CMS Issues 12/5/1980 Exposure Screening Exception

Recently Medicare provided much-needed guidance on when and how a December 5, 1980 policy exception to reimbursement and reporting under the Medicare Secondary Payer (MSP) statute is to be applied. This Client Advisory analyzes Medicare’s most recent Alert and provides key takeaways to assist counsel for plaintiffs and defendants to ensure absolute MSP compliance when resolving their cases in 2011 and beyond.

On September 30, 2011, the Centers for Medicare & Medicaid Services (“CMS”) issued guidance intended to assist parties to better define their Medicare Secondary Payer (“MSP”) obligations where settlements, judgments, awards, or other payments involve exposure, ingestion or implant/explantations.

CMS begins the Alert by noting that it continues to follow a policy to not assert reimbursement rights where the Date of Incident (DOI) occurred before December 5, 1980, the date by which Congress extended the MSP statute, to apply to liability settlements, judgments, awards, or other payments. Where a case involves: (1) continuous exposure to a hazardous substance; (2) continuous ingestion of a substance; or (3) a ruptured implant that allegedly led to toxic exposure, parties are to use the last date those conditions (exposure / ingestion / implantation) existed to determine whether the December 5, 1980 policy exception applies. The Alert provides three separate instances where both recovery and reporting under Section 111 of the Medicare, Medicaid and SCHIP Extension Act of 2007 (“MMSEA”) must be considered.

Both repayment and reporting must be considered where:

1. Exposure, ingestion, or the alleged effects of an implant on or after December 5, 1980 is claimed, released, or “effectively released”. A complaint alleging such exposure, ingestion, etc. meets this condition.
2. A condition of settlement, judgment, award, or other payment exists such that the claimant must have experienced a specified length of time for exposure, ingestion or implanted medical device exposure, and that time frame, when added to the DOI (first date of exposure, etc.) results in a date that is on or after December 5, 1980. A settlement requiring at least 10 years of exposure, ingestion, etc., where the date of incident is January 1, 1977 meets this condition.
3. The claimant’s exposure to, or ingestion of a substance on or after December 5, 1980 is a required element of a settlement, judgment, or other payment. This rule also applies if the settlement, judgment, or other payment depends on an implant that was never removed or was removed on or after December 5, 1980.

CMS also provided a three-part test to apply this policy exception. When ALL of the following criteria are met, Medicare will not assert a recovery claim against a liability insurance (including self-insurance) settlement, judgment, award, or other payment; and Section 111 MMSEA reporting is not required.

1. All exposure or ingestion ended, or the implant was removed before December 5, 1980; and
2. Exposure, ingestion, or an implant on or after December 5, 1980 has not been claimed and/or specifically released; and,
3. There is either (a) no release for the exposure, ingestion, or an implant on or after December 5, 1980; or (b) where there is such a release, it is a broad general release (rather than a specific release), which “effectively releases” exposure or ingestion on or after December 5, 1980. The rule also applies if the broad general release involves an implant.

To ensure this policy exception is better understood, CMS provides six different examples of situations to apply its December 5, 1980 policy to ensure proper implementation.

Takeaways

The September 30, 2011 Alert, released one day before Mandatory Insurer Reporting was to take effect for certain liability settlements, provides a clear set of rules to follow whereby parties involved in settling, paying a judgment or making some other payment to a Medicare enrolled beneficiary must address the resolution and / or reporting aspects of MSP compliance.

The key to best understanding the Alert and employing its guidance as part of your formalized approach to addressing MSP issues is to recognize that the first set of criteria on the bottom of page 1 in the CMS Alert is to be read in the disjunctive; with each clause describing a separate situation where reporting is mandatory. Whereas, for the exception to be met, the conditions listed on the top of page 2 of the CMS Alert are to be read in the conjunctive such that all three of those conditions must be met in each settlement, judgment, award, or other payment involving a Medicare enrolled beneficiary. For example, although CMS does not define the term “effectively released,” when considering the implications of the three-part test, if a settlement occurs where all exposure occurred or ingestion ended before December 5, 1980, and the second prong of the test has been met (no claim to post December 5, 1980 exposure), a broad general release that includes all claims now and in the future would technically also include claims of post December 5, 1980 exposure by virtue of its broad terms, but lacking any specific claims, releases or evidence of the existence of such exposure, the broad general release effectively releases such exposure, but does not actually release it (as would be the case with a specific release as described in the Alert).

Accordingly, the Alert distinguishes between actually releasing exposure, etc. which occurs on or after December 5, 1980, and including release language that releases the paying party from all claims, including potential post December 5, 1980 exposure, ingestion, or an implant that was not removed before the obligation trigger date of the MSP statute as applied to liability cases. Where there is no post December 5, 1980 exposure, there has been no claims made including such exposure, and there is a broad general release which has the effect of releasing all exposures, even those that are non-existent, but nevertheless, technically released due to the broad language used, the Alert clarifies that such a case is neither reimbursable nor reportable under the MSP.

Action Steps for the Parties

Consistent with our prior MSP compliance Client Advisories, when faced with how best to use this Alert to ensure absolute MSP Compliance, the parties should consider each matter separately (case by case), properly documenting their files that they:

1. Validated all exposure, ingestion, etc. ended before December 5, 1980.
2. Validated no post December 5, 1980 exposure was claimed / alleged, and / or that or no post December 5, 1980 employment years were used to qualify for payment in a settlement program or otherwise.
3. If (1) and (2) above are true, the parties should use a broad, general release. Do not use any specific release language that includes an exposure timeline that crosses the December 5, 1980 threshold because that exposure is nonexistent.

For attorneys who represent Medicare enrolled beneficiaries, this means ensuring that if there is no evidence of exposure, ingestion, or implantation/explanation on or after December 5, 1980, that any complaint filed not inadvertently include any such allegations. The parties should identify what information was pled in the original complaint, but also take into account amended complaints, as circumstance change and facts develop. If after filing a complaint, evidence is adduced that includes such an incident timeline, then reimbursement will follow under the MSP statute.

For attorneys who represent the parties making payments to Medicare enrolled beneficiaries and / or their attorneys, the key to compliance is to review your and your clients’ files to ensure that there exists no evidence that contradicts any statements made by counsel that the last date of incident (exposure, ingestion, implant / explant, etc.) occurs on or after December 5, 1980.
The CMS has given the industry an important tool that is intended to help the parties cope with the intricacies involved in certain settlements and litigations, respecting the fact that CMS has no right of recovery where the last date of incident occurs before the date the MSP statute was extended to liability-type settlements, judgments, awards, or other payments. Under the right circumstances, with the files properly documented, we now have a much better idea when and how MSP reimbursement and reporting issues need be addressed.