Medicare’s conditional payment recovery tactics challenged by CIGA

Although Medicare is a secondary payer when a primary payer is available, the Center for Medicare and Medicaid Services (CMS) often overreaches when seeking reimbursement of conditional payments under the Medicare Secondary Payer statute (MSP).  This typically occurs when CMS seeks reimbursement for payment of a bill that includes treatment diagnosis codes that cover both an injury related and a non-injury related condition.  Since a workers’ compensation carrier is generally not responsible for treatment of non-injury related conditions, the proper primary payer for the non-injury related treatment is Medicare.

CMS’s  overly broad reimbursement claims were the subject of the California Insurance Guarantee Association (CIGA) v Burwell, et al case in the U.S. District Court for the Central District of  California (Case No 2:15-cv-01113-ODW-FFM, 1/5/17).  The action stemmed from CIGA’s objection to CMS’s three reimbursement demands for payments made on service dates that included both work related and non-work related treatment charges. Although CMS subsequently dropped the demands, CIGA sought a judicial declaration and permanent injunction barring CMS from calculating conditional payments in this way. CIGA argued that this practice was contrary to the MSP and Medicare’s regulations.

CMS moved for summary judgment and a dismissal of the action raising several defenses. It argued that the action was moot since CMS was no longer seeking reimbursement. It also argued that CMS’s practice is based on a reasonable interpretation of the MSP and implementing regulations. The adequacy of CIGA’s pleadings were also challenged as well as their “programmatic attack” on Medicare.

The Court rejected all of CMS’s arguments and denied CMS’s Motion to Dismiss and Motion for Summary Judgement. CIGA’s Motion for Partial Summary Judgment was granted. In rejecting CMS’s argument that the action was now moot, the Court noted that the timing of CMS’s withdrawal of the reimbursement claims supported their conclusion that this was simply a “strategic maneuver” in this claim.

It also disagreed with CMS’s claim that their interpretation of the MSP and implementing regulations was reasonable based on the Court’s review of the relevant language. The Court noted that under the MSP, a primary plan’s reimbursement obligations pertained to an “item or service if it is demonstrated that such primary plan has or had a responsibility to make payment with respect to such item or service.”  42 U.S.C. Section 1395 y(b)(2)(B)(ii). The corresponding regulation’s definition of an “item or service” was also reviewed. It provides in pertinent part as follows: “Any item, device, medical supply or service provided to a patient (i) which is listed in an itemized claim for program payment or a request for payment…” 42 C.F.R. Section 1003.101. Given the use of the singular version of the words “item or service” in the MSP and the regulation’s reference to “any item, device, medical supply or service”, the Court determined that one medical treatment should be considered for recovery despite the manner in which the provider bills for the treatment.

The Court also considered the MSP language pertaining to “responsibility to make payment” in its analysis.  In citing Caldera v Ins. Co. of the State of Pa., 716 F.3d 861, the Court noted that state law generally determines whether a compensation carrier has a responsibility to make payment with respect to an item or service. In the instant case, California law clearly stated that a compensation carrier is not responsible for treatments that are unrelated to the industrial accident. In light of this, the Court held that when a single charge contains multiple diagnosis codes, the presence of one injury related code does not “ipso facto” make CIGA responsible for full reimbursement of the non-industrial codes.  The ability to reasonably apportion between the work related and non-industrial codes in the charge should be considered by CMS.


Although the CIGA case pertains to conditional payments, its arguments may also apply to “future conditional payment” projections that are included in a CMS reviewed Medicare Set-Aside.  For example, a compensation carrier’s payment for a physician’s visit that treats an accepted condition yet also lists a denied condition should not be viewed as an acceptance of both conditions.  In addition, the CIGA Court’s discussion of the role state law plays in the determination of “responsibility to make payment” in an MSP context provides further support for state law limited projections in the Medicare Set-Aside.

In regards to conditional payment recovery claims, we continue to recommend that parties carefully examine the charges listed in CMS’s Statement of Reimbursement.  Since many workers’ compensation laws require parties to secure itemized bills from providers, these bills and supporting medical records may be used to dispute over-inclusive conditional payment recovery claims. The direct right of appeal process is also available and should be used.  We will keep you advised of further developments.

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