Posted by Sylvius Von Saucken
I was at a conference last week where the Medicare Secondary Payer Act was discussed. The belief was that you could get double damages for the failure of an insurer to pay the proper Medicare reimbursement. Do you know anything about this? And if yes, what does it mean to plaintiffs attorneys?
The concept of a private cause of action where a Medicare beneficiary can use an applicable plan to recover damages on behalf of both Medicare and the Medicare beneficiary is valid.
Hidden in the headaches that typically follow resolving Medicare’s conditional payment reimbursement rights is an enforcement provision that gives Medicare beneficiaries a private cause of action allowing the beneficiary to sue for double the amount of what Medicare paid which has not be repaid for the accidental injuries or exposures.
This private cause of action is often over-looked by insurance carriers/TPAs, claims handlers and defense lawyers. If it is not quickly and properly addressed by the knowledgeable risk/claims manager, Plaintiff’s attorneys might use this separate cause of action to increase the value of their cases and bring about higher settlement values. According to one recent commentator who writes for insurance companies, this little used part of the Medicare Secondary Payer Act (42 U.S.C. §1395y(b)(3)(A)) might create significant issues for claims adjusters, as very few, if any, claims adjusters establishes reasonable reserves for failing to reimburse Medicare’s conditional payments.
The private cause of action is set forth in 42 U.S.C. § 1395y, and provides:
(A) Private cause of actionThere 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 (or appropriate reimbursement) in accordance with paragraphs (1) and (2)(A).
The purpose of this private cause of action statute was to help the federal government recover conditional payments from insurers or other primary payers, to encourage private parties to enforce Medicare’s rights, and to save money for the taxpayers. The premises underlying the private cause of action are:
(1) The beneficiary can be expected to be more aware than the government of whether other entities may be responsible to pay medical expenses,
(2) Without double damages, the beneficiary might not be motivated to sue an insurer/TPA because Medicare may have already paid the expenses and the beneficiary would have nothing to gain by pursuing the primary payer, and
(3) With the private right of action and double damages, the beneficiary can pay back the government for its outlay and still have money left over to pay for the litigation.
The 2003 amendments to the MMA were specifically enacted to overturn previous court decisions that limited the effectiveness of the MSP private cause of action. The 2003 Amendments also made it easier for injured Medicare recipients to bring these private actions on behalf of CMS-Medicare against an expanded class of entities and individuals with insurance, and clarified when such entities are required to pay the Medicare beneficiary’s medical expenses.
These amendments established:
(A) All businesses, trades or professions shall be deemed to have insurance regardless of whether or not it carries its own risk.
(B) Any judgment or payment conditioned upon the recipient’s compromise, waiver or release whether or not there is a determination or admission of liability will demonstrate a plan’s responsibility to reimburse Medicare.
(C) Reimbursement to Medicare was no longer tied to anticipation of “prompt” payment because the Secretary of Health and Human Services may make conditional payments if a primary plan has not made, or cannot reasonably be expected to make payments with respect to such services promptly.
Prior to the 2003 amendments, it was not clear whether Medicare had a right of reimbursement from certain self-insured defendants. After the amendments, it became crystal clear Medicare’s right of reimbursement applies to practically all tort or workers’ compensation settlements in which Medicare payments have been made on behalf of the tort plaintiff.
Relevant case law suggests the private cause of action exists when the insurer/TPA was aware of the conditional payment and ignored Medicare’s interest. Then, and only then, can the Plaintiff file to seek double recovery for the unreimbursed payment. Court decisions decided since the enactment of the 2003 amendments consistently permit the private cause of action to proceed against insurers and similar entities including employers, who are deemed responsible for the tort or workers’ compensation victim’s injuries.
Lawyers representing tort and workers’ compensation claimants should understand the MSP private cause of action and might decide to use it as a tool to advance their clients’ interests. For example, before a case goes to trial, you might consider the ramifications of adding a Medicare Secondary Payer private cause of action lawsuit to potentially increase the settlement demand or bring a reluctant Defendant to the settlement table.
All that being said, there are some caveats to this technique.
The private cause of action exists when Medicare’s conditional payment reimbursement obligation has not been satisfied.
As a result:
• While it is true that Medicare beneficiaries can bring a private cause of action against primary plans (defined in the MSP Act as a workmen's compensation law or plan of the United States or a State or under an automobile or liability insurance policy or plan (including a self-insured plan) or under no fault insurance), the cause isn’t “ripe” until the defendant’s obligation to have paid (or, said differently, Medicare’s overpayment) has been established by settlement or judgment. • If there is a settlement, then this cause of action is ripe – HOWEVER, most, if not all settlement agreements require plaintiffs to indemnify defendants for any liability related to the MSP Act.
So, if you asked us to consider when to bring a private cause of action against primary plans for their failure to provide coverage of items that Medicare ended up paying, then that cause of action typically isn’t “ripe” until the Medicare beneficiary (your client) settles the underlying PI case with the defendant and at that time the plaintiff indemnifies the defendant. So, in essence, even if the plaintiff could collect based on the private cause of action, their indemnifying for MSP obligations and attorney fees changes the paradigm, where it is the Plaintiffs who would lose out, rather than the defendants, whose primary plans paid for the settlement.
The bottom line: this private cause of action is real, but may not be practical to use in the typical settlement scenario. On the other hand, this cause of action has much more staying power where your client’s case goes to trial and you receive a verdict. At that point, there is no corresponding indemnification agreement. In that circumstance, double damages would still be on the table. Knowing this, the private cause of action may be best implemented as additional settlement leverage (increase pressure to settle by threatening a suit with a private cause of action), or to increase damages if the case actually proceeds to trial; noting that if the case goes to trial with a private cause of action, and the case subsequently settles, your verifying and resolving Medicare’s claims would work in conjunction with your dismissal of the private cause of action as part of your settlement agreement (as you would be ensuring Medicare’s reimbursement).
Please let us know if this clears the muddy waters a bit.
Sylvius von Saucken