Alcorn v. Pepples – Medicare conditional payments aren’t ripe until there is a settlement, judgment or award

Posted date in Jason D. Lazarus, J.D., LL.M., MSCC Liens, Medicare, Medicare Secondary Payer Act, MSP Compliance

The Alcorn case is identical to the situation presented by Hick v. Chamberlin.  In Alcorn, the plaintiff, Hettie Alcorn was injured in a car accident and sued Pepples.  Alcorn brought a state court action against Pepples and tried to join the Centers for Medicare and Medicaid Services (CMS) as an indispensable party.  Alcorn sought "[a]n Order stating weather [sic] any medical services were paid for by CMS, and if so, that exact amount."  The Secretary of Health and Human Services removed the action to Federal Court. 

Alcorn argued that Medicare had an interest in the action and must participate or give up all claims against any potential future settlement.  Further, Alcorn argued that she couldn’t reach a settlement or make a claim for special damages at trial without knowing the extent of her reimbursement obligation to Medicare.  CMS argued that it could not be joined in the action because Alcorn had not yet exhausted the administrative remedies set forth in the MSP. 

The United States District Court agreed with CMS and dismissed the case to the extent that it joined the Secretary.  The court stated its rationale very clearly as follows:

“Federal courts may not exercise jurisdiction over claims arising under the Medicare Act except under the circumstances set forth in the Act itself. 42 U.S.C. § 405(h).  Pursuant to 42 U.S.C. § 405(g), an individual may bring a civil claim in federal court after the Secretary has made a final decision following a hearing Thus, the Medicare Act "demands the `channeling' of virtually all legal attacks through the agency, . . . assur[ing] the agency greater opportunity to apply, interpret, or revise policies, regulations, or statutes without possibly premature interference by different individual courts . . ." Shalala v. Ill. Council on Long Term Care, Inc., 529 U.S. 1, 13 (2000).”

“Alcorn's claim with respect to the Secretary arises under the Medicare Act because it rests on the repayment obligations set forth under 42 U.S.C. § 1395y. She therefore must exhaust the administrative remedies established under the Medicare Act before this court may exercise subject matter jurisdiction over her claim. Alcorn has not yet received any settlement or judgment from Pepples, and therefore Alcorn's reimbursement obligation has not yet been triggered.”

The lesson from this case and others similar to it is that Medicare’s administrative process must be followed before a matter may be heard by a federal district court.  Just because Medicare has paid for care, does not mean that a claim against Medicare is ripe.  Until there is a settlement, judgment or award Medicare can’t insist upon reimbursement of a conditional payment.  Therefore, there aren’t even any administrative remedies to be exhausted prior to settlement, judgment or award.  The condition precedents to bringing an action against Medicare are a settlement, judgment or award and exhaustion of the Medicare administrative remedies provided for the MSP and its regulations.