Michigan State Court Awards Double Damages on MSP Private Cause of Action Despite Payment

Rafael Gonzalez, Esq.

Vice President, Strategic Solutions

 

On February 17, 2016, the State of Michigan Circuit Court for the County of Oakland published its opinion on Hull v. Home Depot, finding that although Home Depot had already paid $42,233.16 to Medicare and Blue Cross Blue Shield Medicare Advantage Plan, because Mr. Hull’s filing of the MSP private cause of action prompted Home Depot’s payment of same, Mr. Hull is entitled to double damages and therefore awards another $42,233.60 to reward him for his efforts.

John Hull was employed by Home Depot when he injured his knee while at work in April 2010. In September 2011, he submitted a claim for workers’ compensation benefits, which was denied. Mr. Hull appealed the denial and ultimately a hearing before the Worker’s Compensation Board of Magistrates was held in March 2015. On May 5, 2015, the Magistrate rendered an order finding that Home Depot was responsible for paying medical expenses relating to the knee injury.

On June 26, 2015, Home Depot filed a claim for review appealing the Magistrate’s decision. While that appeal was pending, on August 3, 2015, Mr. Hull filed an action pursuant to the private enforcement provision of the Medicare Secondary Payer Act at 42 USC Section 1395y(b)(3)(A), not in federal court, but in the State of Michigan Circuit Court for the County of Oakland, seeking double damages for the $42,233.60 paid by Medicare and a Medicare Advantage Plan for medical treatment related to his work knee injury.

On August 13, 2015, Home Depot sent a letter to the Michigan Compensation Appellate Commission withdrawing its claim for review. As a result, the Commission entered an order granting the withdrawal on August 28, 2015. Consequently, on September 10, 2015, Home Depot paid $6,813.83 to Medicare and $35,419.33 to Blue Cross Blue Shield, the Medicare Advantage Plan which paid for the knee injury medical costs.

Having paid the outstanding Medicare and MAP conditional payments, Home Depot then filed for summary disposition of Mr. Hull’s MSP Private Cause of Action for double damages. Mr. Hull opposed Home Depot’s motion and filed his own summary disposition. In deciding summary disposition, affidavits, depositions, admissions, or other documentary evidence may be submitted. If pleadings show that a party is entitled to judgment as a matter of law, or if the evidence shows that there is no genuine issue of material fact, the trial court may render judgment.

The state court correctly points out that the Medicare Secondary Payer statute was enacted in the 1980s to reduce Medicare costs by making the government a secondary provider of medical insurance coverage when a Medicare recipient has other sources of primary coverage. The MSP statute permits Medicare to render conditional payments for medical expenses related to a worker’s compensation claim with the expectation that the primary payer will later reimburse Medicare if the primary care has or had the responsibility to make payment.

Although we generally see federal courts deal with these types of Medicare secondary payer issues, in this case, the state court indicates that there are two causes of action contained in the Medicare Secondary Payer statute. First the government itself may sue primary payers and obtain double damages to obtain money belonging to Medicare. 42 USC Section 1395y(b)(2)(B)(iii). Second, private citizens may collect doubled damages by bringing claims against primary payers to recover money owed. 42 USC Section 1395y(b)(3)(A).

Based on federal and state case law from around the country, the state court indicates that Congress has authorized a private cause of action and double damages to encourage private parties who are aware of non-payment by primary plans to bring actions to enforce Medicare’s rights. The court here indicates that without the double damages, the private party may not be motivated to take arms against an insurer because Medicare may have already paid the expenses and the private party would have nothing to gain by pursuing the primary payer. Therefore, with the private right of action and double damages, the private party can pay back the government and still have money left over as a reward for such efforts.

Here, Home Depot argues that because it voluntarily paid the amounts owed to Medicare and Blue Cross Blue Shield without a court ordering it to do so, dismissal is appropriate. They also argue that because Mr. Hull filed the double damages lawsuit while the Magistrate’s opinion was on appeal, his lawsuit is premature and cannot proceed. Home Depot also argues the complaint should be dismissed because it fails to state a valid claim. In other words, Home Depot argues that Mr. Hull must establish that Home Depot’s responsibility to pay such medical bills was demonstrated prior to the filing of the private cause of action.

The state court however dismisses Home Depot’s arguments by finding that the demonstrated responsibility provision limits lawsuits against tortfeasors, not lawsuits against private insurers. Here, because the claim arose out of worker’s compensation law, it is not a tort action against Home Depot, and therefore there is no tortfeasor, but a private insurer. Consequently, Mr. Hull was allowed to proceed without having to demonstrate Home Depot had the responsibility to pay such medical expenses.

Home Depot also argued that it was entitled to summary disposition because Mr. Hull filed this action before a final adjudication of Home Depot’s responsibility by the appeals commission was entered. Since Home depot paid the amount owed within seven days of receiving the appeals order granting withdrawal of its claim for review, Home Depot argued that the case should be dismissed.

The state court finds the fact that Home Depot paid after receipt of the order does not insulate it from liability. The state court points out that the very same issue was already decided by the USDC in Kentucky in Estate of McDonald v. Indemnity Insurance Company of North America, wherein the federal court concluded that once a private cause of action is filed, a defendant cannot escape double damages by paying single damages to Medicare after the law suit is filed.

In Estate of McDonald, the Kentucky Worker’s Compensation Board found that the decedent’s death was caused by the work accident and issued an opinion ordering worker’s compensation benefits to be paid and medical expenses to be reimbursed. Because Medicare was never reimbursed for the conditional payments it made related to the workers compensation claim, the estate brought a private cause of action against the worker’s compensation insurer. After the lawsuit was filed, but before the federal court heard the case, the insurer paid the amount owed and later argued that because it had made payment, it did not owe double damages. The federal court however disagreed, finding that once a private course of action has been launched, a defendant cannot escape double damages by paying single damages to Medicare after the lawsuit was filed.

Here, the state court points out that Home Depot refused to pay for Mr. Hull’s medical expenses for nearly five years. Home Depot paid the medical expenses only after Mr. Hull filed his private cause of action for double damages. The court therefore found that this course of conduct is not permitted in light of the clear intent and purpose of the Medicare Secondary Payer Act. As a result, Home Depot’s motion for summary disposition was denied and Mr. Hull’s counter motion for summary disposition was granted. Although Home Depot had already paid $42,233.16, because Mr. Hull’s filing of the suit prompted Home Depot’s payment of same, the state court found that Mr. Hull was entitled to double damages and therefore awarded another $42,233.60 to reward him for his efforts.

As we have been communicating for several years now, Medicare Secondary Payer compliance is becoming more and more complex. The MSP private cause of action provision has certainly made compliance more complicated, and many would say even more risky for payers. This is the second published case where despite reimbursing the conditional payments made by Medicare or a Medicare Advantage Plan, a payer has been found to owe double damages because reimbursement was made after the lawsuit seeking double damages was filed. The case law from around the country has allowed medical care providers, injured workers, the estate of the deceased injured individual, and Medicare Advantage Plans to file and ultimately collect double damages under the MSP private cause of action provision. And there are new and ongoing efforts by law firms, collection agencies, and new business ventures specifically set up to chase after such double damages. Make no mistake about it, this is not going away. If the last five years are any indication, this is a trending area we expect will continue to grow and become more significant, more active, and more expensive.

Helios Settlement Solutions is the country’s leading Medicare Secondary Payer compliance services provider. We offer comprehensive MSP compliance services, including mandatory insurer reporting of ongoing responsibility for medical, ICD-9 and ICD-10 codes, and total payment obligation to claimant, conditional payment investigation, analysis, and resolution, as well as set aside allocations, approval, and administration. To speak with us about these industry leading risk management, mitigation, and prevention tools, please contact us at 888.672.7674, or at contactus@helioscomp.com.

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About Rafael Gonzalez

As vice president of strategic solutions, Rafael Gonzalez serves as a thought leader on all aspects of Medicare and Medicaid compliance issues, including mandatory insurer reporting, conditional payments resolution, Medicare set aside allocations, CMS approval, and professional administration of Medicare set asides and special needs trusts. Prior to joining Helios, over the last 30 years, Rafael served as director of Medicare & Medicaid compliance and post settlement administration for Gould & Lamb in Bradenton, Florida. Before that, he served as chief executive officer for the Center for Lien Resolution, the Center for Medicare Set Aside Administration and the Center for Special Trusts Administration in Clearwater, Florida. Prior to that, he served as corporate counsel for FCCI Insurance, a workers’ compensation/property casualty insurance company in Sarasota, Florida. And before that, he practiced social security disability, workers’ compensation, longshore and personal injury law in Tampa, Florida. Rafael Gonzalez received his Bachelor of Science degree from the University of Florida and his Jurisprudence Doctorate degree from the Florida State University.

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