On May 9, 2011 in the United States District Court for the District of Arizona, some substantial guidance was obtained on two very important questions affecting the application of the Medicare Secondary Payer Act (“MSP”):
1) Whether or not the Center for Medicare and Medicaid Services (“CMS”) can require prepayment of an MSP reimbursement claim (often times referred to as “conditional payment”) before the correct amount is administratively determined when a beneficiary either appeals or seeks a waiver of that MSP Reimbursement amount; and
2) Whether or not CMS can hold plaintiffs-attorneys financially responsible for MSP reimbursement if they do not hold or immediately turn over to Medicare their clients’ injury compensation awards.
The following paragraphs set out the main findings of law by the Court on the issues set out above.
As to the first question, the Court found that the CMS’s application of the 60-day reimbursement requirement to support immediate collection activities against beneficiaries when the reimbursement claim is in dispute is neither rational nor consistent with the statutory scheme providing for waiver and appeal rights. The Court went on to state that this collection practice is not permissible because it unnecessarily chills a beneficiary’s right to seek a waiver or to dispute the reimbursement claim and reaches beyond the fiscal objectives and policies behind the 60-day reimbursement provision.
As to the second question, There is no statutory authority, express or implied, to support a direct action against attorneys, except to the extent they are end-point recipients of settlement proceeds. Unlike any other claim against an end-point recipient of third-party insurance proceeds, a reimbursement claim against an attorney seeks to recover property from another “entity”. The Court based its finding on the fact that an attorney’s fees and expenses are another entities property due to CMS recognition of procurement cost offsets under 42 CFR §411.37(c). An attorney only retains as a right or entitlement an interest in that portion of settlement proceeds that pay for his or her services, and that the attorney maintains no right or entitlement to retain any other portion of the settlement awarded his client.
CONCLUSION: The Court found that CMS may not collect disputed reimbursement claims from beneficiaries or their attorneys, pending resolution of waiver requests and appeals, and it may not preclude plaintiffs’ attorneys from disbursing undisputed portions of settlement proceeds to their beneficiary clients. The Court ruled as a matter of statutory construction and did not consider Plaintiffs’ due process clause arguments.