Did Medicare Really Need to Do That?
When Medicare seeks recovery of conditional payments out of a settlement, judgment, or award from a beneficiary (as opposed to a primary plan), the conditional payment lien may be reduced by procurement costs (e.g. attorney’s fees). However, if Medicare must file suit to recover the conditional payments from the beneficiary because they oppose recovery, CMS may recover the full conditional payment amount up to the total settlement or award. See 42 C.F.R. § 411.37. This hinges on whether Medicare “must” file suit. A recent District Court decision in United States v. Angino, 2019 U.S. Dist. LEXIS 30499 (M.D. Pa. Feb. 26, 2019), had to consider what the “must” provision requires.
The whole situation stems from a personal injury claim filed in a Pennsylvania state court, Trostle v. Bloomfield Pharmacy et al., No. 2013-527 (Pa. Ct. Com. Pl. Perry Cnty.). In that case, David Trostle was given the incorrect prescription by a pharmacy, which caused him to become ill and hospitalized. Medicare paid over $84,000.00 in medical bills related to the incident. Trostle sued the pharmacy and was represented by the Angino Law Firm, P.C. (“Angino”). During settlement negotiations, Angino requested the conditional payment amount, which Medicare reported as $1,212.00 in an interim conditional payment letter. In apparent reliance on the reported amount, the lawsuit settled two months later. After Angino notified CMS of the settlement, Medicare reviewed its records and determined that it actually paid $84,353.00. Pursuant to the above noted rule, Medicare reduced the amount of the reimbursement request by the procurement costs and demanded reimbursement of $53,295.00, due within 60 days from August 14, 2014.
Trostle disputed the amount owed in light of Medicare’s prior representations, which Medicare rejected. After missing a deadline for appealing the redetermination, and failing to utilize other options for reconsideration, Trostle’s estate brought suit for declaratory relief in District Court. The District Court found Trostle failed to exhaust his administrative remedies, and thus dismissed the claim with prejudice due to lack of jurisdiction. Trostle v. CMS, No. 1:16-CV-156, 2016 U.S. Dist. LEXIS 143101 (M.D. Pa. Oct. 17, 2016). The Third Circuit Court of Appeals affirmed that decision. Trostle v. CMS., 709 F. App’x 736 (3d Cir. 2017).
After the Third Circuit affirmed that decision, Defendants offered to pay the $53,295.14. However, Medicare argued entitlement to the full amount, without reduction by procurement costs, or $83,353.00 plus interest.
Medicare eventually brought suit, to recover the full amount plus interest against Angino and Trostle’s estate (“Defendants”), and moved for Summary Judgment. U.S. v. Angino, et al., 2019 U.S. Dist. LEXIS 30499 (M.D. Pa. Feb. 26, 2019). The Defendants argued Summary Judgment was improper since, although they were barred from challenging the amount affirmed by the Third Circuit, there was a question of fact as to 1) whether Medicare was entitled to the full conditional payment amount plus interest, and 2) who, if anyone, was liable for the excess amount owed.
In addressing the Defendants’ first argument, the Court had to consider whether this was a situation where Medicare “must file suit.” According to Defendants, because the Third Circuit confirmed that Defendants owed $53,000.00, which they were willing to pay, Medicare did not need to file suit, and cited several cases from other jurisdictions in support. The Court found those cases were non-binding, and rejected Medicare’s argument. The Court, in a footnote, helped Defendants by noting that Medicare’s recovery suit was actually filed before the Third Circuit’s decision. The District Court held that there was in fact a question of fact as to whether Medicare had to pursue litigation for reimbursement, which would determine what amount was actually owed.
In finding summary judgment was inappropriate, the District Court did not address issue of whether there was a question of fact of who must pay any amount in excess of the $53,000.00. Notably, although a settlement and distribution agreement between Angino and Trostle had set-aside $53,000.00 in settlement proceeds to reimburse conditional payments, it provided that Angino would not be liable for any liens. However, the party who would otherwise be liable, David Trostle, was now deceased.
This case illustrates the problems that can arise when a conditional payment amount is not confirmed prior to. Prior to settlement, Medicare only issued an interim conditional payment amount, which was not final. Given that Defendants were aware of Trostle’s extensive hospitalization, they should have known Medicare paid more than just $1,200.00. Defendants could have utilized the Conditional Payment Recovery Portal to request a final conditional payment amount prior to settlement, which has specific requirements. If that process is not utilized, parties must be cognizant that an interim conditional payment amount can change after settlement. Parties should also be mindful of potential liens under a Medicare Part C Advantage Plan or Part D Prescription Drug Plan.
It also demonstrates what can happen when contracts do not adequately account for post-settlement liens. The Court did not address whether Angino could be liable for the excess amount, but, it’s unlikely the distribution agreement would protect Angino against the Medicare Secondary Payer Recovery Provisions.
Finally, had Defendants continued to challenge the alleged conditional payment amount through Medicare’s appeals process, rather than seeking relief in District Court, they may have been able to limit their liability to the amount reduced for procurement costs.
Since summary judgment was denied, the case will either proceed to trial, or settle. We will provide an update on any subsequent opinions from this case.
Our Medicare Secondary Payer compliance department can assist with conditional payment lien investigation, disputing conditional payment charges, and provide guidance in addressing conditional payment issues prior to settlement.