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MSP Private Cause of Action opens doors for claimants

The Medicare Secondary Payer Act (MSPA) allows a private party who is aware of non-payment by a primary plan to file a civil action to enforce Medicare’s rights.  It allows double damages to be recovered by the plaintiff as an incentive to file the lawsuit so that they can pay back the government and have money left over as a reward for their efforts.  The statute at 42 U.S.C. 1395y(b)(3)(A) specifically reads as follows, “Private cause of action – There 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).”

Clinton McDonald (McDonald) was injured in a motor vehicle accident while at work in 2007, and in 2010 the Kentucky Workers’ Compensation Board found that his death was caused by the accident and ordered Indemnity Insurance (Indemnity), or his employer, to pay for his medical expenses.

On September 13, 2012, the Estate of Clinton McDonald (the Estate) filed a suit in the US District Court for the Western District of Kentucky (District Court) against Indemnity, alleging that Indemnity failed to reimburse Medicare for the medical expenses of Mr. McDonald that Medicare paid from the time of his motor vehicle accident on May 10, 2007 and his death on November 5, 2007.   The Estate also claimed that it was entitled to double recovery of that sum under the private cause of action provision in the MSPA.  A week after the lawsuit was filed on September 13, 2012, Indemnity received a Conditional Payment Letter from Medicare and then a Final Demand Letter came three weeks after that asking Indemnity to pay $184,514.24.  Indemnity promptly paid Medicare and filed a motion to dismiss the Estate’s  complaint.  After all, Medicare had been paid so the Estate had no case, correct?  Well, not so fast.

In the motion volley that followed, the Estate claimed that it was entitled to summary judgment because its complaint “spurred Indemnity to pay Medicare, and that its suit accomplished what the MSPA private cause of action was meant to accomplish – an errant workers’ compensation carrier has now paid Medicare what it owed Medicare for the past two years”.

Indemnity claimed, among other things, that since it paid Medicare, it did not fail to provide appropriate reimbursement as set forth in 42 U.S.C. 1395y(b)(3)(A).

The District Court did not accept Indemnity’s “no harm: no foul” argument saying that it disregarded the two years between the order for payment from the Workers’ Compensation Board and the filing of the lawsuit.  The court also stated that “once a private cause of action has been lodged against a defendant, a defendant cannot escape the double damages provided for in that provision by paying single damages to Medicare.”

So, on August 28, 2014, the District Court concluded that the Estate was entitled to a summary judgment against Indemnity for $184,514.24.

This is an important decision in the Medicare Secondary Payer compliance world because it opens the door, and gives claimants an incentive, to file private cause of action lawsuits, making it even more important that Medicare’s conditional payments are paid promptly by the employers/carriers.

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