Medicare Changes are a Comin’

On January 10, 2013, President Barack Obama signed H.R. 1845. H.R. 1845 is the Medicare IVG Access and Strengthening Medicare and Repaying Taxpayers Act of 2012. The Act’s first part directed the Secretary of Health and Human Services to “establish and implement a demonstration project under part B of Title XVIII of the Social Security Act to evaluate the benefits of providing payment for items and services needed for the in-home administration of intravenous immune globin for the treatment of primary immune deficiency diseases.” The second part entitled “Strengthening Medicare Secondary Payer Rules” made several amendments to 42 U.S.C. § 1395y and its Medicare secondary payer provisions. The Act set forth these amendments in five sections. The following represents the key components of those sections.

1. Section 101. Medicare Patient IVIG Access Demonstration Project

The Secretary shall establish and implement a demonstration project to evaluate the benefits of providing payment for items and services needed for the in-home administration of intravenous immune globin for the treatment of primary immune deficiency diseases. This Section provides for certain dates by which the project shall take place including a date for the final evaluation and report. Funding is also provided for.

2. Title II – Strengthening Medicare Secondary Payer Rules, Section 201 – Determination of Reimbursement Amount Through CMS Website to Improve Program Efficiency

Section 201 amended 42 U.S.C. § 1395y(b)(2)(B) by adding clauses (vii). Claimant at any time beginning 120 days before the reasonably expected date of settlement, judgment, award or other payment, shall notify the Secretary that a payment is reasonably expected and the expected date of such payment.

The Secretary shall maintain and make available to individuals to whom items and services are furnished, and to authorize family or other representatives, access to information on the claims for such items and services, including payment amounts for such claims. This shall include those claims that relate to a potential settlement, judgment, award, or other payment.

The access shall be provided to an individual, representative, or plan through a website that requires a password. The Secretary shall update the information on claims and payments on such website not later than 15 days after the date that payment is made.

The Act provides information related to claims and payments shall be consistent with a number of guidelines and rules including completeness, accuracy, the ability to communicate, information about official time and date of information and transmittal, and the ability for the individual representative or plan to download a statement of reimbursement amounts.

If an individual obtains a statement of reimbursement amount from the website during the protracted period as defined and the related settlement, judgment, award or other payment is made during such period, then the last statement of reimbursement amount that is downloaded during such period and within three business days before the date of the settlement, a judgment, award or other payment shall constitute the final conditional amount subject to recovery related to such payment, judgment, award, or other payment.

If the individual or authorized representative believes that there is a discrepancy with the statement of reimbursement amount, the Secretary shall provide a timely process to resolve the discrepancy. Under this process the individual or representative must provide documentation explaining the discrepancy and a proposal to resolve the discrepancy. Within 11 business days after the date of receipt of such documentation, the Secretary shall determine whether there is a reasonable basis to include or remove claims on the statement of reimbursement. If the Secretary does not make the determination within 11 business-day period, then the proposal to resolve the discrepancy shall be accepted. If the Secretary determines within such period that there is not a reasonable basis to include or remove claims on the statement of reimbursement, the proposal shall be rejected. If the Secretary determines within such period that there is a reasonable basis to conclude that there is a discrepancy, the Secretary must respond in a timely manner by agreeing to the proposal to resolve the discrepancy or by providing documentation showing with good cause why the Secretary is not agreeing to such proposal and establishing an alternate discrepancy resolution. This process is not an appeals process and does not establish a right of appeal.

3. Protected Period

The term “protected period” as used above means with respect to a settlement, judgment, award or other payment relating to an injury or incident, the portion (if any) of the period beginning on the date of notice with respect to such settlement, judgment, award, or other payment that is after the end of a Secretarial response period beginning on the date of the notice to the Secretary. Such Secretarial response shall be a period of 65 days, except that such period may be extended by the Secretary for a period of an additional 30 days if the Secretary determines that additional time is required to address claims for which payment has been made. The Secretarial response period shall be extended and shall not include any days for any part of which the Secretary determines that there was a failure in the claims and payment posting system and the failure was justified due to exceptional circumstances. The regulations will define exceptional circumstances.

4. The Secretary shall promulgate regulations within 9 months of the date of the enactment of the Act.

5. The Secretary shall promulgate regulations establishing a right of appeal.

6. Section 202.

Section 202 amended 42 U.S.C. § 1395y(b)(2)(B)(ii) by striking the language “A primary plan” and inserting in its place “Subject to paragraph (9), a primary plan,” so that it will read:

Subject to paragraph (9), 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. A primary plan’s responsibility for such payment may be demonstrated by a judgment, a 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. If reimbursement is not made to the appropriate Trust Fund before the expiration of the 60-day period that begins on the date of notice of, or information related to, a primary plan’s responsibility for such payment or other information is received, the Secretary may charge interest (beginning with the date on which the notice or other information is received) on the amount of the reimbursement until reimbursement is made (at a rate determined by the Secretary in accordance with regulations of the Secretary of the Treasury applicable to charges for late payments).

Section 202 also amended 42 U.S.C. § 1359y(b) by adding paragraph (9). Under paragraph (9), the repayment and reporting requirements do not apply to any settlement, judgment, award, or other payment by an applicable plan if: (1) the settlement, judgment, award, or other payment arises from liability insurance (including self-insurance) and an alleged physical trauma-based incident, which does not include an ingestion, implantation, and exposure case and (2) the settlement, judgment, award, or other payment constitutes a total payment obligation to a claimant of not more than the single threshold amount for the year involved.

Section 202 directs the Secretary of Health and Human Services to calculate and publish a single threshold amount by November 15 of the year preceding the year to which the amount will apply. The single threshold amount will be the estimated collection cost incurred by the United States for a conditional payment arising from liability insurance (including self-insurance) and an alleged physical trauma-based incident, which does not an include ingestion, implantation, or exposure case. In publishing the single threshold amount, the Secretary shall include in the publication the estimated cost of collection incurred by the United States and a summary of the methodology and data the Secretary used to compute the threshold amount and the cost of collection.

The amendments Section 202 made will apply to years beginning with 2014.

7. Section 203.

Section 203 amended 42 U.S.C. § 1395y(b)(8)(E)(i) by making the civil-money penalty discretionary in terms of imposition and amount. Under the amended clause (b)(8)(E)(i), an applicable plan that fails to comply with the reporting requirements may be subject to a civil-money penalty and the amount of that penalty could be up to $1,000 for each day of noncompliance with respect to each claimant.

To guide the exercise of this discretion, Section 203 directed the Secretary of Health and Human Services to publish in the Federal Register a notice soliciting proposals specifying the practices for which sanctions will and will not be imposed under subparagraph (b)(8)(E). The Secretary must publish this notice not later than 60 days after Section 203’s enactment. The proposals will be accepted for a 60-day period. After this 60-day period, the Secretary will consider the proposals submitted and, after consultation with the Attorney General, publish in the Federal Register proposed specified practices for which sanctions will and will not be imposed. There will be a 60-day period for comments to the proposed specified practices. After this 60-day period and upon consideration of the public comments received, the Secretary will issue final rules specifying the practices for which sanctions will and will not be imposed.

8. Section 204.

Section 204 amended 42 U.S.C. § 1395y(b)(8)(B) concerning the information an applicable plan is required to submit to the Secretary of Health and Human Services. The amendment required the Secretary to modify the reporting requirements under § 1395y(b)(8)(B), so that, in complying with the reporting requirements, an applicable plan was permitted, but not required to access or report to the Secretary a beneficiary’s social security account number or health identification claim number. Section 204 set a deadline for the modification at no later than 18 months after the Section was enacted. Section 204, however, permitted the Secretary to extend the deadline multiple times and for a period up to 1 year. To due this, the Secretary must notify the committees of jurisdiction of the House of Representatives and of the Senate that a failure to extend the prior deadline will threaten patient privacy or the integrity of the secondary payer program. The Secretary must also include in his notice to the committees: (1) information on the progress being made in implementing the modification and (2) the anticipated implementation date for the modification.

9. Section 205.

Section 205 amended 42 U.S.C. § 1395y(b)(2)(B)(iii) by setting a statute of limitations for an action brought by the United States to recover conditional payments that were made. Section 205 establishes a three-year statute-of-limitations for an action brought by the United States with respect to payments owed. The three-year time period begins to run on the date of receipt of the notice of a settlement, judgment, award, or other payment made pursuant to § 1395y (b)(8). The three-year statute-of-limitations established by Section 205 would apply to actions brought and penalties sought on or after six months after the date of the Act’s enactment.

Case law of significance follows:

In a personal injury action, an insurance company cannot require personal injury claimant to accept Medicare on payment check. Caleppa v. Seiwell, 9 A.3d 632 (Pa. Super. 2010). Nothing in MSPA authorizes post-trial relief requesting either that Medicare be added as a payee to the draft satisfying the verdict or that the verdict award be paid into escrow until receiving notification that no outstanding Medicare lien exists. Similarly, under Pennsylvania law Seiwell and her insurer cannot satisfy the judgment entered in favor of Caleppa if Medicare is added as a payee to the award check. At 640.

In accord, Vincent v. Buck, No. 2011-456 (C.P. Cambria) Swope, J. Plaintiff’s motion to enforce settlement granted in addition to interest because of delay.

Tristani ex rel. Karnes v. Richman, 652 F.3d 360 (3d Cir. 2011) addressed the Medicaid beneficiary in the Pennsylvania context. Tristani found a medical malpractice action seeking costs of medical expenses that had been paid on her behalf by DPW. Tristani settled her medical malpractice case for $5.2 million, and DPW asserted a lien of approximately $250,000 against the settlement. The state trial court directed payment of the DPW lien in full after pro rata attorney’s fees and costs were deducted.

On appeal, the Third Circuit stated:

Our review of the evolution of the various provisions of the Social Security Act reveals that the only way to harmonize the conflicting language of the anti-lien and anti-recovery provisions with the later-enacted reimbursement and forced assignment provisions is to conclude that the anti-lien and anti-recovery provisions do not apply to medical costs recoverable from liable third parties. The anti-lien and anti-recovery provisions evince congressional intent to protect the assets of Medicaid recipients, and to ensure that beneficiaries are not forced to personally bear the costs of their medical care. Meanwhile, the reimbursement and forced assignment provisions require states to recover the costs of medical assistance payments despite the apparent prohibition against seeking recovery of medical assistance payments. It defies common sense to conclude that Congress intended to protect the rights of Medicaid beneficiaries to recover medical costs that they never paid in the first place. Indeed, federal law requires beneficiaries to assign their right to recover such medical costs to the state, because it is the state – not the beneficiaries – that pays these costs.

Our conclusion that liens on medical costs are excepted from the anti-lien and anti-recovery provisions is bolstered by the forced assignment provision. The District Court viewed the forced assignment provision as evidence of congressional intent to require states to intervene in lawsuits initiated by Medicaid beneficiaries against third parties. We see it differently.

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Unlike the District Court, we do not believe that Congress intended to require states to intervene in Medicaid beneficiaries’ lawsuits in order to recoup medical costs from third parties. Congress enacted the forced assignment provision more than a decade after it began requiring states to “seek reimbursement” for medical costs from liable third parties. The purpose of the provision was to ensure that states were able to recoup their outlays. Thus, far from restricting the state’s ability to recoup medical expenses, the forced assignment provision was intended to facilitate the state’s recovery of those funds.

* * *

The text of the Social Security Act, when combined with its structure, purpose and legislative history, reveals that Congress sought to accomplish different goals in enacting the anti-lien and anti-recovery provisions on the one hand, and the reimbursement and forced assignment provisions on the other hand. While the anti-lien and anti-recovery provisions were intended to protect the assets of Medicaid recipients, the subsequently-enacted forced assignment and reimbursement provisions were intended to limit the financial burden of Medicaid on the states and ensure that Medicaid beneficiaries did not receive a windfall by recovering medical costs they did not pay. In this context, the forced assignment and reimbursement provisions are best viewed as creating an implied exception to the anti-lien and anti-recovery provisions of the Act. Our conclusion is bolstered by the fact that the statutory mechanism created by Congress for beneficiaries to relinquish their right to recover medical assistance payments to the state – a partial assignment – itself creates a lien. Consequently, we hold that liens on settlements or judgments limited to medical costs are not prohibited by the anti-lien and anti-recovery provisions of the Social Security Act.

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We agree with the District Court’s conclusion that Pennsylvania’s apportionment scheme is valid. Pursuant to the current statutory framework, beneficiaries unhappy with its results may appeal the default allocation. This mechanism is consistent with the Supreme Court’s holding in Ahlborn, and comports with the practice of other states. Therefore, we will affirm this portion of the District Court’s order.

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We express no view as to whether allocation disputes of this type must be adjudicated by a court, or may instead be resolved through other “special rules and procedures.” Id. At 288 n. 18. We hold merely that in determining what portion of a Medicaid beneficiary’s third-party recovery it may claim in reimbursement for Medicaid expenses, the state must have in place procedures that allow a dissatisfied beneficiary to challenge the default allocation. As the Beneficiaries point out, without such a rule nothing would prevent states from allocating 75%, 90% or even 100% of a settlement to medical expenses, thereby eviscerating the rule promulgated by Ahlborn. Because the District Court concluded otherwise, we will reverse its order in this respect and remand for further proceedings consistent with this opinion.

Tristani, 662 F.3d at 374, 375, 377-78.

In Haro v. Sebelius, 789 F.Supp.2d 1179 (D. Ariz. 2011), the court granted plaintiffs summary judgment on the question as to whether defendant could require prepayment of an MSP reimbursement claim for the correct amount as administratively determined where the beneficiary either appeals or seeks a waiver of the MSP reimbursement claim, and on the issue as to whether defendant could hold plaintiff-attorney financially responsible for MSP reimbursement if they do not hold or immediately turn over to Medicare their clients’ injury compensation awards. The case provides a good overview of the Medicare Secondary Payer recovery program. The court made the following findings:

1. The Secretary’s application of the 60-day requirement to collect reimbursement claim for beneficiaries that seek a waiver or an appeal is not authorized by the statutory structure created by Congress.
2. The Secretary’s application of 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 provided for waiver and appeal rights.

Finally, the court found that the Secretary could not collect disputed reimbursement claims from the beneficiaries or their attorneys, pending resolution of waiver requests and appeals. She could not preclude plaintiffs-attorneys from disbursing undisputed portions of settlement proceeds to their beneficiary clients.

In an unusual factual pattern, the Third Circuit has held that plaintiff Humana Medical Plan, Inc., may sue Glaxo Pharmaceutical for expenses Humana incurred treating its insured’s injuries resulting from Glaxo’s drug, Avandia. In re Avandia Marketing, 685 F.3d 353 (2012). The Medicare Secondary Payer Act, in 42 U.S.C. § 1395y(b)(3)(A), provides Humana with a private cause of action against Glaxo at 355. Medicare-eligible individuals may obtain benefits directly from the government or they may elect to receive their benefits through private insurance companies and contract with the government to provide “Medicare Advantage plan (‘MA’).” 42 U.S.C. § 1395w-21(a)(1).

Rieders, Travis, Dohrmann, Mowrey, Humphrey & Waters
161 West Third Street
Williamsport, PA 17701
(570) 323-8711 (telephone)
(570) 323-4192 (facsimile)

Cliff Rieders, who practices law in Williamsport, is Past President of the Pennsylvania Trial Lawyers Association and a member of the Pennsylvania Patient Safety Authority. None of the opinions expressed necessarily represent the views of these organizations.

Attorney Cliff Rieders

Cliff Rieders is a Nationally Board Certified Trial Lawyer practicing personal injury law. A large part of his practice involves multi-district litigation, including cases related to pharmaceuticals, vitamin supplements and medical devices. He is admitted in several state and federal courts, as well as the Supreme Court of the United States. Rieders is the past regional president of the Federal Bar Association and is a life member of the distinguished American Law Institute, which promulgates proposed rules adopted by many state courts. He is a past president of the Pennsylvania Association for Justice, formerly Pennsylvania Trial Lawyers Association. As a founder of the Pennsylvania Patient Safety Authority, he served on the Board for 15 years.

Not only has Rieders held many highly esteemed, leadership positions, he authored legislation related to the Patient Safety Authority and the Mcare Act, which governs medical and hospital liability actions in Pennsylvania. He authored texts upon which both practitioners and judges rely, including Pennsylvania Malpractice Laws and Forms, and Financial Responsibility Law Issues in Pennsylvania, the latter governing auto and truck collisions in Pennsylvania. In addition, he wrote several books on the practice of law in Pennsylvania regarding wrongful death and survivor actions, insurance bad faith, legal malpractice claims and worker rights, among others. Rieders also serves as a resource to practitioners as a regular speaker for Celesq, an arm of the world’s largest legal publisher, Thomson Reuters West Publishing.

As recognition of his wide range of contribution to his profession and of his dedication to protecting the rights of his clients, he received numerous awards, among them the George F. Douglas Amicus Curiae Award, the Milton D. Rosenberg Award, the B’nai B’rith Justice Award, and awards of recognition from the Pennsylvania Trial Lawyers. [ Attorney Bio ]