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Despite Settlement, Which Included Resolution of Conditional Payments, Florida Federal District Court Finds Insurer to be Primary Payer and Awards Double Damages to MAP

By , March 26, 2015 7:06 am

RafealOn March 16, 2015, the United States District Court for the Southern District of Florida published its opinion on Humana Medical Plan v. Western Heritage Insurance Company, finding that as a matter of law, Humana is entitled to maintain a private cause of action for double damages pursuant to 42 U.S.C. § 1395y(b)(3)(A) against Western Heritage, the primary payer in this matter. Since the MSP Act private cause of action makes it clear that double damages attach, the Court awards Humana $38,310.82, double the $19,155.41 it had paid in medical benefits related to the slip and fall claim from which such payments were born.

Mrs. Reale (Reale) was enrolled in a Humana Gold Plus Medicare Advantage Plan (Humana) when she sustained injuries in a slip-and-fall accident at Hamptons West Condominiums (Hamptons West) on or about January 21, 2009. Mrs. Reale received medical treatment for her injuries. Her healthcare providers billed charges totaling $74,636.17. Humana payed $19,155.41 for such medical charges.

Mrs. Reale then filed a personal injury action against Hamptons West on June 1, 2009. As Hamptons West’s liability insurer, Western Heritage Insurance Company (Western Heritage) entered into a settlement agreement with Mrs. Reale to resolve all issues regarding liability for a sum of $115,000.00. In that settlement agreement, Mrs. Reale attested that she had no outstanding Medicare liens that could represent a lien or claim against the proceeds she received from Western Heritage. Additionally, a letter from CMS dated December 3, 2009 confirmed that CMS had no record of processing Medicare claims on behalf of Mrs. Reale.

Western Heritage eventually learned of Humana’s lien rights and attempted to include Humana as a payee on its draft settlement agreement with Mrs. Reale. However, Mrs. Reale opposed Western Heritage’s attempts to include Humana as a payee on the settlement check because she disputed the amount of Humana’s lien. The state court judge ordered Hamptons West to tender full payment to Mrs. Reale without including any lien holder on the settlement check. The judge simultaneously ordered Mrs. Reale’s counsel to hold sufficient funds in a trust account to be used to resolve all medical liens. As a result of the state court order, Western Heritage tendered the full settlement amount to Mrs. Reale, with the understanding that Mrs. Reale and her attorney would reimburse Humana.

Humana and Mrs. Reale failed to agree on the amount Humana was to be reimbursed so Humana brought suit against Mrs. Reale and her attorney in the United States District Court for the Southern District of Florida on May 7, 2010. After the Court ruled that Humana did not have the same rights and authority as the US government did to file a private cause of action under the Medicare Secondary Payer Act to recoup conditional payments, Humana filed a Notice of Voluntary Dismissal of its action against Mrs. Reale and her attorney on November 9, 2011.

Mrs. Reale then brought suit against Humana in Miami-Dade County, Florida seeking a declaration of the exact amount she owed Humana. The state court found that Mrs. Reale had recovered 33.75% of the full value of her claims in her settlement with Western Heritage and therefore had recovered 33.75% of the total benefits paid by Humana, or $6,464.95. The state court then further reduced that number by 43%, taking into account the pro-rata share of fees and costs incurred in securing the settlement agreement, thus holding that Humana was entitled to reimbursement in the amount of $3,685.03. Humana has appealed the determination of the state trial court to the Third District Court of Appeals, but that court has not yet rendered a decision.

Humana then filed the instant action against Western Heritage on May 7, 2010. Right away, Humana filed a Motion for Summary Judgment seeking (1) a declaration that Western Heritage remains liable to Humana under the Medicare Secondary Payer Act even though it already settled all claims directly with Mrs. Reale and (2) double damages from Western Heritage under the Medicare Secondary Payer Act’s private cause of action provision.

The MSP provisions provide that Medicare cannot pay medical expenses when “payment has been made or can reasonably be expected to be made under a workman’s compensation law or plan of the United States or a State or under an automobile or liability insurance policy or plan (including a self-insured plan) or no fault insurance.” 42 U.S.C. § 1395y(b)(2)(A)(ii). If a primary plan “has not made or cannot reasonably be expected to make payment,” the Secretary is authorized to make a conditional payment. 42 U.S.C. § 1395y(b)(2)(B)(i). However, since Medicare remains the secondary payer, the primary plan must then reimburse Medicare for all conditional payments. 42 U.S.C. § 1395y(b)(2)(B)(ii).

The Medicare Secondary Payer Act (MSP Act) affords secondary plans a remedy against primary payers who fail to satisfy their obligations to make primary payments or to reimburse conditional Medicare payments. It does so by establishing two causes of action against noncompliant primary plans. The first cause of action belongs exclusively to the United States, which “may bring an action against any or all entities that are or were required or responsible…to make payment…under a primary plan.” 42 U.S.C. § 1395y(b)(2)(B)(iii). The second cause of action is a private cause of action with no particular plaintiff specified indicates “there is established a private cause of action for damages (which shall be in an amount double the amount otherwise provided) in the case of a primary plan which fails to provide for primary payment (or appropriate reimbursement) in accordance with paragraphs (1) and (2)(A).” 42 U.S.C. § 1395y(b)(3)(A).

Regulations issued by CMS make clear that the provision extends the private cause of action to MAOs. Those regulations state that “MAOs 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. Moreover, CMS directors sent out a memorandum on December 5, 2011 reasserting that “notwithstanding recent court decisions, CMS maintains that the existing MSP regulations are legally valid and an integral part of Medicare Part C and D programs.” Ctrs. for Medicare and Medicaid Svcs., Dep’t of Health and Human Svcs. Memorandum: Medicare Secondary Payment Subrogation Rights (Dec. 5, 2011).

While the Eleventh Circuit has not yet addressed the issue of whether a Medicare Advantage Organization, such as Humana, may bring a private cause of action against a primary plan under the secondary provision of the Act, the Third Circuit has addressed the issue and held that it can. See In re Avandia, 685 F.3d at 359.

The Ninth Circuit has also addressed whether an MAO has a private right of action to pursue reimbursement under the MSP Act. See Parra, 715 F.3d at 1154-55. It found that the MSP Act does not create a private right of action, but instead, affords MAOs the right to establish such rights within their contracts.

Western Heritage argues that this Court should follow Parra and “interpret the Medicare Act as not providing a private right of action in favor of MAOs such as Humana.” The Court here however finds the facts of Parra distinguishable from the facts of the case at hand, and its holding, inapplicable. The Court finds the Third’s Circuit’s analysis regarding the ability of an MAO to bring a private cause of action under the MSP Act to be persuasive. The statutory text of the MSP Act clearly indicates that MAOs are included within the purview of parties who may bring a private cause of action.

Having determined that MAOs, such as Humana, may maintain a private cause of action under the MSP Act, the Court turns to whether Humana may bring this particular cause of action against Western Heritage, given that Western Heritage has already directly settled all claims with Mrs. Reale, the Medicare beneficiary.

Humana argues that Western Heritage, as a primary payer under the MSP Act, is responsible for reimbursing the Medicare benefits Humana advanced on behalf of Mrs. Reale. In this case, Western Heritage, as Hamptons West’s liability insurer, entered into a settlement agreement with Mrs. Reale to resolve all personal injury claims she had against Hamptons West. That settlement agreement, wherein Western Heritage reimbursed Mrs. Reale for medical expenses she incurred as a result of injuries she sustained at Hamptons West, demonstrates Western Heritage’s responsibility under the MSP Act to reimburse Humana for the Medicare benefits it paid on behalf of Mrs. Reale. Thus, Western Heritage is a primary payer under the provisions of the MSP Act and is responsible for reimbursing the Medicare benefits Humana advanced, even in light of its agreement with Mrs. Reale settling all claims.

Pursuant to the MSP Act’s private cause of action, the Court finds Humana has a right to recover from Western Heritage the benefits it paid on behalf of Mrs. Reale and is statutorily entitled to recover an amount double what it paid on behalf of Mrs. Reale. Additionally, “if Medicare is not reimbursed as required by paragraph (h), the primary payer must reimburse Medicare even though it has already reimbursed the beneficiary or other party.” 42 C.F.R. § 411.24(i)(1). Therefore, the Court concludes that after Western Heritage became aware of payments Humana advanced on behalf of Mrs. Reale, it had an obligation to independently reimburse Humana. Because it didn’t, the Court rules that as a matter of law, Humana is entitled to maintain a private cause of action for double damages pursuant to 42 U.S.C. § 1395y(b)(3)(A) and is therefore entitled to $38,310.82 in damages.

As this case clearly shows, it is no longer advisable for payers to resolve Medicare conditional payments in state courts, or count on opposing counsel to hold funds in trust to reimburse such liens. As we recommend to all of our clients, there is no substitute for identifying the existence of Medicare Part A, B, C, or D conditional payments early on and following the administrative process set by CMS or by the Advantage Plan or Prescription Drug Plan to make certain compliance is reached. Whether a work comp or liability case, at Helios, we can assist with early identification and resolution of such liens.

CMS Educates the Public about ICD-10 through Instructional Videos; ICD-10 Set to go Live October 1, 2015

By , March 10, 2015 1:00 pm

frankCMS has introduced two new videos on ICD-10. The videos can be found here. The videos are exceptional in explaining ICD-10 basic concepts and drives home why ICD-10 will help better communicate diagnoses in the healthcare industry than previously was available with ICD-9.

ICD-10 will not only be required by providers when billing for medical services, but additionally RREs will also have to utilize ICD-10 when reporting claims through MMSEA Section 111 to CMS. As a reminder, CMS last year issued a memorandum outlining the ICD-10 process for RREs which is set to begin October 1, 2015 (link can be found here).

Are you ready for ICD-10 implementation? MedicareConnect, our industry leading Mandatory Insurer Reporting (MIR) solution, is ahead of the curve for the October 1, 2015 ICD-10 implementation date and completely ready for the transition. Helios provides a free lookup tool which converts ICD-9 to ICD- 10 and can be found here (users can simply enter their e-mail address for access).

For more information on the ICD-10 transition or MedicareConnect, please contact Frank Fairchok, MedicareConnect Program Manager, at

Summary of Final Rule: Conditional Payment Appeals Process for Applicable Plans

By , March 2, 2015 11:11 am

On February 27, 2015, CMS published in the Federal Register the SMART Act Appeal Final Rule which can be located at 80 Fed. Reg. 10611. The rule can be found here and will go into effect on April 28, 2015. CMS had previously issued the Proposed Rule on this very topic on December 27, 2013. Materially, the Final Rule is effectively the same as the Proposed Rule without substantive change. While some greater strides toward more operational efficiencies could have been made in finalizing the Final Rule, Helios applauds CMS finalizing this proponent of the SMART Act within two years of the law’s enactment.

What the Final Rule does: The Final Rule puts into place a conditional payment appeals process for “applicable plans.” An applicable plan means liability insurance (including self-insurance), no-fault insurance, or a workers’ compensation law or plan. Prior to implementation of this Final Rule, applicable plans had no appeal rights with regard to conditional payment demands from Medicare. With this final rule in place, applicable plans can now appeal final conditional payment demands issued by Medicare if the applicable plan disputes the amount or liability owed.

How the Appeals Process will work: Applicable plans’ appeal rights are the same process that beneficiaries, providers and others must use to dispute a conditional payment demand. It is a four-level appeals process which requires that the applicable plan exhaust its rights in the following order: (1) reconsideration of a claim by the CMS contractor; (2) evaluation of the claim by a Qualified Independent Contractor (QIC); (3) adjudication of the dispute by an Administrative Law Judge (ALJ); (4) and lastly a review of the ALJ decision by the Department Appeals Board’s Medicare Appeals Council. It has been noted that this current four-level appeals process can take up to four years to pursue. It was requested that CMS simplify this appeals process and skip the first two levels; however, CMS declined this suggestion.

What is Not Subject to Appeal: Through the rulemaking process, industry stakeholders requested that CMS allow applicable plans to appeal issues other than the conditional payment amount. In particular, it was requested that CMS allow the applicable plan to dispute who or which entity that CMS would pursue an MSP recovery from. CMS declined this request, citing its authority within the MSP to recover from the beneficiary, the primary payer or any other entity receiving proceeds from the payment by the primary plan. Stakeholders also requested that an applicable plan be able to appeal an initial conditional payment demand, even if the final amount of the repayment was not yet available in a Final Demand letter. CMS also declined this request; Applicable Plans may only appeal from Final Demands.

Who May Appeal: It was requested that either the applicable plan or the beneficiary be able to appeal where the identified debtor is either the applicable plan or the beneficiary. CMS declined this request and has stated that the Final Rule makes appeal rights available to the identified debtor, not potential identified debtors. Therefore, applicable plans may only appeal under this process if they are the identified debtor in the Final Demand letter. Additionally, beneficiaries may only appeal under previously existing conditional payment processes if the beneficiary is the identified debtor in the Final Demand Letter.

Commenters also had requested that applicable plans be able to appoint third parties/agents as representatives in the appeals process. CMS contends that applicable plans already have this right, and further specified that the party appointing a representative must include the beneficiary’s Medicare health insurance claim number (HICN) on the appointment of representation.

Notice of Appeal: It was also requested that either the applicable plan should be copied on a recovery demand with the beneficiary as the identified debtor; or all potential debtors should be copied on all actions (that is, recovery demands, appeal requests, all notices or decisions). CMS declined this request citing that additional notice would not be necessary since only the identified debtor can appeal the Final Demand. Additionally, it would cause “an increase in administrative costs and would cause confusion in many instances, particularly where beneficiaries would receive copies of demands issued to applicable plans.”

Medicare Advantage Plan Conditional Payment Appeals: Commenters requested that the proposed rule be revised to include appeal rights for applicable plans when a Medicare Part C organization or Part D plan pursues an MSP based recovery from the applicable plan. CMS stated that the request was outside the scope of the rule and that the SMART Act provision for applicable plan appeals amended only the MSP provisions for Medicare Part A and Part B.

MSA Appeals: It was requested that the proposed rule should address appeals related to the determination of WCMSA amounts for future medicals. CMS stated that this issue is outside of the scope of the rule and that this particular issue would be addressed separately. As an aside, if CMS does create an appeals process for MSAs, it would likely be created outside of the legislative process which could allow for the appeals process to be implemented more quickly.

In summary, the Final Rule provides a much needed conditional payment appeals process for Applicable Plans. While the four-level appeals process may be rumored to be slow, Applicable Plans now have the same rights of appeal that previously only existed for others in the Medicare program. The SMART Act is continuing to steadily create a more efficient process and reform the MSP system.

2016 Budget Proposal Would Require Reporting of Workers’ Compensation Benefits to Social Security Administration

By , February 27, 2015 3:02 pm

heatherThe Social Security Administration (SSA) has been vocal in the past about its difficulty in obtaining information about workers’ compensation benefits. The primary reason that the SSA has been seeking this information is to reduce social security benefits by way of an SSDI/WC offset. The SSDI/WC offset is a calculation used by the SSA to reduce a beneficiary’s SSDI benefit amount if the person is also receiving workers’ compensation benefits. The SSDI/WC offset is different in every state and applies only when the individual’s combined monthly amounts of SSDI and workers’ compensation are greater than 80% of individual’s pre-disability “average current earnings.”

The SSA currently has to rely on beneficiaries to report to the SSA when they receive workers’ compensation or public disability benefits. President Obama’s 2016 budget proposal includes a provision to establish a new federal requirement that workers’ compensation and public disability benefit information be provided by states, local governments, and private insurers to the SSA.

The budget proposal summary includes the narrative below:

Establish Workers’ Compensation Information Reporting. Current law requires SSA to reduce an individual’s Disability Insurance (DI) benefit if he or she receives workers’ compensation (WC) or public disability benefits (PDB). SSA currently relies upon beneficiaries to report when they receive these benefits. This proposal would improve program integrity by requiring states, local governments, and private insurers that administer WC and PDB to provide this information to SSA. Furthermore, this proposal would provide for the development and implementation of a system to collect such information from states, local governments, and insurers.

The proposal can be found here: (the workers’ compensation reporting proposal can be found on page 22, section 10 of the document).

In summary, ultimately the proposal’s objective is to have states, local governments and insurers report SSDI beneficiaries to the SSA so that it can use the SSDI offset in more cases and ultimately preserve the fiscal integrity of the Social Security program.

This SSA reporting proposal might be giving payers déjà vu of the ultimate goal of MMSEA Section 111, which is to reduce the shifting of the burden to Medicare and so that Medicare can recoup more conditional payments.

Ultimately, the SSA and Medicare have the same end goal, which is saving money and preserving their respective SSA and Medicare programs. Helios would hope that if this SSA reporting proposal becomes a reality that the SSA and Medicare would solidify these efforts into a single reporting solution/requirement since the SSA and Medicare will often be receiving duplicative data.

Helios will be following this reporting proposal and will keep subscribers apprised of any further progress on this proposal.

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