MEDICARE UPDATE

In this issue, we will describe the September 2011 decision reached by the Sixth Circuit in a case brought under the “private cause of action” language of the Medicare Secondary Payer Act, and a new initiative from the MSP Recovery Contractor regarding settlements of cases under $25,000.

Bio-Medical Applications

The decision in the case of Bio-Medical Applications of Tennessee, Inc. v. Central States Southeast and Southwest Areas Health and Welfare Fund was issued by the Sixth Circuit Court of Appeals on September 2, 2011. The case involved a claim by a medical provider (a dialysis center) against a group health plan which had, in direct contravention of the requirements of the MSP statute, adopted a policy provision that excluded patients from coverage any time that they became eligible for Medicare.

The provider had included a claim for double damages under the private cause of action section of the MSP Act, 42 U.S.C. 1395y(b)(3)(a). The defendant moved for summary judgment on that part of the claim, on the basis of holdings in previous cases including Glover v. Liggett Group, 459 F.3d 1304 (11th Cir. 2006) to the effect that the language of the Act that provides for the “demonstrated responsibility” of a defendant meant that the plaintiff would not be able to assert a claim for double damages under the private cause of action provision unless and until it had been legally established in the case that the money was due and owing from the defendant.

The court’s analysis was lengthy and the issues are complex. We can boil it down to the following highlights:

• The court ultimately concluded that the language of the Act and the congressional intent led to a conclusion that the “demonstrated responsibility” limitation would apply only to tort claims, and would not apply to cases against a defendant whose responsibility is based on contract rather than on a claim of negligence, breach of warranty, or intentional act.

• A significant part of the court’s reasoning was based on the language of the private cause of action section, which permits the assertion of Medicare’s rights by a private actor, and recovery of double damages, when there has not been a proper payment “in accordance with paragraphs (1) and (2)(A).” The court noted that this language is conjunctive rather than disjunctive, and thus requires that the plaintiff establish that both of the referenced subsections were violated.

• In order to resolve issues relating to potentially conflicting language, it would be necessary to consider the provisions of both paragraphs together, rather than individually.

• Bio-Medical had established that both subsections were violated, and thus the double damages provision under the private cause of action section was triggered.

• The “demonstrated responsibility” limitation recognized and applied in Glover applies only to claims based on the liability of a tortfeasor, rather than claims brought under the provisions of a contract of group health insurance.

• The responsibility to pay can be demonstrated in the case of insurance “ex ante” (from the outset) by the existence of a policy of insurance. No further showing is needed.

• The limitation also applies only to claims that are brought by Medicare, and not by private parties.

The Sixth Circuit’s conclusion that the “demonstrated responsibility” limitation will apply only to claims brought against tortfeasors will no doubt lead plaintiffs to try to resurrect these arguments in cases involving alleged delays in payments under no-fault insurance, since no-fault insurance is a contractual obligation rather than an obligation based on tort.

This argument, however, would overlook the significant difference between group health insurance and no-fault insurance. Group health insurance by its nature is intended to cover each and every medical expense that the insured incurs. By contrast, no-fault insurance is limited to those medical conditions and treatments which are medically related to the motor vehicle accident in question, rather than providing comprehensive medical coverage.

The decision in Bio-Medical did not address no-fault insurance and therefore did not permit a consideration of the manner in which no-fault insurance may be distinguished from group health insurance and what effect that difference would have on the issue presented.

Another significant point, one that works this time in favor of no-fault insurers, is the court’s emphasis that the language of the private cause of action/double indemnity provision is conjunctive, and requires that both paragraphs (1) and (2)(A) be violated.

Paragraph (1) imposes a wide range of obligations on group health plans, and only on group health plans. Paragraph (2)(A), paraphrased, is the portion of the MSP statute that provides that Medicare will not pay for medical expenses, except as conditional payments subject to reimbursement, that are paid or payable by any insurer – group health, liability, no-fault, workers compensation – or by a person or an entity which is self-insured in whole or in part.

Since paragraph (1) applies only to group health plans, the conclusion to be drawn from this part of the Bio-Medical court’s analysis is that the double indemnity and private cause of action provisions of the MSP law can apply only to cases brought against group health plans. Neither a liable insurer nor a no-fault insurer can ever violate paragraph (1) of the MSP statute or be subject to the private cause of action, under the court’s analysis.

It may be that the Sixth Circuit has overread the language of the statute in this regard. (In a concurring opinion, Judge Helene White stated that she does not believe that the conjunctive use of the language has the significance that the majority ascribed to it.) As it stands, however, this decision is binding authority in Federal courts in Michigan and in the other states within the Sixth Circuit and must be applied unless and until it is overruled by the United States Supreme Court.

(A petition for certiorari was filed with the U.S. Supreme Court in December 2011.)

New MSPRC Settlement Initiative

The MSP Recovery Contractor has announced a new policy that will apply to the settlement of smaller personal injury cases.

Beginning in Feburary 2012, if a case which meets the criteria settles for a total of $25,000 or less, MSPRC will send a final conditional payment amount before settlement.

The additional criteria are:

• The case must be a liability claim involving personal injuries. No-fault insurance claims and claims based on ingestion or exposure will not be included.

• At least six months must have passed since the date of the incident.

• There must be a demonstration – by a physician’s written statement or by the plaintiff’s written certification – that no related medical treatment has been provided in the previous 90 days.

This will permit the parties to settle with the certainty that the conditional payment amount that is provided will be the final amount due and will not be increased after the settlement has been concluded. The settlement would have to be finalized within 60 days of the response by MSPRC.

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UPCOMING SEMINARS

Buckeye Seminar – Columbus Convention Center – March 15, 2012 8:00 a.m.-12:30 p.m. Agenda will be posted shortly. To register please contact Eileen : ecarty@garanlucow.com

Troy Breakfast Seminar -Troy Marriott
April 19, 2012

Trial Boot Camp -Troy Marriott
May 31, 2012

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GARAN LUCOW MILLER IN THE NEWS

Garan Lucow Miller, P.C. Listed as “2012 Top Ranked Law Firm” in Fortune Magazine

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Rankings are based on the highest level of ethical standards and legal ability. LexisNexis Martindale-Hubbell is the authoritative source for information about U.S. lawyers since 1868.

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TOM CHRISTY FEATURED IN SMART BUSINESS MAGAZINE