Thursday, September 8, 2016

A summer slump in Miami

Another FHCP / La Ley / MSPR case has been decided by the Federal District Court in Miami, and this time the court has dismissed the case on its finding that the plaintiff, MSPA Claims 1, LLC, does not have standing to pursue a Medicare Secondary Payer recovery action against an alleged primary payer. MSPA Claims 1, LLC v. Infinity Auto Insurance Company, Case No. 16-20320-Civ, decided August 30, 2016.

We have been following this series of lawsuits for some time now. See our September 2015 post.

The court reviewed the language of the assignment agreements. Florida Health Care Plus (FHCP) entered into a written agreement with La Ley Recovery Systems, Inc. assigning its MSP reimbursement rights (including alleged private cause of action and double recovery claims) to La Ley. Under that agreement, La Ley could further assign the rights to another entity, but only on FHCP's approval. There was no averment in the complaint that such approval had been granted, and thus no showing that the condition to a valid sub-assignment had been met.

The court thus concluded that the plaintiff had not demonstrated that it had standing, that is, an established interest that justified its assertion of a legal claim against the defendant. The court cited several other cases involving the same cast of characters, and apparently making the same ruling:

MSPA Claims 1, LLC v. Nat'l Specialty Ins. Co., 16-CV-20401-MGC, ECF No. 61 (S.D. Fla. Aug. 25, 2016);
MSPA Claims 1, LLC v. Tower Hill Prime Ins. Co., No. 16-CV-20459-KMM, ECF No. 42 (S.D. Fla. Aug. 3, 2016);
MSPA Claims 1, LLC v. Tower Hill Prime Ins. Co., 16-CV-20460-KMM, ECF No. 27 (S.D. Fla. Aug. 3, 2016); and
MSPA Claims 1, LLC v. Kingsway Amigo Ins. Co., No. 16-CV-20212-JLK, ECF No. 35 (S.D. Fla. July 27, 2016).

The court made note of a filing that had been made in state courts in Leon County, involving the Florida Department of Financial Services, said to be acting as "receiver" for FHCP, La Ley, and MSPA Claims 1, LLC. No further information about this filing is available at this point.

Monday, September 5, 2016

The 11th Circuit refines its demonstrated responsibility standard

The 11th Circuit Court of Appeals, the court which ten years ago issued its landmark decision in Glover v. Liggett Group, Inc., 459 F. 3d 1304 (11th Cir. 2006), has now handed down an important opinion that defines and limits the scope of that ruling, and does so in a way that is very instructive to those of us who have to deal with the misunderstandings on this subject engendered by the 6th Circuit. The case is MSP Recovery, LLC, et al. v. Allstate Insurance Company, et al.835 F.3d 1351 (11th Cir. 2016).

This is another in a series of cases addressing the question of when a litigant may include a claim under the "private cause of action" provided under the Medicare Secondary Payer statute when a claim for payment of insurance benefits is made. As our clients are aware, the private cause of action includes a provision permitting a claim for double recovery under certain circumstances.

As a quick sketch: In Glover, the 11th Circuit had held that a plaintiff who had sued cigarette manufacturers under the private cause of action and double recovery provisions of the Medicare Secondary Payer statute - but who themselves had not sustained any injuries - did not state a claim under which relief could be granted, because the defendants had not been demonstrated (by a judgment, a settlement, or other means, using the statutory language) to be legally responsible for the medical expenses incurred by Medicare beneficiaries who smoked cigarettes.

As the Federal courts are organized, Michigan is included in the 6th Circuit. In the case of Bio-Medical Applications of Tennessee, Inc. v. Central States Southeast and Southwest Areas Health and Welfare Fund, 656 F. 3d 277 (6th Cir. 2011), that Court stated (in obiter dictum) that the demonstrated responsibility standard established in the statute, and recognized in Glover, applies only to tort cases and has no application to claims based on contractual obligations, in that case a policy of group health insurance. We first analyzed and critiqued this decision in 2012, before this weblog was started, and we have followed the trail of wreckage that that language has created ever since. (See our posts from October 2013, July 2014, and September 2014.)

The primary problem that the Bio-Medical court's language creates for Michigan no-fault insurers is that an auto policy is also a contract. Unlike group health insurers, which have a plenary obligation to pay all medical expenses incurred by the insured (subject to deductibles and copayments), the no-fault insurer has an obligation to pay only medical expenses "arising out of the ownership, operation, maintenance or use of a motor vehicle as a motor vehicle." MCL 500.3105.

This new decision arises from a series of lawsuits filed by a company called MSP Recovery, L.L.C. (and a related company) in Federal courts in southern Florida. MSP Recovery purported to be the assignee of Florida Healthcare Plus, a Medicare Advantage plan (Medicare HMO), seeking recovery of payments from liability insurers for medical services provided to their members. (We first discussed this assignee effort here in September 2015.)

The MSPR case involved seven different lawsuits brought by the plaintiff as assignee, against four different liability insurers. In each case, the District Court had dismissed the claim under Glover, for the reason that the obligation of the insurer had not yet been demonstrated. MSPR asserted that the existence of a contractual obligation can be sufficient to demonstrate the insurer's responsibility to pay and thus there is no requirement that the responsibility be established by judgment or settlement. The defendants argued that, even when their obligation to their insureds exist under contract, the obligation must still be established independently in a court proceeding leading to a judgment or settlement.

The Court agreed with MSPR, and unlike the Bio-Medical court, it expressed its analysis and conclusions in a thoughtful manner. It noted:
  • The MSP Act permits demonstration of a primary plan's responsibility to pay "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." 42 U.S.C. § 1395y(b)(2)(B)(ii).
  • The position argued by the defendants, it concluded, would render the "or by other means" language superfluous.
  • The regulations adopted by CMS, at 42 C.F.R. § 411.22(a), state that responsibility may be demonstrated by a judgment entered after a verdict or "other means, including but not limited to a settlement, award, or contractual obligation."
The court expressed its ruling thus:
"We hold that a contractual obligation may serve as sufficient demonstration of responsibility for payment to satisfy the condition precedent to suit under the MSP Act. This does not relieve Plaintiffs of their burden to allege in their complaints, and then subsequently prove with evidence, that Defendants' valid insurance contracts actually render Defendants responsible for primary payment of the expenses Plaintiffs seek to recover."
This is a much more reasoned approach. Unlike Bio-Medical, which simply declared (in dictum) that the demonstrated responsibility standard is irrelevant when a claim is based on contract, the MSPR Court said that a contractual obligation may, in a proper case, be sufficient to demonstrate that the insurer has a responsibility to pay the medical expenses in question.

It is a point of interest that the Court in the new MSPR case made no mention of the 6th Circuit's decision in Bio-Medical.

Saturday, August 20, 2016

The 11th Circuit accepts Avandia

The U.S. Circuit Court of Appeals for the 11th Circuit, on appeal from a Florida District Court, issued its opinion in the case of Humana v. Western Heritage Insurance on August 8. This is yet another decision accepting the Avandia approach and rejecting the Care Choices approach to the ongoing question of whether and to what extent a Medicare Advantage plan is in the same position as CMS under ordinary Medicare when it comes to reimbursement obligations. This decision and the facts leading up to it have some differences from earlier decisions.

Executive Summary: The court accepted the Avandia analysis and allowed a claim for reimbursement as against a primary payer, in this case a liability carrier after settlement, without requiring or even inquiring whether its plan documents provide for such reimbursement. The court went further and approved a double recovery on behalf of Humana.

The case arose out of a lawsuit brought by Mary Reale against Hamptons West, a condominium association, for unspecified injuries. Humana had paid $19,155.41 in medical expenses, and later Reale and her husband settled with Hampton West for $115,000. The parties took steps to account for the Humana claim, agreeing to a holdback by plaintiff's counsel pending resolution of the reimbursement claim.

Humana first sued in Federal court. Reale sought dismissal based on lack of Federal jurisdiction, and the court granted that relief. Humana then sought reconsideration but then elected to dismiss the lawsuit voluntarily before the court could rule, apparently because another lawsuit had been filed in the interim.

The Reales sued Humana in state court, seeking a declaratory judgment on the amount owed. The court applied state subrogation law and found that the reimbursement claim was limited to $3,685.03. This decision was appealed and was reversed by the Third District Court of Appeal for lack of jurisdiction, the court ruling that Reale should have pursued an administrative appeal under the Medicare Act. 180 So.3d 195 (2015)

Thus, at this point, the Federal courts and the state courts had both determined that the claim should be handled under the other system. The attorney for Reale had the reimbursement funds in his account, under the agreement. But what happened to those funds after that point is not clear.

One step was taken here which has not been taken in other cases: Humana sued the liability carrier, Western Heritage Insurance, for the reimbursement amount and for double damages under the Medicare statute in Federal court, well before the state court action was resolved. Summary judgment in favor of Humana's position was granted in March 2015.

The Circuit Court of Appeals, affirming, ruled and reasoned as follows. 

Humana did not assert that it had an implied cause of action under the Medicare Advantage statute, 42 USC 1395ww-22(1)(4), and did not assert that it could pursue a reimbursement claim that is authorized in favor of CMS under the MSP statute. Rather, it asserted that it, like any other private party with standing, had the right to pursue its claim as a "private cause of action" under a different part of the MSP statute, b-3-A.

The court agreed further that Humana was entitled to a double recovery, even though Western Heritage had taken steps to protect Humana's interest by requiring an agreement from Reale that the funds needed to make reimbursement be held in trust by Reale's attorney. The court held that the demand letter plus 60 days time limit provided under the statute, and the provision under the CMS regulation that permits a reimbursement claim "event though [the primary payer] has already reimbursed the beneficiary," precluded that position.

Of interest is the dissent by Judge William Pryor. He noted that the majority opinion was inconsistent, approving the argument that Humana could pursue the same rights that CMS could under the MSP law while also upholding its right to pursue this claim as a private actor pursuing the "private cause of action." He observed,
Subparagraph (B) empowers the Secretary of Health and Human Services to make payments conditioned on reimbursement of the Medicare Trust Funds, but it says nothing about Medicare Advantage Organizations. Medicare Advantage Organizations instead charge primary plans in accordance with section 1395w-22(a)(4). Because Humana is not the Secretary and its coffers are not the Trust Funds, it cannot seek payment or reimbursement "in accordance with paragraphs (1) and (2)(A)." For that reason, section 1395y(b)(3)(A) creates no private cause of action for a Medicare Advantage Organization. . .

Subparagraph (B) also gives the Secretary a cause of action to recover reimbursement against primary plans, and subrogates the United States to any right to payment under a primary plan. A Medicare Advantage Organization receives no authority from paragraphs (1) and (2)(A). . .

Section 1395w-22(a)(4) mentions section 1395y(b)(2), but the cross-reference "simply explains when MAO coverage is secondary to a primary plan—that is, under the same circumstances when insurance through traditional Medicare would be secondary." It does not subject Medicare Advantage Organizations to all of the parts of section 1395y(b)(2). Instead, it establishes a different regulatory regime—one that does not require Medicare Advantage Organizations to be secondary payers, impose time limits on reimbursement, require demonstrated responsibility, establish an extensive administrative process, give the Secretary a cause of action, or subrogate the United States to any right to payment by a primary plan. A Medicare Advantage Organization charges primary plans in accordance with section 1395w-22(a)(4), not section 1395y(b)(2)(A). [Citations omitted]
The fact of Judge Pryor's dissent, and the contrast of the emerging line of pro-Avandia cases with the opposing line of Parra-Care Choices decisions, may make it more likely that the U.S. Supreme Court will agree to accept this case for consideration and, perhaps, finally give us all a definitive ruling on these continuingly thorny issues.

Sunday, July 10, 2016

Another LMSA effort in the works

The CMS Medicare COB What's New page had a new entry on June 8:
The Centers for Medicare and Medicaid Services (CMS) is considering expanding its voluntary Medicare Set-Aside Arrangements (MSA) amount review process to include the review of proposed liability insurance (including self-insurance) and no-fault insurance MSA amounts. CMS plans to work closely with the stakeholder community to identify how best to implement this potential expansion. CMS will provide future announcements of the proposal and expects to schedule town hall  meetings later this year. Please continue to monitor this website for additional updates.

CMS has been considering how to address Medicare Set-Asides in connection with liability claims for many years now, but its approach has always been haphazard.

Be alert. Every time CMS says anything about MSAs in liability cases, there is a rush of poorly-informed sources who announce that MSAs "are now being required" in liability cases. There is no reason to expect anything different this time.

Sunday, May 22, 2016

Another court follows Avandia

The U.S. District Court for the Eastern District of Virginia issued a decision in the case of Humana Insurance Company v Paris Blank, LLP on May 10, 2016. The unidentified Medicare beneficiary, identified only as "Enrollee," incurred medical expenses of over $190,000 in a motor vehicle accident. She later recovered a total of $455,600 from several defendants.

The issue presented was whether Humana's Medicare Advantage plan could assert a claim for recovery of its payments. The court considered only the Medicare statutes and regulations; there is no discussion in the opinion about whether Humana's contract language included a right of reimbursement, and no discussion about whether the Medicare statute requires that such language be included. Instead, the court simply accepted Humana's contention that its payments were "conditional payments" under the MSP statute, and it elected to give Chevron deference to the regulation adopted by CMS at 42 CFR 422.108, declaring that MA plans have the same right of reimbursement that CMS has for ordinary Medicare.

The court did cite and consider several of the cases that have held otherwise, including Parra v. PacifiCare of Ariz., Inc., 715 F.3d 1146 (9th Cir. 2013) but did not mention Care Choices HMO v. Engstrom, 330 F.3d 786 (6th Cir. 2003), the prominent Sixth Circuit decision that requires that an MA plan adopt express reimbursement language before such a right may be enforced.

Sunday, January 31, 2016

Reallocating recovery efforts

As a followup to our January 9 posting, there is now some clarification of the division of responsibility between the Commercial Repayment Center (CRC) and the Coordination of Benefits and Recovery Contractor. In a "webinar" presentation entitled Non-Group Health Plan New Workload to the Commercial Repayment Center, CMS has said that the CRC will be responsible for pursuing recovery of Medicare payments from a primary payer as the "identified debtor" when:
  • the recovery efforts commenced after October 15, 2015,
  • the payer notifies CMS that it has ongoing responsibility for medicals (ORM), and
  • this responsibility is not in dispute. 
Thus, in the case of a contested claim for PIP benefits when the responsibility to pay medical expenses is disputed, whether or not litigation has begun, the responsibility for pursuing recovery should continue to be that of the Benefits Coordination and Recovery Center (BCRC).

CMS, in its notices and published materials, distinguishes between two concepts for which it uses its favored acronyms - ORM and TPOC.

ORM means "Ongoing Responsibility for [payment of] Medical." The PIP carrier does have an ongoing responsibility to pay the medical expenses which are related to a particular motor vehicle accident. In some cases, when some medical expenses have been incurred and paid, the payment of others is denied because the carrier takes the position that they are not causally related to the accident. In other cases, the PIP carrier will deny all coverage after a certain date, based on a medical examination and opinion to the effect that the injured person has reached maximum medical improvement and cannot benefit from further treatment. In both cases, it would be improper for CMS to characterize the unrelated medical expenses as ORM. Yet the CRC may well do so.

TPOC means "Total Paid on Claim." It is an acronym used by CMS to refer to a one-time payment, either by settlement or judgment, and clearly will apply to a liability case based on a tort theory. It will also apply to the settlement of a disputed PIP case or to a judgment paid after a jury verdict in favor of the injured party.

In Michigan, of course, the responsibility of the PIP carrier encompasses both ongoing payment of medical expenses and, when a disputed first-party lawsuit is settled or tried, a lump-sum payment made to the plaintiff. After a settlement and payment of a lump sum, the PIP carrier often continues to have a responsibility to pay medical expenses as they are incurred. The CMS categories just do not fit the Michigan system very well.

If the PIP carrier receives a Conditional Payments Notice from the CRC when a claim is being contested or litigated, it must respond and contest it within the time that is provided, in order to avoid having the claim established as a debt owed by the company to CMS. Failure to respond will likely be regarded as a waiver of the defense.

Ahlborn amendments delayed to October 2017

We have reported to our clients over the years that the U.S. Supreme Court had ruled, in the case of Arkansas Department of Health and Human Services v Ahlborn, 547 US 268 (2006), that a state which seeks recovery of medical expenses paid under the Medicaid program from a beneficiary who has recovered a judgment or settlement from a third party in a tort case must reduce its claim proportionally to account for the extent to which the tort claimant has compromised the full value of his case. If the full liability value of the liability case was $100,000, for instance, and the plaintiff settled for $25,000, for whatever reason, the Medicaid repayment claim would be likewise limited to 25% of the amount paid.

The Ahlborn rule was reaffirmed by the U.S. Supreme Court in Wos v. EMA Ex Rel. Johnson, 568 US _____, 133 S. Ct. 1391, 185 L. Ed. 2d 471 (2013). (See our previous posting on Wos.) It has been followed by numerous lower courts.

The Bipartisan Budget Reconciliation Act of 2013, Public Law 113-67, included language which was intended to overturn the Ahlborn ruling by removing from the Medicaid statute the limiting language cited by the Supreme Court. This change was to be effective on October 1, 2014. In two later statutes, however, the Protecting Access to Medicare Act of 2014, Public Law 113-93, section 211, and the Medicare Access and CHIP Reauthorization Act of 2015, Public Law 114-10, section 220, this date was delayed. As of now, the effective date will be October 1, 2017.

What is not certain from the amending language is whether this change will apply to reimbursement claims filed, tort cases settled, tort cases commenced, or injuries sustained after the new effective date. No doubt the courts will be asked to make that determination as an interpretation of legislative intent.

Saturday, January 9, 2016

Getting a final reimbursement demand figure before settlement

CMS now has its MSP pre-settlement final reimbursement demand procedure in place.

Previously, when settling a lawsuit where Medicare has paid medical expenses, it was necessary to settle the case, using the best available information to estimate what the final reimbursement demand figure would be, submit the settlement information to the recovery contractor (COBRC), and await the "reimbursement demand letter" from the contractor. Then one of the parties, usually the plaintiff's attorney, would have to submit repayment within 60 days.

Under the new program, once the parties are ready to settle the case, they must notify the COBRC that a settlement is expected within the next 120 days. When the parties are ready to settle the case, timing will be crucial. There are several requirements that must be met in order to ensure that the reimbursement demand figure obtained using this process will be binding:

  • The plaintiff has one and only one opportunity to obtain a demand figure from CMS. 
  • The settlement must occur within three days of obtaining the figure. 
  • The parties must submit settlement information, using the MSP Portal, within 30 days. 

Under the procedure as announced, either party can obtain the figure in many cases, but since virtually all of the COBRC's procedures involve reports and information flowing between the attorney for the claimant and the COBRC, it is best that this process also be spearheaded by the attorney for the plaintiff if he or she is cooperative and knowledgeable. If a case for first-party no-fault benefits is settled, and the carrier will continue to pay medical expenses into the future, CMS characterizes it as a claim involving ongoing responsibility for medicals (ORM) and in that case, it appears, the COBRC will only deal with the plaintiff or his attorney.

As expected, CMS says that the recovery amount will not be available to a primary payer or its representative (claim handler or attorney) without a authorization signed by the Medicare beneficiary.

New recovery contractor

CMS has announced that, for new MSP recovery claims initiated after October 5, 2015, recovery efforts directed at primary payers (insurers and self-insured entities) as the "identified debtor" will be handled by the Commercial Repayment Center (CRC). Recovery claims initiated before that date, and those involving the Medicare beneficiary as the "identified debtor," which should include most litigated cases, will continue to be handled by the Coordination of Benefits and Recovery Contractor (COBRC).

The CRC was previously tasked with handling reimbursement issues relating to group health plans.

CMS has posted a presentation (PDF) which provides some details. In light of CMS's track record, we will not be surprised to see notice letters and conditional payments letters originate from either of these contractors, despite the announced demarcation line. The best approach will be to respond to whichever contractor initiates contact.