Category Archives: Legal Matters

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.

Pennsylvania Federal District Court Dismisses Nursing Home MSP Private Cause of Action as Plaintiff Failed to Prove Nursing Home’s Responsibility to Pay Medical Bills

MSP Private Cause of ActionOn March 30, 2016, the United States District Court for the Eastern District of Pennsylvania published its opinion on Hope v. Fair Acres Geriatric Center, concluding that Plaintiff failed to show that Fair Acres’ responsibility to pay had been demonstrated by any of the means recognized in the Medicare Secondary Payer Act. Since there was no determination that Fair Acres was primarily responsible for Plaintiff’s Medicare payments, it cannot be said that Fair Acres failed to provide appropriate reimbursement. Thus, because Plaintiff has failed to establish that Fair Acres is a “primary payer” and Fair Acres’ responsibility to pay has yet to be demonstrated in any fashion, Plaintiff’s Medicare Secondary Payer private cause of action was dismissed.

In January 2014, Plaintiff Georgia A. Hope was admitted to Fair Acres, a county-owned nursing home located in Lima, Pennsylvania. Plaintiff was 90 years old at the time of her admission. During her stay at Fair Acres, Plaintiff experienced infection, gangrene, dehydration, and a lower extremity sacral wound that resulted in a partial leg amputation.

On December 22, 2015, Plaintiff filed her Complaint against Fair Acres, alleging negligence per se; negligence; corporate negligence; violation of civil rights under § 1983 for Fair Acres’ failure to provide the level of care and protection required by the Federal Nursing Home Reform Amendments (“FNHRA”), and Omnibus Budget Reconciliation Act of 1987 (“OBRA”) regulations, violation of Pennsylvania’s Unfair Trade Practices and Consumer Protection Law (“UTPCPL”), and violation of the Medicare Secondary Payer Act (“MSPA”), as to medical expenses incurred and paid for by Medicare.

On January 20, 2016, Fair Acres filed its motion to dismiss. Plaintiff then filed a response in opposition, and Fair Acres filed a reply memorandum. The Court held a hearing and in this decision addresses the motion to dismiss. Although the opinion addresses each of the allegations in the complaint and the motion to dismiss, for our purposes here, we focus only on the Plaintiff’s Medicare Secondary Payer Act claim.

A private cause of action is available under the MPSA when a primary payer fails to make required payments. 42 USC Section 1395y(b)(3)(A). A Medicare payment “may not be made  with respect to any item or service to the extent that payment has been made or can reasonably be expected to be made” by a primary plan. 42 USC Section 1395y(b)(2)(A). Examples of primary plans include group health plans, worker’s compensation laws or plans, automobile or liability insurance policies (including self-insured plans), or no-fault insurance policies. See 42 USC Section 1395y(b)(2)(A)(ii). Regulations promulgated under the MSPA define “self-insured plan” as an “arrangement, oral or written to provide health benefits or medical care or assume legal liability for injury or illness” under which an entity “carries its own risk instead of taking out insurance with a carrier.” 42 CFR Sections 411.21, 411.50(b).

Here, Plaintiff’s only allegation in the Complaint regarding Fair Acres’ “primary plan” status is “Defendants and/or its insurer are primary plans under the Act.” The Court here finds this is a legal conclusion and is therefore not entitled to the presumption of truth. Therefore, the Court finds Plaintiff failed to state a claim under the MSPA.

The Court also concludes that Plaintiff’s MSPA claim also fails because she has not demonstrated Fair Acres’ responsibility to pay for any services rendered. The MSPA provides, in relevant part, that “a primary plan, and an entity that receives payment from a primary plan, shall reimburse the appropriate Trust Fund for any payment made by the Secretary under this subchapter with respect to an item or service if it is demonstrated that such primary plan has or had a responsibility to make payment with respect to such item or service.” 42 USC Section 1395y(b)(2)(B)(ii).

Under the statute’s plain language, “responsibility” can be “demonstrated” by “a judgment, a payment conditioned upon the recipient’s compromise, waiver, or release (whether or not there is a determination or admission of liability) of payment for items or services included in a claim against the primary plan or the primary plan’s insured, or by other means.” 42 USC Section 1395y(b)(2)(B)(ii). See also 42 CFR Sections 411.22(b) (interpreting 42 USC Section 1395y(b)(2)(B)(ii) and describing the ways in which “a primary payer’s responsibility for payment may be demonstrated”). The thrust of the “demonstrated responsibility” requirement is that the payer’s responsibility to pay must be demonstrated as a matter of law.

Fair Acres argues that “a claim under the MSPA simply does not lie against a defendant whose liability to pay medical costs has yet to be determined.” Fair Acres contends that an “MSPA claim must be brought after the defendant is declared responsible for payment.” Plaintiff, on the other hand, suggests that “it is this present action that would contemporaneously demonstrate Fair Acres’ payment responsibility.” (stating that “by her complaint, Plaintiff seeks to recover monies paid by Medicare on her behalf from Defendant as a primary payer”).

The Court here indicates that the Third Circuit “has not addressed the interplay between the time when a defendant’s responsibility must be demonstrated and the time when a plaintiff can bring an MSPRA claim.” But the Court notes that the “Eleventh and Sixth Circuits have held that responsibility must be demonstrated as a condition precedent to bringing an MSPRA claim.” Glover v. Liggett Grp., Inc., 459 F.3d 1304, 1309 (11th Cir. 2006) (per curiam); Bio-Med. Applications of Tenn., Inc. v. Cent. States Se. & Sw. Areas Health & Welfare Fund, 656 F.3d 277, 293 (6th Cir. 2011).

In Glover, the Eleventh Circuit held that “an alleged tortfeasor’s responsibility for payment of a Medicare beneficiary’s medical costs must be demonstrated before an MSPA private cause of action for failure to reimburse Medicare can correctly be brought.” 459 F.3d at 1309. The court explained that “until Defendants’ responsibility to pay for a Medicare beneficiary’s expenses has been demonstrated (for example, by a judgment), Defendants’ obligation to reimburse Medicare does not exist under the relevant provisions.” Id. The court reasoned that if the alleged tortfeasor’s responsibility to pay was not demonstrated before a private MSPA action, “it cannot be said that Defendants have ‘failed’ to provide appropriate reimbursement.” Id. Furthermore, if the responsibility to pay were not first and separately demonstrated, “defendants would have no opportunity to reimburse Medicare after responsibility was established but before the double damages penalty attached” under the statute’s private cause of action.” Id.

Here, the Court indicates that “Plaintiff has failed to show that Fair Acres’ responsibility to pay has been demonstrated by any of the means recognized in 42 U.S.C. §1395y(b)(2)(B)(ii). There has been no determination that Fair Acres was primarily responsible for Plaintiff’s Medicare payments, so it cannot be said that Fair Acres has failed to provide appropriate reimbursement.” Therefore, the Court concludes Plaintiff has not satisfied the condition precedent to bringing her MSPA claim.

Thus, because Plaintiff has failed to establish that Fair Acres is a “primary payer” and Fair Acres’ responsibility to pay has yet to be demonstrated in any fashion, Plaintiff’s MSPA claim was dismissed without prejudice. The Court did however grant Plaintiff leave to amend her complaint should she be able to prove responsibility for such medical expenses in the future.

In Medicare Secondary Payer private cause of action for double damage circles, the question that continues to challenge everyone involved in work comp, liability, auto, no-fault, med pay, medical malpractice, products liability, and nursing home cases is whether the plaintiff must demonstrate responsibility for payment of the medical bills which Medicare ultimately makes payment on. There are now multiple cases on both sides of the issue, but of particular interest here is the fact that the Court did not discuss any of them except for Glover and Bio-Med.

The Court here failed to mention and discuss Humana Medical Plan and Humana Insurance Company v. GlaxoSmithKline, LLC, (USCA 3rd Circuit, June 28, 2012), concluding that without showing responsibility first, any private party may bring a private cause of action under §1395y(b)(3)(A). As a result, the court found that private parties like Humana can bring suit for double damages when a primary plan fails to appropriately reimburse any secondary payer. In addition, since 42 C.F.R. §422.108 states that an Medicare Advantage Organization will exercise the same rights to recover from a primary plan, entity, or individual that the Secretary of HHS exercises under the MSP regulations, the court found that the Medicare Act treats MAOs the same way it treats the Medicare Trust Fund for purposes of recovery from any primary payer.

The Court here also failed to mention and discuss Michigan Spine and Brain Surgeons, LLC v. State Farm Mutual Automobile Insurance Company, (USCA 6th Circuit, July 16, 2014), finding that although the text of the Medicare Secondary Payer Act is unclear as to whether a private cause of action may proceed against a non-group health plan that denies coverage on a basis other than Medicare eligibility, the regulations as well as congressional intent indicate that this requirement applies only to group health plans and not to non-group health plans. Therefore, the court concludes that despite not showing any proof of responsibility, Michigan Spine may pursue its claim under the Medicare Secondary Payer Act against State Farm.

Although it is not known yet whether Ms. Hope will appeal this decision to the US 3rd Circuit Court of Appeals, as always, please count on our Settlement Solutions team to keep you informed on the ongoing evolution of MSP private cause of action. If we can be of any help or assistance with your own MSP compliance program, including private cause of action issues or concerns, please contact us at 888.672.7674, or at contactus@helioscomp.com.