Is there anything in product liability litigation as boring as Medicare liens? Putting aside document privilege reviews, or drafting answers to form complaints, that is. Some substantive area of the law?
Substantively, we’d be hard-pressed to think of anything. Back in the day – when such arguments were still possible – we got a bit of a rush arguing (and winning) the proposition that the government had no Medicare as Secondary Payer (Payor? We’re still not sure which is right.) (“MSP”) liens against manufacturer defendants. See Thompson v. Goetzmann, 337 F.3d 489 (5th Cir. 2002). But the next year, in a stealth tax increase snuck into the bill that created the Medicare Drug Benefit, Congress enacted changes that allowed HHS to hit up tort defendants for Medicare liens once cases settled or went to adverse verdict:
On December 8, 2003, however, the President signed into law amendments to MSP designed to resolve this dispute. See Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Pub.L. No. 108-173, § 301, 117 Stat.2066, 2221 (2003) (hereinafter “MMA”). The amendments to MSP enacted in MMA removed the two elements that had resulted in these conflicting interpretations, i.e., the word “promptly” in subparagraph (A)(ii) and the cross-reference to subparagraph (A) in subparagraph (B)(i). Compare 42 U.S.C. § 1395y(b)(2)(A)(ii), (B)(i) (2000) with 42 U.S.C. § 1395y(b)(2)(A)(ii), (B)(i)-(ii).
Brown v. Thompson, 374 F.3d 253, 258 (4th Cir. 2004). Pretty boring, right? That goes for just about any law with more than two levels of parenthetical subparts.
In any event, the upshot of it all was that, if a product liability defendant paid a Medicare-recipient plaintiff any money (whether by settlement or by satisfying a judgment) and that plainitiff stiffed Medicare, the government could collect from the defendant – and more than once, since there are double-damages penalty provisions in the MSP.
We’re here to tell you that it’s only going to get worse.
And it starts tomorrow.
In 2007, Congress passed another legislative mouthful, called the Medicare, Medicaid and SCHIP Extension Act of 2007 (“MMSEA”). Under this law, by July 1, 2009, tort defendants (who since 2003 have been self-insured “plans” under the MSP) will also be “responsible reporting entities” (“RREs”) required to register and to provide information about “plan participants” – read, plaintiffs. That’s mostly in §111 of MMSEA, which has been summarized as follows:
Requires any entity serving as an insurer. . .as well as the administrator or fiduciary of any self-insured, self-administered group health plan [that’s tort defendants, folks], to: (1) secure from. . .plan participants information [that’s the plaintiffs] necessary to identifying situations where the group health plan is or has been a primary plan to the Medicare program; and (2) submit such information to the Secretary.
Requires an applicable plan to determine: (1) whether a claimant is entitled to Medicare benefits on any basis; and (2) submit specified information about any entitled claimant to the Secretary. [this means our clients have to file reports]
Establishes civil money penalties for enforcement. [this means they could get fined]
Congressional Research Service Summary of MMSEA §111. For true masochists, the actual text of this section is found at 42 U.S.C. §1395y(b)(7) (for those of you with Westlaw/Lexis), or is available here uncodified.
So what does all this gobbledygook mean? It means that, starting in July, our clients are going to have to: (1) get from plaintiffs in pending litigation (presumably through releases, as set out below) information about their Medicare status, and (2) report that information to the government. 42 U.S.C. §1395y(b)(8)(A). And if our clients don’t do that, they can get fined $1000 a day per plaintiff – above and beyond any and all other MSP penalties. 42 U.S.C. §1395y(b)(7)(B)(i).
So how does one go about determining the Medicare eligibility of, say, 30,000 pharmaceutical mass tort plaintiffs? Well, the only sure way to get that information is from Medicare itself, by getting plaintiffs to sign this release or something equivalent. It’s also possible to get this information from the Centers for Medicare & Medicaid Services (“CMS”) using this release, but we understand that the CMS isn’t as accurate, and thus the client won’t be as safe.
What? You mean our clients are being required to report to the government information that they have to get from somewhere else in the government?
Why can’t one government agency just talk to the other?
Because they’re the government, and they don’t have to if they can force someone else to do it for them.
The simple fact is this: As regular practitioners of mass tort litigation on either side of the “v.” know, in case after case, the government has proven utterly incapable in practice of supporting its own demands for MSP payments with evidence of what Medicare paid to which plaintiffs for what procedures.
So in the spirit of bipartisanship, Congress and the Bush Administration agreed to make defendants do the government’s recordkeeping work for it – in return for the princely fee for such services of zero dollars and zero cents.
And our clients have to register to do this.
Registration opens tomorrow (5/1/09) and extends through May and June, 2009.
Once a defendant manufacturer has become a registered RRE, it can electronically query a Medicare database (as often as once a month) to determine if a particular plaintiff is eligible to get money from Medicare. The RRE will need either the plaintiff’s social security number of Health Insurance Claim Number and also three of the following: first initial of first name, first six letters of last name, date of birth, and gender. That’s one from column A and three from column B.
Supposedly, the government is to get back with a plaintiff-specific answer in no less than 14 days. Don’t hold your breath. For its part, HHS has promised final regulations for this reporting process by March 31, 2009, and they’re still not there. And we all know how frequently the FDA meets its nominal drug and device approval deadlines under the FDCA.
Our clients can get fined, but not Uncle Sam.
But for now, we’ll assume the government responds. What then?
Our clients have to keep track of the Medicare eligibility status for all plaintiffs in the litigation. Whenever any plaintiff receives money, through settlement or payment of a judgment, the defendant has to report that to the government. 42 U.S.C. §1395y(b)(8)(C). It doesn’t matter when the plaintiff first became eligible for Medicare – defendants are required to check not only at the beginning of the case, but to check again at the end. Failure is subject to the aforementioned fines as well as double damages and all the other sanctions of this lovely piece of legislation.
The question of what to report is more nightmarish, so much so that we’re not even going to try. Here’s a link to the HHS reporting website. We understand (we can’t register ourselves, since lawyers aren’t RREs – our clients are more or less on their own) that the CMS now has over 100 categories of information that it can demand depending on the plaintiff and the type of claim.
There’s no explicit requirement in MMSEA that a tort defendant establish a set aside account as part of a settlement – as is done in some workers compensation matters – but who knows what the future (or future regulations) might bring.
Further, the MMSEA obligation to report exists despite any denials of liability. Disclaimers do not affect our clients’ reporting requirement. Similarly a settlement disclaimer of claims for recovery of medically related special damages (the infamous “no medicals”) does not affect the reporting requirement – as long as the plaintiff included medical expenses in his/her demand in either an original or amended complaint. There are both dollar and claimant age thresholds for reporting, but they are subject to change. A lot of this stuff is discussed in the “User Guide” that CMS has published concerning §111 reporting. Read it and weep (or at least sweat bullets).
If that doesn’t put you to sleep, and give you nightmares, you can tackle the CMS overview page for reporting. As we mentioned earlier, formal regulations governing the reporting process have been promised. When they finally appear, they’ll be available here.
So what’s a defense lawyer to do? Here are some practical steps that might help: (1) the necessary plaintiff releases of Medicare information should become part of standard discovery. (2) If the plaintiff has to negotiate lien amounts with CMS, use of some sort of registry or escrow account to protect a defendant’s interests during the interim is a good idea. (3) Settlement releases should not be signed until the client checks the Medicare data base one last time. (4) Settlement releases should include a specific indemnity provision addressing MSP claims (something that we’ve been doing since 2003, but even more essential now). (5) Ideally, the plaintiff should have to provide a release signed by Medicare in favor of the client before getting any money.
And good luck. As of July 1, 2009, our clients are going to need it.