In Haro v. Sebelius1, the U.S. District Court for the District of Arizona (the "Court") recently ordered the Centers for Medicare and Medicaid Services (CMS) to limit its collection practices and procedures for recovering Medicare Secondary Payer (MSP) reimbursement claims from beneficiaries and/or their attorneys. While the order did not change CMS's entitlement to such payments, it did (i) curtail the methods CMS may use to collect such payments, by holding that aspects of CMS's current collection procedures and methods exceed the authority granted to it by 42 U.S.C. § 1395y(b)(2) and (ii) clarify when interest will begin to accrue and become due and owing for disputed MSP reimbursement claims. The court issued an order (i) enjoining CMS from continuing these overreaching procedures and methods and (ii) granting class certification for the plaintiffs.
As a result of the order, CMS can no longer demand pre-payment of disputed MSP reimbursement claims by threatening collection actions until the resolution of an appeal or waiver request by the beneficiary. Additionally, CMS may not continue to demand that beneficiary attorneys withhold settlement proceeds from their clients until the payment of disputed MSP reimbursement claims. Finally, interest cannot be due and owing until after the MSP reimbursement amount is determined if the beneficiary seeks a waiver or appeal of the MSP reimbursement claim.
Background
Congress enacted the MSP provisions at issue in this case in an
effort to stem the skyrocketing costs of the Medicare program. The
MSP provisions require liability and no-fault insurance to be the
primary payers for services rendered to Medicare beneficiaries, and
the Medicare program to provide benefits only as a secondary payer,
thereby ensuring that Medicare does not pay if a primary payer is
responsible for the cost of medical services received as a result
of an injury. However, the MSP provisions require Medicare to make
a conditional payment for care when a primary insurer does not pay
promptly.
In Haro v. Sebelius, the plaintiffs were Medicare
beneficiaries [and an attorney representing beneficiaries] (the
"Plaintiffs") who were injured, received medical
services, which were conditionally paid for by Medicare, and then
received settlement proceeds from a primary payer, i.e. a liability
insurance company. Subsequently, the Plaintiffs were informed by
CMS through a demand letter of a reimbursement claim, which each
Plaintiff disputed. The demand letters informed the Plaintiffs that
the reimbursement claims were required to be paid within 60 days or
interest would begin to accrue and collection actions could be
initiated. The Plaintiffs' attorneys were also notified that
Medicare's claim must be paid up front out of settlement
proceeds before any distribution occurs. Plaintiffs filed suit
individually and on behalf of a class of persons similarly
situated. By way of this Order, the Court certified the class,
which is defined as "persons who are or will be subject to MSP
recovery, and from whom [CMS] has demanded or will demand payment
of MSP claims before there have been determinations of the correct
amounts through the waiver or appeal process."
Rationale
While the MSP provisions require a beneficiary to reimburse CMS
within 60 days of receiving payment from a primary payer, there is
no authorization for CMS's position to require pre-payment of a
MSP reimbursement claim where a beneficiary has appealed or
requested a waiver before the correct amount is determined. The MSP
provisions provide that CMS may begin to charge interest on the
amount of reimbursement if payment is not received within 60 days
from a primary payer. If a primary payer's reimbursement is not
made within 60 days, CMS may bring an action for double damages
under 42 U.S.C. § 1395y(b)(2)(B)(iii), (3)(A). Upon judgment
or settlement, a beneficiary is positioned differently. A
beneficiary may request a waiver or appeal the amount of the
reimbursement claim. Since a beneficiary may request a waiver of
the reimbursement requirement and/or dispute the amount of a
reimbursement claim by administrative review and appeal, the timing
of when interest may begin to accrue for a beneficiary who requests
a waiver or appeals is ambiguous.
The MSP provisions do not expressly suspend collection activities
or interest accrual during the waiver and review period. But, as
admitted in a previous court filing in this case, it is undisputed
that CMS may not refund for overpayment of interest. If CMS began
charging and collecting interest on the disputed balance remaining
after 60 days, prior to the resolution of the disputed
reimbursement claim, it would violate federal
regulations2. When a beneficiary seeks a waiver or
appeal of the MSP reimbursement claim, interest cannot be due and
owing until the MSP reimbursement amount is determined.
The Court held that CMS's application of the 60-day
reimbursement requirement to support immediate collection
activities against beneficiaries with unresolved waiver requests or
appeals to be inconsistent with the statutory scheme providing for
waiver and appeal rights. The Court opined that CMS's
interpretation was impermissible because it unnecessarily chilled a
beneficiary's right to request a waiver or to dispute the
amount of a reimbursement claim on appeal. It also reached beyond
the fiscal objectives behind the 60-day reimbursement
provision.
The Court further noted that the MSP provisions never expressly
made attorneys responsible for reimbursement as an entity that
receives payment from a primary payer. Thus, CMS may not preclude
beneficiaries' attorneys from disbursing undisputed portions of
settlement proceeds to their beneficiary clients.
It is clear that the challenged policy – the collection
of reimbursement payments prior to resolution of waiver requests
and appeals – applies across the board to Medicare
beneficiaries who are, or will be, the subject of MSP reimbursement
claims before resolution of waiver requests or appeal process.
Footnotes
1 4:09-cv-00134-DCB, ECF Doc. 79 (D. Ariz. May 9, 2011). Herein, the Defendant is referred to as "CMS."
2 If a statute does not prohibit collection activity pending consideration of the request for a waiver or administrative review, [CMS] may use discretion, but ordinarily will suspend collection upon a request for waiver or review if [CMS] is prohibited by statute or regulation from issuing a refund of amounts collected prior to agency consideration of the [beneficiary's] request. 45 C.F.R. § 30.29(c).
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