6th Circuit District Court Neuters MSP Private Cause of Action Against Non Group Health Plans
Jeff Signor
October 2, 2013

In McDonald v. Indemnity Insurance, 2013 (W.D. KY), the Court was presented with a Medicare Secondary Payer (MSP) private cause of action claim.  Plaintiff commenced a lawsuit after he had prevailed in his underlying workers’ compensation claim that was in dispute for over two years.  After a determination of legal responsibility, Indemnity Insurance promptly secured and paid Medicare’s conditional payment of $184,514.24.  Plaintiff nonetheless filed this MSP claim to secure double damages.

Indemnity Insurance defended the MSP private cause of action on several grounds, all of which were dismissed by the Court.  Whether the claim was ripe or moot was irrelevant for MSP private cause of action purposes according to the Court, and potentially disconcerting for Indemnity Insurance.   It would potentially have to pay twice, simply for exercising its right of dispute under state workers’ compensation law.  However, the Court did not rule for the Plaintiff because of its findings as it delved into the construction of the MSP private cause of action.  The Court reviewed precedent on this issue and cited to Bio-Medical Applications of Tennessee, Inc. v. Central States Southeast and Southwest Areas Health and Welfare Fund, 656 F.3d 277 (6th Cir. 2011) and based on it, determined that the MSP private cause of action does not apply to Non-Group Health Plans.  This is because 42 U.S.C. §1395y(b)(3)(A), the MSP private cause of action provision, references two paragraphs within the MSP law and connects it by the conjunction “and” to establish a primary plan’s liability.  The first paragraph applies only to Group Health Plans, whereas the second paragraph connected by the conjunction speaks to both Group Health Plans and Non-Group Health Plans.  That being the case, Indemnity Insurance cannot be responsible because it is not a Group Health Plan.    In the Court’s own words it understands the import of its decision “[t]o be sure, the court notes that its holding would seem to take some of the wind out of the sails of the private cause of action provision”.  The court’s holding means, in essence, that only a “group health plan” may possibly be liable under that provision, even though other types of entities may be primary payers that fail to pay or reimburse Medicare.

Franco Signor Commentary:  This case will no doubt be helpful in recent cases brought by Medicare Advantage carriers against Non-Group Health Plans.  It conflicts with at least one other Circuit (See In Re Avandia), but the logic presented is potentially compelling.  The conflict in the Circuits will no doubt have to be resolved by the U.S. Supreme Court and the recent cases filed by Humana against Farmers in several Districts, including the 6th Circuit here, is the most likely the litigation to monitor in that regard.  Today, it is a Circuit by Circuit analysis when considering how to approach MSP compliance pertaining to the private cause of action.

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