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.

Gucwa v. Lawley: Injured worker and attendant care provider did not demonstrate standing in their complaint to sue under Medicare Secondary Payer Act (“MSP”).

On 4/16/2018, the United States District Court of Appeals for the Sixth Circuit ruled that a workers’ compensation carrier did not have to reimburse an injured worker or attendant care provider for double the amount of payments of medical expenses made by Medicare under the MSP. Gucwa v. Lawley, 2018 U.S. App. Lexis 9428 (4/16/2018, 6th Cir.). The Court ruled the injured worker, and attendant care provider did not demonstrate standing in their complaint to seek reimbursement for from the workers’ compensation carrier under the MSP.

Standing is one among other requirements that must be demonstrated by a plaintiff in Federal Court in order for the Court to have authority over the parties and case. The plaintiff must show that they were in fact injured by the other party. There are a few federal laws that allow a person to sue on behalf of the government where the person suffered no injury at all, called whistleblower laws or qui tam statutes. The MSP is not, however, one of those statutes.

In the circumstances of this claim, Nancy Gucwa provided attendant care treatment to an injured worker, Mark Marusza, related to a workers’ compensation claim and sought payment from the workers’ compensation carrier. The workers’ compensation carrier disputed payments after obtaining favorable independent medical examinations. Medicare paid allegedly $15,665.00 in charges for Mr. Marusza’s treatment costs. The workers’ compensation claim went to trial, and a workers’ compensation judge ruled that claimant’s medical expenses should have been paid for by the workers’ compensation carrier.

After the workers’ compensation decision, Marusza and Gucwa filed an amended complaint in District Court alleging violations under various state and federal laws but also alleged double damages under the MSP for the expenses paid by Medicare. The District Court dismissed the complaint because Marusza or Gucwa did not demonstrate a concrete injury as a result of the carrier’s non-payment.

Marusza and Gucwa appealed the dismissal and provided the District Court with a demonstration of financial injury by stating that Marusza made for co-payments made to Medicare for Gucwa’s treatment in a request for reconsideration. However, because the copayment information was not a part of the original or amended complaint, the District Court continued to uphold its dismissal. Marusza and Gucwa appealed this decision to the Sixth Circuit Court of Appeals.

Although a party may bring a suit on behalf of the federal government under the MSP, the Sixth Circuit Court of Appeals stated in Gucwa that the federal law is not a qui tam statute and the plaintiff must also demonstrate injury. This means that where payments are made by Medicare that may require reimbursement under the MSP, the Sixth Circuit Court held a person suing on behalf of the government must also demonstrate an injury due to Medicare making payments.

The Court of Appeals agreed that the plaintiff did not demonstrate in their complaint that there was a financial or concrete injury suffered by Marusza or Gucwa as a result of Medicare making payments for the attendant care services. Although the plaintiff’s tried to bring in additional allegations of co-payments after dismissal, the Sixth Circuit noted no supporting documentation was provided with the allegation copayments. The Sixth Circuit Court of Appeals was not persuaded the additional allegations warranted an exception to the general law that arguments raised the first time in a motion for reconsideration are untimely and forfeited on appeal.

This case does not speak to the requirements or legal aspects of the MSP. Instead, this case demonstrates a plaintiff’s failure to allege financial injury in a suit under the MSP can lead to a dismissal, which is a universal legal principle.

Recap of Capitol Bridge LLC’s WCRC Transition Webinar

The new WCRC, Capitol Bridge presented a short transition webinar this afternoon.  The main presenters were Holly Havens of Capitol Bridge and  John Jenkins of CMS. Ms. Havens stressed the group’s 25 years of experience in providing various support services to CMS.  The group intends to maintain the same level of quality and timeliness with processing the files. According to their Statement of Work, development letters, if any, will be sent out within the first 10 business days after receipt of the CMS submission. Determinations will be issued within 20 business days after the complete submission is received.   Files that are currently pending will be transferred over to Capitol Bridge as of March 19, 2018, their first full day. There will be no change to CMS’ projection methodology.

Customer service will be handled by Capitol Bridge’s staff in Pittsford, New York. The preferred method of contact is by telephone, (833) 295-3773 or by email at WCRC@capitolbridgellc.com. All forms of communication must include the claim’s specific case number. Claims should continue to be submitted through the portal and to the same mailing address in Oklahoma. Capitol Bridge’s fax number is (585) 425-5390.

A question and answer session included questions regarding possible liability and no-fault MSA review. John Jenkins declined to address these during this call. Other questions focused on a concern about a backlog given the transition and the qualifications of Capitol Bridge’s reviewers. No backlog was anticipated by Capitol Bridge. Their review staff was also described as experienced MSA nurse reviewers, MSP compliance attorneys, physicians, and pharmacists. Capitol Bridge’s goal is to automate as much of the process as possible to avoid double keying of information and better coordinate the exchange of data between various systems. The portal user interface will not change as a result of the transition.  Capitol  Bridge also indicated that their 20 business day turn-around time should also apply to the amended review process. This presentation will also be available in the near future on CMS’ “What’s New” section on their website.

We will continue to keep you advised of further developments.

Bipartisan Budget Act of 2018: Medicaid Reimbursement Limited

On 2/9/2018, President Donald Trump signed into law the Bipartisan Budget Act of 2018. As a part of the 2018 Act, Section 53102 repeals section 202(b) of the Bipartisan Budget Act of 2013. Section 202(b) was the legislative response to the United States Supreme Court Decision in Arkansas Dept. of Health and Human Services, et. al. v. Ahlborn, 547 U.S. 268 (2006).

Practically speaking, the Supreme Court in Ahlborn ruled that where there is a settlement or judgment of a third party liability claim, federal law limited Medicaid’s recovery to the amount designated as payment of medical expenses. The Bipartisan Budget Act of 2013 altered the federal law the Supreme Court relied on in deciding Ahlborn. By altering the law, Congress provided direction to the Supreme Court and the public that Medicaid could recover up to the amount of settlement or judgment associated with a third party liability claims. The effective date of this change initially was 10/1/2014, but ultimately the change in recovery became effective on 10/1/2017.

The Bipartisan Budget Act of 2018 does away with Section 202(b) of the 2013 Act retroactively as of 9/30/2017 (before the 10/1/2017 effective date). This puts the Supreme Court’s interpretation of the federal law in Ahlborn back in play and may limit Medicaid’s recovery to the amount the settlement or judgment has designated as payment of medical expenses.

As more develops over Medicaid’s reimbursement rights, we will keep you posted.

CMS Delivers Expanded Re-Review Process and Modifies Case Re-Opening Process

CMS issued an updated Workers’ Compensation Medicare Set-Aside Portal (WCMSAP) User Guide, Version 5.1 on July 10, 2017. Section 12.4 of the Guide outlines the new expanded Re-Review process for CMS approved cases , as promised by CMS in its December 21, 2016 Alert. Under this Section, a party may now seek a re-review when the current care projections differ by 10% or $10,000, whichever is greater, from the projections in the CMS determination. The difference may be higher or lower.

In order to seek an “Amended Review”, the following requirements must be met:

  • The original submission must have occurred between one and four years before the date of the Amended Review request.
  • Cannot have a prior request for an Amended Review.
  • The change in treatment must result in the greater of either a 10% or $10,000 change in the prior CMS determination amount.

The portal process for completing the Amended Re-Review request requires a line by line review of the CMS determination projections along with the entry of the new treatment projections and reference to specific supporting documentation. Since parties are still able to seek a re-review when they disagree with the CMS determination, this right will presumably apply to the Amended Review determination.

The updated Guide also revised the case re-opening process for submissions that have been closed by CMS. Section 12.3.5 provides that parties will have to resubmit the entire case, along with all associated documentation, when more than 12 months have passed since the date of the last closeout letter. This is essentially a new CMS submission in the case.
NuQuest offers the “Amended Review Submission Service” upon request. Our Service Coordinators and Settlement Consultants will also work with you to determine the optimal approach for your case. Although the CMS “Amended Review” is a welcome addition, the NuShield Certified MSA may be a better option.