Friday, February 18, 2011

Superior Court Clarifies Defendants Responsibility for Reimbursing Medicare

Medicare Reimbursement implications clarified in recent Superior Court decision.

Zaleppa v. Seiwell was a motor vehicle case in which Seiwell backed her car into 69 year old Zaleppa causing injuries. The case went to trial on the issue of damages alone. Zaleppa was awarded $15,000. Following the verdict, Seiwell filed a post trial motion seeking a court order directing her to pay the verdict either (1) by naming Medicare, along with Zaleppa and her attorneys, as payees on the draft satisfying the verdict or (2) by paying the verdict into court pending notification from Medicare that all outstanding Medicare liens have been satisfied.

Seiwell argued on appeal that the terms of the Medicare Secondary payer Act (MSPA) require all parties in litigation to protect Medicare’s interests when resolving claims involving conditional payments made by Medicare.

The issue on appeal was whether the MSPA either requires or allows a private entity to assert the rights of the United States government regarding a potential claim for reimbursement of a Medicare lien.The Superior Court concluded that there is no legal basis under either federal or Pennsylvania law to assert the interests of the United States government as to the reimbursement of Medicare liens.

In my opinion the following excerpts are the key takeaways from this opinion:
  • In the event that a private insurer is legally required to pay for the treatment for which Medicare has already paid, the MSPA provides that Medicare must be reimbursed for the expense. 
  • If an outstanding Medicare lien exists, the MSPA requires that either the entity that received payment from the primary plan or the insurer, as primary plan, must reimburse Medicare. 
  • Under MSPA only a recovery demand letter issued by Medicare and directed specifically to the insurer/primary plan, triggers the primary plan’s duty to reimburse the Medicare trust fund. 
  • Nothing in the MSPA expressly authorizes a primary plan to assert Medicare’s right to reimbursement as a preemptive means of guarding against its own risk of liability. 
  • Under the MSPA, only the U.S. government is authorized to pursue its own right to reimbursement. 
  • The United States may bring an action against any or all entities that are or were required or responsible…to make payment with respect to the same item or service (or any portion thereof) under a primary plan.
  • The United States may recover “from any entity that has received payment from a primary plan or from the proceeds of a primary plan’s payment to any entity. 
  • The United States government may only seek recovery directly from a primary plan after it has issued a recovery demand letter to that primary plan. 
  • Though the MSPA establishes a “private cause of action for damages,” a consensus among the Federal Circuit Courts of Appeal has determined that the MSPA does NOT allow a private party to bring suit on behalf of the U.S. government for the reimbursement of conditional Medicare payments.

The bottom line- insurance defense firms need to stop holding settlements captive unless they have proof of receipt of a demand letter to them from Medicare. Share this post :
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  1. No, the bottom line is that it's an entirely unworkable and impractical system as it's currently set up. It needs to be clarified and left black and white with no potential ambiguity for who possesses what obligation.

  2. This makes it black and white Ed. "The United States government may only seek recovery directly from a primary plan after it has issued a recovery demand letter to that primary plan."

    How many times have your carriers received demand letter from MSPRC?