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Abstract: A recent Eleventh Circuit decision creates some needed clarity in addressing the timeframe within which Medicare can pursue its conditional payment reimbursement claims. A Medicare claim against a primary plan must be brought by the government within three years, and a Medicare claim against other entities, including the Medicare beneficiaries and their attorneys, must be brought within six years of settlement or judgment.
On September 30, 2010 the United States District Court for the Northern District of Alabama issued its anticipated opinion and order in the case of United States v. Stricker (United States of America v Stricker et al (E.D. N.D. Ala. 2009) (No. 1:09-cv-02423-KOB). The case addresses the Statute of Limitations ("SOL") applicable to government recovery under the Medicare Secondary Payer Act ("MSPA"). In this case the U.S. sought, from attorneys and corporations, reimbursement of Medicare benefits the government paid to individuals who participated in a 2003 class tort settlement with various chemical companies involving PCB contamination. (Memorandum Opinion Granting Certain Defendants' Motions to Dismiss (Sept. 30, 2010)
Holding: The Court found that the government failed to file the action in a timely manner, regardless of whether a three-year SOL or a six-year SOL applied.
Case Analysis: The underlying settlement agreement ("Settlement") was announced on August 20, 2003. The Settlement was technically not final until December 2, 2003 when plaintiffs' counsel filed certification with the state court that approved the settlement agreement that the last conditions (including participation rate satisfaction) had been met and distribution of funds could commence. However, December 2, 2003 was not adopted by the court as the SOL triggering event. The government filed this lawsuit on December 1, 2009. Because the MSPA does not have a separate SOL, the Court followed the Federal Claims Collection Act ("FCCA") to determine the duration of the SOL. To make that determination the Court needed to decide whether the government's MSPA action was founded upon contract or tort. The government argued that the United States' claim for reimbursement of conditional Medicare payments sounded in contract (express or implied), which subjected the U.S. to the six (6) year limitations period in 28 U.S.C. §2415(a). The Defendants asserted that the claim sounded in tort, thereby subjecting the U.S. to the three (3) year limitations period in 28 U.S.C. §2415(b).
The Court analyzed the SOL issue separately for the corporate defendants and attorney defendants. The corporate defendants were deemed to have been subject to the three-year SOL because there were no contractual ties to the government, only the statutory obligation triggered by the underlying tort claim. The Court rejected the Government's argument that the SOL could not begin to run until the claimants returned sufficient releases to satisfy a participation threshold, instead focusing on the plain language of the MSPA to show that a primary plan's responsibility to reimburse for conditional payments may be demonstrated by a judgment, a payment conditioned on the recipient's compromise, waiver or release, or by other means. In this case, the Court determined that the claimants' conditional return of releases in exchange for the corporate Defendants' payment into the court registry was sufficient to trigger the corporate Defendant's responsibility to pay within the meaning of 42 U.S.C. §1395y(b)(2)(B)(ii). The Court noted, however, even if the six-year SOL applied, the government would still not prevail, because it filed its suit too late. Judge Bowdre concluded that the Government's cause of action accrued, at the latest, on September 10, 2003, when the state court approved the executed settlement. On the other hand, the defendant attorneys were granted contractual status as agents of the Medicare beneficiaries contractually bound to the Medicare program to assist with its recovery program when necessary, and therefore were subject to the six-year SOL. Judge Bowdre found that the attorney defendants "received payment" from a "primary payer" (e.g. corporate defendants) at the latest, on October 29, 2003, when the state court ordered the transfer of $275 million to the attorneys' escrow account as part of the settlement agreement.
Going Forward: Despite this being one Circuit's opinion, the following can be considered: if attorneys get sued for not paying back Medicare, the six (6) year SOL is likely to apply (because of the contingency fee contract attorneys have with their Medicare beneficiary clients). Alternatively, the insurers and other parties who pay into the settlements would have a three (3) year SOL (because their failure to pay arises on account of the underlying tort action against which the Medicare beneficiary has made claims).
And, in the mass tort context, a settlement contingency, even a participation rate, which if not met, results in a return of settlement funds to the primary plan (or other defendants), may not serve to delay the start of the statute of limitations should the government not be properly reimbursed later on. At the same time, parties who find themselves in the position to settle their claims, whether mass tort, or a single case, should actively seek to determine whether the settlement involves any Medicare enrolled beneficiaries. This can be accomplished through adopting a formalized process to verify, resolve and satisfy conditional payment reimbursements, whether through use of a lien resolution administrator in mass torts, or through integrating a Medicare claims reimbursement process in individual settlements.
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