Rhode Island District Court Places Responsible Primary Payer Between a Rock and MSP
Heather Sanderson
April 29, 2020

A recent decision out of Rhode Island demonstrates a common dilemma wherein a Non-Group Health Plan (workers’ compensation, liability, or no-fault insurance carrier or self-insured) Responsible Reporting Entity (RRE) is stuck between a rock and a hard place (Medicare Secondary Payer reporting requirements). It is a commonplace occurrence, particularly in general liability claims, that some Medicare beneficiary claimants are reluctant to provide their social security number (SSN) to the primary plan, most likely for fear of identity theft or other improper use of their SSN. This issue is not as common in workers’ compensation claims, as the employer typically already has their employee’s SSN.

But, the MSP/MMSEA Section 111 law requires primary plans to collect injured parties’ first name, last name, date of birth, gender, and social security number (SSN) in order to properly query the injured party’s Medicare status and satisfy MMSEA Section 111 Medicare reporting requirements. This leaves the primary plan in a tough spot as primary plan RREs are left to wonder whether they will be subject to Civil Monetary Penalties (CMPs) later by CMS if it is later determined that the RRE did not establish enough good faith efforts to obtain the claimant’s SSN.

Taking a look at the recent case at hand out of Rhode Island illustrates how this often plays out. In Ruiz v. R.I., 2020 U.S. Dist. LEXIS 73448 (April 27, 2020), Plaintiff Ruiz (hereinafter referred to as “Plaintiff”) entered into a binding settlement agreement with the State of Rhode Island and others (hereinafter referred to as “State”) based upon a 2013 incident, wherein the Plaintiff alleged excessive force during arrest and wrongful detention resulting in serious injuries requiring medical treatment in a hospital. The State denied liability but agreed to settle the case. In the settlement agreement executed on June 7, 2019 for $55,000, Plaintiff acknowledged that to the extent he was a Medicare beneficiary, it was his responsibility to resolve any Medicare claim.

However, during the settlement negotiations, neither party discussed how any possible Medicare conditional payments would be handled. Further, Plaintiff did not advise the State that he would refuse to supply his SSN (or any part of it) so that the State could ascertain whether Plaintiff was a Medicare beneficiary to comply with MMSEA Section 111 requirements. But on the other hand, the State never advised Plaintiff that the submission of his SSN, or any part of it, would be required. Neither party brought up this issue prior finalizing the settlement.

It was not until after the settlement was finalized as the parties worked to implement the settlement agreement that the State consistently requested Plaintiff’s SSN. After Plaintiff finally clearly articulated his position that he would never supply his SSN, or any part of it, the State refused to pay the settlement proceeds and the parties turned to the Court for assistance in getting the settlement agreement consummated.

The Court conducted a deep-dive analysis into MMSEA Reporting Requirements, as well as the Strengthening Medicare and Repaying Taxpayers Act of 2013 (SMART Act) which modified some elements of the original MMSEA Section 111 law. The Court acknowledged three interesting principles out of the SMART Act pertinent to this issue: 1) “Since 2013, HHS has struggled to comply with the SMART Act,” 2) Due to the SMART Act, a September 10, 2014 CMS Alert announced the modification of the reporting requirement to mandate that the required query could now be conducted with at least the last 5 digits of the SSN if the primary payer is unable to obtain the full SSN; and 3) CMS must provide safe harbors from CMPs if a primary plan documents and can demonstrate their good faith efforts to obtain the full or partial SSN.

The Court further noted that this notion of protection by demonstration of good faith efforts to exempt RREs for CMPS for noncompliance was referenced in a November 25, 2014 CMS Alert, as well as the recent Proposed Rule published on February 18, 2020 (with public comment period closing April 20, 2020). For our recent blog on the Proposed Rule, click here.

Despite the SMART Act alleviating the Plaintiff to need to provide his full SSN to the State, the Plaintiff nonetheless continued to refuse to even provide the last 5 digits of his SSN and the parties were at an impasse. At this juncture, the Court had two determinations to make: 1) Had the State nonetheless complied with MMSEA Section 111 reporting obligations by making good faith efforts to obtain Plaintiff’s full or partial SSN? and 2) Should Plaintiff’s motion for punitive damages, interest, and attorneys’ fees be granted due to the State’s failure to pay the settlement within 30 days of the execution of the settlement agreement?

On the first issue, the Court ruled that the State had made “extraordinary efforts to comply” with MMSEA Reporting obligations, and further that the Plaintiff’s refusal to provide either his full or last 5 of his SSN was well established. The Court further noted that the State’s actions “fit neatly into the not-yet-established safe harbor limned by the Proposed Rule, so that the penalties and sanctions for non-compliance, should that somehow be suggested, may not be imposed.” On the attorneys’ fees/sanctions/punitive damages issue, the Court found that the State’s conduct was impeccable, fully consistent with the express and implied terms of the settlement agreement, and that the State had done nothing to approach a standard of bad faith for sanctions to be seriously considered. Further, the State has been put to extreme expense as a result of Plaintiff’s refusal to disclose any part of his SSN, which is in breach of his implied duty of good faith and fair dealing.

Commentary: This case demonstrates the important lesson that determining a claimant’s Medicare status should be conducted at the outset of a claim, far in advance of settlement negotiations. Had the State requested the claimant’s SSN prior to the finalization of settlement, all this protracted litigation could have been avoided. It is also odd that the State arrested Plaintiff but did not have his SSN from the arrest. Further, the State’s allowance of the Claimant to handle any Medicare conditional payments was a perilous settlement strategy, in that if Medicare had made payments relative to the claim, the State could still be held responsible (and potentially subject to double damages) if the Plaintiff did not reimburse Medicare.

What is also interesting is that the Court looked to the Proposed Rule on Section 111 in making the determination that the State had met the level of “good faith efforts” to determine Plaintiff’s Medicare status by making multiple attempts to request Plaintiff’s full and partial SSN. However, this Proposed Rule is not yet final law. Further, it is unclear whether a Court’s determination on whether an RRE has complied with MMSEA Section 111 requirements would be binding upon CMS.

In summary, seeking a claimant’s Medicare status at the outset of the claim prior to settlement is highly recommended for RREs, and the Final Rule on Section 111 CMPs will provide greater guidance on what level of documentation is required to document these good efforts, which we expect to be released this summer. There are also solutions to alleviate the SSN issue that Franco Signor can help RREs with through our proprietary SSN Look-Up Tool. Reach out to us at engage@francosignor.com if you would like to learn more about this solution. We will keep our readers posted on the Section 111 NPRM, and Franco Signor has submitted our comments to CMS prior to the April 20, 2020 due date.