Posted on November 16, 2011 by Lisa Baird

MMSEA Section 111 Mandatory Insurer Reporting Updates

This post was written by Catherine A. Hurley.

The Centers for Medicare & Medicaid Services (CMS) has recently updated the information on its website with respect to the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA), Section 111 “Mandatory Insurer Reporting” requirements. The recent updates cover (1) a revised implementation timeline for certain liability insurance (including self-insurance) total payment obligation to claimant settlements, (2) revised guidance on claims involving exposure, ingestion, and implantation issues, (3) upcoming improvements to the Medicare Secondary Payer (MSP) program, (4) a new exception for certain settlements paid into a qualified settlement fund and (5) a new way for certain injured Medicare beneficiaries to satisfy their past and future MSP obligations.

Revised Implementation Dates

First, CMS has delayed Section 111 reporting for certain liability insurance (including self-insurance) total payment obligation to claimant (TPOC) settlements, judgments, awards, or other payments. The revised implementation date for reporting will be based on the TPOC amount. A schedule of the new dates is provided here.

Exposure, Ingestion, and Implantation – Revised Guidance

Second, CMS has posted revised guidance pertaining to liability insurance (including self-insurance) responsible reporting entities (RREs) where the claims involve exposure, ingestion, and implantation issues. In the guidance, CMS explains its policies for claims involving exposure, ingestion, and implantation. Specifically, CMS discusses when Medicare will, and will not, assert a recovery claim against the settlement, judgment, award, or other payment, and when the MMSEA, Section 111 mandatory reporting rules must (or need not) be followed. CMS also provides examples of various factual scenarios involving exposure, ingestion, and implantation, and discusses how its policies will be applied to each. 

Upcoming MSP Improvements

Third, according to CMS, certain improvements to the MSP program can be expected within the next three to nine months, including:

  • The implementation of a Medicare Secondary Payer Recovery Contractor (MSPRC) web portal, where the beneficiary or representative can obtain information about Medicare's claim payments, demand letters, etc., and input information related to a settlement, disputed claims, etc.
  • The implementation of an option that allows for an immediate payment to Medicare for future medical costs that are claimed/released/effectively released in a settlement. 
  • The implementation of a process that discloses Medicare's conditional payment amount, prior to settlement in certain situations.

If implemented, these new options and processes could significantly improve the efficiency of the existing MSP system and provide greater certainty to all parties where settlements involve Medicare beneficiaries. More information can be found on CMS’s website. 

Narrow Exception for Qualified Settlement Funds Prior to October 1, 2011

Fourth, in an “Alert” dated September 20, 2011, a narrow exception has been announced for certain settlements that are paid into a qualified settlement fund (QSF) under Section 468B of the Internal Revenue Code (IRC) prior to October 1, 2011.  Specifically, each of the following criteria must be met in order for exception to apply:

  • The settlement, judgment, award, or other payment is a liability insurance (including self-insurance) TPOC amount, where no ongoing responsibility for medicals (ORM) is involved
  • The settlement, judgment, award, or other payment will be issued by a QSF under Section 468B of the IRC, in connection with a state or federal bankruptcy proceeding
  • The funds at issue were paid into the trust prior to October 1, 2011

New “Fixed Percentage Option”

Finally, for certain settlements that are less than $5,000, there is a new "fixed percentage option" for beneficiaries to satisfy Medicare's total MSP claim.  Details are provided on the MSPRC website and are reprinted below. Although this option is currently only available under narrow circumstances, it represents a significant departure from CMS’s historical and complicated approach to the MSP recovery process.  

 

Effective November 7, 2011, the Centers for Medicare & Medicaid Services has implemented a new and simple fixed percentage option that is available to certain beneficiaries. This option is available to beneficiaries who receive certain types of liability insurance (including self-insurance) settlements of $5,000 or less.

A beneficiary who elects this option will be able to resolve Medicare's recovery claim by paying Medicare 25 percent of his/her total liability insurance settlement instead of using the traditional recovery process. This means that a beneficiary will know what he/she owes and will be able to immediately pay Medicare.

In order to elect this option, the following criteria must be met:

  • The liability insurance (including self-insurance) settlement is for a physical trauma based injury. (This means that it does not relate to ingestion, exposure, or medical implant)
  • The total liability settlement, judgment, award, or other payment is $5,000 or less
  • The beneficiary elects the option within the required timeframe and Medicare has not issued a demand letter or other request for reimbursement related to the incident
  • The beneficiary has not received and does not expect to receive any other settlements, judgments, awards, or other payments related to the incident

 
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Posted on August 19, 2011 by Lisa Baird

California Supreme Court Limits Recoverable Medical Expenses to Amounts Actually Paid by Tort Plaintiff's Insurer

This post was written by Farah Tabibkhoei and Ginger Pigott.

In a highly anticipated decision, the California Supreme Court yesterday decided the issue of whether tortuously injured plaintiffs with private health insurance get to recover the full rate charged by their doctors and hospitals or the discounted, contract rate their insurers actually pay.

The standard, the California Supreme Court held in Howell v. Hamilton Meats & Provisions, is that personally injured plaintiffs may recover, at most, the dollar amount that actually is paid by their insurers for plaintiffs’ medical services, not the larger amount that generally is billed to those not covered by negotiated contracts between insurance companies and medical providers.

Motivating the Court’s decision was the fact that medical expenses are meant to be recovered by successful tort plaintiffs as economic damages, and insured plaintiffs’ damages are limited to the amounts they are personally obligated to pay—in other words, the amount their insurance company negotiated to pay for their care.

In its decision, the Court extended a rule it previously had adopted for tort plaintiffs with public health coverage, reasoning that regardless of whether public or private insurance is involved, the key issue is the amount of the plaintiffs’ personally liability for their medical bills.

This analysis is not without controversy, however, because of the collateral source rule, which ordinarily prohibits the introduction of evidence of insurance. Where the collateral source rule applies, however, as in products liability cases, the amount paid by an insurer for medical services is now admissible at trial to limit the amount of recoverable damages a plaintiff receives. The Court emphasized that its ruling is consistent with the collateral source rule, which is not meant to cover expenses plaintiffs never incurred in the first instance.

The collateral rule still bars evidence of the source of payment (that is, that an insurance company paid the plaintiff’s medical bills), as well as the undiscounted amount of the medical bills if the insurer has paid a discounted sum.

As to policy considerations, the Court rejected the argument that requiring tortfeasors to pay a lesser amount for their wrongdoing is necessarily an under-deterrent, as the Court observed that providers’ undiscounted bills do not always equal the reasonable value of medical services given the complexities inherent in medical billing in the United States.

The Court also concluded that limiting the recoveries of insured plaintiffs would not serve to punish those with the foresight to obtain insurance because insureds still get what they paid for, that is, having their medical bills satisfied by the insurer. That uninsured plaintiffs might reap larger recoveries, the Court noted, is just a fortuity of life.

The amounts at stake for defendants add up. In just Howell itself, an auto accident case, Howell’s undiscounted medical bills were $130,000, but her private health insurance company paid only $60,000. Given the number of personal injury lawsuits in California, the Howell decision certainly comes as a relief for personal injury defendants. 

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Posted on May 12, 2009 by Lisa Baird

Senate Finance Committee Options for Expanding Health Care Coverage (Comment Deadline May 22, 2009)

On May 11, 2009, Senate Finance Committee Chairman Max Baucus (D‐Mont.) and Ranking Member Chuck Grassley (R‐Iowa) released their policy options for expanding health care coverage, including options for designing a government-run public health insurance plan. Members are scheduled to meet to discuss these options on May 14, and public comments will be accepted on the options through May 22, 2009. An overview of the document is reprinted after the jump. This is the second of three options papers scheduled for release by the Committee, with the third options paper on financing health care reform planned for release before a May 20 meeting of Finance Committee members.

For the full post, please see our sister blog, HealthIndustryWashingtonWatch.com.

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Posted on June 3, 2008 by David E. Weiss

Cross-Complaints and Counterclaims May Trigger A Right To Insurance Recovery

Lawyers representing clients as plaintiffs in litigation often overlook the fact that a cross-complaint or counterclaim may give rise to an obligation by the client’s liability insurer to provide a defense. A recent decision in favor of Hewlett-Packard, awarding it $51 million, serves as a reminder that insurance coverage must be examined when a cross-complaint or counterclaim is filed.

Hewlett-Packard filed a patent infringement, trademark infringement and false advertising lawsuit against a company called Nu-kote. The case related to HP’s ink jet cartridge technology. Nu-kote apparently marketed products designed to refill HP ink jet cartridges after they ran out of ink. HP argued that Nu-kote’s products infringed HP’s patented technology, and that Nu-kote used deceptive packaging that copied HP’s trade dress. Nu-kote filed counterclaims against HP alleging antitrust violations, unfair competition, trade libel, false advertising and other alleged wrongful conduct.

HP tendered the defense of the counterclaims to its insurer, Ace Property and Casualty Company, seeking a defense under the advertising liability provisions of its general liability policy. A coverage lawsuit between HP and Ace followed. The coverage lawsuit entitled Hewlett-Packard Company v. Ace Property and Casualty Insurance Company, Case No. C-99-20207, was venued in the Northern District of California. The district court judge, The Honorable James Ware, found that Ace had an obligation to defend the counterclaims.

HP purportedly incurred approximately $28 million in litigation fees and costs after it tendered the case to Ace for a defense. The parties stipulated to have a Special Master determine the amount of those litigation expenses that were incurred in connection with the defense of the covered counterclaims, and to make a recommendation to the district court. Ace argued that more than $13 million of the litigation expenses were not covered because Ace contended they were not related to the defense of the counterclaims, or were otherwise not appropriate defense expenses. The Special Master rejected the insurer’s arguments and held that all of the expenses were covered. The district court ultimately affirmed the Special Master’s decision overruling extensive objections filed by Ace. The court entered judgment for HP in the amount of $51 million, which includes the past litigation expenses plus costs and prejudgment interest.

The moral of this story is that cross-complaints and counterclaims must always be analyzed for coverage and tendered to insurance carriers where there might be a potential defense obligation. Defense expenses are often payable in addition to policy limits, so in many cases obtaining a defense can be even more important than obtaining indemnity coverage for an ultimate settlement or judgment.

As evident from the HP case, in many situations it is appropriate to argue that once a counterclaim or cross-complaint has been filed, all or substantially all of the subsequent litigation expenses should be covered as being related to defensive litigation activities, as opposed to being purely related to the offensive claims that started the litigation.
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