LMSA Rules by September?

Once again the possibility of regulations from the Department of Health and Human Services regarding Liability Medicare Set-Asides (LMSA) and No-Fault Medicare Set-Asides (NFMSA) has been brought into the spotlight.  In recent days, the Office of Information and Regulatory Affairs’ Office of Management and Budget published a notice of proposed rulemaking to provide guidance to Medicare beneficiaries and to protect the Medicare Trust Fund.  The full notice can be found here.  Per the abstract:

“This proposed rule would ensure that beneficiaries are making the best health care choices possible by providing them and their representatives with the opportunity to select an option for meeting future medical obligations that fits their individual circumstances, while also protecting the Medicare Trust Fund. Currently, Medicare does not provide its beneficiaries with guidance to help them make choices regarding their future medical care expenses when they receive automobile and liability insurance (including self-insurance), no fault insurance, and workers’ compensation settlements, judgments, awards, or payments, and need to satisfy their Medicare Secondary Payer (MSP) obligations.”

Interestingly, this proposed rule in regards to Liability Medicare Set-Asides (LMSAs) is noted to have “economically significant” priority. According to the Office of Management and Budgets, “significant” regulatory actions are defined in an executive order as those that: ‘Significant regulatory actions are defined in the Executive Order as those that have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities; create a serious inconsistency or otherwise interfere with an action taken or planned by another agency; materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or raise novel legal or policy issues arising out of legal mandates, the President’s priorities, or the principles set forth in this Executive order.”[1] Furthermore, a Notice of Proposed Rulemaking (NPRM) is expected to be decided upon in September 2019. Although the actual proposed rule was unavailable for review, to those of us that are familiar with the industry, rules for LMSA and NFMSA have been anticipated for some time.  However, this is the first indication of movement outside the Department of Health and Human Services.

This posting by the Office of Management and Budget is the first step to development of regulation and is not yet a proposed rule. This publication is simply notification that CMS is currently in the process of putting together a proposed rule.  Once the draft is prepared it will be published in the Federal Register and after publication any interested parties in the rule will be provided 60 days to comment.  Once the period for comment closes, CMS will decide whether to proceed with development of the regulation.

It is unclear as to whether CMS will seek ongoing feedback from interested stakeholders. As of this date, no Town Hall has been scheduled.

Gordon & Rees has previously written official comments for prior notices of proposed rulemaking and is equipped to do so on behalf of interested stakeholders. If you are interested in this service, please contact us. As this process develops Gordon & Rees will continue to keep you apprised of the progress.

[1] Department of Management and Budget FAQs. https://www.reginfo.gov/public/jsp/Utilities/faq.myjsp

New Conditional Payment Portal Functionality Expected in January

Long awaited improvements to the Medicare conditional payment reimbursement process may be available at the start of the new year, according to a November 19 alert from The Centers for Medicare and Medicaid Services (CMS). Back in August, CMS announced the Medicare Secondary Payment Recovery Portal (MSPRP) would offer enhanced functionality in 2019, including the ability for authorized Non-Group Health Plan (NCHP) users to self-report leads on liability, auto, no-fault or workers’ compensation cases. According to the alert, this functionality will be effective on January 7, 2019.  CMS is hosting a webinar regarding this enhancement on December 18th, 2018 at 1:00PM EST. A link to register for this webinar can be found here>>CMS 12.18.18 Webinar Registration

The ability to self-report leads will generate Medicare Conditional Payment information that authorized parties can review and/or dispute in accord with their reimbursement obligations under the Medicare Secondary Payer laws. Such enhanced portal functionality should eliminate several weeks of wait time per claim in obtaining Medicare conditional payment information.

This enhancement was initially introduced as a possible improvement for 2019 during a webinar CMS conducted on August 16. A second enhancement allowing online payment of Medicare conditional payments to the MSPRP was also referenced at that time as a possible improvement for 2019. The November 19 CMS alert makes reference to online payment.

Stay tuned to the Gordon & Rees MSPulse for a summary of the December webinar. In the meantime, please contact us should you have any questions.

CMS Low Dollar Recovery Threshold Remains $750 for 2019

There will be no change in the low dollar threshold for Medicare conditional payment reimbursement in 2019. The SMART (Strengthening Medicare And Repaying Taxpayers) Act of 2012 serves to avoid governmental waste by setting an annual amount in which the costs associated with reimbursement outweigh the benefits. The SMART Act provides that the Secretary must calculate and publish not later than November 15th a low dollar threshold amount applicable in the following year for settlements, judgments, awards or other payments in which Medicare Conditional Payment reimbursement need not be reimbursed given the costs associated with recovery. This threshold corresponds also to the $750 threshold for Medicare Mandatory Insurer Section 111 reporting requirement.

On Friday, November 15th, The Centers for Medicare and Medicaid Services released their updated Computation of Annual Recovery Thresholds for Non-Group Health Plans.  Below are the Agency’s findings:

  • The 2019 reporting threshold remains $750 for no-fault, workers’ compensation and liability cases.
  • The estimated cost to process any individual case is $297
  • The average Medicare conditional payment demand amount for settlements of $500 is $368 (74%)
  • The average Medicare conditional payment demand amount for settlements around $750 is $518 (69%)

These metrics once again demonstrate exceedingly high percentages of cost versus recovery for low dollar settlements. The SMART Act applies a common sense approach to recovery efforts, given such costs associated with reimbursement and the interest of avoiding wasteful spending of government money,. The complete notice can be found in the link here>> CMS Computation-of-Annual-Recovery-Thresholds-for-NGHP–2019.pd

Should you have any questions regarding the above or need any Medicare compliance assistance, please do not hesitate to contact Gordon & Rees Medicare Compliance Group at mstockdale@grsm.com or 412-588-2277

IDS Property Casualty Insurance Class Certification Reversed, Remanded

As previously reported, the Third District Court of Appeal for the State of Florida recently reversed and remanded the class action certification for MSPA Claims 1, LLC v. Ocean Harbor. On October 24, 2018, the same Court reversed and remanded the only other certified class action suit brought by MSPA Claims 1, LLC.

Citing Ocean Harbor specifically, the Third District Court again opined that in this case, MSPA has failed to establish that common issues predominate over individual issues. Applying the same rationale as Ocean Harbor, the Court noted “to quantify the claims of the putative class members will require a comprehensive and distinct analysis of each underlying PIP claim and automobile accident…Plainly this is one of those cases where merely proving entitlement to reimbursement from IDS for payments made by Florida Healthcare Plus on behalf of MA., in no way proves the cases of the other class members.” IDS Prop. Cas. Ins. Co. v. MSPA Claims 1, LLC, 2018 Fla. App. LEXIS 15107

The Court then went on to reverse as well on the alternate ground of standing. Harkening back to MSPA Claims 1, LLC. v United Auto. Ins. Co., 204  F. Supp. 3d 1342, 1345 (S.D. Fla. 2016), the Court ruled that the approvals of assignment did not occur until after the initial complaint had been filed. The parties in question did not assign benefits until June 1, 2016 as a part of a settlement agreement. However, MSPA filed its amended complaint on March 8, 2016, several months prior to the Receiver’s approval. As previously found, standing must exist at the inception of a case. As IDS had based its attack on standing on validity of the assignment, standing was not present[1].

As such, the Court reversed and remanded for proceedings consistent with the opinion.

It would be remiss to not point out that this was MSP Recovery’s only other certified class action suit. With its reversal and remand, the future of these class action proceedings seems dimmer and dimmer, at least in the Third District Court of Appeal for the State of Florida.

 

[1] The court does note that this case does differ from MSP Recovery LLC v. Allstate Insurance Co., 835 F. 3d 1351 (11th Circ. 2016) which similarly argued lack of standing. In that IDS argued that MSPA’s private cause of action against IDS was barred by the federal anti-assignment statue. This was rejected by the Eleventh Circuit.

MSPA Claims 1 LLC v. Infinity Auto – No Collection Without Recollection

For MSP Recovery LLC, it apparently takes more than two things to make a thing go right. Collecting fees is now out of sight.

The United States District Court for the Southern District of Florida, dismissed yet another MSP Recovery LLC subsidiary claim with prejudice. It seems this time around the Plaintiffs could not establish that MSPA Claims 1, a subsidiary of MSP Recovery, was in fact acting on behalf of the now defunct Florida Healthcare Plus, Inc. Medicare Advantage Organization, despite producing affidavits speaking to the relationship from top brass within both companies.  The assignment was allegedly first with La Ley Recovery Systems prior to MSPA Claims 1.

On October 19, 2018, The Southern District of Florida, ruled in the case of MSPA Claims 1, LLC v. Infinity Auto Ins. Co., granting summary judgment. The Court also dismissed the case with prejudice.

In the present case, the Court allowed over sixteen months of discovery to go forward with this claim. Despite this timeframe, Plaintiff relied on only two affidavits to establish standing (based upon assignment from FHCP to La Ley Recovery) for the claim: the first of the Defense’s own attorney John. H. Ruiz and the second of Susan Molina, CEO of FHCP. Putting aside that it is generally improper for a lawyer in a case to testify as to his legal opinion regarding facts in the case[1], the Court found that the testimony about conversations between Attorney Ruiz and Susan Molina was “merely Mr. Ruiz’s mental impression following conversations…” that “does not lay the necessary factual predicate for Mr. Ruiz’s lay opinion testimony.”[2]

The Court then went on to examine the Affidavit of Susan Molina, who essentially attested to not remembering specific conversations with John Ruiz and did not specifically recall approving assignment to La Ley Recovery. The Court very clearly points out what is missing from the affidavit: a positive statement that express assignment was given to La Ley Recovery.

After that analysis, the Court found in a very familiar fashion, that the Plaintiff lacked standing even despite the Plaintiff’s position that such was demonstrated via the settlement agreement between FHCP and its liquidators. As has been held in several previous MSP Recovery cases, a settlement agreement cannot retroactively establish standing after a case is filed. As no assignment was found and standing was lacking, the Court dismissed the matter with prejudice.

 

[1] Hickman v. Taylor, 329 U.S. 495, 67 S Ct. 385, 394, 91 L Ed. 451 (1947)

[2] MSAP Claims 1, LLC v. Infinity Auto Ins. Co., 2018 U.S. Dist. LEXIS 181446

CMS Issues New WCMSA Reference Guide and Section 111 NGHP User Guide

As of October 1, 2018, CMS has issued updated versions of both the WCMSA Reference Guide and the Section 111 NGHP User Guide.

 WCMSA Reference Guide Version 2.8:

The updates found in version 2.8 of the Workers’ Compensation Medicare Set-Aside Reference Guide are as follows:

– As a part of an ongoing process, CMS must discontinue use of Social Security Number-based Medicare identifiers and distribute new randomly selected Medicare identification numbers to all beneficiaries, referred to as Medicare Beneficiary Identifiers (MBIs). Accordingly, all fields formerly labeled HICN are now labeled “Medicare ID” and will accept either an individual’s HICN or MBI (if assigned)

– The link to the CDC Life Expectancy Table has been updated. This link can be found at bullet #7 of Chapter 10.3 of the Reference Guide.

– The Verifying Jurisdiction and Calculation Method for medical reviews has been updated. This information can be found in Tables 9-1 and 9-2 in Chapter 9.4.4 of the Reference Guide.

– Version 2.8 of the WCMSA Reference Guide can be found here.

NGHP Section 111 User Guide Version 5.4:

The updates found in version 5.4 of the Section 111 Non-Group Health Plan User Guide are as follows:

– To meet Section 111 requirements, a Paperwork Reduction Act (PRA) disclosure statement has been added to this guide. This disclosure can be found on page iii of the User Guide.

– The contact protocol for the Section 111 data exchange escalation process has been updated. This escalation process can be found in Sect. 8.2 of the User Guide and in short, provides the contact information for the newly appointed EDI Director.

– In order to ensure updates are applied to recovery cases appropriately, RREs are asked to submit the policy number uniformly with a consistent format. When reporting updates enter the policy number exactly as it is entered on the original submission whether blank, zeros, or a full policy number. This requirement is discussed in greater detail in Sect. 6.6.5 of the User Guide

The excluded and no-fault excluded ICD-10 diagnosis codes have been updated for 2019. These codes can be found in Table I-1 and J-1 of Chapter V of the User Guide.

– The placement of the decimal point in the excluded ICD-10 “Y codes” of table I-1 has been corrected. For example, in version 5.3 of the User Guide these codes were written as Y921.10 whereas it should be written Y92.110. These codes are now written correctly.

Each chapter of the Section 111 NGHP User Guide, version 5.4 can be found here.

Gordon & Rees remains committed to bringing you the most up to date information regarding all things Medicare Secondary Payer related. Please do not hesitate to contact us should you have any questions about the newest versions of these reference guides.

 

Ocean Harbor Class Certification Reversed, Remanded

Another blow was just dealt to MSP Recovery. On September 26, 2018, the Third District Court of Appeal for the State of Florida reversed and remanded the class action certification that had gained so much attention when it was granted last year.

This case has its genesis with MSPA Claims 1, LLC, a subsidiary of MSP Recovery acting on behalf of Florida Healthcare Plus, Inc., a now defunct Medicare Advantage Organization (MAO), and other similarly situated entities. MSPA filed a class action against Ocean Harbor Casualty Insurance Company for failure to reimburse medical bills. MSPA sought double damages via the Medicare Secondary Payer Act’s private cause of action, 42 U.S.C. § 1395Y(b)(3)(A). MSPA contended that class action was appropriate as some or all of the thirty-seven (37) MAOs in Florida might be in a similar situation. The trial court determined that common issues existed because the Plaintiffs’ right to reimbursement was “automatic,” given that a payment was made on behalf of a Medicare enrollee who was also insured by the Defendant and that such payment was not reimbursed.

In order to understand the Appeal Court’s ruling, the underlying class certification must be first examined. According to Fla. R. Civ. P. 1.220(a), the prerequisites to class certification are numerosity, commonalty, typicality and adequate representation, in additional to the satisfaction of other requirements under Fla. R. Civ. P. 1.220(b). Under 1.220(b), one of three subsections must be satisfied. The subsections are: (b)(1) prosecution of individual actions for members of the class creates a risk of inconsistent adjudications and incompatible standards of conduct; (b)(2) relief sought by the class is injunctive or declaratory in nature, rather than predominantly monetary damages, or (b)(3) that common issues of law or fact predominate over issues affecting only individual class members, and thus the class action is superior to other methods of adjudication.  The trial court certified this class based on subsection (b)(3), referencing Porsche Cars N. Am., Inc. v. Diamond, “In a (b)(3) class action, not all issues of fact and law are common, but common issues predominate over individual issues.” 140 So. 3d 1095-96 (Fla. 3d DVA 2014) (citing Fla. R.Civ. P. 1.220(b)(3)).

The Appeal Court reconsidered predominance under Fla. R. Civ. P. 1.220(b)(3), stating “the appropriateness of the class certification turns largely on whether issues common to the class will predominate.” The Appeal Court noted that this matter was an “intersection” of Florida class action law, Medicare Secondary Payer law and Florida no-fault insurance law. In exploring the obligation to reimburse Medicare under the MSP Act and also Florida no-fault insurance law, the Court aptly examined not only that a payment was made by Medicare, but also whether Ocean Harbor was required to make the payment in the first place. Through this exercise, the Appeal Court questioned the “automatic” requirement to reimburse Medicare simply due to a demonstrated responsibility to make a payment, as the MSP does not eliminate the terms and conditions of the state no-fault law. Specifically, the Court referenced 42 C.F.R Section 411.51, stating “Medicare does not pay until the Beneficiary has exhausted his or her remedies under no-fault insurance” (emphasis added). In blending the federal Medicare law with the state no-fault law, the Court first observed that the MSP’s private cause of action does not arise until a payment could reasonably be expected to be made under no-fault insurance. In turn, the Court stated that MSPA must prove that not only was a proper conditional payment made, but that Ocean Harbor was required to make the payment in the first place under the state no-fault law.

MSPA relied upon the holdings in In re: Avandia Marketing[1], and Humana Medical Plan v. Western Heritage Ins[2], two predominant circuit court cases conferring the private cause of action on the Plaintiff(s). In each of these two cases, the responsibility to make a payment was in reference to the primary plan’s pre-existing settlement of a claim relating to the tort from which the medical bills arose. The Appeal Court distinguished the facts of Ocean Harbor from these two landmark cases, in that no pre-existing settlement was being referenced as creating a responsibility for payment. Rather, the demonstrated responsibility was to be established “by other means,” thereby cancelling these cases out as precedent, bringing this matter within the MSP Recovery LLC v. Allstate[3] tutelage. In Allstate, the 11th Circuit held that even without a settlement, a demonstrated responsibility for payment could be established through proof of the primary plan’s contractual obligation to make a payment. The burden of proving this is on the Plaintiff.

According to Florida no-fault law, there are exclusions from the obligation to make payments, and also necessary procedures that if not followed, are grounds to decline payment. The Appeal Court observed that “payment under Florida no-fault law proceeds on a factually intensive bill-by-bill and case-by-case basis,” and that MSPA would be required to prove the Defendant was required to pay each particular bill. Ocean Harbor would likewise be permitted to raise defenses regarding each particular bill, thus resulting in a series of mini-trials to determine whether payment is required under Florida no-fault law. The Appeal Court stated in its conclusion “Proof that certain medical bills paid by MSPA’s alleged assignor should have been paid by Ocean Harbor as a primary payer will not establish that other medical bills paid by a different MAO should also have been paid by Ocean Harbor as a primary payer.” Accordingly, a finding of predominance was precluded, rendering the case inappropriate for class action certification. As such, the class certification was reversed and the case remanded.

Practitioner’s Note: This Court delves into interesting territory in its determination that common issues of law or fact do not predominate over issues affecting only individual class members if there is a question about whether payment of each individual bill was ever required to begin with. A similar analysis can be applied as to whether it is appropriate to file suit for Medicare conditional payment reimbursement when each individual Medicare conditional payment may not be “ripe” for reimbursement. Like Florida no-fault law, there are processes and procedures in obtaining Medicare conditional payment information, as well as for making timely reimbursement. There are defenses. There is a statute of limitations. There are reasons why payments made by Medicare may be proper payments rather than conditional payments. This decision touches on the concept of exhaustion of administrative remedies, and references the SMART Act (Strengthening Medicare and Repaying Taxpayers Act of 2012), which provides primary payers an appeal process for Medicare conditional payment matters.  Many of the various court rulings in MAO litigation focus on demonstrated responsibility for reimbursement without considering whether it is actually timely or appropriate to reimburse Medicare. If MAOs wish to assert the same rights of reimbursements as traditional Medicare Parts A and B under the MSP laws, it would stand to reason that the same processes and procedures would apply. In day-to-day practice, the mere existence of Medicare conditional payments does not necessarily trigger the obligation to reimburse.

___________________________________________________________________

 

 

 

[1] In re: Avandia Marketing, 685 F.3d 353, (3rd Cir. 2012)

[2] Humana Medical Plan v. Western Heritage Ins, 832 F.3d 1229, (11th Cir. 2016)

[3] MSP Recovery, LLC v. Allstate Insurance Company, 853 F. 3d 1351 (11th Cir. 2016)

MSP Recovery v. Travelers

On June 21, 2018, the U.S. District Court for the Southern District of Florida granted with prejudice, Travelers’ motion to dismiss MSP Recovery’s claim against it for recovery under the Medicare Secondary Payer Act (MSP). This motion was granted, and the case dismissed, based on lack of subject matter jurisdiction. In MSP Recovery Claims v. Travelers Cas. & Sur Co., the court was faced with deciding whether MSP Recovery had standing under the private cause of action provision of the MSP to bring suit against Travelers for recovery of medical payments made to Medicare beneficiaries. See generally MSP Recovery Claims v. Travelers Cas. & Sur. Co., 2018 U.S. Dist. Lexis 105078.

As a brief background, MSP Recovery, LLC is an entity whose business model is relatively simple- it sets out to obtain assignments from Medicare Advantage Organizations (MAOs) in order to attempt to sue and recover for payments made by the MAO for medical treatment of a Medicare beneficiary that allegedly should have been made by a different insurer, or primary payer. This case is similar to a multitude of cases that MSP Recovery and its subsidiaries have filed against insurers across the country, alleging recovery on behalf of an MAO under the MSP. Gordon & Rees has previously covered, and will continue to provide updates on similar cases such as Recovery v. State Farm Mut. Auto. Ins. Co

In the case at hand, the court did not have to decide whether MSP Recovery’s arguments for recovery here were valid, as it must first determine whether MSP Recovery had standing to bring the case in the first place. MSP Recovery argues that has received an executed assignment from Health First Administrative Plans, Inc. (HFAP), and therefore should be permitted to bring this case under the MSP. While MSP Recovery may have very well received such an assignment, it has been made very clear in several cases now that HFAP is not an MAO, and therefore does not have standing to bring a cause of action against Travelers under the Medicare Secondary Payer Act. The court here agrees with and relies on the reasoning of other district courts in other similar cases, including MSP Recovery Claims, Series LLC v. Auto-Owners Insurance Co. and Recovery v. State Farm Mut. Auto. Ins. C., in holding that HFAP is in fact not an MAO, and at most, the administrative arm of another company that may have an MAO. Given that HFAP, and therefore MSP Recovery, is not an MAO it has not suffered an injury and further, lacks standing under the MSP, this case was dismissed based on lack of subject matter jurisdiction.

While this case represents an unsuccessful attempt by MSP Recovery, LLC to bring a case on behalf of a Medicare Advantage Organization under the MSP, the landscape surrounding MAO recovery rights continues to grow and change. Gordon & Rees will continue to provide the most up to date information as these cases develop.

 

What’s in a Name? MSP Recovery LLC Sanctioned in Latest MAO Litigation

MSP Recovery LLC, welcome to the Illinois federal courts. This may not be the jurisdiction for you. In a recent decision from the United States District Court for the Central District of Illinois, Peoria Division, not only did the legal group from Miami, now infamous for bringing hundreds of complaints against various insurance carriers under Medicare Secondary Payer reimbursement theories, fail to prevail in yet another effort to collect big money, but it ended up costing them and their attorneys $5,000 each in sanctions.

There are several written decisions about MSP Recovery LLC, many sounding familiar. Assignments, amended complaints, failure to state a claim – it all begins to run together. But when a court states: “This is when things got hairy” halfway through its written decision, something is going down.

The case of Recovery v. State Farm Mut. Auto. Ins. Co 2018 U.S. Dist. LEXIS 95789, U.S. District Court for the Central Dist. Of Ill. (June 7, 2018), began back in March of 2017 when the Plaintiffs filed their original complaint alleging that they were assigned the right to seek reimbursement from the Defendant for Medicare conditional payments made on behalf of a Medicare Advantage Organization. The Defendant filed a successful Motion to Dismiss on the grounds that there was no standing because no injury-in-fact had been alleged. The complaint alleged the Plaintiff had received assignments from the MAO to seek recovery under the MSP, however, the Plaintiffs failed to name the MAO.

On June 2, 2017, the Plaintiffs filed the first Amended Complaint, apparently adding nothing more of consequence to the original complaint than the names of a representative Beneficiary (R.F.) and a representative MAO called Health First Administrative Plans (HFAP). Without furnishing additional details to support an injury-in-fact, the Plaintiffs’ Amended Complaint did not establish standing and was subsequently dismissed.

Undaunted, a Second Amended Complaint was filed on January 30, 2018, substituting the previous representative Beneficiary R.F. with the more representative R.Y. The allegation was that R.Y. was an enrollee in HFAP and Defendant, as a primary payer under the MSP, failed to reimburse HFAP for medical items and services in a timely manner. Illustrating the relationship between MSP Recovery and HFAP, the Plaintiffs attached documentation including a Recovery Agreement and an Assignment document, in which Plaintiff MSP Recovery LLC assigned the rights of HFAP to MSP Recovery Claims Series, LLC. On March 6, 2018, the Defendant filed a Motion to Dismiss the Second Amended Complaint due to lack of standing.

Elsewhere, a court in the Southern District of Florida was busy working on another similar lawsuit filed by MSP Recovery LLC against Auto-Owners Insurance Group. In the course of this litigation it was determined by the testimony of HFAP’s Chief Operating Officer that HFAP was a company that performed administrative duties for a Medicare Advantage Organization called Health First Health Plans.

This distinction was news to the U.S. District Court for the Central District of Illinois, Peoria Division. And they were none too happy that while the Plaintiff had known about it since April 12th, it took a call from the Defendant on April 26th to notify the Court of the mistaken identity. The next day the Court ordered the Plaintiffs to file a response as to why the case should not be dismissed.

That’s when things got hairy.

Apparently the Plaintiffs did not think it was significant to know details like exactly which company assigned to them its rights of recovery. In their May 11, 2018 response to the Court, the Plaintiffs admitted that it was HFHP, not HFAP that had made conditional payments on behalf of R.Y., but had they had an opportunity to make a “minor clarifying” amendment to the Second Amended Complaint, they may have been more precise. Next that they stated that said potential clarification “would not change the substantive validity of the Health First assignments or R.Y.’s adequacy as an exemplar beneficiary,” a position the Court referred to as “palpably absurd and clearly wrong under the law.” The Court was further perturbed that MSP Recovery had not brought the identity of their intended Defendant to their attention until there was a threat of sanctions, rather than when they learned of the distinction weeks earlier.

When a lawsuit is filed, there are obligations that exist to ensure that the facts alleged are truthful and well-researched. The Federal Rules of Civil Procedure provide for sanctions against frivolous lawsuits, and case law indicates that the imposition of sanctions is allowable if the litigating parties should have known their position was groundless. By bringing a lawsuit against a company that does not make any medical payments, much less Medicare conditional payments on behalf of R.Y., a question exists as to whether MSP Recovery’s position was groundless. The law recognizes that corporations are separate and distinct legal entities and cause must be shown to ignore the corporate form.

The MSP Recovery LLC attorneys attempted to show they were not personally involved in the Auto-Owners matter, presumably to suggest they weren’t aware of the testimony, because they had not entered appearances in that case. The Court did not buy it, nor did they buy the Plaintiff’s explanation that the two separate companies are all part of the Health First “corporate family,” complicating their ability to identify the correct entity. And while this case is certainly not the longest legal battle in MSP history, it went on long enough for the Court to acknowledge the Plaintiff had wasted time and resources with its groundless claim.

Upon issuing the sanctions, the Court stated its purpose to “deter repetition of the conduct or comparable conduct by others similarly situated.” Given the prolific manner in which MSP Recovery LLC has been filing complaints that other courts have also determined to be less than adequate, it will be interesting to see whether this case results in a true deterrent or merely a slap on the wrist.

 

Pennsylvania’s Governor Wolfe Vetoes Workers’ Compensation Formulary Bill

Following in the footsteps of Texas, Ohio, and various other states, Pennsylvania’s legislature attempted to enact a drug formulary by amending the current Workers’ Compensation Act with Senate Bill 936. While passing in the House and Senate, Governor Tom Wolfe vetoed this proposed amendment.

Introduced on October 20, 2017 by various representatives, Bill 936 proposed that the department should select a nationally recognized, evidence-based prescription drug formulary for resolving issues related to drugs prescribed for or related to the treatment of work-related injuries. Expressly outlining a timeline in which comments would be taken, public notice of the formulary published, and when the final formulary would effect, Bill 936 also outlined the requirements to be considered when creating the prescription drug formulary.

After considerable debate and re-drafting, the bill was voted into the House and Senate on April 17, 2018. As indicated above, Governor Wolf then vetoed on April 27, 2018. Per a letter drafted by the Governor on May 27, 2018, Governor Wolfe noted “The implementation of a drug formulary as prescribed by this legislation will not improve overall health outcomes for Pennsylvania’s injured workers and will not stem the tide of the opioid crisis…many opioid medications are among the lease costly prescription medications on the market. Since the bill’s drug formulary is designed to steer physicians toward prescribing less costly drugs, it will not likely accomplish the often-stated objective of the bill’s promotors – curbing the opioid over-prescription.”

Interestingly, Governor Wolf’s rationale in vetoing the Bill was predicated on the fact that the formulary is aimed at cost-reduction and the limitation of opioids. However, per the language of the Bill itself this formulary was to be created after research and based upon evidence based medicine (which would most likely include the CDC’s recent recommendations regarding opioids), would be open for public comments which would arguably include injured workers’ and their advocacy groups, and would be reviewed yearly by the department based upon public comments received in November of each year. Admittedly, the Bill does state that the Pennsylvania Compensation Ratings Bureau shall calculate the savings achieved through the implementation of the prescription drug formulary, the assumption that the formulary is solely created for the cost-reduction of prescriptions in Workers Compensation claims appears to be faulty.

To further confuse the issue, Governor Wolf announced he signed an executive order aimed at curbing injured workers’ opioid prescriptions. Essentially mimicking much of the original Bill 936 directives, it is questionable whether such an order will be enforceable as state agencies do not have legal authority to limit prescription drugs on their own.

At the end of the day, Pennsylvania’s drug formulary has been tabled. However, several other states (i.e. Indiana and Massachusetts) have proposed legislation in place and are waiting on final voting. Although there is not much in the way of formal research on the benefits of drug formularies, the pioneer states like Texas, Ohio, and California have been implemented for a significant period of time and more empirical evidence of the benefits of such programs can be expected. Furthermore, this methodology is becoming increasingly more attractive to states in light of increasing insurance premiums and the opioid crisis. We at Gordon & Rees will continue to monitor the current legislation and report on any new developments.