Federal Court opens up suits by providers for double damages under Medicare Secondary Payer

A recent Sixth Court of Appeals decision in Bio-Medical Applications v Central States  (09-6121/6169) rejected decisions of earlier courts that a plan’s obligation to pay has to be demonstrated by a civil suit before action for double damages can be tried.  It found that an existing contract for the insurer to pay [the provider] is sufficient.

The decisions in Bio-Medical Applications v Central States by the Sixth Court seem logical, though when the Court finds the Medicare Secondary Payer statues to be tortuous it proceeds to offer some labyrinthine dicta of their own.  Thankfully Circuit Court Hellen White adds back a sense of reality in her concurrence.

The key decisions by the Court are:

1.) The existence of a contract (e.g., Group Health Plan) is sufficient under Medicare Secondary Payer statutes to establish a private cause of action for double damages under 42 U.S.C. § 1395y(b)(3)  as “...other means” under 42 U.S.C. § 1395y(b)(2)(B)(ii).  The 6th Court of Appeals reverses some earlier Courts’ reliance on Glover v. Liggett Group, Inc., 459 F. 3d 1304 - 11th Court of Appeals and found that an existing contract for the insurer to pay the provider is sufficient.

2.) A healthcare provider need not previously “demonstrate” a private insurer’s responsibility to pay before bringing a lawsuit under the Act’s private cause of action.

Discussion
The Court’s first decision above is in line with CMS’s interpretation of the MSP statutes as evidenced by HHS regulation 42 C.F.R. § 411.22(b)(3) which includes a contractual obligation in its definition of “...other means” and 42 C.F.R. § 411.24(c)(2) which includes the provisions for double damages should CMS be forced to take legal action to recover the conditional payment.  Certainly, the MSPRC relies on these statutes and regulations to encourage Group Health Plans and Workers’ Compensation Plans to reimburse medicare on a regular basis.

As for the second decision, it must be noted that a Medicare beneficiary suffered from End Stage Renal Disease (ESRD) and assigned her rights under Central States insurance plan to Bio-Medical.  The Court found that under Medicare Secondary Payer, Central States illegally terminated the beneficiary’s coverage when she was diagnosed with ESRD.  When Central States stopped paying Bio-Medical, they billed Medicare and Medicare paid conditionally.  Bio-Medical subsequently sued Central States to recover the additional monies they would have recovered under Central State's insurance plan had they not been forced to bill Medicare.

The key to whether or not a healthcare provider can bring an action under MSP can be found in Woods v. Empire Health Choice, Inc., 574 F. 3d 92 - 2nd Court of Appeals “...we conclude that a private party may bring suit under § 1395y(b)(3)(A) only where the private party has itself suffered an injury, ordinarily because a primary plan has failed to make a required payment to or on behalf of that party.”  The Court’s assertion that Bio-Medical Applications suffered in injury is buried in foot note 17, “...By allegedly being paid less by Medicare than it would have been paid by Central States, Bio- Medical suffered its own harm here.”  This decision does not imperil earlier decisions that the MSP statute is not a Qui Tam law nor does not create “attorneys general.”  Healthcare providers can only sue if they suffered an injury.

In Summary
The Court reaffirms the 11th Court of Appeals decision in Glover v. Liggett Group stating that “demonstrated responsibility” provision under 42 C.F.R. § 411.22(b)(3)
limits only tortfeasor liability.   Plaintiffs (including CMS) must first prove that the defendant committed a tort or more to the point that a plan was obligated to make a payment on behalf of the defendant, before they can sue for double damages.  The 11th Court clarified that non-tortious liability claims (e.g. breach of contract) “demonstrate their responsibility” in contract.

In Dicta
In convoluted logic that would take days to unravel, the Court suggests that private parties do not have to “demonstrate responsibility” provision under 42 C.F.R. § 411.22(b)(3) and that “... the plaintiffs’ case in Glover should have failed not because the defendant’s responsibility to pay had not been previously demonstrated, but rather because the Act does not permit a private cause of action (as opposed to one brought by Medicare) in tort.”    This commentator has to agree with Ms. White when she states,“ [she] would leave this question to another day as well.”

Double damages
The Appeals court remanded the question of whether the double damages to be assessed where that of Bio-Medicals losses or Medicare’s conditional payments.

Impact

CMS appears to have gained another instrument for enforcing MSP statutes.  When healthcare providers are aware of another plan (e.g., group health plan, workers' compensation plan or no-fault policy) that will not pay primary, this court decision appears to clear the path for them to sue for double damages (their medical claims).

 

September Medicare Secondary Payer The legal implications of reporting Ongoing Responsibility for Medicals (ORM)

So much has been said about payments and payments triggering reporting that perhaps some have missed the legal obligations implied reporting a case as ORM.  Or for those RREs fortunate enough to have had competent legal counsel, perhaps you have yet to see the impact on your claims processing department. 

Reporting Ongoing Responsibility for Medicals (ORM) means that you have a contract, express (e.g., workers’ compensation policy) or implied as demonstrated by your intention to pay for medical claims arising from a injury (tort).  Either way you can expect to some day get a bill from the MSPRC.

The RRE can report any of the three types of insurance, a.) workers’ compensation, b.) no-fault and c.) liability as accepting ORM.  The most common type are, of course, workers’ compensation and no-fault.  Since workers’ compensation is regulated by State law and because Medicare has a great deal of experience with workers’ compensation, the rules for reporting are mature and well documented in the NGHP User’s Guide. On the other hand, the rules for reporting no-fault are limited, because they reflect Medicare stricter interpretation of when a no-fault insurer is obligated to pay.  It is not too much of a stretch to say that Medicare perceives the existence of a no-fault policy to be a primary to Medicare until the policy limits are exhausted . By only exploring the tip of the no-fault iceberg, it becomes apparent that for a variety of reasons no-fault insurance don’t always pay to their limit and hopefully, I will have more to share No-Fault in the next news letter.  That leaves liability insurance.

The most commonly reported liability case is one that arises from a injury (tort), but you should keep in mind that Medicare does not limit its interpretation of a liability to just injury cases  When a plan of insurance does not easily fit into Group Health, Workers’ Compensation or No-Fault buckets, Medicare uses Liability as a catchall. They  take the larger view of liability as a legal responsibility, duty or obligation.  Liability should only be reported as ORM, if the RRE has paid or intends to pay a health care provider to treat the claimant to avoid a lump-sum settlement.  Do not report it as ORM if you make a payment directly to the beneficiary -- that is a TPOC.

The legal ramifications of reporting a case as accepting ongoing responsibility for medicals is that you now have to pay providers for any and all claims that are related to that injury.  If you do not, then the beneficiary is obligated by their legal relationship with Medicare (HHS regulations) to file a “valid” claim for treatment from your insurance plan.  What makes up a “valid” claim is not published in regulation, but has the effect of meaning: “It won’t be valid until the insurer has accepted it.”  So, the beneficiary is on the hook to pursue that claim unto the ends of the Earth.  Should the beneficiary quit or accept something less than payment for treatment, Medicare can sue the insurer for double the payment amount through their MSP statutory subrogation rights.  Medicare Secondary Payer statutes and HHS regulations encourage payment through threat of litigation.  In practice, if Medicare makes a payment for you because you did not want to pay the medical bill, that payment is conditioned upon reimbursement when the beneficiary files a valid claim and...  so on as above. See how it works?

So, to tighten the noose, or help the RRE enforce proper payment ,depending on your point of view: when the RRE reports their assumption of ORM, the beneficiary’s healthcare providers are constrained from billing Medicare for treatment related to the reported injury.  Unless Medicare’s arbitrator of payments, the MAC (formerly the intermediary) decides you aren’t going to pay and they approve payment conditioned upon reimbursement (see above).  Sometimes, however a medical claim just plainly get paid by mistake. So even if you are religious in paying your beneficiary’s medical claims, a claim or two will invariably be improperly billed to Medicare.  Once Medicare discovers these “mistaken” payments they made to the provider, they will send the bill to the RRE for reimbursement.  Mistaken payments are regarded differently than normal conditional payments made under Non-Group Health Plans (NGHP) statutes.  Unlike Group Health Plans (GHP), the RRE’s obligation to reimburse Medicare without civil action it not clear (carefully review the process above once again).  So, when presented with a reimbursement claim from Medicare perhaps you could wait until they take you court, but then, if you lost, you would be faced with double damages.  Wise money is on reviewing the reimbursement claim and if it is correct, then paying it.

September 2011 -- Section 111 Reporting as Self Insured

Less sophisticated reporting agents regularly report self-insured plans as self-insured adding unnecessary complexity to reporting and increasing their chances of getting a reporting error from Medicare.  (We all know that reporting errors are bad, because you get dinged for late reporting if you do it wrong the first time.)  The original, now outdated, reason behind the self-insured data (e.g., self-insured indicator, type of organization, company name, DBA name or first and last name) was to identify a situation in which another business entity was responsible for payment, but was not identified as a Responsible Reporting Entity (RRE).  Over time, with some help from Piatt Consulting, Medicare dropped their idea of reporting “deductibles” and refined their definition of an RRE so that all business entities that might make a payment are RREs and the self-insured data became useless.

[LINK On the surface, it might seem like a bad trade-off, but for insurers, it was a good deal.]

First, remember that the MSP statutes where first passed in 1980 to reduce the Federal deficit and beef-up the Medicare Trust Fund -- both worthy goals.  Congress did a good job.  The MSP statutes make it possible for Medicare to consider any entity that accepts the responsibility to pay for the medical claims to be primary to Medicare.  To back up this vague concept of responsibility they included the very real concept of payment.  MSP statutes provide that if a payment is made and the payor is a business entity, then the payor is a “plan” and hence primary. It is a bit confusing, but airtight.  So it should come as no surprise that when this all began, the people at CMS where dedicated to getting everything possible under the Medicare Secondary Payer (MSP) statutes. They did not, however, have much experience with the ins and outs of the world of insurance. 

Now, putting yourselves in Medicare’s shoes, you have to wonder about deductibles.  They are not paid by the insurer who is clearly on the hook to report, they are paid by the insured.  If the insured pays a deductible that payment could conceivably be considered a “plan” and that makes their payment part of what  Medicare should get to offset any payments they may have already made.  On many levels this might seem a bit unsophisticated for myriad reasons not the least of which would be separating out insurance from reinsurance and unraveling a whole industry, but at the tie there seemed to be the very real risk that some companies paid their own claims and only resulted to commercial insurers when the amount of the claim got too high. If you are sophisticated in the ways of insurance, you are no doubt saying to yourself -- that is a Self Insured Retention (SIR), not a deductible.  My response to that is that it took more than you know to get Medicare to recognize the concept of an SIR, the word deductible, is, after all, mentioned in the MSP statute.  It has legal meaning.  We worked with Medicare to help them understand captives, pools and other lines of insurance that led to a much better definition of an RRE and a nod at the idea of a SIR.  We do not report deductibles.

So, why is this better for commercial insurers?  Because commercial insurers (and reinsurers) do not have to identify themselves responsible for payments made by their client’s SIR and worse be subject to all the MSP statutes that implies.

The bottom line is that you signed up as the RRE.  You put your name on the list and there is no need to re-identify yourself within your own report for being a plan that has responsibility for the primary payment.  BE CAREFUL, if you decide to not report the data, you cannot just change the self-insured indicator to blank or “N” you have to change all of the rest of the information (e.g., type of organization, company name, DBA name or first and last name) to blank or you will draw an error from CMS for incomplete data.

To be thorough, there is one situation in which an insurer might want to consider identifying one of their insureds within their report.  If the insurer offers coverage from dollar one or the ground up, it might be useful to let Medicare know that their insured may in fact carry some responsibility for repaying Medicare should Medicare come calling.