Tag Archives: medicare secondary payer act

Is Baseline Testing Worth It? (Part 3)

This is the conclusion to the series of articles on whether baseline testing is worth the effort. The first two articles dealt with baseline testing from an employer’s point of view and from an injured worker’s point of view. We believe that those case studies were compelling. This final article will examine the statistics and, we believe, prove that baseline testing is truly worth the effort.

The concept of baseline testing for soft-tissue injuries began for us when requirements for set asides were established to protect Medicare from future medical expenses for workers’ compensation and general liability claims. ln 2011, the Centers for Medicare and Medicaid Services (CMS) mandated that all workers’ compensation  and general liability claims be reported in electronic format. This change enables CMS to look back and identify if it has ever made any work comp-related payments on a patient. Section 111 of the Medicare, Medicaid and SCHIP Extension Act of 2007 establishes Medicare’s status as a secondary payer under 42 U.S.C. 5 1395y (b), and this creates a right to reimbursement for any future claims related to a past workers’ compensation settlement. Therefore, this act has the potential to impose a possible risk of future liability against all parties indefinitely.

Soft-tissue injuries are the leading cause of claims and costs in this challenging system. They account for at least one third of all claims and are the primary reason for lost time at work. So, we  began baseline testing for soft-tissue injuries for the transportation industry in October 2011. Since that time, we have expanded our baseline testing  program to other industries: manufacturing, retail, warehouse and construction. Our initial testing  was in Georgia and quickly expanded to Texas. Now, our program is being conducted in California, Arizona, Utah, Florida, Oklahoma, Colorado and Indiana. Since the inception of the program, we have conducted more than 15,000 baseline tests.

Of those we tested, 27 have attempted to file a workers’ compensation soft-tissue claim. Only five of those 27 were found to have a change in condition. ln other words, only five had a pathology that arose out of the course and scope of employment (AOECOE). No claim was accepted for the remaining 22 cases. Of the five claims that were accepted, all resolved with the appropriate treatment. Of the cases where there was no change in condition and the claim was not accepted, three went on to litigation. These cases are summarized in the following vignettes.

Litigated case 1: A 54-year-old truck driver underwent the post-loss electrodiagnostic functional assessment (EFA) to compare with the baseline. She alleged incapacitating pathology to her neck, shoulder and back. But the comparison between the post-loss test and the baseline actually demonstrated improvement. It was found she had 25 prior workers’ compensation claims related to the same body part. Her case ultimately went to arbitration. This complicated case settled for less than $6,000. There was a full release with language to prevent future medical care from CMS, thereby protecting the employer from the unpredictable expenses of future claims to the same body part.

Litigated Case 2: A truck driver who was employed for less than a month experienced an unwitnessed fall from a truck and alleged injuries to his back, plus cumulative trauma. When the comparison tests were done, it was revealed that he had substantial pathology on the baseline that was unchanged in the EFA post-loss test.The claim remained denied based on the EFA-STM program, but he continued to receive treatment. No payments were made for the patient’s care, and he continued to pursue the issue through the legal process. The employer agreed to an independent medical exam (IME) appointment to review the status of the EFA comparisons and help establish AOECOE. The IME doctor, based on the EFA reports, found no work-related injury, leading to an uncomplicated resolution of this case.

Litigated Case 3 was detailed in Part 1 of this series. In summary, the results of the EFA-STM program demonstrated no change in condition, and the findings were affirmed in court.

In these three case examples, no unnecessary medical care was permitted; paid time off work was shortened; and litigation was resolved earlier in the process, reducing costs. Even though people will sometimes still litigate, the baseline testing gave objective medical evidence for AOECOE conditions and supported the defense of the case.

A review of the history of claims in businesses also shows that utilization of EFA –STM program significantly reduces the frequency of workers’ compensation injury claims.

In summary, the EFA program leads to more accurate diagnoses and ultimately better site-specific care to the injured worker. There are far fewer litigated cases, and even these cases are less costly because the objective evidence leads to more rapid, accurate and favorable results.

ls baseline testing worth the effort? Indubitably, yes!

Whistleblower Suits: Emerging Risk on MSP

There is an emerging area of risk associated with Medicare Secondary Payer 1 (MSP) compliance. Workers’ compensation, liability, and no-fault insurance, including self-insurance plans, are exposed to penalties and conditional payments, and there may be violations of the False Claims Act (31 U.S.C. §§3729 – 3733) (FCA) that could lead to fines plus treble damages.

The risk stems from lawsuits commonly known as qui tam actions that are being brought by private citizens known as relators, who are bringing these lawsuits. Relators could recover anywhere from 15% to 30% of the damages in the suits, plus attorney’s fees and costs.

The success of such lawsuits largely depends on whether the U.S. intervenes as plaintiff. Companies and insurance carriers that are responsible reporting entities (RREs) must exercise caution on what data on settlements, judgments, awards and other payments is sent to the U.S. and ensure the data is consistent with the Centers for Medicare & Medicaid Services (CMS) guidelines, policies and regulations. A solid reporting solution is a critical step for protection, but must also integrate business intelligence to eliminate the submission of false claims and allow the appropriate reporting of claims.

Background

The FCA was enacted in 1863 by a Congress concerned over the quality of goods being supplied to the Union Army during the Civil War.  Commonly referred to as “Lincoln’s Law,” the rule depended on the private citizen to help the government identify fraud against it. This private citizen, or relator, was rewarded if the government won a judgment. During World War II, the law changed and made it harder for private citizens to assist. When their incentive disappeared, the government’s ability to identify fraud slowed to a trickle even as government contracts surged because of the war. After decades of defense contractor abuse, President Reagan, working with a bipartisan Congress, changed the law in 1986. Fines rose  from a minimum penalty of $2,000 to a range of $5,000 to $10,0002 per violation; recoverable damages went from double to treble; and, most importantly, private citizens again had incentives to coordinate with government to prosecute fraud.

Today, more than 80% of FCA actions are qui tam driven, and recoveries exceeded $4.9 billion in the fiscal year that ended Sept. 30, 2012.  Such actions are predicted to increase into the foreseeable future.

A qui tam, or whistleblower, claim starts with an individual being aware of a possible fraud being perpetuated against the U.S. Typically, a whistleblower works for the organization that is alleged to be perpetuating the fraud, raises a concern and then suffers an adverse employment action for doing so. The results can be costly to the organization.

Consider a quality-control expert at Hunt Valve in Ohio3. Her company made valves for nuclear attack submarines and reactors. The valves were never inspected, and paperwork was fabricated. When she raised concerns, she was fired and forced to move out of town. The responsible parties, Northrup Grumman Newport News, General Dynamics Electric Boat and three other defendants, paid a $13.2 million settlement to the U.S.

Also consider a pharmacist who was treated similarly by his new employer, Omnicare4. He had previously owned a “mom and pop” drugstore outside of Chicago and was a seasoned pharmacist. He discovered widespread drug switching for profit, and, when he notified his bosses, he was fired and forced to work as a temp at other pharmacies that engaged in the same bad practices. He then brought an action and secured a $120 million settlement.

A third example is rare in that the relator was the CEO of a laboratory company5. He realized that a competitor was producing a particular testing product that was defective and caused dialysis patients to be overdosed with expensive and harmful drugs that Medicare paid for. He brought the test results to the competitor’s attention but was rebuffed. He filed under FCA and recovered $302 million for the government.

Certain private citizens are barred from being a relator. If someone was convicted of criminal conduct arising from his or her role, the citizen is not allowed to sue6. If another qui tam concerning the same conduct has already been filed, known as the first bar rule, no suit is allowed7. Where the government is already a party to a civil or administrative money proceeding concerning the same conduct, the action is also barred8. Finally, if the information was already disclosed to the public (and the relator is not the source), the matter is barred under the “public disclosure” rule9.

If allowed, a qui tam complaint is filed under seal for 60 days. During this period, the government is required to investigate the allegations to determine if it will intervene. The government can extend this period under seal if it needs further time to investigate, and typically does so. Sometimes, the government may take a year or more to decide. If the government does intervene, it has primary responsibility to prosecute and pay for it10. When the government declines to intervene, the relator can proceed on his or her own, paying the costs, and the seal is lifted. The cost to prosecute can be prohibitive, and many FCA actions fail if the government declines to intervene. However, the law does increase the relator’s share of the damages from a floor of 15% of the damages to a minimum of 25% as compensation for the additional risk.

To win, the relator must prove that the defendant’s conduct, or lack of conduct, meets one of the statutory requirements under 31 U.S.C. §3729(a). The areas where most of the conduct or lack of conduct fall are: 1) knowingly submitting a false claim or record to the government for payment11; 2) knowingly avoiding the submission of a claim or record to the government to avoid the payment of money to the government12; and 3) liability for those who conspire to violate the FCA13.

A prima facie case of prosecutable FCA conduct in any of the three areas would require the relator to establish: 1) the submission of a false claim/record, or avoiding the filing of a required claim/record to the government; and 2)  knowledge of the falsity itself.  31 U.S.C. §3729(b)(1) sets forth how knowledge of the false information for the claim or record can be defined. It can be (1) actual knowledge; (2) deliberate ignorance of the truth or falsity of the information; or (3) reckless disregard of the truth or falsity of the information. The fact finder will require concrete evidence to uphold the FCA violation. The relator will also be focused on the applicable regulations, rules and policy memoranda from the government.

The Trends

After 1986, contractors for the Department of Defense were the primary focus of the government concerning FCA because of unbridled fraud. When the law changed, both government and private citizens unleashed prosecutions against contractors such as United Technologies ($150 million), Boeing ($75 million), Teledyne ($85 million) and Litton ($82 million). As lawsuits were filed, and the substantial recoveries publicized, the industry responded with increased compliance and vigilance to the point that FCA actions are rare in this area today.

Next FCA were lawsuits involving the big pharmaceutical companies. Glaxo Smith Kline paid $1.2 billion for the unlawful promotion of Paxill, Wellburtin, Advair, Lamictal and Zofran for uses not approved by the Food and Drug Administration. Johnson & Johnson paid $2.2 billion for similar off-label use promotion. These highly publicized settlements, and changes in how drug companies may interact with providers, has seen a tapering of such cases and left the FCA qui tam industry on the search for the next area of fraud, waste and abuse against the government.

One method to determine the next industry trend for FCA actions is to follow the focus of certain government enforcement agencies.  The Office of Inspector General (OIG) is one such Agency to monitor enforcement actions.   The OIG has focused recovery efforts on big pharmaceutical companies, and recent focus has been on Providers for Medicare & Medicaid items and services.    FCAs have been equally as active against these Providers.  As a result, the OIG had a particularly effective year in recovering over $4.3 billion in 2013 against Providers, returning $8 for every $1 spent by the Agency.

The OIG is also responsible for MSP compliance enforcement.  An example of OIG activity is the recent settlement late last year by a Texas health system for $3.67 million14.   In that situation, the Relator alleged that Baptist Health Care billed Medicare for items and services it provided to beneficiaries that were covered by other payers such as workers’ compensation, liability and no-fault insurance (Plans).  Under MSP law Medicare is allowed to pay for such items and services, when no payment has been made, or payment is not reasonably expected to be made.  If that is the situation then Medicare pays, but on the condition it be reimbursed for items and services if payment is ever made by the Plan.   That is what happened here.  The Plans made payment to the Provider, but no reimbursement occurred, and when the oversight was brought to the attention by the Relator, he was ignored.  Correction to the Program was made, but past errors were not corrected.  The Provider therefore recognized the falsity of its information, and easily satisfied the criteria for the Relator when it did not reimburse for historical errors after it was brought to their attention.  The FCA community is therefore aware of MSP violations and how it can implicate the FCA.

An area that may be subject to FCA is the Medicare & Medicaid SCHIP Extension Act of 2007 (MMSEA).  This law modified the MSP to require data reporting by RREs.  To encourage participation, the government included a penalty provision for non-compliance of up to $1,000 per day, per claim for failure to report15.  The OIG has adjusted its work plan for 2013 and 2014 to look at the MMSEA and the associated penalties that arise from non-reporting of data.  OIG involvement typically precedes FCA qui tam actions.  It is this area where the greatest potential for FCA actions are likely to begin to take root.

An example of a matter that nearly received government backing was the recent seal that was lifted on March 20, 2014 with respect to a U.S. District Court case filed in the Western District of New York.  The government did not choose to intervene, and the Relator is a personal injury attorney who has filed against well over 50 insurance carriers and a few trucking companies that self-insure.  The main cause of action alleged was that these companies shifted MSP risk to the United States government through the use of a general release16.  Whether there will be success under the FCA remains to be seen as the root cause appears to be brought under a FCA conspiracy theory.  The Relator will have to prove a false claim, or avoidance of filing a claim, knowledge thereof the falsity, and the impact to the government.  It is unclear, based on present allegations, if the lawsuit will pass the procedural stages, but it does demonstrate that the FCA qui tam industry is taking a serious look at the MSP area for recovery.

Concerns for the RRE in this area are potentially significant.  Only recently has MMSEA data been accepted by CMS for reporting by the RRE.   As of 1/1/2010, CMS received quarterly downloads from RREs’ workers’ compensation and no-fault plans that involve cases where Ongoing Responsibility for Medical (ORM) was determined.  Pursuant to the CMS User Guides, Regulations, and Memoranda, these RREs must monitor all claims, no matter the case status that were open on 1/1/2010, re-opened or newly reported after that date.  Once identified, ORM status is to be reported, but it can be immediately terminated if certain established CMS criteria is met.

On October 1, 2010, CMS started to accept the second MMSEA data element from RREs’ workers’ compensation and liability plans regarding the Total Payment Obligation to Claimant (TPOC) meeting certain value thresholds.  These TPOCS, or settlements with Medicare beneficiaries, were collected typically the quarter before reporting, and then submitted during an assigned window period set up by CMS for the RRE.

The reporting requirement under the MMSEA provides a relatively straightforward way to establish a claim/record being submitted to the government under the FCA.   Whether or not it is false would depend on the Regulations, Rules, Policies (User Guides) and Memoranda from the government about what and when to report.    FCA criteria can be easily met, as it is simple to determine from the data when a claim/record was submitted or if it was missed.  Determining whether it is false would be harder, but how claim systems manage information based upon the regulations, rules, and policies could be probative on that point.  This exact issue came up in an older FCA case involving a Medicare fiscal intermediary, known as Highmark17.  This entity served two roles with Medicare, one as a Medicare contractor processing payment claims, and the other as a private provider of services.    An FCA action was brought against Highmark for inconsistent claim processes and the court found basis to sustain the FCA complaint based on the fact that the claims processing system did not properly line up with Medicare requirements.  Consistent with that ruling, the CMS User Guides and related policy memoranda would be similarly construed and therefore whether an RRE had a case to report as a TPOC or ORM would be based on how those rules would apply.

An RRE’s exposure to an FCA action is mitigated if the RRE utilizes an MMSEA reporting system that is tested.  Most MMSEA reporting systems are compliant with the technical aspects of the CMS User Guides; however, they lack the processes that integrate the CMS regulations, policies and user guide rules to allow the end-user to enter the appropriate data.  Most reporting systems lack a MMSEA solution with built-in business intelligence to allow the right information to be entered at the right time.  The adjuster responsible to enter the data at the critical points needs to be guided to ensure correct submission of data to the government.

Franco Signor LLC processes over 2M records each month to the government for RREs.  We have audited over 1,900 RREs and have drawn the conclusion that the MMSEA reporting systems are sound, but the data being populated by the front-lines is not consistent with known rules, regulations and policies of Medicare.  We have recommended business intelligence methodology to guide the adjuster to avoid the potential MSP exposure, as well as the emerging risk of associated FCA exposure.  The cost is minimal to secure a base line on MSP compliance performance.  Integration of business intelligence takes time, but must be accomplished before MSP penalties become fully enforceable.  Do not be the RRE whose MMSEA reporting system and methodology is tested by an FCA or qui tam action.

[1] 42 U.S.C. §1395y(b)

[2] Today the FCA penalty range is set at $5,500 to $11,000 based on auto triggers within the legislation

[3] Gonter v. Hunt Valve Co. 510 F.3d 610 (2007)

[4] http://www.quarles.com/omnicare-settles-more-allegations-2013

[5] http://www.phillipsandcohen.com/Success-for-Clients/P-C-s-Successful-Whistleblower-Cases.shtml[6] 31 U.S.C. §3730(d)(3)

[7] 31 U.S.C. §3730(b)(5)

[8] 31 U.S.C. §3730(e)(3)

[9] 31 U.S.C. §3730(e)(4)(A)

[10] 31 U.S.C. §3730(c)(1)

[11] 31 U.S.C. §§3729(a)(1)(A) and (B)

[12] 31 U.S.C. §3729(a)(1)(G)

[13] 31 U.S.C. §3729(a)(1)(C)

[14] http://www.francosignor.com/blog/medicare-jurisdiction/medicare-secondary-payer-act-implicated-in-false-act-claim-against-hospital

[15] 42 U.S.C §1395y(b)(8)

[16] U.S. v. Allstate Insurance Company, et al., Case #cv-01015-WMS, U.S. Dist. Court for the Western District of New York.

[17] http://www.paed.uscourts.gov/documents/opinions/04D0039P.pdf

The Looming $20 Billion MSA Train Wreck: Welcome Aboard

There is a $20 billion calamity on the tracks ahead, and no one seems to care. As this train hurtles ever closer to its inevitable demise, the passengers ride oblivious. A program created to protect those passengers – U.S. taxpayers — seemingly will do anything but what was originally intended. 

Medicare Set Asides were developed with the good intentions of protecting Medicare, and the taxpayers that fund it, from unnecessarily paying for injuries and illnesses that are the prior responsibility of third parties. Quite simply, people were taking settlement money received from a general liability or workplace accident—money that was supposed to pay for future medical needs from the injury—and were spending it on anything but its intended purpose. While this was great for the bass boat and travel industries, it was a less than stellar deal for the U.S. taxpayer, who wound up paying for the injured persons’ care once they were eligible for Medicare.

Enter the MSA: a vehicle designed to protect a designated portion of settlement funds by placing them aside and requiring they be used for the purpose intended. This is not new. The roots of today’s MSA lie in the passing of the Medicare Secondary Payer Act of 1980. That act was significantly strengthened in 2003, however, and this has resulted in far more activity for the workers’ compensation industry over the past decade.

True to form, the government has not made implementation easy. Extremely detailed reporting requirements, extensive fines for the Responsible Reporting Entity (even for rules not established at the time) and a complex process made for a confusing road for employers and payers. An entire industry has sprung up to manage this process. The risks of not complying are serious, and the liability for getting it wrong is huge. The Medicare Set Aside today is integral to virtually any settlement situation in the workers’ compensation industry.

All of this is done to protect the U.S. taxpayer from Joe Sixpack and his desire for a bass boat.

I am in no way an expert on MSAs. I have, however, spent time over the last two years attending conferences and talking to various experts on the topic, trying to better understand their purpose and procedure. I discovered a singular statistic that absolutely floored me. It was a fact that, in my opinion, flies in the face of logic and makes all the burdened activity around the MSA seem pointless.

What is so shocking? Only 4% of completed MSAs are professionally administered.

The rest, 96%, are given directly to the claimant/recipient and are self-managed. That means that, when all is said and done, when the calculations are made, when the submissions and approvals are complete, the money that is set aside for the purpose of protecting Medicare and the U.S. taxpayer is given right back to Joe Sixpack, the guy we were trying to protect ourselves from in the first place.

It makes no sense. None.

I am not saying Joe Sixpack is a bad guy. I am not saying his intents are not pure. I am saying that managing payments from an MSA, making sure they are properly coded and complying with mandated reporting is difficult. The process may be well beyond the ability of an injured worker turned fund manager.

Even with his best efforts, Joe could be in trouble when Medicare starts paying for his health care. If he has not dotted every “i” and crossed every “t,” as well as made sure all expenditures were classified to show appropriate care for the affected injury, he could find himself denied needed coverage by Medicare.

And when an army of Joes are pounding at the door of Medicare, because of possible denial of coverage, something is going to have to give.

So how bad is it? What are we looking at here?

For that I turned to Ken Paradis, chairman of Ametros Financial, a company that offers professional administration of MSAs. He confirmed that my suspicions were potentially accurate and provided some very interesting – make that scary – numbers.

In 2010, the Centers for Medicare and Medicaid Services (CMS) approved $1.4 billion in MSAs. Assuming a consistent approach since 2001, the inception of the current program, we can estimate that $16.8 billion have been approved for MSAs in the past 12 years. Using a straight-line estimation, this could mean that $16.1 billion is being self-managed.

Not all MSAs are reviewed by CMS—some are set up with no input or review by the government—and these Class III MSAs represent a completely unknown addition in risk to the long-term health of Medicare. Paradis indicated from experience that 20% of MSAs may be in this category. Using the base numbers from our equation, that estimate brings the total risk pool to perhaps $20 billion.

That figure represents true risk for the nation and our industry.

It seems that many are under the impression that self-administered funds are managed with some level of competence by Joe Sixpack’s counsel. However, the existence of waiver or hold-harmless indemnification language in many settlement agreements tells a different tale. The November 2013 manual on MSAs included guidance for non-professionally administered MSAs, which tells us someone out there might need that advice.

After all the convoluted effort focused on setting up MSAs to protect the interests of Medicare, the guidelines on administration offered by CMS are surprisingly simple:

  • Deposit the fund into an interest-bearing account.
  • Use the fund only for the MSA settlement injury.
  • Use the fund only for expenses covered by Medicare.
  • Pay according to the appropriate fee schedule.
  • Prepare and submit an annual account report to CMS.

The first three seem easy enough to understand. The last two, however, are where the wheels will most likely come off the bus for our wayward injured worker turned financial wizard. Fee schedule and medical classification codes are a science unto themselves, yet we expect Joe Sixpack to navigate that labyrinth with a ninja-like accounting skill set that many industry professionals themselves do not possess.

As for those detailed annual reports, anecdotal information shows CMS hasn’t actually seen many of those over the last decade or so. They, and we, are operating blind in that area.

And, as I’ve indicated, it is a damn big area.

The harsh truth is, no one knows what is out there. No one knows what is coming. We are blindly turning on faith that all this energy and effort will somehow end up doing what was intended. Trust me; this is not going to end well.

The cost of professional administration is a mere pittance when compared with the cost and complexity of setting up an MSA. It seems even smaller when we fully recognize the consequences at hand. Some in the industry are openly suggesting that the expense of professional administration could easily be offset by using it in place of the costly and slow approval process. By skipping the approval but securing the long-term health of the MSA, the greater goal of limited liability will be met. The indemnity saved by settling the case sooner would in many cases more than offset the cost of a professional manager.

Under the current scenario, the taxpayers will clearly be on the hook, but the workers' comp industry should not be foolishly complacent. There are potential clawbacks in our future, and many who think they've put these issues to bed may be again facing a call for more cash by our government.

Why the government fails to close the loop on this and secure the protection it originally intended is beyond comprehension. We are requiring the crafting of a lengthy and expensive letter, getting it reviewed, edited and approved, and then no one is putting a stamp on the envelope.

All that effort, all that expense, only to wind up where we were to begin with; with the exception of our new sense of security. Our false sense of security.

This is part of a much bigger issue: 10,000 retirees are entering the Social Security system every day. The Medicare trust fund will be broke by 2022 at its current expenditure rates, and the ability of Joe Sixpack to manage his funds has never been more critical. There is a train wreck coming, and we are all on board for the ride.  An army of angry Joes will soon be pounding on our door, and the $20 billion may be nowhere to be found.

After all the effort and fuss, I find myself wondering: Why?

Don't Get Washed Away By The Medicare Set-Aside

A storm has been brewing since requirements for set asides were established in order to protect Medicare from future medical expenses from work comp and general liability claims. With the mandatory requirement that all work comp and general liability claims be reported in electronic format, CMS has the mechanism to look back and identify if they have ever made any work comp-related medical payments. Section 111 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 adds new mandatory reporting requirements for group health plan (GHP) arrangements and for Liability Insurance (including Self-Insurance), No-Fault Insurance, and Workers' Compensation. Failure to comply will subject any company to a fine of $1,000 per day and “double damages.”

While this practice has been required for many years in workers' compensation, the new mandatory reporting application to civil matters has dramatic implications. It should be noted that Medicare's status as a secondary payer under 42 U.S.C. § 1395y (b) creates the right to reimbursement, which has the potential to simultaneously impede settlement and impose a possible risk of future liability against all parties.

In the 1980s, Congress amended the Social Security Act to include the Medicare Secondary Payer Act (“MSP”), which effectively enacted Medicare liens. In 2003, the Government clarified its position that self-insured entities were also included in the Medicare Secondary Payer Act in passing the Medicare Act of 2003. The 2003 revisions altered the Medicare Secondary Payer Act to expressly include self-insured entities as “responsible” parties obligated to reimburse Medicare.

Prior to the Act, Medicare did not have an efficient mechanism to identify or evaluate instances where Medicare's liability should have been secondary to the “responsible” party (or it's insurance carrier), and could only recoup payment from insurance plans to the extent that payment had been made or could “reasonably be expected to be made promptly.”

The 2003 amendments to the MMA, found in Title III, were specifically enacted to overturn court decisions that limited the effectiveness of the Medicare Secondary Payer Act private cause of action. The amendments made it easier for injured Medicare recipients to bring these private actions on Medicare's behalf against an expanded class of entities and individuals with insurance, and they clarified when such entities and individuals must pay the Medicare beneficiary's medical expenses. The Amendments state:

All businesses, trades, and professions are deemed to have insurance, regardless of whether they carry their own risk. Any judgment or payment — including a settlement — conditioned on the recipient's compromise, waiver, or release of claims against the person or entity that commits the wrongful act (whether or not there is a determination or admission of liability) demonstrates a plan's responsibility to reimburse Medicare.

This legislation thereby expanded the possible defendants for the private cause of action to include any person or entity (including a business, trade, or profession without insurance), the entity's insurance company, and the plaintiff's self-insured employer or the third-party administrator. With these amendments it is now crystal clear that Medicare's right of reimbursement applies to almost all settlements in which Medicare payments have been made on a plaintiff's behalf. In addition, Congress applied the amendments retroactively to the original passage of the act in 1980. Court decisions since the 2003 amendments were enacted have consistently allowed the private cause of action to proceed against insurers and similar entities, including employers, who are deemed responsible for injuries. Therefore, responsible parties need to be made aware of the double exposure and how both the 2003 amendments to the Medicare Secondary Payer Act statute and the subsequent court cases expand the class of entities with direct exposure to damages.

The latest update took place very recently. On October 1, 2012, the Supreme Court declined review of a lower court's Medicare Secondary Payer decision. The important facts decided in this case (Hadden vs United States) is the fact the Supreme Court of the United States declined review of a 6th Circuit decision that upheld the government's authority under the Medicare Secondary Payer law to recover all expenses paid on behalf of a Medicare beneficiary when that beneficiary, in turn, recovers from a third party. The ruling helped define “Responsibility” under 42 U.S.C. 1395y (b)(2)(B)(ii), as that term was clarified under the 2003 amendment to the Medicare Secondary Payer Act. In this respect, the court essentially ruled that when there is a settlement, the primary plan demonstrates “responsibility” as defined under the Medicare Secondary Payer Act statute, thereby entitling Medicare to a full recovery of its claimed conditional payment amount — even if the settlement is for a compromised or reduced amount.

How will this affect employers?

One scenario is that when CMS/Medicare learns (and they will) it has been paying for work comp-related medical care, it will seek repayment from the claimant. The claimant, having spent the work comp settlement, will be unable to pay. Ultimately, it will be the employer and/or insurance carrier that will be held accountable. And should CMS have to pursue the employer in court, the amount is doubled. Unbelievably, the insured or employer could pay the future medical cost twice — once to the claimant at settlement and later when Medicare seeks reimbursement of the medical care they paid on behalf of the claimant. Legal attempts to put language in settlement agreements that the claimant agrees to be responsible for the cost of all future medical care has or will likely meet with failure because federal law will trump settlement agreements every time. Claimants, employers, and insurers are still bound by the requirements of the MSA statutes. Another scenario allows for a private cause of action to proceed against insurers and similar entities, in which there is still a potential for double costs.

Going forward, claims adjusters should have systems in place to verify compliance with the MSA requirements of CMS. However, problems may arise when you look backwards; there is no statute of limitations on compliance with the MSA requirements. CMS can review claims that were closed last year, five years ago or more for that matter to check for compliance. If CMS finds medical payments are owed, then you have 10 days to pay to avoid penalties and interest. One potential solution is baseline testing that can establish if there is an injury and if it is related to or aggravated by the date of loss.