Attempted Class Action Filing Serves as Reminder of Importance in Diligence to Medicare Conditional Payment Obligations

An attempted class action pursuant to the Medicare Secondary Payer (MSP) private cause of action for double damages filed in a North Carolina District Court by a Medicare beneficiary against a workers’ compensation plan/carrier serves as a reminder of the importance of diligence to Medicare conditional payment obligations. Failure to pay careful attention and remain responsive to attempted recoveries by CMS for conditional payments which would otherwise be the responsibility of the primary payer (primary plans would be the workers’ compensation, general liability, or no-fault plan/self-insured) can automatically result in a double damages penalty under the MSP pursuant to 42 USC §1395y(b)(3)(A). Although the primary workers’ compensation carrier/plan was diligent in its conditional payment responses and ultimately had the attempted class action litigation dismissed here, this attempted class action filing nonetheless highlights how any missteps/failure to address conditional payments could have resulted in a different outcome.

The opinion is entitled Sims v. PMA Ins. Co., 2021 U.S. Dist. LEXIS 20434, (February 3, 2021) and involves an injured worker (“Claimant”) that became Medicare eligible during the pendency of her workers’ compensation claim with PMA (“Carrier”). Although Claimant’s workers’ compensation claim for her lower back was initially not covered by the Carrier, the North Carolina Commission deemed Claimant’s ongoing care compensable, and ordered Carrier to authorize treatment for Carrier’s back injury as recommended by her treating physician.

The Centers for Medicare & Medicaid Services (CMS) served Carrier with several conditional payment letters, to which Carrier disputed the accuracy of the conditional payments on several (but not all) of the letters. On the fifth round of conditional payment letters, Carrier was able to reduce CMS’ conditional payment balance amount to zero. Thus, Carrier was not required to reimburse CMS for any conditional payments as it related to Claimant’s workers’ compensation claim.

However, Claimant nonetheless filed this putative class action, attempting to establish a class action for double damages under the MSP for Carrier’s failure to reimburse Medicare for its conditional payments. Carrier moved to dismiss the Complaint on the basis that the Carrier had no demonstrated responsibility to reimburse Medicare and thus a private cause of action was not ripe. The Court agreed with Carrier’s position and dismissed the claim as premature. The Court further noted that when a determination of responsibility for conditional payments is made, and the Carrier fails to reimburse, then the MSP would allow for a private cause of action for double damages.

More specifically, the Court noted, under the MSP, for a plaintiff to recover in a private cause of action, a primary payer must have a demonstrated responsibility to reimburse Medicare for given services and the primary payer must have failed to do so.  In that case, the primary payer is subjected to double damages — not only is the primary payer required to reimburse Medicare, but the primary payer is also liable to the private plaintiff for that same amount. 42 U.S.C. § 1395y(b)(3)(A); see also Liggett Grp., 459 F.3d at 1309. Were the court to infer an injury-in-fact based on Defendants' failure to reimburse CMS, despite CMS's clear indication that Defendants owe no reimbursement, Defendants would automatically be exposed to double damages without any opportunity to avoid those penalties by reimbursing CMS. See also Liggett Grp.,459 F.3d at 1309.

Commentary: Although the underlying facts of this particular workers’ compensation claim did not warrant the standards for a double damages MSP private cause of action, this attempted class action filing is a stark reminder of how careful primary payers should be.

Further, one can speculate, as Claimant’s attorneys attempted to establish a class action against Carrier here, that the overall endgame on the Claimant’s behalf was to find other Medicare beneficiary claims in which Carrier may have failed to reimburse conditional payments and win double damages on those claims. The Claimant and her attorneys ultimately picked the wrong claim to attempt to establish such a class action as the Carrier did not owe reimbursement for any payments on Claimant’s WC Claim. Nonetheless, the double damages provision within the MSP is a tempting litigation tactic for litigant Medicare beneficiaries and this attempted filing is a good reminder of it.

Key take-aways from this case to remember as it pertains to Medicare conditional payments are: 

1. Know and understand the different types of conditional payment recovery correspondence issued by Medicare and its contractors. Conditional payment letters (CPLs) should be disputed, but there is no required timeframe to reimburse. Conditional payment notices (CPNs) and Demands do have a short timeframe to reimburse, and failure to do so can result in a double damages action.
2. Remember that just because CMS asserts a recovery for particular payments, that does not mean that reimbursement is automatically owed, and primary plans should dispute where it is warranted. The complaint in this case does not go into details, but the Carrier was able to successfully dispute all conditional payments asserted even though it was a compensable claim. Had the Carrier not filed disputes, the conditional payments would not only be due and owed but potentially the Claimant would have had a successful claim for double damages.
3. Settlement language should be tight and detailed around conditional payment obligations and describe how the parties plan to reimburse Medicare/Medicare Advantage/Part D for any known or future conditional payments.  Primary plans may want to include a waiver of the private cause of action within the settlement language.
4. Work with an MSP expert for optimal conditional payment outcomes and to avoid MSP private cause of action double damages litigation.

For a copy of the decision or for questions, please contact me at heather@sandersoncomp.com.

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