Should Medicare be billed first before a hospital lien is filed? Colorado Supreme Court Tackles this Perplexing Issue

Last week, the Colorado Supreme Court examined the interplay between an ambiguous Colorado hospital lien statute, § 38-27-101, C.R.S., and the Medicare Secondary Payer statute, 42 U.S.C. § 1395y, in the case of Harvey v. Catholic Health Initiatives, 2021 CO 65. Specifically, the court addressed whether Colorado’s hospital lien statute requires hospitals to bill Medicare before filing a lien against a patient whose primary health insurer is Medicare.

Factual Overview

The petitioners, Peggy Harvey and Eileen Manzanares, each sustained injuries in unrelated car accidents. Both women received medical treatment at separate hospitals and their health insurance was provided exclusively through Medicare and Medicaid. At the time of their respective accidents, both women were also covered under automobile insurance policies which included medical payments (Med Pay / No-Fault) coverage (the third-party tortfeasors who caused the petitioners’ injuries also had automobile insurance). Their hospitals’ debt collection agency submitted the petitioners’ medical expenses to all the automobile insurers, and the hospitals quickly filed liens (for unpaid medical expenses) against the petitioners within two weeks of billing the automobile insurers. Neither the hospital nor the debt collection agency submitted the petitioners’ bills to Medicare.

The Colorado lien statute provides, in pertinent part, the following language:

Before a lien is created, every hospital duly licensed by the department of public health and environment . . . which furnishes services to any person injured as the result of the negligence or other wrongful acts of another person . . . shall submit all reasonable and necessary charges for hospital care or other services for payment to the property and casualty insurer and the primary medical payer of benefits available to and identified by or on behalf of the injured person.

§ 38-27-101(1) (emphasis added). The petitioners filed suit against the hospitals and alleged that the hospitals violated the above-referenced lien statute by not billing Medicare before asserting a lien against them personally. In other words, the petitioners argued that Medicare was the “primary medical payer of benefits” under the terms of the lien statute.

The hospitals defended on the basis that the federal Medicare Secondary Payer statute prohibits Medicare from being a primary payer when other insurers are responsible. Section 1395y(b)(2)(A) states the following:

Payment under this subchapter may not be made . . . with respect to any item or service to the extent that – payment has been made or can reasonably be expected to be made under a workmen's compensation law or plan of the United States or a State or under an automobile or liability insurance policy or plan (including a self-insured plan) or under no fault insurance.

(Emphases added). Thus, the hospitals asserted that Medicare could not be a “primary medical payer of benefits” under the language of the lien statute because treating Medicare as a primary payer runs afoul of federal law.

Ruling

The Colorado Supreme Court ultimately ruled that Colorado hospitals are required to bill Medicare before asserting hospital liens against Medicare beneficiaries. More notably, the court reinforced the premise that hospital liens are governed by state (rather than federal) law, and that enforcing the Colorado lien statute does not, in and of itself, transform Medicare into a primary payer of medical benefits in violation of the Medicare Secondary Payer statute.

Commentary

Both hospitals in this case attempted to wield the Medicare Secondary Payer statute as a defense to their aggressive billing practices. While the hospitals may have overtly argued that the Medicare Secondary Payer statute prevented them from complying with the hospital lien statute, their real motivation may have been to avert Medicare to maximize their reimbursement. This potential motive was not lost upon the court, and it was noted that billing Medicare “could potentially result in hospitals’ inability to collect the full amount that they billed for medical expenses while the injured parties could potentially obtain a windfall.”

In the end, the court likely reached the correct conclusion. A “primary medical payer of benefits” under the hospital lien statute is not necessarily the same as a “primary payer” under the Medicare Secondary Payer statute. Had the lien statute required Colorado hospitals to bill Medicare over the automobile (or other) insurers, such a statute would, no doubt, be preempted by the Medicare Secondary Payer statute.

To view the full text of the Harvey v. Catholic Health Initiatives decision, please visit the Colorado judicial branch website. If you have any questions regarding this case, Medicare conditional payments/liens, or wish to retain Sanderson Firm for Medicare Secondary Payer legal services, please contact us.