. Potentially, the time and resources required to pursue de minimus lien amounts may now be used elsewhere in an effort to bolster Medicare’s precarious financial state.

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.

MARC Coalition Endorses H.R. 1063, The Strengthening Medicare and Repaying Taxpayers Act, Before Congressional Subcommittee

A hearing was conducted by the Subcommittee on Oversight and Investigations, Committee on Energy and Commerce on Wednesday June 22, 2011 at the Rayburn Building in Washington D.C., to discuss the MARC Coalition’s H.R. 1063, the Strengthening Medicare and Repaying Taxpayers Act. Representatives of the MARC Coalition, Marc Salm, Vice President of Risk Management for Publix Supermarkets, Scott Gilliam, Vice President and Government Relations Officer for Cincinnati Insurance Companies, Jason Matzus, a Personal Injury Attorney at Raizman, Frischman & Matzus and Ilene Stein, Federal Policy Director for the Medicare Rights Center presented testimony to the committee on behalf of the bill. Deborah Taylor, Chief Financial Officer and Director, Office of Financial Management for Center for Medicare and Medicaid Services (CMS) testified as did James C. Cosgrove, Director, Health Care, United States Government Accountability Office. The hearing was an important next step in the MARC Committee’s attempt to modify the Medicare Secondary Payer (MSP) Act.

The bill alters the current procedural aspects of Medicare’s conditional payment subrogation efforts in workers’ compensation and tort cases by imposing time constraints, establishing recovery lien thresholds, applying a set statute of limitations to recovery efforts, and removing a beneficiary’s social security number as an identifier, among other significant changes. As I have written previously, Gould & Lamb endorses the bill and views it as an effort to bring certainty and clarity to an otherwise seemingly endless and inefficient system that, in its current form, benefits neither litigants nor Medicare. Both Gould & Lamb’s President and Chief Operating Officer, Deborah Pfeifle and I, met frequently with members of the United States House of Representatives and the United States Senate in anticipation of the hearing as did the other members of the MARC Steering Committee. I was privileged to attend the hearing on the 22nd.

CMS and MSPRC Performance Scrutinized

Ms. Taylor and Mr. Cosgrove were allowed to enter written statements and were then questioned by the Subcommittee members. Ms. Taylor testified that Medicare is responsible for approximately 413,000 Secondary Payer claims and that that number comports with the amount of claims received last year. She also acknowledged that the implementation of Mandatory Insurer Reporting has doubled the CMS workload over the last eighteen months. She estimated that CMS has recovered $600,000,000.00 as a result of the CMS conditional payment recovery efforts. Ms. Taylor advised, however, that she was not aware of the median amount of the conditional payment claims sought to be recovered, the average response time of the Medicare Secondary Payer Recovery Contractor MSPRC or the rejection rate of data electronically transferred to Medicare which may trigger recovery efforts. Significantly, she discussed the performance of MSPRC and acknowledged “problems” including the fact that the MSPRC is overwhelmed with their workload. In response to these efficiency concerns, CMS visited the MSPRC “several times” and has begun rewriting the Statement of Work that guides MSPRC. While CMS has considered setting a threshold amount below which recovery efforts will not be made, no policy has been formulated.

Mr. Cosgrove essentially advised the Subcommittee that he was unable to objectively measure the performance of CMS and was unable to testify about the efficiency of the process. He explained that the system has five elements: notification, negotiation, resolution, reporting and recovery. However, he has been unable to gather data to quantify the process and its effect on beneficiaries or the Medicare Trust Fund. Significantly, he promised that a report was forthcoming outlining the recommendations of the GAO but that it was “far down the road.” He expected to complete the report, perhaps, by year’s end.

The Subcommittee, particularly Chairman Cliff Stearns (R-FL), seemed quite unsatisfied with the CMS presentation and the lack of concrete data or knowledge of MSPRC performance, the amount of potential recovery dollars, and the reasons for the 120-150 day lag in requests for conditional payment information and its receipt. For the MARC Committee, Ms. Taylor’s testimony underlined the seeming lack of institutional control exercised by CMS over the MSPRC. Clearly, the testimony proved that Mandatory Insurer Reporting has exponentially increased the workload of a system already strained to the breaking point. No cogent arguments were raised by Ms. Taylor or Mr. Cosgrove to account for the failure of the MSPRC to adhere to CMS internal guidelines or policies.

Mr. Salm and Mr. Gilliam presented the perspective of the self insured and insurance carrier, respectively and further pointed out the need for recovery thresholds, the necessity of receipt of information before settlement, the lack of a limitations period and the potential that even small settlements would trigger reporting requirements and potential recovery efforts. Both witnesses provided numerous accounts of CMS and MSPRC lack of responsiveness and its effect on their businesses and Medicare beneficiaries.

Mr. Matzus provided the perspective of the trial lawyers and their frustrations encountered on behalf of beneficiary litigants. Ms. Stein added testimony regarding the difficulty of receiving information from the MSPRC and the procedural roadblocks she has experienced in her work on behalf of beneficiaries.

Gould & Lamb and MARC Coalition Will Continue To Discuss H.R. 1063 Merits

CMS was asked to provide the Subcommittee with the information requested and promised to do so. Disturbingly, the CMS representatives did not remain in the Subcommittee hearing room to listen to the testimony of the other witnesses or to hear the questions and concerns of the other legislators. Perhaps we can assume that their early exit was to begin to remedy the problems brought to their attention by the MARC bill? It would appear that further hearings will be scheduled and perhaps CMS will be able to more completely explain their work model and convince lawmakers that the problems in the implementation of the Medicare Secondary Payer  and MMSEA does not require a legislative fix but, rather, an internal one. In the interim, Gould & Lamb, with the MARC Committee, will continue to discuss the merits of H.R. 1063 with the 112th Congress.

MSP statute of limitations dismissal arguments heard by judge in U.S. v Stricker litigation

Judge Karon Bowdre, US District Court for the Northern District of Alabama considered arguments on Monday, September 13, 2010 for dismissal of the U.S. v. Stricker case. Her decision will have far reaching effects on tort litigation and MSP compliance regardless of her ruling.

Attorneys for the defendants (the Abernathy plaintiffs) argued that the United States government failed to timely file its Medicare reimbursement lawsuit against plaintiffs (including hundreds of Medicare beneficiaries) in connection with a huge class action lawsuit recovery in which more than $300,000,000.00 was paid from various insurance companies and manufacturers. They specifically contend that the government missed the filing deadline by at least three months, regardless of which statute the court chooses to apply.

Defendants (the Abernathy plaintiffs) Argued Three Year Statute of Limitations Applies

The defendants argued that a three year statute of limitations applies to the action as the rights of the government are grounded in tort law. The argument, based upon Federal Claims Collection Act, is that the obligations of the defendants to reimburse Medicare arose from a tort and therefore the repayment obligation was triggered when the suit settled and the limitations period applicable to tort actions controls. Failure to bring action within three years of settlement is untimely, they contend.

Plaintiff (U.S. Government) Argued Six Year Limitations Period Applies

In opposition, the United States of America argued that a six year limitations period applies to the case as the matter is grounded in contract law and controlled by in 28 U.S.C. §2415(a).  The statutory section, the United States claims, allows the compliant to avoid dismissal as it was filed within six years of settlement and the receipt of settlement funds subject to MSP recovery. Even if the limitations period is six years, the defendants contend that the government’s suit is still untimely as any reimbursement rights began to accrue at the time health services are received. The defendants argue that the settlement of the underlying case merely ended the MSP reimbursement obligation which began at the time the primary payer became obligated to pay for medical services. Failure to file during the subsequent six year period requires dismissal. This argument requires the judge to agree that the timing of receipt of benefits by the Medicare beneficiary is the event that begins the running of the limitations clock, not the payment of the settlement itself.

Judge Bowdre will, therefore, be required to decide whether Medicare’s reimbursement rights are considered contractual or tort related. If grounded tort, the three year limitations period controls. If grounded in contract, the six year statute of limitations is applicable. She must also determine when the government’s right to conditional payment recovery becomes ripe. Does the government’s right to recovery commence at the time medical benefits are received, when conditional payments are made, or when a settlement is reached? Hopefully, these questions and more will be answered.

Judge’s Decision Will Offer Compliance Industry Insight into MSP Statutory Limitations

Despite the judge’s decision, the Medicare compliance industry, insurance industry and legal practitioners seemingly will be given some indication of an appropriate statutory limitations period on MSP recovery. If the case is dismissed on either grounds, precedent will then be established to base arguments about Medicare’s reach and their recovery rights in previously settled cases. If the motions to dismiss are denied on other that factual grounds, we would seem to have been provided a roadmap as to the government’s interpretation of the limitations of the Medicare Secondary Payer Act. Some long awaited certainty should be brought to Medicare compliance issues with the publication of this crucial MSP statute of limitations ruling. It is doubtful that the ruling will be published before the end of the week.

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