New Development Regarding MSP Private Enforcement Provision

This post was written by Eric Buhr, Catherine Hurley and Michael Mandell.

A recent case out of a district court in Michigan suggests medical providers may have a new method to obtain payment for bills that were denied by an insurance company – Medicare Secondary Payer Act’s (MSP) private enforcement provision. Mich. Spine & Brain Surgeons, PLLC v. State Farm Mut. Auto. Ins. Co., No. 12cv11329, 2013 U.S. Dist. LEXIS 17721, *1 (E.D. Mich. Feb. 11, 2013).

In Michigan Spine, an insured covered by Medicare and State Farm automobile insurance was involved in a severe car accident. Id. at *2. Following the accident, the insured underwent extensive neurosurgery performed by Michigan Spine and Brain Surgeons, PLLC ("Michigan Spine"). Id. at *5. Michigan Spine submitted its charges to State Farm, but Sate Farm refused to cover the individual claiming that her injuries were from preexisting conditions and unrelated to the car accident. Id. at *5-*6. The insured then submitted her claim to Medicare which made a partial payment to Michigan Spine. Id. at *6.

Michigan Spine then sued State Farm under the MSPA’s private enforcement provision, 42 U.S.C. Section 1395y(b)(3)(A), which allows private actions, on Medicare’s behalf, for reimbursement from primary payers who wrongfully denied coverage. Id. at *6-*7. State Farm argued that Michigan Spine had no standing to sue under the provision because the claim had not yet "materialized" – i.e. no court had determined State Farm was liable for the insured’s medical treatment. Id. at *10.

The district court found otherwise. The court, reiterating a previously determined ruling by the Sixth Circuit, held that the showing of "materialization" or "demonstrated responsibility" only applies to a "lawsuit brought by Medicare for reimbursement for medical expenses caused by tortfeasors." Id. at *15 (quoting Bio-Medical Applications of Tenn., Inc. v. Cent. States Southeast & Southwest Areas Health & Welfare Fund, 656 F.3d 277, 279 (6th Cir. 2011)). In contrast, "a healthcare provider need not previously demonstrate a private insurer’s responsibility to pay before bringing a lawsuit under the Act’s private cause of action." Id. at *15 (quoting Bio-Medical, 656 F.3d at 279)). Thus, the district court denied State Farm’s motion to dismiss.

While Michigan Spine may relax the requirements for MSP private causes of action against primary insurance providers, the holding does not apply in the context of medical device and drug manufactures (even if self-insured); rather, that avenue remains restricted to a showing of "demonstrated responsibility."

New Law Spells MSP Relief For Private Sector

This post was written by Catherine A. Hurley and Jouya Rastegar.

There seems to be growing awareness that engaging in a “business, trade, or profession,” can easily subject any person or entity to what is known as the Medicare secondary payer ("MSP") law—a series of provisions in Title XVIII of the Social Security Act, governing the hierarchy of who pays first among applicable insurers. Given its scope and complexity, understanding and complying with the MSP law can be overwhelming. Further, although failure to comply carries obvious risk, conforming to what the law requires may also trigger certain risks of its own.

Amid consensus that the existing situation demands improvement, Congress recently passed the Medicare IVIG Access and Strengthening Medicare and Repaying Taxpayers Act of 2012, commonly referred to as the SMART Act provisions—new legislation signed January 10, 2013 that addresses at least of few of the acute challenges presented under the existing MSP system.  

Although it does not change the basic premise that a promise to pay an injured beneficiary is tantamount to a plan of liability insurance that is primary to Medicare, or generally relieve parties from their reporting obligations under section 111 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA), the Act should give parties that make payments to Medicare beneficiaries at least some opportunity to control the process and the outcome, and alleviate some of the more draconian qualities of the current system.

Among other things, the Act:

  • Requires the agency to make up-to-date conditional payment information available on a website;
  • Requires the agency to provide a process for parties to liability settlements to dispute Medicare’s alleged MSP refund amount;
  • Ensures greater certainty to settling parties, before the settlement, with respect to the total amount Medicare is owed;
  • Requires the agency to establish an appeals process for plans to challenge MSP collections actions;
  • Requires the agency to establish minimum dollar thresholds in certain circumstances, below which refunds to Medicare are not required and payments need not be reported;
  • Requires the agency to establish safe harbors to the MMSEA section 111 reporting obligations for liability insurance and similar types of primary payers;
  • Makes civil money penalties (CMPs) for failure to comply with MMSEA section 111 reporting obligations discretionary rather than mandatory;   
  • Alleviates the existing burden to collect and report beneficiary social security numbers or health insurance claim (HIC) numbers as part of the MMSEA section 111 reporting process; and
  • Establishes a three-year statute of limitations for commencing an action against any type of primary payer to recover conditional payments and/or double damages.

Reed Smith's full analysis of the SMART Act is available here.

A SMART Change for Tort Defendants?

This post was written by Michael Mandell and Eric J. Buhr.

President Obama recently signed the Medicare IVIG Access and Strengthening Medicare and Repaying Taxpayers Act (commonly referred to as the SMART Act) to alleviate some of the confusion surrounding the Medicare Secondary Payer Act (MSP), which allows Medicare to seek reimbursement, and potential penalties, from “responsible” parties. These “responsible” parties include tort defendants, such as drug and medical device manufacturers, who become primary payers once they settle or have a judgment awarded against them in a case involving a Medicare beneficiary. The SMART Act will, among other things, introduce a three-year statute of limitations for which the government may bring an action for reimbursement and create a minimum settlement/judgment threshold below which the government will not seek reimbursement.

One of the most significant aspects of the SMART Act is that it creates a new process for obtaining final Medicare lien demands, which is meant to give some closure to defendants and plaintiffs by providing them with Medicare’s final lien amount prior to settlement. Under current practice, Medicare only issues a final lien demand after there is a settlement, judgment, award or other payment resolving the Medicare beneficiary’s liability claim against a tortfeasor. This leaves parties uncertain over what Medicare’s piece of the settlement will be and in turn hinders the settlement process. Under the SMART Act, Medicare must now create a website where the claimant or applicable plan can obtain Medicare’s “final conditional reimbursement amount” prior to settlement. Armed with this information, parties will be able to make more informed settlement decisions.

Although the Act will remove some of the ambiguity surrounding Medicare’s lien demands, the multistep process for acquiring Medicare’s final lien amount may prove too rigid. To satisfy the requirements for a finalized lien demand, individuals must pay careful attention to the SMART Act’s numerous deadlines.

In short, the process for obtaining Medicare’s final claim for reimbursement under the Act is as follows:

  1. A Medicare beneficiary/claimant or applicable plan is required to provide Medicare at least 120 days’ notice of a reasonably expected settlement, judgment or award.
  2. Medicare will then have 65 days from receipt of this notice to provide the Medicare reimbursement amount. In exceptional circumstances this period can be extended to 95 days.
  3. The parties can then rely on the reimbursement amount as a final amount so long as (i) settlement occurs within the notified date of the expected resolution (provided in part 1) and (ii) the reimbursement amount statement is last downloaded within three business days of the settlement.

The consequences of failing to adhere to each of the above deadlines could result in Medicare enforcing a higher lien demand post-settlement. For instance, downloading the reimbursement amount statement four business days before settlement would result in a non-final statement. The same result would occur if one settled the case outside of the expected settlement date originally specified to Medicare. Therefore, defendants attempting to settle should remain vigilant of the above deadlines to ensure reliance on Medicare’s lien demands are warranted.

What’s Next? 

The Secretary will establish regulations for the right to appeal and an appeals process for primary plans that oppose Medicare’s collection actions. Stay tuned for what these provisions will be.

Effective 9 months from enactment

The Secretary will annually create a minimum settlement or judgment threshold below which the government will not seek reimbursement or require reporting.

Effective January 1, 2014

Medicare will issue regulations providing an alternative form of identification for beneficiaries, which may eliminate the need for responsible reporting entities to report to Medicare a beneficiary’s social security number or health insurance claim number.

Effective within 18 months from enactment (with possibility of 12 month extension)

The SMART Act has many more implications as well; stay tuned tomorrow for a more detailed analysis of how this new legislation impacts Medicare Secondary Payer law and the opportunities and issues it creates in contexts besides final lien demand resolution.