Friday, January 9, 2009

Does Medicare Recognize Ahlborn?

Posted by Matthew Garretson

Has anybody been successful getting Medicare to recognize the Supreme Court’s decision in Arkansas Dept. of Health and Human Serv. V. Ahlborn, 547 U.S. 268 (2006) (Medicaid must reduce its claim on personal injury recovery by the percentage that the plaintiff reduced its claim in accepting a settlement)? I just got Medicare’s written determination to an appeal, stating that it doesn’t recognize Ahlborn as that case involves Medicaid which is statutorily different than Medicare.

-Maryland Attorney

Medicare does not recognize Ahlborn; however it has always been Medicare’s policy to accept a court-ordered allocation on the merits of the case. Below is an excerpt (albeit more info than you probably want) from an article I wrote last year (footnotes omitted):

Arguments against Applying Ahlborn to Medicare—Differing Statutory Language
It can be argued that because Medicaid third-party liability provisions differ greatly from Medicare third-party liability provisions, Ahlborn should not apply to cases involving Medicare. Unlike Medicaid, the Medicare statute is not based on an assignment of rights—payments are made conditionally, and are subject to full recovery when a third-party payer is held to be responsible for Medicare-related services and items. In addition, Medicare is not limited to recovering only from the portion of a settlement that is allocated to health care items and services, nor does the Medicare statute contain an anti-lien provision. Glibly stated, the intent behind the Medicare Secondary Payer (MSP) legislation was not to protect Medicare beneficiaries from having to repay certain conditional payments made on their behalf.
When third-party liability is alleged, Medicare makes a payment conditioned on being reimbursed from any recovery from an insurance policy (including a self-insured plan) covering the liable third party. The MSP legislation does not limit The Centers for Medicare and Medicaid Services’ (CMS’s) right of reimbursement to its right of subrogation. The statutory framework provides CMS with an independent right of recovery against any entity that is responsible for the payment of, or that has received payment for, Medicare-related items or services. This independent right of recovery is separate and distinct from CMS’s right of subrogation and is not limited by the equitable principle of apportionment (from which the benefits of Ahlborn flow) stemming from the subrogation right. See Zinman v. Shalala, 67 F.3d 841 (9th Cir. 1995).

In Zinman, certain Medicare beneficiaries argued that because CMS is a subrogee, its recovery must be limited to the pro-rata share of an insurance settlement that includes payment for medical expenses. However, the right of Medicare to receive full reimbursement was upheld (even though a beneficiary receives a discounted settlement from a third party).
Holding that the right of Medicare to recover is not limited by the equitable principle of apportionment, the Ninth Circuit Court of Appeals reasoned:

It is clear from the statute that the references to “item or service” are intended to define the payments for which Medicare has a right to reimbursement. Nothing in this language, however, compels the conclusion that Congress intended to limit the amount of recovery for a conditionally paid “item or service” to a proportionate share of a discounted settlement. The beneficiaries’ reliance on 42 U.S.C. §§ 1395y(b)(2)(B)(i) and (ii) is misplaced.

The Ninth Circuit further stated:

[T]o define Medicare’s right to recover its conditional payments solely by reference to its right of subrogation would render superfluous the alternative remedy of the independent right of recovery contained in section 1395y(b)(2)(B)(ii). We decline to construe the statute in a way that would render clear statutory language superfluous.

In sum, the Ninth Circuit confirmed CMS’s position that MSP legislation allowed for the full reimbursement of conditional Medicare payments.

The only situation in which Medicare may recognize allocations of liability payments to nonmedical losses is when payment is based on a court order on the merits of the case. If the court or other adjudicator of the merits specifically designates amounts that are for payment of pain and suffering or other amounts not related to medical services, Medicare will accept the court’s designation. Medicare does not seek recovery from portions of court awards that are designated as payment for losses other than medical services—that has always been the rule. However, the allocation must be supported by a court order. As the court reasoned in Zinman:
[T]he injured victim alleged a variety of damages, some capable of precise computation, some not. Such allegations are not uncommon. [CMS’s] ability to recover the full amount of its conditional payments, regardless of a victim’s allegations of damages, avoids the commitment of federal resources to the task of ascertaining the dollar amount of each element of a victim’s alleged damages. . . . Apportionment of Medicare’s recovery in tort cases would either require a factfinding process to determine actual damages or would place Medicare at the mercy of a victim’s or personal injury attorney’s estimate of damages.

Because liability payments are usually based on the injured or deceased person’s medical expenses, liability payments are assumed/considered to have been made “with respect to” medical services related to the injury even when the settlement: (1) does not expressly include an amount for medical expenses; or conversely, (2) when the allocation is done by the parties absent an order or other adjudication on the merits. Absent a court order, any intellectual or legal arguments directed to the lead recovery contractor for Medicare might be met with the classic “huh?” or “what?” response. The Medicare Secondary Payer Recovery Contractor (MSPRC) holds the majority of the deck and, some would argue, display indifference because they are governed by a clear statutory framework. If thrown a curveball, the MSPRC might simply move your client’s file to the bottom of the stack and defer the matter until later. Thus, trying to use Ahlborn to assist in determining the amount of Medicare’s reimbursement is likely a dead end.

Arguments in Favor of Applying Ahlborn to Medicare—Similar Statutory Obligation and Purpose Arguments in favor of applying Ahlborn to Medicare present the flip side of the statutory difference position noted above: Ahlborn should apply to repayment claims made by Medicare even though the statutory language differs from the Medicaid statute, because the basic elements of the reimbursement obligation are the same under all of the major government-funded health care programs. Medicaid, the Medical Care Recovery Act (MCRA), and the Medicare Secondary Payer Act (MSP) share a common legislative purpose—specifically, to ensure that the obligation to pay is secondary to the obligation of another plan of insurance when both are responsible for payment for medical care. All three provide their respective health care program with similar reimbursement rights to meet that purpose.

The MSP third-party liability provisions contain language that is similar to the language of the Medicaid Act that was interpreted in Ahlborn and the MSP repayment and enforcement provisions are similar to those of Medicaid:

A primary plan, and an entity that receives payment from a primary plan, shall reimburse the appropriate Trust Fund for any payment made by the Secretary under this subchapter with respect to an item or service if it is demonstrated that such primary plan has or had a responsibility to make payment with respect to such item or service. A primary plan’s responsibility for such payment may be demonstrated by a judgment, a payment conditioned upon the recipient’s compromise, waiver or release (whether or not there is a determination or admission of liability) of payment for items or services included in a claim against the primary plan or the primary plan’s insured, or by other means . . .

Tort litigation has seen the application of MSP because in many situations a defendant has liability insurance to compensate victims for injuries that the defendant may have caused. When the primary insurance plan (i.e., the defendant’s liability policy) is not expected to be able to pay promptly (possibly because liability has not been established), Medicare may pay for the medical items and services for the victim, subject to a right of reimbursement. MSP allows the government to waive any provision of the Act when it is determined that “waiver is in the best interests of the program.”

In addition, under both statutes—Medicaid and MSP—the government’s repayment rights are limited to medical costs, while the injured party’s right to recover for other damages remains intact:
  1. Medicaid: State assigned “rights . . . to payment for medical care from any third party”
  2. MSP: Reimbursement from primary plans having “responsibility to make payment with respect to such item or service”

Thus, while the common goal of both statutes—having the government be the payer of last resort (to keep government health care costs as low as possible) rather than the primary payer—should be noted, it can be argued that these statutes construe the reimbursement obligation narrowly to just the medical costs recovered by the plaintiff.