WSG Article: Sixth Circuit Clarifies Scope of Medicare Secondary Payer Liability for Non-Group Health Plans

Haynes and Boone, LLP
July 31, 2014 - United States of America

Sixth Circuit Clarifies Scope of Medicare Secondary Payer Liability for Non-Group Health Plans
by Micah E. Skidmore

On July 16, 2014, the Sixth Circuit Court of Appeals confirmed that a “health care provider can bring the Medicare Secondary Payer Act’s (“MSP’s”) private cause of action against a non-group health plan that denies coverage for a reason besides Medicare eligibility.” In Michigan Spine & Brain Surgeons, PLLC v. State Farm Mutual Automobile Insurance Co., the Court clarified a key holding in its prior decision in Bio-Medical Applications of Tennessee, Inc. v. Central States Southeast & Southwest Areas Health & Welfare Fund, 656 F.3d 277 (6th Cir. 2011), which had been construed to limit MSP’s private cause of action against a “primary plan” to claims involving discrimination against planholders on the basis of their Medicare eligibility.

In Bio-Medical, the Court interpreted the language in MSP’s private cause of action clause enabling claims against “a primary plan, which fails to provide for primary payment (or appropriate reimbursement) in accordance with paragraphs 1 and 2(A).” 42 U.S.C. § 1395y(b)(3)(A). Paragraph 1 prohibits group health plans from “taking into account” a planholder’s Medicare eligibility. Paragraph 2(A) outlines when Medicare may make payments, i.e., Medicare may only pay for service required to be paid by a primary plan when the primary plan cannot reasonably be expected to pay promptly. Reconciling the inconsistent but conjunctive phrasing of the private cause of action provision, the Bio-Medical Court held that “a primary plan is liable under the private cause of action when it discriminates against planholders on the basis of their Medicare eligibility and therefore causes Medicare to step in and (temporarily) foot the bill.” 656 F.3d at 286.

In spite of the fact that Bio-Medical involved claims against a group health plan, since 2011, several district courts have dismissed claims against non-group health plans on the basis that, following Bio-Medical, the defendant non-group health plans did not violate paragraph 1 by taking into account a beneficiary’s Medicare status in denying or failing to pay a claim. In Michigan Spine, the Sixth Circuit again examined the text of MSP’s private cause of action provision to conclude that paragraph 1, and its “Medicare eligibility requirement”, was at the very least ambiguous with respect to its application to non-group health plans. Relying on CMS regulations—which only address conduct by group health plans—and the overall intent of Congress to sustain the private cause of action as a means of controlling Medicare costs, the Court ruled that MSP’s prohibition against taking Medicare eligibility into account applies only to group health plans and not non-group health plans. Language in Bio-Medical referring to “primary plans” in general was dicta, according to the three-judge panel in Michigan Spine.

The Bio-Medical Court also held that MSP’s requirement of “demonstrated responsibility” as a condition of Medicare reimbursement under 42 U.S.C. § 1395y(b)(2)(B)(ii) only applies to tortfeasor liability and then only for suits brought by Medicare—not those brought under the statute’s private cause of action provision. The Michigan Spine decision does not disturb this portion of Bio-Medical’s holding.

As a result of Michigan Spine, healthcare providers, like Michigan Spine & Brain Surgeons, Medicare Advantage Organizations, among others are empowered to seek double damages against liability insurers (including self-insurers), no-fault insurers and workers’ compensation carriers, who are liable for injuries to Medicare beneficiaries. In some cases, providers are entitled to recover the full undiscounted value of the healthcare services provided.

If you have any questions about the Sixth Circuit’s decision in Michigan Spine, Medicare Secondary Payer Liability or recovering from liability insurers, self-insurers, group health plans, no-fault insurance, and workers’ compensation carriers, please contact one of the Haynes and Boone Insurance Coverage and Healthcare Practice Group attorneys listed below.

Read full article at: http://www.haynesboone.com/sixth-circuit-clarifies-scope-of-medicare-secondary-payer-liability-for-non-group-health-plans-07-30-2014/