The court found that the plaintiff was required to reimburse Medicare for all conditional payments, regardless of when they were made. The sum of those payments was $4,352.67. Additionally, the court determined that an MSA was required in the amount of $3,200 to cover the plaintiff’s reasonably foreseeable medical expenses that would otherwise be paid for by Medicare in the future. With respect to unforeseen medical expenses, the court held that the plaintiff must not bill Medicare until the funds he received in the settlement were exhausted.

This case is another example of how CMS will not often intervene to assure compliance with the MSP Act. Litigants are thus forced to request judicial intervention to ensure compliance with the MSP.

Date of Decision: March 12, 2012
Frank v. Gateway Insurance Company, No. 6:11-0121, 2012 U.S. Dist. Lexis 33581 (W.D. La. Mar. 12, 2012)

The court reviewed the scope and purpose of the MMSEA, noting that “[a]pplicable plan was expressly defined to include liability insurance” and that the OSBPLF is “liability insurance.”
However, the court held that, because the OSBPLF provides “legal malpractice insurance,” it does not cover claims for “bodily or emotional injuries,” such as the claims covered by Medicare. As such, the OSBPLF will never have primary responsibility for paying for “items or services claimed by a Medicare beneficiary,” as required to be an RRE under the MMSEA.

DHHS argued that a malpractice claim involving a personal injury case could involve medical expenses paid conditionally by Medicare. While the court agreed with this assertion, it held that in such a case the OSBPLF would not have primary responsibility to pay for the claimant’s medical injuries. Moreover, the court found that there would be a significant time lag from when an injury occurs to when the OSBPLF pays out a claim. The court stated that although Medicare authorized conditional payments following an accident, it is unlikely that Congress expected reimbursement from legal malpractice insurers. Therefore, the court held that the OSBPLF is not a liability insurance plan upon which Congress imposed reporting requirements under the MMSEA.

This case provides some assistance in deciphering the language of the MMSEA. While this decision represents a bright-line rule and may provide guidance to entities that are unsure of their status as an RRE, it is very limited in scope. Therefore, the decision may not provide substantial direction to certain liability insurers that fall somewhere between a malpractice carrier and one that insures against personal injury.

Date of Decision: March 29, 2012
Oregon State Bar Prof’l. Liab. Fund v. U.S. Dept. of Health and Human Serv’s., No. 03:10-CV-1392-HZ, 2012 U.S. Dist. LEXIS 43790 (D.O.R. Mar. 29, 2012).
 

The following organizations have filed amicus briefs in support of the petition: Retail Litigation Center, Inc., Workers’ Compensation Section of the State Bar of Michigan, Property Casualty Insurers Association of America, et al., and DRI – The Voice of the Defense Bar. The government’s response is due on or before June 4, 2012. 

This issue is particularly important because Medicare’s current policy is that CMS is entitled to a full recovery of its conditional payment regardless of the fact that a beneficiary’s settlement can be significantly reduced to reflect the defendant’s exposure under tort liability concepts. Medicare’s current position hampers the settlement process by not only delaying settlements until the parties can obtain the MSP reimbursement figure but also increasing the settlements to fully reimburse the MSP claim.

In order to use this option, ALL of the following criteria must be met:

1. the liability insurance (including self-insurance) settlement, judgment, award, or other payment must be for a physical trauma based injury (the settlement does not relate to ingestion, exposure, or medical implant);
2. the total liability settlement, judgment, award, or other payment is expected to be and ultimately is $25,000 or less;
3. the Date of Incident occurred at least six months before the beneficiary or his/her representative submits the self- calculated final conditional payment amount to Medicare for review; and
4. the beneficiary demonstrates that treatment has been completed and no further treatment is expected, by:
             a. a written physician attestation, OR
             b. a written certification provided by the beneficiary that

(1) no medical treatment related to his/her case has occurred for at least 90 days prior to submitting the self-calculated final conditional payment amount to Medicare, AND
(2) he/she expects no further care related to his/her case.

The beneficiary will be asked to give up the right to appeal the amount or existence of this debt.  However, the beneficiary will keep the right to pursue waiver of recovery. 

CMS provides instructions on how a beneficiary or his/her representative can calculate the final conditional payment amount.  After the beneficiary submits his/her self-calculated amount, within 60 days, the MSPRC will inform the beneficiary whether it agrees or disagrees with the self-calculated amount.  If the MSPRC agrees with the Self-Calculated Conditional Payment Amount, it will send a letter informing the beneficiary that the amount is considered final, as long as the beneficiary settles within 60 days of the date of the MSPRC’s letter and the settlement is $25,000 or less.  If the MSPRC disagrees with the Self-Calculated Conditional Payment Amount, but the beneficiary is otherwise eligible for the process, the MSPRC will send the beneficiary a Medicare Amended Final Conditional Payment Amount. This letter will inform the beneficiary that the amount it calculated will be considered final, as long as the beneficiary settles within 60 days of the date of the MSPRC’s letter and the settlement is $25,000 or less. 

MSPRC advises that this option is best exercised when the beneficiary has a current conditional payment letter from the MSPRC and is nearing settlement of the case.

The MSP Act provides:

A primary plan, and an entity that receives payment from a primary plan, shall reimburse the appropriate Trust Fund for any payment made by the Secretary under this subchapter with respect to an item or service if it is demonstrated that such primary plan has or had a responsibility to make payment with respect to such item or service. . . .

42 U.S.C. § 1395y(b)(2)(B)(ii). According to the Hadden court, the use of the term “responsibility” clearly and unambiguously dictates that a Medicare beneficiary’s tort recovery from a tortfeasor/primary plan is subject to Medicare’s claim for reimbursement for the entire amount of Medicare’s conditional payments without regard to whether the tort recovery included full payment for the items and services paid for by Medicare. The court found that the amount the beneficiary is obligated to reimburse Medicare remains unchanged even if the claimant’s settlement reflects a reduced amount because of the alleged tortfeasor’s share of liability.

The practical import for those claims involving Medicare in the Sixth Circuit will be that CMS will be much less willing to negotiate its interest, taking the position that it is entitled to its full share regardless of equitable arguments. As a result, settlement will be less likely in cases involving a Medicare beneficiary. Beneficiaries will fear that Medicare will claim the entire settlement award.  Insurance carriers will be unwilling to pay any more than what they value the settlement regardless of Medicare’s present and future interest. As a result, the parties will be more likely to try those cases, which will adversely impact the court system.

The Hadden decision is at odds with the decision by the United States Court of Appeals for the Eleventh Circuit decision in Bradley v. Sebelius et al., No. 09-13765,  2010 U.S. App. LEXIS 20091 (11th Cir. Sept. 29, 2010), which held that Medicare was not entitled to a full recovery of the conditional payment amount in a wrongful death action.  Please click here for a discussion of the Bradley decision. As a result of the decisions in Hadden and Bradley, an obvious conflict exists among the United States Courts of Appeals with respect to whether Medicare must be willing to adjust the amount it seeks to recover in cases where the parties reach settlement, which may only be resolved by the Supreme Court of the United States. 

Date of Decision: November 21, 2011
Hadden v. U.S., No. 09-6072, 2011 U.S. App. LEXIS 23289 (6th Cir. Nov. 21, 2011).

Beneficiaries may not be willing to pay a quarter of a small settlement to Medicare, especially where the beneficiary is represented by an attorney and will have to pay attorney’s fees from those settlement proceeds.  It does not appear that this option provides a reduction for procurement costs.

Click here to see the MSPRC announcement.

The plaintiff was a current recipient of Social Security Disability benefits, and therefore, he was Medicare eligible.  To protect Medicare’s interest in the settlement, the parties agreed to establish an LMSA and retained the Garretson Resolution Group to determine an LMSA amount to cover the future cost of plaintiff’s accident-related medical treatment.  The proposed LMSA was submitted to CMS for approval, but CMS refused to review it due to “workload issues.”  Instead, the parties filed a motion with the court to review and approve the proposed LMSA.  The court approved the proposed LMSA finding that the parties had reasonably considered and protected Medicare’s interest in the settlement and that the LMSA amount fairly and reasonably took Medicare’s interest into account. 

It seems likely that CMS will refuse to review the majority of LMSA’s submitted for third-party liability settlements.  By having a court review and approve a proposed LMSA, parties can obtain some assurance that the amount set aside is sufficient and meet their good faith obligations.

Date of Decision: August 9, 2011
Smith v. Marine Terminals of Arkansas et al., No. 3:09-CV-00027 (E.D. Ark. Aug. 9, 2011).

While the scope of the memorandum is limited to cases where a treating physician is able to opine that no future injury-related care is needed, the memorandum serves as the first official notice regarding CMS’s position on the use of LMSAs.

Click here to view the memorandum.