Kentucky – Run for the Roses in MSP Litigation

Medicare Set-Aside Blog on March 3, 2011 | Posted by

If it doesn’t watch out, Kentucky is going to establish itself as the most active MSP state in the nation. Recently we commented on proposed workers’ compensation legislation that would require CMS’ approval of MSAs in Kentucky comp settlements when available [see 2/25 post ]. This week we have two more opinions out of the United States District Court for the Western District of Kentucky involving the MSP. Last October the Eastern District published an opinion deciding the same issue and in January, a state law case made it to the Kentucky Supreme Court on an issue regarding an MSA  (Hudson v. Cave Hill Cemetery, No. 2010-SC-000223-WC (Ky. 01/20/11).  In an area of law with not much published authority, this is quite a representation from one state. And the message from the district court cases to plaintiff lawyers is stop impleading Katherine Sebelius into your claims, she just isn’t going to participate.


In all of the district court cases, motions by the Secretary of Department of Health and Human Services to dismiss for lack of subject matter jurisdiction were all granted because administrative remedies were not exhausted and sovereign immunity not waived. In all of the cases, Plaintiff’s are generally looking to determine what amount will satisfy Medicare’s reimbursement rights. However rather than contact the MSPRC to obtain that information, they feel it is more efficient to drag the federal government to court, and some attempt to further request that failure to appear infers waiver of its reimbursement rights. While the decisions of the district court in these cases are absolutely correct, more important MSP issues don’t always make it into the opinion because it isn’t necessary to evaluate for purposes of granting the motion. Perhaps if people understood this issue better, they might stop bringing this particular claim. So here’s the answer: the amount in question is $0 because Medicare is not owed anything at that point in time.


An important distinction between liability and workers’ compensation insurance is when the MSP obligations are triggered. In work comp, the insurer/employer becomes the primary payer upon acceptance of the claim [establishment of ORM]. In liability insurance, there is no Medicare overpayment until a settlement, judgment or award takes place. Until that time, Medicare has no claim and any payments made are simply Medicare benefits paid on behalf of an entitled beneficiary. And until the obligation to make repayment exists and demand made, one can never exhaust administrative remedies. So unless Medicare is pursuing a subrogation claim pursuant to another separate statutory right granted it in the MSP, don’t plan on seeing the Secretary of Health and Human Services voluntarily participating in many court actions. And certainly stop bringing the claims in state court because they will just be removed to federal court and then dismissed and ultimately waste even more of your time.


HETTIE ALCORN, PLAINTIFF v. ALICESON PEPPLES, et al., DEFENDANTS
CIVIL ACTION NO. 3:10-CV-000284
UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF KENTUCKY
2011 U.S. Dist. LEXIS 19627
February 25, 2011, Decided
February 28, 2011, Filed



LINDA PORTMAN, PLAINTIFF v. WALTER S. GOODSON, et al.,
DEFENDANTS/THIRD-PARTY PLAINTIFF v. U.S. DEPARTMENT OF
HEALTH & HUMAN SERVICES, et al., THIRD-PARTY DEFENDANTS
CIVIL ACTION NO. 3:10CV-313-S
UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF
KENTUCKY
2011 U.S. Dist. LEXIS 19491
February 25, 2011, Decided
February 28, 2011, Filed



BENJAMIN HICKS, PLAINTIFF vs. JOE AND BARBARA CHAMBERLAIN, ET
AL., DEFENDANTS
CIVIL ACTION NO. 10-144-DLB
UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF
KENTUCKY, NORTHERN DIVISION
2010 U.S. Dist. LEXIS 112969
October 21, 2010, Decided
October 22, 2010, Filed