Readers of this blog were introduced to the concept of Medicare Set Aside Trusts (MSA's) as part of the settlement of workers compensation claims in our post of 8/27/2012. MSA's are the mechanism by which private parties (Employers, Insurers, Self Insurers, tortfeasors) can comply with the Medicare Secondary Payor Act. Federal law aims to make Medicare only a "secondary payer" as to medical expenses for which some other entity (e.g., a tortfeasor) bears responsibility. See 42 U.S.C. § 1395y(b)(2). Sometimes the Medicare system will pay for medical expenses nonetheless, pursuant to a provision that allows it to do so if the responsible entity might not pay the expenses "promptly" Id. § 1395y(b)(2)(B)(i) or based on ministerial incompetence where the govenrment (the Center for Medicare Services or "CMS") pays those expenses that they did not necessarily have to pay in the first place. These payments are known as "conditional payments." But that same provision gives Medicare the right to seek "reimbursement" from the responsible entity or the beneficiary, if the beneficiary himself later receives a payment directly from the responsible entity. Id. § 1395y(b)(2)(B)(ii), (iii). In a case decided by the United States Court of Appeals for the Sixth Circuit on November 21, 2011 the court was asked to decide whether a question of the percentage of liability for one party should partially absolve the plaintiff (the injured party) of the obligation to reimburse CMS for the conditional payments made to cover the costs of medical treatment for that plaintiff. That case was Vernon Hadden v. The United States.
In August 2004, Hadden was standing near a traffic circle in Kentucky when he was struck by a vehicle owned by Pennyrile Rural Electric Cooperative Corporation. His medical bills totaled $82,036.17. Medicare paid his bills in full, because Hadden is a Medicare beneficiary. Hadden later sued Pennyrile, demanding compensation for all of his medical expenses, among other damages. Pennyrile eventually paid Hadden $125,000 in exchange for a full release of his claims against it. After subtracting a portion of the attorneys' fees that Hadden himself had paid to obtain the settlement, see 42 C.F.R. § 411.37, Medicare determined that Hadden owed it $62,338.07. As the Court noted, "That amount was likely no surprise to Hadden, since he had escrowed exactly $62,000 of his settlement money for the specific purpose of reimbursing Medicare." Having secured the settlement, Mr. Hadden and his attorneys wanted to negotiate with the Government (yeah, good luck with that Scooter). Since interest would accrue on the unpaid reimbursements, Mr. Hadden paid the $62,338.07 (plus some interest) under protest nonetheless, arguing that he should be required to reimburse Medicare for only 10%—or about $8,000— of the more than $80,000 of expenses that Medicare paid on his behalf. According to Hadden, the accident in which he was injured was primarily the fault of an unidentified motorist who had caused the Pennyrile truck to swerve into him; that motorist was responsible for 90% of Hadden's damages, with Pennyrile responsible for only 10%; and thus Pennyrile's payment of $125,000 represented only 10% of Hadden's total damages, meaning that it only compensated him for 10% of his medical expenses, or about $8,000. The remaining $117,000 or so of the settlement, Hadden says, compensated him for damages other than medical expenses (e.g., pain and suffering)—and was therefore off-limits to Medicare."
CMS said no dice. The Medicare Appeals Counsel said no and so Mr. Hadden went to the US District Court in Kentucky. When they said no, Mr. Hadden appealed to the Court of Appeals for the Sixth Circuit Court of Appeals who likewise told Mr. Hadden to pay up. According to the Court, the controlling statute could ONLY be that section of the Medicare Secondary Payor Act:
The relevant section of the Medicare statute provides:
(2) Medicare secondary payer
(B) Repayment required
(ii) Primary plans
A primary plan, and an entity that receives payment from a primary plan, shall reimburse the appropriate Trust Fund for any payment made by the Secretary under this subchapter with respect to an item or service if it is demonstrated that such primary plan has or had a responsibility to make payment with respect to such item or service....
In this context, the PRIMARY PLAN would include the tortfeasor who was responsible for the injury to Mr. Hadden. But, Mr. Hadden reasoned, if the tortfeasor that paid up (Pennyrile) was only partially responsible for his injury, it is only partially responsible for the medical expense and therefore, Medicare shouldn't be able to recover everything from that party. Thus, Hadden and his attorneys reasoned that the medical expenses of more than $80,000.00 are only partially attributable to the tune of 10% so $8,000.00 should be enough. Hadden's attorneys argued that other provisions of the US Code provided support for their position that Medicare was not entitled to full reimbursement. Hadden pointed to the Medical Care Recovery Act, 42 U.S.C. § 2651(a), and the Medicaid statute, id. § 1396a(a)(25)—both of which are undisputedly inapposite—"the government is entitled to recover only its proportionate share of a discounted settlement." Hadden Br. at 13. And he argues at considerable length that there is "no principled reason" not to apply the same limitation to the government's right to reimbursement under the Medicare statute.
"A primary plan, and an entity that receives payment from a primary plan, shall reimburse the appropriate Trust Fund for any payment made by the Secretary under this subchapter with respect to an item or service if it is demonstrated that such primary plan has or had a responsibility to make payment with respect to such item or service. A primary plan's responsibility for such payment may be demonstrated 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."
The Court stated:
if a beneficiary makes a "claim against [a] primary plan[,]" and later receives a "payment" from the plan in return for a "release" as to that claim, then the plan is deemed "responsib[le]" for payment of the "items or services included in" the claim. Id. Consequently, the scope of the plan's "responsibility" for the beneficiary's medical expenses—and thus of his own obligation to reimburse Medicare—is ultimately defined by the scope of his own claim against the third party. That is true even if the beneficiary later "compromise[s]" as to the amount owed on the claim, and even if the third party never admits liability. And thus a beneficiary cannot tell a third party that it is responsible for all of his medical expenses, on the one hand, and later tell Medicare that the same party was responsible for only 10% of them, on the other.
That is precisely what Hadden attempts to do here. In his claim against Pennyrile, he did not demand that it pay for only 10% of the medical expenses that he incurred as a result of his accident; he demanded that it pay for all of them.
Bottom line: nice try, no cigar. Pay up sucker.
The dissenting opinion, however, found some credibility in Mr. Hadden's argument stating: "The majority finds...clarity by equating "responsibility" with the amount that must be paid; in other words, if a primary plan is responsible to any degree with respect to an item or service for which Medicare paid, it is responsible for the entire amount Medicare paid, as is any entity to whom the primary payee made a payment in any amount.". The dissent reasoned "The majority concludes that if it is demonstrated that the primary plan had a responsibility to make payment with respect to an item or service paid for by Medicare, then the primary plan or an entity receiving payment from the primary plan is liable to the Secretary for the full amount the Secretary paid with respect to the item or service, without regard to the extent of the primary plan's liability or the amount paid to the entity receiving payment from the primary plan. Having so found, the majority does not explain the statutory basis for limiting the Secretary's recovery to the settlement amount paid to the recipient by the tortfeasor." In other words, if the statute requires complete reimbursement to Medicare, why should Medicare accept anything less an the whole amount of expense due?
I must confess some sympathy with Mr. Hadden and, therefore some agreement with the dissenting opinion. There does appear to have been an exercise in line drawing done by CMS in determining what it would accept and therefore what Mr. Hadden would be required to pay. If the line could be drawn here, why not there? After all, if CMS was bowing to practical realities, then it was no longer a simple decision that x was paid and that x was now due as reimbursement. However, recognizing practicalities breeds its own very real problems.
Attorneys are trained to read a statute not only for what it says but also for what the attorney can make the language do for his client. The criticism is not that this propensity of attorneys is somehow illegitimate but that the law of unintended consequences would predict that a more permissive, dare we call it "understanding" position from CMS would ultimately undo the Medicare Secondary Payor Act. Had Mr. Hadden's position been accepted, is it difficult to imagine the next set of litigants would not have wanted to similarly limit their reimbursement obligations? That position, once accepted is consolidated and the next aggressive position considered. The ratcheting effect would eventually undermine the statutory scheme. If CMS was so pliable in making that concession is it all that far of a stretch to imagine collusion between the litigants to disadvantage Medicare's interests if it means a lower payout from the defendant but a higher net figure to the plaintiff? When Medicare does not have a seat at the table, indeed does not even know that the table has been set until after the matter is concluded, bright
Iines do seem to be in order. There remains the possibility that the Supreme Court will be heard on this subject. Unless and until that happens, do not expect a kinder and gentler line at the Medicare offices.
Do not confuse this post as any profession of fealty to the Center for Medicare Services or a paean to the Federal Government. Recognizing that they have a job to do in no way expresses contentment with HOW they do that job. We will discuss in future posts the problems of HOW that job is done, most especially the seeming disconnect between reality and the unbelievable numbers that employers and insurers are seeing in MSA recommendations and the "counter higher" requirements when CMS finally deigns to review and respond to an MSA submitted for approval.
"Skedsvold & White
Join us on Facebook
No comments:
Post a Comment