No Fault Insurance and Group Health Insurance one in the Same under Medicare Secondary Payer
Roy Franco
February 13, 2013

Michigan Spine and Brain Surgeons, PLLC v. State Farm, 2013 U.S. Dist LEXIS 17721

This matter involves a Personal Injury Protection benefits claim that arises from an automobile accident which occurred in Michigan on October 26, 2010.  Following the accident, the injured party, Jean Ellen Warner (“Warner”) received extensive spinal surgical services, including neurosurgery, from Michigan Spine and Brain Surgeons (“MSBS”).  The charges for the received treatment were $24,645 and MSBS submitted its charges for payment to State Farm, the No Fault carrier for Warner.  State Farm denied payment on the grounds that Warner’s injuries pre-existed the accident and contended such treatment was related to her employment disability claim which pre-dated her auto accident.

Warner is a Medicare beneficiary.  She receives her health care benefits through a private HMO plan, Blue Care Network, which is authorized by the Centers for Medicare & Medicaid Services (CMS) as a Medicare Advantage Part C benefits plan (MA) for Medicare beneficiaries.  In exchange for enrolling in the Medicare Advantage Plan, she is not entitled to traditional fee for service Medicare benefits provided under Part A (Hospital) or Part B (Medical) administered by CMS.  Notwithstanding, CMS views such MA plans as having the same recovery rights as the U.S. under the Medicare Secondary Payer Law.  Read CMS Memo Supporting MA Plans.

After MCBS submitted claim for payment was denied by State Farm, it then submitted and was paid by Warner’s Blue Care Network MA Plan.  Subsequent to receipt of such payment,  it filed a lawsuit in State Court against State Farm under the Medicare Secondary Payer Act private cause of action (42 U.S.C. §1395y(3)(A) and sought double damages.   State Farm appears to have moved the matter from State Court to U.S. District Federal Court for Michigan, in its Southern Division; and moved for dismissal and partial summary judgment with respect to the Medicare Secondary Payer aspect of the claim on two grounds:  1) Lack of standing to sue; and 2) no justiciability as State Farm’s liability has not been determined by a court.

State Farm lost its motion and the matter is allowed to proceed.  The Court determined that MCBS had the right to sue and justiciability under a previously determined case, Bio Medical Applications of Tenn., Inc. v. Central States health and Welfare Fund, 656 F.3d 277 (6th Cir. 2011).  That case dealt with a Group Health Plan that terminated dialysis coverage when its insured became a Medicare beneficiary.  The law had changed, and a Group Health Plan could no longer terminate its coverage.  The Group Health Plan attempted to side step the issue, but putting forth a defense that since its responsibility to pay had not been evidenced by a settlement, judgment or award, Medicare must continue to pay for the services.  The court in a “not so fast” move disagreed and found that such a requirement would run afoul of the underlying purpose of the Medicare Secondary Payer Act.   As such, the court determined that such a requirement only applied to tort situations.

In this case, the Court in Michigan Spine and Brain Surgeons, PLLC v. State Farm Mutual Automobile Insurance Company (2013 U.S. Dis. LEXIS 17721), determined the No Fault Plan is in the same position as a Group Health Plan.  This author’s opinion is that it does not.  Group Health Plans provide medical benefits based on an insurance contract, but coverage occurs for illnesses or injuries that occur during a  covered period, and for covered services and formularies.  In a no-fault situation, the coverage is further tempered with regard to what is related to the accident giving rise to the claim.  For example, one cannot expect no-fault coverage for a hereditary disease, just because the claimant was involved in an automobile accident.  That would be bad public policy as those with severe injuries purposefully get into an accident to trigger additional medical coverage.  The plan language of the no-fault policy should determine whether a medical item or service is covered or not, and if it is in dispute, then such plan has a built in process by which to obtain a determination of coverage.    Once determined, then the provider of services can recover its full payment beyond what it was reimbursed by Medicare or the MA Plan.  See 42 C.F.R. §411.31.  Whether the insured is a Medicare beneficiary or not, should not change that result.

Further, it is curious that MCBS is the plaintiff in this matter under the MSP private cause of action.  It is a provider and therefore cannot under the law make a conditional payment which is reserved for Medicare, and with the recent decision in Avandia, MA plans.  The real party in interest here is the Blue Network, as they would be the entity entitled to reimbursement.  MCBS at most would be able to balance bill the difference, after a determination of responsibility, under 42 C.F.R. §411.31.

Franco Signor is opposed to the Avandia decision and has supported an amicus brief requesting the Supreme Court to take writ of certiorari on the issue.  As with that case, this decision should also be appealed as it has incorrectly applied the decision reached in Bio-Medical.