Medicare Reporting/Medicare Related Lawsuits

Medicare, the national social insurance program administered by the federal government since 1966, uses a number of private insurers to provide health insurance for over 55 million older and disabled Americans. Medicare covers about half of actual medical costs; beneficiaries must cover the rest with supplemental insurance often referred to as “medi-gap” policies, or purchase another form of coverage for themselves.

Since the beginning of the Medicare program, a Medicare-related federal administrative agency, the Centers for Medicare and Medicaid Services (CMS), has contracted with insurance companies to operate as intermediaries between the government and medical providers. The companies handle claims and payment processing, fraud investigation, call center services, medical provider enrollment and more.

Beginning in 1997, Medicare beneficiaries were allowed to opt out of the “fee for service” benefit structure and choose to participate in a capitated health insurance plan structured more like a health maintenance organization. The capitated plans came to be known as “Medicare Advantage” plans.

Background

How private insurance plans should bill Medicare for services provided to beneficiaries has been an issue between the insurers and the government for some time, particularly the rules for how insurers should deal with overpayments made by Medicare. At the same time, the government has conducted audits that uncovered a significant and long-standing problem of private insurers overcharging Medicare.

“Medicare Advantage” plans have come under particular scrutiny. In these plans, physicians assign billing codes to document a patient’s condition in terms of the disease the patient has and its severity. The codes are submitted to the government, which uses the codes to calculate the patient risk score to decide how much to pay the private insurance plan for medical services rendered. Several whistleblower suits have been filed against Medicare Advantage insurers alleging that they deliberately chose codes that represented patients as more ill than they actually were and resulted in larger payments from Medicare.

Injuries and Damages

The government claims that abuse of federal health care programs costs taxpayers billions and puts the health and welfare of beneficiaries at risk – and that the risk continues to grow as the population served by Medicare swells.

Legislation and Regulation

The Medicare Secondary Payer Act (MSPA) passed in 1980. The law was intended to lower federal health care costs by addressing Medicare’s inability to identify primary payers. In 2007, the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA) became law and established new reporting guidelines. Under Section 111 of the MMSEA, no-fault insurers, liability insurers, group health plans, workers' compensation insurers and self-insurers are required to establish whether a person claiming against the Insurer or related entity is entitled to receive Medicare benefits. If so, insurers are required to report that and other information to CMS.

Under the law, the party actually paying the loss is referred to as the “Responsible Reporting Entity” (RRE), and is required to submit certain information to CMS to help it determine whether the injured party is a Medicare beneficiary. For claims involving insurance payments to individuals found to be entitled to Medicare benefits, RREs are required to report the claimant identity and other information to allow the federal agency to coordinate benefits and possible recoveries. The RRE might be compelled to report the nature of the illness or injury and how it came about, the value of the insurance reimbursement and an estimate of future medical expenses. The RRE should also report whether past medical expense payments which would be eligible for Medicare reimbursement have been made and whether future expenses are likely to occur.

Where the insured is making a tort claim, the RRE is required to notify CMS electronically when resolution of the claim is being sought. The intent is that, supplied with this information, Medicare will be able to examine settlements, awards and judgments to be sure that conditional payments are identified and reimbursed, and to determine whether funds have been allocated for medical expenses. Some economists have concluded that the MSPA frustrates the settlement process with its requirement that insurers report settlements or awards involving Medicare beneficiaries to CMS, and that the federal agency’s frequent reporting delays and uncertainty about the amount of the payments further impede the process.

Liability and Insurance

Personal injury cases present particular problems for litigants and their insurers in relation to Medicare. Medicare beneficiaries who receive a settlement in a personal injury suit have to pay Medicare back for medical expenses paid by insurers. Medicare will file a lien, often referred to as a “super lien” because Medicare offers little, if any, opportunity to negotiate the lien down. Also, Medicare can seek repayment from all parties even if a settlement amount has been paid. Medicare can double the amount of a lien that is not paid in accordance with its guidelines.

Under certain circumstances, Medicare might reduce the amount it demands in accordance with attorney fees and costs, but generally will not reduce its lien to accommodate for settlements that are made for less than the full value of the case. Medicare liens for accident-related treatment will sometimes mistakenly include charges for care not related to the accident and must be appealed. Barring errors, a Medicare lien is expected to be resolved within 120 days. In 2013, the Medicare “SMART Act” was finalized with the intention of speeding up lien resolutions by establishing a website containing current lien information and imposing deadlines on Medicare with respect to dealing with disputed items. Cases settling for more than $300 are not subject to Medicare liens and cases settling for less than $5000 may benefit from a special fixed percentage option.

If a plaintiff in a personal injury case bears partial fault for his own injuries, a Medicare lien can complicate settling the case because Medicare may choose to ignore allocations of settlement funds agreed to by the parties. Also, in cases where the defendant lacks adequate liability insurance to fund a fair settlement, Medicare is not obligated to take this fact into account by reducing the amount of its lien, although a waiver – not usually granted - can be requested.

Litigation

The nature of Medicare-related litigation is varied, including, for example, problems with MSPA, Medicare Advantage programs, the rules governing the administration of skilled nursing medical services, and allegations of Medicare fraud in the form of the provision of medically unnecessary services.

U.S. v. Stricker
In United States of America v. Stricker, No. 09-CV-2423 (N.D. Ala. Sept. 30, 2010), the United States sued a number of parties, including insurers, who participated in a $300 million class action to resolve claims related to claims of exposure to polychlorinated biphenyl (PCB). The International Agency for Research on Cancer declared PCB to be a human carcinogen and the EPA declared it a probable carcinogen. It is generally agreed that many buildings and rivers have suffered contamination, and some organizations assert that food supplies have also been affected. The U.S. alleged that settlement proceeds were distributed without reimbursing Medicare for the medical care that it had provided to the settling class members. Medicare claimed that under the MSPA, insurers and others who participated in the settlement were liable to Medicare for up to double the amount of incurred medical expenses. The trial court dismissed the claim on the basis of the statute of limitations. The U.S. appealed to the U.S. Court of Appeals for the 11th Circuit, which affirmed the trial court’s ruling in United States of America v. Stricker, No. 11-14745, 524 Fed. Appx. 500 (11th Cir. July 26, 2013). The case is important for insurers involved in settlements with Medicare beneficiaries because it is one of the primary rulings to provide insight into Medicare’s recovery practices under the MSPA, especially as applied to mass torts and old class action settlements.

United States of America, ex rel. Benjamin Poehling v. UnitedHealth Group, Inc.
In United States of America, ex rel. Benjamin Poehling v. UnitedHealth Group, Inc., 11-cv-0258A, filed under seal in the Western District of New York in October 2011 and made public in February 2017, a whistleblower accused UnitedHealth Group and affiliated insurers of overcharging Medicare by possibly billions of dollars through their Medicare Advantage programs. The alleged overcharges were based on the insurer making people look sicker than they were by inflating patient risk scores, a practice known as “upcoding.” Mr. Poehling claimed that the insurer set “risk adjustment” targets for their employees, who were judged on whether they had sufficiently increased risk scores. Mr. Poehling alleged that coding specialists would examine patient records looking for long-term conditions that could be used to increase Medicare reimbursements. The Justice Department intervened in the pending case in 2017.

Jimmo v. Sebelius
In a 2013 settlement of Jimmo v. Sebelius, No. 11-cv-17 (D. Vt.), Medicare ended its longstanding policy that skilled medical services must be terminated unless a beneficiary with a chronic condition or disability can show a likelihood of improvement. This change benefitted those with chronic conditions like multiple sclerosis, Alzheimer’s disease, Parkinson’s disease, ALS (Lou Gehrig’s disease), diabetes, hypertension, arthritis, heart disease and stroke. Under the changed policy, medical providers were required to treat patients with medically necessary nursing or therapy services in order to prevent or slow medical decline. The issue for insurers after Sebelius is whether the services are needed, not whether the patient will improve.

21st Century Oncology
21st Century Oncology’s Florida operation agreed to pay approximately $34.7 million in 2016 to settle allegations of Medicare fraud. The U.S. government claimed that Century Oncology performed a test that was intended to measure the exit dose radiating from a patient after radiation treatment, but that the procedure was medically unnecessary. The government also alleged that medical staff at 21st Century Oncology locations were not properly trained to interpret or use the test results.

Future Outlook

Experts project increasing Medicare costs based on projections of increasing enrollment due to an aging population and fewer workers in relation to program enrollees. Some experts foresee an increased need to fund these costs with higher taxes, rising costs for beneficiaries, reduced benefits, or all three situations. Insurers will surely be involved in considering, testing and implementing any changes in Medicare and must protect themselves by understanding their role in shaping this complex program.

In the News

2017

• Scheme Tied to UnitedHealth Overbilled Medicare for Years, Suit Says - MARY WILLIAMS WALSH, NYtimes.com (02/16/2017)
  UnitedHealth Group, one of the nation’s largest health insurers, is accused in a scheme that allowed its subsidiaries and other insurers to improperly overcharge Medicare by “hundreds of millions — and likely billions — of dollars,” according to a lawsuit made public on Thursday at the Justice Department’s request. . . . The accusations center on Medicare Advantage, a program through which people 65 or older agree to join private health maintenance organizations, or H.M.O.s, whose costs the government reimburses. . . .  Instead of slowing Medicare costs, UnitedHealth may have improperly added excess costs in the billions of dollars over more than a decade, according to the lawsuit, which was unsealed in Federal District Court in Los Angeles.

2016

• Senior surprise: Getting switched with little warning into Medicare Advantage - Susan Jaffe, Washington Post (08/26/2016)
  

  With Medicare’s specific approval, a health insurance company can enroll a member of its marketplace or other commercial plan into its Medicare Advantage coverage when that individual becomes eligible for Medicare. Called “seamless conversion,” the process requires the insurer to send a letter explaining the new coverage, which takes effect unless the member opts out within 60 days.

2014

• Hospital, Medical Firm CEOs to Plead Guilty to Kickbacks - R. Robin McDonald , Daily Report (07/31/2014)
  Two key players in what federal prosecutors have described as a massive scheme to defraud Georgia's Medicaid program are slated to plead guilty to charges that they negotiated kickback payments to prenatal clinics that steered undocumented Hispanic women to local hospitals for deliveries of their babies.
• Hazards tied to medical records rush - Christopher Rowland , Boston Globe (07/20/2014)
  President Obama and Congress poured $30 billion in taxpayer subsidies into the push for digital medical records beginning in 2009, with only a few strings attached and no safety oversight of the vendors who sell the systems.

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