US v. Blue Cross Blue Shield of Michigan

• Decision Date: 26 July 1994
• Docket Number: No. 89-CV-70756-DT.,89-CV-70756-DT.
• Citation: 859 F. Supp. 283
• Parties: UNITED STATES of America, Plaintiff, v. BLUE CROSS BLUE SHIELD OF MICHIGAN, a non-profit health care corporation, Defendant.
• Court: U.S. District Court — Eastern District of Michigan

859 F. Supp. 283

UNITED STATES of America, Plaintiff, v. BLUE CROSS BLUE SHIELD OF MICHIGAN, a non-profit health care corporation, Defendant.

No. 89-CV-70756-DT.

United States District Court, E.D. Michigan, Southern Division.

July 26, 1994.

J. Christopher Kohn, Sandra P. Spooner, John M. Keough (argued), Jack Kaufman, U.S. Dept. of Justice Civ. Div., Washington, DC, for plaintiff.

Charles N. Raimi (argued), Bodman, Longley & Dahling, Joseph W. Murray, Blue Cross Blue Shield of Michigan, Detroit, MI, for defendant.

ORDER DENYING DEFENDANT'S MOTION FOR PARTIAL SUMMARY JUDGMENT

WOODS, District Judge.

This matter having come before the Court on defendant's motion for partial summary judgment;

The Court having reviewed the pleadings submitted herein, and being otherwise fully informed in the matter;

The Court finds that defendant's motion for partial summary judgment shall be, and hereby is, DENIED.

I. INTRODUCTION

The Court refers to its memorandum opinion and order published at 726 F.Supp. 1517 (E.D.Mich.1989) for the genesis and pertinent background facts of the instant litigation. Presently before the Court is defendant's motion for partial summary judgment addressing the single issue of whether the government is authorized under the Medicare Secondary Payer ("MSP") laws to recover reimbursement from Blue Cross for Medicare benefits erroneously paid on working aged beneficiaries insured by complementary coverage plans.

II. FACTS

In the present case, pursuant to an administrative subpoena issued by the Inspector General of the Department of Health and Human Services, the government has been conducting an audit of Blue Cross covering the years 1983-89. Initially, the government assembled universe files purportedly containing 3 million alleged payments by Medicare for individuals who had coverage under Medicare and an employer group health plan (EGHP) insured by Blue Cross. At the present phase of the audit, the government intends to use statistical sampling to examine specific Medicare payments from the universe to determine which, if any, are actionable under the MSP laws.

Under the sampling plan, the government purports to examine 5,600 payments. Recently the government reviewed a subsample of 397 payments from that group. Upon examination of the files, the government asserts that 116 of the 397 payments are recoverable from Blue Cross in whole or in part. Defendant brings the instant motion in response to plaintiff's preliminary determination, because some of the 116 payments were made on behalf of individuals who were insured by Blue Cross with complementary coverage only.

By the terms of a complementary coverage policy, Blue Cross is obligated to pay only certain specified expenses not covered by Medicare, such as Medicare deductibles and co-pays. Prior to enactment of the MSP laws, employers routinely purchased complementary coverage for Medicare-eligible beneficiaries of their EGHPs. Blue Cross receives a significantly reduced premium for beneficiaries for whom an employer purchases complementary coverage.

III. ANALYSIS

The sole issue before the Court is whether the MSP laws entitle the government to reimbursement for primary Medicare payments erroneously made on behalf of individuals insured by complementary coverage plans. Defendant maintains that it is not an "entity responsible for payment" under the MSP laws when an employer purchases only complementary coverage for its employees. Plaintiff asserts, however, that the MSP statute converts illegal secondary coverage plans like complementary coverage to primary coverage plans, thus authorizing the government to seek reimbursement for primary care Medicare expenditures.

The Tax Equity and Fiscal Responsibility Act of 1982 ("TEFRA") amended the Medicare Act, in order to make Medicare benefits secondary to benefits payable under employer group health plans for employees age 65 through 69. See 42 U.S.C. § 1395y(b)(3) (1983). The provision applied to items and services furnished on or after January 1, 1983. See 48 Fed.Reg. 15902, 15903. TEFRA additionally amended section 4 of the Age Discrimination in Employment Act ("ADEA") to require employers to offer employees aged 65-69 the "same group health plan coverage and under the same conditions" as those offered to younger employees. See 29 U.S.C. § 623(g)¹. The Deficit Reduction Act of 1984 ("DEFRA") made employer group health plans the primary payer and Medicare the secondary payer for spouses age 65-69 of employed individuals covered by an EGHP. See 42 U.S.C. § 1395y(b)(3).

The MSP statute enacted after the 1984 DEFRA amendments and applicable at the time in question was codified at 42 U.S.C. § 1395y(b).² That section provided in relevant part:

(3)(A)(i) Payment under this subchapter may not be made ... with respect to any item or service furnished ... to an individual who is under 70 years of age ... who is employed at the time such item or service is furnished to the extent that payment with respect to expenses for such item or service has been made, or can reasonably be expected to be made, under a group health plan ... under which such individual is covered by reason of such employment.

(ii) Any payment under this subchapter with respect to any item or service ... shall be conditioned on reimbursement to the appropriate Trust Fund ... when notice or other information is received that payment for such item or service has been or could be made under a group health plan.

Under subsection (ii), Medicare payments were to be conditioned on reimbursement from an appropriate payer. The provision also provided the United States with an express statutory right of action to recover Medicare overpayments from "any entity which would be responsible for payment ... under a group health plan."³ This amendment became effective July 18, 1984.

The Secretary of Health and Human Services ("the Secretary") is charged with overseeing the Medicare program, and has authority to "prescribe such regulations as may be necessary to carry out the administration of the insurance program...." 42 U.S.C. § 1395hh(a)(1). The Secretary's regulations have the force of federal law and are entitled to substantial deference. Chevron U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837, 844-45, 104 S.Ct. 2778, 2782-83, 81 L.Ed.2d 694 (1984). Broad deference is especially warranted, where the regulations at issue "concern `a complex and highly technical regulatory program' like Medicare, in which the identification and classification of relevant `criteria necessarily require significant expertise and entail the exercise of judgment grounded in policy concerns.'" Thomas Jefferson University v. Shalala, ___ U.S. ___, ___, 114 S.Ct. 2381, 2383, 129 L.Ed.2d 405 (1994), quoting Pauley v. BethEnergy Mines, Inc., 501 U.S. 680, 697, 111 S.Ct. 2524, 2526, 115 L.Ed.2d 604 (1991).

The Secretary promulgated MSP governing regulations in 1983, following the substantial statutory changes of TEFRA. See 42 C.F.R. §§ 405.340-.344 (1983).⁴ Section 405.341(c)(1) attempted to override EGHPs purporting to provide benefits secondary to Medicare benefits. That provision states:

(c) Medicare will:

(1) Not pay primary benefits for otherwise covered services even though the employer plan states that its benefits are secondary to Medicare's or otherwise excludes or limits its payments to Medicare beneficiaries.

The statutory interpretation of 42 U.S.C. § 1395y(b)(3)(A)(ii), the conditional reimbursement provision, is at issue in this motion. Issues of statutory construction are questions for the Court to decide as a matter of law. Central Montana Elec. Power Coop., Inc. v. Admin. of Bonneville Power Admin., 840 F.2d 1472 (9th Cir.1988). To determine the meaning of an Act, the Court must give effect not only to the particular statutory language, but to its design, purpose and policy. Crandon v. U.S., 494 U.S. 152, 158, 110 S.Ct. 997, 1001, 108 L.Ed.2d 132 (1990); In re Merchant, 958 F.2d 738, 739 (6th Cir.1992).

Defendant claims it is entitled to partial summary judgment because the MSP laws do not authorize the government to recover a primary Medicare payment from Blue Cross made on behalf of an employee insured by complementary coverage. Defendant maintains that the statute's plain language only allows reimbursement from "an entity which would be responsible for payment," and that under a complementary coverage policy, it is not responsible for any portion of a primary care expenditure. The first step in statutory interpretation is to review the plain language of the statute itself. U.S. v. Ospina, 18 F.3d 1332, 1335 (6th Cir.1994). The Court finds the statutory language of § 1395y(b)(3)(A)(ii) inconclusive as to the question at bar. Accordingly, the Court must look beyond the Act's literal terms to ascertain whether under a complementary coverage policy, Blue Cross would be an entity responsible for a payment.

From its inception in 1965, Medicare provided primary payment for all services to Medicare beneficiaries except those services covered under workers' compensation. Prior to 1980, even if a working aged employee had coverage under an EGHP, Medicare was the primary payer; the plan remained secondarily liable. Blue Cross & Blue Shield v. Shalala, 995 F.2d 70, 73 (5th Cir.1993). Congress enacted the MSP laws in the early 1980's in an attempt to control exorbitant Medicare costs by requiring EGHPs to assume the risk of primary health care. "The intent of Congress in shifting the burden of primary coverage from Medicare to private insurance carriers was to place the burden where it could best be absorbed." Provident Life and Acc. Ins. Co. v. U.S., 740 F.Supp. 492, 498 (E.D.Tenn.1990).

The effect of the 1983 TEFRA amendments was to realign coverage under the Medicare program for the working aged, thereby placing Medicare as a secondary rather than primary payer. This was so even if an EGHP stated that its benefits were secondary...