Top 10 MSP-Related Events of 2011 – A Recap
As we approached the end of the year, I was asked to contribute to a number of different articles recapping the year and making predictions for 2012. Most requests focused on workers’ compensation and none really captured just how active the MSP arena was in 2011. For those of us who remember the early days, a new CMS memo may have proved for an exciting shake up in the MSP world. Now we have to monitor published court opinions, proposed legislation, and CMS email subscription notifications for new MSA memos and MMSEA reporting alerts, as well as all the industry news tracking the latest outlandish thing CMS did to screw up yet another good insurance settlement. So while still floating around my cluttered mind, here is what I perceived as the MSP Top 10 of 2011.
#10 – May 11, 2011 WCMSA Memo
While by far the most useless memo published to date, it committed the facts to writing once and for all, which I did appreciate. After an entire decade of explaining to people that CMS approval is totally voluntary, not mandated by any law or regulation, and the dollar thresholds totally arbitrary and there only to limit the number of cases that CMS does allow for review, I now only have to forward a link to the newest memo to make my point. The reason it was published, by my understanding, is because CMS receives a great number of cases for review that are not eligible, but still require the resources of their various contractors to determine that eligibility and to send notifications to the parties that they will not be reviewing it, thus contributing significantly to the incredible delays and the growing back-log. Since my word isn’t sufficient, I thank CMS for this memo.
#9 – WCMSA Web Portal
CMS is finally taking CMS submissions electronically and the overwhelming response is “it’s about time.” While CMS does receive some paper submissions, MSA vendors send the majority of files electronically and have done so for many years now; however, the files all went to a post office box in Detroit where a contractor existed for the sole purpose of receiving MSP-related mail – so someone still had to copy the files from CD-ROM to the CMS servers. Well, no more. With web submissions, we cut out that contractor and, hopefully, cut the review program down by a few days. The COBC’s job at the next step, doubling checking for completeness, should be greatly reduced as well, meaning that cases should get into the hands of the WCRC faster where the review actually takes place. Over the past year, several MSA companies participated in a trial of the portal, which prioritized these cases and turned around approvals in less than a week. Some industries players began using this as a marketing tool to lure new clients. Knowing CMS as we do, we were highly suspicious that this would not last for long and, true to form, when the portal opened to all comers, the review times extended back to the multi-month turnaround. At least we can hope this will speed things up somewhat and that CMS will continue to look for ways to get the MSAs reviewed in a more timely manner.
#8 – WCRC Contract Delays
It’s only fitting that the WCRC contract delays make the next spot on the list. To compound all of the already existing inefficiencies baked into the WCMSA review process, 2011 was riddled with contractor drama. As you may be aware, the WCRC contract was involved in a re-compete and awarded to Provider Resources, Inc. in June 2011. The award was immediately followed by a bid protest that was dismissed by the GAO in August, yet there was no evidence of the $1.5M transmission starting. The original WCRC contractor has been, and continues to be, operating under contract extensions with no real incentive to excel as they were rumored to not be eligible for the re-compete anyway. On September 27th, the original bidders were notified that a FAR 52.233-3 “Protest After Award” was filed with the GAO, a stay of contract was issued, all proposals would be re-reviewed, and corrective action would be completed no later than November 10, 2011. So here we are with no evidence that the new contract is underway, the turnaround time and back log of cases are steadily increasing, and generally there seems to be no promising outlook for 2012. Even if the contract is issued tomorrow, it will take the new contractor time to get up to speed and become effective. Not to mention, the new contract does not address the existing back log which is assumed to remain with the outgoing contractor until completed. Numbers 9 and 10 show the only hope of improvement for 2012, as fewer submissions and more efficient processing are the best shot at having cases approved faster. Now if only I can convince more of you to forego the process all together…
#7 – Chickasaw Nation Industries Loss of MSPRC Contract
While we’re talking about contractors, the sudden dismissal of the MSPRC contractor was an interesting development. It was assumed that, in CMS tradition, the Chickasaw nation would continue indefinitely in contract extensions. Yet after an embarrassing display before the Energy and Commerce Subcommittee on Health in July, CMS elected to save face and allow the contract to simply end on its terms. For those who didn’t see it, it is posted on the committee’s web page and makes for entertaining reading. The CFO of CMS was grilled extensively on the financial data from its operations that she was unable to provide – items like the cost of recovery compared to what is recovered and what was lost, with the best question focusing on the cost of issuing the $1.57 demand letter. And this was just was example of what the committee was provided on the ridiculous practices going on at CMS. She tried to shift the blame to the MSPRC which only prompted the committee to question the competitive nature of the original contract award, which was apparently nonexistent. There’s nothing I’ve enjoyed more over the last 10 years than the federal government fulfilling their 8(a) contracting requirements with MSP-related activities. Note that the new contract has no such requirements.
#6 – Haro v. Sebelius Injunction
In April, the United States District Court for Arizona certified a class of Medicare beneficiaries and enjoined CMS from putting recovery claims into collections while pending a waiver or compromise request. Makes sense, but in the past, CMS would routinely make such egregious threats in demand letters, all but requiring that you surrender your first born in satisfaction of frequently unsubstantiated debts to the federal government. While the overall outcome of the case was disappointing as it did little more than cause CMS to cease collection operations for maybe a month while it revised its demand letters, it did at least demonstrate that there is a limit to CMS’ reach and that despite the deference given its interpretation of the MSP in developing its policies, the acts themselves are not without limits. If more people took the time to bring such administrative claims against CMS, we could bring about needed change as opposed to continue to hope that Congress will help any time soon.
#5 – New Conditional Payment Reimbursement Policies
Much like the dismissal of the Chickasaw Nation, CMS took additional subsequent remedial measures to deal with the embarrassment before Congress last summer. Following the questioning regarding the cost of pursuing nominal recoveries, CMS suddenly issued several new policies for conditional payment recoveries in liability insurance settlements. In September, CMS announced that it would no longer pursue recovery in claims that settled for less than $300. Not sure how many of those cases you see, but it was a start. Then, in November, CMS announced that in cases settling for less than $5,000, it would accept a fixed percentage in satisfaction of unknown conditional payment obligations. An incredible costly alternative to actually requesting the information and resolving the debt cost effectively, but again progress on CMS’ part nonetheless. Then finally, in December, it announced a self-calculated final conditional payment amount option that will become available in February for cases that settle for less than $25,000. Again, with all of the electronic data available to the federal government, it is about time that such an option was contemplated but the dollar limit will exclude the vast majority of cases with a reimbursement obligation, so it is unlikely to affect those most in need of MSP reform. Regardless, these are promising signs that CMS is headed in the right direction and willing to ease some of the burdens stemming from the MSP. Hopefully, it will continue in this direction in 2012.
#4 – MSP Compliance Insurance Hits the Market
Given that we are working within the risk management industry, it has been incredibly surprising that we have not seen more insurance solutions enter the MSP marketplace over the years. As big a disaster as the Coventry guaranteed MSA program turned out to be, the concept was headed in the right direction. Although all the issues not very well thought out, or that marketing and sales took precedence over legal, the core of the idea was still to insure the approval so that claims could be closed faster, thus ending the associated expenses of waiting for CMS. The problem there was in the unknown: the subjective and fluid nature of CMS’ idea of what it takes to protect Medicare’s interests. The review not being regulated made that proposition much riskier than the premiums inferred and hence the failure of the program. While there is one other plan that insured against the $1,000 per claim per day penalty for reporting noncompliance, a new policy that became available on 2011 is offering coverage for more of a comprehensive MSP compliance plan. Premiums are derived by the overall compliance plan and the number of reportable claims. Those with comprehensive and reliable reporting, conditional payment and MSA controls in place will pay significantly less in total premium, much like an employer’s premium is affected by its experience rating. The policy covers not just the reporting penalty but things like medical benefits for the claimant while MSP triggered disputes are resolved with CMS. I would anticipate this offering to become more popular in 2012 as people become more aware of the benefits of foregoing CMS approval and taking more control over of their MSP exposures.
#3 – MSP Captured Congressional Attention
Although there have been MSP-related bills presented to Congress in years gone by, H.R. 4796 was the first to really capture its attention, despite having little chance of scoring. Whether due to the lobbying efforts of the MARC Coalition or it was just time for Congress to see what all the fuss was about, Congressman Pete Stark set into motion what turned into a very interesting 2011 for the MSP within the federal government. The GAO initiated a study at the beginning of 2011, requested by Stark on behalf of the Ways and Means’ Subcommittee on Health, to investigate the financial implications of H.R. 4796 and H.R. 2641 (a now defunct bill that, at the time, was in its third manifestation presented to three consecutive Congresses with no progress). In March, H.R. 4796 was replaced by H.R. 1063 which amended the safe harbor provision to be adjusted annually by the CMS chief actuary to track the cost of recovery, which may permit the bill to score better. Then about midyear, Energy and Commerce developed an interest in the matter and held a hearing in July in which the CFO of CMS was left looking like a buffoon in her inability to answer questions about the financial implications of its recovery efforts. Finally last fall, the Senate introduced a companion bill, S.B. 1718, which gives the issue bipartisan support in both houses of Congress.
So where does that leave us? The GAO report has not been release to Congress and until it is, it is unlikely that Congress will take any further action given that it cannot possibly understand the total dollars in play here. Energy & Commerce gave CMS clear directions to obtain specific information for which it will be called upon to report, indicating another hearing. Given that it is an election year, by the time the needed data becomes available, the existing bills may not see any action in this Congress, but that could be a good thing. The bills as they exist take very small steps in what needs to be a much greater total reform of the MSP efforts of the Medicare program in general. A new comprehensive bill proposed in the 113th Congress could not only make needed changes to conditional payment and reporting problems, but address resolution of MSA issues, apportionment (particularly in mass tort) and Medicare Advantage oversights not dealt with in the pending legislation. As with everything else, this is a great start and 2012 remains promising.
#2 – 6th Circuit Decision in Hadden v. US Appeal
After only a little over 400 days of deliberation, the 6th Circuit Court of Appeals finally rendered a decision in the appeal of U.S. v. Hadden on November 21, 2011, upholding Medicare’s right to recovery in full from Mr. Hadden’s insurance settlement. For those unfamiliar, Mr. Hadden was a pedestrian struck by a public utility vehicle that swerved to avoid a negligent driver. The accident occurred in Kentucky, a pure comparative negligence state, and the insurer of the not-at-fault driver settled claims against it for about 10% of Mr. Hadden damages. Medicare asserted a claim for over half of the settlement proceeds and denied all requests for waiver or compromise of that amount. Mr. Hadden appealed that decision through the four steps of the Medicare appeal process, through district court review of that determination, to finally have the 6th Circuit Court of Appeals affirm Medicare’s rights to the amount of its demand.
The outcome was not surprising as it follows all case law to date, with the exception of one case, but that is what makes its occurrence significant. In September 2010, the 11th Circuit Court of Appeals rendered a landmark decision in the Bradley v. Sibelius appeal in which it upheld a probate court decision to apportion a policy limits settlement over all claims, Medicare’s being weighed against the ten demands for loss of parental companionship by the surviving children. While not a perfect decision in that the probate court did not question the worth of the children’s claims but simply assessed the apportionment at the amounts demanded, the value in the opinion is the resulting public policy discussion.
Public policy favors settlement: our courts cannot handle adjudicating every insurance claim involving a Medicare beneficiary, let alone all those with a reasonable anticipation of becoming one, to determine Medicare’s stake, particularly when Medicare routinely refuses to participate. There is an art to settling insurance claims that involves a lot of tried and true practices based upon financial and legal implications, resulting in the best possible compromise of all parties. Parading that evidence through a court of law does not change the facts as to why the parties elected not to see a case through to trial. Yet CMS refuses to compromise its claim absent a ruling on the merits of the claim. This represents an enormous waste of government resources, both judicial and federal, given that the private sector already paid for the analysis that led up to the value of the settlement. Nevertheless, insurers routinely pay these demands because “it’s not enough money to fight over” or “there’s no winning against CMS’ track record,” thus the agency grows stronger and makes more wild demands and creates new overreaching policies and the problem continues. But I digress.
Returning to Mr. Hadden, we can only hope that he continues to pursue his appeal because every chink we can put in CMS’ armor, like the Haro injunction and the Stricker dismissal, helps rein in its reach little by little.
#1 – CMS’ First Official LMSA Policy Published
While of little significance to someone like myself who always read the express terms of the MSP to include “workers’ compensation, liability, auto, no-fault and self-insurance,” CMS has finally acknowledged the existence of Liability Medicare Set-Asides in writing. The acceptance of the need for MSAs in liability settlements has been fought since the inception of WCMSAs. Whether the lack of CMS policy memorandum specific to liability settlements or the lack of regulations similar to 42 CFR 411.46 and 411.47 that specifically address a Medicare exclusion in the event of an insurance payment for future medical expenses, organizations such as the AAJ and most recently the ABA TIPS section at the 2011 annual meeting have taken the position that LMSAs are not “required” by the MSP.
With regard to the reasons against, it is important to understand a few basic facts about the MSP to understand why reliance upon CMS memos was shaky at best. First, the CMS policy memoranda are merely agency interpretations of the governing statutes and regulations and do not carry the force or effect of law. While generally granted deference by the courts, CMS policy is not infallible nor is it the only means by which to comply with the underlying legal obligations. It is simply the agency’s recommendation in light of what it believes it can do to pursue recovery under the MSP. The WCMSA review program is not governed specifically by any law or regulations and is voluntary, a fact finally openly admitted by CMS itself in its May 2011 memo. Those who have followed the issue since the beginning will recall CMS’ liberal use of the word “must” in the early memos, and the idea that an MSA must be approved by CMS when the settlement meets the established thresholds continues to erroneously linger today. The reason we have not had any detailed memos for liability is that tort law is not as uniform as workers’ compensation, thus it would be impossible to render unilateral policies across all jurisdictions as was possible for workers’ compensation which is fundamentally the same throughout the country. I am not saying that all states are exactly the same, only that the differences are more the exception, whereas in liability, the only common thread is generally the common law elements of negligence. Pretty much everything after that will be determined on a case by case basis due to a unique limiting feature specific to state law or governed by an insurance contract. To even expect such policies to be issued by CMS is unreasonable in and of itself, but to rely upon the absence as a means to avoid a statutory obligation borders upon negligence.
With regard to the Code of Federal Regulations, note that there is a valid issue. If, in fact, the courts want to infer Congressional intent where there is obviously none as they have been prone to do in 2011, this argument could have merit. Unfortunately, for those hoping to use it, think through the issue before you do. The MSP statute in essence forbids Medicare from making payments where other insurance is available to pay first. The sections of the CFR in question merely state that if an allocation is made from a workers’ compensation settlement specifically to compensate for future medical expenses, then Medicare will exclude payments only until it has been demonstrated that the allocation was exhausted on related medical expenses, upon which Medicare would resume coverage. So, absent this limiting factor to the exclusion, aren’t liability settlements subject to the exclusion in perpetuity because the statute prohibits Medicare from making payments? However, there is no point in debating the issue as both arguments have their merits and resolution will only come from Congress or the Supreme Court, whichever gets there first, which brings me to my final significant 2011 moment.
On September 30, 2011, CMS issued its first official policy regarding MSAs in liability settlements. In it, CMS outlined a situation in which an LMSA would not be necessary, that being when written certification by the treating physician stating that no further treatment was anticipated could be obtained. It didn’t say that one has an obligation to do an LMSA, but the question remains, what if no written certification stating that no further treatment is needed exists? What if there is foreseeable future anticipated related medical care? I think it was a brilliant move on CMS’ part to not have to publish LMSA policy, yet leave the inference that absent such a statement, then what? Clearly CMS believes that the MSP allows for secondary payer exclusions and reimbursement rights in liability situations. Whether you elect to read into the omission or continue to ignore any possible obligation, 2012 may finally provide resolution to this debate once and for all. CMS has finally started to capture liability settlement data and it must have a plan for what to do with it.