In early February, the American Insurance Association (AIA), a group of representatives of the property-causality and self-insurance industries, sent a letter to the Secretary of the Department of Health and Human Services, Kathleen Sebelius, requesting her to delay the April 1, 2010 implementation of the Medicare Secondary Payer (MSP) mandatory reporting requirements. AIA argues that a “more realistic” implementation date is appropriate and imperative because the Centers for Medicare and Medicaid Services (CMS) has not yet provided appropriate reporting guidance to insurers and self-insurers. AIA claims that the test period for the electronic reporting system was inadequate to ensure that the system is fully operational prior to the implementation date. Additionally, AIA states that the industry has serious concerns with the mandatory requirement to submit certain types of data (i.e., Social Security numbers), especially when it appears that CMS is not properly using the appropriate technology to ensure the privacy of personally identifiable information. Finally, AIA argues that the MSP Act’s penalty provision of $1,000 per day, per claim, is excessive and, at the very least, should not be assessed on the first report submitted by any entity.

On December 1, 2009, in U.S. v. Stricker et al., pursuant to the Medicare Secondary Payer (“MSP”) Act, the United States Department of Justice (DOJ) filed a suit against the tortfeasors, plaintiff attorneys, and insurers, that were involved in a $300 million settlement. The tortfeasors and the insurers allegedly all made payments to the settlement fund. It is not clear whether any of the tortfeasors were self-insured. The settlement called for continuous payments through 2013 to be made by the insureds or insurers. It is not clear whether all of the parties that contributed to the settlement made continuous payments or if they finished paying as early as 2003. However, pursuant to 28 U.S.C. § 2415, the statute of limitations for the government to bring an action is six years.

The government seeks reimbursement of the conditional Medicare payments it made to approximately 900 Medicare beneficiaries. Under the MSP Act, Medicare will pay a beneficiary’s medical expenses on a conditional basis where payment under a liability insurance does not occur “promptly.” Additionally, the government seeks double damages from the tortfeasors and insurers, as primary plans, because it was necessary to initiate the lawsuit. The government may collect double the amount of the outstanding conditional Medicare payments from any entity responsible to make payment under a primary plan which fails to provide for primary payment or appropriate reimbursement of conditional Medicare payments. Finally, the DOJ asserts that the plaintiff attorneys received payment under a primary plan for purposes of the MSP Act, and are required to reimburse the United States for outstanding conditional Medicare payments (plus interest) to the extent of any such payments received.

It is worth nothing that the Medicare beneficiaries, as well as the attorneys of the defendants in the underlying suit, were not named as defendants in the pending lawsuit.

This case not only demonstrates the government’s aggressiveness to litigate in order to recover conditional Medicare payments, but also raises some other interesting issues. Due to the six-year statute of limitations in such actions, any entity that contributes to a settlement may face liability for double damages for six years after such payment if Medicare’s interest is not satisfied. This case also highlights the fact that filing Chapter 11 bankruptcy will not discharge a tortfeasor’s obligations under the MSP Act. One of the tortfeasors filed for Chapter 11 bankruptcy and the Department of Health and Human Services filed a proof of claim to recover Medicare conditional payments, which survived the bankruptcy and was not discharged.