Does the Medicare Secondary Payer Act Preempt State Law?

Recently the Maryland Court of Special Appeals addressed this question, in Netro v. Greater Balt. Med. Ctr., Inc., No. 1990, 2018 Md. App. LEXIS 679 (App. July 5, 2018). You may be aware that Netro, is also a case in which the Fourth Circuit was added to the growing list of jurisdictions addressing who can sue under the private cause of action provision of the Medicare Secondary Payer Act (“MSP”)[1] and when double damages may apply.  In Netro, the Court held that a personal representative of a Medicare beneficiary’s estate had standing to bring suit under the MSP, allowing for the private cause of action to proceed, but also found that the Defendant did not fail to reimburse Medicare for conditional payments.

Background

At the root of the MSP question before the Maryland Court of Special Appeals, is a Maryland state law.  The law provides that a plaintiff who brings a negligence action can put into evidence the bill submitted by a health care provider, and the defendant is prohibited from bringing the jury’s attention to the fact that a portion of the bill has been written-off.  Nevertheless, pursuant to Maryland Code, Courts and Judicial Proceedings Article §3- 2A-09 (“the Maryland Act”), a defendant against whom a verdict for past medical expenses has been entered may file a post-trial motion to reduce the judgment by the amount of the write-offs.

Netro was originally brought as a medical malpractice suit in a Maryland state court by a personal representative of a Medicare beneficiary’s estate, against the Greater Baltimore Medical Center (“GBMC”).  After a trial on the merits, a jury returned a verdict for damages, which included compensation for conditional payments made by Medicare for the decedent’s treatment.  GBMC filed a post-trial motion to reduce the judgment pursuant to the Maryland Act, in consideration of the amount of the medical expenses which were written off.  Plaintiff/Appellant subsequently filed an opposition to the motion and asserted that the Maryland Act should not be applied because the MSP preempts it.  Plaintiff/Appellant further contended that if the provisions of the Maryland Act did not exist Medicare would receive more in repayment of the amount conditionally paid by Medicare, than it would if the Maryland Act was enforced.  Plaintiff/Appellant also asserted that the Maryland Act conflicts with the “paramount Congressional purpose” of the MSP; the “paramount purpose” being that the Medicare Program be reimbursed for its conditional payments “to the maximum extent possible.”  Essentially, the Plaintiff/Appellant contended that with application of the Maryland Act, Medicare would be entitled to less repayment.

Court Analysis

In addressing the issue of whether the MSP preempts Maryland law, the Court opined that the congressional intent and purpose of the MSP was to ensure that Medicare was the secondary payer of medical bills to the greatest extent possible, and for Medicare claims to take a priority right of recovery.

The court further noted the circumstances when federal law may preempt state law, when either:

 

  • the state law “sharply” interferes with, or is directly contrary to a federal law; or
  • when compliance with both federal and state law is a physical impossibility.

The Court of Special Appeals applied the circumstances to the matter before the Court, as follows:

Does the Maryland Act “sharply interfere” with, or is it directly contrary to the MSP?

The MSP spells out the amount for which Medicare is entitled to recover. Specifically, “[a] primary plan and an entity (such as appellant) must reimburse Medicare “for any payment made” by Medicare “with respect to an item or service if it is demonstrated that such primary plan has or had a responsibility to make payment with respect to such item or service.” Id. at 28-29.  Here, Medicare’s priority right to recovery was paramount to any other claim, as there were no competing claims between GBMC and any other insurer.  Therefore, the Maryland Act did not “sharply” interfere with Medicare’s priority right to recovery for payment made, and Medicare’s claims remained paramount, even after the Maryland Act was implemented.

Is compliance with both the MSP and Maryland Act a physical impossibility?

The MSP requires full reimbursement of all conditional payments made.  The conditional payments made by Medicare for all items and services in Netro totaled $157,730.75; and therefore, Defendant’s obligation to repay Medicare was also $157,730.75.  The Maryland Act could be implemented without any effect on the amount Medicare would recover.  Furthermore, the Maryland Act was not “directly contrary” to the MSP, or Medicare’s priority right to full recovery of the payments made.  Therefore, the Court found that compliance with both the Maryland Act and the MSP was not a “physical impossibility.”

Takeaway and Commentary

Ultimately, the Court found that the MSP does not preempt any part or provisions of the Maryland Act primarily because the state law does not interfere or conflict with the purpose of the MSP.  The purpose being that Medicare be the secondary payer.  As such, the Maryland Act allowing for a reduction in the judgment amount was applicable; allowing Defendant to reimburse Medicare for payments that were made, rather than all payments billed.

In general, state law dictates the standards of compensability, which means that reimbursement obligations will ultimately be controlled by state law.  However, a state law cannot directly conflict with a federal law.  In cases involving MSP considerations, any state law that purposefully interferes or conflicts with the MSP, particularly with ability to obtain full reimbursement, will likely not survive.  This most recent case solidifies the MSP’s position with respect to federal preemption.  In MSP considerations, state law can survive if it does not stand in the way of the MSP.  The MSP does not preempt state law if certain conditions are met.

 


[1] The MSP provides that "[t]here is established a private cause of action for damages (which shall be in an amount double the amount otherwise provided) in the case of a primary plan which fails to provide for primary payment (or appropriate reimbursement)…” 42 U.S.C. §1395y(b)(3)(A).

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