WC not Subject to MSP Private Cause of Action Under 42 UCS 1395y(b)(3)(A)?

Medicare, Medicare Set-Aside Blog, MSP Litigation on September 27, 2013
Posted by Jennifer Jordan, JD, MSCC

Strict statutory construction strikes the MSP again. The US District Court for the Western District of Kentucky has interpreted the private cause of action provided under section 1395y(b)(3)(A) to only apply to group health plans. The case in question involved a death following a 2007 auto accident incurred during the course and scope of the decedent’s employment. While the employer disputed whether the death was related, the Kentucky WC Board found that it was on December 28, 2009 and ordered medical expenses be paid. Indemnity Insurance Company of North America was the carrier. The Estate moved to reconsider other parts of the order but the order to pay medical expenses remained, yet the $180,185.75 paid by Medicare remained unpaid.

The Estate filed suit under the MSP on September 13, 2012. MSPRC issued a conditional payment letter on September 18, 2012 instructing Indemnity to not make payment. The Final Demand Letter was issued on October 25, 2012 and Indemnity made payment on December 11, 2012. On February 25, 2013, Indemnity moved to dismiss this suit as the issue is now moot. Because matters outside the pleadings may not be considered in ruling on a Rule 12(b)(6) motion, the court converted the motion to a summary judgment motion since the CPL that Indemnity relies upon to make that case came after the suit was filed.

With regard to the defenses that the claim was not ripe when filed because Medicare had not yet made demand and that it was not moot as the debt was paid, the court did not find either of those arguments convincing. As to ripeness, the court found that nothing in the statute indicated that such a claim could only be brought once Medicare made demand and further opined that the purpose to such a private cause of action was to pursue reimbursement when Medicare is unaware of its rights to reimbursement. As to mootness, the court found that such a holding would be contrary to the language of the statute. Once a private cause of action has been filed, a defendant cannot escape double damages by making single payment. Although the court found for the Estate on both of these issues, they were irrelevant as the court ultimately found that the Estate has no claim under the MSP private cause of action.

To bring a private cause of action under § 1395y(b)(3)(A), the primary plan must fail to make payment in accordance with paragraphs (1) and (2)(A). Paragraph (1) deals only with group health plans and (2)(A) instructs Medicare when not to make payments. It is impossible for a primary plan to fail on both of these fronts and it was Congress that placed the conjunction between them. Referencing the 6th Circuit opinion in Bio-Medical Applications of TN, the court found that the only way to evoke the PCA provision is again a GHP that denied benefits for which Medicare is statutorily precluded from making payment for. (2)(A) has two separate subsections, one for GHPs and one for NGHPs, so given the conjunction in (b)(3)(A), it can only really work with subsection (i) governing GHP situations.

Although the court found that the Estate could not establish a private cause of action against Indemnity under the MSP, it declined to enter summary judgment in either party’s favor, providing the parties with an opportunity to address the court’s conclusions about the language of the statute. The court noted that “its holding would seem to take some of the wind out of the sails of the private cause of action provision. The court’s holding means, in essence, that only a “group health plan” may possibly be liable under that provision, even though other types of entities may be primary payers that fail to pay or reimburse Medicare. Nevertheless, the Sixth Circuit’s holding in Bio-Medical and the language of the statute appear to the court to compel this holding.”

Courts can only apply laws as written and the MSP is one of the most poorly cobbled together statutes ever written. As with this issue, the majority of statute appears to address group health situations and all other insurances as an afterthought. Worse, in application, CMS has historically attempted to treat all forms of insurance the same, as if they all were just like GHPs and responsible for ALL medical expenses. It was not until mandatory insurer reporting that CMS was educated in the many types of P&C insurances and none of that has worked its way into the statute or regs yet.

The last year has seen an uptick in (b)(3)(A) PCAs, mostly bastardized applications of the statute to permit cases that otherwise lack standing because I agree with this court that the statute was clearly written by Congress with only group health plans in mind. Not that Congress didn’t intend recovery from NGHPs when it amended the statute in 1980, it just didn’t do a very good job of accomplishing that. We desperately need judicial clarification or we need legislative overhaul. The Supreme Court has an opportunity in Caldera to address this the fastest as that is the same statutory provision in use there and the 5th circuit did not arrive at this same conclusion, putting these circuits in conflict. Otherwise we’re waiting for legislative change but we saw how long SMART took and how watered down the final product was. Either way, we need help because as this case demonstrates, 42 UCS 1395y(b)(3)(A) in its current state obviously does nothing to protect Medicare’s interests if Medicare’s repayment is irrelevant.


2013 U.S. Dist. LEXIS 138068
September 26, 2013, Filed