4. Medicare Right to Reimbursement

4(a) Determination of Responsibility

The right to reimbursement does not arise immediately upon the making of a conditional payment. If it did, CMS would be able to instigate its own actions on the merits of any underlying dispute, such as coverage or issues concerning liability. Instead, the reimbursement right requires that it be "demonstrated that such primary plan has or had a responsibility to make payment with respect to such item or service". FN 1. In the 2003 amendments, language was added to describe how responsibility can be demonstrated. "A primary plan's responsibility for such payment may be demonstrated by a judgment, a payment conditioned upon the recipient's compromise, waiver, or release (whether or not there is a determination or admission of liability) of payment for items or services included in a claim against the primary plan or the primary plan's insured, or by other means." FN 2. The determination of responsibility is an essential element of the reimbursement right. FN 3. For the most part, the determination language of the statute is pretty straightforward. In general, responsibility must be established by a body with adjudicatory authority or by agreement to pay. Payment does not have to be accompanied by an admission of liability. The contention relating to this requirement arises from the phrase “or by other means” coupled with the standard overreach by CMS.

The regulations provide that responsibility can be demonstrated "[b]y other means, including but not limited to a settlement, award or contractual obligation. FN 4. This raises the question of whether "a contractual obligation" refers to a contract establishing liability, like a settlement agreement, or whether the insurance contract itself "demonstrates" responsibility. Clearly, it does not in the contact of liability policies, because the responsibility to pay under a liability insurance contract is itself conditioned on the establishment of liability on the part of the insured. FN 5. This is equally true in the context of workers' compensation insurance. FN 6. So the focus must be on first party contracts which provide benefits to the insured. However, some first party contracts also are conditional on the establishment of liability of a tortfeasor, such as underinsured and uninsured motorist coverages, so these cannot be a contract that determines responsibility for the same reasons as liability policies.

In Geer v. Amex Assurance Co.FN 7, The District Court considered a no-fault claim. Apparently, the no-fault insurer had resolved some claims and made payments for specific time periods and amounts, the Court observed that the insurer's payment of some claims " cannot be thought to infinitely establish Defendant's obligation to pay benefits." At the heart of the analysis was the concept that there was no reason to treat first party claims any differently that liability insurance claims. Clearly, the statutory language does not differentiate between them. However, to keep things interesting, the Sixth Circuit took a contrary position in the context of group health plans in Bio-Medical Applications of Tennessee, Inc. v. Central States Southeast and Southwest Areas Health and Welfare Fund FN 8. The Court rejected the idea that a contract of insurance was insufficient to demonstrate responsibility, holding instead that:

After engaging in a close reading of the Act's tortuous text and studying its amendment history, we believe that the Act's “demonstrated responsibility” provision serves as a limitation only in a very specific situation: when Medicare seeks reimbursement for medical expenses caused by tortfeasors. Thus, we hold that a healthcare provider need not previously "demonstrate" a private insurer's responsibility to pay before bringing a lawsuit under the Act's private cause of action. FN 9.

This holding was in the context of group health plans, but the language used would apply equally to no-fault insurance. The dissent made a good point that much of the opinion is actually dicta, which may reduce the opinion's weight generally but in the Sixth Circuit it will be gold (or hemlock, depending on your point of view).

While two circuits have taken different approaches to this problem, it cannot truthfully be said that the holdings of the opinions are in conflict. The 11th Circuit opinion applied to tortfeasors, and the Sixth Circuit just limited the 11th Circuit analysis to that. In this and other cases, the Sixth Circuit has been liberal in allowing the CMS interpretation to prevail, while the 11th Circuit has been more skeptical of overreach by the agency. At this point, the battle lines are drawn but the result that will be reached is much less than clear.

FN 1.42 U.S.C. §1395y(b)(2)(B)(ii).

FN 2. PL 108–173, December 8, 2003, 117 Stat 2066 § 301.

FN 3. Glover v. Philip Morris USA, 380 F.Supp.2d 1279 (M.D.Fla. 2005).

FN 4. 42 C.F.R. §411.22(b)(3).

FN 5.Glover v. Liggett Group, Inc., 459 F.3d 1304 (11th Cir. 2006); Graham v. Farm Bureau Ins. Co., 2007 WL 891895 (W.D.Mich. 2007).

FN 6.Fisher v. Clarendon Nat. Ins. Co., 2008 WL 191813 (W.D.Mo. 2008). Noting that the Eleventh Circuit's analysis in Gloveri> was broader than the tort context, the Court wrote:

This Court cannot establish Clarendon's liability under the policy without first determining whether Fisher's injuries arose out of and in the course of her employment. However, that determination is solely within the exclusive and original jurisdiction of the LIRC, where Fisher currently has a workers' compensation claim pending.

FN 7.2010 WL 2681160 (E.D.Mich. 2010)

FN 8.656 F.3d 277, 2011 WL 3873777 (6th Cir. 2011).

FN 9. Id. at 279.