I have come to realize that there are no easy solutions for the MSP problems we face in claims because the MSP is not the problem. Our MSP issues are collateral damage of more systemic societal problems we face as a nation. We clearly do not know how to treat chronic pain properly and instead have essentially let workers’ compensation legalize drug addiction, which increases claim costs that get projected out into the future. We solved the healthcare crisis by promising more services at lower costs, which results in physicians increasing the frequency of services. We’ve attempted to address healthcare financing, but we have not addressed the underlying causes of most health care costs—obesity and consumer behavior. And most significantly, we solved a long-term unemployment crisis by turning the Social Security Disability Insurance (SSDI) program into a welfare program for middle aged, blue-collar workers, contributing several more million Americans to the 76 million baby boomers already joining the Medicare rosters daily.
About 3.2 million people applied for SSDI in 2012, an increase of 25% over the previous decade. During the last two decades, the number of SSDI recipients has more than doubled to about 8.5 million without counting the children and spouses who also receive benefits. The two things blamed for the increase are qualifying for SSDI got easier while finding work got harder. The most common qualifying diagnoses, such as chronic low back pain and mental illness, are far from debilitating from a work perspective, so that calls into question how severe of an impairment is really needed to become disabled at least for purposes of not returning to the work force and collecting disability benefits. Considering that less than one percent of Americans who go on disability ever go back to work, this is a problem that the financial integrity of neither the SSDI program nor the Medicare trusts can handle.
Research indicates that this problem started when the Reagan administration attempted to thin out the SSDI roster back in the early 80s. Congress responded by loosening the qualifying criteria, allowing self-reported pain and mental health problems to be more heavily weighted than before. Fast-forward to today and the problem has worsened because the Social Security Administration (SSA) has responded to the increased quantity of applications by imposing quotas on administrative law judges (ALJs) making the disability determinations. SSA believes that a judge should decide 500 to 700 disability cases a year, calling it a productivity goal. That is more than two cases a day. Some judges feel that they approve cases they might otherwise have denied if time permitted investigation in order to clear cases faster to meet quotas. Some ALJs felt strongly enough about this problem that the ALJ Union filed suit against SSA in Chicago in April 2013, claiming that the “requirement violates judges' independence, denies due process rights to applicants and further strains the finances of a disability program that is projected to run out of money in 2016.” Regardless of whether it is the lower standard or the quotas impacting quality of review, the fact is that there are far too many people capable of some kind of work getting a pass funded by the American taxpayer and unfortunately the insurance industry is also subsidizing the entitlement.
For those readers who may not be aware, in the majority of states, SSDI benefits are off-set when a beneficiary is also receiving workers’ compensation benefits. To prevent people from making more when not working than they did when they were working and to incentivize them to return to the workforce, they can receive no more than 80% of the beneficiary’s average cumulative earnings between SSDI and workers’ compensation. It is the SSDI benefit that is reduced to meet that limit when added to the workers’ compensation benefit, leaving carriers to pay their exposure. And given that these benefits are not taxable, there is no wonder why few people ever return to the workforce once they’ve qualified for disability benefits. And of course, once they’ve received 24 months of SSDI benefits, they automatically become entitled to Medicare as well.
It’s interesting that so many of the failures of the health care system and government entitlement programs fall squarely on the shoulders of employers. With the increased employment health benefit requirements of ObamaCare, it is clear that the federal government expects employers to take responsibility for their employees’ general wellbeing. An employee can be covered by a group health plan, by workers’ compensation if injured at work, under an ERISA plan if retired or under a COBRA plan if no longer employed, all before Medicare is obligated to pay anything, which is partially funded by the employers’ contribution to payroll taxes.
Meanwhile, the government is unleashing its enforcement machine to protect Medicare, especially with regard to fraud. In March 2013, federal and state officials raided the Texas headquarters of the infamous The Scooter Store and uncovered that it had overbilled Medicare by $47 to $88 million dollars from just 2009 to 2011. On April 24, 2013, the Secretary introduced a proposed rule that would increase a whistle blower’s maximum compensation to $9.9 million. The CMS website now encourages seniors to review their EOBs to identify inconsistencies between care billed and care received. All in all, the government’s efforts to protect Medicare must be working; the annual report, provided by the Board of Trustees on May 31, 2013, stated that the depletion of the Medicare health insurance trust fund is two years later than previously projected. One might conclude that all of these efforts have not been in vain.
Yet, despite all its successes, CMS continues to push heavily on the P&C industry to shore up the failing Medicare system. While CMS continues to try to improve MSP practices and policies, it still holds tightly to the idea that Medicare never has to pay once secondary payer status sets in and that is just not the case in many circumstances. Medicare’s exclusion is dictated by some underlying force, whether that be state workers’ compensation law or the contractual obligations in an insurance policy. No one is obligated to make medical payments beyond their legal obligations; however, due to ambiguities in the manner in which the law was written, it has not always been the outcome.
That is why the Fifth Circuit Court of Appeals recent decision in Caldera v. The Insurance Company of the State of Pennsylvania could be so important to employer/insurers [see Part I, Ch. 5, § 5.07 of The Complete Guide to Medicare Secondary Payer Compliance]. The court upheld the primary plan’s rights under Texas workers’ compensation law to refuse payment for surgeries due to Claimant’s failure to obtain proper preauthorization at the time of the surgeries in question and for which Medicare paid. Preauthorization was not sought because the claim was administratively closed at the time; however, the parties subsequently entered into an agreed judgment, stipulating that all treatment received did in fact relate back to the original work injury. Given the chicken or the egg situation, it will be interesting to see how that case ultimately turns out. If reconsideration is denied, the plaintiff will be petitioning for cert to the U.S. Supreme Court. The high court has denied cert in two other MSP petitions in 2013, so let’s see if the third time is a charm.
Should the Supreme Court opine that state law prevails, that could make a significant impact on CMS. As it stands, CMS relies heavily upon federal preemption, believing the MSP recovery rights trump any other legal issues and entitle it to full reimbursement. The problem it doesn’t recognize is that absent the underlying state law giving rise to the liability to provide for medical expenses, Medicare would be the primary payer. The public policy of encouraging settlements through compromise is at odds with this position, and this decision could go a long way to bringing equity into play in these situations.
Despite our continued complaints, Congress failed to provide any significant relief either with regard to these most costly elements of MSP compliance, that being the lack of consideration for apportionment and Medicare set-asides. While the SMART Act was finally passed into law, thanks to assistance from the bubble-boy, it did not even touch upon these concerns [see Part I, Ch. 1, § 1.01 of The Complete Guide to Medicare Secondary Payer Compliance]. While we can now obtain conditional payment information a little easier and freely dole out gift cards in exchange for release from liability without opening the MSP ugly can of worms, we are still slaves to CMS’ whims in most other areas of MSP compliance. While the latest version of the Medicare Secondary Payer and Workers' Compensation Settlement Agreement Act was introduced in May 2013, there is no reason to believe it will gain much more support than the previous four versions [see Part I, Ch. 1, § 1.01 of The Complete Guide to Medicare Secondary Payer Compliance]. Regardless, the bill really only creates ways to fund inflated MSAs faster. Any significant legislation needs to address balancing Medicare’s interests with that of primary payers.
The courts also did little to alleviate the burdens of MSP compliance during 2013. The Supreme Court denied cert in Hadden and In re Avandia, leaving us with full Medicare reimbursement regardless of the legal issues in the underlying case and Medicare Advantage plans asserting recovery rights similar to traditional Medicare despite the lack of express statutory or regulatory rights to do so. In direct conflict with Avandia, the Ninth Circuit Court of Appeals recently upheld Parra v. PacifiCare, which holds that Medicare Advantage plans do not have a right to a private cause of action under the MSP [see Part I, Ch. 3, § 3.03[d] of The Complete Guide to Medicare Secondary Payer Compliance].
And the most disturbing recent decision was Michigan Spine and Brain Surgeons v. State Farm, in which a medical provider that billed Medicare and received a conditional payment was permitted to turn around and sue the primary payer for reimbursement on behalf of Medicare under the MSP for double damages [see Part I, Ch. 3, § 3.03[b] of The Complete Guide to Medicare Secondary Payer Compliance]. Given that the medical provider has no damages as it elected to accept and received the very same conditional payment it seeks reimbursement for, it is unclear as to how the court found the provider to have damages enough to achieve standing to maintain the suit. Should the provider prevail, it will only have to reimburse Medicare that which it paid out, meaning that it would likely refund the conditional payment it accepted and keep all of the proceeds from the suit. Potentially, the provider could come out of this with twice the conditional payment even after Medicare was reimbursed. It hardly seems that this was the Congressional intent when 42 U.S.C.S. § 1395y(b)(3) was written into the MSP.
So until the government addresses our concerns, it is really up to the insurance industry to continue to mitigate the problem on its own, and it has recently made great strides to that end. By lowering claim costs and improving medical outcomes, MSAs are naturally reduced as well. There has been much more diligent pharmaceutical management in claims, as adjusters are becoming more cognizant of drug indications and costs. Many states are establishing morphine equivalent dose limits to attempt to curtail the excessive narcotic use. Even the pharmaceutical companies are doing their part to combat addiction. Purdue recently created tamper proof OxyContin, which unfortunately increased its cost; however, it made it much less attractive for illicit use. The industry appears to be moving towards evidence-based medicine in order to treat symptoms rather than follow treatment formulas. To that end, there has even been talk about implementing more psychological treatment to discover if it is not a physical cause impeding the return to work process. Once we can control our costs and in turn perfect our records to reflect the best possible medical outcome, MSAs will reflect little more than the actual projected future of anticipated related medical care that even CMS could not view differently.
As I draw the time on my soapbox to a close, let us look at what the future holds for the MSP. To begin, CMS shall continue to phase in its new contractors under its new matrix organization. To that end, on June 7, 2013, the contract for the BPOC was awarded to Group Health, Inc. It is unclear what happened to Integriguard, LLC, d/b/a HMS Federal, but this announcement should come as a comfort to the MSP industry because GHI has always performed well in its previous contracts, particularly when it assumed the role of MSPRC from the Chickasaw Nation [see Part I, Ch. 1, § 1.03[c] of The Complete Guide to Medicare Secondary Payer Compliance]. All other contracts, such as the MSPIC, MSPSC and MSP RAC, were all awarded in 2012, and we are just waiting to see evidence of their involvement [see Part I, Ch. 1, § 1.03 of The Complete Guide to Medicare Secondary Payer Compliance]. With significant updates to the website and initiation of voluntary initiative, such as the ANPRM, it appears that CMS is attempting to improve the MSP program.
During 2014, be on the lookout for significant rule promulgation. By statute, the Secretary is obligated to create rules governing mandatory insurer reporting penalties and an appeal process for primary plans. While the first was set to be initiated within 60 days of enactment of the SMART Act, March came and went without a sign of activity in the Federal Register. It’s interesting how CMS can violate the MSP statute with no ramifications, but I digress. The appeal rules are mandated in the section of the Act and are required to be implemented within nine months of enactment, so look for that to be completed in or about October. But the question remains if we will see anything more of the ANPRM for Medicare set-aside rules [see Part I, Ch. 1, § 1.03]. Because they were initiated voluntarily, there is nothing forcing CMS to continue to pursue their completion. CMS has successfully established its intent to enforce future medical allocations in liability settlements, so its true mission has already been accomplished.
The other SMART Act provisions shall be implemented throughout 2014. The MSPRP is already in use so there is not much to that. It will be exciting to see how much effort it will take CMS to find the point at which the cost of recoveries equals the average reimbursements to the trust fund, get it reviewed by the Comptroller General of the United States and report it all to Congress annually, all so that certain large self-insureds can freely give gift cards in exchange for releases. I anxiously await to hear the excuses as to why CMS cannot create and implement an alternative to the use of Social Security numbers in the reporting process given there is not another easy way to query its database to determine Medicare eligibility. The one area I am intrigued by is the primary payer appeal. It was decided that the existing Medicare appeal contractors would absorb that task, meaning that it will be conducted outside the MSP department. That will be interesting to see if determinations are more or less reasonable. Unfortunately, those contractors only have experience with medical necessity and coverage determinations so there could be a significant learning curve.
2014 will present some interesting challenges with the additional drugs covered by Part D and implementation of ICD-10 codes [see Part I, Ch. 5, § 5.07 of The Complete Guide to Medicare Secondary Payer Compliance]. The new coding system will make available over 68,000 codes to more accurately describe injuries and illness. No longer will we be left to guess whether a left or right knee was replaced. But with the added benefits will come serious hardship to insurers and self-insureds that barely have a handle on ICD-9 for purposes of its MSP compliance efforts. There are already great fears with what exposures may exists for misreporting codes, so this should exacerbate that problem. But as with everything MSP, we shall adapt in time. It is just a question of how many fines may be assessed in the interim.
So I am looking forward to what transpires in the months to come. I am very excited about the prospect of Caldera getting to the Supreme Court. The total disregard by CMS of the underlying state laws determining claim and settlement value must stop and we must finally gain some control over both set-asides and reimbursements. I anticipate that we may see more False Claims Act actions as the federal government appears to be developing a taste for its other applications. And more than anything, I anxiously await the use of ORM RACs contemplated in the OIG’s 2013 work plan. It is rumored that CMS is finally prepared to assess some MMSEA fines, so what that exposure amounts to will be interesting to see. I apologize if my excitement leaves you sleepless, but us MSP geeks have too little joy in our work.
Before I conclude, I would like to thank some unofficial helpers that assisted with updates of The Complete Guide to Medicare Secondary Payer Compliance reflecting the many changes implemented by CMS in 2013. Kim, Amber, Erin, Glenn, George and John—your contributions were greatly appreciated. And as always, Robin is an absolute angel for putting up with me. Enjoy the new edition of The Complete Guide to Medicare Secondary Payer Compliance, particularly all of the new guides published by CMS in 2013, and please let us know if there are areas of concern that we could add in future editions. The MSP is like a virus, and I think we have only begun to try to sort out how it impacts other areas of law.
—Jennifer C. Jordan, Esq.
© Copyright 2014 LexisNexis. All rights reserved. Reprinted from The Complete Guide to Medicare Secondary Payer Compliance, 2014 Edition (LexisNexis).
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