States Looking in Every Corner to Discover Recoveries Owed to Medicare and Medicaid
Heather Sanderson
March 21, 2017

A Complaint has been filed in the State of Utah by its Attorney General to force four of its largest asbestos bankruptcy trusts to comply with civil investigative demands (CIDs) seeking information regarding whether the trusts were failing to reimburse Medicare and Medicaid for medical expenditures. The Complaint was filed March 7th in Salt Lake City. A copy of the Complaint can be found here.

Asbestos bankruptcy trusts exist as a Trust funded with court-approved dollars to compensate people who claim injury from asbestos. The Complaint asserts that more than 60 manufacturers of asbestos or asbestos-containing products have filed for bankruptcy under the weight of plaintiff lawsuits, paying out $17 billion since 2008.

Specifically, the Complaint alleges: “Plaintiffs’ attorneys across the country are using asbestos trusts to obtain significant monetary recovery for claims, even where they would fail in the tort system. The abuse injures states by improperly draining the trust assets, precluding future legitimate claimants from relying on asbestos trusts, and leaving states with the high cost associated with asbestos-related disease. Further, there are questions surrounding the Medicare Secondary Payer statute regarding whether asbestos trust handlers are ensuring that medical assistance programs are being reimbursed for payments made from the trusts.”

Thus, the Utah Attorney General issued the CIDs as part of a joint Medicaid fraud investigation into possible mismanagement of asbestos trusts. The complaint alleges that should the CIDs reveal that the asbestos bankruptcy trusts were in fact avoiding reimbursement to Medicaid/Medicare, that such violations would not only be a violation of the Medicare Secondary Payer Act, but also the federal False Claims Act and Utah’s False Claims Act.

Utah’s Attorney General ultimately sought two forms of relief in its Complaint: an order to enforce responses to the CIDs, and an order of contempt since the asbestos bankruptcy trusts have indicated that they will not comply with an enforcement order issued by the Court. Time will tell whether the asbestos bankruptcy trust Defendants will respond to the CIDs, and if the Court issues an order of contempt upon the Defendants for failure to respond.

Commentary: This litigation is indicative of a foreboding for increased enforcement of Medicare and Medicaid secondary payer laws. From a Medicaid aspect, states are under increased pressure by the federal government to discover over-payments. Since the passage of the Affordable Care Act in 2010, states have expanded their Medicaid population to record numbers. In the meantime, with the current administration change and the impending repeal of the Affordable Care Act, statistics are indicating that state governments will be squeezed to stretch their dollars to fund their state’s poorest residents. Therefore, with state Medicaid budgets being squeezed, enforcement by states of their Medicaid Third Party Liability laws will be increasing. While on this topic, it is important to remember that the Murray/Ryan budget deal is just three months away from allowing Medicaid to recover 100% of their lien from settlements effective October 1, 2017. Medicaid will be looking for more dollars this year from primary payers on a go-forward basis.

Regarding Medicare Secondary Payer, of particular interest was the Utah Attorney General’s assertion in the Complaint that failure to reimburse Medicare and resolve Medicare Secondary Payer obligations also gives rise to action under the federal False Claims Act and even a state’s false claims act. False claims act, both state and federal, can provide as much as treble damages to the whistleblower. This is not the first time or suggestion that a Plaintiff has asserted that failure to comply with the MSP also gives rise to a False Claims Act action. Recall in Negron v Progressive, that the whistleblower Negron (a Medicare beneficiary) alleged Progressive’s failure to comply with the MSP gave rise to both the federal False Claims Act as well as New Jersey’s False Claims Act. For our prior blog on the Negron case and other information relative to MSP and False Claims Act, click here.

The current conditions, both political and financial, are all contributing to a “perfect storm” for both the states and the Feds to enforce Medicare and Medicaid secondary payer laws. We will keep our readers informed on the ultimate outcome of this case. For more information on our Medicare Secondary Payer and Medicaid compliance solutions, contact us at