Saturday, October 18, 2014

Follow-up on McDonald case

Clinton McDonald was severely injured in an on the job motor vehicle accident in Kentucky on May 10, 2007. He died from his injuries several months later, on November 5, 2007. According to the court decision, Medicare paid over $180,000 in medical expenses. Defendant contested the workers compensation claim on a causation issue - whether McDonald's death was caused by the injuries. The decision does not reveal whether it took the position that the medical expenses paid by Medicare were unrelated to the injuries, although that would seem to be the central question.

The following were the key dates:
  • The final decision by the workers compensation agency was issued on 12-28-09
  • On 9-13-12, a year and nine months later, the current lawsuit was filed. The defendant had not reimbursed CMS in that time. 
  • Defendant received the conditional payments letter on 9-18-12 and a reimbursement demand letter on 10-25-12. The amount was $184,514.24.
  • That amount was paid by the defendant to the Medicare reimbursement contractor on 12-11-12.
The District Court for Kentucky's Western District observed, as to the issue raised in its previous ruling *, that it was now bound to follow the recent decision of the 6th Circuit in Michigan Spine and Brain Surgeons. That, however, was not the most significant ruling by the court. More important was the determination that the plaintiff had established an entitlement to double damages under the private cause of action provision, found at 42 UCS 1395y-b-3-A.

The imposition of double damages on the defendant which has already paid the reimbursement amount to the Medicare reimbursement contractor, at first glance in compliance with the applicable statutory and regulatory requirements, appears to be an unfair result. But there is more under the surface.

There is no information in this opinion as to what happened between December 2009 and September 2012. Certainly, during that time Indemnity knew that it had the obligation to pay the medical expenses, and it knew that Medicare had paid those expenses. That payment by Medicare would be regarded as a conditional payment, with a reimbursement obligation. It is beyond question that Indemnity knew that it had a reimbursement obligation.

One possibility would be that Indemnity was pursuing an appeal of the decision of the state workers compensation agency during that time, but if that were the case, we would expect that that would be one of the arguments that Indemnity would have made against the imposition of the double recovery penalty. It made no such argument, it would appear.

It seems likely that Indemnity simply decided to wait until it received the conditional payments letter and the final reimbursement demand letter before paying the amount it owed. While that may be a technical compliance with the law, it was not enough in this case.

The court commented:
Indemnity's "no harm; no foul" argument disregards the two years between the order for payment by O'Reilly or its carrier from the Worker's Compensation Board and the filing of this suit during which Indemnity did nothing to notify or reimburse Medicare. As the Estate's filing of the suit prompted payment in the amount of $184,514.24, the Estate is entitled to the double damage in that amount to reward the Estate for its efforts.
When the payment of workers compensation benefits was made to the estate, in compliance with the December 2012 ruling, is unknown. Whether and when this payment was reported to CMS under the MMSEA requirements is unknown. Whether it was that reporting that triggered the issuance of the conditional payments letter is unknown.

The court does not mention it directly, but there is an affirmative reporting obligation by the defendant, one which predates the now well-known reporting under MMSEA after money has been paid. The rule, 42 CFR 411.25, provides:
§ 411.25   Primary payer's notice of primary payment responsibility.

(a) If it is demonstrated to a primary payer that CMS has made a Medicare primary payment for services for which the primary payer has made or should have made primary payment, it must provide notice about primary payment responsibility and information about the underlying MSP situation to the entity or entities designated by CMS to receive and process that information.

 (b) The notice must describe the specific situation and the circumstances (including the particular type of insurance coverage as specified in §411.20(a)) and, if appropriate, the time period during which the insurer is primary to Medicare.

 (c) The primary payer must provide additional information to the designated entity or entities as the designated entity or entities may require this information to update CMS' system of records.
It is likely that Indemnity never made any report to CMS under this rule. While that report would not be required as long as it continued to assert that the expenses were not related to the accident - if that indeed was its position - once the workers compensation agency had made its ruling in December 2009, assuming no appeals were pursued after that point, that report was required under that regulation.

What is the takeaway lesson? This case still does not establish that a defendant which contests a claim does so at the risk of an adverse ruling under the double indemnity provision, although there will probably be plaintiffs' attorneys who will argue that it does. What it does suggest is that, once the defendant's position on the merits of the claim is rejected by the court or agency, the defendant should take affirmative steps  to deal with the known Medicare reimbursement obligation within a reasonable time rather than waiting for the reimbursement contractor to send its notice. The required notice under section 411.25 should be made, in writing, and if there is no response, the defendant should follow it up with additional notices in writing. It is very unlikely that a defendant which makes such efforts would suffer the imposition of double damages under the MSP statute.

* (We discussed the first ruling in the McDonald case here in October 2013, just a year ago. Thanks to Franco Signor for alerting us to the followup ruling.)


A couple of new developments as recently reported on the Franco Signor weblog

1. The Humana v Farmers case in the Texas Federal court (the one remaining case after the strategic dismissal of three others by Humana) finally has a decision by the Article III judge. The court has rejected most of the magistrate’s recommendation and has found that a Medicare Advantage plan does have the right to pursue a "private cause of action" under the Medicare Secondary Payer laws. The judge purported to be following the In re Avandia case from the 3rd Circuit, but of course that case did not involve this unusual issue. Implicit rather than explicit in the judge's ruling is a determination that Medicare Advantage plans do have the rights that CMS has under the Medicare Secondary Payer laws, thus putting the Eastern District of Texas in the Avandia rather than the Care Choices camp.

Our previous writeups on this case: 

This case remains very perplexing, since Humana and the court are pursuing the issue as one of the applicability of the "private cause of action" theory. In truth, Humana's theory does not need the private cause of action language at all. Its argument, in essence, is that it stands in the shoes of CMS and can assert a reimbursement right to the same extent as the Coordination of Benefits and Recovery contractor can do, on behalf of CMS, under the Medicare Secondary Payer law. The private cause of action theory under the MSP laws inures to the benefit of an outsider to the relationship between obligor and obligee under the reimbursement statute. It simply has no proper role to play in the Texas lawsuit.

Considered fairly, the issue that the courts address by the misuse of the phrase "private cause of action" in this context is whether the reimbursement claim arises under Federal law, thus raising a Federal question and permitting the case to be heard in the Federal courts.

2. CMS has withdrawn its previous Advance Notice of Proposed Rulemaking on the issue of creating Medicare Set-Asides in liability cases. This does not mean that CMS will not issue a proposed rule in the future. It does probably mean that it will not do so soon. Thus the same analysis and recommendations will continue to apply: set-asides are not mandatory in liability cases, CMS will probably not review and approve such set-asides, but a voluntary set-aside is a very reasonable consideration for certain cases, particularly large-dollar cases involving significant expected future medical expenses for a Medicare beneficiary. There is no reason for a defendant to insist upon a set-aside in a liability case, but there is every reason to agree and cooperate if the plaintiff's attorney suggests, for the protection of his client, that that step be taken.

Medivest reports that the ANPRM was withdrawn because the proposed rule, after having been developed, was rejected by the Office of Management and Budget, for reasons not apparent.