Haro v. Sebelius – CMS Takes a Beating in Federal Court
We are all painfully familiar with the questionable reimbursement demands of CMS when it comes to Medicare conditional payment recovery: Pay now (and pay all we think you owe) and ask questions later. Last fall CMS lost a little ground in the continued debate about the determining the amount in question, and this month it is the demand for payment before appeal itself that is in question. As you may recall, last year US District Judge David Bury granted plaintiff’s motion to compel discovery in Haro v. Sebelius (2010 U.S. Dist. LEXIS 38620, April 12, 2010), permitting the case to move forward in resolution of whether CMS can require prepayment of MSP recovery claims before the correct amount is determined through administrative appeal. It also allows the question of whether CMS can hold the attorneys financially responsible for not holding to immediately turning over insurance proceeds belonging to their clients, along with all the due process concerns those issues raise. CMS harps on the fact that it is entitled by statute to recovery and it is of great public interest to protect the fiscal integrity of Medicare, therefore we must pay first and suffer a great inconvenience to try to get it back, if we bother at all and can ultimately make a sufficient case. This is what is in question in this case – the enormous burden to beneficiaries. Unlike previous MSP cases whining about the particulars of an individual case, Plaintiffs here sought data to determine how frequently the appeal process is actually pursued, the error rate, the cost of recovery procedures and if CMS has studied any alternatives to the current oppressive demands for immediate collection.
After a year of discovery, plaintiff sought declaratory judgment that CMS practices are not authorized by Congress, not a permissive interpretation of the statute and violate the Due Process Clause of the US Constitution. Additionally, Plaintiffs sought an injunction against the continued challenged practice and class certification of the beneficiaries. In a comprehensive Chevron analysis, the court found that the collection practice is not authorized by Congress, but that the lack of an express prohibition created ambiguity requiring the court to consider whether CMS’ interpretation of the law was permissible. The court then determined the practice is not permissible because it is inconsistent with the statutory scheme of providing for waiver and appeal, and because it unnecessarily chills a beneficiary’s right to seek a waiver or dispute the reimbursement claim and reaches beyond the fiscal objectives and policies behind the 60 day reimbursement provision. The fiscal integrity of Medicare is protected by a vast arsenal of powerful recovery mechanisms against a number of persons not limited to the plaintiffs, therefore the court seems to find these particular practices excessive.
With regard to the question of attorneys’ personal responsibility, the court addresses the precarious position in which attorneys are placed. CMS threatens attorneys with personal responsibility to MSP debt in a number of ways, only one of which is supported by statute. In its rights and responsibilities letters and demands, CMS insinuates that the representative attorney has the same responsibilities as the beneficiaries, which is entirely untrue. CMS is effectively saying that as an entity in receipt of the total settlement proceeds, despite passing them along to the beneficiary, the attorney retains the obligation to repay the entire amount rather then the recovery rights following the money. While I have no issue with the statutory right of CMS to seek the portion retained by the attorney as a fee, the idea of the attorney being forced to violate other ethical duties with regard to the settlement proceeds for the benefit of Medicare over his own client is unconscionable. Being forced to turn over funds not actually owed to the federal government in lieu of a client, especially one of low income or in financial trouble, places attorneys in an impossible position, especially when the demand turns out to be unlawful.
The court ruled that CMS may not collect disputed reimbursement claims from beneficiaries or attorneys pending resolution of waiver requests and appeals and that attorneys may not be precluded from disbursing undisputed portions of settlement proceeds to their clients. Furthermore, the court certified the class, defined as: “persons who are or will be subject to MSP recovery, and from whom defendant has demanded or will demand payment of MSP claims before there have been determinations of the correct amounts through the waiver or appeal process.” Because this will ultimately change the decision making process of whether to bother with appeal or not, I anticipate that this will not be the last we hear of this case. Not only does this order severely curb CMS’ rapid recovery efforts, but the MSPRC barely has the capacity to handle the volume of claims it currently processes and this decision will create more appeal and waiver requests if for no other reason than to delay repayment requirements. With an appeal here and a possible answer someday from the 6th Circuit in Hadden, we’re getting closer and closer to a Supreme Court resolution of this long standing nightmare.
We have always maintained that the Courts are the most expedient way to correct the wrongful actions by CMS (while a legislative fix will take years to accomplish, if ever). Hopefully, the string of recent successes will spur more parties with standing to challenge the labyrinth of CMS excess.
Haro v. Sebelius
CV 09-134 TUC DCB
United States District Court for the District of Arizona