Upcoming Webinar: Medicare Compliance Updates

Join us for a FREE client webinar on August 29, 2013.  

Melisa Zwilling will discuss the most recent Medicare compliance updates including how to best resolve Medicare Advantage (Part C) liens. Attendees will receive one CE credit hour for the following states: Georgia, Florida & Texas.

Click here to register.

Eleventh Circuit Court of Appeals Confirms Dismissal of Government's Claims in U.S. v. Stricker as Claims are Barred by the Statute of Limitations

The district court recently dismissed the action brought by the federal government in U.S. v. Stricker as barred by the statute of limitations. The government appealed that decision to the Eleventh Circuit Court of Appeals. On July 26, 2013, that court agreed with the district court and affirmed its dismissal of the government’s complaint.

Under the Federal Claims Collection Act, the government is given two different statutes of limitations depending on the action. For actions arising under contracts, the government has six years to file a complaint. For actions arising under torts, the government has only half that time with three years. In the original case giving rise to this action, a settlement was reached on August 20, 2003, and an initial payment was made on August 26, 2003. The plaintiffs’ attorneys had to certify that 75% of the class action plaintiffs had signed a release before the second, larger payment could be made. The releases were certified and the second payment was made on October 29, 2003. After that, the only remaining payments were to be made annually. The settlement was voidable if less than 97% of the plaintiffs had not signed a release. On December 2, 2003, the plaintiffs’ attorneys certified that the required number of plaintiffs had signed a release. The government filed its complaint to recover Medicare payments on December 1, 2009.

The government argued that the statute of limitations did not begin until December 2, 2003, and that the six year statute applied as this claim arose under a contract relationship with Medicare beneficiaries. The plaintiffs to this action, which now included the original plaintiffs, their attorneys, and the original defendants, argued that the government’s claim arose under a tort and thus the three year statute applied. The court did not find it necessary to decide which statute of limitations applied however. The court found that the claim accrued on October 29, 2003, when the initial settlement payment was made. The court cited the Code of Federal Regulations, which clarified when a claim arose under the Medicare Secondary Payer Act. The regulation in question states, "[a] primary payer’s responsibility for payment may be demonstrated by (1) A judgment; (2) A payment conditioned upon the beneficiary’s compromise, waiver, or release . . . ." 21 C.F.R. § 411.22(b). When the original defendants made the second payment on October 29, 2003, the federal government’s time for filing a claim began as this constituted a payment conditioned upon a release. That the contract was voidable if less than 97% of the plaintiffs signed a release did not deter the court, as the court noted that the settlement would proceed to completion if the defendants chose to simply do nothing. As such, the court found that the government’s complaint was not timely made, whether the allowable time frame was three years or six years.

Court Order Not Based Upon a Hearing on the Merits Does Not Limit Conditional Payment Claim Recovery

In Cecelia Taransky v. Sebelius, et al., 2013 U.S. Dist. LEXIS 107429 (D. N.J. decided June 12, 2013), a plaintiff who had previously settled a slip and fall was ordered to repay Medicare its $10,121.15 demand for conditional payment claims.

As a result of the plaintiff's underlying accident, a fall at a shopping center, Medicare had made $18,401.40 in conditional payments. After the plaintiff settled her case for $90,000.00, she requested and obtained an unopposed order from New Jersey's Superior Court. This order provided that "no portion of this recovery ... [was] attributable to medical expenses" (Id. at *5), and plaintiff apparently believed that this would prevent Medicare from recovering their conditional payments. After set

The plaintiff's attorney appealed the demand, unsuccessfully, through Medicare's administrative process, and ultimately filed an action for declaratory judgment and injunctive relief with the District Court of New Jersey. He argued that Medicare was not due reimbursement on various grounds, all of which failed. Because the plaintiff failed to timely raise a due process argument (under both the Fifth and Fourteenth Amendments), the district court was unable to consider this argument. The remaining arguments were almost identical to the arguments that failed in Mason v. Sebelius (Mason v. Sebelius and its failing arguments were previously discussed in our newsletter of April 5, 2012). What makes this case worth our consideration is two "slight tweaks" (Id. at *23) in the arguments made in Mason v. Sebelius: here, plaintiff (who was represented by same attorney, apparently, as the attorney in Mason) obtained an order providing that the recovery was not attributable to medical expenses. Second, plaintiff argued that Medicare's recovery, if it could recover at all, should be limited to the proportion of the settlement proceeds attributable to medical expenses.

Unfortunately for the plaintiff, the court order obtained by Taransky was not based on the merits of the case and as such it did not limit Medicare's right of recovery. Because this order was based only upon an unopposed stipulation of the plaintiff and not on an independent inquiry into the issues, with opposing arguments promoted in an adversarial setting, it could not be used to limit Medicare's recovery. In fact, there was ample evidence that contradicted the order: the lawsuit claimed medical costs as damages, and plaintiff's correspondence to opposing counsel showed that plaintiff's counsel had used the tentative conditional payment letters from Medicare as leverage for settlement. The settlement documents themselves even provided that the plaintiff would be responsible for outstanding conditional payments.

Like the due process arguments that failed, plaintiff's argument that Medicare was only entitled to the proportion of the settlement actually attributable to plaintiff's medical damages was made too late to be considered. It is unfortunate that this argument was not timely made, as (in my opinion) this argument had the most promise of succeeding.

This case is consistent with prior decisions that support Medicare's claim that a plaintiff cannot demand repayment for medical expenses during settlement negotiations and then, to avoid conditional payments, tell Medicare that the settlement ultimately obtained was only for pain and suffering. The upside of cases such as these is that they may ultimately curb the pursuit of unmeritorious claims for medical care damages.
tlement, however, Medicare treated the claim like any other with a Medicare beneficiary: it reduced its claim by its share of attorney fees and demanded repayment of $10,121.15 in related claims.

Medicare Advantage Appeals Alert

In recent years a growing number of courts have addressed the recovery rights of Medicare Advantage plans. Medicare Advantage plans, otherwise known as Part C plans, are offered by private health insurers as a replacement for Medicare hospital insurance (Part A) and medical insurance (Part B). In exchange for Advantage plans providing health coverage to Medicare beneficiaries, Medicare pays Advantage plans a fixed monthly amount for each beneficiary enrolled. Although most Advantage plans only provide benefits that are otherwise payable under Parts A and B, some Advantage plans also provide prescription coverage. Medicare beneficiaries also have the option of enrolling in separate Medicare prescription drug (Part D) plans, which like Advantage plans are offered by private health insurers that receive a subsidy from Medicare. It is important to keep in mind in resolving conditional payment claims that Medicare only asserts conditional payment claims for payments made under Parts A and B. If a Medicare beneficiary is enrolled in a Medicare Advantage or prescription plan, each plan may have a separate lien that should be addressed in settling a case.

Humana, one of the nation's largest Medicare Advantage and prescription drug plan providers, filed four lawsuits over the last two weeks against Farmers Insurance in an attempt to establish new case law supporting the recovery rights of Medicare Advantage plans. The U.S. District Courts in which the cases were filed include the Eastern District of Tennessee, the Western District of Missouri, the District of Kansas, and the Western District of Texas. In each case Humana is asserting claims for double damages for medical expenses that Humana argues should have been paid under no-fault or med pay coverage. As an alternative to double damages, which is based on the amount of Humana’s discounted payments, Humana is seeking payment for the full amount that would have been paid by Farmers if Farmers had issued payment directly to the providers for the charges asserted. Humana has also asked each court to issue a declaratory judgment finding that Medicare Advantage plans are secondary to no-fault and med pay insurance and that Farmers must reimburse a Medicare Advantage plan in situations when Farmers is the primary payer. Finally, Humana has requested that each court order Farmers to provide broad restitution to Humana for medical expenses paid for any Humana plan enrollee when Farmers was the primary payer and had no-fault or med pay coverage.

As noted above, Humana's complaints are focused on no-fault and med pay policies. Farmers allegedly denied payment for Humana's claims on the basis that Farmers had a first party contract with the insured and Humana therefore did not have a valid subrogation lien. As discussed below, Farmers' position is consistent with prior case law holding that Medicare Advantage plans do not have the same direct recovery rights as Medicare and may only assert subrogation claims based on their contract with the insured. According to Humana, however, Farmers should nevertheless have issued payment, as Humana claimed in reimbursement letters that they have the same direct recovery rights as Medicare despite the prior case law supporting Farmers' position.

Prior to the Third Circuit’s decision in In re: Avandia Marketing, Sales Practices, and Products Liability Litigation, 685 F.3d 353 (3rd Cir. 2012), every court that had addressed the issue held that Medicare Advantage plans do not have a cause of action under federal law to recover from primary plans. Instead, courts held that Medicare Advantage plans could only pursue a subrogation claim based on a contract with each insured, which is consistent with Farmers’ description of Humana’s claims as subrogation liens. In the Avandia case, however, the Third Circuit held that a Medicare Advantage plan may assert a private cause of action against an insurer under the Medicare Secondary Payer Act. Earlier this year, the U.S. Supreme Court denied certiorari in the Avandia case. Thereafter, the Ninth Circuit held in Parra v. PacifiCare, 715 F.3d 1146 (9th Cir. 2013) that a Medicare Advantage plan could not assert a private cause of action against claimants under the Medicare Secondary Payer Act, although the Ninth Circuit did not address the rights of Medicare Advantage plans to recover from insurers.

The lawsuits filed by Humana are a clear attempt to extend the Third Circuit’s ruling to other Circuits. Texas is in the Fifth Circuit, Tennessee is in the Sixth Circuit, Missouri is in the Eighth Circuit, and Kansas is in the Tenth Circuit. Given the holdings of U.S. District Courts outside the Third Circuit, these cases should set important precedent concerning the recovery rights of Medicare Advantage plans. We will continue to follow these cases closely and we will provide you with any updated information.

If you have any questions on Medicare Advantage or prescription drug plan liens, please do not hesitate to contact us. If you are uncertain whether a claimant is enrolled in a Medicare Advantage or prescription drug plan, we can help verify that information. We are currently assisting clients in a number of cases with the lien research and negotiation process and we can handle the process in any case in which a Medicare Advantage or prescription drug plan is involved.