From: Katie A. Fox
[katie.fox@francosignor.com]
Sent: Wednesday, May 25, 2011
12:24 PM
To: 'Douglas Shaw';
sdavison@gci.net; 'Jeff Knipper'; 'John Cattie'; 'Shannon P. Metcalf';
members@namsaplists.org
Subject: Arizona U.S. District
Court Orders Medicare to Change MSP Collection Practices
In response to all the emails flowing today on this issue, I thought I would share our review of the matter from 5/16/2011
Friends of Franco Signor LLC,
Last Friday, we promised you a more detailed analysis of a recent Order in Arizona that we believe will be discussed widely by the Industry in general. No doubt, the Order covers a lot of MSP ground, but the ruling itself is actually very narrow. The holding allows plaintiff attorneys to distribute settlement proceeds that include conditional payment obligations which are in dispute without incurring MSP liability exposure for that distribution. It also allows plaintiff Medicare beneficiaries to hold onto the funds during the pendency of an appeal or waiver. Interest is of course due on that portion that is not on dispute but it is at the option of the plaintiff as to whether to hold on or pay Medicare. The obvious impact of this decision is the additional exposure of the primary plan. Primary plans will need to be extra careful in our opinion. Our additional thoughts on the Order follow.
Haro v. Sebelius
Medicare requires Medicare beneficiaries to reimburse conditional payments within 60 days from receipt of a Final Demand Letter, even if there is disagreement over the amount owed. Patricia Haro, along with several other Medicare beneficiaries, sued the Health and Human Services Department Secretary, Kathleen Sebelius, to prohibit this practice when a request for waiver or appeal is filed disputing the conditional payment obligation. The Secretary, early on in the case, moved to dismiss the lawsuit for lack of jurisdiction; but the Court found for the Plaintiffs, holding that the Secretary’s reimbursement practices fell outside the Congressional intent. The action was then later certified as a class after and both sides moved for Summary Judgment. The following issues relate to those Motions wherein the Court is asked to determine:
1. Whether the Secretary can require
prepayment of a Medicare Secondary Payer (MSP) reimbursement claim before the
correct amount is administratively determined where the beneficiary either
appeals or seeks a waiver of the MSP reimbursement claim; and
2. Whether the Secretary can hold
plaintiffs-attorneys financially responsible for MSP reimbursement if they do
not hold or immediately turn over to Medicare their clients’ injury
compensation awards.
A final issue of due process was also put before the Court, but not decided because the decision was resolved based on statutory construction, not requiring such analysis. Plaintiffs won, the Secretary lost.
What the Haro Court Decided
Medicare beneficiaries are not required to reimburse Medicare within the prescribed 60 day period for the portion of conditional payment it disputes or otherwise seeks a waiver of. The Medicare beneficiary should still reimburse for that portion of the conditional payment obligation that is not in dispute or part of the request for waiver, but there is not requirement to do so. If it does not reimburse within the prescribed 60 day period then the portion that is not subject to dispute or waiver will be charged interest.
The plaintiff attorney that represents the Medicare beneficiary is not obligated to withhold funds that are subject to dispute with Medicare. These funds can be promptly distributed to the Medicare beneficiary without incurring any MSP liability with Medicare. Although not clearly laid out in the Order, it appears the plaintiff attorney is ethically bound to withhold the amount that is not in dispute with Medicare. To the extent that money is distributed there could be MSP liability.
Precedential Value
Whether this case is law beyond the State of Arizona remains to be seen. The fact that it was certified as a class, increases its precedential value, but is not determinative. Principles of res judicata (a doctrine prohibiting a losing party from re-litigating the same issue or issues) may ultimately prove the value of this case, should the Secretary not appeal. However, whether it is appealed or not, Centers for Medicare & Medicaid Services (CMS) may adjust its processes to conform to this Order. If CMS does this then the impact of this case will be felt by anyone subject to the MSP.
What Does this Decision Mean?
There is no doubt this ruling will cause confusion for an industry already grappling to understand their MSP responsibilities. The Court spends 27 pages painstakingly explaining the MSP. In the end, the Haro court’s good intentions may backfire because primary plans will be in a “Catch 22” situation should money be distributed through any settlement, judgment or award without first having a final determination of what Medicare is owed.
Primary Plan’s Obligations As Stated by the Haro Order
An insurance company, or an entity that chooses to be self insured for a risk, voluntarily or involuntarily, becomes a primary plan when it obligates itself to be responsible for a claim for injuries by a Medicare beneficiary. This obligation is usually demonstrated by a judgment, a payment conditioned upon the recipient’s compromise, waiver or release (whether or not there is a determination or admission of liability) of payment for items or services (medical bills) included in a claim against the primary plan. See 42 U.S.C. §1395y(b)(2)(B)(ii). In plain speak, MSP responsibility attaches to the party responsible for the liability claim when it is resolved.
The Haro Court makes reference, no less than twelve (12) times, a primary plan’s responsibility for Medicare.
1. The provision for double damages is
expressly included under the statutes enforcement section, 42 U.S.C.
§1395y(b)(3)(A), “in case of a primary plan which fails to provide for primary
payment (or appropriate reimbursement)…” See Order, Page 7, Lines 25-28.
2. The Secretary’s regulations provide,
“Special rules[][i]n the case of liability insurance settlements…if Medicare is
not reimbursed…, the primary payer must reimburse Medicare even though it has
already reimbursed the beneficiary or other party.” 42 C.F.R.
§411.24(i). See Order, Page 8, Lines 1-3.
3. Looking first to the statutory
language, the Court considers that the caption to subsection (ii) is expressly
limited to “primary payers”. See Almendarez-Torres v. United States, 523
U.S. 224, 234 (1988) (title of a statute and heading of a section are helpful
tools for resolving the meaning of a statute). See Order, Page 11,
Lines 8-11.
4. While the purpose of the MSP
provisions has been generally described as “to ensure fiscal integrity of
Medicare,” (D’s MSJ at 1,3) or to reduce Medicare costs, Zinman, 67 F.3d
at 845, “[t]he courts have uniformly recognized that the MSP statute’s clear
purpose was to grant the government a right to recover Medicare costs from
insurance entities.” See Order, Page 11, Lines 23-26.
5. (Relying on legislative history
indicating MSP originated as a device to recoup payments from automobile
insurance coverage. See Order, Page 12, Lines 2-3.
6. (Explaining the flip-side to
protecting financial integrity of Medicare is to prevent the unjust enrichment
of the torfeasor or its liability insurer at the expense of the government).
See Order, Page 12, Lines 6-8.
7. The combined impact of these changes
allow Medicare to recover directly from torfeasors, something the government
had been unsuccessfully attempting to do in respect to large class action
lawsuits involving settlements with Medicare beneficiaries. See Order,
Page 13, Lines 3 -5.
8. The legislative history reflects that
Congress focused MSP reimbursement responsibilities on primary-payer plans,
which Congress broadened in 2003 to prevent tortfeasors from settling directly
with beneficiaries without reimbursing Medicare. See Order, Page 13,
Lines 9-11.
9. The 60-day requirement for immediate
payment makes sense in respect to a primary plan and self-insurer (tortfeasor)
because the government’s claim against them is established upon “a judgment or
payment conditioned upon the recipient’s compromise, waiver, or release
(whether or not there is a determination or admission of liability) of payment
for items or services included in a claim against the primary plan. Or the
primary plan’s insured, or by other means.” Once there is a judgment or
settlement, the primary payer’s reimbursement payment is due and owing, and if
not made within 60 days, the government may bring an action for double damages
against it. See Order, Page 13, Lines12 – 19.
10. Congress has ensured the fiscal integrity of the Medicare
program by providing double damages against any primary payer that does not
ensure she is reimbursed. Congress closed the loophole where tortfeasors
settle directly with Medicare beneficiaries. See Order, Page 16, Lines
15-17.
11. Finally, if she [Secretary] fails to recover the
reimbursement claim from the beneficiary, she may proceed against the primary
plan, even when it has paid the beneficiary. See Order, Page 16, Line
28, Page 17, Lines 1-2.
12. Importantly, the regulation expressly provides the
appropriate course of action for the Secretary: if the beneficiary or
other party receives a third party payment and does not reimburse Medicare, the
third party payer must reimburse Medicare even though it has already reimbursed
the beneficiary. See 42 C.F.R. §411.24(h) and (i)(1).
Congress expressly allocated this burden to the third-party liability payer
that makes its payment to a party other than Medicare with it is, or should
be, aware that Medicare has made a conditional payment. See Order,
Page 19, Lines 16-21.
When all of these statements are read together, the only conclusion that can be drawn is that the primary plan will pay twice if it does not manage the conditional payment obligation on the front end of the case. (Once to the Medicare beneficiary and again to Medicare). It is difficult to imagine many primary plans accepting this exposure. The primary plans should implement protocols to make certain the Medicare obligation is paid when the claim is resolved.
But how would this work to protect the Medicare beneficiary from paying into Medicare funds that are in dispute? It cannot, because primary plans will not tender funds only to be exposed to paying Medicare again.
Today’s Process to Identify Conditional Payment Owed Medicare
The exact amount owed Medicare for conditional payments is not certain at the time a liability claim is resolved. Medicare takes the position it is entitled to recover for medical items and services up to the date when the primary plan becomes obligated. Because of this position, Medicare must be notified of the resolution date and then a Final Demand is presented. The process to accomplish this today is as follows:
Step 1: Medicare’s Coordination of Benefits Contractor (COBC) is notified of a primary plan’s potential responsibility for a claim. It will take this notice from anyone remotely connected to the claim.
Step 2: Within 48 hours COBC transmits the information it has received to Medicare’s Recovery Contractor (MSPRC) which will develop a Conditional Payment Letter (CPL).
Step 3: MSPRC issues a Rights & Responsibilities Letter to the Medicare beneficiary explaining the MSP. This usually takes two weeks from the point in time the information is received from the COBC.
Step 4: The MSPRC’s goal is to issue a CPL within 65 days from the date of the Rights & Responsibilities Letter. Usually, it takes a longer period. The primary plan is not entitled to a copy of the CPL without written consent from the Medicare beneficiary.
Step 5: The Medicare beneficiary can dispute charges unrelated to the claim and receive an updated CPL before primary plan responsibility is determined. The primary plan cannot dispute these charges without consent and other proper documentation from the Medicare beneficiary.
Step 6: Once primary plan responsibility is demonstrated (judgment or settlement), a Final Demand Letter can be requested by filing with the MSPRC a Final Settlement Detail Sheet, that summarizes the settlement terms.
Step 7: The MSPRC’s goal is to issue a Final Demand Letter within 35 days of submission of the Final Settlement Detail document, but usually it takes longer. The primary plan is not entitled to a copy of the Final Demand, unless the Medicare beneficiary provides written consent and it is on file with the MSPRC.
There is no statute, regulation or rule requiring the Medicare beneficiary to cooperate with the primary plan once its responsibility is demonstrated. As such, the primary plan may never know the conditional payment obligation it is expected to pay within the prescribed 60 day period. The absence of such requirement leaves the primary plan with limited options to identify the amount owed Medicare in order to sufficiently withhold funding of the claim settlement or judgment. The primary plan can only obtain the information by cooperation of the Medicare beneficiary from withholding such payment. In short, the Haro Court’s does not take into account the process to identify the conditional payment obligation and the limitations on the primary plan’s ability to secure a copy of it. Yet, the Court assumes that a primary plan will pay the Medicare beneficiary the obligation and dangerously expose itself to additional damages in a case it has already resolved.
Practical Problems Which May Result
1. Appeals take time and can last many
years. If the Medicare beneficiary does not prevail on his or her claim,
no protections are in place that the money will still be available to
pay. If Medicare wins and the Medicare beneficiary cannot pay, the
primary plan will be responsible to pay and liability can extend many years
after a case is resolved.
2. Request for waivers are not specific
to medical items and services. It is based on hardship and, as such, the
amount that is in dispute is not clear. It could be a portion or the
entire amount. Where a hardship claim is pending, the Medicare beneficiary
will have the entire conditional payment amount at his or her disposal, without
any security for the primary plan.
3. How can the primary plan pay within
60 days after its responsibility is demonstrated when it is not entitled to
know the amount of the conditional payment? The primary plan must have
written consent from the Medicare beneficiary to obtain that number.
Furthermore, the Final Demand can take more than 60 days to be produced by
Medicare’s contractors.
4. If a primary plan pays the
conditional payment obligation owed to Medicare, how can the Medicare
beneficiary withhold the disputed portion of the claim?
5. Where are the checks and balances
with regard to frivolous appeals and requests for waivers, if the plaintiff
attorney has no MSP responsibility?
Lessons Learned from Haro
· A primary plan must reimburse
Medicare or otherwise the danger to pay again has dramatically increased as
plaintiff attorney (at least in AZ) is no longer similarly exposed.
· Medicare beneficiaries do not need to
reimburse Medicare disputed conditional payments when an appeal or waiver is
pending.
· Plaintiff attorney’s do not have
unlimited MSP exposure, limited perhaps to the non-disputed portion of the
conditional payment obligation.
· The entire conditional payment
obligation is in dispute when a waiver is filed.
· Primary plans should have a protocol
in place that will not allow for tendering of monies to a Medicare beneficiary
unless the conditional payment obligation is clearly defined and resolved.
· Claims could be open longer as
appeals and waivers are filed.
· Primary plans will have sole
responsibility for future medical treatment that relates back to the claim,
should the Medicare beneficiary not properly agree to protect that interest.
· The Medicare beneficiary will not
prevent money from being paid to Medicare as smart primary plans will pay
Medicare directly.
Franco Signor’s Recommendations
· Primary plans need to aggressively
identify the conditional payment obligation before it incurs responsibility to
pay.
· Any unrelated items should be removed
as soon as practical from the CPL before a settlement, award, and or judgment.
· Plaintiff attorneys need to cooperate
with primary plans to encourage prompt distribution of funds and raise
disputes, as soon as practicable, that are related to certain Medicare items
and charges.
· Pay the conditional payment or secure
a funding mechanism to ensure it will be paid.
· Have an agreement on the future
medical as primary responsibility appears to lay at the primary plan.
At Franco Signor LLC we continue to monitor the growing caseload
across the country on this important and elusive topic. Allow us to be
your company or law firm’s Center of Excellence and “one voice” on the topic of
Medicare compliance.
Regards,
Roy A. Franco
Katie A. Fox, MSCC
Franco Signor LLC | V.P. Medicare Compliance | 17011 Lincoln Ave. #517, Parker, CO 80134 | P
716.877.4677 ext 121 | C 720.219.9904 | F 888.370.7030
email: katie.fox@francosignor.com
The Authority for Medicare Secondary Payer Compliance
From: Douglas Shaw [mailto:dshaw@medivest.com]
Sent: Wednesday, May 25, 2011 9:17 AM
To: sdavison@gci.net; 'Jeff
Knipper'; 'John Cattie'; 'Shannon P. Metcalf'; members@namsaplists.org
Subject: Re: lien letter inquiry
Here is the blog post that we wrote about the Haro
case:
The blog is at www.medivestblog.com
and the Court Order is there too.
Jeff, very interesting observation. I bet your right. I bet we will
see the demand letters revised to comply with Haro regarding conditional
payments under an appeal or waiver request.
Douglas L. Shaw, C.P.A.
Chief Operating Officer
Medivest Benefit Advisors, Inc.
2100 N. Alafaya Trail, Suite 201
Oviedo, FL 32765
877.725.2467 ext. 236
321.279.2355 cell
Check out our Website and Blog at www.medivest.com
=====================================================
May 16, 2011
Haro v. Sebelius: Court Orders CMS to Stop Certain Medicare
Secondary Payer (MSP) Collections Practices
by Douglas L. Shaw, Chief Operating Officer
On May 5, 2011, the Arizona US District Court (Court) ordered the Centers for
Medicare and Medicaid Services (CMS) to stop demanding of beneficiaries
“payment of a MSP reimbursement claim with threats of commencing collection
actions before there is a resolution of an appeal or waiver request” and to
stop “demanding that attorneys withhold proceeds from their clients pending
payment of disputed MSP reimbursement claims”.
In the underlying cases, the plaintiffs were injured, received medical services
conditionally paid for by Medicare, and subsequently received settlement
proceeds from a liability insurance company. CMS, followed its
longstanding procedure and sent a demand letter to the plaintiffs and the
plaintiffs-attorneys notifying them that the reimbursement claim must be paid
within 60 days or interest of 13.375% would accrue and collection actions would
be initiated. Interestingly, each Plaintiff disputed CMS’s conditional
payment reimbursement claim. Plaintiff attorneys were additionally told
that Medicare’s claim must be paid up front out of the settlement proceeds
before any distribution occurs.
60 Day Requirement – The Court found CMS’s 60-day requirement to collect
reimbursement claims from beneficiaries “neither rational nor consistent with
the statutory scheme providing for waiver and appeal rights.” In other
words, the Court seems to be saying that it makes no sense to essentially say
to the plaintiff, “you can appeal this but, but you have to pay it in sixty
days.” So, the Court ruled that “collection activities are precluded against
beneficiaries, pending resolution of waiver requests or appeals…”
Recovery Actions Against Attorneys - The Court found that:
Class Action Case – The Court certified this as a class action case defining the class broadly
as persons who are or will be subject to MSP recovery, and from whom defendant
has demanded or will demand payment of MSP claims before there have been
determinations of the correct amounts through the waiver or appeal process.
The Court said that it “found no case which considered the propriety of direct
recovery actions against attorneys”. It seems to me that U.S. v. Harris
addresses this issue. Regardless, this is going to be much discussed
case, with impact, so stay tuned to industry legal analysis to come and perhaps
an appeal by CMS.
From: Shelby
Davison <sdavison@gci.net>
Organization: Davison & Davison
Reply-To: <sdavison@gci.net>
Date: Wed, 25 May 2011 05:33:54 -0800
To: 'Jeff Knipper' <Jeff.Knipper@ccsholdings.com>,
'John Cattie' <jcattie@garretsongroup.com>,
"'Shannon P. Metcalf'" <SMetcalf@hedrickgardner.com>,
<members@namsaplists.org>
Subject: RE: lien letter inquiry
What was the Huro decision about?
From:
Jeff Knipper [mailto:Jeff.Knipper@ccsholdings.com]
Sent: Wednesday, May 25, 2011 5:23 AM
To: John Cattie; Shannon P. Metcalf; members@namsaplists.org
Subject: RE: lien letter inquiry
Given the timing I can only assume
this moratorium on final lien letters is a result of the recent Haro decision.
Although the MSPRC alert doesn’t confirm, anyone else agree with my conclusion?
Jeff Knipper, MSCC, CMSP
Director of Medicare Services
CCS Holdings
(800) 743-2231 ext. 2906
jeff.knipper@ccsholdings.com
From: John Cattie [mailto:jcattie@garretsongroup.com]
Sent: Tuesday, May 24, 2011 4:43 PM
To: Shannon P. Metcalf; members@namsaplists.org
Subject: RE: lien letter inquiry
Shannon – that is true. Here is the Client
Alert we drafted and sent to our clients earlier this afternoon advising of
this.
John V. Cattie, Jr., esq.
future cost of care lead consultant
Garretson Resolution Group
2115 Rexford Road, Suite 400 | Charlotte, NC
28211
Phone: 704.559.4300 | Fax: 704.559.4331 www.garretsongroup.com <http://www.garretsongroup.com/>
From: Shannon P. Metcalf [mailto:SMetcalf@hedrickgardner.com]
Sent: Tuesday, May 24, 2011 5:33 PM
To: members@namsaplists.org
Subject: lien letter inquiry
Anyone heard anything about CMS putting an
indeterminate hold on the issuance of final lien letters?
Shannon Metcalf
Partner
Hedrick Gardner Kincheloe & Garofalo LLP
P. O. Box 30397
Charlotte, NC 28230
Direct Phone: 704.319.5454
Direct Fax: 704.602.8081
smetcalf@hedrickgardner.com
www.hedrickgardner.com <http://www.hedrickgardner.com>
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