Tag Archives: Liability MSA

CMS Issues NGHP User Guide Version 4.5; Reaffirms that Orders Contradicting the MSP will not receive Deference

heatherCMS has updated their User Guide for Non Group Health Plans. The update is dated February 2, 2015. The only update to the guide is the following:

The updates listed below have been made to the Policy Guidance Chapter Version 4.5 of the NGHP User Guide. As indicated on prior Section 111 NGHP Town Hall teleconferences, the Centers for Medicare & Medicaid Services (CMS) continue to review reporting requirements and will post any applicable updates in the form of revisions to Alerts and the User Guide as necessary.

The following update was made to Chapter III for this release: RREs generally are not required to report liability insurance (including self-insurance) or no-fault insurance settlements, judgments, awards or other payments where the date of incident (DOI) as defined by CMS was prior to December 5, 1980. For this release, new policy language was added to the following document: “Liability Insurance (Including Self-Insurance): Exposure, Ingestion, and Implantation Issues and December 5, 1980.” (Section 6.5)

  • Any operative amended complaint (or comparable supplemental pleading) must occur prior to the date of settlement, judgment, award, or other payment and must not have the effect of improperly shifting the burden to Medicare by amending the prior complaint(s) to remove any claim for medical damages, care, items and/or services, etc.
  • Where a complaint is amended by Court Order and that Order limits Medicare’s recovery claim based on the criteria contained in this alert, CMS will defer to the Order. CMS will not defer to Orders that contradict governing MSP policy, law, or regulation.

This information was provided in a previous August 19, 2014 CMS alert; therefore, it appears that CMS has simply incorporated that alert into the User Guide. However, it is noteworthy that CMS continues to point out it will not abide by court orders that contradict MSP policy, law, or regulation. Particularly in the liability context, this could certainly cause some anxiety for settling parties since without an official LMSA process, the courts are now often times issuing orders that no LMSA obligations remain. CMS could later look upon that court order and state that the order contradicted MSP regulations.

However, there are steps that parties can take to take into account Medicare’s interests and decrease the likelihood that CMS would find that the settlement/order contradicts MSP regulations. For example, in the recent liability case Berry v. Toyota Motor Sales (click here to read our blog on this case), the plaintiff was able to obtain opinions from its treating providers that no future medical treatment related to the claim would be needed. Since CMS has stated that if a treating physician certifies in writing that no future care is needed, no LMSA would be required, CMS would not later find that the order contradicted MSP policy in this case.

The fact that CMS has continued to reiterate its policy that it will not defer to court orders that contradict MSP policies and regulations should not come as a shock, and as previously stated, if parties take proactive steps to demonstrate the protection of Medicare’s interests, CMS would likely defer to the court’s decision on the matters relative to the MSP in the court order.

The new User Guide can be found here, and the August 19, 2014 alert can be found here. For questions, please contact heather.sanderson@helioscomp.com.

CMS Withdraws Rulemaking on MSP and Future Medicals

We previously posted blogs regarding CMS working on a proposed rulemaking regarding Medicare Secondary Payer requirements and future medicals. Our initial blog with more information on this ANPRM can be found here. Our secondary blog which indicated that CMS was looking to move to the NPRM stage of the rulemaking can be found here.

CMS never did resume rulemaking last year in September as was previously indicated by CMS on their regulatory calendar. Instead, CMS took no noticeable action on the rulemaking until October 8, 2014 where they withdrew the rulemaking altogether. Notice of the withdrawal can be found here: http://www.reginfo.gov/public/do/eoDetails?rrid=123255.

Within the rulemaking, CMS was considering providing various options pertaining to protecting Medicare’s interests with regard to future medicals in both workers’ compensation and liability cases. The most well known part of the rulemaking was around allocations in liability cases, as this would be the first official guidance published/provided by CMS with regard to allocations in liability cases, also known as liability MSAs (LMSAs).

So where does this leave us all with regard to allocations in liability cases, now that CMS has withdrawn the rulemaking? Although CMS has, for the moment, chosen not to clarify when and how parties can take Medicare’s future interests into account in liability cases, the Medicare Secondary Payer laws (MSP) still mandates that Medicare remain the secondary payer, both pre-settlement as well as post-settlement.

Additionally, there has been speculation in the industry that this is not the last we will see of this rulemaking, and that CMS plans to later re-draft and re-file the proposed regulations. It is unclear if and when this will happen, as CMS has silently withdrawn this rulemaking with no public comment. Therefore, the industry should expect that this rulemaking will eventually resurface.

While many have applauded the withdrawal of this rulemaking, an argument could be made that there would have been some benefit to finalizing the rulemaking. Perhaps it would have brought some certainty within the liability industry regarding when and how Medicare expects its future interests to be taken into account in liability cases.

There has continued to be ongoing confusion as to when and how to take Medicare’s interests need to be taken into consideration with regard to the future medical component of these claims due to the lack of guidance from CMS. We have seen this demonstrated in various case law across the country where courts have issued divergent opinions on whether LMSAs are required under the MSP.

Hearing from CMS on this issue would have provided some solidarity on this contentious issue so that liability settlements with Medicare beneficiaries could occur and the parties could have confidence that their settlement has complied with Medicare’s interests.

Helios will keep subscribers updated on any additional developments on this issue and forthcoming rulemakings.

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!