October, 2014

The “private cause of action” provision of the Medicare Secondary Payer Act (MSPA),
42 U.S.C. ss 1395 y(b)(3)(A) has been the subject of several recent Court decisions.
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). The following is a summary
of the Bio-Medical Applications of Tennessee, Inc. vs Central States Southeast and
Southwest Areas Health and Welfare Fund, 656 F. 3d 277 (6thCir.2011), Raymand
Nawas vs State Farm Mutual Automobile Insurance Company No.13-11158, and
Humana Insurance Company vs Farmers Texas County Mutual Insurance Company and
Mid-Century Insurance Company of Texas (Cause No. 13-CV-611-LY) decisions.

Bio-Medical Applications of Tennessee, Inc. vs Central
States Southeast and Southwest Areas Health and Welfare
Fund, 656 F. 3d 277 (6thCir.2011),

The Bio-Medical case addressed the concept of “primary” and “secondary” payers in
the context of coverage for kidney dialysis treatment. The facts of the case involved a
patient with end-stage renal disease (ESRD) who had a health insurance policy through
Central States. Central States insurance plan provided for the termination of coverage on
the date the insured becomes entitled to Medicare benefits. In this claim, the patient was
diagnosed with ESRD in August of 2005 and became eligible for Medicare benefits three
months later. Her initial dialysis treatment at one of Bio-Medical’s centers was paid by
Central States. Central States terminated her insurance coverage as of November 1, 2005.
Bio-Medical sued Central States for its non payment of the dialysis treatment under two
theories. It asserted an ERISA claim for unpaid benefits under the patient’s insurance
policy as the patient’s assignee and a private cause of action for double damages under
the MSPA for Central States violation of the statute.

The Court, after a lengthy discussion of the MSPA, found that a group health plan is
prohibited from denying coverage to one of its insureds because the individual became
eligible for Medicare. The plain language of the MSP, 42 U.S.C. ss 1395y(b)(1)(C)(i)
provides that “ A group health plan …..may not take into account that an individual is
entitled to or eligible for (Medicare benefits due to end stage renal disease) during the
(30)-month period which begins with the first month in which the individual becomes
entitled to benefits.”. It also noted that 42 C.F.R. section 411.108(a)(3) gave coverage
termination as a specific example of “take into account”. The Court noted that “the
shifting of costs from private plans to public was exactly the evil that the Act sought to
correct”

The remedy for the injured healthcare provider and the proper amount of damages was
also addressed by the Court. The Court interpreted the private cause of action language,
when read as a whole, to allow a lawsuit against the primary plan noting that the “primary
plan” may be a tortfeasor whose responsibility to pay has been demonstrated by judgment
or settlement or “other means”. 42 U.S.C.ss1395y(b)(2)(B)(ii). The demonstrated
responsibility requirement however was limited to tortfeasors. The Court pointed to
the “other means” language in the provision that had been defined by 42 C.F.R ss
411.22(b)(3) to include a “contractual obligation”. In light of this, an insurance contract
demonstrated a traditional private insurance plan’s responsibility to pay. The Court
also found that “double damages” under the private cause of action provision should be
sufficient to motivate these lawsuits against private insurers. The specific amount of the
double damages however wasn’t determined by this Court since this issue was remanded
to the district court for a determination.

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