Portman v. Goodson - Defendant can't get declartory judgment regarding Medicare conditional payment while still litigating PI claim

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

Due to fear over failing to reimburse Medicare for conditional payments, some defendants are taking extraordinary measure to try and protect themselves.  Portman v. Goodson is a perfect example of this type of overzealous behavior.  Portman brought a personal injury action claiming damages from an automobile accident.  The defendant, Goodson and his employer, then filed a third party complaint against t the Secretary, naming the HHS Centers for Medicare and Medicaid Services (“CMS”), and the Central States, Southeast and Southwest Areas Health and Welfare Fund (the “Fund”).  The third party complaint alleged that Medicare had made conditional payments on behalf of Portman and resulting liens may be asserted against future monies payable to Portman via a settlement or judgment. 

Goodson sought a declaratory judgment regarding the amount of reimbursement due to CMS under the MSP.  Goodson claimed that he had exposure to liability for reimbursement and that any potential liability for repayment should be established through this action.  Since the action was pending in state court, the Secretary of Health and Human Services removed the case to federal court and sought to be dismissed because the matter was premature depriving the federal district court of subject matter jurisdiction. 

The Secretary in the motion to dismiss explained that

If Plaintiff receives an award, settlement or other payment as satisfaction of her claims against the Defendants, Medicare will determine whether it made payments on Plaintiff’s behalf with respect to her claims against the Defendants and the amount, if any, that must be reimbursed to the Medicare Trust Fund. Plaintiff can seek administrative review of that determination and, after exhausting administrative remedies, judicial review. Absent satisfaction of those administrative procedures, sovereign immunity is not waived and no jurisdictional basis exists for this action against the Secretary.

The federal district court in Portman agreed with the government’s position.  It analyzed the MSP statutory and regulatory provisions concluding that “it is not until a beneficiary receives an award, settlement or other payment in satisfaction of his claims that Medicare conditional payments can become overpayments subject to reimbursement.”  The court also explained that there are administrative process that must be exhausted prior to any federal district court having jurisdiction over Medicare conditional payment questions.  Accordingly, the court held:

Portman and Goodson are still litigating Portman’s tort claims. There has been no settlement, judgment or other payment to trigger an initial determination by the Secretary, much less the full gamut of administrative remedies which must be exhausted before seeking judicial review. Goodson’s third-party complaint is premature. The third-party complaint thus fails to allege a “case or controversy” cognizable under the Declaratory Judgment Act, 28 U. S .C. § 2201(a). Goodson’s claim is not ripe for review.

The Secretary’s motion to dismiss was granted and the case was remanded back to the state court in which it was filed since no federal jurisdiction existed.  My hope is that through case law such as Portman, defendants will learn slowly but surely that compliance with the MSP does not require needless litigation such as in Portman.  Conditional payment resolution becomes ripe when repayment is required.  Repayment is required when a primary plan’s responsibility for payment can be demonstrated by judgment, a payment conditioned upon a release or other compromise waiver, including a settlement.  See 42 C.F.R. 411.22(b)(3).  While defendants/insurers do have exposure under the MSP for failing to repay a conditional payment and a direct right of action by the government does exist against all parties to a settlement, cases such as Portman demonstrate a lack of understanding as to when the resolution process can be started.  Portman should clear up the issue for defendants that take the time to read the court’s holding.