Avoid Unexpected, Duplicate Medicare Files Created by Section 111 Insurer Reporting in Medical Malpractice Cases

By: Yeganeh Gibson, Esq., CMSP  | Lead Lien Attorney, Precision Resolution, LLC  |  Click to Email Yeganeh

At Precision Resolution, we often see medical malpractice cases come our way where Plaintiff’s counsel has already reported a settlement to Medicare and received a closure letter, only to be surprised to learn that a new Medicare file has been opened upon the insurer’s mandatory Section 111 reporting, with a significant increase in the Medicare payments.

In one such case, Plaintiff, who had been suffering from hypertension and kidney disease for years, had an MRI of the kidneys in 2010. While a small mass was identified in his right kidney, it was dismissed as benign. Plaintiff continued to treat his kidney disease. Several years later, in 2015, it was discovered that the mass had actually been cancerous. Plaintiff asserted a medical malpractice action against the defendant-doctor for failure to timely diagnose and treat the kidney cancer in 2010.

Plaintiff’s attorney proceeded to open a file with Medicare using the date of the cancer diagnosis–2015. No conditional payments were identified by Medicare and the file was closed. However, a few months later, Medicare issued a new letter with a new date of injury: plaintiff’s first encounter with the defendant-doctor in 2010. The insurance carrier had reported this case under Section 111. Medicare was seeking over $145,000 in conditional payments for the kidney under this new file, including treatment for end-stage renal disease and kidney transplant surgery.

After a thorough analysis of the medical records, expert reports, and review of the individual conditional payments, Precision’s attorneys developed substantial arguments that demonstrated the conditional payments were unrelated. Medicare agreed and reduced the file to zero.

Best Practices Tip: This scenario may be prevented by providing Medicare with the proper date of incident. At Precision Resolution, we ensure that your case has the proper Medicare date of incident. We monitor and remove all unrelated charges, so that the risk-of-loss is not borne by the Plaintiff and counsel after settlement – and we take care of any duplicate files opened under Section 111 reporting.

FEHB Plan Lien Reduction of Nearly $200,000 & Securing Continuation of Coverage for the Plaintiff

By: Yeganeh Gibson, Esq., CMSP  | Lead Lien Attorney, Precision Resolution, LLC  |  Click to Email Yeganeh

In this case, the available policy limit was only $1,000,000. There were three claims asserted under a Federal Employee Health Benefit (“FEHB”) Plan, which totaled approximately $240,000. The plaintiff required future coverage under the Plan, including several future surgeries and ongoing therapy.

Although the plaintiff had no issue securing the full policy limit, the large purported FEHB lien overshadowed the case and prevented settlement.

The plaintiff’s personal injury attorney reached out to Precision Resolution for assistance in resolving the FEHB claim. We carefully reviewed the FEHB Plan language and developed factual and legal arguments, while stressing the severity of the plaintiff’s injury and his age.

The plaintiff was only 15 years old on the date of injury. He had a severe injury involving a crushed hand and forearm. The plaintiff’s arm got caught in construction equipment while he was helping the defendant on his farm. For the challenge, we scrutinized the plan language that seemed to be in our favor and applied our interpretation of the language to our argument.  We also relied on input from Precision’s nurse paralegal team who added context regarding the severity of the injuries and the future treatment that would be needed.

Precision Resolution was successful in the end, reducing the liens by nearly $200,000.00.

Another interesting aspect of this case was the fact that there were three FEHB plans involved. It turned out that initially the plaintiff was admitted to the hospital near his residence. However, because the facility didn’t have the means to treat him properly, they flew him out to another facility in a neighboring state. He then came back to his state of permanent residence once he got better.

Since FEHB has contracts in different territories, different plans administered the benefits in each territory, hence the three separate plans that were involved.

Further, we secured agreements with the Plan that coverage would continue for the plaintiff uninterrupted, and that the Plan would not seek reimbursement for any future incident-related medical bills.

Medicare Beneficiary Plaintiff’s Lawsuit vs. Liability Carrier for Failure to Reimburse Medicare Survives Motion to Dismiss

By: Paul R. Loudenslager, Esq., MSCC  | Senior Lien Counsel, Precision Resolution, LLC  |  Click to Email Paul

On June 30, 2020, the United States District Court for the District of New Jersey denied a liability carrier’s motion to dismiss a Medicare beneficiary’s case under the Private Cause of Action provision of the Medicare Secondary Payer Statute, 42 U.S.C. Section 1395y(b)(3)(A). Osterbye v. United States, 2020 U.S. Dist. LEXIS 116591, 2020 WL 3546869 (D. N.J. June 30, 2020). Please note that not all details noted below are included in the court’s decision; but such details were extracted from the parties’ motion papers and other submissions to the court.

In 2009, Anna May Osterbye was injured in a fire at her home. Ms. Osterbye alleged that the fire was caused by the negligence of a plumbing contractor. The contractor’s liability insurance carrier was Selective Insurance Company (hereinafter referred to as “Selective” or “liability carrier”). The claim against the contractor was settled at mediation for a lump sum of $740,000. The settlement amount was “based on known damages, including $13,562.90 that Medicare estimated it would seek for reimbursement of conditional payments.” Osterbye, 2020 U.S. Dist. LEXIS at *2.

On April 29, 2013, Plaintiff executed a release which released any and all claims and rights which Plaintiffs had or may have against the plumbing contractor. In the release, Plaintiff also agreed to “satisfy all [Medicare] liens . . . and hereby agrees to indemnify all the above named Releasees and their respective insurance carriers against any further liability for the satisfaction of any such liens.”

After the agreement was executed, Plaintiff’s counsel submitted notice of settlement to Medicare. On June 4, 2013, the Medicare contractor (the BCRC) issued a final demand letter for an amount of $118,071.28; obviously, much higher than the $13,562.90 quoted on the conditional payment letter obtained prior to settlement.

Plaintiff appealed Medicare’s right of reimbursement through the administrative appeals process. The last level of administrative appeal—an unfavorable decision by the Medicare Appeals Council—took four years from the date of the Administrative Law Judge decision.   

After exhausting the administrative remedies available, on August 28, 2019, Plaintiff brought an action in federal court versus the United States (Medicare); but, also against Selective as a “primary plan” under the Medicare Secondary Payer Act’s private cause of action provision at 42 U.S.C. Section 1395y(b)(3)(A).

At some point during the proceedings, Plaintiff and the United States stipulated to the dismissal of the action against the United States with prejudice, leaving Selective, the defendant’s liability carrier on the underlying injury settlement, as the only remaining defendant.

Selective filed a motion to dismiss based upon a statute of limitations defense, and that the release in the underlying injury litigation precluded the carrier’s responsibility for any Medicare lien.

The motion failed on both issues. The court reasoned that the statute of limitations had not expired, because Plaintiff’s claims arose under the Medicare Act, thus requiring exhaustion of administrative remedies before filing suit.

Likewise, the court here left open the possibility that the underlying release could be nullified based upon a theory of mutual mistake of fact.  The mistake of fact would be Medicare’s reimbursement amount.

As of July 2020, the case is noted as having been voluntarily dismissed.

While the case did not last long after the court’s decision on June 30, it is instructive nonetheless. It raises several unanswered questions and provides some important points to consider regarding the obligations of plaintiffs, attorneys, and carriers with respect to Medicare.

While the private cause of action was ruled timely with respect to a statute of limitations defense, the substantive question of whether the plaintiff could have proceeded with this case against the defendant’s liability carrier remains unanswered. The United States had been dismissed from the action, leaving the plaintiff and the carrier to battle over the responsibility to reimburse Medicare.

Moreover, there is a substantial question as to whether the plaintiff could continue this action after agreeing in the release to satisfy all Medicare liens and indemnify the defendant and the defendant’s carrier from any liability to satisfy the lien.

Finally, can the release itself survive? The possibility is noted by the court in this case that the release itself could potentially be undone based on the parties’ mutual mistake. If that is the case, the Medicare reimbursement obligation would likely disappear. The obligation to reimburse Medicare exists only when there is a settlement. The original parties would be left to negotiate once more based on the proper Medicare reimbursement amount.

Important Points to Consider

The opinion states that Medicare was paid the original amount of $13,562.90. There is no mention of the unpaid balance in excess of $100,000. It is important to remember that interest begins to accrue on any unpaid portion of a demand 60 days after the issuance of the final demand letter, even if it is in the administrative appeals process. Here, six years after the date of the original demand, at a rate of approximately 10%, significant interest charges would have accrued on the unpaid balance.

It is unfortunate that this situation continues to occur. But it is still the case that Medicare, for whatever reason, will exclude related medical treatment costs on a conditional payment letter, only to have those claims appear for the first time on a final demand letter, after the case has settled.

We call this situation the “Surprise Demand.” While unfortunate, it is avoidable. Our attorneys at Precision Resolution make it a point to mention this issue at every liens seminar or CLE at which we are invited to speak. If the conditional payment amount seems low in light of the actual medical treatment that a plaintiff has received, and if you see that there is related medical treatment that is missing from the Payment Summary Form, more investigation is required.

It is likely that any “missing” charges will suddenly appear for the first time on a final demand letter. In order to avoid the Surprise Demand, it is sometimes necessary to “dispute” Medicare’s conditional payments so that those missing charges will actually appear on the conditional payment letter. It seems counterintuitive, but sometimes the goal is to increase the Medicare payment amount in an effort to get a real and accurate number, so that you can properly negotiate a settlement.

The worst-case scenario is the Osterbye case from 2020, taking six years after a settlement to get in front of a federal court judge to argue as to who is responsible for Medicare’s reimbursement.