Monthly Archive for March, 2011

KENTUCKY DISTRICT COURT HOLDS THAT CONDITIONAL PAYMENT RESOLUTION DOES NOT BECOME RIPE UNTIL REPAYMENT IS REQUIRED

Published on March 31, 2011 in Uncategorized. Closed Tags: , , , .

In Portman v. Goodson et al., after the defendant was sued by the plaintiff for personal injuries, the defendant filed a third-party complaint against the Secretary of the U.S. Department of Health and Human Services (“Secretary”) seeking a declaratory judgment with respect to the amount of any reimbursement the Secretary might seek pursuant to the Medicare Secondary Payer (MSP) Act.  The defendant contended that Medicare made conditional payments on behalf of the plaintiff and argued that he had “exposure to liability” for reimbursement and that any potential liability for repayment should be established. 

The U.S. District Court for the Western District of Kentucky granted the Secretary’s motion to dismiss.  The court held that the third-party complaint was premature because it failed to allege a “case or controversy” cognizable under the Declaratory Judgment Act, 28 U.S.C. § 2201(a), and therefore, the court lacked subject matter jurisdiction.  The court explained that the MSP Act makes clear that Medicare conditional payments do not become subject to reimbursement until a beneficiary receives an award, settlement or other payment in satisfaction of his claims.  Further, the court stated that administrative remedies must be exhausted before a federal district court has jurisdiction over Medicare conditional payment issues.  The court found that the case was not ripe for disposition because there had not yet been a settlement, judgment or other payment to trigger an initial determination by the Secretary and the administrative process had not yet been exhausted.

This case highlights the problems an insurance carrier faces because it does not know the amount of a Medicare reimbursement before settlement.  Once the Medicare Secondary Payer Recovery Contractor (MSPRC) has been notified of a claim by a beneficiary, it will issue a “Rights and Responsibilities” (RAR) letter informing the beneficiary of his or her responsibilities to Medicare.  Within 65 days from the date of the RAR letter, the MSPRC is supposed to automatically issue a “Conditional Payment Letter” (CPL), which contains the amount Medicare paid for medical claims related to the case.  However, it is not until after the MSPRC receives notice that a settlement, judgment or other payment was reached that it calculates the final reimbursement amount and issues a “Demand Letter.”

The system as currently administered precludes insurers from determining the exact amount of the Medicare reimbursement before settlement.  Under proposed legislation, H.R. 1063, The Strengthening Medicare and Repaying Taxpayers Act (SMART Act), the Secretary would be required to provide the reimbursement amount upon request.

Date of Decision: February 28, 2011
Portman v. Goodson et al., No. 3:10CV-313-S, 2011 U.S. Dist. LEXIS 19491 (W.D. Ky. Feb. 28, 2011).

PROPOSED LEGISLATION TO IMPROVE THE EFFICIENCY OF THE MSP SYSTEM

Published on March 21, 2011 in Uncategorized. Closed Tags: , , .

On March 14, 2011, Congressman Tim Murphy (R-PA) and Congressman Ron Kind (D-WI) introduced H.R. 1063, The Strengthening Medicare and Repaying Taxpayers Act (SMART Act), into the U.S. House of Representatives.  A year ago, Pat Murphy introduced, H.R. 4796, the Medicare Secondary Payer Enhancement Act of 2010 (MSP Enhancement Act), which proposed similar changes to the MSP Act.  See Proposed Changes to the Medicare Secondary Payer Act.  Both bills share a similar goal: making the process of determining the Medicare reimbursement amount more efficient so that parties know the amount of the reimbursement before settlement. 

Under the SMART Act, the Secretary of the U.S. Department of Health and Human Services would have 65 days from the receipt of a request to provide the Medicare reimbursement amount.  Under the proposed changes in the MSP Enhancement Act, if the Secretary failed to respond to the initial request for the reimbursement amount, the applicable plan would automatically not be liable for or obligated to make the reimbursement payment.  Under the proposed changes in the SMART Act, after the Secretary’s initial failure to respond to the request for the reimbursement amount, the applicable plan must provide an additional notice to the Secretary of its failure to respond.  The Secretary would have 30 days from the additional notice to provide the reimbursement payment before the applicable would not be liable for or obligated to reimburse the reimbursement payment, except where the Secretary’s failure to respond was justified due to exceptional circumstances.  The enactment of the SMART Act would help facilitate settlements because parties would know the amount owed to Medicare during their settlement negotiations. 

Similar to the MSP Enhancement Act’s proposed changes, the SMART Act’s amendments include: (1) a three-year statute of limitations for MSP recovery actions from receipt of the Section 111 report; (2) discretionary penalties instead of mandatory penalties; and (3) the development of safe harbor provisions for meeting the mandatory reporting requirements (i.e., good faith efforts to identify a beneficiary).  Unlike the MSP Enhancement Act, the SMART Act does not provide a mechanism for parties to voluntarily submit a “conditional payment calculation” and reimbursement payment to CMS and wait 70 days for CMS to contest the amount and to provide a final demand for the balance of the remaining amount owed. 

Some of the SMART Act’s amendments would benefit all parties involved.  For example, the bill would also establish a minimum threshold that would exempt small claims from the MSP reporting requirements, ensuring that the government does not spend more collecting on small claims than it will ultimately recover.  Additionally, CMS would be required to implement a reporting process so that responsible reporting entities do not have to access or report social security numbers or health identification claim numbers (HICN).  It is anticipated that CMS will use part of the Medicare beneficiary’s social security number or HICN, instead of the entire number.