After Reimbursing Conditional Payment Amount to Medicare, Workers’ Compensation Carrier Still Held Liable Under MSP Private Cause of Action

A recent case out of the United States District Court for the Western District of Kentucky, Estate of McDonald v. Indemnity Insurance Co., 2014 U.S. Dist. LEXIS 121902 (September 2, 2014), has set a new precedent for the use of the private cause of action under the Medicare Secondary Payer Act (MSP): a primary payer can be held liable for double damages despite the fact that it has already reimbursed Medicare.

The private cause of action within the MSP, which is located at 42 U.S.C. § 1395y(b)(3(A), states: “[t]here is established 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).”

This ambiguous provision of the MSP has been subject to interpretation in recent case law, due to the fact that the actual provision does not specify who may bring the private cause of action (the beneficiary, provider, Medicare)  and who it may be brought against (group health plans, non-group health plans, or both). Two cases in particular are worth highlighting prior to discussing McDonald.

1)     In Bio-Medical Applications of Tennessee, Inc. v. Central States Southeast and Southwest Areas Health and Welfare Fund, 656 F.3d 277 (6th Cir. 2011), a healthcare provider prevailed on a private cause of action under the MSP against a group health plan where it terminated a beneficiary’s coverage due to her Medicare entitlement (which induced Medicare to make conditional payments).

2)     Additionally, in Brain Surgeons, PLLC v. State Farm Mutual Automobile Insurance Co., 2014 WL 3440644 (6th Cir. July 16, 2014), a provider successfully prevailed on a private cause of action against a non-group health plan where the non-group health plan, a no-fault provider, denied coverage due to a purported pre-existing condition, which then prompted the provider to submit its bills to Medicare instead.

In McDonald, Clinton McDonald (“claimant”) was injured in a motor vehicle accident while in the course and scope of his employment. He suffered injuries as a result of the accident, and shortly thereafter passed away. Prior to his death, Medicare had paid $180,185.75 in medical bills to treat claimant between the accident and his death. Although the workers’ compensation carrier, Indemnity Insurance Company (“carrier”) initially disputed that claimant’s death was caused by the work related accident, the workers’ compensation board ordered carrier to pay for claimant’s medical expenses.

Subsequently, claimant’s Estate filed a lawsuit against carrier alleging that due to the fact that carrier had failed to reimburse Medicare for the medical expenses of claimant that Medicare had paid, the Estate was entitled to a double recovery of that sum under the private cause of action provision of the MSP. After the Estate filed its complaint, carrier received a conditional payment letter from Medicare stating that Medicare had made $181,326.38 in conditional payments for claimant’s healthcare. The conditional payment letter specifically stated within it that the carrier should “refrain from sending any monies to Medicare prior to submission of settlement information and receipt of a demand/recovery calculation letter from Medicare’s office, so as to eliminate underpayments, overpayments, and/or associated delays.”

Shortly thereafter, carrier received a “final demand letter” from Medicare asking that  carrier pay $184, 514.24 and that interest would be assessed on the amount if it was not fully resolved within 60 days of the date of the letter. Carrier then issued a check to Medicare for the $184, 514.24, and Medicare acknowledged receipt of the check and stated that the amount due had been reduced to zero.

The carrier then filed a motion to dismiss the Estate’s complaint with the understanding that the Estate’s lawsuit should no longer be a viable claim since Medicare’s conditional payment claims had been satisfied. The Estate contended that the carrier’s motion to dismiss should be denied, due to the fact that its complaint spurred the carrier to pay Medicare, and that its lawsuit accomplished what the MSP private cause of action was meant to accomplish: essentially that an errant workers’ compensation carrier has now paid Medicare what it owed Medicare for the past two years. Even though the carrier initially disputed that it was liable, once the workers’ compensation board concluded that claimant’s death was caused by the accident and that carrier was responsible to pay claimant’s medical expenses, carrier did not notify or seek to reimburse Medicare. Carrier did reimburse Medicare in full within sixty days of its receipt of Medicare’s request for payment; however, this occurred only after the Estate filed this lawsuit.

The court analyzed both Bio-Medical and Brain Surgeons, although neither case was exactly on point, in coming to its conclusion that the Estate would prevail on its private cause of action against carrier for double damages. It determined that the purpose of the private cause of action is to encourage beneficiaries to bring claims even if Medicare has already paid the beneficiaries’ expenses. Once a private cause of action claim has been lodged against a defendant, a defendant cannot escape the double damages provided for in that provision by paying single damages to Medicare. Additionally, carrier’s “no harm; no foul” argument disregards the two years between the order for this payment by carrier and the filing of this suit during which carrier did nothing to notify or reimburse Medicare. Therefore, as the Estate’s filing of the suit prompted payment in the amount of $184, 514.24, the Estate is entitled to the double damage in that amount to reward the Estate for its efforts.

This case should not be taken lightly. Although McDonald technically only applies in the sixth circuit, we now have a case where a beneficiary has been allowed to prevail on a double damages private cause of action claim against a workers’ compensation carrier, despite the fact that it had already paid Medicare and had done so within 60 days of Medicare issuing its final demand, prior to interest even accruing.

Traditionally, it has not been recommended to reimburse Medicare prior to Medicare issuing its final demand, but perhaps it is time to revise that recommendation based upon McDonald. Because this case will likely set a precedent for other jurisdictions, it would be wise for payers to become more proactive verify if any conditional payments are owed to Medicare immediately upon learning that a claimant is a Medicare beneficiary. Treading water and waiting for Medicare to issue a demand for payment is what caused the carrier in this case to be punished with double damages.

Helios Settlement Solutions encourages you to contact us to discuss any impact this case may have on your conditional payment handling. For questions, please contact Heather.Sanderson@helioscomp.com.

Leave a Reply