CIGA Update: California District Court Rules CMS’ Interpretation of the MSP for Conditional Payments is Unlawful

The California Insurance Guaranty Association (CIGA) is California’s largest workers’ compensation provider as the insurer of last resort for employers who would otherwise not be able to afford the mandatory coverage.  Because it operates for all intents and purposes as an adverse risk pool, it must exercise care in payments it makes for worker’s compensation claims that result.  Consequently, when faced with recent conditional payment demands from the Centers for Medicare & Medicaid Services (CMS) recovery contractors CIGA felt compelled to respond where it found within these demands treatment for unrelated care based on ICD codes.  CIGA had no choice but to dispute those charges, because if left undisputed, it would have exposed CIGA to payments for care it would not otherwise have paid for but for the claimant being a Medicare beneficiary.

The case made its way through administrative hearings before it went to the Courts, which is a requirement of jurisdiction against CMS.  CIGA did not fare well initially, but at the District court level finally prevailed.  The case, CIGA v. Burwell, was a unique one in that it challenged groupings of ICD codes associated with a single conditional payment record, contained within a conditional payment demand.  CIGA desired, and received a ruling that the CMS recovery contractor must remove unrelated ICD codes from the group, along with the value of the charged service.  In other words, CMS must apportion the single charge to related injury treatment.  CIGA won and it was determined that Medicare was not entitled to reimbursement of the codes unrelated to the accident. 

Following the ruling that was issued this past January, the parties were required to submit briefing on what relief should be awarded to CIGA. Two specific issues were addressed:   1) CIGA is entitled to an order vacating and setting aside the three reimbursement demands at issue in the lawsuit; and 2) CIGA is entitled to a judicial declaration that the Center for Medicare and Medicaid Services’ (CMS) interpretation of the Medicare Secondary Payer statute (MSP) with respect to reimbursement of conditional payments is unlawful. CIGA won the first issue, but the Court declined to enjoin CMS from continuing its billing and reimbursement practices at this time.  This decision now titled CIGA v. Price (due to the change in HHS Secretaries since the January decision), can be found at 2017 U.S. Dist. LEXIS 67589 (May 3, 2017).

The Court’s reasoning to why it would not grant CIGA the requested relief for the second issue was one of self-preservation for the Court’s and deference to the Agency.  The Court was not in any position to properly evaluate CMS’ reimbursement processes, or CMS’ general administration of the MSP and the MSP Act.  The intricacies of reimbursement and the manner in which MSP systems work may have led to unintended consequences harmful to the Agency that could substantially disrupt CMS operations, because CIGA and other parties already have remedies in place to correct such errors.  However, the Court also felt that issuing the injunction would inject the Court into virtually all future reimbursement disputes between CIGA and CMS, for any arguable violation of the injunction would need to be resolved by the Courts rather than the administrative process, which would “create a procedural nightmare.”

Commentary: While this decision falls short of an injunction to stop CMS from pursuing these unlawful reimbursement practices in the future, the decision is still extraordinarily helpful in that a finding was made that CMS’ recovery practices are unlawful. Essentially, this decision supports a primary plan’s ability to dispute with CMS that the pursuit of unrelated charges, simply because they are bundled, is an unlawful practice under the Medicare Secondary Payer Act.

Keep in mind this is a District Court decision, and does not apply to the entirety of the 9^th Circuit.  However, it is strong persuasive authority to other Courts, and this decision has already had a positive impact upon CMS’ recovery practices. Franco Signor has had great success in disputes with CMS wherein CMS has acknowledged the principles determined in CIGA in just the past few months and removed unrelated charges accordingly. As such, this has resulted in substantial savings for our clients. We applaud CMS for already aligning with the principles decided in the CIGA case and withdrawing recovery for payments in which Medicare should be primary. 

About the Author

Heather Schwartz Sanderson, Esq., MSCC, CHPE, CLMP, CMSP

Heather is Chief Legal Officer for Franco Signor LLC, the nation's compliance authority for Medicare Secondary Payer (MSP) matters. She has lectured on MSP compliance to the workers' compensation and liability insurance communities at conferences, associations, and individual offices nationwide. She is a regularly published author on court decisions and legislative reforms involving Medicare Set-Asides, conditional payments, and Mandatory Insurer Reporting issues. Understanding that compliance with the Medicare Secondary Payer Act can be at times complex and frustrating for those that handle claims with Medicare beneficiaries, Heather's goal is to speak and write with the primary goal being simple and understandable solutions to compliance. 

Heather can be reached at Heather.Sanderson@francosignor.com
Franco Signor's Blog can be found at: http://www.francosignor.com/msp-blog/

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