Category Archives: Legal Matters

North Carolina Federal Court Finds Provision on Anticipation of Medicare Eligibility within 30 Months of Settlement Does Not Concede Potential Social Security Disability

051816_1352_VirginiaFed1.jpgOn June 1, 2016, the United States District Court for the Eastern District of North Carolina published its opinion on Boone v. Colvin, concluding that in deciding Plaintiff’s credibility pertaining to her Supplemental Security Income (SSI) application, the administrative law judge (ALJ) incorrectly used a portion of the workers compensation settlement agreement addressing future Medicare eligibility. Because the issue was entitlement to SSI, not Disability Insurance Benefits (DIB), the fact that the settlement agreement indicated there was no reasonable expectation that Plaintiff will be Medicare eligible within thirty months of the settlement, did not mean Plaintiff conceded or agreed she was not disabled under the Social Security Administration rules for SSI benefits.

Case History

Ms. Boone, the Plaintiff in this case, had an accident in the course and scope of her employment on December 2, 2004. As a result of her industrial accident, she suffered a disc herniation at L4-5, which was initially treated with pain management. Ultimately, she had an artificial disk implantation on February 5, 2007. Thereafter, she reached maximum medical improvement on July 5, 2007 with permanent light duty restrictions and a 15 percent partial disability rating. After negotiating with her employer/carrier, on March 30, 2009, she agreed to and was awarded a $75,000 settlement by a workers’ compensation judge, terminating any and all entitlement to indemnity and medical benefits she may have had pursuant to the North Carolina workers’ compensation law. After attorney fees and costs, she netted $56,000.

The workers’ compensation settlement agreement contained a provision regarding future medical benefits. Because she was not then a Medicare beneficiary, had not applied for social security disability benefits and was not within 30 months of reasonably anticipating becoming a Medicare beneficiary, the agreement included language stating “it is not the intention of the instant settlement agreement to shift responsibility for future medical benefits to the federal government. Having considered Medicare’s potential interest in future medical expenses, the parties have agreed no Medicare set aside amount is necessary by way of this claim. In determining no set aside is necessary, the parties considered various matters, including but not limited to the following: Plaintiff is not Medicare eligible and there is no reasonable expectation that Plaintiff will be Medicare eligible within the next thirty (30) months. It is noted that the future need for medical care and treatment is disputed in this case as previously noted in this agreement. It is further noted that this settlement agreement specifically forecloses the possibility of future payment of medical benefits incurred after the date of the settlement agreement.”

Although the opinion does not indicate whether at a previous point the Plaintiff may have been insured for Disability Insurance Benefits (DIB), by the time she applied for social security benefits, she was not insured for DIB, therefore applied only for Supplemental Security Income (SSI). Almost six years after her date of accident, and more than three years after her settlement, Plaintiff filed an application for SSI on July 14, 2010, alleging a disability onset date of December 2, 2004, her workers’ compensation date of accident. The application was denied initially and upon reconsideration, and a request for a hearing was timely filed. While waiting for the hearing to be scheduled, on May 9, 2011, the North Carolina Department of Health and Human Services (NCDHHS) allowed Plaintiff Medicaid benefits.

On February 9, 2012, a video hearing was held before an ALJ. The ALJ issued a decision denying Plaintiff’s claims on March 9, 2012. Plaintiff timely requested review by the Appeals Council. More than a year later, on April 15, 2013, the Appeals Council allowed the request and remanded the case with instructions that the ALJ further evaluate Plaintiff’s medically determinable mental impairments, evaluate the May 9, 2011 decision by the NCDHHS allowing Plaintiff Medicaid benefits and give further consideration to Plaintiff’s residual functional capacity (RFC), providing appropriate rationale for it with specific supporting references to evidence of record.

On December 5, 2013, a second hearing was held before a different ALJ On March 24, 2014, the ALJ issued a decision again denying Plaintiff’s claim for SSI. Plaintiff timely requested review by the Appeals Council. More than a year later, on June 25, 2015, the Appeals Council denied the request for review. Almost 11 years after her date of accident, and more than 5 years from the date of her application for SSI, on August 31, 2015, Plaintiff commenced this proceeding for judicial review of the ALJ’s decision.

Administrative Law Judge Findings

Plaintiff was 42 years old on the date she filed her application for SSI and 45 years old on the date of the hearing, therefore considered a younger individual. 20 C.F.R. § 416.964(b)(3). The ALJ found that she had at least a high school education. 20 C.F.R. § 416.964(b)(4). The ALJ further found that Plaintiff had past relevant work as a driver, fire watcher, transporter and child care provider.

Applying the five-step sequential evaluation analysis of 20 C.F.R. § 416.920(a)(4), the ALJ found at step one that Plaintiff had not engaged in substantial gainful activity since the date of her application. At step two, the ALJ found that Plaintiff had the following medically determinable impairments that were severe within the meaning of the Regulations: post-laminectomy syndrome, lumbosacral spondylosis and chronic back pain. At step three, the ALJ found that Plaintiff’s impairments did not meet or medically equal any of the Listings.

Due to concerns about the Plaintiff’s credibility, the ALJ next determined that Plaintiff had the RFC to perform a limited range of light work. Based on her determination of Plaintiff’s RFC, the ALJ found at step four that the Plaintiff was not capable of performing her past relevant work. At step five, the ALJ accepted the testimony of the vocational expert and found that there were jobs in the national economy existing in significant numbers that the Plaintiff could perform, including jobs in the occupations of silver wrapper, routing clerk and advertising material distributor. The ALJ therefore concluded that Plaintiff was not disabled from the date of her application, July 14, 2010, and therefore not entitled to SSI.

Evaluation of the Workers’ Compensation Agreement

On appeal, Plaintiff asserted that the ALJ’s decision should be reversed and SSI benefits awarded or, alternatively, that the case should be remanded for a new hearing on the principal grounds that the ALJ erroneously evaluated the state Medicaid decision and the workers’ compensation settlement into which Plaintiff entered into on March 30, 2009 in determining Plaintiff’s credibility.

At the second step of the assessment, the ALJ found that Plaintiff’s allegations were not fully credible. The ALJ stated that “the claimant’s statements concerning the intensity, persistence and limiting effects of her symptoms are not entirely credible.” The ALJ provided specific reasons for her credibility determination, including an assessment of the workers’ compensation agreement.

The ALJ deemed the “not reasonably eligible for Medicare within 30 months of settlement” provision inconsistent with Plaintiff’s claim of disability. In other words, the ALJ found that because the claimant herself agreed in the workers’ compensation settlement agreement there was no reasonable expectation she would become Medicare eligible within 30 months; in effect, “she conceded that she agreed she was not disabled under the Social Security Administration rules at that time.”

Improper Use of Medicare Eligibility Provision to Evaluate Credibility

On appeal, Plaintiff contends that “the agreement and the specific Medicare eligibility provision does not relate at all as to whether or not she meets Social Security requirements.” The court finds merit in this point indicating that “while entitlement to a period of disability and disability insurance under Title II of the Act (DIB) establishes entitlement to Medicare benefits, 42 U.S.C. § 426(b)(2)(A)(i), entitlement to SSI does not. Plaintiff’s agreement to the provision could reflect simply Plaintiff’s pursuit of SSI rather than DIB.”

The Commissioner of the SSA agrees that the ALJ was evaluating the Medicare eligibility provision from a DIB perspective and that the ALJ erred in doing so. “The Commissioner concedes that the ALJ’s interpretation of the agreement was ill-founded.” The Commissioner argues, nonetheless, that the ALJ’s error in discounting Plaintiff’s credibility on the basis of the provision in the workers’ compensation agreement is harmless. She cites to the other significant evidence the ALJ discusses in support of her credibility assessment. The court here however indicates that “while the evidence is admittedly extensive, the court cannot say that the ALJ’s error was harmless.”

One reason is that the ALJ did not indicate the weight she gave the inconsistency she found between the provision in the workers’ compensation agreement and Plaintiff’s claim of disability. “The decision fails to foreclose the possibility that the ALJ’s error significantly tainted her view toward Plaintiff’s credibility and her evaluation of other evidence bearing on Plaintiff’s credibility.”

Moreover, Plaintiff’s claim of disability relies substantially on her allegations of pain and other limitations resulting from her back impairment. “Because symptoms, such as pain, sometimes suggest a greater severity of impairment than can be shown by objective medical evidence alone, any statements of the individual concerning his or her symptoms must be carefully considered if a fully favorable determination or decision cannot be made solely on the basis of objective medical evidence.” Soc. Sec. Ruling 96-7p, 1996 SSR LEXIS 4, 1996 WL 374186. Thus, “the credibility of Plaintiff’s statements about her pain and other symptoms and their functional effects are of particular importance to the propriety of her disability claim.”

In addition, the court here alludes to the fact that Plaintiff was not well equipped to understand the interrelation between DIB, SSI, Medicare, Medicaid and workers compensation. “She is not a lawyer and does not have a college degree. As noted, the ALJ found at one point that she obtained a GED, but only had an

eighth grade

education. While Plaintiff expressly represented in the workers’ compensation agreement that she had read and fully understood it, the implicit concession the ALJ found arguably falls outside the scope of simply understanding the agreement. There does not appear to be any evidence showing that Plaintiff’s lawyer or anyone else explained to her any impact the provision in question could have on a claim by her for Social Security disability-based benefits. The ALJ herself does not appear to have properly understood the statutory interrelation on which she grounded her finding.”

Conclusion

The court concludes that the ALJ committed prejudicial error in her evaluation of Plaintiff’s credibility. As a result, the court recommends this case should be remanded for further administrative proceedings. In making this ruling, the court expressed no opinion on the weight that should be given to any piece of evidence, as that is a matter for the Commissioner to decide.

Although this is an SSI case, which sometimes affects Medicare eligibility, this is a worrisome case for many reasons. First, it clearly demonstrates that even when injured individuals stipulate in their settlement agreements there is no reasonable anticipation of Medicare enrollment within 30 months of settlement, when injured individuals apply for benefits and allege a retroactive date of disability onset which matches the date of accident, if successful, Medicaid or Medicare coverage may also become effective within 30 months of the date of the settlement. Those who have been following Medicare Secondary Payer compliance over the last fifteen years see CMS pursuit of a primary payer or applicable plan for reimbursement of any conditional payments it may make related to the accident that gave way to eligibility for benefits and therefore Medicare coverage.

Second, the case shows how the language and ideas expressed in a workers compensation, auto, longshore, medical malpractice, no-fault, products, or general liability settlement, agreement, release or stipulation matter and may be significant to other parties, including federal agencies like the SSA and CMS. As the ALJ did here, it is no longer unthinkable for an ALJ deciding entitlement to DIB benefits, which has a direct correlation to Medicare, to use the language regularly included in such agreements when contemplating MSP compliance to conclude that no anticipation of Medicare eligibility within 30 months of settlement means the claimant concedes he or she is not disabled.

Third, the case provides a blue print for potential federal false claims. Given the direction that false claims case law has gone over the last several years, it is no longer inconceivable to think that the federal government would interpret the language used by litigants, such as the parties in this case, as a purposeful shift to taxpayers for the future responsibility of any and all medical expenditures related to the settled non group health plan claim.

As part of our MSP compliance services, Optum Settlement Solutions offers a review of clients’ settlement release, agreement or stipulation by our legal team to ascertain if Medicare’s interests have been properly considered and appropriate protective language has been included. Our legal team, with years of experience as claims handlers, trial attorneys, appellate lawyers and MSP compliance counselors, will discuss ideas and strategies as well as provide recommendations and suggested language to comply with MSP statutory, regulatory and case law mandates.

Appropriate Authorization: Required CMS Forms to Resolve Conditional Payments

signing-paperPursuant to the Medicare Secondary Payer Act (42 USC Section 1395y(b)(2), Medicare does not pay for items or services to the extent that “payment has been, or may reasonably be expected to be made through a liability insurer (including a self-insured entity), no-fault insurer or workers’ compensation entity (Non-Group Health Plan (NGHP).” However, if Medicare pays for items or services related to the NGHP claim, then the Benefits Coordination & Recovery Center (BCRC) is responsible for ensuring that Medicare gets repaid for any such conditional payments when a settlement, judgment, award, or other payment is made. If no settlement, judgment, award, or other payment is made, and the NGHP has accepted ongoing responsibility for medical (ORM), the Commercial Repayment Center (CRC) is responsible for ensuring that Medicare gets repaid for any such conditional payments. https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Beneficiary-Services/Medicares-Recovery-Process/Medicares-Recovery-Process.html

Pursuant to the Privacy Act of 1974 (5 USC Section 552a), Medicare “will not release information from a beneficiary’s record without appropriate authorization to do so.” For Medicare beneficiaries who have filed a claim for liability insurance (including self-insurance), no-fault insurance, or workers’ compensation, and a settlement, judgment, award, or other payment has been made, this means that the BCRC must receive either a “Proof of Representation” signed by the beneficiary and the beneficiary’s attorney or other representative or a “Consent to Release” signed by the beneficiary. https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Beneficiary-Services/Medicares-Recovery-Process/Downloads/POR-vs-CTR.pdf If no settlement, judgment, award, or other payment is made, and the NGHP has accepted ongoing responsibility for medical (ORM), this means that the CRC must receive a “Letter of Authority” signed by the Applicable Plan and its representative or agent. https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/InsurerServices/Insurer-NGHP-Recovery.html

Proof of Representation

The Proof of Representation (POR) is required when a beneficiary has authorized an individual or entity to act on the beneficiary’s behalf. “The representative has no independent standing, but may receive or submit information/requests on behalf of the beneficiary, including responding to requests from the BCRC, receiving a copy of the recovery demand letter if Medicare has a recovery claim, and filing an appeal (if appropriate) when that beneficiary is involved in a liability, workers’ compensation, or auto/no-fault situation.” Therefore, when using a POR, the exchange of information is a two way street. The individual or entity may receive and provide necessary information to or interact with the BCRC, on behalf of the beneficiary, in order to resolve Medicare’s recovery claim. https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Attorney-Services/Downloads/Liability-No-Fault-and-Workers-Compensation-Recovery-Process.pdf

An individual/entity with a POR will be able to “submit information/requests, receive copies of all mail related to the case (e.g., the Rights and Responsibilities letter, the Conditional Payment Letter, the Demand letter, etc.), receive identifiable health information, respond to requests from the BCRC, or resolve and dispute any potential recovery claim that Medicare may have” if there is a settlement, judgment, award, or other payment. https://www.cob.cms.hhs.gov/MSPRP/help/userManual/MSPRPUserManual.pdf

Consent to Release

The Consent to Release (CTR) is required when “a beneficiary has authorized an individual or entity to receive certain information from the BCRC for a limited period of time. The CTR does not give the individual or entity the authority to act on behalf of the beneficiary.” Therefore, when using a CTR, the exchange of information is a one-way street. The beneficiary has authorized the BCRC to provide privacy protected data to the specified individual/entity, but this does not authorize the individual/entity requesting information to act on behalf of/make decisions on behalf of the beneficiary. https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Coordination-of-Benefits-and-Recovery-Overview/Non-Group-Health-Plan-Recovery/Non-Group-Health-Plan-Recovery.html

An individual or entity with a verified CTR will be able to receive copies of all mail sent related to the case (e.g., the Rights and Responsibilities letter, the Conditional Payment Letter, the Demand letter, etc.). https://www.cob.cms.hhs.gov/MSPRP/help/userManual/MSPRPUserManual.pdf

Letter of Authorization

The Insurer Letter of Authorization (LOA), or sometimes also known as the Recovery Agent Authorization, is required “to inform Medicare that a liability insurer (including self-insured entities), no-fault insurer, or workers’ compensation entity wishes to be represented by another party. The identified representative can act on behalf of the insurer regarding an MSP recovery case and is authorized to take any actions or make any decisions needed to resolve Medicare’s recovery claim on behalf of the Applicable Plan, primary payer or debtor.” https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/InsurerServices/Downloads/Recovery-Agent-Authorization-Model-Language .pdf

An individual/entity with a LOA will be able to “submit information/requests, receive copies of all mail related to the case (e.g., the Conditional Payment Notice, the Demand letter, the Redetermination letter, the Reconsideration, etc.), receive identifiable health information, respond to requests from the CRC, or resolve any potential recovery claim that Medicare may have” if there has been no settlement, judgment, award, or other payment, and ORM is or has been accepted. https://www.cob.cms.hhs.gov/MSPRP/help/userManual/MSPRPUserManual.pdf

Model Language

Optum Settlement Solutions is happy to assist to either amend or create the appropriate authorization form for you and/or your client. Proof of Representation model language may be found at https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Beneficiary-Services/Medicares-Recovery-Process/Downloads/Proof-of-Representation-Model-Language.pdf, Consent to Release model language may be found at https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Beneficiary-Services/Medicares-Recovery-Process/Downloads/Consent-to-Release-Model-Language-.pdf, and Letter of Authorization model language may be found at https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/InsurerServices/Downloads/Recovery-Agent-Authorization-Model-Language .pdf

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

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

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.