Appropriately Administratively Challenging Conditional Payments Saves Insurer from Double Damages
Yesterday, an opinion on a familiar case came out of the Sixth Circuit . The case is Duncan v. Liberty Mut. Ins. Co., Civil Action No. 16-CV-12570, 2019 U.S. Dist. LEXIS 106265 (E.D. Mich. June 25, 2019). You may recall that we discussed this case previously here on our blog in August, 2018. Last August, the case was remanded to the lower court to determine whether the Estate had standing to bring suit under the Medicare Secondary Payer’s (MSP) private cause of action provision, and subsequently if double damages may apply. As with all MSP cases we see on a regular basis, a plaintiff’s first hurdle is to demonstrate standing, which requires that a plaintiff show:
- he or she has suffered an injury in fact;
- that the injury is fairly traceable to the action of the defendant; and
- that the injury will be redressed by a favorable decision.
A brief background to refresh your recollection on this case:
- Liberty Mutual was David Duncan’s (Duncan) no-fault insurer, and Duncan was a Medicare beneficiary.
- Duncan sustained serious injuries after an automobile accident.
- Medicare subsequently made payment for Duncan’s medical expenses stemming from the accident.
- Duncan died one year after the accident.
- Liberty Mutual did not pay the medical expenses, determining that it was not liable under the no-fault policy, and the estate subsequently sued Liberty Mutual.
- A jury verdict determined that Liberty Mutual was responsible for the medical expenses.
- Liberty Mutual subsequently notified Medicare that it was the primary payer in relation to the accident, and accepted liability.
- Medicare responded and informed Liberty Mutual that claims had been identified in the amount of $174,815.20 in conditional payments; however, a final conditional payment amount had not been determined.
- Liberty Mutual committed to reimbursing Medicare upon receiving a final conditional payment demand.
- The Estate amended its complaint to include a claim for double damages under the Medicare Secondary Payer Act (MSPA).
- Liberty Mutual then removed the action to the United States District Court for the Eastern District of Michigan and moved for summary judgement on the issue of whether the Estate was entitled to pursue double damages under the MSPA.
- The District Court granted Liberty Mutual’s motion, and the Estate appealed the matter to the US Court of Appeals.
- The US Court of Appeals found that the lower Court failed to address the standing issue and remanded the matter to the district court.
Of significant note, additional conditional payments were identified in the amount of $225,668.29, which resulted in a request of double damages by the Plaintiff in the amount of $451,336.58.
Analysis by the District Court:
At the root of the standing issue, and whether the Estate was entitled to bring suit under the MSP is whether the defendant failed to provide primary payment or appropriate reimbursement under the MSP. The court determined the defendant did not do so, because it had committed to repaying Medicare, once liability was determined and once presented with the final conditional payment amount. The Court rejected the Estate’s argument that double damages liability should apply under the MSPA, specifically noting that the double damages provision should apply when an insurer has acted unreasonably in denying the underlying claim, which was not the case here. Id. at 8. In fact, Medicare originally accepted defendant’s defense of no-liability under the no-fault policy, and once the jury verdict determined defendant’s liability, defendant accepted responsibility which included the obligation to reimburse Medicare for its conditional payments. Moreover, the Court opined that a plaintiff does not satisfy the elements of standing simply by showing that the insurer failed to make payments and specifically, a plaintiff must show that an injury in fact was suffered because a primary payer has failed to pay. Id. at 11. In this case, the plaintiff did not show that the Estate had been personally and concretely affected by defendant’s failure to pay the medical expense at issues in the case. Id. at 17.
Takeaway and Commentary:
While this case continues to stand as an example of a private citizen using the private cause action provision of the MSPA to bring a suit for double damages, it also serves as an example of the importance in being diligent in investigating, disputing charges, and understanding the Conditional Payment Recovery Process. Understanding the Conditional Payment Recovery process includes understanding inner workings of the Medicare Administrative Appeals process. Of utmost importance in this case, is the fact that when Medicare first informed defendant that it was primarily responsible for Duncan’s medical bills, defendant used the available administrative appeal procedures and asked Medicare to change its determination. In these cases, parties often spend significant time and resources in litigating and defending a case, yet it all boils down to whether conditional payments have been properly addressed and handled timely. With any case, it is critical that the conditional payment issue is handled through established internal proactive processes to avoid unnecessary costs, undue delay, and drawn out litigation.
 The United States Court of Appeals for the Sixth Circuit has jurisdiction over federal appeals arising from the states of Kentucky, Michigan, Ohio and Tennessee
 See Id. at 10.