Auto Club Insurance Association vs. The United States
Roy Franco
June 11, 2012

Auto Club Insurance Association vs. The United States, 103 Fed. Cl. 268, 2012 U.S. Claims LEXIS 28 (U.S. Court of Federal Claims) – The Medicare Secondary Payer Act is not a money mandating statute.  Therefore, a private no-fault insurer is barred against recovery from Medicare claiming to be a secondary payer.

Facts:  Plaintiff is a no-fault insurance carrier.  As a consequence of an automobile accident, which pre-dated the Medicare Secondary Payer Act (12/5/1980) no-fault benefits were paid.  Michigan has no cap for no-fault benefits.  Under its statute (Public Law 294) there is a requirement that the carrier pay for medical items or services, even if there are issues relating to other coverage or priority, and then to seek repayment or reimbursement from such other coverage.  The no-fault insurance carrier plaintiff, as a consequence of Medicare’s stated policy that it is primary for no-fault claims which took place before 12/5/1980, filed suit in Federal Claims Court to seek recovery of its secondary payment.


1)      Whether the No-Fault Carrier has jurisdiction against Medicare to recover benefits paid under the Tucker Act; and

2)      If so, whether the Medicare Secondary Payer Act is a money mandating statute which confers recovery rights to Plaintiff; or

3)      Is jurisdiction based on an implied in fact contract with the United States; or

4)      Is jurisdiction based on an illegal Exaction?

Opinion:  Issue #1:  Federal courts are courts of limited jurisdiction.  Plaintiff seeks jurisdiction under the Tucker Act (28 U.S.C. Section 1491).  Under this law, the U.S. partially waives its sovereign immunity for monetary damages which arise under the Constitutions, or any Act of Congress or any regulation of an executive department, or upon any express or implied contract with the United States, or for liquidated or unliquidated damages in cases not sounding in tort.  The Tucker Act only confers jurisdiction and does not create any substantive rights enforceable against the United States for money damages.  See United States vs. Mitchell, 463 U.S. 206, 216 (1983). To be cognizable, a plaintiff’s claim must be for money damages based on a “money-mandating” source of substantive law, and he must allege that he is “within the class of plaintiffs entitled to recover under the money-mandating source.”  See Jan’s Helicopter Serv., Inc. v. Fed. Aviation Admin., 525 F.3d 1299, 1309 (Fed. Cir. 2008).

Issue #2:  The Medicare Secondary Payer Act (42 U.S.C. Section 1395y(b)) is not a “money-mandating” statute and therefore Plaintiff’s claim fails under the Tucker Act.  The Medicare Secondary Payer Act is designed to vindicate “Medicare’s Rights,” not the private insurers.  Stalley v. Methodist Healthcare, 517 F.3d 911, 916 (6th Cir. 2008).   No benefits can be inferred to flow to private insurers as is supported by the language of the statute itself where a private cause of action is granted against private insurers for failing to pay Medicare conditional payments.

Issue #3:  In order for jurisdiction to set against the U.S. under an implied contract theory, Plaintiff must establish the elements of a contract:  offer, acceptance, consideration or actual authority.  Conclusionary allegations that allows for its priority right of recovery based on the statutes and regulations are insufficient.  Plaintiff fails because no proof was offered in this regard.

Issue #4:  As for an illegal exaction, because the Tucker Act allows suits against the federal government for money “damages in cases not sounding in tort”, it requires that the Government somehow be in receipt of the funds being demanded as part of the recovery.  In this case, Plaintiff paid the no-fault claimant’s health care providers.  No money was received by the federal government and there is no claim.

Franco Signor LLC Commentary: On its face this case appears outside the mainstream of Medicare Secondary Payer cases that impact the liability industry.  The No-Fault Carrier was forced to pay benefits under state law and claimed reimbursement from Medicare as the primary payer and failed in its attempt.  As the Court aptly states, Plaintiff’s “assertion of a right of reciprocal right of reimbursement is, unfortunately, only a wishful extrapolation with no basis in the text of the Medicare Secondary Payer Act.”  The private insurer lost, and this case further supports that this law is not intended beyond application to Medicare.  While the situation involving no-fault benefit payments for accidents that pre-date 12/5/1980 will become less and less important over time, the issue of private insurance carriers using the Medicare Secondary Payer to perfect recovery rights for Part C (Medicare Advantage) and Part D (Pharmaceutical) will become more mainstream.  This particular case raises that bar, and such private carriers will continue to face uphill battles in using the Medicare Secondary Payer Act as a sword in seeking recoveries against others.