In their opinions: We know it’s a double dip but that’s the law

This is a case in which plaintiff chose not to purchase any automobile insurance and, yet, remarkably, the majority rules that plaintiff properly has and will continue to make a profit every time he is treated by a doctor.

– Court of Appeals Judge Henry Saad, dissenting, in Lee v. Farmers Ins. Exchange (unpublished per curiam).

In 1978, Antoine Lee was a passenger in a car. A traffic accident left him seriously injured. He had no insurance and there was no other no-fault coverage available to him. Farmers Insurance Exchange got Lee’s case from the Assigned Claims Facility and paid no-fault PIP benefits.

But Lee also received Medicare coverage to pay of his medical expenses. These dual payments apparently were made for almost 30 years before Farmers balked at paying expenses already covered by Medicare.

Lee sued. Farmers took the position that Lee was double-dipping from both the assigned claims facility and Medicare. Lee argued that the medical expenses were allowable no-fault expenses that Farmers was obligated to pay, even though Medicare had already paid them.

The trial court found for Lee but stayed execution of the $155,000 judgment until Farmers was through with its appeal.

The COA affirmed on a 2-1 vote. The majority opinion noted that a combination of circumstances required judgment for Lee:

  • [T]he Legislature has … specifically permitted recipients of assigned-claims no-fault benefits to receive duplicative compensation from Medicare by making the assigned-claims payment structure partially uncoordinated as to Medicare. Whether or not that is a wise policy choice, the trial court correctly ruled that defendant may not set off the Medicare payments.
  • Because plaintiff’s accident occurred in 1978, it preceded the congressional enactment of the Medicare Secondary Payer provision of the Omnibus Budget Reconciliation Act of 1980, 42 USC 1395y(b)(2)(a), which prevents Medicare from acting as the primary payer for auto accident injuries. The statute only applies to accidents that occurred after December 5, 1980. …
  • We need not address whether any offset would be appropriate under MCL 500.3109(1), however, because that statute, and the case law addressing that statute, contemplates a payee receiving benefits pursuant to some kind of purchased no-fault insurance policy. …
  • [I]t is impossible for MCL 500.3109a to have any bearing: no insurer could have offered plaintiff a coordinated policy because plaintiff had no insurance at all. …
  • MCL 500.3172(2) states that PIP benefits paid by the assigned claims facility “shall be reduced to the extent that benefits covering the same loss are available from other sources,” but further states that Medicare is not one of those “benefit sources.”

The majority acknowledged Saad’s and Farmers’ frustration with the outcome, but explained that “[h]owever anomalous the situation might seem, our Supreme Court has repeatedly instructed that our Court must enforce legislation as written rather than weigh its wisdom.”

The case is Lee v. Farmers Insurance Exchange. (majority opinion) (dissent)


In their opinions …

“My effort is in the direction of simplicity.” once wrote the namesake of the Henry Ford Hospital. Henry Ford, My Life and Work 13 (Garden City Publ’g Co. 1922). Mr. Ford apparently had nothing to do with the creation of the Medicare program.

— Sixth Circuit Judge Jeffrey S. Sutton, in Henry Ford Health System v. Department of Health and Human Services.

The case required Sutton to reconcile a provision of the Patient Protection and Affordable Care Act of 2010 with a regulation promulgated under it.

At issue was whether Henry Ford Hospital, a teaching hospital, was entitled to Medicare reimbursement for the time residents spend doing “pure research.”

The act requires the “Secretary of Health and Human Services to reimburse teaching hospitals for ‘all the time spent by an intern or resident …. in non-patient care activities … as such time and activities are defined by the Secretary.'”

One of the Secretary’s regulations “exclud[es] from hospitals’ Medicare reimbursements the time residents spent conducting pure research.”

Sutton concluded there was a clear delegation of authority from Congress to the Secretary to define “non-patient activities.” He also ruled the Secretary’s exclusion of “pure research” from those activities did not exceed Congress’ delegation of authority.

This is a pure financial headache for Henry Ford Hospital. The ruling affects the hospital’s Medicare reimbursements for Fiscal Years 1991–96 and 1998–99.

What’s fair policy for medical liens?

In the December 21 issue of Michigan Lawyers Weekly, we’re featuring a story about a recent U.S. District Court decision involving a conflict that can occur in a third party auto case – who pays the medical bills when an ERISA plan asserts its contractual lien against the non-economic loss settlement?

The plan has a right of reimbursement that attaches to an entire settlement no matter whether its for medical expenses or not. The auto insurer has a coordinated benefits policy that states it’s secondary to the health plan.

What struck me as interesting in researching the subject of medical liens is that not all medical liens have the same rights.

There are several types of medical liens. Medicare, Medicaid and  ERISA are three of them. Each has a right of recovery that Congress or the U.S. Supreme Court has granted or identified, but not all have the same rights.

Medicare: As discussed in the December 14 issue (subscription needed), Medicare liens are statutory. Both the plaintiff and defendant have a duty to repay related medical bills from any settlement. Starting in January, reporting entities (insurers/insureds) can be fined $1,000 a day for each settlement it fails to report to the Center for Medicare and Medicaid Services (CMS).

Medicaid: Medicaid liens are also statutory, but through state law, so the rights of recovery can vary from state to state. In Michigan, Medicaid has first right of recovery from a settlement, but it can only collect as much as the injured party does. (Essentially, the settlement becomes a three-way split between the attorney, the client, and Medicaid. See paragraph 5).

However, under the U.S. Supreme Court’s decision in Arkansas Dept. of Health and Human Services, et al v Ahlborn,* a Medicaid plan is entitled to reimbursement from the economic damages portion of any settlement only.  The settlement has to itemized to show how much of the settlement is economic versus non-economic damages.

ERISAAs discussed in the November 30 issue (subscription only), ERISA plans rights of recovery depend on the contract.  But since the U.S. Supreme Court’s decision in Seraboff v Mid-Atlantic Medical Services,* a plan’s contracted right of recovery is pretty standard: it’s automatic and it extends to the entire amount of the settlement. Also, because Michigan is in the Sixth Circuit, the attorney can be responsible for a percentage share of the lien if the settlement check is deposited into his trust account and dispersed to the client without resolving the lien.

So, of the three, Medicare has the greatest right of recovery as it is absolute, and parties are penalized not only for not reporting the settlement, but it is fined for each day after the date of settlement that it does not report it. ERISA is close behind with only difference being the fine for late reporting. Medicaid is far behind because of the limitation on the type of settlement from which it can collect, and, in Michigan, the limitation on what percentage it can take versus the plaintiff’s share.

The question for you, Reader of Michigan Lawyers Weekly is this: which of these policies is most fair for the plan/fund, the attorney and the injured party? Or, if none are fair, how do you think it should be handled.

Feel free to discuss it in the comments.

* Another interesting point is this: Both Seraboff and Ahlborn were unanimous decisions — and only one year apart — yet one gives private health insurers extreme contractual power to recover from entire settlements, regardless of whether medical expenses were claimed or not, and the other only allows state government funds to collect from economic damages.