Phillips v. Kaiser

Medicare Set-Aside Blog on July 27, 2011
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On July 25, 2011, the US District Court for the Northern District of California dismissed an attempted class action using California consumer protection laws to dispute claims by a Medicare Advantage plan for reimbursement. Plaintiff alleges that nowhere in Kaiser’s evidence of coverage was it ever mentioned that she might have to personally repay the plan if she received a personal injury settlement or verdict, because apparently that may have influenced her decision to enroll. The court determined that Kaiser was extended secondary payer status by the Medicare Act, that Kaiser did not have a private cause of action under the MSP, that the MSP preempts any state law that tries to limit MSP rights, but ultimately it was determined that Plaintiff’s rights were merely a disguised claim for benefits for which she hadn’t exhausted administrative remedies so the case was dismissed.

Once I let the rage pass that yet another class action was pursued on the basis of “that’s my money and I don’t care if you did pay for the medical care that I received reimbursement for!”, I found that her claim did have some merit.  One of my principle problems with the government’s MSP effort is the inherent inequities that are created unintentionally (at least I hope that is the case).   Here Plaintiff may really be held to a higher reimbursement rate than a plain Medicare beneficiary if Kaiser’s negotiated rates are higher than the Medicare fee schedule so I have to wonder if equal protection can be waived.

The biggest problem I saw in the case was one of apportionment. Kaiser made a demand of $88,205.46 from a $100,000.00 settlement. Because of the discussion of California civil code limiting Kaiser to recovery of the sum of reasonable costs actually paid to perfect the lien, I have to assume that there were no reductions for even procurement costs. If the MSP is going to be used to support its rights to recovery of the full amount paid, then the regulations should at least apply equally as with the traditional plan. But as we have seen through the case law this last year, the MSP doesn’t apply to MAOs equally and that’s part of the fundamental conflict.

Setting aside my personal beliefs that apportionment should apply to traditional Medicare recoveries as well, in an MAO situation it is particularly true. Humana and Parra basically say that the MAO’s recovery rights lie in state court under subrogation, in which principles of equity apply. Medicare, no matter what form, should not be permitted to completely decimate a personal injury recovery representative of reimbursement for more than just medical expenses and that remains the primary battle we continue to face against CMS. Opponents of liability MSAs don’t recognize this as they would prefer to argue that Medicare has no post-settlement rights at all, but the fundamental flaw in Medicare’s demands against liability proceeds is the idea that it should be made whole in any situation, past, present or future, and liability recoveries just simply don’t lend themselves to that. Liability recoveries are limited by policy limits, statutory caps, state tort laws, etc. Some reasonable regulations about applying apportionment to MSP issues in liability recoveries and I think most of the MSP controversy in general disappears. If Congress truly intends to follow up in its recent interest in the MSP situation, I hope that it cleans up the entire program rather than add yet another MSP amendment band-aid to the mess. 

No. C 11-02326 CRB
2011 U.S. Dist. LEXIS 80456
July 25, 2011, Decided