Tag Archives: MSA

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.

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.

Pennsylvania Bankruptcy Court Finds MSA is a Trust, Allows Claimant to Keep Funds, Away from Creditors

Stethoscope and GavelOn January 5, 2015, the United States Bankruptcy Court for the Middle District of Pennsylvania published its opinion on In Re: Jesus Arellano, concluding that property traceable to a pre-bankruptcy petition lump sum workers’ compensation settlement award may be claimed as exempt resources. The court also finds that the WCMSA established a trust for the benefit of medical providers since the express intent of the settlement agreement was to create a fund to pay for medical treatments and prescription drugs related to the work-related injury. By finding that the WCMSA funds were to be held in trust for the benefit of providers of medical services related to the workers’ compensation claim, the court determines that the WCMSA is not property of the bankruptcy estate and may not be administered by the Bankruptcy Trustee for the benefit of creditors. Therefore, the court rules in favor of exempting all proceeds from the settlement agreement and all property acquired with these proceeds.

In 2010, Jesus Arellano (Debtor) sustained a broken hip at work in Maryland. Thereafter, he filed a workers’ compensation claim. On December 1, 2011, Debtor entered into a settlement agreement with his employer whereby Debtor would receive a lump sum payment of $225,000. In addition, $72,741.88 was paid to Debtor as a Medicare set aside for Debtor’s need for future treatment for his injuries.

In January 2012, Debtor deposited both the lump sum settlement and the Medicare set aside in his bank accounts. Debtor admitted that he used to funds to make several purchases – a 2005 Ford F-150 for $17,000, real property located at 3587 Cannon Lane, York PA 17408 for $85,000, and real property located at 3887 Cannon Lane, York PA 17408  for $86,000. On November 1, 2012 Debtor sold the 3887 Property to his brother through an installment agreement for $90,000. Under the terms of the sale, Debtor’s brother is obligated to make payments of $1200 per month, which includes principal and interest at 5.5 percent, until the balance is paid in full in June 2020.

Debtor filed a Chapter 7 bankruptcy petition on March 8, 2014, claiming as exemptions  the 3587 Property, the 3887 Property, funds in 2 checking accounts established from Debtor’s workers compensation pay-out, and the Ford F-150 under 11 U.S.C. §522(d)(11)(E).

On April 30, 2014, the Trustee filed an objection to Debtor’s exemption claim asserting that §522(d)(11)(E) did not authorize Debtor to exempt property that was the proceeds of a workers’ compensation claim. On May 22, 2014, Debtor responded to the Trustee’s objection asserting that the property could be exempted under §522(d)(11)(E) and that the property claimed was reasonably necessary for Debtor and his dependents.

A hearing on the Trustee’s objection was held on September 25, 2014, at which time the issues were identified as follows: 1) whether funds or property traceable to the proceeds of a lump sum workers’ compensation settlement received prepetition may be claimed as exempt under §522(d)(11)(E); and 2) if the funds and property may be exempted, whether they are necessary for the support of Debtor and his dependents.

The Trustee based his objection on a decision rendered in 2001 by Judge Thomas in the case of In re Michael, 262 B.R. 296 (Bankr. M.D. Pa. 2001). The facts in In re Michael are similar to the facts here. The debtor received a lump-sum settlement after sustaining a work-related injury prior to filing his bankruptcy petition. On his schedule of exemptions, the debtor listed the proceeds of the settlement as exempt under 11 U.S.C. §522(d)(11)(E). Judge Thomas upheld the trustee’s objection to the exemption claim holding that workers’ compensation claims could not be exempted under §522(d)(11)(E), but must be exempted under §522(d)(10)(C). Judge Thomas cited the analysis of the court in In re Williams, 181 B.R. 298 (Bankr. W.D. Mich. 1995), and adopted the majority view that “workmen’s compensation awards, and the tracing of those awards into certain specific items, are beyond the scope of 11 U.S.C. §522(d)(11)(E).”

To avoid the injustice of finding that workers’ compensation awards paid in installments could be exempted, but those received in a lump sum could not, the bankruptcy court in In re Sanchez, 362 B.R. 342 (Bankr. W.D. Mich. 2007) decided to give the issue a fresh look. In Sanchez, Judge Hopkins looked at the plain meaning of the statute and concluded that workers’ compensation awards may be exempted under §522(d)(11)(E) if the award is traceable to a payment that is intended to compensate the debtor for the loss of future earnings and is reasonably necessary for the support of the debtor or the debtor’s dependents.

The court here agrees with the conclusion of the Sanchez court that §522(d)(11)(E) unambiguously exempts “a payment in compensation of loss of future earnings of the debtor,” including lump sum workers’ compensation payments, without restricting such payment to tort-type actions. The court therefore concludes that §522(d)(11)(E) provides a basis upon which property traceable to a pre-petition lump sum workers’ compensation settlement awarded for the loss of future earnings to the extent that the lump sum is reasonably necessary for the support of a debtor and the dependents of a debtor may be claimed as exempt.

In addition, part of Debtor’s workers’ compensation settlement was a Medicare “set aside” (WCMSA) payment. WCMSA is a “financial agreement that allocates a portion of a workers’ compensation settlement to pay for future medical services related to the workers’ compensation injury, illness, or disease.” The Center for Medicare and Medicaid Services provides that a claimant “can ONLY use a WCMSA to pay for medical treatment or prescription drugs related to his or her workers compensation injury, and ONLY if the expense is for a treatment or prescription Medicare would cover. This is true even if he or she is not yet a Medicare beneficiary.”

The court therefore concludes that the WCMSA provided as a result of Debtor’s settlement agreement established a trust for the benefit of medical providers. The express intent of the settlement agreement was to create a fund from which Debtor was to pay for his medical treatments and prescription drugs related to his work-related injury. Even though the agreement did not specifically state that Debtor is to hold the funds as trustee for the benefit of his medical providers, no such words are needed in order to create an express trust. The subject matter of the trust is the WCMSA of $72,741.88. The parties to the settlement agreement were competent to create the trust, Debtor was capable of holding the funds as trustee, and entities providing medical services to Debtor were named beneficiaries of the trust. Thus, all the requirements necessary to create a trust have been met in the settlement agreement.

By finding that the WCMSA payment was to be held in trust for the benefit of providers of medical services related to Debtor’s workers’ compensation claim, the court finds that the WCMSA is not property of Debtor’s bankruptcy estate and, as such, may not be administered by the Trustee for the benefit of creditors. The court therefore rules Trustee’s objection to Debtor’s exemptions under 11 U.S.C. §522(d)(11)(E) is overruled.

Does this case open up any liability for payers? If, in fact, MSAs are a trust for the benefit of medical and prescription providers, doesn’t the trustor, the payer funding the trust, have a fiduciary responsibility to the medical and prescription vendors providing such benefits/services? If a medical or prescription vendor provides benefits/services to the claimant, but the MSA trustee is unable to pay because funds were misused, does the medical or prescription vendor have a cause of action against the trustor, the original primary payer? At Helios, because of our extensive national resources and country-wide market strength in pharmacy, medical services, and durable equipment, our MSP compliance products, specifically our MSA professional administration services, not only take this potential liability into account, but solves it. Contact us to find out how.

Louisiana Appellate Court Agrees Claimant Committed Fraud, Forfeits All Future Benefits, Including Medicare Set Aside Annual Structured Funds

Stethoscope and GavelOn December 23, 2014, the Louisiana Court of Appeal, 1st Circuit, published its opinion on Shropshire v. Anco Installation, finding that because claimant deliberately misrepresented the facts of his settlement negotiations for the purpose of obtaining additional benefits, all workers’ compensation benefits, including future settlement monies and Medicare set aside funds, are forfeited.

Mr. Shropshire was employed by ANCO. He alleged he suffered permanent injuries in an accident on October 23, 1998, while in the course and scope of his employment with ANCO. ANCO disputed whether an accident occurred and whether Mr. Shropshire was unable to perform the duties of his occupation.

In June 2010, Shropshire, ANCO and its workers’ compensation insurer entered into a compromise agreement, “Joint Petition for Authority to Compromise Workmen’s Compensation Claim.” The Order of Approval was signed by the workers’ compensation judge (“WCJ”) on June 25, 2010. The documents included language that recited Mr. Shropshire was to receive $5,381.00 per month for twenty-six years “to settle the future medical aspect part of the claim.” Other documents however reflected that the payment was to be $5,381.00 per year, not monthly.

Neither ANCO nor its insurer ever paid Mr. Shropshire $5,381.00. In July 2012, Mr. Shropshire filed a Form 1008 Disputed Claim for Compensation with the OWC seeking a monthly payment, to which he alleged he was entitled. ANCO and its insurer answered, asserting that the payment of $5,381.00 per month was a typographical error and that the Order should be amended to reflect payments due of $5,381.00 per year.

The matter came for hearing before the OWC in February 2014. The WCJ found the payments per month to be a typographical error and amended the Order of Approval to substitute the word “annually” in place of the word “monthly” everywhere the word “monthly” appeared in the settlement agreement and Order of Approval dated June 25, 2010. The WCJ also held that Mr. Shropshire willfully made false statements and representations for the purpose of obtaining additional benefits, in violation of La. R.S. 23:1208. Accordingly, the WCJ voided the annuity set up to pay the settlement and relieved third parties and their assignees from further obligation to pay Mr. Shropshire.

The WCJ addressed two issues at the trial on the merits: (1) the amendment of the Order of Approval judgment due to a typographical error; and (2) fraud pursuant to La. R.S. 23:1208.

First, the WCJ had to decide whether the settlement agreement and Order of Approval contained a typographical error; that is, whether the structured payments for Mr. Shropshire’s medical benefits were to be made monthly or annually. After hearing from the witnesses and considering the documentary evidence in the record, the WCJ held that “considering all the evidence, especially the Medicare Set Aside information, and the testimony of the witnesses, it was clear to the Court there was an error in the settlement documents and the payments were agreed to be paid annually, not monthly.”

The WCJ, pursuant to La.C.C.P. art. 1951, which provides that a modification of a judgment can be made at any time to alter the phraseology of the judgment, but not the substance, or to correct an error of calculation, amended the June 25, 2010 settlement agreement and Order of Approval to substitute the word “annually” in place of the word “monthly” everywhere the word “monthly” appeared in those documents. This court concludes it is unable to say the WCJ erred in determining the settlement agreement and Order of Approval contained typographical errors, as the WCJ’s ruling is reasonable and supported by the record.

Next, the WCJ had to decide whether Mr. Shropshire committed fraud pursuant to La. R.S. 23:1208. Section 1208 forbids any person from willfully making false statements or representations to obtain workers’ compensation benefits. La. R.S. 23:1208(A). Upon a determination of fraud by a WCJ, a person in violation of Section 1208 forfeits any right to workers’ compensation benefits. La. R.S. 23:1208(£). To this extent, the WCJ found “Mr. Shropshire’s testimony totally unbelievable, failing to contain any element of truth in this regard. The Court was clearly convinced Mr. Shropshire fabricated the story about an additional settlement negotiated between him and Mr. Maher for the purpose of obtaining benefits clearly unsupported by any other documentation. Mr. Shropshire attempted to convince the Court his deposition testimony was falsely transcribed as well.”

As a result, the WCJ found he deliberately misrepresented the facts of his settlement negations for the purpose of obtaining additional benefits, as it was very clear from the medical records, all records surrounding the settlement negotiations, including a notation in Mr. Shropshire’s own handwriting, as well as Mr. Maher’s testimony, he would never have remotely been entitled to $5,000 a month in medical expenses. Due to Mr. Shropshire’s deliberate misrepresentation of the settlement negotiations, the WCJ concluded all workers’ compensation benefits were forfeited from the date of the deposition, August 13, 2013 forward.

Based on the record, the Court here is unable to say the WCJ erred in determining that Mr. Shropshire committed fraud pursuant to La. R.S. 23:1208, as the WCJ’s ruling is reasonable and supported by the record. As a result, based on the foregoing, the February 24, 2014 final judgment of the Office of Workers’ Compensation is affirmed.

As this case clearly shows, Medicare Set-Aside work is not done simply because the parties have settled the case and funds have been disbursed. At Helios, given our superior medical, pharmacy, claims, and legal expertise, MSA post-settlement work not only includes professional administration of MSA account funds, or assisting the Medicare beneficiary with self administration, but also includes post-settlement legal issues, billing disputes, fee schedule discrepancies, annual accounting to CMS, temporary and permanent exhaustion of MSA funds, and assistance with any remaining funds in the MSA account after claimant’s death.