U.S. District Court Dismisses Action Against CMS Due to Lack of Subject-Matter Jurisdiction
In Country Mutual Insurance Company v. Decker, 2018 U.S. Dist. LEXIS 115281 (July 11, 2018), the United States District Court for the Western District of Kentucky determined that the United States Department of Health and Human Services for Medicare and Medicaid Services (“CMS”) must be dismissed from an action filed by Country Mutual Insurance Company (“Country Mutual”), as CMS had not waived its right to sovereign immunity and the other parties to the matter had not properly exhausted administrative remedies through CMS.
The matter arose following a motor vehicle accident in 2016. In February 2018, Country Mutual brought an action for interpleader against the individuals involved in the motor vehicle accident and CMS. CMS removed the action to federal court and filed a motion to dismiss Country Mutual’s action as it applied to CMS.
In its motion to dismiss, CMS argued that the court lacked subject matter jurisdiction because 1) Country Mutual failed to allege that CMS had waived its right to sovereign immunity, and 2) no party to the action had properly exhausted administrative remedies. The court agreed with CMS on both counts, and dismissed CMS from the action.
The court explained that the United States, as a sovereign, is immune to suit unless it consents to be sued. The principal of sovereign immunity stretches to agencies of the United States, which includes CMS. As part of its action for interpleader, Country Mutual failed to allege that CMS had waived its right to sovereign immunity.
Additionally, CMS argued that the parties to the action had not properly exhausted administrative remedies required under the Medicare Act. Under the Medicare Act, Medicare may make payment on behalf of a claimant, if the primary plan has not made prompt payment. Following these payments by Medicare, an administrative process to govern any reimbursement obligations is provided in the Medicare Act. Therefore, a civil action may not be brought regarding Medicare’s payments until the Secretary has made a final determination. This allows Medicare to evaluate legal claims within the agency, and to apply, interpret, or revise its own policies without premature interference by federal courts. In this instance, neither Country Mutual nor the other parties to the action properly exhausted administrative remedies through CMS.
Based on the above, the court granted CMS’s motion to dismiss the action as it applied to CMS and remanded the action to state court for further litigation amongst the remaining parties.