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Inflation Reduction Act Update

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Will the Inflation Reduction Act affect your settlement? A prior post discussed that possibility. A year later, there are developments

The First Drug Designation
The Department of Health and Human Services has named the first ten drugs to be subject to negotiation. The chosen drugs represent about 20% of total Part D annual spending, fifty and a half billion dollars.

The drugs are principally used for cardiac disease and diabetes as well as the autoimmune diseases psoriasis and Crohn’s disease. These are not conditions caused by run-of-the mill tort or workers compensation cases. They might occur as a result of medical or pharmaceutical malpractice, but that is not something practitioners are likely to see frequently.

Big Pharma Litigation
Predictably, passage of the Inflation Reduction Act provoked a rash of lawsuits from drug manufacturers challenging the law. Among others, plaintiffs Pharmaceutical Research and Manufacturers of America, Merck, and Janssen Pharmaceuticals have complained that the law unconstitutionally forces manufacturers to sell their products at below-market prices.

Briefing is ongoing, and appeals are sure to follow.

The Conclusion for the Claims Community

There was a lot of hoopla when this law passed about how it would finally tame the high cost of pharmaceutical drugs. However, the evaluation of cases with significant ongoing drug expense appears to be unaffected, at least for now.

Communicate! Why Are Counsel Non-Responsive?

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A recent CLM magazine article listed multiple reasons for claim processing inefficiencies. One was “unresponsive counsel.”

That got me thinking about why this should be.

Staff Counsel
Everyone is on the same team. Staff counsel have no motive to perform work to increase billings. Theoretically, at least, communication between Claims and staff counsel should be seamless.

Outside Counsel
Outside counsel who have secured a place on a carrier’s approved panel cannot rest on their laurels. These panels are routinely reviewed. Many carriers maintain departments or hire outside contractors to conduct deep-dive audits of panel counsel performance.

Panel counsel firms survive on income from their carrier clients. When panel counsel cannot handle the case due to a conflict of interest or geographic issues, outside counsel not on the panel may be appointed. They, too, want to keep getting these assignments.

So why would they put that at risk by failing to respond to client inquiries?

CUMIS Counsel
The insurer has the least amount of control over the activities of outside counsel who was chosen by the insured because of a potential coverage conflict of interest.  It may be difficult to obtain comprehensive reports because of the need to protect the insured’s continuing access to benefits from the insurer’s duty to defend.

Possible Reasons
Just as claims reps may be overburdened, so are their counsel. Many attorneys are juggling heavy caseloads that hinder their ability to respond promptly. Sometimes they automate their reporting by repeatedly sending in the same report with hardly any revision. If we’re being honest, let’s admit that some claims reps “check the box” that a report was received without drilling down to see if the case is progressing as it should.

Rather than creating a litigation plan unique to the case, many insurance defense attorneys defend on autopilot. They send out irrelevant discovery or concentrate on battening down facts when there is a dispositive legal issue applicable to the facts already known. I have also had claims reps tell me that their counsel ignore their directions.

Believe it or not, another reason may be that internal firm politics are getting in the way of efficient reporting.

A Solution For Settlement
We know that approximately 96% of all cases settle. I have reviewed many insurers’ litigation guidelines. Hardly any set rules about when to initiate mediation.

The earlier parties start talking about mediation, the earlier the case is likely to settle. Revising guidelines to define events, such as deposition of the plaintiff, which trigger evaluation of mediation at this time would be helpful.

If counsel (and perhaps claims) ignore the litigation guidelines, revision will be of little help. Of course, claims and defense counsel must cooperate to pay attention to their shared goal. Communication among all the players closes cases faster.

Medical Expense HopScotch

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Injury claimants are most likely to accept a settlement offer that 1) takes care of liens without wiping out the entire settlement and 2) provides a safety net for their future medical care. In mediation, I try to prompt negotiators to present proposals which show how a demand or offer addresses these issues. To do this, negotiators must review past medical expense records, understanding that claimants may hopscotch among payors or have concurrent payors as their status changes.

Private insurance Most Americans under 65 get health insurance through their or a family member’s employer. Some people may have purchased health insurance through an Affordable Care Act exchange such as CoveredCA.com; depending on their income, they may receive subsidies to reduce the premium. Claimants who are no longer able to work, and now have a pre-existing condition, may have transitioned from an employer’s plan to an Affordable Care Act plan. Some claimants may be self-procuring health insurance, including Medicare enrollees buying supplemental plans known as Medigap insurance and Part D prescription drug plans.

 

Workers Compensation will have paid past medical expenses for an accepted industrial injury.

 

Medi-Cal pays medical expenses for low-income individuals who qualify

 

Medicare provides medical care for disabled people who have qualified for Social Security Disability Insurance after 30 months, as well as for Medicare enrollees  who have reached  normal retirement age.

 

Out of pocket – Those with the financial ability to do so may self-pay when they lack insurance or want a procedure the insurer has denied or stalled.

 

“On a Lien” – When an attorney refers the client to a medical provider who provides services without charge, the provider has a lien on the ultimate case proceeds.

 

Every one of these possibilities (other than expenses paid out of pocket by the rare individual who can afford it) can give rise to a lien which must be resolved before settlement proceeds can be distributed. Negotiators should determine the extent of such liens before coming to mediation and be prepared with a plan to fund the injured person’s future medical needs.

Why Your Cases Aren’t Settling

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Why aren’t your cases settling? In his book, How to Talk to Strangers, best-selling author Malcolm Gladwell explains that we normally DTT, Default-To-Truth, when we receive communication. When we default to lies instead of to truth, we undermine our ability to get to resolution.

The Litigation Defaults-To-Lies
In almost every facet of our lives, most people take information at face value until something convinces them otherwise. Actually, it’s the only way a society can survive. Unfortunately, though, Gladwell points out, our default to truth lets people like Bernie Madoff, Jerry Sandusky and simultaneous CIA analyst and Cuban spy Ana Belen Montes perpetuate their crimes. Evidence built up, but the people who received the information rationalized it away.

The other end of the spectrum is when a person suspects everyone of being a liar and treats them that way. Gladwell analyzes the 2015 Texas police handling of the Sandra Bland arrest. Officer Brian Encinia habitually stopped motorists on the thinnest, and sometimes manufactured, pretexts as often as multiple times per hour, an off-the-chart frequency rate. He then found reasons to escalate the situation. The “view everyone with suspicion” philosophy of policing originated as a response to crime in a tiny geographic area, but, Gladwell writes, went out of control.
Litigants are often in the default-to-lie camp. When an adjuster was told a claimant’s position on an issue, the immediate reaction without any further information was, “She’s a liar.” Many claims and litigation professionals default to fight every issue, even when that’s a losing argument.

Transparency is the term for another negotiating problem, though it might be better called non-transparency. Transparency assumes that body language reflects what is going on in a person’s mind. An early reaction to remote mediation was an objection to not being able to closely observe someone’s facial expressions and body language. Gladwell documents that we are all very poor at correlating those things, even judges who use observation to set bail and police officers who are trained in assessing facial and body signals.

We humans can have many things going on in our brains at the same time. A facial expression may reflect something going on that has nothing to do with that person’s interaction with us at that moment. What’s more, different cultural groups use and interpret body language differently. The face 91% of Spaniards identified as angry was seen that way by only 7% of people who lived in the Tobriand Islands in the Solomon Sea.

The Lesson

Even when you are sure your evidence unquestionably contradicts your opponent’s position, active listening with an open mind can efficiently lead to settlement. Defaulting to lies does not.