In an opinion out of the United States District Court for the District of New Jersey, Osterbye v. United States, 2020 U.S. Dist. LEXIS 116591 , the Court denied Defendant Selective Insurance’s Motion to Dismiss Plaintiff’s suit and allegations that Defendant failed to reimburse Medicare for Osterbye’s medical expenses under the Medicare Secondary Payer Act (MSP) private cause of action pursuant to 42 USC § 1395y(b)(3)(A).

Plaintiffs’ decedent, Anna May Osterbye, a Medicare beneficiary, was injured in a fire at her home allegedly caused by the negligence of a plumbing contractor, insured by the Defendant. Osterbye.

The claim resulted in a settlement in the amount of $740,000 including $13,562.90 that Medicare estimated for reimbursement of conditional payments. On April 29, 2013, the Plaintiffs executed a Release.

After Plaintiffs reimbursed $13,562.90 to Medicare, Medicare issued a final demand letter for an additional amount of $118,071.28 on June 4, 2013. The Plaintiffs then proceeded to exhaust administrative appeals with Medicare. On June 26, 2019, the Medicare Appeals council dismissed Plaintiffs’ request for review.

On August 28, 2019, Plaintiffs elevated the dispute to the United States District Court. Defendant’s Motion to Dismiss asserted two main arguments 1) The statute of limitations time-bars Plaintiff’s MSP claim and 2) Dismissal is appropriate based upon the settlement agreement and release.

With respect to the statute of limitations defense, administrative remedies were not exhausted until June 26, 2019- over 6 years after the settlement and release were executed. Plaintiffs were unable to seek judicial review on their MSP claim until all administrative remedies were exhausted. It was not apparent on the face of Plaintiffs’ Complaint that Plaintiffs’ MSP private cause of action is time-barred and denied the Motion to dismiss on the statute of limitations defense.

Defendant argued that the Court should dismiss Plaintiff’s claims by enforcing the Release Plaintiffs executed on April 29, 2013. The Court ultimately determined that whether the Plaintiffs’ Release should be nullified based on mutual mistake turns on a factual inquiry that was better left for a later time.

The ultimate outcome of this case is yet to be determined; however, there are several clear warning signals and reminders found within this case. Relying on an initial Conditional Payment Letter, and not a Final Demand amount can leave a primary payer open to significant exposure. Understanding the Conditional Payment Recovery process also includes understanding the inner workings of the Medicare Administrative Appeals process, and the associated delay.