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By Settlement Solutions, May 21, 2013 3:35 pm

We previously blogged about a case wherein Medicare was unable to recover conditional payments due to the fact that the claimant sought unauthorized treatment under Texas workers’ compensation law. Please click here to read our prior blog.

On appeal, the Firth Circuit has affirmed this decision; please see Caldera v. The Insurance Company of the State of Pennsylvania, 2013 U.S. App. LEXIS 9706 (May 14, 2013).

It is likely that this decision will be appealed to the U.S. Supreme Court, and until such time the Supreme Court decides whether or not to hear the case, this decision remains controversial. Some view this decision as a burden shift to the taxpayer, due to the fact that Medicare was unable to recover payments where a claimant did not exhaust his state workers’ compensation administrative remedies.

Others view this case as a wise decision and beneficial for workers’ compensation carriers due to the fact that the treatment sought by the claimant in this case was unauthorized under Texas workers’ compensation; therefore the workers’ compensation carrier did not become primary and responsible for repayment to Medicare.

PMSI will continue to follow this case and will keep its subscribers updated on any developments with regard to a possible appeal to the U.S. Supreme Court.

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By Settlement Solutions, May 16, 2013 11:11 am

A liability case out of a District Court in Louisiana, Benoit v. Neustrom, 2013 U.S. Dist. Lexis 55971 (April 17, 2013), issued an order wherein an LMSALiability Medicare Set-Aside was apportioned and reduced. A Motion for Declaratory Judgment was filed by Michael Benoit (“Plaintiff”), in which he sought a judgment to declare the interests of Medicare satisfied with a reduced LMSALiability Medicare Set-Aside proportionate to the Plaintiff’s recovery.

The facts preceding the settlement involved the Plaintiff filing suit against Michael Nuestrom, individually and as Sheriff of Lafayette Parish, and Rob Reardon, individually and as Warden of the Lafayette Parish Correctional Center (collectively, “Defendants”). The Plaintiff alleged that the Defendants and their employees failed to properly evaluate his condition upon his transfer to Lafayette Parish Correctional Center. Specifically, he claimed he was not given a pre-medical evaluation when he was suffering in his cell from the effects of alcohol detoxification. The Plaintiff was later found face-down and unresponsive in his cell; he was diagnosed at the hospital with hypoxic brain injury, secondary to seizure, followed by cardiac arrest, secondary to alcohol withdrawal and hypoxic encephalopathy. He was admitted to the hospital and received treatment including physical, occupational and speech therapies. Upon discharge from the hospital, Benoit was placed in a nursing home and then moved to outpatient care.

In October of 2012, the parties reached a settlement agreement, conditioned upon the Plaintiff’s release of all claims against all Defendants and the Plaintiff’s assumption of sole responsibility for protecting and satisfying the interests of Medicare and Medicaid. At that point in time, an LMSALiability Medicare Set-Aside projection was prepared by an independent MSAMedicare Set-Aside vendor which estimated that the cost of future medical expenses would range from $277,758.62 to $333,267.02. Additionally, the parties established an amount to reimburse Medicare for past conditional payments and establish a special needs trust in exchange for a lien waiver by Medicaid.

The remaining issue for the court’s consideration was the Plaintiff’s future medical care as a result of the alleged accident and the extent to which the LMSALiability Medicare Set-Aside can or should be reduced to account for the financial hardship to the Plaintiff. The court noted and received the following into evidence: 1) the settlement amount was $100,000; however, the amount due to the Plaintiff would be reduced to $55,707.98, after payment of fees, expenses and Medicare conditional payments; 2) the LMSALiability Medicare Set-Aside prepared by an MSAMedicare Set-Aside vendor which demonstrates that the future medical cost estimates are considerably larger than the net settlement figure; and 3) a Social Security financial statement offered to demonstrate financial hardship on the Plaintiff.

Before diving into the court’s decision and its logic, it should be noted that CMSCenters for Medicare and Medicaid Services was noticed on the hearing for the Motion for Declaratory Judgment. The United States Attorney / CMSCenters for Medicare and Medicaid Services declined to participate in the hearing; however, they did issue a letter to all parties of the litigation declaring an amount due of $2,777.88 to CMSCenters for Medicare and Medicaid Services for past conditional payments. Therefore, CMSCenters for Medicare and Medicaid Services did not provide its input on a major issue that the parties were seeking to resolve—the future medical aspect of Medicare Secondary Payer (MSPMedicare Secondary Payer Act) compliance in the settlement. The settlement parties had already addressed the conditional payment aspect of the case.

Since the court did not have CMSCenters for Medicare and Medicaid Services to opine on the future medical aspect of this case, when considering the Plaintiff’s Motion for Declaratory Judgment, the court looked to two main items for guidance on possible apportionment to the LMSALiability Medicare Set-Aside: a handout from the MSPMedicare Secondary Payer Act Regional Coordinator for CMSCenters for Medicare and Medicaid Services in Region VI (aka “Stalcup memo”) and the well known MSPMedicare Secondary Payer Act case, Bradley v. Sebelius, 621 F.3d 1330 (11^th Cir. 2010).

In the Bradley case, the probate court reduced Medicare’s lien based on the proportion of Medicare’s contribution to the total settlement’s potential worth, had adequate funds been available. The DHHSDepartment of Health and Human Services disagreed with the probate court’s decision citing that the MSPMedicare Secondary Payer Act Manual provided them with a full right of recovery. The district court agreed with the probate court and upheld its decision, finding that the MSPMedicare Secondary Payer Act field manual did not hold the weight of the law and that there is a strong public interest in encouraging settlement in the interests of judicial economy. Additionally, the court noted that within the Stalcup memo the only situation in which Medicare recognizes allocation of liability payments to non-medical losses is when payment is based on a court of competent jurisdiction’s order after their review of the merits of the case.

Between the Stalcup memo and the Bradley case, as well as recognizing the fact that Medicare does not have a formal policy in place for LMSAsLiability Medicare Set-asides, the court resorted to making its own finding of fact as to the appropriate amount of the LMSALiability Medicare Set-Aside. A court-ordered equitable allocation could be considered reasonable based upon guidance in the Bradley case and the Stalcup memo.

The Plaintiff argued that 10% of the gross settlement proceeds would be an equitable amount since the recovery obtained was 10% of the possible recovery if he had prevailed on all the liability issues. The court disagreed with that methodology, but still found that an equitable allocation was in order for the Plaintiff’s family due to his financial hardship. Noting that the mid-point of MSAMedicare Set-Aside projections was $305,512.50, and that the settlement is 18.2% of that figure, the court found that the LMSALiability Medicare Set-Aside amount should be $10,138.00. (The percentage of 18.2% was determined by the court by dividing the net proceeds to the Plaintiff by the mid-point amount of the LMSALiability Medicare Set-Aside. More specifically, the $10,138.00 amount was determined by multiplying the 18.2% to the net proceeds to the Plaintiff of $55,707.98.)

This decision is interesting as it is the first of its kind seen by the industry. Since CMSCenters for Medicare and Medicaid Services has not yet provided any formal guidance around LMSAsLiability Medicare Set-asides, this methodology could be used by liability settlement parties in order to achieve appropriate consideration of Medicare’s interests while still allowing settlement.

Parties settling with Medicare beneficiaries should consider their risk tolerance and the circumstances of each case before deciding the best methodology to achieve consideration of Medicare’s interests with regard to any allocation of future medical treatment. While CMSCenters for Medicare and Medicaid Services has not formally approved the LMSALiability Medicare Set-Aside calculation used in this case, the fact that the court issued an order on the appropriate/equitable amount of the LMSALiability Medicare Set-Aside after reviewing the merits of the case, it would seemingly prevent CMSCenters for Medicare and Medicaid Services from challenging the court’s order pursuant to their own guidelines.

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By Settlement Solutions, May 6, 2013 4:48 pm

As of January 1, 2013, Medicare expanded its Part D guidelines to include coverage for benzodiazepines and barbiturates for certain conditions. For more information on this new expanded coverage, when it will be covered, and how this coverage change is predicted to apply to WCMSAs, please see our prior blog here.

CMSCenters for Medicare and Medicaid Services recently issued an alert on their website which provides the date for which this new coverage guideline is to affect WCMSAs: June 1, 2013. Below is the text of the alert:

Effective June 1, 2013, all  Workers’ Compensation Medicare Set-Aside (WCMSAWorkers' Compensation Medicare Set-Aside) proposals submitted to CMSCenters for Medicare and Medicaid Services for a review of the adequacy of the proposal amount are to include the pricing of benzodiazepines and barbiturates, where appropriate.

Please note that WCMSAWorkers' Compensation Medicare Set-Aside cases submitted to CMSCenters for Medicare and Medicaid Services  before June 1, 2013, closed due to missing, incomplete and/or inadequate supporting documentation (or any  other reason), and subsequently re-opened after June 1, 2013, will also be subject to a review that includes the pricing of benzodiazepines and barbiturates.

As noted in our prior blog, the silver lining of this change is that the majority of barbiturates and benzodiazepines on the market have generic formulations which are fairly inexpensive. Therefore, if generics are prescribed, the impact of this change should not be significant to WCMSAs.

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By Settlement Solutions, April 24, 2013 4:25 pm

Medicare Advantage Plans (MAPsMedicare Advantage Plans), also known as Medicare Part “C”, are private insurance plans which provide Medicare benefits to beneficiaries. A beneficiary may opt to receive their Part A and B Medicare benefits through a MAPMedicare Advantage Plan rather than through traditional Medicare. Often times, MAPsMedicare Advantage Plans offer more flexibility in benefit options and pricing than traditional Medicare. Additionally, all Part D prescription benefits are provided by MAPsMedicare Advantage Plans as Medicare does not provide Part D prescription benefits directly. It has been estimated that approximately 25% of Medicare beneficiaries are enrolled in some type of MAPMedicare Advantage Plan, and that number is expected to increase over time.

If you handle workers’ compensation or liability claims, you may be wondering what MAPsMedicare Advantage Plans have to do with recovery rights under the MSPMedicare Secondary Payer Act or the extent of those rights.   

It has been questioned for some time whether MAPsMedicare Advantage Plans simply have a contractual right to recover conditional payments made when a primary payer exists, or if they have similar rights to Medicare, in that they could pursue an action for double damages for a primary payer’s failure to reimburse Medicare conditional payments. Below is a brief timeline which displays where we are today and references the recent impactful cases, Parra v. PacifiCare of Arizona, and In Re Avandia Marketing as well as CMSCenters for Medicare and Medicaid Services’ input on this issue through a memorandum.   

December 5, 2011- CMSCenters for Medicare and Medicaid Services issues a memorandum in support of MAPsMedicare Advantage Plans having the right to collect for payment of services where Medicare is not the primary payer. CMSCenters for Medicare and Medicaid Services even goes as far as to state that MAPsMedicare Advantage Plans can exercise the same rights of recovery that the Secretary exercises under the existing MSPMedicare Secondary Payer Act regulations. This memorandum was likely prompted by the initial decisions in Parra and In Re Avandia which found that MAPsMedicare Advantage Plans simply had a contractual right to recovery, and did not have the same rights as Medicare to recover conditional payments. For a copy of this memorandum, please click here. 

July 12, 2012- The District Court decision from In Re Avandia is overturned in the Third Circuit Court of Appeals. The Third Circuit finds that MAPsMedicare Advantage Plans have the same rights to recovery as Medicare, and additionally MAPsMedicare Advantage Plans have a right to pursue a private cause of action for double damages under the MSPMedicare Secondary Payer Act for conditional payments that are not reimbursed. To view our legal bulletin on this case, please click here.

April 15, 2013- The U.S. Supreme Court denies certiorari/review of the In Re Avandia case; therefore the decision in the Third Circuit stands.

April 19, 2013- The Ninth Circuit affirms the initial decision in the Parra case which found that MAPsMedicare Advantage Plans do not have the same rights to recovery as Medicare does and can recover conditional payments by way of their contract with the beneficiary.

So where are we today? Currently we have two circuits, the Ninth and Third Circuit, which have differing views on MAPMedicare Advantage Plan recovery rights. Both circuits agree that MAPsMedicare Advantage Plans have the right to recover conditional payments; however they disagree as to what extent MAPsMedicare Advantage Plans can utilize that right. We recently had the U.S. Supreme Court deny taking cert in the In Re Avandia case; therefore, even if Parra is appealed to the U.S. Supreme Court, it is unlikely that the Supreme Court will take the case. With the conflict among the circuits, eventually the Supreme Court will need to hear this issue or we will need formal legislation to definitively address the issue.

In the meantime, primary payers would be wise to err on the side of caution and ensure that MAPMedicare Advantage Plan demands are addressed, so as to not risk a private cause of action for double damages. Best practices in this time of uncertainty would be to question the Medicare beneficiary if they are currently or have ever been enrolled in a MAPMedicare Advantage Plan. With that knowledge, the primary payer can at least be aware of any potential conditional payment demands by that MAPMedicare Advantage Plan and seek to reimburse those payments before the risk for double damages sets in. Settlements that occur within the Ninth Circuit where the Parra case was decided is seemingly the only jurisdiction currently not subject to double damages, at least for now.

Based upon recent history, the status of MAPsMedicare Advantage Plans and their recovery rights under the MSPMedicare Secondary Payer Act is certainly going to continue to evolve, and PMSI will continue to stay abreast of any new developments.