As the Centers for Medicare and Medicaid Services (CMS) faces mounting pressure to address financial challenges, the agency is looking for methods to recover overpayments and ensure that it does not make a payment when a primary payer may be available. Consequently, the present landscape for settling personal injury (liability) and no-fault claims with Medicare and Medicaid beneficiaries is changing and becoming increasingly complex.
The following three compliance issues are currently affecting, or will soon affect, liability and no-fault payers:
• CMS is taking steps to implement a formal review process for Liability Medicare Set-Asides (LMSAs) and No-Fault Medicare Set-Asides (NFMSAs).
• States are enhancing their Medicaid Secondary Payer laws, and, as of Oct. 1, 2017, Medicaid will be able to recover 100 percent of dollars expended.
• Medicare Advantage Plans’ (MAPs) recovery rights for a double-damages action under the Medicare Second Payer Act (MSP) are expanding nationwide.
Writing on the Wall
CMS very clearly is taking steps toward creating a review process for LMSAs and NFMSAs. On June 9, 2016, CMS issued an alert that it was considering a voluntary review process for LMSAs and NFMSAs, and was seeking feedback from the industry on how best to implement this process.
Then, in its request for proposal for CMS’ Workers’ Compensation Review Contractor (WCRC), released in December 2016, the agency indicated that bidders would not only be reviewing Workers’ Compensation Medicare Set-Asides (WCMSAs), but also LMSAs and NFMSAs. The contractor will begin work on reviewing WCMSAs in the summer of 2017, but will not begin its review of LMSAs and NFMSAs until at least July 1, 2018.
The review of LMSAs, if adopted, would be broken down into two categories: A full review and a cursory review, based on settlement amounts. Full review cases would be subject to a review process similar to the one currently implemented for WCMSA submissions. A cursory review, meanwhile, would only ensure that all required documents were provided for an amount determination to be made.
CMS estimates that as many as 11,000 or as few as 800 cases would require a full review, based upon industry response, while potentially 40,000 cases would require a cursory review.
Lastly, CMS recently issued documentation signaling that LMSAs and NFMSAs will be notated fields in CMS’ Common Working File (CWF). Effective Oct. 1, 2017, Medicare Administrative Contractors (MACs) will begin denying payment for services associated with an open LMSA or NFMSA record.
When settling a claim with a Medicare beneficiary, primary plans and their defense counsel need to understand the exposure and how to address it as part of the settlement agreement. Currently, the exposure under the MSP lies with the plaintiffs and their attorneys. If the settlement is greater than $750, then the settlement information and related diagnosis codes will be reported to Medicare through Section 111 data. Under the MSP, CMS can deny benefits to the beneficiary until the entire settlement amount is expended on medical care related to the claim that would otherwise be covered by Medicare.
In most instances, proper settlement language will insulate the primary plan from any concerns about future medical treatment, but primary plans may consider the use of MSA-type products to segregate the medical component of the settlement from the portions unrelated to medical in certain scenarios. Unrepresented claimants, large dollar general liability/no-fault settlements with substantive medical components, and educated plaintiff attorneys looking to protect some of their clients’ settlement proceeds are all great examples of scenarios where discussions about LMSA/NFMSAs make sense.
Ultimately, primary plans have some risk, but it is minimal compared to the exposure the plaintiff attorney and beneficiary face from Medicare for post-settlement medical expenditures related to the claim.
Enhanced Medicaid Secondary Payer Initiatives by States
Medicaid is a state-administered program in which eligibility is based upon financial need, whereas Medicare is a federally administered program in which eligibility is based upon age (at least 65 years old), disability, or end-stage renal disease. While Medicare and Medicaid are different programs, the government’s intent is that neither should pay when a primary payer is available, such as a liability, no-fault, or workers compensation insurance plan.
Each state has its own Medicaid Third Party Liability (TPL) laws, however, each state’s law, and the degree to which each state enforces its Medicaid Secondary Payer (MSP) laws, varies. Rhode Island is the first state to require electronic reporting by non-group health plans (NGHP) for any potential settlement with a Medicaid enrollee that is at least $500. Pennsylvania recently enacted a law that allows Pennsylvania Medicaid to impose a penalty of $5,000 against a primary plan for failure to provide notice of a settlement with a Medicaid beneficiary.
Additionally, a relevant part of the Bipartisan Budget Act of 2013, otherwise known as the Murray/Ryan Budget Deal, is set to go into effect on Oct. 1, 2017, and it will authorize Medicaid to recover 100 percent of its lien. Historically, and based upon the 2006 U.S. Supreme Court decision Arkansas v. Ahlborn, Medicaid was only entitled to recover its payment based upon the portion of the settlement allocated to medical expenses. The Murray/Ryan Budget deal supersedes the Ahlborn decision and allows Medicaid to recover the full amount expended. Clearly, CMS is interested in full recoveries as it reduces the U.S. government’s burden when reimbursing states for Medicaid payments.
Medicaid would like to be aware of settlements and have its liens reimbursed at the amount expended on the related medical care, which is understandable. But Medicaid’s recovery program has a deficiency that Medicare’s does not: Medicaid’s recovery rights remain limited as subrogation rights, whereas Medicare has the legal ability to pursue primary plans post-settlement for conditional payments.
For state Medicaid programs to achieve their desired recovery objectives, they need to become aware of settlements before they occur so that they may assert their recovery rights and coordinate benefits. Both Rhode Island and Pennsylvania have taken steps in this direction with a reporting requirement and associated penalty for non-reporting. We anticipate that more states will begin to adopt the Pennsylvania and Rhode Island reporting requirement models, and primary plans will need to monitor the requirements in each state.
Today, primary plans should be using settlement language to address the subrogation reimbursement responsibilities of claimants and their attorneys, except when they are aware of the recovery pre-settlement. Furthermore, they should be properly reporting in the states that require them to do so. This is an area that will require diligent monitoring over the next few years as up to 50 states introduce various reporting and recovery standards around this issue.
Medicare Advantage Litigation Becoming Commonplace
Medicare Advantage Plans (MAPs) and their assignees are becoming quite litigious regarding the recovery of conditional payments made that have not been reimbursed by NGHPs. Noteworthy case law includes the decisions in In Re Avandia Marketing and Humana Medical Plan Inc. v. Western Heritage Insurance Company, which found that MAPs have the right to pursue a double damages MSP private cause of action against primary plans that fail to reimburse conditional payments. The other circuits have not yet ruled on this issue, but it is expected that the decisions will be persuasive to other jurisdictions that encounter this issue.
If this wasn’t enough to intimidate no-fault and liability payers, a law firm out of Miami, MSP Recovery LLC (also known as MSP Claims), recently has been filing nationwide class actions against no-fault insurers for failure to provide reimbursement for Medicare Advantage conditional payments by its enrollees. The MSP Recovery law firm, as an assignee for a MAP in Florida, recently won a class certification for all Florida MAPs against a no-fault insurer. The action is titled MSPA Claims v. Ocean Harbor Casualty Insurance.
The MSP Recovery law firm is a plaintiff in other lawsuits nationwide at both the state and federal levels for similar actions under the MSP. Essentially, MSP Recovery is asserting that when a no-fault insurer allows the MAP to pay first, it creates a private cause of action for double damages for failure to provide reimbursement made by the MAP under the MSP.
MAPs need to be addressed proactively when settling a claim with a Medicare beneficiary in New Jersey, Pennsylvania, Delaware, Florida, Georgia, and Alabama. These states already have ruled that MAPs have the right to recovery from primary plans post-settlement using the private cause of action available under the MSP.
Cautious primary plans should consider proactive identification in Texas, Louisiana, Tennessee, and Virginia, where lower courts have ruled similarly. In all other jurisdictions, if there has been no lien asserted pre-settlement, then it remains a subrogation right that can be addressed with settlement language and an affidavit executed by the claimants and their attorneys denying any enrollment in a MAP during the life of the claim.
These three areas remain fluid, and primary plans should be monitoring changes as they occur to remain compliant. We have seen the MSP enforcement expand from its humble “MSA review process” origins in 2001, impacting fewer than one percent of all claims, to a broad-based recovery attempt by hundreds of entities representing state and federal agencies, involving over 20 percent of the population of the United States.