CMS Withdraws Proposed Rule Regarding Medicare Set-Asides and Liability Claims

On October 8th, the Centers for Medicare and Medicaid Services (“CMS”) withdrew its Notice of Proposed Rulemaking (NPRM), which proposed regulation of future medicals for settlements in liability claims.

The proposed regulation was intended to provide guidance on how to protect Medicare’s interests in liability situations.  Unlike the recommendations given for a workers’ compensation claim, CMS does not have a recommended policy regarding the provision of future medicals in a liability claim. The NPRM appeared to be CMS’ attempt to establish such guidelines.  The withdrawal of the NPRM has not changed the way we advise with regard to protecting Medicare’s interest from a future medical perspective in liability claims.  Despite the lack of clear guidance on how to provide for future medicals in liability claims, the law still requires that the burden of paying for a claimant’s future medicals not be shifted to Medicare.  Therefore, it is still advisable in certain cases to either designate a portion of the settlement proceeds for future medical expenses, and in large settlements, in order to effectively evaluate the potential cost of future treatment, to consider a Medicare Set-aside.

CMS Updates Section 111 Reporting Guide: Expands definition of "Spouse" to include same-sex marriages

In the updated User Guide released on October 6th, 2014, with regards to Medicare Secondary Payer (“MSP”) policies, CMS redefines "spouse" to include partners in a same-sex marriage. The result of this redefinition is that any legal same-sex marriages entered into in a U.S. jurisdiction that recognizes same-sex marriages, the District of Columbia, or a U.S. territory or a foreign country will be recognized for MSP purposes.  Although the provision will not be effective until January 1, 2015, if an employer, insurer, third party administrator or other plan sponsors so chooses, they may currently use the broader definition of spouse.                                                          
Due to this change, if an individual, based on the Social Security Administration's rules, is entitled to Medicare as a spouse, that individual is a "spouse" for purposes of the MSP Working Aged provisions. Similarly, if a marriage is valid in the jurisdiction in which it was performed as noted above, both parties to the marriage are "spouses" for purposes of the MSP Working Aged provisions. Additionally, if a plan sponsor (employer, insurer, etc.) has a more expansive definition of spouse, it may take over primary payment responsibility for the "spouse". If the "spouse" is reported as such pursuant to Medicare, Medicare, & SCHIP Extension Act of 2007 ("MMSEA") Section 111, Medicare will both pay and pursue recovery accordingly.

For more information please visit the CMS website here.

Save the Date: What You Need to Know to Avoid Problems with Medicare

Join us on 

November 20, 2014

 @ 1:00 PM CST

Staying up-to-date on Medicare Secondary Payer issues can be a real challenge. Join us for this one hour webinar during which attorney Melisa Zwilling, Chair of the Medicare Compliance Group at the law firm of Carr Allison, will discuss recent developments in this area, including some very important court decisions.  In addition, she will discuss how you can save big dollars on both conditional payment claims and MSAs.

  

Register today: https://www4.gotomeeting.com/register/673760199

Attendees will receive one CEU credit for the states of AL, AK, FL, GA, IN, KY, LA, MS, NC, NH, OK, OR, and TX, if needed.

Fifth Circuit District Court Holds Medicare Advantage Plans May Assert Private Cause of Action Against NGHPs

As we previously reported, last year, Humana filed several lawsuits asserting private causes of action and seeking double damages for medical expenses paid by Humana Medicare Advantage Plans that were allegedly payable under the defendants' no-fault and med pay policies.  Humana voluntarily dismissed each of the lawsuits except for the lawsuit in the Western District of Texas.  In that case, the Magistrate Judge previously issued a Report and Recommendation advising the court to dismiss Humana's claims under the Medicare Secondary Payer Act (MSPA) on the basis that the private cause of action under the MSPA is not applicable to Medicare Advantage Plans.

Recently, the court issued an order finding that the Magistrate's Report and Recommendation should be rejected and denying the defendants' motion to dismiss.  The court agreed with the decision of the Third Circuit Court of Appeals in re: Avandia Marketing, Sales Practices, and Products Liability Litigation, 685 F.3d (3rd Cir. 2012), holding that Medicare Advantage plans may assert a private cause of action against a primary plan under the MSPA.

We will continue to follow this case and will keep you informed on any developments, as this case will likely be appealed to the Fifth Circuit Court of Appeals.  As we discussed last year, Humana is seeking broad restitution for medical expenses paid for any Humana plan enrollee when the defendants were the primary payer and had no-fault or med pay coverage, in addition to double damages.  If Humana prevails on its claims, the amount of damages awarded could be staggering.

Please let us know if you have any questions or concerns about resolving Medicare Advantage and Part D Prescription Drug Plan liens.  If you are uncertain whether a claimant is enrolled in a Medicare Advantage or Part D Prescription Drug Plan, we can help confirm that information.  We are currently assisting a number of clients with resolving Medicare Advantage and Part D Prescription Drug Plan liens, and we will be glad to help ensure that you are protected.

Changes in TPOC Reporting Thresholds

On October 1, 2014, the mandatory TPOC reporting thresholds changed for workers' compensation and liability claims. For workers' compensation claims with TPOC dates on or after October 1, 2014, the mandatory cumulative TPOC reporting threshold is $300.00.  For liability claims with TPOC dates on or after October 1, 2014, the mandatory cumulative TPOC reporting threshold is $1,000.00.  For no-fault claims, all TPOCs must still be reported since there is no de minimis TPOC reporting threshold.

Sixth Circuit District Court Denies Insurer’s Motion to Dismiss MSP Private Cause of Action

Last week, in Nawas v. State Farm Mut. Auto. Ins. Co., 2014 U.S. Dist. LEXIS 12365, a U.S. District Court in Michigan, following precedent set by the Sixth Circuit, denied a defendant’s motion to dismiss a private right of action under the Medicare Secondary Payer Act (MSPA). The Plaintiff, Mr. Nawas, sued his insurance company, State Farm, after they declined to pay his medical bills, which caused Medicare to step in and conditionally pay for his treatment.

State Farm put forth two reasons that the complaint against them should be dismissed.  One argument was that the plaintiff has no private cause of action under MSPA because he did not allege that State Farm denied his coverage based on the fact that he was entitled to Medicare. That argument was subsequently withdrawn following the Sixth Circuit’s reversal of the district court’s ruling in Michigan Spine & Brain Surgeons, PLLC v. State Farm Mut. Auto. Ins. Co., 758 F.3d 787 (6th Cir. 2014).  State Farm then argued that the Plaintiff’s claim was premature, because such a claim under the MSPA cannot be pursued until State Farm’s obligation to pay Plaintiff has been established by a judicial determination or settlement.

State Farm relied heavily on the fact that the MSPA requires a judicial determination or settlement that establishes a defendant’s “responsibility to make payment.” They built their argument on two cases. Relying heavily on the decision in Bio-Medical Applications v. Central States, 656 F. 3d 277(6th Cir. 2011), the court determined that when Congress amended the MSPA in 2003, they did so in order to reinforce the legal responsibility of tortfeasors, not all potential defendants. The court reasoned that the “demonstrated responsibility” language included in the 2003 amendment of the MSPA was not meant to prohibit or delay direct actions against non-tortfeasor defendants, including private insurance companies like State Farm. They agreed with the Bio-Medical Court’s reasoning that the addition to the MSPA regarding demonstration of responsibility is only logical when in the context of the tort and should not be applied to a case involving an insurance contract, where the carriers assume the responsibility of paying by virtue of their contract with the petitioning party. The court went on to say that their decision not to dismiss was implicitly supported by the Sixth Circuit’s recent decision in Michigan Spine, which allowed a claim to proceed against the defendant - State Farm in that case as well - prior to any “demonstrated responsibility” on the part of the defendant to pay an underlying no-fault claim.

Please note that this is not the final decision in this case. Instead, the court’s decision denying dismissal only allows the parties to proceed and litigate their claims based on the merits of the case.

Private Cause of Action Provision Successful Against NGHPs, Even When Medicare's Conditional Payments Reimbursed Within Sixty Days of Formal Demand

As we reported last month, the Sixth Circuit Court of Appeals issued a decision which confirmed that a non-group health plan can be subject to the private cause of action provision of the Medicare Secondary Payer Act Michigan Spine & Brain Surgeons, PLLC v. State Farm, 2014 F. App’x 0154P (6th Cir. July 16, 2014).  The private cause of action provision provides double damages for a private party who files suit against an entity that has failed to fulfill its responsibility for primary payment of a beneficiary’s medical expenses.

The purpose of the provision is to provide financial incentive for the general public to assist the Government in recovering Medicare’s conditional payments. While the purpose of the provision is clear, its application to claims has been a source of dispute. 

In 2011, the Sixth Circuit held that health care providers could assert a private cause of action against a group health plan. Bio-Medical Applications of Tenn., Inc., v. Cent. States Southeast & Southwest Areas Health & Welfare Fund, 656 F.3d 227 (6th Cir. 2011). From the court’s analysis in Bio-Medical, the Sixth Circuit extrapolated that there could not be a private right of action against a non-group health plan.  However, the Sixth Circuit was presented that exact issue last month, in Michigan Spine, and determined that Congress must have intended the private cause of action to be read broadly, to include both group health plans and non-group health plans.

The United States District Court for the Western District of Kentucky recently applied the precedent set in Michigan Spine and awarded double damages to a beneficiary’s estate, whose suit prompted repayment of Medicare’s conditional payments. Estate of Clinton McDonald v. Indem. Ins. Co. of N. Am., 2014 U.S. Dist. LEXIS 121902 (W.D. Ky. Aug. 28, 2014).  In McDonald v. Indem. Ins. Co., Clinton McDonald was severely injured in a motor vehicle accident that occurred during the scope of his employment and died several months later. During that time, Medicare paid for medical treatment related to the accident. The employer disputed whether McDonald’s death was as a result of the accident; however, in December 2009, the Workers’ Compensation Board found that his death was caused by the work-related accident and ordered the Defendant employer or its workers’ compensation insurance carrier to pay for McDonald’s medical expenses.

Over two years after the Defendant was ordered to pay McDonald’s medical expenses, the Estate of Clinton McDonald (Estate) filed suit under the private cause of action provision of the Medicare Secondary Payer Act seeking double damages as the Defendant had not reimbursed Medicare for McDonald’s medical expenses. Shortly after suit was filed, the Defendant received a conditional payment letter from Medicare, followed by a formal demand asking for payment in the amount of $184,514.24. The Defendant reimbursed Medicare for the full amount, as instructed, and sought to have the suit brought by the Estate dismissed.

The Estate argued that their suit ultimately led to Medicare being reimbursed, which is exactly what the private cause of action provision was implemented to accomplish. The Court agreed, finding that the Estate’s suit prompted payment, and therefore entitled them to an award of $184,514.24 for their efforts. The Court noted that an outcome supporting the Defendant’s “no harm; no foul” argument would have been contrary to the language of the private cause of action provision. The Court reasoned  “Once a private cause of action claim has been lodged against a defendant, a defendant cannot escape the double damages provided for in that provision by paying single damages to Medicare.”

This string of cases emphasizes the importance of ensuring that Medicare is reimbursed for its conditional payments.  Responsibility for reimbursement of conditional payments should be addressed during settlement negotiations and clearly set out in settlement documents.  Parties should keep in mind that a court/board decision ordering payment of medical expenses could encompass conditional payments made by Medicare, like in McDonald.  If this scenario arises, parties should immediately take steps to determine if payment to Medicare is necessary in to avoid the potential of being subject to double damages.

Court Determines MSA Funds Not To Be Considered When Calculating Pension Plan Offset Amounts

In Rood v. New York State Teamsters Conf. Pension & Ret. Fund, 2014 U.S. Dist. LEXIS 115722, the Plaintiff alleged a claim for disability pension benefits under the Employee Retirement Income Security Act (ERISA) and filed suit following a recalculation of his pension benefits, where the Defendant, a multi-employer plan that provides pension funds, included the amount of the Plaintiff’s Medicare-set Aside (MSA) in its calculation to offset the amount of monthly benefits he should receive.

The language of the Plan provides that the amount of Fund Disability Benefits the participant receives will be reduced by the amount of their worker’s comp benefits, “unless such amounts also are used to offset other payment sources (i.e., Social Security disability awards, long-term disability, etc.) for which he may be entitled.” The Plan’s language specifically names Social Security disability awards and long term disability as examples of this exception, and the Plaintiff argued that his MSA should be similarly considered under the title of “other payment sources.” The Court agreed and found that the “etc.” following the two enumerated categories left the language of the Plan open to interpretation. Because the MSA is used to offset another payment source, Medicare, the funds in the Plaintiff’s MSA should not have been included when the Defendant recalculated the Plaintiff’s pension benefits.  The Court’s analysis focused on the fact that the Plaintiff was only able to use part of his Worker’s Compensation Award without any restrictions since the portion allocated to the MSA is strictly for medical expenses otherwise reimbursable by Medicare and is not accessible by the Plaintiff.