MEDICARE COMPLIANCE

What is the statute of limitations for Medicare to institute an action for repayment of conditional payments used to be a question with more than one answer.  In the past the Centers for Medicare and Medicaid Services (“CMS”) had argued that the six (6) year limitation period contained in the Federal Debt Collection Act for claims arising out of contract was the correct standard for the plaintiff attorney.   That statute provides:

“every action for money damages brought by the United States or an officer or agency thereof which is founded upon any contract express or implied in law or fact, shall be barred unless the complaint is filed within six years after the right of action accrues…”

28 USC § 2415(a)

The plaintiff’s bar and Medicare enrollees argued that the shorter three (3) year statute of limitations was the correct standard for claims arising out of tort. That statute provides:

“every action for money damages brought by the United States or an officer or agency thereof which is founded upon a tort shall be barred unless the complaint is filed within three years after the right of action first accrues…”

28 U.S.C. § 2415(b).

When President Obama signed the Strengthening Medicare and Repaying Taxpayers Act  (“SMART”) on January 10, 2013 he answered this question in favor of Medicare beneficiaries. Additionally, unlike some of the other components of the “SMART” Act this section is self-enacting and  does not need rule promulgation or post a proposed rulemaking in the Federal Register for this to be effective. By operation of statute this new time limit became effective six (6) months after signing.  Therefore, all cases that settle after July 10, 2013 will be controlled by the three (3) year statute of limitations. The “SMART” Act reads in pertinent part:

“(a) In General.–Section 1862(b)(2)(B)(iii) of the Social Security Act (42 U.S.C. 1395y(b)(2)(B)(iii)) is amended by adding at the end the following new sentence: `An action may not be brought by the United States under this clause with respect to payment owed unless the complaint is filed not later than 3 years after the date of the receipt of notice of a settlement, judgment, award, or other payment made…’”

Pub. L. No. 112-242, § 205(a) (2013)

In the recent case U.S. v. Stricker, Lexis 15204 (11^th Cir. July 26, 2013) the court provides an excellent analysis of the above competing statutes of limitation and confirms that the “SMART” Act has resolved the controversy for settlements after July 10, 2013.  The Stricker Court discussed the need and purpose of federal statute of limitations:

The purpose of a statute of limitations, such as 28 U.S.C. § 2415, “is to require the prompt presentation of claims.” Coppage v. U.S. Postal Serv., 281 F.3d 1200, 1206 (11th Cir. 2002) (internal quotation marks and citation omitted). Originally, there was no statute of limitations for lawsuits filed by the government. Congress, however, passed § 2415-a statute of limitations that applies to the United States  [*14] -“to promote diligence by the government in bringing claims to trial and also to make the position of the government more nearly equal to that of a private litigant.” United States v. Kass, 740 F.2d 1493, 1496 (11th Cir. 1984).

The new three (3) year statute of limitations under the “SMART” Act addresses that need and the complaint of so many Medicare beneficiaries who wonder if there is ever an end to CMS’s demand for repayment.  It is now incumbent on the plaintiff’s attorney to report settlements to CMS (via their contractor MSPRC) so that the three (3) year timer starts running as soon as possible.

For help with Medicare Conditional payment resolution, turn to Synergy.  Synergy offers a unique post payment of final demand service where we attempt to secure a refund back from Medicare via the compromise/waiver process.  There is a small administrative fee at the outset and then Synergy only gets paid if there is a refund on a percentage of savings basis.  To learn more about Synergy’s lien resolution services, visit www.synergylienres.com

By Director of Lien Resolution

An Administrative Services Agreement between a Plan Administrator and a Claims Administrator may fall within the purview of a document request under ERISA 29 U.S.C. § 1024(b)(4), with non-compliance subject to the penalty assessment authorized under ERISA 29 U.S.C. § 1132(c).   As Synergy has long advocated, one of the keys to properly defending against an asserted subrogation or reimbursement claim from an ERISA plan is making requests to the plan administrator.  ERISA places certain responsibilities upon the Plan Administrator to assist with the proper management of ERISA qualified employee welfare-benefit plans and to promote communication with the plan beneficiaries.

One of the major responsibilities of the plan administrator, in so far as dealing with providing information to beneficiaries, is contained in 29 U.S.C. 1024(b)(4).  This section of the statute deals with requests for information made upon the plan administrator:

29 U.S.C. 1024(b)(4)– The administrator shall, upon written request of any participant or beneficiary, furnish a copy of the latest updated summary plan description, and the latest annual report, any terminal report, the bargaining agreement, trust agreement, contract, or other instruments under which the plan is established or operated.

In Grant v. Eaton, S.D.Miss, Civil Action No. 3:10CV164TSL-FKB, decided 2/6/13, there was an allegation that the Administrative Services Agreement between the third party claims administrator and the plan administrator contained a provision that purports to grant discretion as well as authority from the plan administrator to the claims administrator.  Due to this allegation of the transfer of certain rights from the Plan to the Claims Administrator, the court found that the Administrative Services Agreement was not excluded from the 29 U.S.C. 1024(b)(4) requests and the failure to provide the contract would subject the plan to penalties under 29 U.S.C. § 1132(c)(1)(B).

The court further reasoned that the Administrative Services Agreement contained information on “who are the persons to whom the management … of his plan … have been entrusted.” Hughes Salaried Retirees Action Comm., 72 F.3d 686, 690 (9th Cir. 1995). As a result, the Court found that the Administrative Services Agreement was subject to the ERISA disclosure requirements as it is a document “that restrict[s] or govern[s] a plan’s operation.” Shaver v. Operating Eng’rs Local 428 Pension Trust Fund, 332 F.3d 1198, 1202 (9th Cir. 2003).

The Southern District of Mississippi relied upon the rationale of other courts who had evaluated whether or not a 29 U.S.C. 1024(b)(4) request included Administrative Services Agreements.  In Michael v. American International Group, Inc., No. 4:05CV02400 ERW, 2008 WL 4279582 (E.D. Mo. 2008), the court wrote at length on the issue, stating, in pertinent part,

“The proper inquiry for the Court to determine whether the contract at issue should have been disclosed is to consider whether the administrative services agreement “allow[s] ‘the individual participant [to] know … exactly where he stands with respect to the plan-what benefits he may be entitled to, what circumstances may preclude him from obtaining benefits, what procedures he must follow to obtain benefits, and who are the persons to whom the management and investment of his plan funds have been entrusted.”

(See also, Hughes Salaried Retirees Action Comm. v. Administrator of the Hughes Non-Bargaining Retirement Plan, 72 F.3d 686, 690 (9th Cir. 1995)).

The court also looked to the Eleventh Circuit and noted that the Eleventh Circuit has found that the Administrative Services Agreement may be subject to disclosure under ERISA not just as “other instruments under which the plan is established or operated” but as a “contract” pursuant to 29 U.S.C. § 1024(b)(4). Heffner v. Blue Cross and Blue Shield of Alabama, Inc., 443 F.3d 1330, 1343 (11th Cir. 2006). The Eleventh Circuit succinctly stated that “[a] contract between a group and an insurer such as Blue Cross is specifically listed as an ERISA document which may control a plan’s operation.”

The court also recognized Fisher v. Metropolitan Life Ins. Co., 895 F.2d 1073, 1077 (5th Cir. 1990) which noted that the Plan, by its own terms, contemplated delegation of the Plan Administrator’s responsibilities to a third party administrator “arguably incorporat[ed] the Administrative Services Agreement … as a further delineation of how the Plan would in fact operate”. Which meant disclosure of the Administrative Services Agreement was required under a 29 U.S.C. 1024(b)(4) request.

Though there is case law which stands for the opposite conclusion reached by the Southern District of Mississippi, the distinction seems to be one of degree.  If the Administrative Services Agreement transfers any authority or discretion, or there are allegations that it does, from the Plan Administrator to another party then under the rationale expressed by the courts above that agreement needs to be provided in response to the beneficiary’s 29 U.S.C. 1024(b)(4) request.  Similar to the requirement created by Cigna v. Amara, 131 S.Ct. 1866 which necessitates a comparison between the Summary Plan Description and the Master Plan Document, there is need to review the Administrative Services Agreement to determine if a transfer of authority or discretion has taken place.  Under the cases cited, above failure of the Plan Administrator to provide the Administrative Services Agreement so that this review can be conducted could subject the plan to penalties under 29U.S.C. § 1132(c)(1)(b) & 29 CFR § 2575.502c-1.

Forcing a Plan Administrator to fully comply with its obligations under 29 U.S.C. 1024(b)(4) is one of the few ways to exert pressure on a self-funded ERISA plan who is attempting to enforce purported recovery rights.  Understanding that neither the Plan Administrator, nor the Claims Administrator, wants to provide their Administrative Services Agreement can be used as a negotiation tool by the wise plaintiff’s attorney to reduce repayment. Get the documents your client is owed, or demand a discount from the Plan or recovery vendor.

Synergy can help with reduction or possibly elimination of ERISA liens.  Contact us today to see how we can help you.

By Synergy Director of Lien Resolution

Medicare Advantage plans, otherwise known as Medicare Part C, have proven to be a hot and confusing topic for plaintiff’s attorneys over the past few years.  Recent rulings by the U.S. Supreme Court and 9^th Circuit have done little to eliminate this confusion.  Instead, the latest case law has increased the complexity.  The Medicare Secondary Payer Act has been appropriately described as one of “the most completely impenetrable texts within human experience.” (See Cooper Univ. Hosp. v. Sebelius, 636 F.3d 44, 45 (3 Cir. 2010)) and the line of reasoning in the area of repayment to Medicare Advantage plans for benefits they have provided is a shining example of this sad truth.  The question boils down to the ability of the Medicare Advantage Organization (“MAO”) to utilize the Medicare Secondary Payer Act as the basis for enforcement of the MAO’s reimbursement rights.  It appears that due to the cross referencing between 42 U.S.C. §1395w-22(a)(4) and 42 U.S.C. § 1395y(b)(2)(A) the MAO plan is allowed to seek a repayment under 42 U.S.C. § 1395y(b)(3)(A).

Approximately twenty five percent (25%) of all Medicare beneficiaries, twelve million (12,000,000) people, are enrolled in MAO plans.  Medicare Advantage plans allow Medicare entitled individuals to receive healthcare services through a non-governmental organization, commercial insurance companies, who contract with the Centers for Medicare and Medicaid Services (“CMS”) to administer Medicare benefits. CMS pays a capitated monthly fee for the traditional Part A & B coverage and a separate amount for Part D, prescription drug benefits.  The MAO plan then is entitled to charge a premium to their enrollee.  These MAO plans must handle all aspects of benefit administration, including the recoupment of benefits paid that should have been paid by a “primary payer.”  It is this responsibility, and the mechanism for performing it, that has sparked much litigation and created significant uncertainty.

Over the past few years a consensus had been growing that MAO plans had no private right of action under the Medicare statutes, rather, they have state court contract claims. (See, Care Choices HMO v. Engstrom, 330 F.3d 786 (6th Cir. 2003); Nott v. Aetna U.S. Healthcare, 303 F.Supp.2d (E.D. Pa. 2004); Parra v. Pacificare, 2011 WL 1119736 (D. Ariz. 2011), Humana v. Reale, 2011 WL 335341 (S.D. Fla. 2011)).  However, this trend was derailed when the U.S. Supreme Court denied the petition for writ of certiorari in In re Avandia Marketing, Sales Practices and Product Liability Litigation, 685 F.3d 353 (3d Cir. 2012), called Avandia II.

In Avandia II the Third Circuit reasoned that the MSP should be read broadly and that the language of the Medicare Advantage Organization statute (42 U.S.C. §1395w-22(a)(4)) cross references the Medicare Secondary Payer Act’s (“MSP”) language (42 U.S.C. § 1395y(b)(2)(A)) which allows these plans to utilize the enforcement provision of the MSP (42 U.S.C. 1395y(b)(3)(A)).  The Third Circuit added to their opinion that the MAO plans are able to use the MSP since to deny them this ability would put them at a competitive disadvantage and moreover that the federal agency had enacted reasonable regulations in 42 C.F.R. § 422.108.  This regulation is relied on by the MAO plans in their recovery actions as it states that the MAO plans have the same recovery rights as traditional Parts A & B.  This decision was considered by most to be outside the trend in this area of law, but when the U.S. Supreme Court denied certiorari it became clear that MAO plans now had equal and parallel rights for a private cause of action as did traditional Medicare.

Immediately following this decision by the U.S. Supreme Court the Ninth Circuit weighed into the fray and issued its ruling in Parra v. Pacificare of Arizona, 2013 U.S. App. LEXIS 7861.  In Parra the MAO enrollee was struck by a car and later died from his injuries. Para’s wife and children (“Survivors”) made a demand for wrongful death damages, which under the Arizona Wrongful Death Statute did not include the debts or liabilities of the deceased.   PacifiCare, the MAO, argued that it had a private right of action under two provisions of the Medicare Act: (1) §1395w-22(a)(4) (the “MAO Statute); and (2) §1395y(b)(3)(A) (the Medicare Secondary Payer Act “Private Cause of Action”). The Ninth Circuit Court of Appeals rejected both arguments.

Unlike the Third Circuit the Ninth Circuit was not persuaded that the cross referencing of the MAO Statute (42 U.S.C. §1395w-22(a)(4) ) and the MSP (42 U.S.C. §1395y(b)(2)) created a federal cause of action.  The Ninth reasoned that this cross-reference simply explains when MAO coverage is secondary to a primary plan, but does not create a federal cause of action in favor of a MAO.

PacifiCare then attempted to invoke 42 C.F.R. §422.108(f) as support for its position to the creation of a private cause of action. This regulation confers on the MAO “the same rights to recover from a primary plan, entity, or individual that the Secretary exercises under the MSP regulations.” Here the Court found that “[l]anguage in a regulation may invoke private right of action that Congress through statutory text created, but it may not create a right that Congress has not”.  They elaborated by stating in clear terms that “[i]t is relevant laws passed by Congress, and not rules or regulations passed by an administrative agency, that determine whether an implied cause of action exists”.

Attempting to rely on Avandia II and the U.S. Supreme Court’s de facto endorsement of the Third Circuit’s holding, PacifiCare turned to the private cause of action created under 42 U.S.C.  §1395y(b)(3)(A). Here the Ninth Circuit chose not to take on the rationale of the Third Circuit and rather made a fact specific determination that the language of the statute applies only “in the case of a primary plan which fails to provide for primary payment”.   That was not the circumstance in the Parra litigation.  Here the primary plan had “long ago tendered the sum claimed by PacifiCare … [and] Pacificare’s claim for relief is not against the insurer, or even against the Parra’s estate for sums received from a primary plan for medical expenses, but rather against the Survivors.”

The holding of the Ninth in Parra is not of much assistance to the practitioner as it is tailored narrowly to the facts of the specific case.  Though not cited, the reasoning is the same as found in Bradley v. Sebelius, 621 F.3d 1330 (11th Cir. 2010) which found that a “primary payer” under 42 U.S.C.  §1395y(b)(2)(A) is not defined as “surviving children with tort property beneficiary rights.”  This ruling, while helpful, has limited applicability as currently the only opportunity to avoid repayment to the MAO plan under MSP is in situations involving a wrongful death claim where the proceeds of any settlement or award are not held by the estate of the MAO enrollee.

By Jason D. Lazarus, J.D., LL.M, MSCC, CSSC

Since the landmark decision by the US Supreme Court in Arkansas Department of Health and Human Services v. Ahlborn in 2006, state Medicaid agencies have grappled with how to recover monies spent for injury related care through their third party liability statutes without violating the Ahlborn decisions.  Many states, like Florida, have continued to apply third party recover statutes that seemingly violate Ahlborn.  In WOS v. EMA, the Supreme Court was asked to review one such statute from North Carolina.  North Carolina’s statute required that up to one-third of any damages recovered by a beneficiary for their injuries must be paid to Medicaid to reimburse it for payments it made on account of the injury.  The Supreme Court found that this statute was not compatible with the federal anti-lien provision and violated the holding of Ahlborn which “precludes attachment or encumbrance” of any portion of a settlement not “designated as payments for medical care”.

In the EMA decision, the court again went through the tension between the mandate under federal law requiring an assignment to the state of “the right to recover that portion of a settlement that repre­sents payments for medical care,” and the preclusion of “attachment or encumbrance of the remainder of the set­tlement.”  The Ahlborn opinion held that the federal Medicaid statute sets both a floor and a ceiling on a state’s potential share of a beneficiary’s tort recovery.  The EMA court pointed out that an injury victim has a property rig hint he proceeds of a settlement “bringing it within the ambit of the anti-lien provision.”  “That property right is subject to the specific statutory “exception” requiring a State to seek reimbursement for medical expenses paid on the benefi­ciary’s behalf, but the anti-lien provision protects the beneficiary’s interest in the remainder of the settlement.”

North Carolina’s statute as applied ran afoul of the holding in Ahlborn because it set “forth no process for determining what portion of a beneficiary’s tort recovery is attributable to medical expenses.”  Instead, the statute applies an arbitrary figure (one-third) and mandates that amount be the payment for medical care out of the tort recovery.  Because, as applied, this violates the federal anti-lien law it is pre-empted.  The EMA Court pointed out that if “a State arbitrarily may designate one-third of any recovery as payment for medi­cal expenses, there is no logical reason why it could not designate half, three-quarters, or all of a tort recovery in the same way.”  Since North Carolina could provide no evidence to substantiate the claim it made that the one-third allocation was reasonable and provided no mechanism for determining whether it was a reasonable approximation in any particular case, the Court rejected its application.

In a very important part of the decision, in my view, the court discusses when the state may not demand recovery from a portion of the settlement allocated to non-medical damages.  The court stated that when “there has been a judicial finding or approval of an allocation between medical and nonmedical damages—in the form of either a jury verdict, court de­cree, or stipulation binding on all parties—that is the end of the matter.”  “With a stipulation or judgment under this procedure, the anti-lien provision protects from state demand the portion of a beneficiary’s tort recovery that the stipulation or judgment does not attribute to medical expenses.”

In applying all of the foregoing to the facts of EMA, the high Court pointed out the flaws of the NC statute which didn’t allow for an allocation.  The Court found that a substantial share of the damages in EMA must be allocated to skilled home care in the future.  This would not be reachable by the state Medicaid agency to satisfy their lien.  In addition, the Court noted that it may also be necessary to consider how much EMA and her parents could have expected to receive in terms of compensation for the other tort claims made in the suit had it gone to trial.  “An irrebuttable, one-size-fits-all statutory presumption is incompatible with the Medicaid Act’s clear mandate that a State may not demand any portion of a beneficiary’s tort recovery except the share that is attributable to medical expenses.”

The final portion of the opinion addressed and rejected each of the five arguments made by North Carolina in defending its third party recovery statute.  The first argument was that North Carolina was doing what Ahlborn said it could do which was “adop[t] special rules and procedures for allocating tort settlements.”  According to EMA, that “misreads Ahlborn” as the decision did not endorse irrebuttable pre­sumptions that designate some arbitrary fraction of a tort judgment to medical expenses in all cases.”  Second, North Carolina argued that its statute falls within the scope of a state’s traditional authority to regulate tort actions.  The EMA court stated that a “statute that singles out Medicaid beneficiaries in this manner cannot avoid compliance with the federal anti-lien provision merely by relying upon a connection to an area of traditional state regulation.”  Third, North Carolina suggested that even though the one-third allocation might be arbitrary, other methods of allocation would be just as arbitrary.  The EMA opinion’s response is that while no allocation is precise, it need not be arbitrary as trial judges and trial lawyers “can find objective benchmarks to make projec­tions of the damages the plaintiff likely could have proved had the case gone to trial.”

The fourth argument made by North Carolina asserted that it would be “wasteful, time consuming and costly” to hold “mini-trials” to allocation settlements between medical and non-medical expenses.  The Court stated that even if that were true, which it felt it wasn’t, that still “would not relieve the State of its obligation to comply with the terms of the Medicaid anti-lien provision”.    The Court pointed to the sixteen states and the District of Columbia who provide for hearings of this sort with no indication that it is overly burdensome.   “The State thus has ample means available to allocate Medicaid beneficiaries’ tort recoveries in an efficient man­ner that complies with federal law.”  The fifth and final argument contended that CMS had approved North Carolina’s statutory scheme for Medicaid reimbursement.  Citing the Brief for United States as Amicus Curiae, the Court found that was no longer the agency’s position.  Furthermore, the documents North Carolina pointed to were “opinion letters, not regulations with the force of law.”

The question becomes what does this mean for other state Medicaid Third Party Recovery statutes that are similar to North Carolina’s invalidated statute?  If you look at the EMA opinion’s holding and the analysis the US Supreme Court engages in relative to the North Carolina statute, one must conclude that any statute that provides for an arbitrary percentage would be interpreted in the exact same way.  The question is will the state Medicaid agencies capitulate now with the EMA decision.  In the long term I don’t think they will have a choice but to capitulate once the opinion has been digested.

To view the opinion click HERE