New Avenue for Medical Vendors?

A difficult trend may be in the making. Difficult, that is, for carriers and employers, collectively referred here as "payers."

The complex interaction of workers' compensation laws with other laws, both federal and state, sometimes create circumstances that just can't be predicted, and once these circumstances are identified they quickly morph into a trend that results in new pressures.

The Medicare Secondary Payer Act (MSPA) is mostly looked at as some pesky law that interferes with the timely settlement of claims because of the requirement to satisfy elements satisfactory to avoid liability to the Centers for Medicare and Medicaid Services (CMS).

A creative position taken by a medical vendor in a no-fault auto liability MSPA claim may open the door to future payer headaches though and start a new trend for medical vendors seeking payment on denied or partially paid bills.

Jean Ellen Warner was in an October 2010 car accident that severely injured her.

Warner underwent neurosurgery with Michigan Spine and the surgery center sent a $24,645.001 bill to State Farm, which had provided Warner with no-fault auto insurance coverage at the time of her accident.

State Farm denied payment, asserting that Warner's spinal injuries predated the October 2010 collision and were attributable to a prior workplace accident.

Warner then submitted a claim to the CMS, which made a partial payment to Michigan Spine.

Michigan Spine then sued State Farm under the MSPA's private enforcement provision, 42 U.S.C. Section 1395y(3)(A).

The MSPA pays for medical services when an insured who is also covered by Medicare is denied coverage by the primary payer. The act allows the CMS to later seek reimbursement from the primary payer if coverage was wrongfully denied. The act also has a private enforcement provision, which Michigan Spine invoked.

State Farm moved for summary judgment, arguing that Michigan Spine had no right to sue before a court or other adjudicative body has determined whether or not State Farm was in fact liable for the medical care Michigan Spine had provided.

State Farm lost at the Federal District Court level in the 6th Circuit.

The 6th Circuit acknowledged that federal courts had held that the private insurer's responsibility to pay must be "demonstrated" via a prior judgment or settlement in order for a private insurer to be liable under the act. But after engaging in a close reading of the act's "tortuous text" and studying its amendment history, the 6th Circuit ruled that a private insurer's responsibility had to be "demonstrated" only when the CMS brings a claim for reimbursement.

When a health care provider is the party seeking payment, the 6th Circuit said, it need not "demonstrate" the insurer's responsibility to pay before bringing a lawsuit under the act.

The court ruled that Michigan Spine did not need to obtain a judgment on State Farm's obligation to pay for Warner's care in order to sue the carrier for payment.

One question not addressed by the ruling is whether workers' compensation would be the exclusive remedy, since the case dealt with a no-fault automobile liability situation; clearly a conflict of authority that may provoke a jurisdictional fight in the near future.

The thinking from observers who are expert in the MSPA is that the ruling is applicable to comp since no-fault insurance and workers' compensation both fall within the umbrella of "non-group health plans" under the MSPA.

And there is close correlation between Michigan no-fault auto and workers' compensation. Both are "no fault" meaning it does not matter who or what caused the accident/injuries. Both pay for the injured/policy-holder's medical expenses, wage loss benefits and other costs. Both are mandatory.

But no-fault auto is not exclusive - if there is insufficient insurance to cover all damage claims the at-fault party may still be liable for damages in excess of policy limits. This is generally not the case in workers' compensation unless there was some intentional aspect or violation of code where by liability outside of the exclusive remedy of comp is permitted.

One thing I have learned in my 29 years in The Law, however, is never say "never."

Just when payers thought they were getting some control over medical costs...

Wow.

The case is Michigan Spine & Brain Surgeons v. State Farm Mutual Automobile Insurance Co., No. 12-CV-11329.