2011 – An Active Year for MSP News

2011 turned out to be a very significant year for Medicare Secondary Payer (MSP) Compliance news developments. Congress considered new bills and had hearings, CMS issued several new memos and made some significant improvement, and the courts decided important cases. Here is a brief recap of the most significant MSP news stories of 2011.

U.S. Congress

Smart Act introduced in the U.S. House of Representatives (3/15/2011) – H.R. 1063, the Strengthening Medicare and Repaying Taxpayers Act of 2011 (SMART ACT) was introduced in the 112th Congress by Congressman Tim Murphy (R-PA) and Congressman Ron Kind (D-WI). The purpose of the legislation is to “significantly improve the efficiency of the current Medicare Secondary Payer (MSP) system and speed repayment of amounts owed from Medicare beneficiary claims directly to the Medicare Trust Fund”.

Congress Holds Hearings on MSP Problems (7/22/2011) – The Oversight and Investigations Subcommittee held a hearing to examine widespread complaints of delays, roadblocks and a badly broken Medicare Secondary Payer Program. Witnesses included representatives from CMS, GAO, Publix Super Markets, Cincinnati Insurance Company and the law firm of Raizman Frischman & Matzus.

SMART Act Introduced in U.S. Senate (10/17/2011) – The Senate version of the Strengthening Medicare And Repaying Taxpayers (SMART) Act of 2011 was introduced in the U.S. Senate, as S. 1718, on October 17, 2011. The House version of the SMART Act was previously introduced, as H.R. 1063, on March 11, 2011. The purpose of the bill is to improve the efficiently of the MSP system, speed up conditional payment reimbursements, and help cases settle.

The Centers for Medicare and Medicaid Services (CMS)

CMS Reiterates WCMSA Review Thresholds (5/11/2011) – CMS released a new policy memo that reiterates, in one place, previous guidance regarding its review thresholds for Workers’ Compensation Medicare Set-Aside (WCMSA) agreements.

MSPRC Resumes Issuance of Rights and Responsibly Letters (6/10/2011) – In response to an Arizona court decision, Haro v. Sebelius, the MSPRC revised its “Rights and Responsibilities letter to state that “Medicare will not take any collection action during the pendency of any appeal or waiver request”.

CMS Testing a WCMSA Portal (July, 2011) – CMS started pilot testing a web based Workers’ Compensation Medicare Set-Aside (WCMSA) Portal that gives WCMSA submitters the ability to directly upload and inquire about case information. The goal of the program is that this automation will greatly improve efficiencies and review turn around times.

WCRC Bid Protest Resolved (8/3/2011 and 7/1/2011) – CMS awarded a new Workers’ Compensation Review Contract (WCRC) to Provider Resources, Inc. from Erie, PA. The 7/1/2011 expected start date was delayed due to one of the unsuccessful bidders filing a bid protest. On 8/3/2011, the bid protest was dismissed. The industry is hopeful that this new contract will result in improved service for the government review of Workers’ Compensation Medicare Set-Asides.

CMS to Combine MSPRC and COBC into MSPIC; Appoint Interim MSPRC Contractor (8/24/2011) – CMS announced that it will combine its Medicare Secondary Payer Recovery Contractor (MSPRC) and Coordination of Benefits Contractor (COBC) contracts into a centralized contract, called the “Medicare Secondary Payer Integration Contractor (MSPIC)”. CMS hopes that by merging these activities, they can provide a single point of contact, improve data and debt collection, and enhance customer service. In addition, CMS did not renew the MSPRC contract with Chickasaw Nation Industries, Inc., which expired on September 30, 2011. Instead Group Health Incorporated will be the interim MSPRC contractor until the new MSPIC contract is awarded.

Medicare Implements $300 Threshold for Liability Settlements (9/6/2011) – The Medicare Secondary Payer Recovery Contractor (MSPRC) announced that Medicare has implemented a $300 threshold for certain liability cases. If all the conditions are met, the MSPRC will not recover conditional payments from the settlement. To apply the single lump sum settlement must be less that $300 and the injury must be related to physical trauma and not exposure, ingestion or implantation.

Delay in Section 111 Reporting for Certain Liability TPOCs (9/30/2011) – CMS delayed Section 111 reporting for certain liability Total Payment Obligation to Claimant (TPOC) settlements, awards or other payments. Previously, all liability TPOCs incurred in Q4/2011 where to be reported in Q1/2012. That still applies to TPOCs that exceed $100,000. But, the new reporting timetable extends the reporting requirement for liability TPOCs under $100k according to a schedule.

Policy Guidance Regarding Date of Injury (9/30/2011) – CMS stated that historically it has not pursued recovery for claims for settlements where the date of injury (DOI) occurred prior to the MSP Statute, which was 12/5/1980. CMS went on to clarify that DOI, for purposes of the 12/5/1980 date, is the date of last exposure for environmental cases, the date of last exposure for ingestion cases, the date of last physical exposure for ruptured medical implant cases and the date the implant was removed for non-ruptured implant cases. In addition, CMS stated that when reporting both under Section 111 and to the COBC, the date of first exposure/date of first ingestion/date of implantation is the date that MUST be reported as the DOI.

CMS’s First Liability MSA Policy Memorandum (9/30/2011) – In its very first policy Memorandum addressing Liability Medicare Set-Asides (LMSA), CMS addressed the issue of how to “consider Medicare’s interest” in liability settlements where future injury related medical treatment will not be required. CMS said that if the treating physician certifies in writing that no future medical treatment is required, Medicare will consider its interest satisfied and there is no need an LMSA for review.

MSPRC Announces a Self-Service Phone Feature (9/30/2011) – The Medicare Secondary Payer Recovery Contractor (MSPRC) added a 24/7, no wait-time, self-service phone feature to its customer service line that gives callers up-to-date demand and conditional payment amounts and the dates those letters were issued without having to speak to a customer service representative.

CMS Announced Upcoming Improvements (9/30/2011) – CMS announced that within 3-9 months it would implement: (a) a MSPRC Web portal where a beneficiary/representative can obtain information about Medicare’s claim payments, demand letters and input settlement and disputed claim information, (b) an option that allows for an immediate payment to Medicare for future medical costs that are claimed/released/effectively released in a settlement and (c) the implementation of a process that provides Medicare’s conditional payment amount, prior to settlement in certain situations. It looks like item (c) was announced effective 11/7/2011, above.

CMS Announces New Life Tables (10/4/2011) – CMS announced that effective October 31, 2011, the newly released 2007 Centers for Disease Control (CDC) life tables must be used for all workers’ compensation Medicare set-aside submissions.

Fixed Percentage Option (11/7/2011 and October 2011) – In October, 2011 CMS announced a new and simple payment option, that gives beneficiaries who have physical trauma liability insurance settlements of $5,000 or less the ability to resolve the Medicare’s recovery claim by paying Medicare 25% of the settlement to Medicare. On November 7, 2011 the MSPRC provided additional guidance on this option. For more information see

CMS Launches WCMSA Web Portal (11/29/2011) – CMS launched its web based submission process for Worker’s Compensation MSA submissions in order to speed up CMS review turn around times.

CMS Issues RFP for a MSPIC Contract (12/8/2011) – CMS issued a request for proposal (RFP) to combine its Coordination of Benefits Contractor (COBC) services and its Medicare Secondary Payer Recovery Contractor (MSPRC) services into one central contract called a Medicare Secondary Payer Integration Contractor (MSPIC).

The Courts

Haro v. Sebelius (5/5/2011) – The Arizona U.S. District Court ordered CMS to stop demanding of beneficiaries “payment of a MSP reimbursement claim with threats of commencing collection actions before there is a resolution of an appeal or waiver request” and to stop “demanding that attorneys withhold proceeds from their clients pending payment of disputed MSP reimbursement claims”.

Hunsinger v. Showboat Atlantic City (5/19/2011) – The Supreme Court of New Jersey ruled that a portion of the attorney’s fees can be taken directly from the Liability Medicare Set-Aside Account. In addition, the judge concluded that the workers’ compensation CMS policy memorandums also apply to liability MSAs.

Wilson v. State Farm (6-15-2011) – The U.S. District Court held that State Farm did not act in bad faith, but acted responsibly, in delaying the settlement until the Medicare lien could be determined.

Erin Brockovich’s Partner in Litigation Loses Appeal: Sixth Circuit Holds that Medicare Secondary Payer Statute is not a Qui Tam Statute (7/11/2011) – Erin Brockovich, made famous by the 2000 movie staring Julie Roberts, and her litigation partners, have been suing hospitals and nursing homes for years claiming that those groups violated the Medicare Secondary Payer Statues (MSP) by failing to reimburse Medicare for unspecified conditional payment advances. In these cases, the plaintiffs claimed that the MSP Statutes was a Qui Tam statue, which permits private individuals to sue on behalf of the United States. Most of these cases were dismissed. In a Florida case, the Court of Appeals for the Sixth Circuit, after describing the Stalley’s claims as “utterly frivolous”, “unreasonable” and “vexatious” upheld the lower District Courts decision to impose sanctions of $276,589.69 against he plaintiff as a deterrent against anymore similar vexatious law suits.

Schexnayder v. Scottsdale Insurance Company: Settlement Tailspin (7/28/2011) – The settling parties, in a global workers’ compensation and liability settlement, contingent upon CMS reviewing the MSA, asked to court to declare that the MSA satisfied the interests of Medicare. After reviewing the “Sally Stalcup” handout, the court found that the MSA was reasonable and that it protected Medicare’s interest as a secondary payer. The case is perplexing because the parties did not seem to have a clear understanding of CMS’ policy memos regarding global settlements, CMS review thresholds or when MSA should be done.

Smith v. Marine Terminals of Arkansas (8/9/2011) – CMS refused to review this Longshore and Harbor Workers’ Compensation case even though it exceeded their review threshold. The court determined that the MSA was reasonable and that Medicare’s interest were reasonably considered and protected in the settlement.

Hadden v. U.S. (11/21/2011) – The U.S. Court of Appeals for the Sixth Circuit affirmed the District Court’s decision, which held that the MSP laws allow Medicare to recover 100% of it’s conditional payment demand even though Mr. Hayden was only able to settle for 10% of the value of his case due to the 90% at fault drive leaving the scene of the accident. This much anticipated case, which took over a year to decide, was argued on October 13, 2010.

U.S. v. Stricker (10/13/2011) – On 9/30/2011 the U.S. District Court’s decided to dismiss the case due to it being time barred by the statute of limitations. On 10/13/2011 the U.S. Department of Justice filed a notice of appeal with the U.S. 11th Circuit Court of Appeals to challenge the lower courts finding.