The Implication of the Medicare Secondary Payer Act in Litigation Does Not Necessarily Create a “Federal Question” to be Resolved in Federal Court
Jesse Hamby
May 5, 2016

In an opinion out of the U.S. District Court for the Middle District of Pennsylvania, Mikiewicz v. Hamorski and Erie Insurance Exchange, 2016 U.S. Dist. LEXIS 58859 (May 3, 2016), the Defendant Erie Insurance Exchange (“Erie”) removed the Plaintiff Helen Mikiewicz’s (“Plaintiff”) auto accident litigation to Federal Court. Erie had initiated removal to Federal Court due to the fact that the parties were in dispute over whether Erie could withhold settlement funds until the Plaintiff produced a final conditional payment demand from Medicare.

More specifically, Erie had alleged that removal of the matter to Federal court was proper because the Plaintiff’s claim “involves the federal statute which is known as the Medicare Secondary Payer Act (MSPA)” and therefore federal jurisdiction exists under 28 U.S.C. § 1331. Further, Erie maintained that removal was appropriate because the MSPA is an “extraordinary” statute that “completely preempts” state law.

Plaintiff disagreed and filed a Motion to Remand to state court, pursuant to 28 U.S.C. § 1446 and 1447. The Court agreed with Plaintiff and granted the Plaintiff’s Motion to Remand. The Plaintiff was also granted an award of attorneys’ fees, expenses and costs. The Court agreed with the Plaintiff for the following reasons: Nothing on the face of the Plaintiff’s motion to enforce the settlement agreement raised a question of federal law; Erie in fact was using federal law as a defense to the Plaintiff’s claim. The court further noted existing Supreme Court case law which has found that “a case may not be removed to federal court on the basis of a federal defense including the defense of pre-emption, even if the defense is anticipated in the plaintiff’s complaint, and even if both parties concede the federal defense is the only question truly at issue.”

Furthermore, Erie’s assertion that removal is appropriate because the MSPA completely preempts state law is without merit. Courts have consistently held that a state law cause of action that references or “involves” the MSPA or the Medicare statute is not removable to federal court because it does not raise a federal question. In short, nothing in the MSPA demonstrates that the MSPA completely pre-empts state law and therefore the removal of this action was improper.

Commentary: The District Court came to the correct conclusion in this matter in that simply a defense involving the MSPA does not raise a Federal Question. What’s interesting and mentioned within this Opinion is that Erie had previously been repeatedly sanctioned for making similar unsuccessful arguments in the past concerning the MSPA. Clearly, Erie felt that the argument was worth continuing to pursue despite its prior unsuccessful attempts.

What would have made more sense here would have been for Erie to state its conditional payment requirements up front in the settlement agreement. Specifically, if Erie made it a condition precedent in the settlement agreement that the Plaintiff must provide all conditional payment correspondence before Erie would be required to disburse the settlement funds, that would have worked without issue as the settlement agreement would have controlled this issue.

However, as we mentioned in our last blog, the safest practice is for the insurance carrier to control the process and ensure that Medicare is directly reimbursed. Even if a Plaintiff is the listed debtor on the conditional payment correspondence, Medicare can pursue recovery from the insurance carrier/primary payer at any time pursuant to 42 § CFR 411.24. Involving an expert will save you future troubles and litigation expenses. Contact us at engage@francosignor.com to learn more.

 

Heather Schwartz Sanderson, Esq., MSCC, CHPE, CLMP, CMSP
Chief Legal Officer
Franco Signor LLC