Brown v. US Steel: A Story of Retirement Benefits and MSP Triggers

Wednesday, November 23, 2011 | 0

Understanding the order of priority in determining who pays first when Medicare is involved can be extremely complex. As I reported earlier this year, where you are in the payer lineup may very well be your defense to Medicare Secondary Payer Act (MSP) claims brought against you as it cannot always just be assumed that everyone has to pay before Medicare even though that is what CMS likes us to believe.

Just as with any other type of insurance, there will very frequently be overlapping coverage when Medicare beneficiaries are involved. Picture a 65-year-old man, retired military and retired state police, married to a 60-year-old woman currently employed by a company with more than 100 employees who was injured in a motor vehicle accident while volunteering as a driver for his local church receiving $50 per week for expenses. In order of description, you may have Medicare, Tricare, the state retirement health plan, a large group health plan's spouse coverage, a third-party auto/general liability policy, and potentially workers' compensation and/or another group health plan depending upon the size of the church because the MSP considers volunteers who receive remuneration to have current employment status for purposes of its application. It is safe to assume that Medicare should never have to pay in this example, however the exercise is not always easy.

As a general proposition, when you have served your time with an employer and become entitled to retirement benefits, it will likely provide for a lifetime medical benefit of some kind. Because you have also served your time and fully paid into the Medicare system, the retirement health plan does not replace Medicare but usually supplements it by paying for the things that Medicare doesn't. Perfectly acceptable practice as you don't need the overlapping coverage and again, have fully paid for your entitlement to Medicare. If you happen to continue working after entitlement sets in or have benefits through another source, you can elect to pick one over the other, however no employer can force you off of a large group health plan because you become eligible for Medicare. But apparently you can force an employee into retirement to get them off of comp, and then allege that they are not an active employees to keep from having an MSP claim brought against them. At least that appears to be what the most recent MSP case infers.

William Brown worked for US Steel from 1968 until he was injured in a work-related motor vehicle accident in 1981. US Steel provided work comp benefits through its self insured program pursuant to Pennsylvania law through 1986 when Brown applied for permanent incapacity retirement benefits from the pension fund. There was no mention as to the status of his work comp claim in the case reported. Brown applied for Social Security Disability Insurance, received a retroactive award back to 1984 and was notified by Social Security in 1989 that he was entitled to Medicare as of July 1, 1984, for which the US Steel benefits office advised him to apply. After some difficulty, Brown was eventually enrolled and between 1992 and 2004, Medicare paid out over $750,000 in medical benefits on his behalf. In September 2005, the Social Security Administration notified Brown that he improperly applied for Medicare Part B, refunded his premiums back to 1992 and stated that the Medicare Secondary Payer Recovery Contractor (MSPRC) was investigating the outstanding conditional payments.

In June 2010, Brown filed a private cause of action under 42 USC 1395y(b)(3) for recovery of said conditional payments that he alleged should have been paid by US Steel. US Steel moved to dismiss, which the district court ordered be treated as a motion for summary judgment and then granted it. The district court basically determined that Brown lacked standing to bring the MSP claim because he was not an active employee. Among other procedural issues under appeal, the 3rd Circuit Court of Appeals found no reversible error on the part of the district court, inclusive of the idea that "Brown could not prevail on his MSP claim because he is a retiree, not an active employee, and MSP only applies to active employees." Boy do I love cases that come out of Pennsylvania…

Despite the lack of details important to a better understanding of what really transpired with the underlying workers' compensation claim, it can be assumed that MSPRC is looking to exclude benefits on the basis of that rather than the group health plan status. If purely an issue of Brown being a retiree, the outcome is likely fine. As I stated above, in a pure retirement situation, Medicare is generally primary. Sadly, the bigger issue in this case is the intentional shifting of the burden of Brown's work-related care to Medicare by retiring him and forcing him to apply for Medicare, complete with help from the benefits office, to the tune of three quarters of a million dollars in medical benefits paid out over 12 years. Medicare is statutorily barred from making payments because US Steel is the primary payer and even if an allocation was made to future medical if the workers' compensation claim was even properly closed in conjunction with the retirement, the limiting language of 42 CFR 411.46 that would exclude benefits only to the extent of that allocation if made did not go into effect until 3 years after the retirement so I question if would even apply.

Why Brown would not be entitled to Medicare is questionable since he was clearly deemed disabled within the statutory definition; chances are that that was most likely a misapplication of the secondary payer exclusion by MSPRC (typical that they would be so quick to refund premium before they really sorted out the problem).

So to conclude, Brown very likely does have standing to bring a private cause of action for exclusions arising due to his work injury so it will be interesting to see how this case plays out. If the facts of the underlying workers' compensation claim play out to his advantage, I can see a motion of reconsideration on the basis of the employment status not being the controlling fact for standing here. Unfortunately, the statute of limitations argument (whichever one that may be) should make a showing as well as these overpayments are a little long in the tooth. Alternatively, if MSPCR is truly investigating the matter, I can see the U.S., Department of Justice unearthing a gold mine if they can prove this was a predatory practice of US Steel. Pursuant to the False Claims Act, US Steel caused significant overpayments to be made by Medicare and would be subject not just to repayment, but to civil penalties as well. Guess we shall wait and see.

<i>Jennifer Jordan is general counsel for Medval, a Maryland-based Medicare Secondary Payer Act consulting company. This column was reprinted with her permission from her blog, http://medicaresetasideblog.com/</i>