US v. Stricker Update

Medicare Set-Aside Blog on September 15, 2010 | Posted by

A recent increase in activity in the United States v. Stricker case culminated in a hearing on September 13, 2010 regarding various motions to dismiss. Since May of this year, several procedural motions were filed, however among them, the US filed an amended complaint on May 26, 2010, to which defendants AIG & Travelers moved to dismiss counts III & IV in June. In addition to arguments presented that they were not proper parties to the suit given that it was actually subsidiaries of theirs that wrote the policies, the insurers made interesting arguments as to the US’ claims not being timely filed. Given that settlement funds were actually paid by the insurers in September 2003, the US’ filing of its original complaint in December 2009, regardless of whether the six year statute of limitations adopted by the Courts from the False Claims Act rather than the 3 year one expressly provided in the MSP holds up or not, would ultimately prove to be 3 months too late. According to CMS manuals, the trigger for MSP obligations is an “insurance payment” in exchange for release from responsibility for medical treatment. The insurers made payment into the settlement fund in September 2003 when the settlement was reached and approved by the court despite the fact that those funds were not distributed to any of the injured parties until December.


On August 24, 2010, the pharmaceutical company defendants filed a counterclaim against the US basically seeking a ruling from the court regarding the $2.5 million dollar August 2010 settlement payment due to the Abernathy Trust Foundation, to which the government immediately moved to dismiss.  The Plaintiffs-in-Interpleader are essentially looking for a definitive ruling from the court as the whom the appropriate payee of this payment should be so as to avoid making payment into the trust, then potentially obtaining a judgment against them forcing them to pay it again to Medicare. To do so, the court would have to make a ruling as to nature of the underlying claim itself, which it is not likely prepared to do at this time. Regardless, it is unlikely that it will come to that as the court has the opportunity to dismiss the counterclaim on the grounds of sovereign immunity alone. Similar issue was just decided last month by the US District Court for the Eastern District of Kentucky in Gray v. Doe (2010 U.S. Dist. LEXIS 83067). In that case, the Plaintiff named Medicare a party to the suit, essentially demanding that it be required to participate in the litigation and assert a claim for reimbursement or forever be barred from doing so. The Secretary of HHS removed the action to federal court, then immediately moved to dismiss on the grounds that the government had not waived sovereign immunity and that the Plaintiff had not exhausted administrative remedies, which the court immediately granted. I would expect no less from the Stricker Court.


On September 13, 2010, a hearing was held before Judge Karon O. Bowdre on the various motions to dismiss. Today, she issued an order suspending responses to the Counterclaim, Cross-claim and Third Party Complaint in Interpleader and the United States’ Motion to Dismiss. It is presumed that the court is prepared to issue a ruling without anything further from the parties. Rumor is that the matter has been dismissed, but it is unclear as to whether that applies to the matter in its entirety or just as to certain named parties. The MSP industry anxiously awaits the order; however sadly, if the statute of limitations issue proves sufficient to dismiss the entire action, the court can do so without any discussion as to the appropriate use of the 6 years as opposed to the 3 expressly provided by the MSP, nor the appropriateness of the government’s claim for 6 years worth of post-settlement conditional payments. And so the debate continues….