Significant Developments in Medicare Law

In Haro v. Sebelius, No. 11-16606, 2014 WL 21353 (9th Cir. Jan. 2, 2014), the Ninth Circuit Court of Appeals addressed who may be liable to reimburse the U.S. government’s Medicare program for conditional payments made to a Medicare beneficiary for medical treatment that is also the subject of a personal injury claim against a company or insurer.  Unfortunately, the Ninth Circuit took an expansive view and held that persons beyond the beneficiary herself may be liable.

We have reported extensively1 on companies’ and insurers’ obligations under the Medicare Secondary Payer Act and corresponding mandatory reporting provisions.  As a brief overview, in an effort to cut costs to the government-run health care program, in 1980 Congress passed the Medicare Secondary Payer Act, which forbids Medicare from making payments when a “primary plan,” i.e., a liability insurance plan or self-insured company, can be reasonably expected to make a payment for the injury associated with that same medical care.  Medicare, however, will make a “conditional payment” if the primary insurer is not expected to pay promptly and is entitled to reimbursement of those conditional payments.  Medicare may seek such reimbursement from “an entity that receives payment from a primary plan.”  42 U.S.C. § 1395y(b)(2)(B)(ii).

Haro involved claims by a class of Medicare beneficiaries challenging Medicare’s demand that reimbursement of conditional payments be made upfront despite a beneficiary’s pending appeal as to Medicare’s calculation of the conditional payments.  Following the district court’s decision in the beneficiary class’s favor, the Ninth Circuit reversed and held that the class had not sufficiently presented their challenge at the administrative level to Medicare’s policy of requiring upfront reimbursement, which is a jurisdictional requirement under relevant federal regulations.

For our purposes, however, the significant aspect of the Haro decision was a separate claim by John Balentine, an attorney representing the named class representative of the beneficiary class.  Attorney Balentine challenged Medicare’s instruction that he withhold settlement proceeds from his clients until Medicare had been reimbursed.  The district court held that such a policy was inconsistent with the Medicare Secondary Payer Act because attorneys do not receive a payment from a primary plan, see 42 U.S.C. § 1395y(b)(2)(B)(ii), “except to the extent that they are end point recipients of settlement proceeds.”

The Ninth Circuit reversed, finding that Medicare’s interpretation of the Act as imparting liability against attorneys was reasonable.  The Ninth Circuit’s holding was based on three rationales.  First, consistent with the language of the statute, an attorney “in a literal sense” receives payment from a primary insurer.  No distinction is made as to the purpose of the payment, i.e., whether as fees earned or funds deposited into a trust account held on behalf of a client.  Second, prior to 2003, courts interpreted the Medicare Secondary Payer Act as requiring reimbursement by beneficiaries, physicians and other similar medical providers.  Congress amended the statute in 2003, however, to clarify its intention that “any entity [without limitation] that has received payment from a primary plan” may be held liable for reimbursement.  And third, Medicare’s broad interpretation of who is liable for reimbursement is consistent with the Act’s overall purpose of reducing Medicare costs.

The obligation to reimburse Medicare for conditional payments should ultimately rest with the Medicare beneficiary herself.  Under the Ninth Circuit’s decision in Haro, however, that obligation rests with any entity or person who receives “in a literal sense” a primary payment intended for a Medicare beneficiary.  This category could reach well beyond the beneficiary and her attorney and potentially could be interpreted as including defendants, leading Underwriters, brokers, and defense attorneys alike.

This expansive interpretation of liability under the Medicare Secondary Payer Act, based in part on the Act’s overarching goal of reducing Medicare’s costs, renders a recent Advanced Notice of Proposed Rulemaking calling for comments as to penalties that may be assessed under the mandatory reporting provisions of Section 111 increasingly important.

Prior to issuing federal regulations, a U.S. administrative agency must give interested parties an opportunity to participate in rulemaking through the Notice and comment process.  The regulations eventually adopted by the agency must be justified in light of the comments received.

The Notice can be found at:, and calls for comments as to (1) possible criteria for determining noncompliance in the context of Section 111 reporting and how Medicare will determine that any such noncompliance has occurred; (2) methods to determine the amount of any civil monetary penalty levied against a primary insurer for such noncompliance; and (3) possible methods and criteria for determining what steps by a primary insurer would constitute “good faith efforts” at compliance, such that penalties should not be assessed.  Comments must be submitted by February 10, 2014.

1 See “MMSEA Section 111 Dollar Threshold Exemption Decreases April 1, 2012,” found at:; see also “Additional Responsibilities for Those Liable to Medicare Beneficiaries;” “Section 111’s New Direct Data Entry Option for Small Reporters;” “Section 111 Mandatory Reporting Extended;” and “CMS Increases MMSEA Section 111 Threshold Dollar Exemptions,” which are available upon request to