Tag Archives: Medicare Secondary Payer Act

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 Final Rule Establishing Conditional Payment Appeals Process Pursuant to the SMART Act

We previously had posted a blog that CMS had issued a proposed rulemaking regarding an appeals process to be utilized by applicable plans for conditional payment disputes. For background on the rulemaking and to view our prior blog, please click here.

Today, CMS issued a final rule implementing provisions of the Strengthening Medicare and Repaying Taxpayers Act (the SMART ACT), which establishes a right of appeal and formal Medicare Secondary Payer (MSP) appeals process for applicable plans, for situations where the Secretary seeks to recover payments from applicable plans. Applicable plans include liability insurance (including self-insurance), no-fault insurance, and workers’ compensation laws or plans. The SMART Act further requires that the Medicare beneficiary who received the items and/or services in question be notified of the applicable plan’s intent to appeal.

CMS has not yet published the final rule in the Federal Register. Once the final rule is published, we will provide more specific feedback and guidance on the final rule.


Federal Circuit Court Finds Employment Discrimination Settlement Lacking Medicare Details Binding, Leaving Parties Unprotected from MSP Viewpoint

gavel-papersOn February 11, 2015, the United States Court of Appeals for the Second Circuit published its opinion on Hoover v. New York State Department of Corrections and Community Supervision, Albion Correctional Facility, Sue Wojcinski, Sandra Durfee, Angie Maume, and Donna Baker, finding that if defendants considered plaintiff’s Medicare status to be critical in deciding whether to settle, they should have ascertained that status before agreeing to settle the case on November 5, 2012 for $750,000. As a result, the court affirmed the judgment of the district court, which had previously directed that judgment be entered in favor of plaintiff in the amount of $750,000 when the parties were unable to agree on the exact Medicare language in the settlement documentation.

Plaintiff commenced this employment discrimination action on November 21, 2002. After several motions for summary judgment, and several changes in attorneys, at a conference on July 9, 2012, the court scheduled jury selection and trial to commence on November 7, 2012. On the morning of November 5, 2012, two days before the trial was scheduled to commence, counsel telephoned the judge’s chambers to report that the parties had reached a settlement. That afternoon, the material terms of that settlement were placed on the record. At that time, defendants’ attorney indicated he had offered and the plaintiff had accepted $750,000 total inclusive of damages, costs and fees to settle. Defense counsel also indicated he had advised plaintiff counsel that because of new Medicare and Medicaid laws, there would be some documents that would be forthcoming to determine how to word the stipulation.

On the record, the judge asked whether the dismissal of the claims would be with prejudice in return for the payment of the settlement amount, and both counsel agreed. The judge further asked counsel to confirm the material terms of the settlement, and that although documentation needed to be executed to confirm the settlement, that the settlement would be effective November 5, 2012, notwithstanding any additional documentation which needs to be executed. Both counsel agreed. As a result, the court issued an order that same day indicating that because a settlement had been reached, the material terms of which were placed on the record, the jury trial scheduled to commence on November 7, 2012 was cancelled, as the parties would file an executed stipulation of dismissal.

After spending the better part of a year attempting to finalize the language of the settlement documentation, the parties reached an impasse. Defendants then asked the court to compel plaintiff to execute their settlement agreement, and plaintiff asked the court to compel defendants to execute her version.

On October 16, 2013, the United States District Court for the Western District of New York published its decision denying both motions and concluding instead that if the parties had not executed settlement documentation by November 8, 2013, the court would entertain a motion to enforce the settlement.

Defendants insisted that plaintiff either provide a physician’s letter stating that she would not require further treatment, or else agree to a Medicare Set-Aside (MSA), whereby a certain amount of the settlement proceeds would be set aside to pay for future medical payments, in order to protect the parties against any potential liability to Medicare. The court however ultimately found that although defendants could have conditioned the settlement on plaintiff’s providing a physician’s letter or agreeing to a MSA, they did not do so.  If defendants considered plaintiff’s Medicare status to be critical in deciding whether to settle, they should have ascertained that status before agreeing that the settlement was effective as of November 5, 2012. The court therefore ordered that if the parties had not executed settlement documentation by November 8, 2013, the court would entertain a motion to enforce the settlement.

When the parties were unable to agree on the exact language of the settlement documentation, the court directed that judgment be entered in favor of plaintiff in the amount of $750,000. The State appealed that decision. On appeal here, the Circuit Court reiterates the fact that the parties expressed a clear intent to settle and placed the material terms of their settlement on the record, with neither party making any express reservation to be bound only by writing. As a result, the court agrees with the magistrate judge that “although defendants could have conditioned the settlement on plaintiff’s providing a physician’s letter or agreeing to a Medicare set-aside, they did not do so.” “If defendants considered plaintiff’s Medicare status to be critical in deciding whether to settle, they should have ascertained that status before agreeing that the settlement was effective as of November 5, 2012.” The court therefore affirms the judgment of the district court.

We have all seen work comp and auto cases with MSP issues. And it is no longer unusual to read about medical malpractice or products liability cases with MSP issues. This however may be the first federal employment discrimination case dealing with MSP issues. More so however, this is yet another example of how waiting too long to prepare to protect Medicare’s interests in any type of settlement can end up affecting your agreement, provide you with unclear or unwanted language, or even worse, leave you unprotected from an MSP perspective. Over the last five years, there have been numerous state and federal cases concluding that despite Medicare’s guidance in workers compensation cases, and lack thereof in liability cases, courts will not disturb parties’ agreement to settle, even if it is clear both parties may be leaving the courtroom without appropriately taking Medicare’s interests into consideration. Helios can assist you with complying with MSP issues from the moment a claim is filed through settlement. Please contact us at http://www.helioscomp.com/settlement-solutions to learn more.

Louisiana Federal Court Finds Beneficiary Failed to Exhaust Remedies, Also Concludes MAP Has Private Cause of Action, But Denies Double Damages

29106aeOn December 16, 2014, the United States District Court, for the Eastern District of Louisiana, published its opinion on Collins v. Wellcare Healthcare Plans, Inc., concluding that because the plaintiff, Collins (hereinafter referred to as Collins), did not exhaust the administrative remedies available under the MAO/MSP, the Court lacks subject matter jurisdiction to entertain her claim. The Court further finds that Wellcare has a private cause of action under the MSP and is entitled to reimbursement from Collins’ tort settlement. But the Court denies double damages because it remains a disputed material fact as to whether Collins’ tort settlement provided compensation for her medical expenses and as to whether the settlement released the tortfeasor from all liability.

Collins was injured in an automobile accident on August 21, 2009 and required medical treatment as a result of that accident. Collins claims that Wellcare, a Medicare Advantage Organization (MAO), provided a Medicare Advantage Private-Fee-For-Service health insurance plan to her and that Wellcare paid medical expenses on her behalf to several providers. Collins instituted an action against the tortfeasor and recovered damages.

Her attorney then deposited the amount paid by Wellcare into a special account. Collins sought a declaratory judgment that Wellcare is not entitled to subrogation or reimbursement for the amounts paid. Wellcare removed the case to federal court pursuant to the Court’s diversity jurisdiction. Wellcare filed an Answer and a Counterclaim, claiming that the Medicare Advantage Plan at issue has a statutory right of reimbursement and subrogation which expressly pre-empts contrary State Law. According to Wellcare, Collins has not exhausted her administrative remedies and her declaratory action should be dismissed. In its Counterclaim, Wellcare claimed that it paid a total of $181,261.97 for medical care and treatments received by Collins and is entitled to reimbursement from Collins’ tort settlement.

Wellcare argued that the Court should dismiss Collins’ claim because she failed to exhaust the mandatory Medicare exhaustion requirements pursuant to §405(g), and the Court therefore lacks subject matter jurisdiction over her claim. Wellcare argued that MAOs are secondary payers under the Medicare Secondary Payer Statute (MSP) and “share the same exact rights under the MSP as provided to the United States Government under traditional Medicare.” Wellcare stated that Medicare Part C “specifically gives MAOs a statutory right of secondary payer reimbursement where conditional benefits have already been paid.” Wellcare therefore argued that “congressional intent supports the conclusion that MAO plans are entitled to the same recovery rights as traditional Medicare.”

Collins argued that she is not required to exhaust administrative remedies because she brought the action in state court based on state law causes of action and does not seek any Medicare benefits or services. Collins contended that the contract between the parties stated that the administrative requirement is “invoked only ‘if you have problems getting the Part C medical care or service you request, or payment (including the amount you paid) for a Part C medical care or service.”

Collins did not assert a claim for benefits to the administrative agency and to the Secretary as required by 42 U.S.C. § 405(h). Instead she filed a declaratory action in state court which was removed to USDC. The Court finds that Section 405 (h) of Title 42 is more than an exhaustion requirement; it precludes federal courts from exercising jurisdiction over claims arising under the Medicare Act. The Supreme Court has held that all claims that “arise under” the Medicare Act must exhaust their administrative remedies prior to any judicial review. Heckler v. Ringer, 466 U.S. 602, 605 (1984).

The Court found that while Collins fashioned her claim as a declaratory judgment and invoked Louisiana State Law, she ultimately sought to retain her benefits based on an argument that the Medicare Act does not afford Wellcare a subrogation right. Such a declaration inherently demands an interpretation of the Medicare Act. Therefore, the Court found that Collins’ claim arises under the Medicare Act, and as such the Court lacks subject matter jurisdiction to entertain her claim.

The Court does not answer the question as to whether the MAO Statute provides Wellcare a cause of action because the Court finds that a cause of action exists under the MSP. This Court finds that the Third Circuit’s analysis In Re: Avandia (click here to see our prior blog on this case) is persuasive. The MSP’s statutory text does not include any narrowing language that would exclude MAOs from the private cause of action clause. The text therefore clearly indicates that MAOs are included within the purview of parties who can bring a private cause of action under the MSP.

Although having determined that Wellcare has a private cause of action pursuant to the MSP, the Court also finds that such a cause of action does not automatically afford a right to double damages. Rather, a primary plan must “fail” to provide reimbursement in order to afford an MAO the right to pursue double damages. Failure connotes an active dereliction of a duty, and the award of double damages is intended to have a punitive effect on plans who intentionally withhold payment. The Court here finds that there was no purposeful failure to provide reimbursement. Therefore, the intended punitive remedy of double damages is not appropriate given the facts here.

Collins also argued that Wellcare’s Counterclaim is barred because per 42 U.S.C. § 1395y(b)(2)(B)(vi), Wellcare had a three year period after it paid Collins the conditional payment to seek reimbursement. However, Wellcare urged the Court to apply the six year statute of limitations for government contracts contained within the Federal Claims Collection Act (FCA). This Court however was not persuaded by either party’s position.

President Obama signed the Medicare and Repaying Taxpayers Act of 2012, also known as the SMART Act, in January 2013. Although the 3 year statute of limitations in it specifically applies to a cause of action brought by the United States, the Court finds that the statute of limitations applies to all causes of actions brought under the Medicare Secondary Act. Notably, the statutory language specifies that a cause of action “must be brought within 3 years of the time that a party is notified of a settlement.” Here, Wellcare contends that it sent Collins numerous inquiries about a possible settlement and only learned of her settlement through the filing of this lawsuit. Accordingly, the Court finds Wellcare is within the three-year statute of limitations period.

Collins disputes whether the settlement compensated her for her medical expenses. The MSP provides that a primary plan’s responsibility for reimbursement may be demonstrated by a settlement. The CMS regulations further buttress that statutory language and include regulatory language that mirrors the quoted MSP statutory language. See 42 C.F.R. 411.22(b)(2). Although the Court believed that Collins did likely receive compensation based on the nature of her claim, it remains a disputed material fact. Based on these disputed facts, the Court did not grant summary judgment as to the amount of reimbursement.

This case is yet another example where a court has granted the private cause of action right to a MAO, a trend that has been increasing in the past several years. As MAOs continue to become more aggressive in seeking reimbursement of conditional payments, Helios encourages payers to speak to us about our Part C Medicare Advantage Plans and Part D Prescription Drug Plans conditional payment investigations, analysis, negotiations, and finalization services. Additionally, we encourage you to speak with our area service representatives or regional managers about resolving all conditional payments.