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By Settlement Solutions, July 23, 2012 9:24 am

On July 11, 2012, Peter J. Calderone, Director & Chief Judge of the NJNew Jersey DWCDivision of Workers' Compensation, issued a memorandum regarding “Medicare Conditional Payment and Set-Aside Issues.” For a copy of the memorandum, please click here.

The memorandum stated that based upon recent CMSCenters for Medicare and Medicaid Services announcements and the position of the United States Justice Department in recent litigation in the New Jersey Federal District Court that the NJNew Jersey DWCDivision of Workers' Compensation sought to revise its involvement in the application of the MSPMedicare Secondary Payer Act on two issues:

1) whether to continue to require parties to obtain CMSCenters for Medicare and Medicaid Services approval of an MSAMedicare Set-Aside, and

2) whether to continue to require a specific NJNew Jersey DWCDivision of Workers' Compensation Medicare Attachment to settlement documents.

Continue reading 'CMSCenters for Medicare and Medicaid Services Approval No Longer Required in NJNew Jersey Workers’ Compensation Settlements'»

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By Settlement Solutions, July 17, 2012 4:11 pm

In a surprising decision, the Third Circuit of the United States Court of Appeals overturned a District Court’s opinion which found that MAPsMedicare Advantage Plans ¹ could not recover against a primary payer through a PCOAprivate cause of action under the MSPMedicare Secondary Payer Act. ² For PMSI’s June 30, 2011 Legal Bulletin on the District Court opinion, please click here.

This case involved GlaxoSmithKline (GSK), a pharmaceutical corporation that was sued by thousands of individuals alleging that they suffered personal injury from the use of GSK’s diabetes medication, Avandia. Humana, which has several MAPMedicare Advantage Plan plans, filed a complaint to enforce its claimed rights as a secondary payer under the MSPMedicare Secondary Payer Act, specifically seeking a PCOAprivate cause of action right for double damages pursuant to 42 U.S.C. § 1395y(b)(3)(A), for reimbursement of costs that Humana incurred to cover treatment for Avandia-related illnesses and injuries on behalf of settling MAPMedicare Advantage Plan enrollees.

The Third Circuit took a completely different view than the District Court, finding that the plain text of the PCOAprivate cause of action provided under the MSPMedicare Secondary Payer Act sweeps broadly enough to include MAPsMedicare Advantage Plans and even if the court found the MSPMedicare Secondary Payer Act to be ambiguous on this particular point, that deference to CMSCenters for Medicare and Medicaid Services regulations would require the Court to find that MAPsMedicare Advantage Plans have the same right to recover as the Medicare Trust Fund. The Third Circuit even went so far as to find that the PCOAprivate cause of action was not limited to MAPsMedicare Advantage Plans, and could be used by any private party: “[t]he plain text of the MSPMedicare Secondary Payer Act 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.” (emphasis added)

GSK argued points to the contrary in defense of the District Court’s opinion, asserting that no rights to reimbursement are granted to an MAPMedicare Advantage Plan directly under the MSPMedicare Secondary Payer Act. Essentially, although an MAPMedicare Advantage Plan may be considered a primary payer under the MSPMedicare Secondary Payer Act and have the right to reimbursement of conditional payments, it must recover these payments through any contractual rights it had with the beneficiary in state court. GSK cited case law to support its position, but the Third Circuit found none of the case law to be on point and persuasive in this matter.

As further backing to their opinion, the Third Circuit dove into a discussion regarding legislative history and policy surrounding MAPsMedicare Advantage Plans (even though it concluded the MSPMedicare Secondary Payer Act to be unambiguous on this point), finding that MAPsMedicare Advantage Plans were created by Congress to create a more efficient and less expensive system, and that by essentially allowing MAPsMedicare Advantage Plans to “faithfully pursue and recover from liable third parties” they will have lower medical expenses and as a result will be able to provide additional benefits to their enrollees. The Court additionally noted that it would put MAPsMedicare Advantage Plans at a competitive disadvantage if Medicare could threaten primary payers with a right to double damages but MAPsMedicare Advantage Plans could not, and that it did not believe it was the intent of Congress to “hamstring” MAPsMedicare Advantage Plans in this manner.

The Court also gave Chevron deference³  to CMSCenters for Medicare and Medicaid Services regulations, specifically 42 C.F.R. § 422.108, which provides that MAPsMedicare Advantage Plans “. . . will exercise the same rights to recover from a primary plan, entity, or individual that the Secretary exercise under the MSPMedicare Secondary Payer Act regulations…” A recent memorandum from CMSCenters for Medicare and Medicaid Services dated December 5, 2011 also clarified that CMSCenters for Medicare and Medicaid Services understood § 422.108 to assign MAPsMedicare Advantage Plans the right to collect from primary payers using the same procedures available to traditional Medicare and that the same applies to Part D prescription drug plan sponsors via 42 C.F.R. § 423.462. To view this memorandum, please click here.

This decision by the Third Circuit should be carefully considered by primary payers when settling a case with a Medicare eligible individual. MAPMedicare Advantage Plan demands should be given priority for reimbursement just as traditional Medicare conditional payment demands are given, or the primary payer may be subject to a PCOAprivate cause of action for double damages from the MAPMedicare Advantage Plan as happened in this case.

Additionally, primary payers may not be aware that during a March 22, 2012 teleconference call, CMSCenters for Medicare and Medicaid Services  stated that they are sharing MMSEAMedicare Medicaid and SCHIP Extension Act Sec 111Section 111Section 111 of the Medicare Medicaid and SCHIP Extension Act stating requirements for mandatory insurer reporting of the Medicare Medicaid and SCHIP Extension Act stating requirements for mandatory insurer reporting data with MAPsMedicare Advantage Plans. Therefore, MAPsMedicare Advantage Plans are now being armed with settlement information concerning Medicare beneficiaries in the same manner as traditional Medicare.

MAPMedicare Advantage Plan demands are issued from the MAPMedicare Advantage Plan directly; i.e., if the MAPMedicare Advantage Plan is Humana, the demand will be issued on Humana letterhead. This is unlike traditional Medicare conditional payment demands which will be issued directly from CMSCenters for Medicare and Medicaid Services and are currently on letterhead from the MSPRCMedicare Secondary Payer Recovery Contractor - responsible for verification of conditional payments. Primary payers should become familiar with some of the major MAPMedicare Advantage Plan plans on the market so they will recognize these MAPMedicare Advantage Plan demands when they are received.

Because MAPMedicare Advantage Plan demands are issued from the MAPMedicare Advantage Plan plan, primary payers should be proactive in determining whether an MAPMedicare Advantage Plan demand exists. The primary payer may want to seek MAPMedicare Advantage Plan enrollment/benefit history from claimants/plaintiffs prior to settling cases. Once the primary payer is availed of this information, it should consider contacting the MAPMedicare Advantage Plan for conditional payment information prior to settlement.

Beyond the affect this decision may have on MAPsMedicare Advantage Plans, the court’s statement that any private party may pursue a PCOAprivate cause of action under the MSPMedicare Secondary Payer Act for double damages is dubious and sure to confuse primary payers even further as to which parties may pursue a PCOAprivate cause of action under the MSPMedicare Secondary Payer Act (double damages apply) if they fail to protect Medicare’s interests.

If it is any consolation to the industry, within the text of Third Circuit’s opinion, the Court refers to the MSPMedicare Secondary Payer Act as “the most completely impenetrable texts within human experience.” Due to the opaque nature of the MSPMedicare Secondary Payer Act, we can be certain that the courts will be called to the task of interpreting the bounds of the MSPMedicare Secondary Payer Act into the infinite future until Congress reforms and clarifies this federal law.

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By Settlement Solutions, July 2, 2012 12:26 pm

In what appears to be a pattern of Federal court decisions, the MSAMedicare Set-Aside industry is taking note of a trend whereby parties to liability lawsuits are opting for a Court’s review and approval of a proposed LMSALiability Medicare Set-Aside.  It appears that United States Magistrate Judge C. Michael Hill, whose court resides in the Western District of Louisiana, Lafayette Division, is taking matters into his own hands due, most likely in part, to the lack of a formalized process and procedure by CMSCenters for Medicare and Medicaid Services when it comes to determining if the amount of a settlement sufficiently protects Medicare’s interests.

In March 2012, Judge Hill rendered an opinion in Frank v. Gateway Insurance Co., 2012 U.S. District Lexis 33581 (March 13, 2012), in which he concluded that the parties’ settlement amount reasonably protected Medicare’s interests.  Just as in the Frank matter, CMSCenters for Medicare and Medicaid Services followed their standard procedure and declined to participate in a court hearing involving the determination of LMSAsLiability Medicare Set-asides, stating that only under limited circumstances would they provide an opinion. This practice appears likely to continue until CMSCenters for Medicare and Medicaid Services creates formal guidance for LMSAsLiability Medicare Set-asides or alters its policy on whether it will participate in judicial hearings where the adequacy of protecting Medicare’s interests is at stake.   Until then, it seems that courts will be able to continue to stand in the shoes of CMSCenters for Medicare and Medicaid Services and provide a determination as to whether the particular liability settlement has properly considered Medicare’s interests.

CMSCenters for Medicare and Medicaid Services’ decision not to participate in these court proceedings may create issues in the future, if at some point the agency independently concludes that Medicare’s interests have not been protected in settlement documents. Will CMSCenters for Medicare and Medicaid Services give deference to the court’s determination when providing an opinion on the amount and need for a MSAMedicare Set-Aside when this has traditionally been an agency function of CMSCenters for Medicare and Medicaid Services?   Does the fact that CMSCenters for Medicare and Medicaid Services voluntarily failed to appear or timely appeal the court’s ruling now prevent it from later raising this issue in a legal forum under a theory of res judicata? Additionally, are the courts further muddying the waters of the current state of MSPMedicare Secondary Payer Act compliance in liability settlements, or are the courts helping during this uncertain time when parties to a liability settlement are generally unable to receive security that they have protected Medicare’s interests? In the meantime, let us explore a recent case as an example of such a scenario.

In Bertrand v. Talen’s Marine & Fuel LLC.¹, the plaintiff, Philip Bertrand (Bertrand), was injured in a workplace accident in December, 2007. Bertrand was employed with Talen’s Marine & Fuel LLC (Talen’s) as a captain on a tow boat. Bertrand hurt his lower back when a bathroom medicine cabinet fell off the wall. He twisted his back when he tried to catch the cabinet. Bertrand filed suit on August 10, 2010, seeking recovery for the damages that he sustained as a result of his workplace accident in 2007.

Bertrand’s lawsuit with the defendants was settled on January 6, 2012; however, Bertrand’s settlement with the defendants was conditioned upon approval of an MSAMedicare Set-Aside by CMSCenters for Medicare and Medicaid Services. On January 27, 2012, the parties filed a motion for declaratory judgment seeking: (1) approval of the settlement, (2) a declaration that the interests of Medicare is adequately protected by setting aside a sum of money determined by the court to fund any of Bertrand’s future medical expenses related to the injuries claimed and released in the lawsuit, and (3) an order setting that amount aside from the settlement proceeds and depositing it into an interest-bearing account to be self-administered by Bertrand.

When the court set the matter for an evidentiary hearing and sent a copy of the order to the U.S. Attorney’s Office in Lafayette, Louisiana, CMSCenters for Medicare and Medicaid Services advised it would not participate in the hearing. The hearing went forward without CMSCenters for Medicare and Medicaid Services, and the court received into evidence an LMSALiability Medicare Set-Aside that was prepared by an MSAMedicare Set-Aside vendor. The court also received all corresponding medical records which were pertinent to the calculation of the LMSALiability Medicare Set-Aside and the affidavit of the preparer of the LMSALiability Medicare Set-Aside. The LMSALiability Medicare Set-Aside called for $64, 866.88 to be set aside for future potential medical expenses that would be covered by Medicare and were related to the injuries claimed in the lawsuit, which the court found to be both reasonable and reliable.

Although the court noted that Bertrand was born in 1960 and would not obtain the age of 65 within 30 months of the date of the settlement, it went on to state that Bertrand will become an “entity who received payment from a primary plan,” and is therefore responsible as a primary payer for future medical items or services that would otherwise be covered by Medicare and therefore, the $64, 866.88 should be set aside in consideration of Medicare’s interest. The court additionally stated that Bertrand would be obligated to reimburse Medicare for any conditional payments. Between the LMSALiability Medicare Set-Aside and covering the conditional payment issue, the court concluded that Medicare’s interests were adequately protected in the settlement within the meaning of the MSPMedicare Secondary Payer Act and the case was settled.

From the facts of the opinion, it seems that Bertrand was neither a Medicare beneficiary or expected to become a Medicare beneficiary within 30 months of the settlement. Therefore, conditional payments should not have been a concern since it is not possible for Medicare to make payments for an individual who is not currently receiving Medicare benefits. Additionally, the general industry consensus is that an allocation is not necessary if the injured party is not currently receiving Medicare or expected to become eligible within 30 months, yet the parties as well as the court felt that an LMSALiability Medicare Set-Aside was appropriate to protect Medicare’s interests.

Either way, it seems that the parties in Bertrand went above and beyond to ensure that the settlement was MSPMedicare Secondary Payer Act compliant. This case is a great example of the extreme need for guidance from CMSCenters for Medicare and Medicaid Services with regard to future medicals in liability settlements. CMSCenters for Medicare and Medicaid Services is actually seeking to address this issue through their recent issuance of an Advance Notice of Proposed Rulemaking (ANPRMAdvance Notice of Proposed Rulemaking) on MSPMedicare Secondary Payer Act and Future Medicals, which was posted to the Federal Register on June 14, 2012. The ANPRMAdvance Notice of Proposed Rulemaking proposes several different options on how future medicals should be addressed in both liability and workers’ compensation settlements. For more information on the ANPRMAdvance Notice of Proposed Rulemaking, please read our recent blog posting.

^{1. [2012 U.S. Dist. LEXIS 78053 (U.S. Dist. Court, Western District of Louisiana, Lafayette Division. June 4, 2012)]↩}