Private Medicare Secondary Payer (MSP) Cause of Action Claim

Although there may be some truth to the “let sleeping dogs lie” adage, it was not demonstrated in the recent Estate of Clinton McDonald vs Indemnity Insurance decision, Civil Action No. 3:12-CV-577,  involving the “private cause of action” provision of the Medicare Secondary Payer Act (MSPA) 42 U.S.C. ss 1395 y(b)(3)(A).  This provision establishes “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)” 41 U.S.C. ss 1395y(b)(3)(A).

McDonald, a Medicare beneficiary, was injured in a motor vehicle accident on May 10, 2007 while working for O’Reilly Auto. McDonald died on November 5, 2007, allegedly from the injuries sustained in the accident. Between the accident and his death, Medicare paid $180,185.75 in injury-related medical bills.

The Kentucky Workers’ Compensation Board found that McDonald’s death was related to the accident and ordered O’Reilly Auto’s workers’ compensation insurance carrier, Indemnity Insurance, to pay for McDonald’s medical expenses.  Although an appeal was filed by the Estate, the Kentucky Board’s subsequent March 9, 2010 Order did not impact its prior opinion on the medical expenses. There is no indication that Indemnity took any action in regards to Medicare’s conditional payments after this Kentucky Board Order was entered.

The Estate filed a lawsuit on September 13, 2012 under the MSPA “private cause of action” provision seeking double recovery of the medical expenses given Indemnity’s failure to reimburse Medicare. After the Estate filed its complaint, Indemnity received an interim conditional payment letter from MSPRC dated September 19, 2012. Medicare sought the sum of $181,326.38 in conditional payments. A Final Demand Letter was sent to Indemnity on October 25, 2012 seeking $184,514.24. Indemnity issued a check to Medicare on December 11, 2012 that was acknowledged by Medicare on January 11, 2013.

Both Indemnity and the Estate filed multiple cross-motions in the case seeking dismissal of the action and summary judgment. The US District Court for the Western District of Kentucky filed its Decision on September 2, 2014, finding that the Estate was entitled to receive double damages under the MSPA. It rejected Indemnity’s “no harm; no foul” argument since it disregarded  the two years between the Kentucky Board’s Order for payment of the medical and the filing of the Estate’s suit.

This case stresses the importance of addressing conditional payments in settlements and awards.  A proactive approach in the identification and resolution of conditional payments should protect against a double damage private cause of action.


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