What’s Good for the Goose… MSAs the Federal Government’s Way

Commentary, Medicare Set-Aside Blog, Medicare Set-Asides, MSP Litigation on November 17, 2014 | Posted by Jennifer Jordan, JD, MSCC

An interesting longshore case involving an MSA was recently reported out of Oregon. Claimant Phillip Tucker was hurt on a vessel owned by the United States and being serviced at Cascade General, Inc., the plaintiff’s employer. Tucker filed suit against both and then each of them filed cross-claims against each other. Tucker’s wife had filed a loss of consortium claim but had long since settled and dismissed her claim prior to these events. Tucker then settled with Cascade and the Cascade cross-claims against the US were dismissed, so the opinion here represents only Tucker’s claims against the US. In the 37 page opinion, liability was clearly established and the Supreme Court’s decision in Jones & Laughlin Steel Corp. v. Pfeifer [462 U.S. 523 (1983)] controlled the award of damages, entitling Tucker to reimbursement for lost earnings and earning capacity; for past and future medical expenses; for any other economic loss he sustained or is likely to sustain; and the non-economics, such as pain and suffering and quality of life. It is only the determination of medical damages we are interested in.

Mr. Tucker requested an award of $195,643 for past medical expenses and $614,341 for future medical expenses. Beginning with the past expenses, the US objected to the amount of the demand given that it was not the amount actually paid, but rather the amount billed “prior to any adjustments that were ultimately ‘written off by the doctors’” (as testified by the life care planner in explaining his questionable methodology of calculating past expenses by looking at reasonable charges consistent with the location rather than what was actually paid). The court noted that it was unreasonable to seek reimbursement for amounts that were never paid and awarded only $145,537.

Now here is where the testimony gets interesting.  In item #36 of the opinion, the United States contends that the $614,341 life care plan should be reduced to approximately $141,810, which is representative of the PRESENT VALUE of medical services and 2 anti-seizure medications.  The government then asks the court to “use the medical costs projected by the Workers’ Compensation Medicare Set-Aside Arrangement (“MSA”) to determine these future expenses, but for the cost of the seizure medications the United States prefers the prices projected by Fountaine in the Life Care Plan.” I have to assume that means the government wished to price drugs at something other than Average Wholesale Price (AWP) given that the court footnoted that the total present value of the drugs projected in the MSA was $154,964??? In case anyone has forgotten already, please refer back to the first line of this paragraph to note that the government proposed a TOTAL future medical expense award of $141,810 – that would be $13,154 less than just the drugs in the CMS approved WCMSA. And with regard to that CMS approval, also note that in footnote 14, the approved MSA was actually for $334,840.

INTERESTING!!! How is it that when we private sector folks have a Medicare interest to protect, we are “encouraged” to fully fund all possible related medical treatment at the highest rates that CMS can stand behind in exchange for its opinion, but when the federal government has a workers’ compensation exposure of its own that touches upon Medicare’s interest, it not only wants to disregard its own agency’s opinion that was apparently voluntarily sought, but it also wants to selectively discount its medical liabilities to the present value of the lowest available pricing mechanism???  That seems a little hypocritical, doesn’t it???

Well due in part to some really bad testimony by the MSA vendor, the court was not fooled. Besides completely ignoring that Mr. Tucker very likely had medical expenses outside those covered by Medicare, particularly after it declined to award $40,048 in household services to prevent a double recovery since it was included in the lifecare plan, the MSA vendor basically told the court that there was no guarantee that Mr. Tucker would be able to obtain treatment at those rates, therefore implying it was unrealistic to use them. In fact, she went so far as to say “you actually have to argue with each provider.” The court concluded that the “fees and charges set forth by the MSA do not provide a fair and comprehensive projection of the costs Tucker will incur for medical services over the course of his life and, as such, the court declines to rely upon the MSA to set Tucker’s future medical expenses.” Unfortunately, the court instead awarded the full life care plan projection of $614,341.

So besides the rage over the government’s hypocritical ways and the need to really reevaluate the value of CMS approval of WCMSAs, the take away from this case is to recognize that an MSA alone does not determine future medical exposures. Unfortunately the wish list in a typical life care plan usually does not either, but let’s not get into the ethics of that right now. An  MSA is merely a subset of the projected future medical expenses that would otherwise be covered by Medicare but for the MSP exclusion. The pricing used by CMS in a WCMSA is not representative of Medicare’s exposure, hence why I question how it is that Medicare’s interests are identified and protected in the exercise, but rather the actual legal liability to pay by the primary payer and an arbitrary pricing mechanism selected in the interest of uniformity for its WCRC contractor. There is no statutory or regulatory support for Medicare beneficiaries to obtain services at those “preferred” rates, whereas the government could easily grant them access to the Medicare fee schedule and yet doesn’t. So as this court rightfully identified, the WCMSA exercise is virtually meaningless with regard to an individual’s actual medical needs or determination of the value of an insurance claim.

Future medical cost projections are an estimation and ultimately funded within a legal liability. It is that legal liability that determines the value and amount paid, not enrollment to Medicare. If a claimant involved in an insurance settlement happens to be a Medicare beneficiary, then some portion of that future medical compensation, however determined, should be earmarked with Medicare’s interests in mind simply so those funds are used in lieu of Medicare being billed. If you have provided future medical compensation, it is that compensation that triggers the MSP exclusion and pursuant to the reg’s, determines the extent of the exclusion. CMS is not entitled to determine claim value, no matter what it might prefer. And the best evidence of the legality of this concept is the government’s position about its future medical obligations in this opinion. If it is good enough for the federal government, then it should be good enough for the rest of us.

 

PHILIP TUCKER, Plaintiffs, v. CASCADE GENERAL, INC., an Oregon corporation, and UNITED STATES OF AMERICA, Defendant.
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF OREGON, PORTLAND DIVISION
2014 U.S. Dist. LEXIS 160265
November 13, 2014, Decided