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Posts tagged: workers’ compensation

Haro v. Sebelius Reversed (in part): Medicare May Seek Upfront Reimbursement of Conditional Payments Despite Pending Appeals/Waivers

By , September 12, 2013 4:01 pm

Some of us in the industry may remember an interesting case back from May of 2011 where a class of Medicare beneficiaries successfully obtained an injunction against CMS for certain conditional payment reimbursement practices. The two conditional payment practices that Haro sought to enjoin were: 1) requiring pre-payment of an MSP reimbursement claim before the correct amount is administratively determined where the beneficiary either appeals or seeks a waiver, and 2) holding plaintiff attorneys financially responsible for MSP reimbursement if they do not hold or immediately turn over to Medicare their clients’ injury compensation awards. For our prior blog on the district court case, please click here.

The original case involved Patricia Haro (“Haro”) and two other Medicare beneficiaries who all owed conditional payments to CMS but sought appeals or waivers of that amount. The beneficiaries collectively alleged that it was improper for CMS to require upfront payment of the conditional payment amount while an appeal or waiver of the reimbursement amount was pending. Attorney John Balentine, who represented Haro in her personal injury lawsuit, joined the lawsuit alleging that it was improper for CMS to require attorneys to hold settlement funds until Medicare is reimbursed. Additionally, Balentine alleged that the MSP does not support an attorney being held personally liable for unreimbursed conditional payments.

The injunctions as well as the class certification granted by the district court have now been reversed by a recent decision out of the Ninth Circuit Court of Appeals.[1] More specifically, although the Ninth Circuit found that the plaintiff Haro demonstrated standing on behalf of the class of Medicare beneficiaries, and Haro’s attorney independently demonstrated standing to raise his individual claim, the Ninth Circuit concluded that the beneficiaries’ claims were not adequately presented to the agency at the administrative level, and therefore the district court lacked subject matter jurisdiction pursuant to 42 U.S.C. d 405(g). The Appellate court reached the merits of the attorney’s claim, but concluded that the Secretary’s interpretation of the MSP provisions were reasonable; lastly, the Circuit Court did remand the beneficiaries’ due process claim for consideration.

Regarding the beneficiaries’ claims, the reasoning the Ninth Circuit Court of Appeals gave as to why it lacked subject matter jurisdiction is that the beneficiaries did not properly present their claims to CMS. More specifically, the court stated that the beneficiaries did not provide an opportunity for the Secretary to consider the claim and never previously alleged that her interpretation of the MSP provisions exceeded her authority. Although the beneficiaries presented reimbursement disputes and sought waivers or appeals of the reimbursement amount, they did not make an argument to the Secretary that she was exceeding her authority under the MSP by seeking up front reimbursement. Essentially, the Court of Appeals stated that the beneficiaries had to make this argument directly to CMS through the conditional payment negotiation/appeal process before bringing the issue to court. However, the court did remand the beneficiaries’ due process claim for further analysis.

Regarding attorney Balentine’s claims, the Ninth Circuit conducted a thorough analysis of both his standing to bring the claim and the reasonableness of his claim. Regarding standing, since Balentine is not a Medicare beneficiary and therefore could not present his challenge through the same administrative channel as Medicare beneficiaries, the court was able to make an exception and therefore was able to maintain subject matter jurisdiction over the claim.

However, regarding reasonableness, the Circuit Court looked to the MSP provision that states that “an entity that receives payment from a primary plan, shall reimburse [Medicare] for any [secondary payment] if it is demonstrated that such primary plan . . . had a responsibility to make [a primary] payment,” 42 U.S.C. § 1395y(b)(2)(B)(ii), but it does not define “entity.” Therefore, the question for the court was whether an attorney could be considered an “entity.” In looking at this, the court determined that there is no statutory basis to distinguish between entities that receive payment from a primary plan and end-point recipients. Essentially, an attorney does receive payment from a primary plan in a literal sense. Additionally, the 2003 MSP amendments indicate that Congress intended a broad construction of “entity that receives payment from a primary plan.” Lastly, the court found that the Secretary’s interpretation of the MSP is reasonable in that it increases the likelihood that proceeds will be available for reimbursement to Medicare.

So what does this reversal out of the Ninth Circuit mean? With the injunctions against CMS now being lifted, we may see CMS again sending conditional payment demands to collection agencies while waiver or appeals are being pursued. This was a practice that was put on hold after the district court decision was issued back in 2011. The decision as it relates to the attorney’s claim is not surprising; many of us remember cases such as U.S. v. Harris from a few years ago where a plaintiff attorney was held personally liable for unreimbursed conditional payments by CMS.

What we should learn from this case is 1) beneficiaries should always ensure that claims have been properly presented and that they have exhaust administrative remedies before bringing an issue with the conditional payment amount itself or CMS’ conditional payment recovery practices to review by a court; and 2) while it is unlikely that CMS will begin sending conditional payment demands to collections while an appeal or waiver is being pursued as they did in the past, CMS now technically has the legal right to do so with the injunctions being lifted; therefore, settling parties should be aware of this possibility. Additionally, parties should be aware, as always, that interest will accrue on final demands not paid within 60 days of their issue date.

PMSI will continue to follow the remand of the beneficiaries’ due process claims and any future updates on the Haro case.

[1] Haro v. Sebelius, 2013 U.S. App. LEXIS 18353 (September 4, 2013).


Undocumented Workers: What are the MSA Obligations?

By , August 20, 2013 9:34 am

PMSI has frequently been asked what the MSP obligations are when a settlement occurs and the claimant alleges that he/she does not have a SSN and/or is not a legal resident or citizen of the United States. Let’s examine the various scenarios and how to handle each one.

Claimant is in the U.S. illegally and does not have an SSN-

Undocumented workers do not pay into the Social Security and Medicare system and therefore cannot receive SSDI or Medicare benefits. An MSA would not be necessary in this scenario. However, the parties settling the case should be absolutely certain that the claimant is in fact neither a legal resident nor a U.S. citizen or MSP liabilities may later attach.

Suggested methods to inquire as to the claimant’s residency status could include questioning the claimant during discovery as well as having the claimant sign a statement under oath that he/she does not have a SSN. Additionally, payers that enter into a settlement with undocumented workers should strongly consider including language in their settlement documents which demonstrates that Medicare’s interests were still considered despite the claimant’s undocumented status just in case.

Claimant is a legal resident of the U.S., but not a citizen-

Legal residents of the U.S. (aka green card holders) do in fact pay into the Social Security and Medicare system just like citizens do and are assigned SSNs. Therefore, with enough work quarters, legal residents can become eligible for SSDI and Medicare benefits just like U.S. citizens. In addition, a legal resident of the U.S. can “buy into” Medicare at age 65 by paying a premium whether or not they have the required work quarters (this option is also available to U.S. citizens). Therefore, an MSA should be considered in settlements with legal residents just as they should with U.S. citizens.

PMSI is available for any complex or unique MSP compliance questions. Please feel free to e-mail us at for assistance.


Updated WCMSA Regional Office Contact List

By , August 13, 2013 9:47 am

CMS has posted an updated contact list for its regional offices that review WCMSAs. The updated contact list can be located here.


Physician Dispensing and Workers’ Compensation

By , August 8, 2013 9:15 am

Physician dispensing of repackaged drugs continues to be a major contributor to the growing cost of prescription drug treatment within the workers’ compensation industry. In the 2012 Survey of Prescription Drug Management released by CompPharma and authored by Joseph Paduda in January of 2013, it was noted that physician dispensed medications were second only to the use of opioids as the largest driver of workers’ compensation prescription drug costs.

Physician dispensing is not a new practice among physicians. It became popular in the late 19th and early 20th centuries and was first seen in workers’ compensation in California in the middle of the last decade. At that time, physicians began to partner with companies who marketed repackaged drugs for resale as an opportunity for offsetting practice revenue losses due to reimbursement cuts made by government, commercial and workers’ compensation payers.

Repackaged drugs are usually purchased in large quantities from the original manufacturer by companies who then repackage them into smaller quantities for resale. The repackaged drugs are usually sold at a profit by physicians who dispense them to the patient at time of treatment. The FDA requires the company that is repackaging and relabeling the drugs to assign a new NDC number (different from the original manufacturer’s NDC) and at that time it is common for the company to set a new AWP (average wholesale price) that is generally higher than the original. This new AWP is also typically higher than the AWP utilized by retail and mail order pharmacies and is often not controlled by state fee schedules.

From a workers’ compensation payer’s perspective, arguably there are numerous “Pros” and “Cons” concerning physician dispensing.


*Allows the physician the opportunity to ensure the patient has the medication to begin treatment immediately as it is dispensed at the time of service. Additionally, physician dispensing makes it more convenient for those patients who may have difficulty finding transportation to a retail pharmacy. Those patients that may not otherwise have reliable transportation may postpone filling the medication or never obtain the medication for treatment at all.

* Beneficial for specific medications that require physician monitoring such as those dispensed within a drug rehabilitation program.


*Patient Safety:  Since the medication is being dispensed by the physician without the oversight of the pharmacy benefit manager or pharmacist, an important safety check is bypassed.  Since the physician must depend on the injured worker to provide the medication history in order to perform drug utilization review, drug therapy problems may go undetected.  This leads to possible missed drug interactions, duplicate or excessive drug therapy, as well as other high risk medication concerns.

* Inflated costs:  The majority of medications dispensed by physicians are associated with an increased cost per unit because of the creation of a new NDC and AWP.  In many cases this AWP is much higher (in some cases as much as 400% higher) than the same drug dispensed through the retail or mail order pharmacy setting.

*Administrative inefficiency:  It is difficult for bill review systems to identify physician dispensed drugs as they are often simply included in the physician’s treatment bill and the reviewer is unable to separate the cost of treatment from that for drugs.  As these transactions are often billed on paper, this drives additional cost for payers compared to PBM-billed transactions that tend to be billed electronically.  This also makes it very difficult for the payer to build a complete data picture of the magnitude and amount of physician dispensed drugs.

As the practice of physician dispensing continues to gain in popularity, it will remain a concern for payers of worker’s compensation claims.  Due to the financial benefits as well as aggressive marketing by the repackaging companies, it is estimated that the percentage of physicians dispensing drugs is growing well over 10% per year.  In response to this, many, but not all of the states, have begun to  change regulations monitoring physician dispensing in an attempt to help control the inflated cost due to this type of dispensing.

In order to control rising costs, it is important that the workers’ compensation industry work with state legislators to provide insight into this issue. It is equally important for the industry to remain informed on how physician dispensing is being handled by each individual state.  Payers should also discuss with their PBMs their approach to controlling physician dispensing and to ensure sure that it is being actively managed and monitored.


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