LIENS

After nearly five years, on October 6, 2016, the Florida Supreme Court issued Opinion SC16-104 and declined to make any change to the existing Rules Regulating the Florida Bar in relation to lien resolution outsourcing. As Florida’s trial attorneys know, the issue of whether there was a need for a change in the existing rules has festered in the Florida Bar Association for years. The issue was raised by a lawyer who requested that the Florida Bar address a reverse contingency fee on the reduction of hospital liens. From there, the Florida Bar has tried to craft a rule regarding outsourcing which ultimately has been rejected by the Florida Supreme Court several times.

The Florida Bar Association had created a proposed rule to address a concern that outsourcing lien resolution services could further reduce an injury victim’s net recovery. In responding to that concern, the Supreme Court used dicta in Opinion SC16-104 to remind counsel that addressing repayment obligations is part of the representation that is expected during the underlying personal injury action. The Court said:

On balance, we wish to reemphasize that lawyers representing clients in personal injury, wrongful death, or other cases where there is a contingent fee should, as part of the representation, also represent those clients in resolving medical liens and subrogation claims related to the underlying case. This should be done at no additional charge to the client beyond the maximum contingency fee, even if the attorney outsources this work to another attorney or non-attorney.

The Court goes on to say in dicta that:

If the circumstances of a particular case are such that the fee generated under the contingency fee agreement is expected to be insufficient for the work of resolving any outstanding lien, the attorney and client can seek leave of court pursuant to rule 4-1.5(f)(4)(B)(ii) of the Rules Regulating the Florida Bar to obtain an increased fee appropriate for the circumstances of the specific case.

It is unfortunate that the Court’s dicta is focused on the financial circumstances of the trial attorney rather than on what is most beneficial to the injury victim. In their proposal for a change even the Florida Bar Association acknowledged that in order to “maximize the client’s net recovery,” it may be that the “client’s best interest [are] served by having the lien and subrogation matters resolved by another with significant experience in the field.”[1] Synergy Lien Resolution Services (SLRS) was founded on that principle and has always operated under policies/ procedures designed to maximize the plaintiff’s net recovery. Additionally, the backbone principle of SLRS’s industry leading fee structure is based upon our ability to demonstrate a quantifiable value add to the injury victim’s net recovery.

Understandably the disconnect between the issue presented by the Florida Bar, and the dicta from the Court has left many Florida trial attorneys confused. Thus, it is important to remember that the Court refused to make a rule change so as before this ruling trial counsel must make reasonable efforts to identify any lien, advise the client of the potential lien, and make reasonable efforts to resolve the matter. Should trial counsel believe it would be in the plaintiff’s best interest to engage an expert, then outsourcing to SLRS for an additional fee is ethically authorized.[2] If there is a concern regarding whether the fees to reduce the lien may be passed along to the client, SLRS will assist with getting an order from the court with jurisdiction to approve all fees in conformance with 1.5(f)(4)(B)(ii).

SLRS processes are designed to assist Florida attorneys in compliance with the existing rules. SLRS can provide lien resolution outsourcing language which can be incorporated into retainer agreements. Additionally, upon engagement, SLRS will provide the required separate written informed consent. This separate informed consent has been required by the American Bar Association since 2008 and is contained in all SLRS intake packages. Finally, as discussed above, SLRS will assist trial counsel in obtaining court approval of the lien resolution fee. SLRS regularly assists counsel (specifically guardians of our minor and catastrophically injured clients) in obtaining court approval of our “savings” based fees, wherein we are regularly complimented by the court for the reasonableness of our fees.

In the end, each Florida attorney will have to decide what they believe the best course of action is given all of the foregoing. SLRS stands ready to assist in any way we can.

[1] Rule 4-1.5(f)(4)(E) Comments

[2] IN RE: Amendments to Rule Regulating the Florida Bar 4-1.5-Fees and Costs for Legal Services.

Florida Sup. Ct. No. SC16-104

Medicare has reduced the threshold for when a physical trauma-based liability settlement is large enough that the beneficiary needs to report it and repay conditional payments. On November 15, 2016, the Centers for Medicare & Medicaid Services (“CMS”) issued an alert which decreased the current reporting threshold from $1,000 to $750. The threshold decrease is a result of the mandatory annual review required by Section 202 of the Strengthening Medicare and Repaying Tax Payers Act of 2012 (“SMART Act”) to determine at what level do the costs related to collecting data and determining the amount of Medicare’s recovery claim outweigh the benefits of recovering the conditional payments.

The new threshold is effective as of January 01, 2017 for cases where a recovery demand has not yet been issued. It is important to note this threshold does not apply to settlements for alleged ingestion, implantation, or exposure cases. This means that physical trauma-based liability settlements of $750 or less do not need to be reported, nor will the beneficiary need to repay Medicare’s conditional payments.

CMS determined the average cost of collection for Non-Group Health Plan (NGHP) cases is $368.75 per case. NGHP cases are: liability insurance (including self-insured liability), no-fault insurance, and workers’ compensation. To arrive at a threshold, CMS compared the average cost of collection per case to the average liability insurance demand amount per settlement range. Among liability insurance cases, the average cost of collection most closely aligns with settlements of $750 and below, which have an average final demand amount of $384.25.

Among workers’ compensation and no-fault insurance cases, the settlement ranges of $750 and less result in average demand amounts of $510.03 and $573.27 respectively. These ranges most closely align with the average cost of collection per case. Based on these findings, CMS revised their reporting thresholds.

The SMART Act was designed to save Medicare money. Part of the expected savings is to come from an annual review meant to ensure that the federal government does not spend more money pursuing a reimbursement amount than the cost of that recovery effort.  The wise personal injury attorney can co-op this purpose and save his clients who receive de minimis recoveries from the hassle of dealing with the Medicare conditional payment issue.

The alert is available on the CMS website by click here.

On Monday, August 8^th, the 11^th Circuit affirmed the decision of the Southern District of Florida to award a Humana Medicare Advantage plan double damages when they were not repaid at the conclusion of a personal injury action. In Humana Medical Plan, Inc. v. Western Heritage Ins. Co., No. 15-11436 (11th Cir. Aug. 8, 2016) the 11^th Circuit found that Humana’s claim against Western Heritage, the liability carrier in a personal injury action, for double the amount of benefits it provided to the plaintiff was proper. In fact, the 11^th Circuit stated that Humana was entitled to summary judgment as to such a claim. Though, this decision by the 11^th Circuit involves the complex cross-referencing of different sections of the Medicare Secondary Payer Act (MSP), the facts are ones trial attorneys are confronted with on a daily basis.

In June, 2009 the plaintiff sued a condominium association in state court for damages arising out of a slip-and-fall accident. In resolving the underlying personal injury action plaintiff’s counsel confirmed there were no outstanding Medicare liens as evidenced by a letter from The Center for Medicare and Medicaid Services (“CMS”) dated December 3, 2009. Near the conclusion of the underlying personal injury action it was discovered that the plaintiff’s medical benefits were provided by a Humana Medicare Advantage plan, which paid $19,155.41 in medical benefits related to the slip-and-fall.

Eventually Western Heritage, the third party liability carrier, learned of Humana’s Medicare Advantage lien and attempted to include Humana as a payee on the settlement draft. The state court judge ordered full payment to the plaintiff without including any lien holder on the settlement check. The judge simultaneously ordered plaintiff’s counsel to hold sufficient funds in a trust account to be used to resolve all medical liens. The plaintiff attempted to resolve the Humana claim, but while Humana and the plaintiff remained in ongoing litigation Humana filed an action against Western Heritage seeking double damages pursuant to 42 U.S.C. § 1395y(b)(3)(A).

In affirming the Sothern District of Florida’s opinion, the 11^th Circuit found that the Medicare Secondary Payer Act’s (MSP) private cause of action extends to Medicare Advantage plans. The MSP provides:

“there is established a private cause of action for damages (which shall be in an amount double the amount otherwise provided) in the case of a primary plan which fails to provide for primary payment (or appropriate reimbursement) in accordance with paragraphs (1) and (2)(A).” 42 U.S.C. § 1395y(b)(3)(A)(emphasis added)

The 11^th Circuit, in agreeing with the 3^rd Circuit, found that 42 C.F.R. §422.108(f) extends the private cause of action to Medicare Advantage Plans (Medicare Advantage Organizations “MAO”s).

“The district court concurred with the Third Circuit’s analysis of the MSP private cause of action and held that ‘[t]he statutory text of the MSP Act clearly indicates that MAOs are included within the purview of parties who may bring a private cause of action.’  We agree.”

Id.

What should be especially upsetting for the trial bar is that the 11^th Circuit performed this analysis specifically regarding 42 C.F.R. §411.24(g).

“CMS has a right of action to recover its payments from any entity, including a beneficiary, provider, supplier, physician, attorney, State agency or private insurer that has received a primary payment.”

42 C.F.R. §411.24(g) (emphasis added) See Also, United States v. Weinberg, 2002 U.S. Dist. LEXIS 12289 (E.E. Pa. July 1, 2002); United States v. Harris, 2009 U.S. Dist. LEXIS 23956 (N.D. W. Va. March 26, 2009) affirmed, 334 F. App’x 569 (4^th Cir. 2009); Denekas v. Shalala, 943 F. Supp. 1073 (S.D. Iowa 1996).

The reality of this exposure struck home in a recent case of national attention in which a Humana Medicare Advantage plan utilized these statutes and regulations to file suit against the ParisBlank law firm, one of the most respected firms in the Commonwealth. As both the ParisBlank law firm and Western Heritage discovered, Humana is aggressively using these statutes and regulations. Humana’s mantra, proven successful to date, has been “damages shall be in an amount double.” Despite the fact that Western Heritage placed the full amount of Humana’s claim in trust ($19,155.41) during litigation, Humana demanded the damages be doubled. The 11^th Circuit found that placing the funds in trust was not the required “appropriate reimbursement” and thus Humana’s intractability was rewarded. In supporting Humana, the court drew a harsh bright line stating:

“If a beneficiary or other party fails to reimburse Medicare within 60 days of receiving primary payment, the primary plan ‘must reimburse Medicare even though it has already reimbursed the beneficiary or other party.” 42 C.F.R. § 411.24(i)(1).

Id.

If the MAO is not repaid within sixty days, regardless of ongoing negotiations, they shall collect double damages.

“Finally, we agree with the district court that double damages are required by statute. Unlike the Government’s cause of action, the private cause of action uses the mandatory language “shall” to describe the damages amount.  Compare 42 U.S.C. § 1395y(b)(2)(B)(iii) (“The United States may . . . collect double damages  . . . .” (emphasis added)) with 42 U.S.C.  § 1395y(b)(3)(A)  (Damages “shall be in an amount double the amount otherwise provided.” (emphasis    added)); see also Baxter Jnt’l, Inc. , 345 F.3d at 905.

Therefore, the district court correctly ordered Western to reimburse Humana $38,310.82, double the amount to which Humana was otherwise entitled.

As an expert witness in the ParisBlank suit, Synergy’s Director of Lien Resolution Services, Dave Place, testified that one factor that  makes this clear trend of the Circuits unsettling is that Medicare Advantage plans are not required to follow any of the reporting or disclosure obligations that exist for traditional fee-for-service Medicare (A&B). There is no “portal” to check, or central repository of information from which a trial attorney could obtain some level of certainty that any potential repayment obligation is satisfied. In both the Western Heritage case and the ParisBlank matter, the parties involved had confirmation from CMS that Medicare had no interest. Understandable confusion followed when Humana asserted repayment rights at the conclusion of both personal injury cases. Yet, despite this confusion, which is clearly a result of the lack of corresponding, reporting, and disclosure requirements for MAOs, in both cases there was a demand for double damages as penalty.

Making it even more difficult and confusing for the trial attorney is that neither CMS nor BCRC provide any assistance. If a trial attorney reports a case to BCRC and the plaintiff is actually on a Medicare Advantage Plan neither CMS nor BCRC will inform the trial attorney. The burden is on the trial attorney to discover and satisfy these Medicare Advantage repayment obligations or potentially be forced to pay double themselves.

A few best practices:

• Get all insurance cards from your client or their personal representative – Clients on Medicare Advantage plans often refer to their coverage as Medicare.
• Confirm effective dates of coverage – Clients can switch back and forth from Medicare A&B to a MAO and back each year.
• Potentially a repayment obligation to both CMS and a MAO may exist in the same case for the same accident, so you must check for both.
• If you are expecting a large conditional payment amount to return from CMS and it is small or zero this should be a red flag that potentially an MAO is paying.
• Review billing statements from hospitals and providers to determine if an MAO is making payment.
• Consult an expert.

Another likely result of this case is that the trial attorney should now expect the same treatment of Medicare Advantage claims by defense counsel as is now the case with Medicare A&B. Defense counsel may demand written confirmation that any purported Medicare Advantage lien has been satisfied, and may be reluctant to disburse funds to the plaintiff with only the expectation that the plaintiff will satisfy this obligation.

Synergy will continue to actively protect injury victims and the attorneys who represent them. If you are having an issue like ParisBlank, give us a call and speak to an expert (877) 242-0022.

Montanile v. Board of Trustees of National Elevator, 577 U.S. ____ (2016)

In the post McCutchen world wherein trial attorneys find themselves at the mercy of ERISA Plans, it was with a measure of dread that we anticipated another unfavorable ruling from the U.S. Supreme Court in Montanile. (See previous blog post). However, Justice Clarence Thomas who delivers the opinion in Montanile deals a serious blow to ERISA Plans and their overreaching recovery efforts against personal injury victims. In Montanile, the Court found that should the plaintiff fully exhaust the settlement funds so that they are no longer in the possession and control of the plaintiff, then the ERISA Plan cannot make a claim against the plaintiff since the subject of their claim, the settlement fund, is fully dissipated.

“We hold that, when a participant dissipates the whole settlement on nontraceable items, the fiduciary cannot bring a suit to attach the participant’s general assets under §502(a)(3) because the suit is not one for ‘appropriate equitable relief’.”
Id. at pg 2.

The facts of this case are tragic and typical of the kind of situation most plaintiff attorneys often find themselves dealing with in their cases. Mr. Montanile was severely injured when a drunk driver collided with his vehicle. Mr. Montanile incurred substantial medical bills, of which his ERISA Plan paid $121,044.02. During the course of litigation, Mr. Montanile executed an additional agreement reaffirming the reimbursement language contained in his ERISA Plan’s contract. Eventually the personal injury action was settled for $500,000 from all sources, including Mr. Montanile’s UIM coverage. After attorney fees and costs, Mr. Montanile was to net $240,000.00. Trial counsel began negotiations with the ERISA Plan but was unable to reach an agreement. Trial counsel then notified the ERISA Plan in writing that he would disburse the remainder of the funds to Mr. Montanile unless the Plan objected within fourteen days. The Plan failed to respond and the funds were disbursed. Six months later, the ERISA Plan filed suit in federal district court against Mr. Montanile by which time Mr. Montanile contends the settlement funds were spent. The ERISA Plan asserted that despite Mr. Montanile spending all the settlement funds, they can still recover the amount of their claim from his general assets. Appropriately, Justice Thomas writing for the majority reaffirmed that ERISA requires “appropriate equitable relief” and a claim against Mr. Montanile’s general assets is not authorized.

This well-reasoned and well written opinion makes clear the requirements and limitations placed on an ERISA Plan’s recovery efforts. As we noted in our previous blog, the Court was concerned with the cost ERISA Plan’s might incur if their recovery efforts were limited to funds “in the possession and control” of the plaintiff. Justice Thomas addressed that squarely and accurately characterizing the ERISA recovery industry.

“More than a decade has passed since we decided Great-West, and plans have developed safeguards against participants’ and beneficiaries’ efforts to evade reimbursement obligations. Plans that cover medical expenses know how much medical care that participants and beneficiaries require, and have the incentive to investigate and track expensive claims. Plan provisions—like the ones here—obligate participants and beneficiaries to notify the plan of legal process against third parties and to give the plan a right of subrogation.

The Board protests that tracking and participating in legal proceedings is hard and costly, and that settlements are often shrouded in secrecy. The facts of this case undercut that argument. The Board had sufficient notice of Montanile’s settlement to have taken various steps to preserve those funds. Most notably, when negotiations broke down and Montanile’s lawyer expressed his intent to disburse the remaining settlement funds to Montanile unless the plan objected within 14 days, the Board could have—but did not—object. Moreover, the Board could have filed suit immediately, rather than waiting half a year.”
Id. at pg 14.

It is important to note, as the Court does repeatedly, that Mr. Montanile’s counsel kept the ERISA Plan informed, cooperated with signing additional agreements, gave fourteen (14) days’ notice and even gave them an opportunity to object before he disbursed the remaining settlement funds.

This opinion is likely to encourage quicker action by the ERISA Plan’s and their recovery vendors. Though the Court is clear in stating:

“[D]efendant dissipat[ion] [of] the entire fund on nontraceable items … eliminated the lien. Even though the defendant’s conduct was wrongful, the plaintiff could not attach the defendant’s general assets instead. Absent specific exceptions not relevant here, “where a person wrongfully dispose[d] of the property of another but the property cannot be traced into any product, the other . . . cannot enforce a constructive trust or lien upon any part of the wrongdoer’s property.” Restatement §215(1), at 866 (emphasis added); see also Great- West, 534 U. S., at 213–214 (citing Restatement §160).”
Id. at pg 9

ERISA Plan Administrators and recovery vendors will also note that the Court made it clear that had they taken more aggressive action, and sooner, then their recovery rights may have been preserved.

“The Board had an equitable lien by agreement that attached to Montanile’s settlement fund when he obtained title to that fund. And the nature of the Board’s underlying remedy would have been equitable had it immediately sued to enforce the lien against the settlement fund then in Montanile’s possession.”
Id. at pg 7

This opinion finally provides some guidance to the trial bar on how to address ERISA subrogation claims. Here the Court recognizes that a plaintiff who honors the contractual obligations of their ERISA Plan but is unable to reach a final resolution regarding their subrogation/repayment demand is not stuck in perpetual limbo following resolution of the underlying personal injury action. If trial counsel provides a reasonable opportunity for the Plan to enforce its recovery rights, here the Court found fourteen days to be reasonable, then exhausting that separately identifiable settlement fund on nontraceable items prevents the ERISA Plan from seeking a recovery.

The term “nontraceable” is only defined in this opinion as items “like food or travel” whereas “traceable” items are defined as “identifiable property like a car.” (Id. at pg 8). However, the court does make it clear that simply comingling the settlement funds with general assets is not to be considered exhausting the fund on “nontraceable” assets (Id. at pg 13). Unfortunately, this does not provide much guidance for plaintiff’s who use their settlement funds to purchase a structured settlement annuity, or place the entirety of the settlement in a Special Needs Trust/settlement trust. However, given the clear requirement that the settlement funds be in the “possession” and under the “control” of the plaintiff, there is a good argument that both monies used to purchase a structured settlement as well as funds placed in a Special Needs Trust are “nontraceable”. These arguments are bolstered by the following passages from Justice Thomas’ opinion:

“[A]ll types of equitable liens must be enforced against a specifically identified fund in the defendant’s possession. See 1 Dobbs §4.3(3), at 601, 603.”
Id. at pg 10.

And when the Court wrote:

“[E]quitable liens by agreement … depend on “the notion . . . that the contract creates some right or interest in or over specific property,” and are enforceable only if “the decree of the court can lay hold of ” that specific property. 4 Pomeroy §1234, at 694–695.
Id. at pg 8

In this case, the majority held that it was unable to determine from the record how much of the subject settlement funds were dissipated by Mr. Montanile prior to the Plan’s suit. The case was remanded to the trial court to determine

“whether Montanile kept his settlement fund separate from his general assets or dissipated the entire fund on nontraceable assets.”
Id. at pg 14

To avoid this confusion, trial counsel should have the plaintiff keep the settlement funds in a separate account so when it is fully exhausted there is no uncertainty for the ERISA Plan to color. Though this SCOTUS opinion is quite clear on many points, it does illustrate the complex nature and exacting steps that must be taken by trial counsel in seeking to resolve reimbursement demands from ERISA Plans. Trial counsel is encouraged to seek the guidance of experts in the area of ERISA lien resolution so that their clients can take advantage of this encouraging clarification by the Court.