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CMS Publishes Final Regulations on Conditional Payment Resolution via Web Portal

By , May 26, 2016 4:46 pm

031016_1424_CMSPublishe1.jpgOn May 17, 2016, the US Department of Health and Human Services (HHS) Centers for Medicare & Medicaid Services (CMS) published final rules on 42 CFR Part 411, Obtaining Final Medicare Secondary Payer Conditional Payment Amounts via Web Portal. The final rule “specifies the process and timeline for expanding CMS’ existing Medicare Secondary Payer (MSP) Web portal to conform to section 201 of the Medicare IVIG and Strengthening Medicare and Repaying Taxpayers Act of 2012 (the SMART Act).” The final rule “specifies a timeline for developing a multifactor authentication solution to securely permit authorized users other than the beneficiary to access CMS’ MSP conditional payment amounts and claims detail information via the MSP Web portal.” The final rule also “adds functionality to the existing MSP Web portal by permitting users to notify CMS that the specified case is approaching settlement; obtain time and date stamped final conditional payment summary statements and amounts before reaching settlement; and ensure that relatedness disputes and any other discrepancies are addressed within 11 business days of receipt of dispute documentation.”

The 2013 SMART Act and Interim Final Rule

The Medicare IVIG and Strengthening Medicare and Repaying Taxpayers Act of 2012 (the SMART Act) was enacted on January 10, 2013. Section 201 of the SMART Act amended section 1862(b)(2)(B) of the Social Security Act by requiring “the establishment of an internet Web site (referred to as the ‘‘Web portal’’) through which beneficiaries, their attorneys or other representatives, and authorized applicable plans (as defined in section 1862(b)(8)(F) of the Act (42 U.S.C. 1395y(b)(8)(F)) who have pending liability insurance (including self-insurance), no-fault insurance, or workers’ compensation settlements, judgments, awards, or other payments, may access related CMS’ MSP conditional payment amounts and claims detail information.”

On September 20, 2013, CMS published an interim final rule with comment period (IFC) that specified “a timeline for developing a multifactor authentication solution to securely permit authorized users other than the beneficiary to access CMS’ MSP conditional payment amounts and claims detail information via the MSP Web portal, add functionality to the existing MSP Web portal that permits users to notify CMS that the specified case is approaching settlement; obtain time and date stamped final conditional payment summary statements and amounts before reaching settlement; and ensure that relatedness disputes and any other discrepancies are addressed within 11 business days of receipt of dispute documentation.” CMS received 21 timely public comments.

CMS Final Changes to 42 CFR Section 411.39 Regulations

After consideration of all of the comments received, CMS finalized the provisions included in the September 2013 IFC with the following modifications to § 411.39:

  • Paragraph (a), removed the definition of ‘‘Medicare Secondary Payer conditional payment information’’ to avoid redundancy and confusion.
  • Paragraph (b)(1)(ii), revised language
  • Paragraph (b)(2), removed language related to Web portal functionality before 1/1/2016.
  • Paragraph (c)(1)(iii), removed the claims refresh requirement.
  • Paragraphs (c)(1)(iv) and (v), revised the language to clarify that a claim, meaning an individual conditional payment amount, or line item, on a payment summary statement, may be disputed once and only once. An individual or entity may submit disputes more than once, but never for the same conditional payment or line item.
  • Paragraph (c)(1)(viii), revised the language to clarify that settlement information must be submitted within no more than 30 days of reaching settlement in order for CMS to remain bound by any final conditional payment amount it provided through the Web portal.
  • Paragraph (c)(2), revised the language to clarify that a final conditional payment amount may be requested at any time after a recovery case has been posted on the Web portal.

Accessing Conditional Payment Information via the Web Portal

A beneficiary may access his or her Medicare Secondary Payer conditional payment information via the Medicare Secondary Payer Recovery Web Portal so long as the beneficiary creates an account to access his or her Medicare information through the CMS website and the appropriate Medicare contractor has received initial notice of a pending liability insurance (including self-insurance), no-fault insurance, or workers’ compensation settlement, judgment, award, or other payment and has posted the recovery case on the Web portal.

An applicable plan may obtain read only access of conditional payment information via the MSP Recovery Portal if the applicable plan obtains from the beneficiary, and submits to the appropriate CMS contractor, proper consent to release. An applicable plan may only obtain a final conditional payment amount related to a pending liability insurance (including self-insurance), no fault insurance, or workers’ compensation settlement, judgment, award, or other payment if the applicable plan has obtained from the beneficiary, and submitted to the appropriate CMS contractor, proper proof of representation.

Notifying CMS 120 Days Before Settlement, Judgment, Award, or Other Payment

Up to 120 days before the anticipated date of a settlement, judgment, award, or other payment, the beneficiary, or his or her attorney, other representative, or authorized applicable plan may notify CMS, once and only once, via the Web portal, that a settlement, judgment, award or other payment is expected to occur within 120 days or less from the date of notification.

CMS Compiles Conditional Payment Information and Post it on Web Portal Within 65 Days

The Medicare contractor compiles claims for which Medicare has paid conditionally that are related to the pending settlement, judgment, award, or other payment within 65 days or less of receiving the initial notice of the pending settlement, judgment, award, or other payment and posts a recovery case on the Web portal.

Resolving Disputed Discrepancies Within 11 Business Days

The beneficiary, or his or her attorney, or other representative may then address discrepancies by disputing individual conditional payments, once and only once, if he or she believes that the conditional payment included in the most up-to-date conditional payment summary statement is unrelated to the pending liability insurance (including self-insurance), no-fault insurance, or workers’ compensation settlement, judgment, award, or other payment.

The dispute process is not an appeals process, nor does it establish a right of appeal regarding that dispute. There is no administrative or judicial review related to this dispute process. However, disputes submitted through the Web portal will be resolved within 11 business days of receipt of the dispute and any required supporting documentation.

Requesting a Time and Date Stamped Summary Statement Within 3 Days of Settlement

When such disputes have been fully resolved, the beneficiary, or his or her attorney or other representative, may download or otherwise request a time and date stamped conditional payment summary statement through the Web portal. If the download or request is within 3 days of the date of settlement, judgment, award, or other payment, that conditional payment summary statement will constitute Medicare’s final conditional payment amount. However, if any claim disputes have not been fully resolved, he or she may not download or otherwise request a final conditional payment summary statement.

Submitting Documentation Within 30 Days of Settlement, Judgment, Award, or Payment

Within 30 days or less of securing a settlement, judgment, award, or other payment, the beneficiary, or his or her attorney or other representative, must submit through the Web portal documentation of the date of settlement, judgment, award, or other payment, including the total settlement amount, the attorney fee amount or percentage, additional costs borne by the beneficiary to obtain his or her settlement, judgment, award, or other payment. If settlement information is not provided within 30 days or less of securing the settlement, the final conditional payment amount obtained through the Web portal is void.

Procurement Costs Pro Rata Reduction and Issuance of Final Recovery Demand Letter

Once settlement, judgment, award, or other payment information is received, CMS will apply a pro rata reduction to the final conditional payment amount in accordance with § 411.37 and will issue a final MSP recovery demand letter.

Resolution of conditional payments continues to be a challenge for many beneficiaries, attorneys, corporations and their insurers. Case law continues to demonstrate it is creating havoc on settlements and producing substantial liability to beneficiaries, to beneficiaries’ attorneys and law firms, to self-insureds, and to insurers. These latest changes, brought about by the SMART Act, are well meaning. Their purpose is to provide all parties involved with a consistent mechanism to be able to resolve conditional payments on an expedited basis. However, there are strict time limitations that if not adhered to, will prevent parties from enjoying the quick and efficient resolution promised by the creation of Section 411.39. Optum Settlement Solutions’ conditional payments resolution team will assist clients sign up for the web portal, will help clients notify CMS of a potential settlement 120 days prior to taking place, will review the conditional payment letter produced within 65 days, will dispute any discrepancies, will update clients upon resolution of such discrepancies within 11 days, will ask for a demand amount within 3 days of the settlement date, will forward to CMS settlement documentation within 30 days of the settlement date, and once a pro-rata share of procurement costs have been deducted, will provide our client with a final demand from CMS to be paid within 60 days for final and complete resolution. If you would like to learn more about our conditional payments resolution products and services, please contact us at 888.672.7674, or at contactus@helioscomp.com.

CMS Updates List of ICD-9 and ICD-10 Codes Excluded from Mandatory Insurer Reporting

By , May 25, 2016 1:57 pm

CMS Stack of PapersAs the Center for Medicare and Medicaid Services (CMS) has previously indicated in their Section 111 NGHP User Guide, Appendix I (Excluded ICD-9 Diagnosis Codes) and Appendix J (No-Fault Excluded Diagnosis Codes), there are several valid ICD-9 and ICD-10 diagnosis codes that may not be submitted as part of Mandatory Insurer Reporting (MIR) Alleged Cause of Injury, Incident, or Illness (Field 15) or the ICD Diagnosis Code 1-19 (Fields 18-36) on the Claim Input File Detail Record. If an ICD-9 diagnosis code is submitted in Field 15, it must be a code starting with the letter E that is not on the excluded list. If an ICD-10 diagnosis code is submitted in Field 15, it must be a code starting with the letter V, W, X, or Y that is not on the excluded list. If an ICD-9 diagnosis code is submitted in the ICD Diagnosis Codes 1-19 (Fields 18-36), it cannot start with the letter E, cannot start with the letter V, and it cannot be a code on the excluded list. If an ICD-10 diagnosis code is submitted in the ICD Diagnosis Codes 1-19 (Fields 18-36), it cannot start with the letter V, W, X, Y, or Z, and it cannot be a code on the exempt list.

Periodically, CMS will update their exemptions list. On May 23, 2016, the Centers for Medicare and Medicaid Services, Office of Financial Management, Financial Services Group, published a Technical Alert on Medicare Secondary Payer (MSP) Mandatory Reporting Provisions Section 111 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (See 42 U.S.C. 1395y(b)(7)&(b)(8)). The Technical Alert specifically addresses new excluded ICD-9 and ICD-10 diagnosis codes.

The Alert indicates that beginning January 2, 2017, the following International Classification of Diseases, Ninth and Tenth Revision, Clinical Modification (ICD-9-CM and ICD-10-CM) Diagnosis Codes will be added to the list of excluded MIR diagnosis codes:

  • 999.9 (Other and unspecified complications of medical care, not elsewhere classified)
  • T88.7XXA (Unspecified adverse effect of drug or medicament, initial encounter)
  • T88.7XXD (Unspecified adverse effect of drug or medicament, subsequent encounter)
  • T88.7XXS (Unspecified adverse effect of drug or medicament, sequela)
  • T88.8XXA (Other specified complications of surgical and medical care, not elsewhere classified, initial encounter)
  • T88.8XXD (Other specified complications of surgical and medical care, not elsewhere classified, subsequent encounter)
  • T88.8XXS (Other specified complications of surgical and medical care, not elsewhere classified, sequela)
  • T88.9XXA (Complication of surgical and medical care, unspecified, initial encounter)
  • T88.9XXD (Complication of surgical and medical care, unspecified, subsequent encounter)
  • T88.9XXS (Complication of surgical and medical care, unspecified, sequela)

As a result, these codes along with those found in Table I-1 (pages I1 to I11) and in Table J1 (pages J1 to J23) of the Section 111 NGHP User Guide will not be accepted in the Alleged Cause of Injury, Incident or Illness (Field 15) or in any ICD Diagnosis Code (Fields 18-36). In addition, updates to previously submitted records using these excluded codes, will also be rejected.

As the most accurate and respected Section 111 MMSEA services provider in the MSP industry, since 2011, Optum Settlement Solutions’ MedicareConnect℠ has delivered Mandatory Insurer Reporting data to CMS on hundreds of thousands of workers compensation, no-fault, and liability claims. With multiple years of 99.99% error free responses from CMS, our MIR platform continues to deliver our clients comprehensive reliable information used to comply with MSP requirements, including using MIR data to resolve conditional payments and appropriately allocate for future set aside arrangements. For more information about our MedicareConnect products and services, as well as our SettlementComplete products and services, please contact us at 888.672.7674, or at contactus@helioscomp.com.

Virginia Federal District Court Allows Medicare Advantage Plan to File MSP Private Cause of Action for Double Damages against Medicare Beneficiary’s Attorney and Law Firm

By , May 18, 2016 9:52 am

On May 10, 2016, the United States District Court for the Eastern District of Virginia, Richmond Division, published its opinion on Humana Insurance Co. v. Paris Blank LLP and Keith Marcus, finding that based on the Medicare Secondary Payer Act, its private cause of action provision, CMS’ regulations and policy memos, and In re Avandia’s analysis allowing Medicare Advantage Organizations to seek double damages just like government, Humana is allowed to seek reimbursement of any conditional payments it paid regarding enrollee’s treatment related to the settled motor vehicle claim. The court makes it clear that since the plain language of the MSP Act fails to limit the parties against whom suit may be maintained, and CMS has previously promulgated regulations specifically allowing recovery of conditional payments from attorneys, Humana may maintain its suit against the law firm and attorney for recovery of conditional payments it made related to the claim.

Facts

Humana contracted with the Centers for Medicare and Medicaid Services (CMS) to administer Medicare benefits for those electing to receive their benefits through the Part C Medicare Advantage Organization (MAO) program. Enrollee elected to obtain Medicare Advantage benefits through Humana. On October 11, 2013, Enrollee suffered injuries as a passenger in a motor vehicle accident. As a result, Humana made conditional payments in the amount of $191,612.09 on Enrollee’s behalf to cover medical expenses. Enrollee engaged Keith Marcus (Attorney) and Paris Blank, LLP (Law Firm) (collectively Defendants) to represent him. As a result of a lawsuit initiated by Defendants, Enrollee received payments from several insurance companies totaling approximately $475,600.

On April 17, 2014, Rockingham Casualty Company issued to Humana and Paris Blank a check for $20,000. Attorney ultimately deposited the check without Humana’s endorsement. Humana contends a portion of these funds were distributed to Enrollee. Additionally, Donegal Mutual Insurance Company issued a check to Paris Blank for $250,000 under Enrollee’s underinsured motorist coverage. Humana pleads that companies issued checks to Paris Blank, Enrollee, or both, in the amount of $100,000 from State Farm Insurance Company, $100,000 from Rockingham Mutual Insurance Company, and another $5,600 from Donegal Mutual Insurance Company under Enrollee’s no fault policy.

On January 15, 2015, Humana communicated to Enrollee that he owed Humana $191,612.09 in reimbursements for the conditional payments it made for Enrollee’s medical expenses related to the settled motor vehicle claim. The communication sought payment within sixty (60) days and included information regarding the request of a waiver or the filing of an appeal. Attorney sent a request for waiver to Humana on Enrollee’s behalf. The request contained correspondence between Attorney and CMS purportedly showing that Enrollee did not owe any conditional payments or have any obligations under Medicare Part A and Part B. However, the correspondence did not address any obligations to any MAO.

Claims and Defenses

On April 23, 2015, Humana denied Enrollee’s request for waiver and, as of the filing of its Complaint here, had not received any reimbursement for the conditional payments. As a result, Humana here seeks reimbursement of the $191,612.09 conditional payments it made related to treatment associated with the settled motor vehicle claim directly from Attorney and Law Firm. Because Defendants have denied reimbursement, Humana seeks double that amount pursuant to MSP private cause of action double damages provision.

Defendants lodge several challenges to Humana’s Complaint. These challenges rest upon the assertion that “no private right of action exits permitting Humana to pursue recovery for any conditional payments.” Defendants therefore contend, this Court “should dismiss Humana’s Complaint in its entirety.” Without any binding Fourth Circuit precedent on point, Humana responds that this Court “should follow the reasoning of In re Avandia Marketing, Sales Practices, &Products Liability Litigation (In re Avandia), 685 F.3d 353 (3d Cir. 2012), in which the Third Circuit found that MAOs indeed could maintain a private right of action to recover conditional payments made on behalf of a beneficiary.”

The MSP authorizes the Secretary of HHS to make conditional payments—premised upon reimbursement—if the workmen’s compensation plan, liability plan, or no fault insurance plan has not made or cannot be reasonably expected to make payment for those items or services. §1395y(b)(2)(B)(i). The government may then bring an action for recovery of any conditional payments in the amount of double damages. §1395y(b)(2)(B)(iii). The statute also generally “establishes a private cause of action for damages (which shall be in an amount double the amount otherwise provided) in the case of a primary plan which fails to provide for primary payment (or appropriate reimbursement) in accordance with paragraphs (1) and (2)(A).” §1395y(b)(3)(A).

In In re Avandia, the Third Circuit addressed the precise question presented here: “whether §1395y(b)(3)(A) created a private right of action which a MAO could use to pursue recovery for conditional payments.” The Third Circuit found that the plain language of the statute “is broad and unambiguous, placing no limitations upon which private (i.e., non-governmental) actors can bring suit for double damages when a primary plan fails to appropriately reimburse any secondary payer.” In re Avandia, 685 F.3d at 359. The Third Circuit also found that “even if the court had found the statute’s language to be ambiguous, Chevron deference would have required the court to find MAOs could pursue recovery just as the government could, as regulations clarified that a MAO exercised the same right of recovery against a primary plan, entity, or individual as the Secretary did under the MSP law.” 42 C.F.R. §422.108. In addition, the Third Circuit also found that “a later memorandum from CMS further specified that CMS understood §422.108 to assign MAOs the right (and responsibility) to collect from primary payers using the same procedures available to traditional Medicare.” (Ctrs. for Medicare &Medicaid Svcs., Dep’t Health & Human Svcs. Memorandum: Medicare Secondary Payment Subrogation Rights (Dec. 5, 2011)).

Court Relies on In Re Avandia

Although not binding precedent, the Court here finds persuasive the Third Circuit’s determination that a MAO may pursue recovery pursuant to the private right of action in §1395y(b)(3)(A). “Section 1395y(b)(3)(A)’s plain language establishes a private right of action to recover double damages where a primary plan fails to pay. Absent from the plain language of the statute is any restriction upon who may utilize that private right of action.”

The Court further indicates that “even if the Court were to find the language ambiguous, CMS regulations afford MAOs the same rights to recover from a primary plan, entity or individual that the Secretary exercises under the MSP regulations.” In re Avandia, 685 F.3d at 366 (quoting 42 C.F.R. § 422.108). “This regulatory promulgation is a permissible interpretation of the MSP statute. This interpretation allows the MAO—an entity providing Medicare benefits under Part C—to exercise the same right to recovery as the government—an entity providing Medicare benefits under Parts A and B—for any conditional payment made for which the MAO ultimately should not have been responsible.”

Defendants describe In re Avandia as “aberrational” and note that the Third Circuit “is the only Circuit Court of Appeal decision holding that §1395y(b)(3)(A) provides a MAO a private cause of action for reimbursement.” Parra v. PacifiCare of Ariz., Inc., 715 F.3d 1146, 1154 (9th Cir. 2013). “This does not diminish the persuasiveness of the Third Circuit’s thorough and well-reasoned opinion. Moreover, other district courts outside of the Third Circuit have found In re Avandia’s reasoning persuasive and allowed MAOs to pursue a private right of action under the statute.” See, e.g., Humana Med. Plan, Inc. v. W. Heritage Ins. Co., 94 F. Supp. 1285, 1290-91 (S.D. Fla. 2015); Collins v. Wellcare Healthcare Plans, Inc., 73 F. Supp. 3d 653, 664-65 (E.D. La. 2014); Humana Ins. Co. v. Farmers Tex. Cnty. Mut. Ins. Co., 95 F. Supp. 3d 983, 986 (W.D. Tex. 2014). Accordingly, “although a dearth of courts may have decided the issue, the Court here hardly is the first to follow the Third Circuit’s well-reasoned opinion in In re Avandia.”

Defendants next aver that “Humana may not maintain suit against Defendants as a law firm and an attorney representing Enrollee.” Specifically, Defendants argue they “are not primary payers and, therefore, fall outside the scope of recovery provided by any private right of action.” Humana, on the other hand, argues the “statute’s language reaches broadly enough to allow recovery from any entity—including law firms and attorneys—receiving payment from a primary plan.” The Court here determines that “contrary to Defendants’ position, the law does not carve out exceptions for attorneys and law firms.” The statute generally establishes a private cause of action “in the case of a primary plan which fails to provide for primary payment.” 42 U.S.C. §1395y(b)(3)(A). Much like who may bring an action pursuant to the statute, “the plain language fails to limit the parties against whom suit may be maintained.”

The Court also explains that “to the extent the language is ambiguous, regulation dictates that MAOs exercise the same rights to recovery from a primary plan, entity, or individual that the Secretary exercises under the MSP regulations in subparts B through D of part 411 of this chapter.” 42 C.F.R. § 422.108(f). In addition, “CMS has promulgated regulations identifying attorneys as an entity from which recovery may be sought under the MSP law by the Secretary.” §411.24(g). Accordingly, the Court concludes “Humana may maintain suit against Defendants for recovery of conditional payments.”

Conclusion

Defendants ask the Court to dismiss Humana’s request for declaratory judgment. Defendants contend that because Humana has “failed to adequately plead any cognizable federal claim, declaratory judgment is inconsistent with the law.” Defendants additionally seek to dismiss Humana’s state law claims, arguing that this Court “should decline to exercise jurisdiction over those claims in the absence of original, federal question jurisdiction.” Defendants premise both of these argument on “the absence of a private cause of action pursuant to §1395y(b)(3)(A).” However, the Court here finds that “because Humana can maintain a private right of action and Defendants pursued no alternative avenues in attacking declaratory judgment or jurisdiction over the related state law claims, the Court denies Defendants’ Motion to Dismiss on those grounds and finds that Humana may pursue recovery pursuant to 42 U.S.C. §1395y(b)(3)(A).”

Much like US v. Harris in 2009 in which a West Virginia federal district court found plaintiff’s attorney responsible for reimbursement of conditional payments made by Medicare, seven years later, this Virginia federal district court similarly finds that plaintiff’s attorney and law firm are responsible for reimbursing conditional payments made by a Medicare Advantage Plan. This time however because the claim was brought under the MSP’s private cause of action provision, plaintiff’s attorney and law firm are looking at double damages, close to $400,000.

If there are any doubts that reimbursement of conditional payments is a big deal, this case should be a reminder to everyone involved in a settlement, judgment, award, or payment, or who may have simply accepted ongoing responsibility for future medical care in a claim, that whether a Medicare beneficiary, or their attorney and law firm, a corporate defendant, or their insurer, an employer, or their carrier, a self-insured, or their third party administrator, reimbursement of conditional payments to Medicare or to a Medicare Advantage Plan, or to a Prescription Drug Plan is serious business.

Whether dealing with Medicare’s Coordination of Benefits Recovery Center, the Commercial Repayment Center, an Advantage Plan, or a Prescription Drug Plan, Optum Settlement Solutions can help with every aspect of conditional payment resolution. From investigating whether conditional payments have been made, to reviewing each payment to determine whether they are related to the underlying claim, to disputing and appealing such payments, to dealing with US Treasury, our team of attorneys, claims specialists, and clinical experts can help you navigate the process to timely and cost-effectively resolve reimbursement of conditional payments.

Pennsylvania Federal District Court Refuses to Remove Case from State to Federal Court, Despite Claims of MSP Involvement

By , May 10, 2016 8:21 am

On May 3, 2016, the United States District Court for the Middle District of Pennsylvania published its opinion on Mikiewicz v. Hamorski and Erie Insurance Exchange, finding that simply because a state law claim involves a federal statute or would require a state court to make a determination as to the duties and obligations under the Medicare Secondary Payer Act, does not in and of itself provide a basis for removal from state court to federal court. Applying the well-pleaded complaint rule, the Court concludes that nothing on the face of Plaintiff’s motion to enforce the settlement agreement raises a question of federal law. The Court therefore removes the case from federal court and remands it back to state court.

Facts

On December 2013, Plaintiff Helen Mikiewicz had a motor vehicle accident with Defendant Stanley Hamorski, who was insured by Defendant Erie Insurance Exchange. The decision does not provide any details regarding the sequence of events leading up to the disagreement at hand, but it seems the parties reached an agreement to settle the matter, and sometime thereafter had some difficulty with seeing eye to eye on Medicare Secondary Payer (MSP) issues. As a result, on December 4, 2015, Plaintiff initiated this action in the Lackawanna County Court of Common Pleas alleging that Erie’s requirement to satisfy certain conditions in order to receive settlement funds violated Pennsylvania Rule of Civil Procedure 229.1, which requires settlement proceeds to be paid within twenty days of the execution of a Settlement Agreement and Release.

Approximately two weeks later, on December 17, 2015, Plaintiff filed a Motion to Enforce Settlement Release and Agreement against Erie. That same day, Erie filed its Answer and sought removal to federal court pursuant to 28 U.S.C. § 1441(a). According to Erie, removal to federal court was proper because Plaintiff’s claim involved federal law, the Medicare Secondary Payer Act (MSPA) and therefore federal question jurisdiction exists under 28 U.S.C. § 1331.1. Erie further maintains that removal is appropriate because the MSPA is an “extraordinary” statute that “completely preempts” state law. In response, on January 13, 2016, Plaintiff moved to remand the action back to the Lackawanna County Court of Common Pleas.

Plaintiff’s Claims Do Not Arise Under Federal Law

The Court reiterates that federal district courts have original jurisdiction over “all civil actions arising under the Constitution, laws, or treaties of the United States.” 28 U.S.C. § 1331. However, whether an action “arises under” federal law is governed by the well-pleaded complaint rule. If a federal question is presented on the face of the plaintiff’s complaint, 28 U.S.C. § 1441(a) generally permits a defendant to remove the action to federal court. Therefore, It is Erie’s burden to show that removal was proper and that the “action is properly before the federal court.”

Erie contends that federal question jurisdiction exists under 28 U.S.C. § 1331 because “the Plaintiff’s Motion to Enforce Settlement Release and Agreement involves the MSP, a federal statute and its provisions including but not limited to 42 U.S.C. Section 1395y(b), and, in particular, Medicare’s entitlement to reimbursement from the primary payer.” However, the Court here indicates that simply because a state law claim “involves” a federal statute or would require a state court to “make a determination as to the duties and obligations in the MSP Act,” does not in and of itself provide a basis for removal. Applying the well-pleaded complaint rule, the Court concludes that “nothing on the face of Plaintiff’s motion to enforce the settlement agreement raises a question of federal law.”

Instead, Erie raises federal law as a defense to Plaintiff’s claim. As the Supreme Court has long recognized, a “case may not be removed to federal court on the basis of a federal defense, including the defense of pre-emption, even if the defense is anticipated in the plaintiff’s complaint, and even if both parties concede that the federal defense is the only question truly at issue.” Therefore, Erie cannot, “merely by injecting a federal question into an action that asserts what is plainly a state-law claim, transform the action into one arising under federal law, thereby selecting the forum in which the claim shall be litigated.”

The MSP Act Does Not Completely Preempt State Law

Erie next asserts that removal is appropriate because the MSP “triggers the complete pre-emption doctrine because an interpretation of the MSP would set forth the obligation of all parties involved in civil litigation nationwide where there is an issue of whether Medicare is entitled to repayment of expenses incurred in civil litigation,” and the “issue is so extraordinary that a federal interpretation should completely preempt any state cause of action.” The “complete pre-emption doctrine,” a corollary to the well-pleaded complaint rule, provides that in certain limited circumstances “the pre-emptive force of a statute is so ‘extraordinary’ that it converts an ordinary state common-law complaint into one stating a federal claim for purposes of the well-pleaded complaint rule.”

“Once an area of state law has been completely pre-empted, any claim purportedly based on that pre-empted state law is considered, from its inception, a federal claim, and therefore arises under federal law.” Here, the Court points out that Erie pointed to no case supporting its assertion that the MSP is so “extraordinary” that it completely preempts state law and the Court is aware of none. In fact, courts in this Circuit have consistently held that a state law cause of action that “references or involves” the MSP or the Medicare statute is not removable to federal court because it does not raise a federal question. In addition, courts outside this Circuit consistently have held that “mere reference to the MSP and the Medicare statute is insufficient to confer federal question jurisdiction.”

Expenses, Costs, and Attorneys’ Fees

Plaintiff requests expenses, costs, and attorneys’ fees in connection with the Defendant’s improper removal to federal court. Pursuant to 28 U.S.C. § 1447(c) “an order remanding the case to state court may require payment of just costs and any actual expenses, including attorney fees, incurred as a result of the removal proceedings.” The Court here concludes that Erie lacked an objectively reasonable basis for removal. Plaintiff’s state law cause of action seeking to enforce a settlement agreement for allegedly violating state law–even if the claim hypothetically “involves” a federal statute such as the MSP–was plainly insufficient to permit removal. Because Erie’s arguments in support of removal wholly lack merit and have been consistently rejected by the federal courts, the Court concludes that Erie’s attempted removal of this action to federal court was objectively unreasonable. Accordingly, the Court grants Plaintiff’s motion for attorneys’ fees and costs under § 1447(c).

Conclusion

For the reasons set forth, the Court grants Plaintiff’s Motion to Remand to state court and for attorneys’ fees and costs. The case therefore is remanded to the Lackawanna County Court of Common Pleas, reminding us all that it is the claim before the court that will decide where the case belongs. Simply because an MSP issue may be a defense does not mean the case belongs in federal court. This case follows a long line of cases over the last several years in which state courts have applied and interpreted the MSP Act and resulting case law, applying it to the applicable state law. As always, Optum’s Settlement Solutions will continue to monitor and inform on the evolution of such federal and state case law.

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