Paying Medicare Does Not Stop MSP Private Cause of Action Once Filed

CMS, Medicare Set-Aside Blog, MSP Litigation on September 3, 2014
Posted by Jennifer Jordan, JD, MSCC

In the latest installment of what constitutes a private cause of action under the MSP, the US District Court for the Western District of Kentucky entered summary judgment on September 2, 2014 in favor of the estate of a Medicare beneficiary that filed suit over a conditional payment the defendant subsequently satisfied with Medicare in the amount of that conditional payment.  The case stems from a 2007 MVA that was disputed by the workers’  compensation carrier yet eventually ruled compensable by the state board in 2010. Having not reimbursed Medicare still, the estate filed suit for double damages under the MSP on September 13, 2012. Coincidentally, the carrier finally received a conditional payment letter from MSPRC on September 18, 2012 and because it specifically said not to send payment, did not satisfy the debt until after the December 11, 2012 demand letter was received. Medicare sent acknowledgement of the payment on January 11, 2013 and the carrier filed a motion to dismiss on February 25, 2013 to which the estate responded with a motion for summary judgment.

On September 25, 2013, the court declined to rule in favor of either party. In that opinion, the Court provided extensive analysis of the MSP and the ruling in Bio-Medical Applications of Tennessee, Inc. v. Central States Southeast and Southwest Areas Health and Welfare Fund (6th Cir. 2011), essentially holding 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.” Because neither party addressed whether the estate could obtain summary judgment, the court denied all motions to provide the parties an opportunity to address the court’s conclusions about the language of the statute.

Since that time, the 6th Circuit Court of Appeals ruled in Michigan Spine and Brain Surgeons, PLLC v. State Farm Mutual Automobile Insurance Company on July 16, 2014 that the private cause of action provision under the MSP could be used against a non-group health plan and remanded that case back to the district court. The estate filed notice of this ruling being directly on point to the case at hand and the court was then able to move beyond that issue and analyze the original summary judgment issues of whether or not the estate’s claims were ripe at the time the suit was filed since Medicare had not made a demand for payment and whether the issue became moot once the debt was satisfied. The court found that nothing in the statute says that a PCA can only be filed after Medicare demands reimbursement and such an interpretation would be contrary to incentivizing beneficiaries to bring suits on Medicare’s behalf. Furthermore, a defendant cannot escape the double damages provision by paying single damages to Medicare. The court concluded that the estate was entitled to summary judgment in the amount of $180,514.24.

This ruling is significant for two reasons. First we are again widening the door for who can bring MSP private causes of action and against whom. While there was a trend developing in the case law that applied a strict interpretation of the poorly worded MSP that would limit PCAs to GHP applications, this ruling returns us to the O’Connor v. Mayor and City of Baltimore days where a comp claimant can bring a claim against his employer/insurer for comp related Medicare payments made on his behalf. But more importantly, this case should make many carriers reevaluate their wait and see approaches for handling Medicare reimbursements. Although it is widely known that you should never send Medicare money that it is not expecting as you will not receive the proper credit for it, many carriers actually hide behind this practice because if you don’t ask, maybe Medicare will never ask for the money. If Medicare does happen to catch up to you, this practice still has the effect of providing interest free floats and reimbursement made at rates lower than any otherwise available to anyone other than Medicare. Often adjusters are aware that a claimant is receiving treatment but that they are not approving payments, therefore they know that someone else is paying and in the post-MMSEA Section 111 days, it is impossible to ignore that a claimant is Medicare entitled anymore. It is situations such as this, where they are turning a blind eye, that will open the employer/insurer up to these double damages.

It is my belief that the MSP private cause of action litigation is far from resolved because the statutory language continues to be contradictory to the congressional intent of the provision. But while I dislike the the fact that the defendant is being punished for working within the Medicare system, dysfunctional as it is, I do think this is the correct outcome. Even post-MMSEA reporting, no one is better positioned to know who should be responsible for payment than the beneficiary and it is actually the beneficiary’s workers’ compensation rights at issue as well. If the employer/insurer refuses to acknowledge state mandated responsibility or worse, accept responsibility but still fail to reimburse, Medicare is entitled to reimbursement and the beneficiary obligated to help procure the same. But unless and until CMS changes its policies, it is not entirely fair to punish anyone to the tune of $180,000. Perhaps in this particular case had the carrier been able to establish that they had tried harder to reimburse Medicare in the two years following claimant’s death, then maybe the court would not have automatically granted the maximum amount permissible under the MSP.



2014 U.S. Dist. LEXIS 121902
September 02, 2014