Sullivan v. Farm Bureau Mutual Insurance Co. of Michigan – Another Case of a Premature MSP Action

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

In another case of failing to understand exhaustion of the MSP’s administrative requirements, a Federal District Court found a count in the plaintiff’s complaint to determine conditional payment amounts to be premature.  In Sullivan v. Farm Bureau Mutual Insurance Co. of Michigan, the plaintiff brought a cause of action against several defendant insurance companies for no-fault benefits in Michigan and simultaneously sought to recover, under the MSP, amounts paid by Medicare which should have been paid by one of the two no-fault insurance companies.  The case was removed from state court to federal court because of the inclusion of the claim under the MSP. 

The Sullivan court recognized the “MSP permits Medicare to submit conditional payments to health care providers "if a primary plan [including, inter alia, no fault insurance] has not made or cannot reasonably be expected to make payment with respect to such item or service promptly." 42 U.S.C. § 1395y(b)(2)(B)(i); see also id. at § 1395y(b)(2)(A)(ii). If Medicare makes any such conditional payment, the primary plan is required to reimburse Medicare "if it is demonstrated that such primary plan has or had a responsibility to make payment with respect to such item or service." Id. at § 1395y(b)(2)(B)(ii). If Medicare is not timely reimbursed, the MSP establishes a private cause of action to enforce the reimbursement provisions by seeking double damages against the recalcitrant primary plan. Id. at § 1395y(b)(3)(A).” 

While recognizing there is a proper cause of action under the MSP, the district court emphasized that there are “two important conditions precedent” to bringing suit.  The first condition is that Medicare must have actually made expenditures on the injury victim’s behalf.  The second is that an insurer (or other responsible party under the MSP) must be responsible for making such payments.  According to the Sullivan court, “responsibility for such payment may be demonstrated by a judgment, a payment conditioned upon the recipient's compromise, waiver, or release (whether or not there is a determination or admission of liability) of payment for items or services included in a claim against the primary plan or the primary plan's insured, or by other means.”

While the first condition precedent was satisfied in this case, the second one was not.  As this case illustrates and many others before it, there must be a settlement, judgment or award to trigger a ripe claim under the MSP.  A conditional payment can’t be recovered by Medicare until responsibility is fixed by a settlement, judgment or award.  Bringing a cause of action that joins Medicare as a party prior to a settlement, judgment or award is simply a waste of time.  Further, if there is a settlement , judgment or award a federal district court lacks jurisdiction until the administrative remedies required by the MSP and its regulations are exhausted.