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US District Court: Ruling in Sexton vs. Medicare

In Sexton v. Medicare, 2016 U.S. Dist. LEXIS 89818, Medicare made conditional payments for Plaintiff’s treatment after Plaintiff was injured in a motor vehicle accident. After the conditional payments were made, Medicare issued a conditional payment letter to Plaintiff notifying him that Medicare had paid $678.80 for treatment of his accident-related injuries and that he may be required to reimburse Medicare for medical expenses related to his liability claim in the future. The conditional payment letter clearly stated, in bold type: “ THIS IS NOT A BILL. DO NOT SEND PAYMENT AT THIS TIME.”

Following receipt of the conditional payment letter, Plaintiff filed an action seeking to compel Medicare to recover funds from the insurer for the driver of the other vehicle involved in the accident or the providers that “Medicare knowingly paid by mistake”. Defendant, U.S. Department of Health and Human Services’ (HHS), filed a motion to dismiss, arguing that Plaintiff’s claim was not ripe for judicial review because Plaintiff had not suffered an actual or imminent injury and that Plaintiff failed to avail himself and exhaust the administrative remedies.

The Court granted Defendant’s motion to dismiss, finding that the Plaintiff did not have standing to sue because he alleged “only a potential for injury that has not yet occurred,” as Medicare had not sought reimbursement for the conditional payments. Plaintiff had only been notified that Medicare could seek recovery in the future. Because the Court found that the Plaintiff lacked standing to sue, the Court did not consider Defendant’s second argument that Plaintiff failed to avail himself and exhaust the administrative remedies.

Importantly, the Plaintiff had not received a primary payment at the time that the conditional payment letter was issued. As such, if Medicare had been seeking recovery from the Plaintiff, instead of just providing notice that recovery could be sought in the future, the outcome of this case may have been different, as a primary payment is required before CMS’s right of action against a beneficiary can arise. Of course, this is unlike CMS’s right of recovery against a primary insurer, which accrues as soon as CMS learns that payment has been made or could be made under workers’ compensation, any liability or no-fault insurance, or an employer group health plan.

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