In 1980, Congress passed the Medicare Secondary Payer Act (MSP) in response to a dramatic increase in Medicare expenditures. See Baptist Mem’l Hosp. v. Pan Am. Life Ins. Co., 45 F.3d 992, 997 (6th Cir. 1995). In doing so, it constructed this law with several safeguards to protect the integrity of the Medicare Trust Fund. One of these is the Medicare Secondary Payer private cause of action which allows the Medicare beneficiary to bring suit for double damages against an insurance company (including self insurance) for a failure to reimburse Medicare for conditional payments related to a liability or workers’ compensation claim. See 42 U.S.C. 1395y(b)(3)(A). Whether this particular claim is viable or not continues to be litigated. Several recent attempts to exercise this right have met with dismissal. See Cheryl Geer v. AMEX Assurance Co., 2010 U.S. Dist. LEXIS and Sullivan v. Farm Bureau Mutual Insurance Co., 2011 U.S. Dist. LEXIS 35817 (Western Dist. Of Michigan). Consequently, most in the industry do not give it much consideration when reviewing their Medicare Secondary Payer Compliance protocols. However, it remains our opinion this is a potentially explosive claim which must be properly dealt with at the time of a settlement, judgment or award.
We start with the obvious concern. No court has concluded this cause of action to be invalid or without merit. Thus, it must have purpose based on general principles of statutory interpretation. Cases will be dismissed if the private cause of action is premature. However, if the conditions are met, they will go forward.
To be successful, all a Medicare beneficiary has to do is establish that the following two conditions have been met: 1) Medicare must have paid benefits on behalf of the claimant; and 2) The primary plan must be “responsible” for paying the benefits that were otherwise paid for by Medicare. This is the roadmap provided in recent cases. See Greer, supra and Sulivan, supra. The private cause of action fails if either condition is not met.
Because of these pre-conditions, the MSP private cause of action cannot be used as leverage to facilitate unwilling parties to the bargaining table. As much as some would have wanted that to be the law (See The Medicare Secondary Payer Act – A Diamond in the Rough!, by R. Neuworth and K. Goldberg), the present court decisions simply do not support it. Responsibility for paying these benefits must first be established and that cannot happen when the parties are still litigating the claim.
MSP responsibility can only be demonstrated against an insurance company, including self insurance, under the Act by a settlement, judgment, award or other payment for the liability or workers’ compensation claim. See 42 U.S.C. §1395y(b)(2)(B)(ii). If the Medicare beneficiary can identify any of these, then the MSP cause of action is sustainable.
A will Court will recognize the MSP private cause of action when the above conditions are met. The only target of the lawsuit will be the insurance company or self insured that resolved the underlying claim. The insurance company, including self insurance, must have protocols in place to mitigate against that possibility. But, what are the situations that can give rise to a private cause of action being filed by a Medicare beneficiary?
Settlements with Unrepresented Medicare Beneficiaries
When a primary plan deals directly with a Medicare beneficiary, extra care has to be taken. If conditional payments go unresolved, the Medicare beneficiary is armed with the settlement agreement that will satisfy the conditions necessary to establish the MSP private cause of action for double damages. Also, is it possible that payments for medical services after the settlement could be considered conditional payments? We believe the answer to this question is “Yes”, so long as the payments made by Medicare relate to treatment that was covered by the terms of the settlement agreement. How were Medicare’s interests protected? In a subsequent lawsuit between an unrepresented claimant and an insurance company, the plaintiff will certainly be given deference.
Ongoing Responsibility for Medical – Closed Claims
MMSEA Section 111 reporting has started for workers’ compensation and no-fault insurance to identify situations where it is responsible to pay ongoing medicals in a claim. This information, supplied by the insurance company, is tantamount to an admission of responsibility that can trigger the MSP private cause of action. Such information will be used to identify conditional payments made by Medicare that should be reimbursed. These notices will not only be sent to the insurance company that reported the information, but also to the Medicare beneficiary. As responsibility is established by payment of the claim, the Medicare beneficiary can file a lawsuit. The incentive will certainly arise if Medicare then subsequently denies medical benefits while the conditional payment issue is being sorted out.
Not Protecting Medicare’s Interest
When it is appropriate to protect Medicare’s interest, not doing so may give rise to the MSP private cause of action. Take the situation where a Medicare beneficiary releases his or her claim, and it is reasonable that future treatment will take place. No provision was made to fund medical treatment related to the claim after the settlement and Medicare has the option of suspending benefits under the MSP. This will no doubt upset the Medicare beneficiary dependent on needed medical care. This may provide enough incentive to explore the option of using the MSP private cause of action to provide those replacement benefits.
Solutions to Defeat the MSP Private Cause of Action
1. Make certain all conditional payments up to the date of claim resolution are properly identified and an agreement in place that those claims will be paid for;
2. Where future medical treatment is reasonably likely to occur related to the claim make certain that Medicare’s interest is covered in the agreement;
3. Have plaintiff waive the MSP private cause of action, but be certain there is consideration to support that waiver;
4. Request the claimant indemnify and hold harmless the insurance company, including self insurance; and
5. Evaluate release language and anticipate defenses to the MSP private cause of action.
Taking these steps will help the primary plan defeat the MSP private cause of action. Having no plan subjects the primary plan to potentially re-litigate the claim. Otherwise, the subsequent litigation will take place in Federal court. See Sullivan v. Farm Bureau Mutual Insurance Co., 2011 U.S. Dist. LEXIS 35817 (Western Dist. Of Michigan), which dicusses the Federal Court’s subject matter jurisdiction over the MSP private cause of action.
Franco Signor LLC can help you with your release to avoid the liability of a private action. If you want to learn more please contact us.