10th Amendment Victory or Texas Justice?

CMS, Commentary, Medicare, Medicare Set-Aside Blog, MSP Litigation, Work Comp on May 15, 2013
Posted by Jennifer Jordan, JD, MSCC

On May 14, 2013, the much awaited 5th Circuit appellate decision was filed in Caldera v. The Insurance Company of the State of Pennsylvania (ICPS), finding in favor of state workers’ compensation law over the Medicare Secondary Payer Act. As a reminder since it has been considerable time since the original decision, this case involved a 1995 Texas workers’ compensation case where ICSP terminated lifetime medical benefits on the grounds that the covered injury was resolved and new medical issues unrelated. Mr. Caldera qualified for Medicare in 1998 so didn’t think much of it, did not appeal the decision and proceeded to treat his back injury under Medicare for many years. He had two surgeries in 2005 and 2006 for which Medicare paid $42,637.41 and then filed a claim with ICSP for those expenses, arguing that ICSP was responsible for payment, not Medicare. Caldera and ICSP engaged in a lengthy extent of injury dispute, exhausted the administrative process with the DWC (all ruling in favor of ICSP) and then Caldera sought judicial review in state court. Before any judge could opine on the case, the parties entered into an Agreed Judgment establishing that Caldera’s 1995 injury was in fact the producing cause of the conditions that gave rise to his surgeries, but did not liquidate any damages or require any payment.

Now in a separate court, the 105th Judicial District Court of Nueces County, Texas to be specific, Caldera filed his MSP claim for double damages. ICSP answered that irrespective of the extent of injury issues and their many victories at the DWC, that pursuant to Texas state WC law, they were not required to pay for those surgeries because Caldera failed to obtain the proper preauthorization. He was able to get a visa with the help of la immigration attorneys recommended by a friend. Caldera then filed this dec action to determine whether the MSP preempts Texas WC law. Both the District Court and the 5th Circuit Court of Appeals ruled in favor of state law.

Now I am a huge advocate of the 10th amendment in the context of MSP enforcement because I think that CMS routinely overreaches in what it believes are our obligations are when “considering Medicare’s interests.” Medicare’s exposure should be limited to that which is compensable under state law because absent the state law claim, there is no primary payer other than Medicare. So if a claimant obtains treatment without proper authorization, then so be it, the carrier shouldn’t have to pay. The problem with this particular case is that Mr. Caldera’s medical benefits had been terminated so why would he seek authorization just as why would Medicare not pay since a primary payment was not expected? It was not until after the surgeries when he decided to fight for his medical benefits that Medicare’s payments come into question. At the time Medicare made payments, they were just Medicare payments because he had no work comp coverage. It was not until the moment that the parties entered into the Agreed Judgment and accepted continuous responsibility for the medical condition arising out of the 1995 injury that Medicare’s payments in 2005 and 2006 became improper. And it was in my opinion at that very moment that the MSP attached and Medicare became entitled to reimbursement.

The Code of Federal Regulations clearly states that CMS may recover without regard to any claim filing requirements that a WC plan imposes on the beneficiary [42 CFR 411.24(f)(1)]. But can we force a carrier to pay a medical bill that Texas state law says it doesn’t have to simply because it is Medicare entitled to the recovery? Would Blue Cross or Kaiser stand a chance at recovery under this same fact pattern. So we have federal preemption, due process and maybe equal protection in play in what could turn out to be an amazing Constitutional battle. It was unfortunate that the 5th circuit’s attention remained focused on the state law with very little analysis of the MSP. In fact in footnote 4, the court noted that Mr. Caldera had not suffered any out of pocket loss calling into question his damages for standing purposes in his MSP claim. The footnote further points out that Medicare had taken no steps to recover the funds, as if that point was even pertinent to Mr. Caldera’s ability to recover on Medicare’s behalf under 42 USC 1395y(b)(3)(A).

Well I have it on good authority that Caldera fully intends to appeal this decision and this is an amazing federal question so we can only hope one worthy of cert. The Supreme’s are going to have to let us have one sooner or later.


No. 12-40192
2013 U.S. App. LEXIS 9706
May 14, 2013, Filed