Several very recent cases confirm the government’s resistance to have the conditional payment responsibility resolved through any means other than those it selects. All of the decisions involved the successful application of the failure to exhaust administrative remedies defense to the court’s jurisdiction.
In Braucher v. Swagat Group, 2011 WL 832512 (C.D.Ill.) the plaintiff filed a post settlement Motion to Adjudicate Medicare Lien and CMS moved to intervene. The court held that it had no subject matter jurisdiction to decide the Motion to Adjudicate Medicare Lien because the plaintiff had not exhausted the administrative process. In Alcorn v. Pepples, 2011 WL 773418 (W.D.Ky.) the plaintiff, pre-settlement, moved to join CMS as an indispensable party. The government objected because the plaintiff had not exhausted the administrative remedies set forth in the Medicare Act and the court agreed. In Portman v. Goodson, 2011 WL 773427 (W.D.Ky.) the plaintiff’s pre-settlement declaratory judgment action against CMS which sought to determine the repayment liability was dismissed for failure to exhaust administrative remedies. All three decisions, each decided between February 28, 2011 and March 3, 2011, relied upon the need for a plaintiff to comply with the post Demand Letter administrative process as being essential to jurisdiction over CMS in an MSP context.
Keep in mind, however, that all three decisions involved a plaintiff’s right to obtain subject matter jurisdiction before exhausting the administrative remedies set forth in 42 CFR §405.900. Similarly unsuccessful, attempts by the court to compel the attendance of Medicare representatives at settlement conferencei or to compel Medicare to intervene to assert a subrogation interestii have all been rejected on principles of sovereign immunity.
We suggest that under circumstances in which the need to resolve the repayment obligation outweighs the costs an insurer/defendant may consider bringing an interpleader in which CMS is named as a defendant via the Secretary of the US Department of Health and Human Services, Kathleen Sebelius. At least two such actions have been successful.iii Alternatively a declaratory judgment action might be appropriate. These may succeed because there appears to be no mechanism by which a settling defendant/insurer might be able to use, let alone exhaust, the administrative process and that such is not contemplated by the regulatory framework.iv Accordingly, such actions may be analyzed and resolved differently by the court.
i Hoste v. Shanty Creek Management, Inc., 246 F. Supp.2d 784 ((W.D. Michigan, 2002)
ii Gray v. Doe,---F.Supp.2d---, 2010 WL 3199347 (E.D.Ky.)
iii See e.g. Farmers Ins. Exchange v. Forkey, 2010 WL 5477726 (D.Nev.) and Integon National Insurance Co. v. Berry, 2009 WL 424466 (W.D. North Carolina)
iv See 42 CFR §405.926(k) and Medicare Secondary Payer (MSP) Manual, Ch. 29, 200.C(11), stating that a determination that Medicare has a recovery against an entity such as insurer or self-insurer that was or is responsible to make payment for services or items that were already reimbursed by Medicare is not considered an “Initial Determination” subject to appeal. 42 CFR §405.906 specifically states that payment by a third party payer does not entitle that entity to party status with respect to the “Initial Determination” subject to appeal. Neither may the appeal right be assigned to the insurer. 42 CFR §405.912.
