MSP Recovery by Whatever Federal Law Available

Medicare Set-Aside Blog on August 12, 2011
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Frequently when questioned about a Medicare Secondary Payer (MSP) statute of limitations, Barbara Wright of CMS will affirm a six-year statute of limitations if a lawsuit is necessary to seek recovery, however she alludes to “other means available.” We know she is not applying the MSP three-year from the date of service provided in the statute, and these comments predate Stricker when they were applying the False Claims Act (FCA). Since then we’ve been told through Stricker that the Federal Claims Collection Act (FCCA) applies to MSP recoveries, now giving the federal government three years to pursue a carrier under contract law or plaintiff attorneys under tort theories. So we know CMS is applying at least three different federal laws to MSP reimbursement actions.

Now if you go back to Manning, to apply the FCA the court made it appear that any payment that Medicare made that it shouldn’t have must have been fraudulently induced. Given the name of the Act, it seemed only reasonable that fraud should be a component and hence why it seems so odd that the Manning court adopted it for MSP recoveries when we know that those plaintiffs presented their Medicare cards. Well that all changed on May 20, 2009 when the Fraud Enforcement and Recovery Act (FERA) of 2009 was passed into law. In essence, FERA expanded FCA liability to persons retaining money owed to the federal government whether or not that person used a false statement to obtain it or whether or not the person was trying to avoid an obligation to repay it.

As with any new law that touches the MSP, vendors enter the scene and try to sell the fear. At the time, I received several inquiries as to my thoughts on FERA and what I found interesting was that I could see how it could apply to Medicare recoveries, but interestingly it did not appear to apply to any of the people being solicited for the service. The only people I could see in jeopardy of FERA claims were medical service providers and that is apparently finally playing out. The most recent inquiries have been about providers being charged back by Medicare once a secondary payer situation is identified and the only likely authority would be a claim under the FERA amended version of the FCA.

To see the path, you have to understand one of the most common MSP misconceptions is that there are no Medicare liens, they are overpayments. Because Medicare is statutorily prohibited from making payment in a secondary payer situation, it technically overpaid any payments made. If it were subrogating under that other section of the MSP, it could have a lien but not when utilizing its priority right of recovery. FERA extended FCA liability to any person or entity that knowingly retains an overpayment from the government, without regard to whether the recipient used a false statement or claim to do so. And the only person in physical possession of the actual overpayment made by Medicare is the medical provider who was very likely presented with a Medicare card and had no idea there was a different primary payer.

This gets particularly egregious when the FCCA comes into play. The FCCA permits the federal government to off-set any monies owed to it by reducing its obligations to the debtor. In the context of the MSP, claimants have been increasingly reporting that SSDI payments are being reduced to compensate for conditional payments that were not repaid. Now we are hearing that doctors and  health plans are getting charged back for MSP situations. Under the FCCA, all the federal government needs to do is identify MSP obligations and subtract those payments from any new Medical billing submitted by that provider. The claims do not even have to be related to the same beneficiaries.

As a final note, this charge back is being handled by Medicare Administrative Contractors (MACs) contractors and not by any of the MSP contractors. Given that CMS treats MSP liability like joint and several liability, it is likely that these MAC actions will take place simultaneously along side MSPRC activities with no interaction among the various contractors. It is extremely likely that Medicare will have double recoveries and neither side will be aware that the other exists let alone satisfied the debt.

And now that this is well under way, my prediction for what’s next =  Recovery Audit Contractors (RACs) for MMSEA reporting audits…