CMS Announces Annual Liability Settlement Recovery Threshold to Remain $1000 for 2015

When a settlement, judgment, award, or other payments occurs (“settlement”), liability insurance (including self-insurance) bears the primary payment responsibility. Pursuant to the Medicare Secondary Payer Act (MSPA), Medicare is obligated to recover the settlement amount, less any attorney’s fees or costs, for the conditional payments it made for medical care related to the settlement.

Section 111 of the Medicare, Medicaid, and SCHIP Extension Act (MMSEA) requires that applicable plans making insurance or workers’ compensation settlement payments report the payments to Medicare so that Medicare is able to determine if any conditional payments were made and seek reimbursement of those amounts less attorney’s fees and costs.

Section 202 of the Strengthening Medicare and Repaying Tax Payers Act of 2012 (SMART ACT)  requires the Centers for Medicare and Medicaid Services (CMS) to annually review the costs associated with collecting data and determining the amount of Medicare’s recovery claim and calculate a single threshold for physical-trauma –based liability insurance settlements. In 2013, CMS established a single threshold where settlements of $1,000 or less do not need to be reported and the conditional payment need not be repaid.

CMS recently announced that is has reviewed the costs related to collecting data and recovering payments, and the single threshold will remain $1,000 in 2015. More specifically, CMS estimated that the average costs of collection was $420 per case, and the settlement amount range that had the demand amount closest to $420 was for settlements above $750 and less than or equal to $1,000. Based upon the above calculations, CMS determined it should maintain the threshold of $1,000.

With the revised threshold, Medicare will not require reporting and Medicare will not assert a recovery claim against physical trauma-based liability insurance settlements that are $1,000 or less.

CMS Announces Upcoming Update to the Medicare Secondary Payer Recovery Portal (MSPRP)

The Centers for Medicare & Medicaid Services (CMS) have announced that the Medicare Secondary Payer Recovery Portal (MSPRP) will be modified, as part of the Strengthening Medicare and Repaying Taxpayers Act of 2012 (the SMART Act), to include functionality for final conditional payment process by January 1, 2016.

On recovery cases that are 120 days (or less) from an anticipated settlement, the new functionality will permit authorized MSPRP users to notify CMS of the anticipated settlement and request that the recovery case be a part of the final conditional payment process. Once the process is requested, any disputes may be submitted through the MSPRP, and will be resolved within 11 days. Once any disputes have been resolved, and the case is within 3 days of settling, a final conditional payment amount can be requested through the MSPRP. The calculated amount will remain the final amount as long as the case settles within 3 days of the request, and the settlement information is submitted through the MSPRP within 30 days of the request.



Florida Supreme Court Rules that the Evidence of a Plaintiff’s Receipt of Social Legislation Benefits is Inadmissible

In John Joerg, Jr., et al v. State Farm Mutual Automobile Insurance Company, No. SC13-1768 (October 15, 2015), the Florida Supreme Court held that evidence regarding a plaintiff’s receipt of future social legislation benefits, such as Medicare, are excluded from evidence by the collateral source rule. The decision expressly receded from the court’s prior decision in Florida Physician’s Insurance Reciprocal v. Stanley, 452 So. 2d 514 (Fla. 1984), which held that evidence of free or low cost services from governmental or charitable agencies available to anyone with specific disabilities is admissible on the issue of future damages.

Under well-established Florida common law, the admission of evidence of social legislation benefits such as Medicare, Medicaid, or Social Security is considered highly prejudicial. However the decision in Stanley constituted a notable, narrow exception to the common law evidentiary rule precluding the admission of social benefits. In Stanley the plaintiffs alleged that the defendants’ medical negligence resulted in intellectual disability and cerebral palsy for their son. After the plaintiffs presented evidence of future damages, the court permitted the defendants to introduce evidence of “free or low-cost charitable and governmental programs available in the community to meet” the needs of plaintiffs son. The court reasoned that keeping evidence of benefits available to all citizens should be admissible for the jury in determining reasonable future care cost, to avoid an unnecessary and undeserved windfall to the plaintiff.
After the decision in Stanley, in an effort to reduce insurance costs and prevent plaintiffs from receiving windfall recoveries, that Florida legislature promulgated Florida statute § 768.76, which requires trial courts to reduce damage awards by the amount of benefits paid or otherwise available to claimants, from all collateral sources. §768.76 (1). There are no reductions, however, “for collateral sources for which a subrogation or reimbursement right exists.” Id.  The statute also expressly states that benefits received under Medicare or similar federal programs which provide for a lien on or a right to reimbursement from plaintiff’s recovery are not considered collateral sources. § 768.76(2)(b).
In Joerg, the Court was specifically faced with the question of whether the exception to the collateral source rule created in Stanley applies to future benefits provided by social legislation such as Medicare. The plaintiff in Joerg was a developmentally disabled adult who due to his disabilities, was entitled to reimbursement from Medicare for his medical bills. After being struck by a car, the plaintiff filed suit against State Farm Automobile Insurance Company (“State Farm”). The trial court precluded State Farm from introducing evidence of plaintiff’s future Medicare or Medicaid benefits, and judgment was entered on behalf of the plaintiff. On appeal, the Second District noted that the promulgation of the Florida statute left the viability of Stanley in question, but ultimately held that the plaintiff’s benefits were free and unearned, and therefore admissible under Stanley.

On appeal, the Supreme Court concluded that “future Medicare benefits are both uncertain and a liability under Stanley, due the right of reimbursement that Medicare retains.”  In reaching that conclusion, the Court discussed the Medicare Secondary Payer Act (“MSPA”) and the various enforcement tools employed by the Centers for Medicare and Medicaid Services (“CMS”) to enforce the right of reimbursement of Medicare benefits under the MSPA, such as the right to file an independent cause of action against any entities required to make a payment under a primary plan. The Court noted that “regardless of whether an individual has directly paid for his or her Medicare benefits, all Medicare beneficiaries who receive an award for future medical damages will be liable to reimburse Medicare, if Medicare makes a conditional payment on their behalf,” therefore the benefits provided are not free. Moreover, the Court found that ‘the uncertainty of the future for any social legislation benefits is far too great to permit damage reductions.” Lastly, the Court noted that its decision was supported by additional policy concerns. Specifically, the Court noted that its decision is consistent with the recognition of the highly prejudicial effect of evidence of collateral source benefits, and the basic principle that tortfeasors, and those who insure against the actions of tortfeasors, should not receive a windfall due to benefits available to injured parties, at the expense of taxpayers who fund social legislation benefits.

Tortfeasors, insurers, and defense attorneys, who litigate on their behalf, should take note of this holding and the impact it will have on their ability to defend against claims of future damages.

Court Enforces Settlement Agreement After Plaintiff Proves He Was Not Medicare Beneficiary

In Villare v. GEICO Casualty Co., the United States District Court for the Eastern District of Pennsylvania held that since Plaintiffs provided uncontroverted evidence that Mr. Villare was not a Medicare beneficiary and no Medicare lien existed, Plaintiffs had satisfied their obligations under the settlement agreement and were therefore entitled to the $100,000 payment for which they negotiatied. The Court reasoned that if GEICO wanted to make the settlement agreement contingent upon a letter from Medicare attesting that there was no Medicare lien and/or that there would not be any future Medicare lien, it could have done so during the settlement negotiations. Because GEICO did not do this, the Court granted Plaintiffs’ motion to enforce the settlement agreement.

The case arose from a collision between Plaintiffs, James and Suzanne Villare, and an underinsured motorist. Mr. Villare suffered injuries, and Plaintiffs sought to recover from their auto insurance company, GEICO, ultimately agreeing to settle for $100,000. The insurer drafted a Release and Trust Agreement, which Mr. Villare was unable to sign in its entirety because it included an inaccurate provision attesting that he was not within 30 months of becoming eligible for Medicare. Plaintiffs struck out the inaccurate provision, and signed the agreement with all of the other provisions intact. The insurer claimed that Plaintiffs did not fully satisfy the terms of the agreement and were consequently not entitled to the agreed upon amount because they did not provide proof of satisfaction of any Medicare liens in the form of a letter from Medicare. Both parties agreed that the only known outstanding lien owed by Plaintiffs was from Aetna, and Plaintiffs agreed to pay the Aetna lien with the proceeds from the settlement. As for any Medicare liens, the Court found that Plaintiffs fulfilled their obligation by providing uncontroverted evidence in the form of affidavits showing that Plaintiff was not yet eligible for Medicare and no Medicare liens existed. As a result, Plaintiffs were entitled to the full amount of the settlement.

CMS Finalizes SMART Act MSP Appeals Provisions

The Centers for Medicare & Medicaid Services (CMS) has published a final rule that implements Medicare Secondary Payer (MSP) appeals provisions under the Strengthening Medicare and Repaying Taxpayers Act of 2012 (SMART Act). More specifically, the rule addresses a multilevel appeal process for liability insurance, no-fault insurance, and workers ’ compensation laws, all of which are now included in the definition of an applicable plan, when Medicare pursues an MSP recovery claim directly from the relevant plan. This appeal process includes a redetermination by the contractor issuing the recovery demand, a reconsideration by a Qualified Independent Contractor (QIC), an Administrative Law Judge (ALJ) hearing, a review by the Departmental Appeals Board’s (DAB) Medicare Appeals Council (MAC), and eventual judicial review. The rule makes the applicable plan the sole party to the initial determination, which means that the applicable plan would also be the sole party to a redetermination or subsequent level of appeal with respect to that initial determination. The new rule also ensures that the special provision that beneficiaries as well as their representatives must receive notices or requests in an MSP case continues to apply only to beneficiaries.

The rule will go into effect on April 28, 2015, and those included are parties to initial determinations issued on or after April 28, 2015 where CMS pursues recovery directly from the plan. CMS has affirmed, however, that it reserves the right to recover directly from an applicable plan notwithstanding any earlier attempts to recover from the beneficiary or provider.