Supreme Court Denies Cert in Yet Another MSP Case

Commentary, Medicare Set-Aside Blog, MSP Litigation on April 16, 2013
Posted by Jennifer Jordan, JD, MSCC

What does it take to get the Supreme Court to listen to an MSP case anyway?  On April 15, 2013, the Supreme Court denied cert in In re Avandia. While I don’t disagree with their decision, I do share in the industry frustration over not being able to get before the high court. Any statutory interpretation by the Court would provide some much needed clarification of our actual obligations under the MSP versus CMS’ interpretation thereof.

The fundamental reason I agree with the Court’s decision is that Medicare Advantage Organizations (MAOs) are in fact secondary payers. To determine this, you must connect many dots between the Medicare Act and the Code of Federal Regulations, but MAOs are secondary payers with all of the rights of the Secretary of Heath and Human Services, which is the original problem of the District Court. By trying to adopt pertinent provisions of the Medicare Act so as not to reinvent the entire wheel, Congress bound MAOs to the same recovery requirements as traditional Medicare and gave only a subrogation right to pursue claims in court. The private cause of action used by traditional Medicare is limited to use by the United States. However, there is no reason an MAO can’t use 42 USC 1395y(b)(3) given that it has Article III standing where the MAO will suffer an actual loss if prevented from recovering.

One has to understand the mechanics of how the MAOs work to see the injury in fact. When a Medicare beneficiary elects to sign up with an MAO in lieu of traditional Medicare, Medicare pays the private insurer a captitated rate per beneficiary, then the MAO actually pays whatever medical payments for that individual regardless of whether it is over or under the capitated amount. In a Secondary Payer situation, Medicare reduces the captitation rate for that beneficiary, making the reimbursement more of a loss to the MAO, but there is still Medicare money in play. By not allowing MAOs to satisfy their obligations under the Medicare Act, MAOs would suffer actual financial damages sufficient to prove an injury in fact to both it and Medicare.

Unfortunately, this decision appears to have widened the door as to what can fit through 42 USC 1395y(b)(3) – the worst example being the Michigan Brain and Spine Surgery Center case. This suit was filed by the provider who had already elected to accept and received a conditional payment from Medicare, meaning that it had suffered no personal loss. When a beneficiary files, he or she suffers a benefit denial and when an MAO files, it suffers out of pocket losses; however, a provider who has submits a bill that causes the government to make an ‘overpayment’ is not suffering a loss. Perhaps the government should take a look at that transaction under the False Claims Act microscope.

Regardless, the deed is done and we shall continue to muddle through without the Supreme Court’s help. The problem with MAOs is not the right to bring a private cause of action, but the same problem as all other Medicare collection efforts, which is determining what amount is owed. It is unreasonable to believe that the government is entitled to 100% reimbursement, which can be doubled if suit is filed, regardless of the underlying issues of the case. Without application of principles of equity, the settlement system breaks down, which is exactly what we are experiencing. Fix that and I think most of the whining would stop once and for all.

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