It is not surprising that plaintiffs claiming to be injured in auto accidents are often evasive about their prior medical history and treaters. In an article published by the American Medical Association, “Examinee-Reported History Is Not a Credible Basis for Clinic,” Robert Barth, Ph.D., cites numerous studies confirming that claimants tend to misrepresent their pre-claim functioning as having been “superhuman,” and distort their reported history in a fashion that potentially inflates the financial compensation for their claims.

This forces defense attorneys to utilize alternative methods in their ongoing attempt to locate the pre-accident smoking gun:

• Jail medical records: In a recent Michigan case, a plaintiff admitted he previously suffered a closed head injury from a prior auto accident. However, he claimed that he never had seizures before a subsequent auto/pedestrian incident, and was not taking Depakote for seizures. There was a gap in his post-MVA treatment, and it was discovered he was incarcerated. Indeed, the jail medical records confirmed a year before the accident that he suffered a seizure and was taking Depakote, an anti-seizure medication, for his condition.
  
• MasterTrace: This service bears fruit, particularly when a plaintiff has no prior history of health insurance, and has lived in other states. MasterTrace performs an extensive canvass profile of hospitals and pharmacies within a certain designated radius and matches up with the plaintiff’s background information to come up with potential “hits.” However, this service can be expensive, depending on the nature of the search.
• Prescription Drug Monitoring Programs (PDMP): A PDMP is an electronic database that collects designated data on substances dispensed to a patient in the state. Thirty-seven states currently have PDMPs. On September 1, 2011, pharmacists in Florida began submitting data to the recently implemented Florida Prescription Drug Monitoring Program. Across the country, access to this information is restricted to physicians and law enforcement personnel. While defense attorneys are not able to subpoena the information, if you are lucky, the plaintiff’s treating physician may request a PDMP if he or she suspects drug abuse or doctor shopping. Generally, the physician will not supply a copy of the PDMP in a standard subpoena unless requested, or if you happen to come across it during a review of the actual file in a doctor’s deposition. If you do land such a report, it may provide an abundance of information, including prior treaters and pharmacies, and demonstrate evidence of pre-accident drug abuse.
  
• Veteran Administration Records: Do not skim over the fact that a plaintiff served in the military 40 years ago. He or she may still be treating and receiving prescriptions from your local VA hospital. Further, if a plaintiff is receiving a pension from the VA, he or she periodically has to undergo a disability determination, and fill out paperwork. It is always compelling to see what the plaintiff tells the VA, as compared to Social Security Disability, workers’ compensation, and plaintiff's own treaters during the identical time frame.
• Health Insurance Cards: Somewhere in every treater’s medical record, hospital’s intake sheet, or hidden deep within a prior auto accident claim file is a copy of plaintiff’s health insurance card (if he or she has one). If located, these health insurance records may provide a precise history of all prior hospital, doctor and pharmacy visits.

A plaintiff is not going to hand you his or her pre-accident history on a platter, so expect to do some extra digging. With enough persistence, you may ultimately discover a wealth of information that could undermine the plaintiff’s credibility and case.

Robert Abramson is an associate in the law firm of Kopka, Pinkus, Dolin & Eads in Farmington Hills, MI. He specializes in first-party, third-party and uninsured motorist claims in Michigan. Mr. Abramson is a member of DRI's Young Lawyers and Insurance Law Committees.

CMS Announcements on Fixed Percentage Option for Settlements of $5,000 or less, $300 Threshold Limit for Reimbursement, and Identification of Contractor for Medicare Secondary Payer Recovery

On September 23, 2011 the MSPRC announced that it would be adding a Self Service Information Feature to its current Customer Service Line that will provide automated conditional payment information over the telephone. It is scheduled to go live on September 30, 2011. The announcement suggests the advantages of the new telephone feature would be:

We find that it raises more questions than it answers. For example:

More information was promised although none has been received to date. We will keep you up to date as we receive the information.

Federal courts in Florida have finally learned what is needed to cut into Medicare Fraud, long prison sentences to those convicted of stealing from Medicare. 

Lawrence Duran, 49, the owner of Miami-based American Therapeutic Corp, a Miami businessman was sentenced to 50 years in prison on September 16, 2011 for masterminding a healthcare fraud scheme that sought to bilk the U.S. government out of more than $200 million. Duran was arrested last October on charges that he executed what prosecutors described in court documents as "one of the largest and most brazen healthcare fraud conspiracies in recent memory." 

His prison sentence was believed to be the harshest ever for defrauding Medicare, the federal insurance plan for the elderly and disabled. He also was ordered to pay $87.5 million in restitution. American Therapeutic was one of the nation's largest chains of community mental health centers licensed by Medicare.

His co-conspirator, Marianella Valera,  will spend the next 35 years in prison for taking part in the $200 million Medicare fraud scam that targeted mental health centers. Marianella Valera manipulated records in order to keep patients at a facility longer than medically required which allowed for higher billings to Medicare bills.

Prosecutors said the company, operating out of the southeastern city widely viewed by law enforcement officials as the healthcare fraud capital of the United States, billed Medicare for more than $205 million in claims over eight years for mental health services that were either unnecessary or never provided to patients.

ZIFL agrees, this has to be the most severe sentence imposed for this type of crime. Judges, like the one in Miami, should understand that Medicare and other insurance fraud will never be deterred unless they impose severe sentences like that imposed on Duran.

On September 6, 2011, the Medicare Secondary Payer Recovery Contractor (MSPRC) announced through its website that Medicare has implemented a $300 threshold for certain liability insurance cases.  This announcement (“Alert”) represents the first time that Medicare has imposed a threshold related to its rights of reimbursement under the Medicare Secondary Payer (MSP) Act (42 U.S.C. §1395y(b)(2)).  

Assuming certain criteria are met when a liability insurance claim is resolved, Medicare will not recover from the recovery proceeds.  Those criteria are as follows: 

1) the settlement (generally defined by Medicare as including settlement, judgment, award or other payment) is related to an alleged physical trauma-based incident (as opposed to an alleged exposure, ingestion or implantation); 

2) the claimant does not have any additional settlements related to the same alleged incident; and

3) Medicare has not already issued a final demand.

The qualifying criteria specifically exclude alleged exposure, ingestion and implantation incidents from benefitting from this Alert.  Thus, it remains business as usual for parties to asbestos claims and other similar incidents (pharmaceutical, environmental, etc.) when working with Medicare to assess, satisfy and resolve Medicare’s rights of recovery.

The practical impact of this announcement is twofold.  First, by implementing this recovery threshold in certain liability settlements, the MSPRC will be able to process conditional payment requests and final demand requests with greater efficiency.  Second, this recovery threshold demonstrates that Medicare is working to find a solution to concerns expressed by the defense community.

The DRI Medicare Secondary Payer Task Force continues to monitor developments at the MSPRC, and will report any future developments to the DRI community.  For more information about this announcement and other MSP compliance issues, including conditional payment reimbursement, Medicare Set-Asides and MMSEA Section 111 reporting, please see http://www.dri.org/open/mstf.aspx. 

To view the Alert as posted by the MSPRC on its website, please follow this link: http://www.msprc.info/.  

The long awaited revision to the Non-Group Health Plan User Guide is finally available.  CMS Issued Version 3.2 of the NGHP User Guide on August 17, 2011.  It can be found on the CMS website. To find it, scroll down to the Downloads section.

Many insurers and self-insureds are asking how to manage the repercussions of CMS’ decision to temporarily suspend issuing “Rights and Responsibilities” (RAR) letters and recovery Demand Letters.  Here are some suggestions while we all await further guidance from CMS and its contractors:
 
The suspension is temporary—presumably just long enough to allow CMS to re-write the standard letters to comply with the opinion released on May 5th in the Arizona case of Haro v. Sebelius (holding certain of CMS’ recovery practices exceed the authority granted by the MSP statutes, and enjoining CMS from: 1) demanding immediate payment from beneficiaries while the recovery amount is being challenged on appeal or a waiver request is pending; and 2) demanding that plaintiff attorneys withhold liability settlement proceeds from their clients pending payment of disputed MSP reimbursement claims).  Recall that even before the temporary suspension we didn’t really know when the MSPRC letters would arrive.  Delays have been the norm, and not knowing the length of the delay--while frustrating--is something we’ve all learned to manage in our claims handling.  We are aware, anecdotally, that some Demand Recovery Letters are being mailed out despite the suspension, so be watchful.  

The MSPRC is still working cases during the suspension, so although standard recovery letters will be delayed, concerns that the entire system will grind to a halt are exaggerated.

The requirement to protect Medicare’s interests, and the penalties for failing to do so, are in full force and effect despite delays in issuing demand letters, so standard MSP protocol should continue to be followed by claims staff. In other words, standard protocol for identifying Medicare beneficiaries should continue to be followed, as should standard protocol for:  

1. Notifying the COBC of new claims;
2. Obtaining Consent to Release forms (where possible);
3. Requesting (and updating) Conditional Payment Letters;
4. Settlements with Medicare beneficiaries should continue being negotiated, and the agreed-upon process for reimbursing Medicare and protecting Medicare’s interests should be memorialized in the written settlement agreement or release.  While we await further guidance on how the recovery process may be affected by the Haro v. Sebelius decision, consider negotiating a reimbursement procedure which gives the settling insurer/self-insured as much control as possible over payment of Medicare’s recovery demand;
5. When settlement is reached the MSPRC should be notified of the settlement and a Demand Letter should be requested (for separate discussion of §111 reporting under the MMSEA see comment below); and
6. Once the Demand Letter is received from the MSPRC, the insurer/self-insured should see to it the full amount identified is paid to Medicare within 60 days.    
 
Stay tuned, and watch for announcements on www.MSPRC.info advising of any changes to the MSP recovery process, including revisions to the standard recovery letters.  Be aware that changes in the MSP recovery process are possible, and MSP best practices may need to adapt quickly once changes are announced.

Be aware that the temporary suspension of standard recovery letters has no effect whatsoever on §111 Reporting under the MMSEA. If your company has completed testing and has started live reporting (as most have), then quarterly reporting  of settlements, payments and judgments (ORMs and TPOCs) should continue. 

On May 5, 2011, a federal judge in Arizona dealt a blow to the routine collection practices of CMS following liability settlements. The Haro v. Sebelius suit was filed by two Medicare beneficiaries (both of whom settled auto accident claims and pursued appeals of the MSPRC’s recovery amount), and by a lawyer who represented one of the two beneficiaries.  The Medicare beneficiaries challenged the right of CMS to demand reimbursement within 60 days of receiving settlement proceeds in those situations where an appeal or waiver request remains unresolved, and the lawyer challenged CMS’s ability to hold attorneys personally liable for their client’s reimbursement claim, contending such collection practices exceeded the Secretary’s authority under the Medicare statutes and violated due process.

After surviving a Motion to Dismiss for lack of standing and failure to exhaust administrative remedies, the plaintiffs filed an Amended Complaint seeking to represent a nationwide class of Medicare recipients. Competing Motions for Summary Judgment were filed and, in a 27-page opinion released May 5th, the district court walked through the MSP statute and supporting regulations, and resolved all issues in favor of the plaintiffs on statutory construction grounds.  The Court also granted the plaintiff’s Motion to Certify Class Action, and defined the class as: “persons who are or will be subject to MSP recovery, and from whom defendant has demanded or will demand payment of MSP claims before there have been determinations of the correct amounts through the waiver or appeal process.”  (Haro slip opinion at 25). 

Here are the holdings of significance which came from the Haro v. Sebelius opinion:

1. CMS may not demand immediate payment from Medicare beneficiaries while the reimbursement amount is pending on appeal or a waiver request.   
The District Court stepped through the Medicare reimbursement statutes and determined the “60-day reimbursement requirement to support immediate collection activities against beneficiaries when the reimbursement claim is in dispute is neither rational nor consistent with the statutory scheme providing for waiver and appeal rights . . . because it unnecessarily chills a beneficiary’s right to seek a waiver or to dispute the reimbursement claim and reaches beyond the fiscal objectives and policies behind the 60-day reimbursement provision.”  (Haro slip opinion at 16).   However, the Haro v. Sebelius opinion made clear that once the appeal or waiver is complete and the reimbursement amount finalized, a beneficiary who refuses to pay the claim will properly be subject to collection efforts and interest may be charged dating back to the original date of the notice.   (Haro slip opinion at 15-16).

2. Medicare cannot hold plaintiff attorneys financially responsible for MSP reimbursement and cannot require them to either turn the settlement awards over to Medicare or hold the settlement sums in trust.
The Haro v. Sebelius court took issue with Medicare’s position that it could pursue MSP recovery directly from plaintiff’s counsel by characterizing the attorney as  “an entity that receives payment from a primary plan . . . .”  Id. at 17 (emphasis in original).   Although the federal regulations define an “entity” to include “a beneficiary, provider, supplier, physician, attorney, State agency or private insurer that has received a primary payment”  (see 42 C.F.R. §411.24(g) the Haro court noted Congress never expressly made attorneys responsible for reimbursement under 42 U.S.C. § 1395y(b)(2)(B)(ii), and the court found no statutory basis for such an expansive reading of the Medicare statute.   Id. at 18-19.  The Haro court reasoned that since attorneys did not have the right to appeal or apply for waiver of Medicare claims themselves, nor were attorneys included in the original scope of the statute, they could not be directly targeted for reimbursement simply because they received the settlement funds on behalf of their client.  The Haro court ultimately held there was:

no statutory support, either expressly or in the legislative history, to support the Secretary’s assertion that she has a direct cause of action, pursuant to 42 U.S.C. § 1395y(b)(2)(B)(ii), to recover a reimbursement claim from an attorney that has received payment from a primary plan and has passed it along to the beneficiary.

Id. at 23.   The Haro court emphasized that its analysis was limited to whether Medicare had a direct right of action to recover from plaintiff’s attorneys, and had no bearing on Medicare’s separate “rights of subrogation under section 1395y(b)(2)(B)(iv) and the common law.” Id.

The Haro v. Sebelius opinion is getting a lot of attention, particularly from the plaintiff’s bar, and many are pleased with the prospect that--if the opinion is affirmed on appeal or gains wider acceptance--Medicare may be forced to dial back its collection efforts against plaintiffs attorneys, and hold off on collecting against plaintiffs who are pursuing appeal or waiver of Medicare’s recovery demand. But the Haro v. Sebelius opinion carries a powerful message for settling insurers and defense counsel too.   While the Haro court was critical of CMS collection efforts focused on Medicare beneficiaries and their attorneys, the court emphasized that settling insurance companies and self-insureds are treated differently than Medicare beneficiaries under the MSP statute: 

The 60-day requirement for immediate payment makes sense in respect to a primary plan and self-insurer (tortfeasor) because the government’s claim against them is established upon “a judgment or payment conditioned upon the recipient’s compromise, waiver, or release (whether or not there is a determination or admission of liability) of payment for items or services included in a claim against the primary plan or the primary plan’s insured, or by other means.”  Once there is a judgment or settlement, the primary payer’s reimbursement payment is due and owing, and if not made within 60 days, the government may bring an action for double damages against it.  42. U.S.C. § 1395y(b)(2)(B)(iii), (3)(A).  Upon a judgment of settlement, a beneficiary is positioned differently.

Haro slip opinion at 13.   The Haro court also emphasized the MSP statutes provide a solution for recovering benefits when a beneficiary receives payment from a third party payment but does not reimburse Medicare—under those circumstances it is the third-party payer which must reimburse Medicare, even though it already has paid the beneficiary.  See 42 C.F.R. § 411.24(h) and (i)(2).  As the Haro court noted:  “Congress expressly allocated this burden to the third-party liability payer that makes its payment to a party other than Medicare when it is, or should be, aware that Medicare has made a conditional payment.”  Id. at 19 (quoting 42 C.F.R. § 411.24(i)(2)).

Defense practitioners should be aware that, in the wake of Haro, the deep-pocket of the primary payer is likely to become even more attractive to Medicare, and it is critically important that settling insurers and self-insureds take appropriate steps to ensure Medicare’s recovery is paid promptly and in full from the proceeds of any settlement or judgment.

Finally, defense practitioners are reminded that although the Haro v. Sebelius opinion is significant, the entire body of MSP case law is developing rapidly and still taking shape.  At this point it is unwise to rely exclusively on any single opinion, and instead practitioners are encouraged to stay current on the landscape of developing case law in the area of MSP, with the goal of effectively managing the various risks inherent in this area. 

Recently, Congressmen Tim Murphy (R-PA) and Ronald Kind (D-WI) introduced HR 1063, a bill titled the “Strengthening Medicare And Repaying Taxpayers Act of 2011.”  This piece of legislation, known as the SMART Act, purports to provide a more streamlined approach to reimbursing Medicare for conditional payments made for injury-related care under the Medicare Secondary Payer (“MSP”) Act (42 U.S.C. §1395y(b)).  Additionally, this bill purports to allow for less onerous requirements for entities obligated to report to Medicare under the recently enacted Medicare, Medicaid and SCHIP Extension Act of 2007 (“MMSEA”).

If passed by Congress and signed into law, the SMART Act would provide for the following:

• Request for Conditional Payment Statement. Claimants and applicable plans would be able to notify Medicare, beginning 120 days before the reasonably expected date of settlement/judgment/award/other payment, that a payment is reasonably expected, and ask Medicare for a statement of the conditional payment reimbursement amount (the “Document”).  A claimant or applicable plan would be able to make this request for the Document only once with respect to such settlement/judgment/award/other payment.
• Medicare’s Response.  Medicare would provide the Document no later than sixty-five (65) days after date of receipt of the request for the Document.  If Medicare fails to provide the Document, the claimant or applicable plan would provide an additional notice to Medicare.  If Medicare then fails to provide the Document within thirty (30) days after receipt of the additional notice, the claimant, applicable plan and an entity that receives payment from an applicable plan would not be liable to make payment to Medicare for conditional payment reimbursement unless Medicare could prove the failure to provide the Document was justified due to exceptional circumstances (defined so that not more than one percent (1%) of the repayment obligations would qualify as exceptional circumstances).
• Notice to Medicare of Failure to Settle.  If settlement/judgment/award/other payment did not occur within 120 days as anticipated by the parties, the claimant or applicable plan shall timely notify Medicare, thus exempting Medicare from any obligations imposed above.
• Right of Appeal.  Medicare would establish a right of appeal and appeals process for the payment procedures set forth above, including review through an Administrative Law Judge and access to the US District Court.
• Threshold.  There would be no conditional payment reimbursement obligation and no reporting obligation under MMSEA when the settlement/judgment/award/other payment fails to reach a certain threshold as determined by Medicare on an annual basis.
• Reporting Requirement Safe Harbors.  The MMSEA would be amended to allow Medicare the discretion not to apply the statutory $1,000 penalty for each day of noncompliance with a responsible reporting entity’s reporting obligation.  The severity of each penalty would be based on the knowing, willful and repeated nature of the violation.  This section would also allow for the creation of safe harbors from penalties asserted under the MMSEA.
• Use of Social Security Numbers and Other Identifying Information in Reporting.  The MMSEA would be amended so that responsible reporting entities would not be required to access or report social security numbers or health identification claim numbers (i.e., Medicare numbers) of claimants.
• Statute of Limitations.  A three (3) year statute of limitation would be established within which time the Federal government must bring any action associated with compliance under the MSP. 

Additionally, penalties asserted under the MMSEA would not be permitted unless service of notice was provided no later than three (3) years after the date by which the information was required to be submitted.

We will continue to follow the progress of this legislation, in addition to other pieces of legislation that may affect DRI members.  A copy of HR 1063 may be found by clicking this link.

Several very recent cases confirm the government’s resistance to have the conditional payment responsibility resolved through any means other than those it selects. All of the decisions involved the successful application of the failure to exhaust administrative remedies defense to the court’s jurisdiction.

In Braucher v. Swagat Group, 2011 WL 832512 (C.D.Ill.) the plaintiff filed a post settlement Motion to Adjudicate Medicare Lien and CMS moved to intervene. The court held that it had no subject matter jurisdiction to decide the Motion to Adjudicate Medicare Lien because the plaintiff had not exhausted the administrative process. In Alcorn v. Pepples, 2011 WL 773418 (W.D.Ky.) the plaintiff, pre-settlement, moved to join CMS as an indispensable party. The government objected because the plaintiff had not exhausted the administrative remedies set forth in the Medicare Act and the court agreed. In Portman v. Goodson, 2011 WL 773427 (W.D.Ky.) the plaintiff’s pre-settlement declaratory judgment action against CMS which sought to determine the repayment liability was dismissed for failure to exhaust administrative remedies. All three decisions, each decided between February 28, 2011 and March 3, 2011, relied upon the need for a plaintiff to comply with the post Demand Letter administrative process as being essential to jurisdiction over CMS in an MSP context.

Keep in mind, however, that all three decisions involved a plaintiff’s right to obtain subject matter jurisdiction before exhausting the administrative remedies set forth in 42 CFR §405.900. Similarly unsuccessful, attempts by the court to compel the attendance of Medicare representatives at settlement conferenceⁱ or to compel Medicare to intervene to assert a subrogation interestⁱⁱ  have all been rejected on principles of sovereign immunity.

We suggest that under circumstances in which the need to resolve the repayment obligation outweighs the costs an insurer/defendant may consider bringing an interpleader in which CMS is named as a defendant via the Secretary of the US Department of Health and Human Services, Kathleen Sebelius. At least two such actions have been successful.ⁱⁱⁱ  Alternatively a declaratory judgment action might be appropriate. These may succeed because there appears to be no mechanism by which a settling defendant/insurer might be able to use, let alone exhaust, the administrative process and that such is not contemplated by the regulatory framework.^iv   Accordingly, such actions may be analyzed and resolved differently by the court.

ⁱ Hoste v. Shanty Creek Management, Inc., 246 F. Supp.2d 784 ((W.D. Michigan, 2002)
ⁱⁱ Gray v. Doe,---F.Supp.2d---, 2010 WL 3199347 (E.D.Ky.)
ⁱⁱⁱ See e.g. Farmers Ins. Exchange v. Forkey, 2010 WL 5477726 (D.Nev.) and Integon National Insurance Co. v. Berry, 2009 WL 424466 (W.D. North Carolina)
^iv See 42 CFR §405.926(k) and Medicare Secondary Payer (MSP) Manual, Ch. 29, 200.C(11), stating that a determination that Medicare has a recovery against an entity such as  insurer or self-insurer that was or is responsible to make payment for services or items that were already reimbursed by Medicare  is not considered an “Initial Determination” subject to appeal. 42 CFR §405.906 specifically states that payment by a third party payer does not entitle that entity to party status with respect to the “Initial Determination” subject to appeal. Neither may the appeal right be assigned to the insurer. 42 CFR §405.912.