Tag Archives: Demand

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

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.

CMS Issues Liability Insurance Settlement Reporting and Recovery Threshold Pursuant to SMART Act

On February 18, 2014, CMS issued an alert notifying the industry of a threshold in which liability settlements would no longer need to be reported to CMS under MMSEA Section 111 and also would not require conditional payment reimbursement under the MSP.  A copy of the alert can be found here.   In the alert, CMS has noted that liability settlements would not need to be reported under MMSEA Section 111 and would not require conditional payment reimbursement if they are $1,000 or less.  It would appear, although it is not explicitly stated, that this threshold is in effect as of the date of the alert, February 18, 2014.

The alert discusses the background of the provision of the SMART Act which required CMS to calculate and issue a liability insurance settlement reporting and recovery threshold by November 15 of each year. CMS should have issued its first threshold amount by November 15th of last year. However, just a few months late, we have our first threshold in place.  The threshold system now in action is an exciting outcome of the SMART Act.

This threshold requirement of the SMART Act came about due to CMS being under scrutiny since June 22, 2011 when they were questioned regarding the MSP program during a congressional oversight hearing. Deborah Taylor, the Chief Financial Officer of CMS, faced very difficult questioning during the hearing regarding financial controls that CMS had in place to ensure the MSP regime was operating efficiently.

Some may see the $1,000 settlement threshold amount as too low. However, this threshold is likely to increase in the future as CMS is required to re-calculate and re-issue a threshold amount by November 15th of each year. It is a great step for CMS to more wisely use their resources and provide liability payers the opportunity to forgo compliance with the MSP on nominal settlements.

The liability industry should take note of this alert and implement this $1,000 threshold into their settlement practices. For questions, please
contact Heather.Sanderson@pmsisettlement.com.

Liability plaintiff loses its right to reimbursement; So does Medicare

In a case out of the Court of Appeals of Oregon, Rhoades v. Beck,  2014 Ore. App. LEXIS 82 (January 23, 2014), a personal injury lawsuit gone wrong demonstrates that when parties do not consider Medicare’s interests during their settlement discussions, not only can the plaintiff lose her right to reimbursement, so can Medicare.

This case involved a motor vehicle collision. The plaintiff and her husband both filed personal injury actions against the defendant. The plaintiff alleged, among other things, that she had incurred medical expenses in the sum of $45,517.69. Trial was scheduled for early May 2010, shortly before the scheduled trial date, the parties’ attorneys discussed settlement and agreed on mutually acceptable terms. In that discussion, the parties agreed that the defendant would pay $15,000.00 to plaintiff, $5,500.00 to plaintiff’s husband, and any personal injury protection (PIP) liens asserted by their auto insurance carrier, in exchange for the plaintiff and her husband holding the defendant harmless from all other liens. The parties subsequently confirmed those terms in an exchange of letters.

After that discussion, the plaintiff received a notice from the MSPRC that there were conditional payments of at least $22,970.62 against plaintiff’s recovery. The plaintiff refused to sign the settlement agreement unless Medicare agreed to waive its lien, but the defendant maintained that their agreement was not dependent on actions by Medicare (the plaintiff’s husband did sign a release as to his claim). The defendant filed a motion for an order requiring plaintiff to sign the documents necessary to complete the settlement. The trial court agreed with the defendant and entered an order granting the defendant’s motion. When the plaintiff refused to sign the settlement documents, the trial court entered a general judgment dismissing the plaintiff’s action.

The plaintiff appealed the trial court’s decision arguing that there was no “meeting of the minds” in the settlement discussions since the reimbursement of Medicare conditional payments would be a material fact that was not considered. The defendant countered that there was no dispute that a settlement agreement had been reached, albeit orally, and that there was evidence that the plaintiff was aware of the existence of Medicare conditional payments at the time of agreement.

The Court of Appeals agreed with the defendant and affirmed the trial court’s decision dismissing the plaintiff’s action. It noted that the record supported the trial court’s implicit finding that the parties’ communications and acts objectively established that they had a meeting of the minds: the parties agreed that the plaintiff would release her claim against the defendant and hold the defendant harmless from all other liens in exchange for the defendant paying the plaintiff $15,000.00 and satisfying the PIP lien. Therefore, the trial court’s legal conclusion that there was an enforceable contract was correct.

This case is noteworthy because in theory it turns out to be a “lose-lose” situation for both the plaintiff and for Medicare, although due to the particular facts of this case it ends up being a wash financially for the plaintiff (Medicare conditional payments exceeded the settlement amount). As to Medicare, because the plaintiff’s claim was dismissed and no final settlement was achieved, Medicare will not issue a final demand to the beneficiary or to the personal injury defendant. Therefore, Medicare will not be able to be reimbursed for the conditional payments it made.

There are only two ways Medicare will ever be able to recover. The first option is if the plaintiff re-files another suit and is successful. The second option or exception may be if PIP benefits remain available, which is unclear in this case. In speaking to the plaintiff’s attorney in this case, Matt T. Parks, he indicated that the PIP coverage never made any medical payments previously in this case. Mr. Parks also indicated that neither side was aware of the fact that Medicare conditional payments had been made; he stressed that it took Medicare thirteen months to respond to his request for a conditional payment demand in this case, which may explain the lack of knowledge regarding conditional payments at the time of settlement negotiations.

However, the plaintiff in this case might be better off not even bothering to re-file a lawsuit, if she is even able to (assuming the case was dismissed without prejudice). With the conditional payment amount in this case (an amended lien later received by the plaintiff showed the current amount due of $23,042.82) exceeding the settlement money she would have received ($15,000), Medicare would have had the right to her entire settlement check of $15,000 and the plaintiff would receive nothing after reimbursing Medicare. However, Medicare would not receive its full amount due and she would not owe beyond what she received in the settlement due to the fact that Medicare only has the right to recover conditional payments up to the amount of the settlement (this is stated in 42 CFR §411.37). Therefore, after receiving a final demand upon receipt of the finalized settlement documents, Medicare would reduce the conditional payment amount from $23,042.82 to $15,000, unless the plaintiff could get Medicare to waive or further reduce the recovery on the basis of hardship.

As a result, it may not make sense for the plaintiff to re-file another suit unless she could somehow get Medicare to agree to waive their recovery or have the defendant agree to reimburse Medicare for its conditional payments, which seems unlikely given the facts in this case. This case is a perfect example of why we should be reminded that not considering Medicare’s interests at the time of settlement and determining who will be responsible and reimburse Medicare for any conditional payments owed can result in the entire settlement falling apart. Many other cases have demonstrated settlements completely falling through due to the failure to consider Medicare’s interests prior to settlement.

If settling parties have all their ducks in a row at the time of settlement, specifically the Medicare “duck,” the Medicare Secondary Payer (MSP) process, as well as the settlement process, can operate as intended.


MSP Predictions for 2014

  1. 1. Conditional Payment Processes will improve- CMS announced on December 23, 2013 that it will launch the Benefits Coordination and Recovery Center (BCRC) on February 1, 2014. The two units that will be consolidated are the Coordination of Benefits and the Medicare Secondary Payer Recovery units. They will collectively be called the BCRC, and the consolidation is aimed at creating greater efficiencies in resolving claims and eliminating confusion caused by two separate contractors. The new BCRC should accelerate conditional payment disputes and make the overall process easier. However, it has been rumored that the new BCRC will pursue conditional payment reimbursement on cases where open ORM is reported. Traditionally, Medicare only seeks reimbursement of conditional payments after a case settles or TPOC is reported. This will create additional revenue for Medicare in that it will be able to recover conditional payments on cases where future medicals remain open.
  2. CMS/WCRC WCMSA Processes will also improve- the WCRC should continue to improve their communication with the industry on their allocation methodology. In 2013, the WCRC issued a more detailed WCMSA Reference Guide, held their first WCMSA teleconference, and turnaround times on WCMSA approvals vastly improved. In 2014, it is expected that the WCRC will continue with their efforts to make the WCMSA process quicker, smoother and more predictable for all involved.
  3. Continued Divergence of Case Law on LMSAs will continue- In 2013, we saw a great deal of case law where parties to liability settlements brought their LMSA disputes to the court system hoping for resolution on the potential need for an LMSA. We had jurisdictions that refused to intervene on the LMSA issue- in Florida in the Early v. Carnival Corp. case, the court found that intervening on whether an LMSA was required would amount to issuing an “advisory opinion” and therefore the court declined opining on the need for an LMSA. However, in Mississippi in the Welch v. American Home Insurance Company case, the court not only reviewed the proposed amount of the LMSA, but increased the amount that was needed! These are just a few examples that demonstrate case law with regard to LMSAs was all over the map last year.This could potentially be resolved in 2014 if CMS continues working on the rulemaking concerning MSP and Future Medicals. As we blogged about in August of last year, CMS noted on its regulatory calendar that it was going to resume its rulemaking on this topic this past September.  However, CMS did not take any further action on this topic in 2013.  If CMS resumes the process on this in 2014, we could receive clarity as to obligations with regard to future medicals in liability settlements with Medicare beneficiaries.
  4. The SMART Act: Rulemakings will set the stage for action in 2014, however most items will not be in place until 2015 or later. In 2013, CMS issued several rulemakings pertaining to required action items from the SMART Act.
  • First, CMS issued an interim final rule which would create a conditional payment web portal. While CMS is applauded for taking action on this item from the SMART Act, the interim final rule left much to be desired, with one of the main disappointments being that the roll-out deadline would be January 1, 2016. One can only hope that the comments received on this interim final rule will push CMS to roll out the portal sooner than indicated as well as resolve other issues present in the interim final rule. However, because CMS has indicated that roll-out will be January 1, 2016, it is unlikely that we will see much action on this item this year.
  • Second, CMS issued an ANPRM which would carve out circumstances where penalties could be imposed for violations of MMSEA Section 111 reporting requirements. We may see some movement and actual rules carved out in 2014 for the circumstances where CMS may issue penalties. However, until the process is set into place, which will likely not be until mid-end of 2014, we will not see penalties
    issued. Our prediction on this item is that actual penalties will not be issued until sometime in 2015.
  • Third, CMS issued an NPRM for an appeals process to be utilized by applicable plans for conditional payment disputes. It appears likely that this appeals process could be rolled out this year, in that it is only for conditional payments (and not WCMSAs), and because it will mirror the existing appeals process currently in place for Medicare beneficiaries.
  • Lastly, we will see pressure on CMS this year to create and publish an annual threshold wherein conditional payments would not have to be reimbursed and the settlement would not be reportable under MMSEA Section 111. This action item of the SMART Act should have already been in effect; CMS was supposed to publish this amount on November 15, 2013 and the threshold would have begun on January 1, 2014. But CMS did not take action on this item in 2013. We should see that pressure upon CMS from the industry aas well as MARC (who was responsible for getting the SMART Act approved) will force a hand in publishing this threshold.

2014 should be an interesting year full of MSP-related events. Count on PMSI Settlement Solutions to keep you up to date, in compliance, and ahead of the curve!