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Over the last couple weeks, members of the defense and plaintiff bar have been discussing the practical implications of U.S. v Stricker (E.D. N.D. Ala. 2009) (No. CV-09-PT-2423-E) in future mass tort settlement programs. In Stricker (filed in December, 2009), the United States government filed a case in U.S. District Court to recover conditional payments and double damages plus interest under the Medicare Secondary Payer Act (42 USC §1395(b)(2)) (“MSP Act”). Though the U.S. has brought previous actions against claimants and their attorneys to recover conditional payments (see, for example, U.S. v. Harris, 2009 WL 891931 (N.D. W.Va.)), this appears to be the first case in which the government seeks recovery from an insurance carrier of funds paid as settlement proceeds in a mass tort liability settlement. The parties named in the suit include claimants’ counsel, insurers and corporate defendants.
In light of Stricker and the new Medicare, Medicaid, and SCHIP Extension Act (MMSEA) reporting requirements (discussed briefly below), the Department of Justice is perhaps now signaling a trend. Specifically, the new MMSEA legislation reflects a more direct path to recovery which focuses upon the source of funds - defendants and their insurers. Further, Stricker perhaps reflects the DOJ intends to more broadly enforce new and existing legislation against all parties, including plaintiffs, defendants, and insurers.
While the Stricker fact pattern raises several concerns, two important points to remember are:
1) the approach utilized in most high-visibility national settlement programs over the last several years (i.e. the Garretson Resolution Group’s (GRG) court appointment as Lien Resolution Administrator and implementation of our protocols) ensures that these issues are efficiently and effectively addressed; and,
2) our group can provide sample language for Term Sheets or Master Settlement Agreements as well as proven procedures to proactively address Medicare (and other healthcare lien) compliance issues.
Without question, defendants participating in future mass tort or class action settlement programs will have heightened concerns about Medicare compliance in light of this recent complaint, especially when coupled with new MMSEA “settlement reporting” requirements taking effect the first quarter of 2010. Against this backdrop, I have summarized the Stricker complaint as well as a blueprint for proactively addressing the parties’ obligations:
Synopsis of U.S. v. Stricker, et al.
In its complaint, the DOJ alleges that the named parties were responsible under the MSP Act and applicable federal regulations (42 CFR §411.24, etc.) to reimburse Medicare for conditional payments made on behalf of settlement claimants for medical items and services rendered for injury-related care. The complaint alleges that the named parties failed to reimburse Medicare for conditional payments made. Within the complaint, the DOJ seeks reimbursement against the named parties for conditional payments made as well as double damages for any conditional payments owed.
The facts demonstrate that the defendants paid out settlement proceeds to the plaintiffs, and the insurance carriers paid the defendants. According to the complaint, it does not matter that the defendants paid out the settlement proceeds to the plaintiffs, because the DOJ claims 42 CFR §411.24(i) allows Medicare to seek payment from the liability insurance carrier regardless of whether payment has already been made to the Medicare beneficiary.
This action is an example of what may happen when settling parties fail to adequately address Medicare’s reimbursement interests from date of injury to date of settlement. When the complaint first came out, some commentators misinterpreted the complaint as being related to the parties’ failure to “set aside” settlement proceeds for future Medicare expenditures (i.e. Medicare Set Asides). Nothing in the complaint implies that action has anything to do with a failure to provide for future Medicare payments or “set asides”; rather, the complaint is limited only to the parties’ failure to address Medicare reimbursement claim for injury related care from date of injury to date of settlement. To the extent that “future payments” are referenced in the complaint, they relate to additional payments (to claimants and their attorneys) to be made as part of the settlement program.
Though this action may give defendants greater reason to pause prior to authorizing disbursement of settlement proceeds, this situation may be easily avoided by understanding the importance of instituting a formalized and systematic compliance program designed to properly consider Medicare’s interests at the time of settlement.
A Formalized Approach to Medicare Compliance in Mass Tort Settlement Programs
In recent national settlement programs such as Zyprexa, Vioxx, Heart Devices (Guidant and Medtronic), Gadolinium, and Ortho Evra, the court and/or settling parties appointed The Garretson Group Resolution Group (“GRG”) as the Lien Resolution Administrator. As such, GRG worked hand-in-glove with both defense and plaintiff counsel when designing the compliance program for each settlement, and we were ultimately charged with the following tasks:
• Compliance: helping ensure third party reimbursement interests – such as Medicare reimbursement claims – were resolved according to the terms of the Master Settlement Agreement / Term Sheet, as well as applicable federal and state law prior to disbursement;
• Efficiency: designing resolution strategies to avoid the time delays and costs associated with traditional “one-at-a-time” resolution efforts;
• Uniformity: helping ensure that similarly-situated claimants achieve similar and fair outcomes;
• Assurance: ensuring penalties were not levied against any party as a direct result of improperly considering the agencies’ reimbursement interests, and that future healthcare benefits were not to be denied to claimants; and,
• Reporting: keeping the settling parties (and court when applicable) informed with regular status updates throughout the program.
With respect to Medicare, in all the above-referenced settlement programs the fact pattern in Stricker was avoided by the Lien Resolution Administrator employing a two-step process:
Phase 1: Verification
As the court-appointed Lien Resolution Administrator, GRG directly coordinated with Medicare to verify which claimants were/are recipients of federal Medicare (Part A and B) benefits. The Stricker complaint provides that the settling parties knew or should have known that one or more of the plaintiffs were Medicare beneficiaries on whose behalf reimbursement rights extended to the United States. Phase 1 of our process ensures that Medicare beneficiaries are identified.
Phase 2: Resolution
In each of these recent settlement programs, once GRG identified which of the claimants were/are beneficiaries we applied our resolution protocols with the Medicare agency to satisfy all reimbursement obligations. More specifically, we employed our “global” resolution methodology to settle claims in sub-groups of similar “claim profiles” as opposed to settling each claim individually. GRG created a formula to determine the appropriate reimbursement amount to satisfy Medicare’s interest in all settling claims. As Lien Resolution Administrator, our methodology allowed us either to:
i) identify a fair and equitable reimbursement amount for each injury category to be deducted from each Medicare-entitled claimant’s settlement (thereby avoiding the time and expense of auditing payment histories consisting of hundreds of pages for each entitled claimant), or
ii) propose a true global reimbursement that came “off the top” of the total settlement fund established by the defendant as an alternative to reimbursement directly affecting each beneficiary’s settlement (e.g., “off the top” of any fund established by the defendant to resolve all eligible cases as opposed to tying reimbursement to each individual file).
In addition to Medicare claim reimbursement compliance/resolution services described above, as the appointed Administrator, GRG assisted (or is assisting) the parties in fulfilling the settlement reporting duties associated with Section 111 of the Medicare, Medicaid and SCHIP Extension Act of 2007 (MMSEA). This statutory amendment poses requirements for all Responsible Reporting Entities (RRE) to report to the Secretary of Health and Human Services all settlement activity involving a Medicare beneficiary. RREs have been defined as liability insurers (including self-insured entities), no fault insurers and workers’ compensation insurers. RREs are charged with determining the Medicare entitlement status of all claimants and then reporting pre-determined information about those claims. This is a natural extension to the “Phase 1: Verification” step described above.
Most of the product manufacturers involved in current settlement programs in which the Garretson Group is serving as Lien Resolution Administrator have appointed GRG as the “agent" for such reporting obligations specifically tied to the aggregate settlement. Our proprietary system for communicating settlements with Medicare – Medicare Compliance Connection – has saved the defendants the hours of sorting through these new MMSEA reporting requirements and ensured all reporting is aligned with the aforementioned resolution program.
The Garretson Resolution Group, in its capacity as serving as the first neutral Lien Resolution Administrator over eight years ago, pioneered this lien resolution process, whereby health care compliance is made a part of a formalized resolution methodology for mass tort settlement programs. As a result, GRG has unmatched experience in this field. Further, our work has been highly regarded by the judiciary in the above-listed programs. With regards to the success of the global resolution methodology as applied to over 20,000 claims in the recent Zyprexa MDL 1596 settlement, presiding Judge Jack B. Weinstein of the Eastern District of New York said, “the settlement techniques utilized in the instant litigation may provide a model for handling Medicare and Medicaid in future mass actions on a uniform, national basis.” Similarly, in the Vioxx Products Liability Litigation MDL 1657-L), Judge Eldon E. Fallon remarked in speaking about GRG’s global resolution program, “I think it’s a win/win ….I think when you look at it globally, efficiency and fairness come to fore, and this is one of the ways that we can deal with some of these complex things, such as liens.” Perhaps more importantly, we have served the parties and the process in an efficient and cost-effective manner.
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