When Can Medical Providers have Standing under the MSP?

A Federal District Court for the Eastern District of Michigan recently allowed a health care provider to proceed with a claim against a patient's no-fault auto insurance carrier for the full cost of its services, as well as double damages, through a private cause of action under the Medicare Secondary Payer Act (MSP). When reading the Opinion and Order (click here to view the Opinion and Order), it is interesting to note that the dispute here is between a medical provider and a no-fault auto carrier. One may start to wonder: where is Medicare in this equation, and further, what is Medicare's position in this litigation? The MSP is clearly designed to protect the Medicare Trust Fund and Medicare as a secondary payer. So how can a private health care provider use, to its benefit, the terms of the MSP Act to force a payment from an insurance carrier when Medicare is not involved in the case at all? Stated more plainly, why is the MSP now being utilized to protect a medical provider when it is designed to protect Medicare and the Trust Fund? It is baffling, but a closer look through the background information on this Order might give us a better understanding.

In Michigan Spine and Brain Surgeons, PLLC v. State Farm, Case No.12-cv-11329 (U.S. District Court for the Eastern District of Michigan, Southern Division), the Plaintiff in this case, Jean Ellen Warner (“Warner”), was in a car accident in 2010. Warner is a Medicare beneficiary who receives her benefits through a Medicare Advantage Plan, Blue Care Network. She underwent neurosurgery at Michigan Spine, and the total of her medical costs were $24,645.00. Michigan Spine sent a bill for this amount to State Farm, who was her no-fault insurance carrier at the time of the accident. State Farm denied the payment, asserting that Warner's spinal injuries predated the October 2010 car accident and were attributable to a prior workplace injury. After State Farm denied payment, Warner sought payment from CMS. CMS made a partial payment on the amount. Michigan Spine then sued State Farm under the MSP's private cause of action provision, 42 U.S.C. 1395y(b)(3)(A).

State Farm then filed a motion to dismiss and/or partial motion for summary judgment, alleging that Michigan Spine did not have a right to bring this lawsuit due to the fact that State Farm's liability had not yet been determined by a court or other adjudicative body. Michigan Spine countered State Farm's argument claiming that a prior case, Bio-Medical Applications of Tenn., Inc. v. Central States Health and Welfare Fund, 656 F.3d 277 (6^th Cir. 2011), has resolved this issue and it is permitted to initiate a private cause of action under the MSP Act. Bio-Medical involved a situation where a Group Health Plan terminated dialysis coverage when its insured became a Medicare beneficiary. The Group Health Plan attempted to defend its termination of coverage, stating that its responsibility had not been evidenced by a prior settlement, judgment, or award, which would satisfy a requirement that such a payment must be “demonstrated.” However, on appeal, the Sixth Circuit determined that the “demonstrated responsibility” requirement in the MSP Act only applies in certain situations. Further, the court found that such a defense would be contrary to the intent of the MSP Act. Therefore, the Bio-Medical case found that only Medicare had to bring a claim for reimbursement for a health care provider to have responsibility under the MSP, and the health care provider need not demonstrate the insurer's responsibility to pay before it could bring an action under the Act.

Although this case is still continuing, the fact that Michigan Spine's argument is allowed to go forward is disturbing for several reasons. First, although this case pertains to a no-fault auto insurance policy, the decision would very likely also apply to workers' compensation since both types of insurance plans are treated in the same manner by CMS and are often grouped together in its policies and procedures directives. This case would be persuasive authority in another case with similar facts involving a workers' compensation insurance plan. For example, a workers' compensation plan has denied all claims asserted by the claimant, and the claimant subsequently treats for those alleged injuries. The healthcare provider then seeks to bill the workers' compensation plan, which subsequently denies the payment. CMS makes only a partial payment, if any payments at all, and the healthcare provider then seeks a private cause of action for double damages under the MSP in spite of the fact that the workers' compensation carrier may have rightfully denied the claim from the start. If this happens and this case becomes persuasive authority, workers' compensation plans may be forced to litigate every denial of coverage so as to avoid obligations under the MSP.

Secondarily, this case is disturbing in that it demonstrates an alarming trend in the broadening of the use and application of the private cause of action under the MSP. In the past, the private cause of action right was generally thought to be a right granted only to Medicare beneficiaries. However, recent case law has also granted this private cause of action right to Medicare Advantage Plans. Further, due to the broad language of the private cause of action, courts are starting to apply it in an increasing number of ways. The private cause of action provision under the MSP simply states that “[t]here is established a private cause of action for damages (which shall be in an amount double the amount otherwise provided) in the case of a primary plan which fails to provide for primary payment…”

Due to the ambiguous nature of the language within the MSP of this private cause of action, courts may continue to broaden its usage. This is a dubious situation since the action allows for double damages. This Order will hopefully be appealed by State Farm and the decision reversed because allowing a health care provider to have this cause of action would not be in sync with the intent behind the MSP. PMSI will continue to follow this case as it progresses.

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About the Author

Heather Schwartz, Esq., MSCC, CHPE, CLMP, CMSP

Heather is Corporate Counsel for PMSI Settlement Solutions, an industry leading provider of Medicare-Set Aside Allocations. Heather's primary responsibility is the education and assistance of compliance with the Medicare Secondary Payer Act. She has lectured on this topic to the workers' compensation and liability insurance and legal communities at conferences, associations, and individual offices nationwide. 

Heather is a major contributor to PMSI's MedicareInsights blog, and also has published numerous publications on court decisions and legislative reforms involving Medicare Set-Asides, conditional payments, and Mandatory Insurer Reporting issues. Understanding that compliance with the Medicare Secondary Payer Act can be at times complex and frustrating for those that handle claims with Medicare beneficiaries, Heather's goal is to speak and write with the primary goal being simple and understandable solutions to compliance.

PMSI's Blog can be found at: www.medicareinsights.com
PMSI's Knowledge Center can be found at: www.pmsionline.com/knowledge-center

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