Last March, a federal judge in California granted the United States’ motion to dismiss portions of CIGA’s complaint regarding Medicare payments, holding that California’s insurance codes are preempted by federal law in the case of California Insurance Guarantee Association v. Sylvia Mathews Burwell, et al., No. 15-cv-1113, C.D. Calif..
CIGA is currently paying several claims in the Burwill case under various workers’ compensation policies issued by now-insolvent insurers. Some of these claimants also received payments from Medicare for items and services that were otherwise covered by these policies. Where Medicare pays benefits for a loss that is also covered by another insurer, the Medicare Secondary Payer statute, 42 U.S.C. § 1395y, designates Medicare as the “secondary payer” and generally requires those other insurance plans (called “primary plans”) to reimburse Medicare for all benefits it paid. Concluding that the workers’ compensation policies were “primary plans” within the meaning of the statute, the United States demanded that CIGA reimburse it for the Medicare benefits paid to these claimants. CIGA refused, prompting the United States to commence collection proceedings.
CIGA filed a declaratory and injunctive relief action against Defendants Sylvia Mathews Burwell, United States Department of Health and Human Services, and the Centers for Medicare and Medicaid Services contending that it was not required to reimburse the United States for Medicare benefits paid to individuals whose losses may also be covered by CIGA.
Ultimately, the California District Court for the Central District of California held last March that the McCarran-Ferguson Act did not subject the United States to California’s claims filing deadline because the Act was never intended to waive the federal government’s sovereign immunity. CIGA’s claims against the United States were dismissed to the extent that they were based on the United States’ failure to file timely proofs of claim under California’s Guarantee Act.
But the CIGA litigation in the case continued, and things change.
In the same case, CIGA alleged that CMS calculated its reimbursement liability in a manner that is contrary to the MSP and the implementing regulations, resulting in over-inclusive reimbursement demands. It sought a judicial declaration to that effect, as well as a permanent injunction barring CMS from reapplying the offending practice to future demands against CIGA.
Curiously, CIGA and CMS were ordered into mediation to resolve the dollar value of the CMS obligation and were unsuccessful. At the conclusion, CMS gave up and withdrew its demands in court altogether, hoping to just walk away from CIGA. Ultimately CMS claimed that this rendered CIGA’s litigation “moot” and asked that the case be dismissed. CIGA responded that Defendants’ conduct does not make it “absolutely clear” that CMS will never again reopen these claims or reapply the offending practice, which means the case is not moot.
The federal judge agreed that the issue was not moot, and held CMS in the lawsuit to consider CIGA’s allegations. It said “Here, the government clearly has not met that burden. Defendants have not changed their practice with respect to reimbursement calculations; rather, they have simply withdrawn their reimbursement demands for the three particular claims at issue in this lawsuit.”
CIGA did not dispute that each charge for which CMS sought reimbursement contained at least one diagnosis code that is covered by CIGA’s policies, and CMS did not dispute that each charge also contained codes that were not covered by those policies. Thus, the parties’ arguments center on two main issues: (1) whether CIGA made a prima facie case to CMS that the reimbursement requests were erroneous; and (2) whether the MSP and the implementing regulations support Defendants’ position that CIGA must always fully reimburse CMS for a charge containing one covered code regardless of whatever uncovered codes are also present.
The Court concluded in a January 5 ruling “that if a single charge contains multiple diagnosis codes – some of which relate to a medical condition covered by CIGA’s policy and some of which do not – the presence of one covered code does not ipso facto make CIGA responsible for reimbursing the full amount of the charge. Instead, CMS must consider whether the charge can reasonably be apportioned between covered and uncovered codes or treatments. Upon such consideration, CMS might still conclude that apportioning the charge is unreasonable. In addition, even if the charge should be apportioned, the Court takes no position on how CMS should do so (e.g., pro-rata by covered codes versus uncovered codes, or some other method)”
This is a ruling at the federal district court trial level, and it may very well and likely will be appealed even to the U.S. Supreme Court. However at this point in time, there is a well reasoned opinion in CIGA’s favor, and also inures to the benefit of all other California workers’ compensation carriers and self insureds.