Sixth Circuit Continues to Limit Use of MSP Private Cause of Action
Roy Franco
December 17, 2013

Following on the heels of Michigan Spine and Brain Surgeons, PLLC v. State Farm Mut. Auto. Ins. Co., 2013 U.S. Dist. (E.D. Mich. 2013) and applying the principles set forth in Bio-Medical Applications of Tennessee, Inc., 656 F.3d 277 (6th Cir. 2011) the Sixth Circuit continues to limit the application of the Medicare Secondary Payer private cause of action – 42 U.S.C. §1395(3)(A).  In Gusmano v. Allstate Insurance Company, 2013 U.S. Dist., the U.S. District Court faced a Motion to Dismiss brought by the defendant.  Plaintiff amended her complaint to invoke federal jurisdiction over her no-fault claim.  She alleged that Allstate had failed to pay her medical benefits and, as a result, Medicare had to make those payments; and she sought double damages under the law to make Medicare whole.

The Court dismissed her claim.  In analyzing both of the previously mentioned cases, the Court concluded that in order for the claim to survive, claimant must allege a violation of both 42 U.S.C. §1395y(b)(1) and (2)(A).  Because the private cause of action as defined under 42 U.S.C. §1395(3)(A) uses the conjunction “and” there can be no other interpretation.  When applying the facts to the law, claimant could not demonstrate that Allstate prevented her no-fault benefits or coverage because she is entitled to Medicare benefits.  Rather, it was clearly for other reasons such as the care was not related to the claim.  Although she could easily demonstrate the second prong – that Medicare made payments for items and services — that by itself was not enough, unless, she could also allege the discriminatory practice.

This result makes sense.  In a prior blog we mentioned another Sixth Circuit U.S. District Court that interpreted both Michigan Spine and Bio-Medical and rejected the MSP private cause of action.  The McDonald v. Indemnity Insurance Court went further in limiting this law, by ruling that it could only apply to Group Health Plans; and not at all to non-group health plans, such as Allstate.  Based on these rulings, it would appear the MSP private cause of action within the Sixth Circuit is barely on life support and will require further clarification from the Sixth Circuit Court of appeals as to its applicability to Non-Group Health Plans.

We had originally thought that such a ruling would have been possible with the flurry of Medicare Advantage filings for reimbursement under the MSP private cause of action by Humana, which included one within the Sixth Circuit.  Humana wished to expand the holding that it was able to secure within the Third Circuit Court of Appeals (In Re Avandia Marketing) to other Circuits to allow for an automatic reimbursement right under threat of Federal jurisdiction for double damages.  However, this will not be the case, as Humana has voluntary dismissed all of it claims except for a single action within the Eastern District of Texas.  It appears Humana’s strategy has changed.  For the moment, claims under the MSP private cause of action are defensible.

Franco Signor will continue to monitor developments under the MSP private cause of action and counsel our customers on the applicability of Medicare Advantage, Part D and private party’s rights to leverage such cause of action for recovery.  Contact us should you face a potential MSP private cause of action.  We may have some suggestions to allow for an alternative way to remove these claims to avoid  litigation.