PAID Act Should Solve MAP Litigation, But Will Have Unintended Effects

On December 8, 2020 and December 11, 2020, the US House of Representatives and US Senate respectively passed HR 1375 and SB 1989, the Provide Accurate Information Directly Act (PAID Act) as part of HR 8900 Title III, Section 1301, Transparency of Medicare Secondary Payer Reporting Information, which President Trump signed into law on December 11, 2020.

The new law requires the Centers for Medicare & Medicaid Services (CMS) to provide information, in response to an inquiry from certain non-group health plans (liability, no-fault, and workers’ compensation insurers), as to whether the individual queried is currently or was enrolled in Medicare, Medicare Advantage, or the Medicare prescription drug benefit during the preceding three-year period.

Although aimed at providing non-group health plans (NGHP) the identity of Medicare Advantage Plans (MAPs) and Medicare Prescription Drug Plans (PDPs) (and therefore reduce or altogether extinguish the increase in Medicare Secondary Payer (MSP) Act private cause of action litigation), the law will likely create some unintended effects and consequences. We expect this as that has been the case with every statutory amendment to the MSP Act and related laws over the past fifteen (15) years. While the PAID Act is certain to provide necessary visibility to data previously overlooked, unintended effects and consequences will almost certainly arise.

The PAID Act Should Solve a Big Problem

On the one hand, the PAID Act should stem the recent tide of MSP litigation commenced by certain “downstream actors” using the MSP private cause of action provision to recover double damages from insurance carriers, self-insureds, and law firms who may not have been diligent enough in verifying, resolving, and satisfying MSP reimbursement obligations related to MAPs and PDPs. 42 U.S.C. § 1395y(b)(3). As you likely know, following the In Re: Avandia Marketing, Sales and Products Liability Litigation decision from the 3rd Circuit Court of Appeals in 2012, almost all corners of the country now provide MAPs and PDPs the same rights of recovery under the MSP Act as traditional Medicare Parts A and B fee-for-service. In re: Avandia Mktg., 685 F.3d 353 (3d Cir. 2012). As of 2020, addressing Medicare conditional payments means looking for reimbursement obligations related to Medicare Parts A, B, C, and D, not just Parts A and B. 

What made this search difficult historically with respect to MAPs and PDPs was the lack of a central data repository from which to obtain this information. CMS, who operates the MSP program, did not make that information readily available prior to the PAID Act. Recipients of a $0 conditional payment letter or $0 final demand letter from CMS (via one of its contractors, the BCRC or the CRC), typically would celebrate that result. Instead, the recipient should be hearing alarm bells. Someone paid those medical expenses. If the claimant is a Medicare beneficiary and Medicare Parts A or B did not pay anything, then who paid the bills? Usually, it’s a MAP or PDP. 

Downstream actors learned to leverage this misunderstanding to their advantage. Using the MSP private cause of action provision, these downstream actors commenced litigation nationwide against defendants of all sorts. While sometimes targeting counsel representing the Medicare beneficiary, the downstream actors primarily targeted insurance carriers and self-insured entities. Though generally unsuccessful in meeting its ultimate goal, a recent win before the 11th Circuit Court of Appeals by one of these downstream actors raised the stakes in this area. This area of litigation revealed a big problem: how can parties trying to resolve a workers’ compensation, auto, liability insurance, or no-fault insurance claim know with certainty if/which MAPs or PDPs have paid medical expenses and may assert a right of recovery under the MSP Act?

The PAID Act should solve this problem. The new law obligates CMS to respond to entitlement queries and provide the entitlement status of an individual queried to any benefits under the Medicare Act at the present time and for a 3 year period prior to the query. CMS must also disclose the specific MAP or PDP (name and address) of which the individual is/was a member. Downstream actors should no longer be able to take advantage of parties settling the types of insurance claims described above. Instead, the responsibility will fall on those settling parties to act appropriately and proactively verify, resolve, and satisfy those reimbursement obligations. With the PAID Act as the law of the land, those parties no longer have any excuses if they fall victim to downstream actors in the future.

The PAID Act Will Likely Result in Unintended Effects and Consequences

The PAID Act should certainly be characterized as a win for most stakeholders in the workers’ compensation, auto, liability insurance, and no-fault insurance settlement communities. Litigation seems certain to recede now that the PAID Act is law. However, if you believe that recent history can predict future performance, the passage of the PAID Act will result in consequences that drafters of the legislation did not intend and may not have foreseen. Why is that? Let’s examine the two most recent amendments to the MSP Act.

Approximately fifteen (15) years ago, the MSP program was in trouble. According to a 2004 GAO report, Medicare was recouping 38 cents for every $1 in conditional payments it made. That math was troubling in that it was hastening the expected bankruptcy of the Medicare Trust Funds. In response to this study, Congress approved and President George W. Bush signed into law the Medicare, Medicaid, and SCHIP Extension Act of 2007 (a/k/a MMSEA Section 111 reporting or mandatory insurer reporting (MIR)) in December 2007. With the intent of simply providing Medicare information about Medicare beneficiaries resolving certain insurance claims, that law has now given way to proposed regulations penalizing non-compliant insurance carriers and self-insureds up to $1,000 per day per file for: 1) entities that have not registered with the federal government; 2) entities who continue to provide incorrect data to CMS; and 3) entities that argue inconsistent theories when challenging conditional payments as compared to information provided to CMS through the mandatory reporting process. These developments were likely not anticipated by drafters of the original legislation.

In the wake of MIR, stakeholders wanted more change to the MSP program. Specifically, stakeholders wanted the $1,000/day penalty provisions changed and wanted the ability to obtain final reimbursement figures from CMS before agreeing to settle a case. In late 2012 and early 2013, Congress approved and President Barack Obama signed into law the Strengthening Medicare and Repaying Taxpayers (SMART) Act of 2012. 

The SMART Act provided those desired changes. It softened the mandatory $1,000/day penalty under MMSEA Section 111 to a discretionary up to $1,000/day penalty. It also provided that Medicare supply final conditional payment reimbursement information to stakeholders before they settle a case. In response to the SMART Act, Medicare finalized regulations providing stakeholders access to a web portal process that by and large is underutilized for purposes of obtaining a “final” conditional payment figure pre-settlement. It also has led Medicare to move towards finalizing the civil monetary penalty provisions of MIR to which we referred earlier. Finally, the SMART Act has now given way to not one, but two federal contractors chasing after reimbursement of conditional payments, referral of unreimbursed payments to the United States Department of the Treasury and to the United States Department of Justice. These developments were likely not anticipated by the drafters of the original legislation. 

Now comes 2020 amendments to the MSP Act by virtue of the PAID Act. What are the potential unintended consequences? They extend to parties sitting on both sides of the table. In our opinion, the unintended consequences are worse for trial attorneys than for insurance carriers and self-insureds.

For insurers and self-insureds, we anticipate that every time a payer reports for MIR purposes (ORM and TPOC), CMS will expect payers to reach out to the MAP(s) or PDP(s) identified by CMS. If payers do not reach out, then the MAPs and PDPs may request reimbursement pre-settlement (when the payer reports ORM in no-fault and workers’ compensation claims) and post-settlement (when the payer reports TPOC in liability claims). This may mean more requests for reimbursement of conditional payments directed at auto, no-fault, medical malpractice, nursing home, products, general liability, and workers’ compensation payers, but it could also mean more requests for payments from Medicare beneficiaries and their attorneys. 

For counsel representing the Medicare beneficiary, the unintended consequences run deeper. While the PAID Act has been on the radar of the insurance industry for months, the same cannot be said for trial attorneys. Even in 2020, many trial attorneys fail to understand that resolving Medicare conditional payments means more than simply asking CMS for a conditional payment letter. It’s much more complex than that. The PAID Act will directly and adversely affect trial attorneys who do not embrace immediate changes to their Medicare compliance process.

Plaintiff attorneys should immediately review their Medicare compliance protocols. Starting at intake, they should review what data is being collected by their firm and make sure they ask the right questions. It is no longer sufficient to merely ask a new client if they are on Medicare (YES/NO). You need to know more. You need to know to what parts of Medicare the new client is currently entitled. You need to know to what parts of Medicare the new client has been entitled to since the date of injury. You need to ask them about any other possible insurance they have had since the date of injury. Let’s be honest: most clients will not know they had a MAP or a PDP; they will just know they had Humana or United HealthCare. It’s your job to know the difference.

Plaintiffs counsel can expect more questions from the insurance adjustor or opposing counsel about these issues. Plaintiffs counsel can expect adjustors and opposing counsel to expect MAPS and PDPs to be put on notice before they entertain settlement talks. Plaintiffs counsel can expect adjustors and opposing counsel to raise more impediments to getting the case settled, thanks to the PAID Act.

But it’s even more than that. We expect that MAPs and PDPs will use the PAID Act to increase their MSP recovery efforts. In total, there are 3,550 MAPs in our country going into 2021, 402 or 13% more than in 2020. Most attorneys know the big ones. We expect all MAPs, big and small, to take this opportunity to increase recovery efforts under the MSP Act. For plaintiff attorneys, this means more liens, more red tape, and more impediments to settling your case and getting the money.

Conclusion

In the MSP world, rarely does the end result look like what was originally intended. Now that the PAID Act is law, we expect more of the same, despite the best of intentions from drafters at the outset. As always, I will continue to keep you updated with any regulatory changes, industry trends, and procedural or administrative requirements resulting from this latest amendment to the Medicare Secondary Payer Act. Stay tuned! 

By Rafael Gonzalez, Esq.

Rafael is a partner in Cattie & Gonzalez, PLLC, a national law firm focusing its practice on Medicare/Medicaid secondary payer compliance issues. He has over 35 years experience in the liability, no-fault, and work comp insurance industry. You can connect with him on LinkedIn, Twitter, Facebook, or reach him at rgonzalez@cattielaw.com, 844.546.3500, or www.cattielaw.com.

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