Failure to Properly Use the Conditional Payment Administrative Appeal Process

In Mouradian v. United States Government, the United States District Court for the District of Massachusetts found that a Medicare beneficiary did not exhaust the conditional payment administrative appeal process. Because the administrative appeal process was not exhausted, the District Court could not make a decision regarding whether the Medicare Secondary Payer Act (MSP Act) and Debt Collection Improvement Act (DCIA) were unconstitutional.  2018 U.S. Dist. Lexis 163106.

Mouradian is a Medicare beneficiary. In 2015 he was in a car accident and Medicare made payments associated with the claim.  On 8/26/2016, Mouradian’s attorney for the liability claim sent an unsigned acknowledgment of settlement form to Medicare stating there was a settlement for $25,000.00. However, as discussed below, there was no settlement. On 9/1/2016, Medicare issued a final demand (initial determination) based upon settlement reporting in the amount of $25,000.00.

In lieu of appealing the initial determination and advising Medicare there was no settlement, the beneficiary first sought a hardship waiver from Medicare for all of the payments.  On 10/20/2016, Medicare agreed a partial waiver was appropriate and advised the beneficiary the initial determination was reduced $12,500.00.  On 12/12/2016, Mouradian first advised Medicare there was no settlement associated with the 2015 car accident. On 1/13/2017, Medicare requested additional information to support that the settlement proceeds were not dispersed.

Claimant did not formally appeal the 9/1/2016 initial determination. On 1/20/2017, instead of responding to Medicare’s 1/13/2017 letter, the beneficiary filed a pro se complaint in the United States District Court for the District of Massachusetts. In March and April of 2017, the Federal Government withheld some of Mouradian’s federal tax refund and began to garnish 15% of his Social Security retirement benefits.

After a scheduling conference for the case on 10/3/2017, the government refunded claimant’s money and stopped its collection process based upon the argument that there was no settlement at that time.  The government argued their actions should dismiss Mouradian’s complaint all together.

The Court agreed with the federal government that the reimbursement and halting of the collection process rendered part of the complaint moot. However, the Court disagreed the government actions also resolved the additional allegations and unconstitutionality of the MSP Act and DCIA. In analyzing the additional allegations, the court found that Mouradian did not present the arguments to CMS to determine whether their regulations and collection process was unconstitutional as applied to Mouradian. Because Mouradian did not follow the administrative appeal process outlined in 42 C.F.R. 405.900, et. seq., his arguments were being denied judicial review.

This case is an important reminder to all stakeholders in appealing conditional payments: (1) know, or obtain an expert who knows, the conditional payment administrative appeal process; and (2) If you want a federal district court judge to review your arguments to Medicare on conditional payments, you first have to follow the administrative appeal process outlined in 42 C.F.R. 405.900, et. seq.

Updates to follow as more case law develops.

Medicare Advantage Plan Class Action Certification Denied by Third Circuit Court of Appeals

As Medicare Advantage Plans (MAPs) continue to aggressively pursue recovery rights under the Private Cause of Action provisions of the Medicare Secondary Payer Act (MSP), 42 USC § 1395y(b)(3)(A), courts are being presented with more and more novel arguments by MAPs to establish these rights.  Such is the case in Ocean Harbor Cas. Ins. v. Claims, 2018 Fla. App. LEXIS 13569 (September 26, 2018), when the Florida Third Circuit Court of Appeals was asked to determine whether the mere existence of a no-fault insurance contract was enough for MAPs to establish primary plan liability under the MSP.

MSPA Claims 1, LLC (MSPA), as an assignee of a defunct Medicare Advantage Organization (MAO) seeking to represent 37 other MAOs, sought to bring a class action suit to recoup double damages under the MSP against no-fault automobile insurer Ocean Harbor Casualty Insurance Company.  MSPA asserted that Ocean Harbor’s liability as a primary payer under the MSP was established not through a settlement or judgement, but by showing that the MAOs made payment for a Medicare beneficiaries’ medical expenses; the beneficiaries had no-fault insurance coverage through Ocean Harbor; and Ocean Harbor failed to reimburse the payment.  Citing to Humana Med. Plan, Inc. v W. Heritage Ins. Co., 832 F3.D 1229 (11th Cir. 2016) and In re Avandia Mktg., Sales Practices & Prod. Liab. Litig., 685 F.3d 353 (3d Cir. 2012), MSPA argued that its reimbursement rights and the rights of similarly situated MAOs was essentially automatic.

Although the trial court agreed with MSPA’s arguments and granted the class certification, the Florida Third Circuit Court reversed on appeal finding that class certification was not appropriate and each MAP recovery right would need to be assessed on a case-by-case basis.  The Court determined that the MSP was never intended, nor did it supersede, state insurance law.  The Court noted that for MSPA to assert a recovery action, it must not only demonstrate that it made a proper conditional payment, but that Ocean Harbor was also required to make a payment under Florida no-fault law.

The Court also rejected MSPA’s argument that Ocean Harbor was required to, and failed to, exhaust its administrative remedies to appeal the MSPA’s organizational determination regarding the conditional lien pursuant to 42 C.F.R. § 422.566, et seq., Significantly, the Court determined that there was nothing in this regulation or subsequent legislation that required a primary plan to appeal an organizational  determination and administrative appeals were only applicable to traditional Medicare liens.

This case illustrates not only the due process requirements for MAP recovery rights, but also the application of these recovery rights in the context of state law and the MSP.  It also illustrates the difficulty primary payers may have in challenging these rights when a formal appeal process is not applicable to these plan as is required under traditional Medicare lien recovery.  As more and more recovery actions are brought by MAPs, it is important for primary payers to not only properly identify MAP liens, but to understand how and when to satisfy these liens to prevent future liability.

What’s New in the New WCMSA Reference Guide 2.8

On October 1, 2018, the Centers for Medicare and Medicaid Services (CMS) issued the latest version of the WCMSA Reference Guide, COBR-Q4-2018-v2.8.  The Guide includes updates regarding the discontinuation of Social Security numbers as  a Medicare identifier; a link to the applicable CDC Life Table; and further illustrations for determining the jurisdiction and pricing methods for a WCMSA.

As required by Section 501 of the Medicare Access and CHIP (Children’s Health Insurance Program) Reauthorization Act (MACRA) of 2015, CMS is required to discontinue utilizing Social Security Numbers (SSNs) as Medicare identifiers and must distribute new 11-byte Medicare Beneficiary Identifier (MBI) cards to each Medicare beneficiary.  Distribution of these MBI cards began in April 2018.  As noted in the new Reference Guide and prior CMS publications, the distribution must be completed by April 2019. In addition, fields that were formerly labeled as “HICN” have now been relabeled as “Medicare ID. ” CMS noted that it can now can accept either HICN numbers or the new MBI numbers for beneficiary identification.

In prior versions of WCMSA Reference Guide, CMS delineates how to determine the correct jurisdiction for the WCMSA.  The new Reference Guide does not change this analysis and, instead, includes additional illustrations to further clarify this process.  This illustration can be found in Table 9-1 of the Guide.  In addition, in Table 9-2, CMS delineates the appropriate pricing methodology to utilize once the jurisdiction has been determined.  Specifically, CMS notes that for cases filed with the U.S. Department of Labor Office of Workers’ Compensation Programs (OWCP), pricing is based upon the OWCP Fee Schedule; for Longshore Harbor Workers’ Compensation Act settlements, pricing is based upon the Office of Workers’ Compensation Programs fee schedule for the zip code of claimant’s residence, unless actual charges are specified; for jurisdictions with a workers’ compensation fee schedule, the most current version of the fee schedule will be used; and for jurisdictions that do not have fee schedules, pricing is based upon actual charges.

The new WCMSA Reference Guide can be found here at https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Workers-Compensation-Medicare-Set-Aside-Arrangements/Downloads/WCMSA-Reference-Guide-Version-2_8.pdf

Construction Claims and Medicare Secondary Payer Compliance – Construction Claims Fall Edition 2018

Construction claims present unique and complicated Medicare Secondary Payer statute (“MSP”) issues. Often such claims involve multiple defendants – each of whom may have different levels of involvement and responsibility for underlying claims. Each claim may follow a different timeline, with some claims settling early and others lingering for years. Not to mention that each claim may be resolved for vastly different amounts depending on liability, causation, policy limits and statutory damage caps. Most importantly for purposes of how MSP issues are addressed, construction claims may involve both workers’ compensation and liability claims. This article is intended to highlight where MSP issues may arise in construction claims and provide best practices for addressing.

In many construction claims, there may be both workers’ compensation and liability considerations depending on the nature of the relationship between the claimant and the defendant – employer/carrier or liability carrier. In a wrap-up policy, both exposures may exist for the same carrier. To add more complexity, it is not uncommon for questions to arise as to whose employee is involved (general contractors or subcontractors) or whether the status of an injured party is that of an employee or an independent contractor. There are a number of scenarios that can complicate the aspects of MSP compliance, whether it be mandatory insurer report, lien resolution or addressing future medical exposure.

The seemingly simplest scenario is where an employee is injured and there is no third party involved. If the employer or carrier is identified and acknowledges the employment relationship, the case is straight forward and the employer, and its carrier, depending on the employee’s Medicare status,  are responsible for mandatory insurer reporting, lien resolution and addressing the future exposure. Nevertheless, some possible problem areas may still exist or arise. For example, the workers’ compensation coverage may have lapsed, usually due to non-payment. This scenario may now involve another party, e.g. the general contractor, or it may allow the employee to assert a liability claim against the employer.

It is not uncommon for a party to represent themselves as an independent contractor for whatever reason, e.g. to avoid having to secure workers’ coverage. Further that independent contractor on the jobsite may involve other workers, which further compounds the issue. Despite safeguards as to notification to parties when a policy is lapsed or about to, it does not always work as intended. The end result is that another party may be forced to assume a risk they were not aware existed.

The next common situation is when an employee is injured where a potential third party exists that may be responsible. A key principle here is that if the workers’ compensation matter remains open, i.e. no settlement of the medical aspect occurs, the primary responsibility as to Medicare remains with the employer/carrier; thus, the third party (e.g. another contractor, product manufacturer, etc. ) should have no responsibility to Medicare for liens or future exposures. They may, however, still have an obligation to report under mandatory insurer reporting requirements if payments are made to a Medicare beneficiary.

Employers/carriers have decisions to make when a viable third party exists. Most workers’ compensation jurisdictions have regulations that address the employers’ rights when a third party is involved. They have rights both as to payments made as well as payments that may be made. For example, as to payments made, a “Holiday” (a respite from ongoing payments until the lien amount is satisfied) may be available; or in many jurisdictions, a partial Holiday in which the claimant must fund their medical care in order to gain the recovery.

The decision to enforce the lien and the Holiday instead of settling the matter is one that should be given considerable thought as each approach has potential benefits and downsides. Negotiating a settlement in conjunction with the third party settlement is often the choice made. Depending on the strength of the liability claim and the coverage limits available, a compromise of the lien and future credit is usually the result. This approach allows certainty for the employer. Claimants do not usually want to reimburse cash but are usually more willing to agree to larger amounts on the Holiday.

For employers that insist on lien reimbursement (total or partial depending on the regulations) and then enforcing the Holiday, there is the danger the claimant will use up the Holiday prematurely and the employer will be back in the claim. The employer does not generally have any cost containment control in those circumstances. There are other circumstances where the recovery amount is also applied to the ongoing payments where the employee is responsible for 66 2/3% of the bills and the employer 33 1/3 %. In that situation, the employer may wish to control the payments and apply fee schedules and/or cost containment to extend the Holiday as long as possible.

In addition to Holiday issues, construction cases often involve multiple parties, both on the employment issue but more often as to the defendants in a liability claim. It is common for the injured party to involve all contractors on the job to ensure they do not leave a responsible party out. Multiple parties complicate the matter as some are let out early, others contribute smaller amounts and still others litigate. Figuring out lien recovery for these parties is complex. Further, in the course of these claims assessing who is responsible to Medicare for how much and how that amount is determined, responsibilities may vary depending on who the party is, i.e. employer, carrier, third party, etc.

It is generally accepted that upon settlement, the MSP requires the parties to a workers’ compensation or liability settlement to reimburse the Centers for Medicare & Medicaid Services (“CMS”) for any conditional payments made by Medicare. In addition, the primary plan must report any ongoing responsibility for medical (“ORM”) and any total payment obligations to claimant (“TPOC”) to CMS. The MSP prohibits the parties to a settlement from unreasonably shifting the burden of future medical care to Medicare. That means the portion of the settlement that is reasonably allocated to future medical care must be used first for that injury-related care before Medicare pays. In this regard, it is well settled in workers’ compensation claims that a Medicare set-aside or other allocation of settlement proceeds is necessary to protect Medicare’s interests and the claimant’s Medicare benefits. On the other hand, it is rather unsettled how and when it is necessary to establish a Medicare set-aside or other allocation of settlement proceeds., frequently touching on all of the foregoing.

The best interpretation of the MSP is that all parties to a settlement have a duty to reasonably consider Medicare’s interests. This means that the funds representing the settlement of the future medical care related to the claimed injury (and otherwise covered by Medicare) must be considered a primary payment to Medicare. Since these funds are a primary payment, Medicare is secondary to the funds allocated for future medical. This interpretation complies with all aspects for the MSP law and fits within the purpose of the MSP.

The MSP is designed to prevent parties from unreasonably shifting the burden of the future health costs to Medicare. This can be done by the allocation of the settlement into medical, economic or other damages categories and in some cases, an MSA is also the appropriate consideration of Medicare’s interests. Currently, best practices suggest that a third party prepare or audit the MSA (or medical cost projection for an allocation) as this third party adds credibility, expertise and objectiveness to the MSA or the settlement allocation.

The following is an outline of the various steps that should be taken in reviewing a claim for Medicare’s potential interest.

  1. Determine whether the claim involves a Medicare beneficiary (or a potential Medicare beneficiary).

This information may be obtained in several ways. A claimant may be asked upfront about his Medicare beneficiary status, or an inquiry can be made to the Social Security Administration Agency. An adjuster may also look for “red flags” that indicate that Medicare may be involved.  If the claimant is not on Medicare at the time of the initial investigation, the information should be periodically updated.

  1. If the claimant is currently a Medicare beneficiary, investigate/negotiate the conditional payments in the claim.

In a liability claim, a payment by Medicare does not become “conditional” until the liability claim settles, or an award is entered. These events turn the insurance carrier into a primary payer and Medicare into a secondary payer. Although a final conditional payment demand will not always be available prior to settlement, the parties may estimate the amount of Medicare’s payments during the life of the claim. This estimate may be based on information found in the medical records, billing statements, or in a settlement demand. The claimant may also access conditional payment information by registering with www.mymedicare.gov. MSA vendors are also able to aid with the conditional payment search, as well as with reviewing and analyzing the payments made.

  1. Address the conditional payment reimbursement issue in the terms of the settlement agreement.

Identify the party responsible for the conditional payment reimbursement to Medicare. Although a claimant may assume responsibility for the conditional payments, Medicare will still have a cause of action against the primary payer if reimbursement is not made by the claimant. Double damages may be sought if the U.S. Government brings suit to collect the conditional payments. The suit may be filed against “any entity, beneficiary, provider, supplier, physician, attorney, State agency or private insurer that has received a primary payment” prior to Medicare’s reimbursement.

  1. Determine whether the nature of the injury claimed is likely to involve future Medicare‐covered care.

The MSP prohibits the parties to a settlement from unreasonably shifting the burden of future medical care to Medicare. In light of this, the claims handler should review the nature of the injury being alleged and the likelihood that future medical care will be involved. Catastrophic injuries, as well as more significant orthopedic or neurological injuries, are more likely to result in future care than the more minor soft tissue types of injuries. The likelihood of future medical care may be based on a review of the treating physician’s opinions, the standard of care guidelines for the type of injury sustained, as well as the type of prior treatment provided in the claim.

If future medical care is likely to occur, a WCMSA, LMSA or other allocation provides a method for avoiding a shift of future injury‐related medical care to Medicare. The parties may elect to fund a commutation WCMSA or LMSA that fully funds all of the future injury-related Medicare-covered treatment or a compromise allocation that apportions funds from the net settlement for future injury-related Medicare-covered treatment.

As demonstrated, construction claims are very complex and may implicate MSP issues in a variety of ways. It is important for all parties to carefully analyze the claim to ensure MSP compliance. More importantly, parties should continually reevaluate through the life of each claim as MSP issues are sure to evolve.

Medicare Secondary Payer Best Practices PRIMA Podcast with Patrick Czuprynski

Hear the Full PRIMA Podcast Here

The Medicare Secondary Payer (MSP) Act has expanded the scope of workers’ compensation and liability claims beyond each individual state’s law concerning Medicare compliance. It also extends responsibility to plaintiffs’ attorneys, claimants of state, as well as self-insureds. As a result, it is vital to realize who is making payments for medical benefits on both accepted cases and disputed cases.

There are a variety of ways that your organization can consider the MSP act and still be in compliance with its new regulations. It is advised to begin with conducting a comprehensive review of each claim prior to choosing a course    of action.

When determining Medicare’s future interest in a settlement, an entity will generally not provide a future medical allocation while documenting that no future medical allocation was provided.

Options for considering Medicare’s future interest in a settlement include:

  • Commutation approach – takes into consideration what to reasonably expect to compensate for future medical expenses after the date of the settlement as a result of a work-related injury or disease.
  • Compromise approach – takes disputes on the case into consideration and is generally computed by an MSA (Medical Savings Account) that funds an accepted portion of the claim or an MSA that is based on a percentage of the settlement.
  • Seeking CMS (Centers for Medicare and Medicaid Services) approval – A voluntary process in which parties involved in the case are not required to undertake. This process typically leads to an overfunded MSA or an MSA that funds all possible treatments rather than probable or expected treatments.

Entities can address Medicare’s reimbursement requests on payments made by asking for documentation confirming that the request is related to the case and to ensure that reimbursement is indeed owed. At times, Medicare may ask for something that is not related to the claim itself. If it is a possibility that Medicare wrongfully collected on the case, the entity should investigate/appeal the request and search for methods to reduce the amount they are asking for or they have already taken from the case.

When reviewing these cases, it is imperative to maintain the mindset that the burden of proof should lie with Medicare.