Medicare Debt Recovery Using the False Claims Act

Medicare Set-Aside Blog on November 19, 2012 | Posted by


In many of my presentations this year, I have tried to emphasize that people should take a look outside the MSP at other federal debt collection laws to uncover additional exposures to potential Medicare recoveries that may not be adequately considered. There’s always that one person who wants to know a case name or statistics on how often the government pursues such matters, and I explain that I’m only raising the issue for awareness so that it can be factored into the risk management process. Well, no more. The United States has finally proved that I am not fear mongering and that the cause of action does in fact exist.

And so the story goes: the claimant worked for a privately-owned beverage distribution company in Smyrna, Georgia where he fell during work in March 2008. He applied for work comp benefits and was denied by AIG. Although the HR director was upset by the WC denial, the president of the TPA that administers the company’s employee health benefit plan advised her not to appeal the denial and told her that the plan would pay the claims and assist with compensation benefits. He spoke with the family, then notified the HR director that the employee declined FMLA leave and instead elected COBRA continuation coverage under the health plan. After few brief calls from the TPA and an email attaching the letter sent to the employee regarding the COBRA election, the employer believed that COBRA was elected and the matter taken care of. Instead, 180 claims totaling $341,802.09 were submitted to Medicare and it would like to be reimbursed. Claimant died at the end of May, and given that I’ve obtained all of this information from a discovery order, it is impossible to tell at this point whether his WC claim should have been compensable or not. As it stands, the primary issue is the COBRA election.

It is important to understand that, in 2009, Congress passed the Fraud Enforcement and Recovery Act of 2009 (FERA) and deleted several words from the statute to “clarify” (broaden) its reach. In doing so, it likely captured potential debtors in its net unintentionally; however, the new exposure exists just the same. Now, essentially anyone who “causes” an overpayment to be made by the federal government is susceptible to a recovery claim under the FCA. There does not need to be an intent to defraud, simply some understanding of the possibility that the government may make an improper payment due to that person’s actions would seem to be sufficient. The “clarification” was worded as follows:


SEC. 4. CLARIFICATIONS TO THE FALSE CLAIMS ACT TO REFLECT THE ORIGINAL INTENT OF THE LAW.
(a) CLARIFICATION OF THE FALSE CLAIMS ACT.—Section 3729 of title 31, United States Code, is amended—
(1) by striking subsection (a) and inserting the following: ‘‘(a) LIABILITY FOR CERTAIN ACTS.—
‘‘(1) IN GENERAL.—Subject to paragraph (2), any person who—
‘‘(A) knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval;


What was deleted following the word “presented” was that the claim previously had to be made to a representative of the government. By deleting that, the statute expands to any act that leads to the government making payment. Medicare debt was clearly not the primary intent, but given the environment for MSP enforcement now a days, you are certainly not going to see the feds not use it if they can. FCA actions carry a fine between $5,000 and $10,000 and treble damages.

Now under the relevant case law in this particular jurisdiction, this court is looking for the U.S. to prove: “(1) that the Defendants made a claim, or made a statement in order to get the Government to pay money on a claim; (2) that the claim or statement was false or fraudulent; and (3) that the Defendants knew that the claim or statement was false or fraudulent. See 31 U.S.C. § 3729(a)(1)(A)-(B).” [U.S. ex rel. Parato v. Unadilla Health Care Center, Inc., 787 F. Supp. 2d 1329, 1339 (M.D. Ga. 2011); see also id. (innocent mistakes or negligence by claimant are not actionable under the FCA, nor are imprecise statements arising from a disputed legal question)]. Therefore, this particular case will turn on whether a COBRA election was actually made. Regardless, even if FCA doesn’t stick, MSP will. Whether it be the Employee Health Benefit Plan or Workers’ Compensation (but for the failure of those involved to properly appeal as the HR director’s outrage would seem to infer would have been called for), Medicare should have been secondary and entitled to reimbursement. So the U.S. amends the complaint and only seek double damages – guess $700,000 will just have to do.

We shall follow this case to see how it ultimately shakes out. This order requires only that the government disclose to the defendants “factual information on several subjects including its experience and approach to the MSP statute in this setting, and communications about Mr. Archer’s claims;” therefore, this matter remains ongoing. It will be interesting to see how the MSP and FCA play out in conjunction with one another, and which one will ultimately win out in resolution of this claim.

UNITED STATES OF AMERICA ex rel. SAINT JOSEPH’S HOSPITAL, INC. and
CANDLER HOSPITAL, INC., Plaintiff, v. UNITED DISTRIBUTORS, INC.;
UNITED DISTRIBUTORS, INC. EMPLOYEE HEALTH BENEFIT PLAN;
COMMERCE BENEFITS GROUP AGENCY, INC. d/b/a COMMERCE
BENEFITS GROUP, INC.; THOMAS J. PATTON; and LINNIE P. REAVES,
Defendants.
Case No. CV410-096
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF GEORGIA, SAVANNAH DIVISION 2012 U.S. Dist. LEXIS 162836
November 14, 2012



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