NGHP Liable under MSP Private Cause of Action Says 6th Circuit Court of Appeals
Jeff Signor
July 17, 2014

Circuit Courts are in conflict over the application of the private cause of action within the Medicare Secondary Payer Act (MSP).  42 U.S.C. § 1395y(b)(3)(A) is the section of the MSP law allowing lawsuits against  primary plans if such plan is responsible to pay for medical items and services related to the claim, but somehow failed in that responsibility, causing Medicare to make such payment.  If successfully brought, the primary plan can be ordered to pay double damages.  See In Re Avandia, 685 F.3d 353 (3rd Cir. 2012) wherein Humana, a Medicare Advantage Plan, successfully recovered against parties to a class action settlement based upon the failure to repay Humana monies it paid in medical items and services related to the loss.  Franco Signor has closely monitored these actions across the country involving the private cause of action, and we regularly consult on whether such a potential action exists to Parties in the process of settling their liability or workers’ compensation cases.  Before today, only the Third Circuit authorized litigation against primary plans.  Now the Sixth Circuit joins, authorizing providers to bring such litigation.  Presumably Medicare Advantage Plans would not be denied this right.

Previously, the seminal case in the 6th Circuit for defining the application of the MSP private cause of action was Bio-Medical Applications of Tennessee, Inc. v. Central States Southeast & Southwest Areas Health & Welfare Fund, 656 F.3d 277 (6th Cir. 2011).  In Bio-Medical, the court focused on a technical read of MSP statute to define what Primary Plans are subject to the private cause of action.  It was concluded that only Group Health Plans (GHPs) were subject to it because of a conjunctive that paired two critical MSP provisions together.  After a lengthy opinion, the conclusion was that Non-Group Health Plans (NGHPs), those that are responsible for workers’ compensation, liability and no-fault, were never intended by Congress to be subject to the private cause of action.

This new Sixth Circuit Court of Appeals opinion refused to draw this distinction.  In Michigan Spine & Brain Surgeons, PLLC v. State Farm Automobile Insurance Company, 2014 U.S. App. LEXIS 13499, (6th Cir. 2014), a claimant was involved in a motor vehicle accident in Michigan, and Michigan Spine & Brain Surgeons provided approximately $26,000 in neurological treatment to the claimant.  State Farm Insurance Company was the no-fault carrier and denied coverage based upon claimant’s purported pre-existing condition.  Michigan Spine then submitted its bills to Medicare for payment, of which Medicare paid approximately $5,000.

Michigan Spine’s suit against State Farm invoked two causes of action, one for repayment of the monies it spent to treat claimant, and one based upon the private cause of action within the MSP Act.  The District Court held on behalf of State Farm and dismissed the complaint.  However, the Sixth Circuit Court of Appeals reversed, holding that Michigan Spine’s claim against State Farm may proceed irrespective of the fact that State Farm denied coverage on a basis other than Medicare eligibility.

This ruling firmly places the Sixth Circuit in the same ballpark as the Third Circuit.  The Fifth and Ninth Circuits are likely next to deal with this issue as it comes up.  It would appear the Ninth is leaning in the direction of Michigan Spine, but the Fifth Circuit may lean in the other direction.  If it does, it may take a U.S. Supreme Court decision to reconcile any conflict.  The important takeaway today is that anyone can commence an action on behalf of the US Federal Government (Provider, Plaintiff, US Citizen).  When settling or handling a matter involving a Medicare beneficiary — Refer the matter to Franco Signor LLC!