Settlement of Conrad v. Perales

December 1, 2006

Author: Peter Dellinger

In trickery, evasion, procrastination, spoliation, botheration, under false pretences of all sorts, there are influences that can never come to good. Charles Dickens, Bleak House, Ch 1, 1852.

The Scheme

While, the Conrad case mirrors the length and literary plot of a Dickensian novel, its origins lie in the 1980s when the New York State Department of Social Services (DSS) and the nursing home industry developed a joint funding plan called “MOP II”, the Medicare Optimization Program.  Under this scheme, nursing homes were allowed to bill both Medicaid and Medicare on behalf of nursing home patients, keep the proceeds from which ever program paid higher benefits (usually Medicaid), and send the remaining benefits (usually Medicare) to DSS.  This program was audaciously  illegal: if a patient is eligible for Medicare, federal law required the nursing homes “to accept Medicare reimbursement in full satisfaction of a patient’s covered services”.  Conrad v. Perales, 92 F.Supp.2d 175, 178 (W.D.N.Y. 2000).
 
MOP II not only defrauded the federal government, but also  thousands of nursing home patients who were eligible for both Medicare and Medicaid (dual eligibles), by unlawfully requiring them to pay for their Medicare covered care under the Medicaid Program.  “Unlike Medicare, Medicaid requires these patients to contribute most of their monthly income towards the cost of their care”.  Conrad v. Perales, 818 F.Supp. 559, 561 (W.D.N.Y.).  This patient co-payment, called a “NAMI” (Net Available Monthly Income), was collected by the nursing homes, and under MOP II nursing home residents paid over $10 million in NAMIs for Medicare covered-care. 

The Trickery

MOP II reached its height in 1989, when the Medicare Catastrophic Coverage Act expanded Medicare eligibility for those needing skilled nursing care.  During this year, some 14,000 nursing home residents, who were dually eligible for both Medicare and Medicaid, had their Medicaid NAMIs unlawfully collected by their nursing homes under the auspices of DSS.  Usually the nursing homes kept their patients’ NAMIs because the Medicaid reimbursement rate was usually higher, but “NAMIs were retained even when the ultimate reimbursement came from Medicare and the Medicaid  payment was reimbursed to DSS.”  Conrad v. Perales, 818 F.Supp. at 562.  DSS officially ended MOP II on January 1, 1990.

Evasion

Soon after, advocates for the elderly became aware of the illegal and defunct program, and DSS promised to issue NAMI refunds to affected clients.  In late December 1991, when these promised refunds were not forthcoming, Anthony Szczygiel, a SUNY at Buffalo Law School professor and attorney with Legal Services for the Elderly, filed a class action lawsuit challenging the MOP II program and demanding NAMI refunds for all affected New York State nursing home residents Conrad v. Perales, No. 91-846C (W.D.N.Y.).

Procrastination

DSS quickly consented to class certification and by March 1992 DSS promised in open court to repay the NAMI refunds to “disadvantaged” class members.  Through a highly successful series of stalling tactics and delays over the next six years, DSS, and its successor, the Department of Health, never identified the affected class members or issued the promised NAMI reimbursements.  In 1989 the Conrad plaintiffs were already frail and elderly, and plaintiffs believe that these delays were actually induced by the defendants in order to reduce the size of the class and curtail liability for the amount of paid refunds. 

False Pretences of All Sorts

Frustrated by the slow settlement process, the court ordered the plaintiffs to file “any motion...they believe will advance this litigation” in December 1998.  In response, the parties filed cross motions for summary judgment, and despite its prior promises and commitments to repay all the NAMI refunds, DOH claimed 11th Amendment immunity, and refused to pay NAMI refunds to anyone.

Spoliation and Botheration

In October 2000, the court directed that discovery be completed in 6 months, but the defendants repeatedly failed to comply with the discovery deadlines, destroyed or withheld critical documents from production, and filed false interrogatory responses.  Plaintiffs uncovered evidence demonstrating that the defendants had filed false and misleading affidavits in support of their prior summary judgment motion.  Professor Geoffrey Hazard, director emeritus of the American Law Institute, stated that “[c]onduct like that of defendants and their counsel threatens the integrity of the entire litigation process” and he had “never encountered such a an egregious failure and refusal to comply with elementary discovery obligations as involved here.”    

Great Expectations

After almost two years of court-ordered negotiations and fifteen years of litigation, the defendants have finally agreed to settle the case by paying up to $11 million in refunds to  each surviving plaintiff class member, or more likely, their surviving heirs.  Working for the plaintiffs, Larry

Glatz of the Center for Medicare Advocacy, has successfully identified the names of 14,000 class members using available computer data and discovery information, and determined the amount of their individual illegally collected NAMIs, which range from $100 to $5000. 

Notices regarding the proposed settlement are now being published in newspapers throughout the state, and the court has scheduled a class action settlement fairness hearing on December 28, 2006 in Buffalo.  If the settlement is approved by the court, defendants have agreed to help provide death certificates for each of the deceased plaintiffs.  With this information, the Conrad Settlement Administrator, Complete Claim Solutions, will attempt to locate heirs of the these class members, and mail them a NAMI refund claim form. 

The amount of any individual class member’s NAMI refund will be determined by the number of heirs identified and participating the settlement, the costs of administering the settlement, and the interest rate to be applied to the NAMI refund.  More information about the proposed settlement may be found at: http://tinyurl.com/yxxd24.

Peter Dellinger is an attorney with the Rochester office of Empire Justice Center.  Along with Anthony Szczygiel and Henry Killeen, III, he represents the plaintiffs in Conrad v. Perales.