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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 22, 2013 9:28 am

On Tuesday, April 16^th, the FDAU.S. Food and Drug Administration announced that they will not approve any new drug applications for generic OxyContin that rely upon the approval of the original formulation of OxyContin.   The FDAU.S. Food and Drug Administration also approved updated labeling for the newer, crush resistant formulation. The label will note that the reformulated product has physical and chemical properties to make abuse more difficult.

Purdue Pharma L.P. originally brought OxyContin (a long- acting opioid medication for the treatment of moderate to severe pain) on to the U.S. market in 1996, but in April 2010, the FDAU.S. Food and Drug Administration approved a reformulated version of the drug that was resistant to crushing, chewing, breaking or dissolving in water to reduce its potential for abuse.    The FDAU.S. Food and Drug Administration noted that even though the original formulation has analgesic benefits similar to the reformulated OxyContin it posed increased potential for certain types of abuse and the benefits did not outweigh the risks. Therefore, the original OxyContin was withdrawn from sale for safety reasons.

What does this mean for the workers’ compensation industry and those involved in the MSAMedicare Set-Aside process? As Purdue’s exclusive rights to produce the original formulation of OxyContin was set to expire next week, generic  pharmaceutical companies had begun looking at the prospect of gaining FDAU.S. Food and Drug Administration approval to produce a lower cost version of the original OxyContin.  With Tuesday’s announcement by the FDAU.S. Food and Drug Administration, Purdue will have several more years of exclusive rights over the reformulated, abuse-resistant OxyContin as its patent is not set to expire until the year 2025.  This means that the cost of the reformulated OxyContin will likely remain high which will lead to a large prescription allocation for injured individuals utilizing the medication for their workers compensation injury.  PMSI’s PBMPharmacy Benefit Management has numerous clinical programs to help target these individuals and can work with our clients early in the process to reduce claim costs which will lead to lower MSAMedicare Set-Aside allocations.

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By Settlement Solutions, April 2, 2013 4:21 pm

CMSCenters for Medicare and Medicaid Services has announced that they will be hosting a WCMSAWorkers' Compensation Medicare Set-Aside Teleconference on April 11, 2013 from 2:30-4:30 PM EST. The notice states the following:

What’s New

April 1, 2013

Workers’ Compensation Medicare Set-Aside Arrangement (WCMSAWorkers' Compensation Medicare Set-Aside) Town Hall Event

The CMSCenters for Medicare and Medicaid Services will be hosting a WCMSAWorkers' Compensation Medicare Set-Aside teleconference on April 11, 2013. This event will provide stakeholders an opportunity to learn more about the Workers’ Compensation Review Contractor (WCRCWorkers’ Compensation Review Contractor), and discuss procedural matters that are not case specific.

In an effort to address as many topics as possible, CMSCenters for Medicare and Medicaid Services is requesting stakeholders to submit non-case specific questions they would like to have addressed during the teleconference to the CMSCenters for Medicare and Medicaid Services MSPMedicare Secondary Payer Act Central mailbox* prior to the teleconference. CMSCenters for Medicare and Medicaid Services will review and categorize the questions submitted and attempt to answer as many questions as possible during the teleconference. There may also be an opportunity for the stakeholders to ask questions after the presentation.

Date of Teleconference:   April 11, 2013

Call-in time for all calls:    2:30-4:30p.m. EST

Call-in line:                      (800) 603-1774

Pass Code:                      WCRCWorkers’ Compensation Review Contractor

Questions for call:            Please submit to CMSCenters for Medicare and Medicaid Services mspcentral@cmsCenters for Medicare and Medicaid Services.hhsDepartment of Health and Human Services.gov*

Questions may be submitted beginning April 1, 2013 thru April 5, 2013 @ 3:30 p.m. EST.

All questions submitted for the teleconference to the email address shown above should clearly state in the subject line “WCRCWorkers’ Compensation Review Contractor April 11, 2013 Town Hall Teleconference.”  

Note: Questions submitted to the mailbox after the date and time noted above will not be considered.

PMSI encourages it subscribers to submit questions directly to CMSCenters for Medicare and Medicaid Services at the e-mail address listed above. We applaud CMSCenters for Medicare and Medicaid Services for holding this teleconference and are looking forward to receiving clarity from CMSCenters for Medicare and Medicaid Services on common industry questions and issues in WCMSAs.