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US District Court Dismisses Plaintiff’s Claim Based on Medicare’s Lack of Request for Recovery

In Sims v. Pma Ins. Co., 2021 U.S. Dist. LEXIS 20434, the US District Court for the Middle District of North Carolina dismissed the Plaintiff’s claim seeking recovery for the alleged failure of the Defendant, PMA Insurance Company, to reimburse Medicare for conditional payments related to her workers’ compensation claim.

In 2011, the Plaintiff was injured at work. Following an initial denial of the claim, in 2012 the Defendant accepted the claimed injury, including future medical expenses. In 2015, following Plaintiff’s 2014 entitlement to Medicare benefits, Medicare issued their first in a series of conditional payment letters. In an August 2015 letter, Medicare identified $4,552.87 in conditional payment claims. The letter also advised Defendant that Medicare was "still investigating this case file" and the enclosed listing of conditional payments was "not a final list and w[ould] be updated." In addition, the letter noted that "This is not a bill. Do not send payment at this time" and advised that Defendant should "refrain from sending any monies to Medicare prior to . . . receipt of a demand/recovery calculation letter." The letter also asked that Defendant advise Medicare if they disagreed with the claims listing, but did not provide a response date for such disagreements. In September of 2015 another letter was issued and the claim amount was lowered to $2,397.39. Defendant did not respond to either 2015 letter. In March of 2017, Medicare issued a third letter in the amount of $6,166.31. The letter noted again that the claims listing was not final and asked that Defendant advise Medicare if they believed the listing to be inaccurate. Again, Medicare did not include a required response date. In February of 2018, Defendant filed a dispute of the March 2017 letter. In March of 2018, Medicare responded to Defendant’s dispute with an updated conditional payment claim amount, but refused to remove all claims. This letter, like the others, advised Defendant that the listing was not final and asked that Defendant notify Medicare if they believed the listing to be inaccurate. In April of 2018, Defendant filed another dispute of the conditional payment claims, but it does not appear that Medicare responded to that dispute.

On March 16, 2020, Plaintiff filed the present action against Defendant for violating the Medicare Secondary Payer Act (MSPA). On April 15, 2020, Medicare sent Defendant another conditional payment letter, which was identical to the two prior letters, with the exception of an increase in the conditional payment claim amount. The amount was increased to $10,859.34. Defendant responded on April 23, 2020 with a dispute of the claims and CMS responded on May 4, 2020 with a letter indicating that it agreed with the dispute and the amount had been reduce to zero. Defendant subsequently filed a motion to dispute the current matter based on a lack of subject matter jurisdiction, or, in the alternative, a failure to state a claim.

Defendant challenged the court’s subject matter jurisdiction on two grounds – first, that the case is not ripe for adjudication and, second, that the Plaintiff lacks standing, as she has not suffered an injury-in-fact. The Court first evaluated the ripeness of the claim. Defendant argued that, at the time the present action was filed, they were in negotiations with Medicare regarding the accuracy of the claims asserted and that, since that time, it had been found that Defendant did not owe any reimbursement. The Plaintiff countered the argument asserting that ”her claims are not dependent on future uncertainties but rather depend ‘on an assessment of past events’” and pointed to the Defendant’s “historical pattern of delay in making payments as obligated." As such, the Court evaluated whether the Defendant’s failure to reimburse Medicare is final and not dependent on “future uncertainties.” Though Plaintiff maintained that Defendant’s obligation to reimburse Medicare was final after Medicare responded to the February 2018 dispute, the Court determined that Medicare’s response letter undermined Plaintiff’s position, given Medicare’s indication in that correspondence that the claims were still being investigated and the enclosed listed of payments were “not final.” The Court once more went through the sequence of correspondence and disputes that occurred after the February 2018 dispute and determined that the Defendant’s “requirement to reimburse Medicare remains contingent upon it being determined with appropriate finality that Defendants owe Medicare reimbursement (for example, by CMS issuing a demand recovery letter), and Sims's suit remains contingent upon Defendants failing to do so after that occurs.” Given this, the Court found that the Plaintiff’s “claim is not currently fit for judicial decision” and “should be dismissed as premature.”

Next, the Court evaluated whether the claimant has suffered an injury-in-fact. Plaintiff argues that she was injured following Defendant’s failure to pay for her medical care as required by law. The Court noted that a plaintiff, as a beneficiary of a primary plan, suffers an injury-in-fact when the primary plan fails to reimburse Medicare as required by the MSPA. They determine, however, that facts did not exist in this case that indicate the Defendant failed to reimburse Medicare when required to do so, and, as a result, the Plaintiff did not plausibly suffer an injury-in-fact under the MSPA. The Court noted that “[u]nder the MSPA, in order for a plaintiff to recover in a private cause of action, a primary payer must have a demonstrated responsibility to reimburse Medicare for given services and the primary payer must have failed to do so.” In this case, the Court determined that if they were to infer an injury-in-fact based on a Defendant’s failure to reimburse CMS, notwithstanding CMS’ indication that Defendant did not owe reimbursement, Defendant would be automatically exposed to the double damages prescribed by the MSPA without the opportunity to reimburse Medicare and avoid this penalty.

Following the Court’s determinations that the claim was not ripe for adjudication and that the Plaintiff failed to prove she suffered an injury-in-fact, the Court granted Defendant’s motion to dismiss.

It is important to note that the sequence of events in the case at hand began before CMS’ implementation of the Commercial Repayment Center (CRC), Medicare’s recovery contractor that assumed responsibility for the recovery of conditional payments where an insurer/workers' compensation entity is the identified debtor. As a result, the entity handling the recovery process in this matter was the Benefits Coordination & Recovery Center (BCRC). In general, the BCRC does not issue conditional payment notices (CPN) or formal demands for reimbursement, both of which include a due date for a response, in the regular progression of a file and primarily issues conditional payment letters, which do not include response due dates. Rather, the BCRC generally issues a CPN or formal demand following a report of settlement and/or termination of ongoing responsibility of medicals (ORM). The CRC, however, does frequently issue CPNs and formal demand, both of which are time sensitive and should be addressed as soon as possible. In fact, we have recently seen an increase in CPNs and formal demand coming from the CRC, especially on older and stagnant files. If you require assistance with addressing these claims, please let us know. If you forgo the administrative appeals process allowed by Medicare, the options to remedy the claim become very limited.


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