Monthly Archive for September, 2011

SIXTH CIRCUIT HOLDS THAT PRIVATE CAUSES OF ACTION UNDER THE MEDICARE SECONDARY PAYER ACT MAY PROCEED WITHOUT “DEMONSTRATED RESPONSIBILITY”

Published on September 23, 2011 in Uncategorized. Closed Tags: , , .

In a recent decision by the Court of Appeals for the Sixth Circuit, the court determined that the “demonstrated responsibility” provision in the MSP Act does not apply to lawsuits brought by private parties against insurers, and that the provision is only a precondition to lawsuits brought by Medicare for reimbursement.  See 42 U.S.C. § 1395y(b)(2)(B)(ii) (“A primary plan . . . shall reimburse [Medicare] for any payment made by [Medicare] . . . with respect to an item or service if it is demonstrated that such primary pan has or had a responsibility to make payment with respect to such item or service.”  In support of its determination, the court relied on the following five reasons: (1) the provision’s text places a condition only when primary plans must reimburse Medicare; (2) the structure of the MSP Act and placement of the provision; (3) relevant legislative history; (4) the backdrop of the MSP Act was Medicare’s failed attempts to bring lawsuits against tortfeasors; and (5) applying the “demonstrated responsibility” provision would limit lawsuits brought by private parties contrary to Congress’s intent.  The impact of this decision is that it will be easier for private parties to bring actions seeking reimbursement of Medicare’s conditional payments along with double recovery from the tortfeasor’s insurance carrier.

Date of Decision: September 2, 2011
Bio-Medical Applications of Tennessee v. Central States, Nos. 09-6121/6169 (6th Cir. Sept. 2, 2011).

COURT REJECTS GOVERNMENT’S MOTION FOR RECONSIDERATION BASED ON THEORY ON CONTINUING ACCRUAL ARGUMENT

Published on September 13, 2011 in Uncategorized. Closed Tags: , , , , , .

In a recent ruling, the U.S. District Court for the Northern District of Alabama denied the Government’s motion to reconsider the court’s dismissal of United States v. Stricker in September of 2010.  By way of background, the court dismissed the action based on its finding that the applicable statutes of limitations barred the Government’s complaint. 

In its motion to reconsider, the Government argued that the court erred in granting the motions to dismiss without considering its theory of continuing accrual argument.  Based on the theory of continuing accrual, the Government argued that because the administration of the settlement fund required disbursements on an annual basis, a new Medicare recovery cause of action accrued every year when the annual payments were made.  The court rejected the theory, finding it “lacking in law and logic.”  The court explained that the Government could have filed suit before the expiration of the statute of limitations seeking a total reimbursement for everything that was to be paid pursuant to the settlement agreement, including the continuing payments.  The court also noted that the regulations implementing the MSP Act define the Government’s right to initiate recovery as beginning “as soon as it learns that payment has been made or could be made under workers’ compensation, any liability or no-fault insurance, or an employer group health plan.” 42 C.F.R. § 411.24(b) (emphasis added). 

It is unknown how other courts will handle the theory of continuing accrual in the context of Medicare recovery actions.  However, there is currently no legislative, regulatory or case law to support it.

Date of Decision: August 12, 2011
United States v. Stricker, No. CV-09-2423 (N.D. Ala. Aug.12, 2011).

$300 THRESHOLD ON CERTAIN LIABILITY SETTLEMENTS

Published on September 12, 2011 in Uncategorized. Closed Tags: , , , .

On September 6, 2011, the Medicare Secondary Payer Recovery Contractor (MSPRC) announced that it has implemented a $300 threshold for certain liability insurances cases.  Medicare will not seek recovery against a liability insurance settlement if all of the following criteria are met:

  1. the settlement, judgment, award or other payment is for a Total Payment Obligation to Claimant (TPOC) of $300.00 or less;
  2. the settlement releases a physical trauma-based injury (This does not include alleged ingestion, implantation or exposure-based injuries);
  3. there are no additional settlements related to the same alleged incident; and
  4. a demand issue has not been issued.

The threshold does not apply to no-fault insurance or workers’ compensation settlements.  This is the first time that Medicare has implemented a threshold related to its rights of reimbursement under the MSP Act.  The purpose behind the threshold is to relieve some of the administrative burden for CMS, the MSPRC, plaintiffs and insurers, which suggests that Medicare recognizes some of the concerns with the MSP Act and potential recovery actions.

Click here to see the MSPRC alert.

PENNSYLVANIA STATE COURT INTERPRETS ZALEPPA TO MEAN SETTLING DEFENDANT CANNOT DELAY PAYMENT OF SETTLEMENT PROCEEDS DUE TO ITS POTENTIAL LIABILITY FOR REIMBURSEMENT

Published on September 12, 2011 in Uncategorized. Closed Tags: , , .

In a recent decision by a Pennsylvania state court, the court interpreted the Superior Court of Pennsylvania’s decision in Zaleppa v. Seiwell, 9 A.3d 632 (Pa. Super. Ct. 2010), to mean that a defendant could not delay paying settlement proceeds due to the fact that the plaintiff’s Medicare liens were unresolved. The court interpreted the holding in Zaleppa as follows:

a settling defendant has no legal responsibility to protect the interests of the United States government in respect to the payment of Medicare liens, and [] a settling defendant [is] not permitted to unilaterally attach to the payment of settlement proceeds, any condition seeking to protect the interest of Medicare.

In this case, the defendants refused to disburse the settlement proceeds until the plaintiff either satisfied his Medicare lien or advised the defendants of the amount of the lien owed. The parties’ settlement agreement provided that plaintiff would be responsible for directly paying all liens, including any outstanding Medicare lien. Defendants argued that they were not required to pay plaintiff any portion of the settlement proceeds until plaintiff received a Final Demand Letter from Medicare; otherwise, they could be subjected to penalties, interests, and the risk of double paying the monies. Plaintiff filed an Affidavit of Non-Payment of Settlement Funds pursuant to Pa. R.C.P. 2291 and requested the court to impose sanctions against Defendants for their failure to deliver the settlement funds to Plaintiff. The court denied plaintiff’s request for sanctions.

On September 24, 2010, after Plaintiff received a Final Demand Letter from Medicare, Plaintiff filed a Motion for Reconsideration of the court’s order. On October 22, 2010, the court ordered the defendants to release one-half of the settlement proceeds with interest and required the plaintiff to verify Medicare’s position with regard to any future medical lien. The court mandated that the remaining settlement proceeds remain in an interest bearing escrow account until verification from Medicare was received.

After the Superior Court issued an opinion in Zaleppa on November 17, 2010, plaintiff filed a motion for reconsideration of the court’s order. The court granted plaintiff’s motion and ordered defendants to immediately release the remaining settlement proceeds with the interest accrued, but denied the plaintiff’s request for additional simple interest, attorneys’ fees and costs, and Petition for Contempt/Sanctions. Plaintiff subsequently appealed the court’s refusal to impose sanctions or find defendants in contempt due to defendants’ failure to release the settlement proceeds. The court found that sanctions were not appropriate against the defendants based on a material dispute of the terms of the settlement. The parties had disputed whether defendants would be protected from any responsibility for paying the outstanding Medicare lien. The court explained that because of the uncertainty of the law at the time, namely, whether tortfeasors were liable to Medicare in litigation cases where Medicare payments were involved, it was uncertain whether defendants could be responsible under the Medicare Secondary Payer Act for reimbursing Medicare unless plaintiff paid his Medicare liens. The court held that based upon the legal uncertainties that existed at the time, Defendants acted appropriately and delivered the settlement proceeds to Plaintiff shortly after the Zaleppa decision. The court further explained that defendants acted on “good faith beliefs and justified concerns related to the delivery of the settlement proceeds without assurances.”

After the Superior Court’s decision in Zaleppa, it appears that Pennsylvania courts will not find a defendant’s delay in paying settlement proceeds to be justified where the delay is due to the defendant’s potential risk of a future Medicare recovery action. The decision is contrary to decisions by district courts in other jurisdictions that have held that a defendant’s delay in paying settlement proceeds until it determined the conditional payment amount owed to Medicare due to the insurer’s potential liability for reimbursement of was reasonable. See 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). Click here for a discussion of the Wilson decision. In light of the Zaleppa decision, the defendant insurer should pay the plaintiff settlement proceeds less any amount asserted by Medicare. It would also be a good practice to insure that the undisputed portion, if any, of Medicare’s interest is paid. With regard to the disputed portion, the insurer should put those monies in escrow pending a final decision by Medicare. In cases involving a plaintiff who may require future medical services, additional analysis is required.

Date of Decision: June 20, 2011
Mirabal v. Bard Access Systems, Inc., No. 2525, 2011 Phila. Ct. Com. Pl. LEXIS 147 (C.C.P. Philadelphia June 10, 2011).

ONE CMS REGIONAL OFFICE'S POLICY ON LIABILITY MEDICARE SET ASIDES

Published on September 6, 2011 in Uncategorized. Closed Tags: , , , .

While there are no formal guidelines with respect to Liability Medicare Set-Asides (LMSAs), a regional CMS office recently released a memo that addresses the issue. The memo was prepared by Sally Stalcup, MSP Regional Coordinator of the Region VI office, which covers Arkansas, Louisiana, New Mexico, Oklahoma and Texas. Stalcup explains that Medicare’s interests must be protected in settlements involving Medicare beneficiaries but that CMS does not mandate a specific mechanism to protect its interest. Stalcup also notes that the law does not specifically require a “set-aside” in any situation. Stalcup, however, emphasizes that the law requires that the Medicare Trust Funds be protected from payment of future services regardless of whether it involves a Workers’ Compensation and liability case. Stalcup notes that CMS prefers set-asides because they offer the best protection for both Medicare and the Medicare beneficiary.

Stalcup explains that anytime a settlement, judgment or award provides funds for future medical services, it can reasonably be expected that those monies are available to pay for future services “related to what was claimed and/or released in the settlement, judgment, or award.” Therefore, Medicare should not be billed for future services until the funds in the set-aside are exhausted. Medicare’s right of recovery, and the prohibition from billing Medicare for future services, extends to all those services “related to what was claimed and/or released in the settlement, judgment, or award” and not just services related to the actual injury/illness that is the basis of the case.

According to Stalcup, the fact that a settlement, judgment, or award does not specify payment for future medical services does not mean that they are not funded. The only time Medicare recognizes the parties’ allocation of liability payments to non-medical losses is when a court has reviewed the facts of the case and determined that there are no future medical services.

Stalcup explains that attorneys are going to have to decide, based on the specific facts of each case, whether there is funding for future medicals. If so, the plaintiff’s attorney should ensure that those funds are in fact used to pay for otherwise Medicare covered services related to the claim. Stalcup also recommends that defense counsel or the insurer document that they notified plaintiff’s counsel and the Medicare beneficiary that the settlement funds future medicals, which obligates them to protect the Medicare Trust Funds. While CMS does not review or sign off on counsel’s determination of whether there is a recovery for future medical services as a routine practice, regional offices may review submitted set-aside proposals, especially in cases involving a large recovery.

In order to determine what is necessary to comply with the Medicare Secondary Payer Act, counsel must find out whether the case involves a Medicare beneficiary or a plaintiff with a “reasonable expectation” of becoming a Medicare beneficiary within 30 months. If the case involves either of these, there will be a potential Medicare set-aside issue.