The Impact on Conditional Payment Obligations after the Sixth Circuit False Claims Act Ruling

Written by: Neha Pellegrino, Esq.

On June 27, 2024, the United States District Court for the Eastern District of Michigan in Detroit addressed whether a primary payer’s obligation to reimburse Medicare arises before or after Medicare makes a conditional payment. Ultimately, the Court ruled that under the Medicare Secondary Payer Act (MSP Act), a primary payer’s obligation does not arise until after Medicare has made a conditional payment.

Background

In the case of the United States of America, Michael Angelo, and MSP WB, LLC v. Allstate Insurance Company, plaintiffs alleged that Allstate failed to accurately report information regarding its beneficiaries to the Centers for Medicare & Medicaid Services (CMS). As a result, Allstate failed to reimburse Medicare for medical costs. Under the False Claims Act (FCA), any entity that knowingly submits false or misleading information to the government, including failing to reimburse Medicare, can encounter considerable penalties. In due course, the United States Court of Appeals for the Sixth Circuit found that the plaintiffs failed to state a claim for a violation of the False Claims Act, noting that the relators did not provide sufficient facts demonstrating that Allstate had a reimbursement responsibility.  

Sanderson Commentary

This ruling not only provides transparency on when primary payers must reimburse Medicare, it assists primary payers to better understand their financial responsibilities and plan accordingly to avoid potential False Claims Act liability.

While there may have been some ambiguity about whether primary payers had to reimburse Medicare immediately upon becoming aware of their payment responsibilities or after Medicare had made a conditional payment, the Sixth Circuit Court’s decision provides clarity on these reimbursement obligations under the MSP Act. Where no obligation arises until Medicare has made a conditional payment, primary payers are now in a place to manage reserves more effectively.   

Accordingly, primary payers can adjust their compliance strategies to align with this ruling, ensuring timely and accurate reimbursement to Medicare. If this ruling continues to hold, it could have broader implications for how primary payers handle claims in terms of strategically handling and dealing with claims involving Medicare beneficiaries and the reimbursement process.

This proposed rule aligns regulatory requirements with the FCA and potentially helps ease an area of uncertainty regarding standards for FCA liability. The proposed rule is also an important reminder of the importance of providers and suppliers having robust compliance systems surrounding Medicare billings. Providers and suppliers need to be aware that compliance-related failures to report and repay overpayments could lead to a violation of the proposed rule and liability under the FCA.

Conditional payments aside, the Court also specifically addressed the plaintiff’s argument that Allstate violated the FCA by conspiring with their Section 111 reporting vendor, Insurance Services Office, Inc. (ISO), to incorrectly report Medicare beneficiary information to CMS as required by Section 111 of the Medicare, Medicaid, and SCHIP Extension Act of 2007. In prior CMS webinars, the representatives clearly commented that intentional misreporting of Section 111 data would result in an FCA claim against the Reponsible Reporting Entity (RRE). In this case, the plaintiff could not sufficiently prove that Allstate and/or ISO “knowingly” misreported or that Allstate/ISO were involved in a “concerted scheme” to defraud the government through false Section 111 reporting. Regardless, this serves as a strong reminder to RREs that incorrect reporting could, at the very least, involve expensive litigation defense costs if your Section 111 reporting vendor reports incorrect information through Section 111 data.

At Sanderson Firm, our team of experienced professionals continue to ensure that our conditional payment and recovery processes not only mirror the guidance outlined by Medicare but also where Medicare’s ability to recover conditional payments is limited by state law.

Sanderson Firm provides a variety of recovery services including comprehensive handling of traditional Medicare, Medicare Advantage Part C, Prescription Drug coverage Part D plans as well as other healthcare liens.

To learn more about our services, please contact us.