In Haro v. Sebelius,1 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.
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."
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 regulations.2 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.
For more information, please contact Kim Harvey Looney, Seema Kanwar, Michael Bracken or any member of Waller Lansden's Healthcare Department at 800-487-6380.
4:09-cv-00134-DCB, ECF Doc. 79 (D. Ariz. May 9, 2011). Herein, the Defendant is referred to as "CMS."
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).
The opinions expressed in this bulletin are intended for general guidance only. They are not intended as recommendations for specific situations. As always, readers should consult a qualified attorney for specific legal guidance.