Effective April 28, 2015, Applicable Plans (Workers’ Compensation Law or Plans, Liability Insurance, No-Fault Insurance, and those who self-insure for casualty losses) will be able to appeal erroneous MSP Final Demand Letters directed by the Centers for Medicare & Medicaid Services (CMS) against these entities. This is a significant victory for such Plans and one that should be savored.

A little over 2 years ago (January 10, 2013), President Barack Obama signed the Strengthening Medicare and Repaying Taxpayer Act into law. This was the first amendment to the Medicare Secondary Payer Act (MSP) led by the industry. Included in this law was the following provision:

“The Secretary shall promulgate regulations establishing a right of appeal and appeals process, with respect to any determination under this subsection for a payment made under this title for an item or services…under which an applicable plan may appeal such determination” See 42 U.S.C. §1395y(b)(2)(B)(viii).

The language developed was intentionally broad to provide for the strongest appeal rights. It applied to any “determinations” and it applied to the entirety of the MSP law. The law authorized CMS to develop appropriate implementing regulations, but provided no time-line. Even though it took the Agency two years to develop this Final Rule, the authority of the Statute would have provided access to the Courts for Parties to redress their interests. Case law is clear that in absence of regulation implementing appeal rights, the Parties have such rights. See Bowen v. Michigan Academy of Family Physicians, 476 U.S. 667. Therefore, the speed of CMS implementation here is more likely a result of wanting to avoid direct access to the Courts by Applicable Plans.

After April 28, 2015, an Applicable Plan that receives a Demand Letter may appeal erroneous charges for items and services contained within that document. The appeal process will take time. CMS has required Applicable Plans to follow the same rules of appeal that is currently available for Medicare beneficiaries. Typically, those appeals can take up to 4 years to achieve a final determination before being presented to the U.S. District Court. See 42 U.S.C. 405(g) (requires exhaustion of administrative remedies before access to Courts). We expect the same time-frame, or possibly even longer, as applicable plan appeals will result in an increased caseload on an already taxed system.

There are four steps that must be taken before an applicable plan will “exhaust its administrative remedies” and have access to the U.S. District Court. Before any of those steps can be taken, there are certain pre-requisites of the newly enacted Final Rule that must be met: 1) Medicare must be pursuing recovery solely from the Applicable Plan (See 42 CFR §405.906(a)(4); and 2) notice to the beneficiary (See 42 CFR §405.947(a). If satisfied, then the Applicable Plan is afforded the opportunity to proceed administratively.

Step One – Reconsideration of a claim by the CMS Contractor. This is a fairly simple step. The Applicable Plan writes a letter to the Benefits Coordination and Recovery Center (BCRC), a department of the Coordination of Benefits & Recovery (COB&R) contractor, outlining why certain items and charges should be eliminated. This is relatively a quick process. Parties should not expect significant changes to a Demand Letter, if previous disputes were filed to lower the Conditional Payment Letter. After a letter is received from the BCRC regarding its decision, then the next level of appeal becomes available.

Step Two – Evaluation of the Claim by a Qualified Independent Contractor (QIC). The process here is still informal. A letter is presented outlining the position. If there are issues with regard to “demonstrated responsibility” for the particular items or services, it would be best to raise them immediately at this point. For example, workers’ compensation in certain jurisdictions limits the number of physical therapy visits. The workers’ compensation Law or Plan is not legally obligated to pay for such services and therefore cannot be primary. Determination by the QIC may take a couple of months, but it is still relatively fast with regard to the framework of appeals. If further review is required, then the Applicable Plan must take the next step.

Step Three – Adjudication of the dispute by an Administrative Law Judge. This is the start of the formal process of the appeal steps. As formality increases, so does time. Essentially, liken this to the trial court aspect of the appeal process, probably a year to prepare and secure a hearing date, and other 6 – 8 months for a decision that can be appealed if the result in undesired.

Step Four – Review of the ALJ Decision by the Department of Appeals. Formality increases and so does the time to process. Also, there is a chance the opinion on your case could be published. Publication of ALJ decisions provides precedent for future cases; thus, parties should carefully consider taking cases to this level so as to avoid creating bad law. The process from here can take up to another two years to complete. Assuming the decision is unfavorable, the Applicable Plan has access to the U.S. District Court.

Appeals can be costly and thus the likelihood of an Applicable Plan taking an appeal to the level of Step 3 and beyond would have to involve a significant conditional payment obligation that is owed, or a “demonstrated responsibility” right that must be clarified, such as the physical therapy example stated above. Therefore, our expectation is very few appeals will occur. However, we expect Applicable Plans burdened with Demand Letters will be quite active in the earlier stages.

One issue that should not be lost is being proactive on conditional payments. The recent announcement by CMS in the Federal Register publishing this rule made several references to an applicable plan’s responsibility for conditional payments. “We may recover from the applicable plan even if the applicable plan has already reimbursed the beneficiary or other party.” This position simply reflects 42 CFR §411.24(i). We remind both our clients and practitioners of the importance of managing conditional payments as early as possible.

Conditional payments, dealt with proactively by the Parties, can result in clarity during the settlement process and avoidance of surprises. The BCRC regularly allows “disputes” for unrelated medical items and services to the claim. The process to raise a dispute is straightforward and the time to complete it can occur within 30 days. Disputes are not appeals, and very informal. There are instances where such disputes can be completed over the phone by simply explaining the injuries that are related to the claim. Managing conditional payments upfront saves time and money. The issue is clarified while the claim is open. Once resolved, there are no further conditional payments because CMS defines “conditional payments” as items and services that occur before the date of the settlement, judgment or award.

Franco Signor applauds CMS publication of the Final Rule for Applicable Plan appeal rights. The content of this publication can be found by clicking the following link here. To visit our earlier blog about the right of appeal, click here. Franco Signor will continue to apprise you of further developments. Hope to see you all in Washington D.C. on March 17 for the upcoming MARC meeting.


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