Monthly Archive for July, 2011

CMS TEMPORARILY SUSPENDS THE ISSUANCE OF DEMAND LETTERS

Published on July 26, 2011 in Uncategorized. Closed Tags: , , , .

In a recent alert, the Medicare Secondary Payer Recovery Contractor (MSPRC) announced that the Demand letter for liability insurance (including self-insurance), no-fault insurance and workers’ compensation has been temporarily suspended while the letter is under review.  After the MSPRC receives notice that a settlement, judgment or other payment was reached, it calculates the final reimbursement amount and issues a “Demand Letter.”

The MSPRC has already reviewed the Rights and Responsibilities letter (“RAR”) and recently announced that its review is complete.  Issuance of the RAR is anticipated to resume on June 10, 2011.  After issuing the RAR, the MSPRC automatically generates a “Conditional Payment Letter” (“CPL”) within 65 days. Until MSPRC resumes issuing the RAR, expect delays obtaining conditional payment information.

It appears that as a result of the Haro decision, MSPRC is now reviewing its internal policies and procedures before issuing any more conditional payment demand letters.

Click here to see the alert and updates.

NEW JERSEY SUPERIOR COURT HOLDS THAT SAME STANDARD APPLIES TO MSAs IN BOTH WORKERS’ COMPENSATION AND THIRD-PARTY LIABILITY CASES; ATTORNEYS’ FEES MAY BE DEDUCTED FROM MSA

Published on July 26, 2011 in Uncategorized. Closed Tags: , , , .

As further support that Medicare Set-Asides (MSAs) are necessary to protect Medicare’s future interest in third-party liability cases, the New Jersey Superior Court recently held that there was no reason to apply a different standard to set asides created with money obtained from third-party liability claims than it applies to set asides created with money obtained from workers’ compensation claims.  See Hinsinger v. Showboat Atlantic City, 2011 N.J. Super. LEXIS 96, at *3 (Jan. 21, 2011).  The court explained that the statutory and policy reasons for creating MSAs in both situations are the same: to protect the government from paying medical bills for which the beneficiary has already received money from another source.  Further, the court held that the same regulations and directives that apply to set asides created in workers’ compensation cases apply to third-party liability cases.

The court also considered whether Medicare regulations allow an attorney to recover fees for a judgment or settlement obtained on behalf of a client in a civil suit from the MSA.  After the plaintiff prevailed at trial, the parties settled the matter for $600,000.  Because the plaintiff only recently became eligible for Medicare, Medicare had not yet made any conditional payments.  Therefore, the only issue was the protection of Medicare’s future interest.  In an effort to comply with the Medicare Secondary Payer Act, the parties agreed to allocate $180,600, the amount the jury had awarded for projected actual medical costs, to an MSA.  Subsequently, the plaintiff’s counsel sought permission to withdraw a portion of his fees from the money allocated to the MSA.

The court found that 42 CFR § 411.37, which provides for a pro-rated reduction of attorneys’ fees from the total amount of conditional payments due to CMS, could also apply to funds obtained for future medical expenses obtained in a civil action.  The court reasoned that its decision to apply 42 CFR § 411.37 was in line with general principles of equity due to the fact that plaintiffs’ attorneys work on behalf of Medicare to secure funds to pay future medical expenses Medicare would otherwise pay.  Accordingly, the court held that attorneys’ fees incurred to procure a settlement or judgment may be deducted from the money allocated to an MSA.

It is unclear whether Medicare will provide coverage after the plaintiff’s reduced MSA is exhausted or whether Medicare will require the plaintiff to spend the amount deducted in attorneys’ fees.

PLAINTIFFS CANNOT JOIN MEDICARE TO LAWSUIT IN ATTEMPT TO FORCE MEDICARE TO MAKE CLAIM FOR CONDITIONAL PAYMENTS

Published on July 26, 2011 in Uncategorized. Closed

In Black v. John/Jane Doe Employee, et al., No. 11-25-DLB-JGW (E.D. Ky. May 2, 2011), the plaintiff sued the tortfeasors and Medicare for personal injuries she sustained in a slip and fall accident.  The plaintiff alleged that because Medicare may have paid some of Plaintiff’s medical bills from the accident, it “should be required to . . . assert [its] interests or otherwise be forever barred from doing so as to any party hereto.”  The court granted Medicare’s motion to dismiss for lack of subject matter jurisdiction holding that disputes regarding the reimbursement of conditional payments can only be reviewed by a federal court after Medicare’s administrative procedure has been exhausted.  The fact that Medicare may seek reimbursement of conditional payments made on behalf of a plaintiff does not give plaintiffs a right to circumvent the administrative process.

This case further demonstrates that a settlement, judgment or award must exist in order for Medicare to assert a claim for conditional payments.  Attempts by plaintiffs to join Medicare as a party to a lawsuit in order to force Medicare to make a claim for conditional payments will not be successful.

SIXTH CIRCUIT AFFIRMS SANCTIONS AGAINST PLAINTIFF FOR FILING QUI TAM ACTIONS UNDER THE MSP ACT

Published on July 15, 2011 in Uncategorized. Closed

The United States District Court for the Eastern District of Tennessee granted sanctions totaling $276,589.00 against plaintiff for filing qui tam actions under the MSP Act.  Click here for a discussion of the decision.  Plaintiff appealed, and the United States Court of Appeals for the Sixth Circuit affirmed the district court’s decision.

The Sixth Circuit held that the district court did not abuse its discretion in awarding the sanctions against plaintiff and his counsel.  The court explained that plaintiff was on notice of the frivolous nature of his filings.  Plaintiff had filed multiple qui tam actions under the MSP across the country.  However, no court has ever found that the MSP is a qui tam statute, permitting private attorneys to sue on behalf of the United States.  The court emphasized the fact that there is no legal support for plaintiff’s argument that the MSP Act is a qui tam statute. 

Date of Decision: July 8, 2011
Stalley v. Mt. States Health Alliance, 2011 U.S. App. LEXIS 13895, No. 10-5211/5212 (6th Cir. Jul. 8, 2011) .

DISTRICT COURT RULES DELAY IN PAYMENT OF SETTLEMENT NOT BAD FAITH WHERE INSURER WAS WAITING TO DETERMINE CONDITIONAL PAYMENT AMOUNT

Published on July 8, 2011 in Uncategorized. Closed Tags: , , .

In Wilson v. State Farm Mutual Automobile Insurance Company, No. 3:10-CV-256-H, 2011 U.S. Dist. LEXIS 63430 (W.D. Ky. June 15, 2011), the United States District Court for the Western District of Kentucky held that an insurance carrier did not act in bad faith by delaying payment of settlement proceeds until it determined the conditional payment amount owed to Medicare. 

This case involved a plaintiff who was injured in a collision with another vehicle.  The driver of the other vehicle was at fault and uninsured.  The plaintiff incurred significant medical bills, some of which were paid by Medicare.  Because the driver was uninsured, plaintiff submitted an uninsured motorist claim to his automobile insurer, which agreed that plaintiff was due uninsured benefits up to the policy limits of $50,000.  The insurer, however, decided not to disburse the settlement proceeds until it obtained the conditional payment amount from Medicare.  In response, plaintiff sued the insurer claiming it was bad faith to delay payment of the $50,000 merely to protect itself from later liability to Medicare. 

The court found that due to the insurer’s potential liability for reimbursement of the conditional payment amount to Medicare, its delay in paying the settlement proceeds was “responsible.”  In its opinion, the court concluded that the insurer’s efforts to comply with federal law and to protect its own legitimate interest against overpayment were reasonable and were not in bad faith, especially because the insurer did not delay payment in order to reduce its payment or harass the plaintiff.

Wilson illustrates the problems with Medicare’s current procedures because the conditional payment amount cannot be obtained until after a claim is settled.  While an insurer waits to obtain the conditional payment amount, it risks potential liability for bad faith for failing to pay a settlement in a timely manner.  Under proposed legislation, H.R. 1063, the Strengthening Medicare and Repaying Taxpayers Act (SMART Act), parties would be able to obtain the conditional payment amount before settlement.

Date of Decision: June 15, 2011 

Wilson v. State Farm Mutual Automobile Ins. Co., No. 3:10-CV-256-H, 2011 U.S. Dist. LEXIS 63430 (W.D. Ky. June 15, 2011),