Bio-Medial Applications v. Health and Welfare Fund

• Decision Date: 13 August 2009
• Docket Number: No. 2:08-CV-228.,2:08-CV-228.
• Citation: 648 F.Supp.2d 988
• Parties: BIO-MEDIAL APPLICATIONS OF TENNESSEE, INC. d/b/a BMA of Kingsport individually and as Assignee of Patient,<SMALL><SUP>1</SUP></SMALL> Plaintiff, v. CENTRAL STATES, SOUTHEAST AND SOUTHWEST AREAS HEALTH AND WELFARE FUND, Defendant.
• Court: U.S. District Court — Eastern District of Tennessee

648 F.Supp.2d 988

BIO-MEDIAL APPLICATIONS OF TENNESSEE, INC. d/b/a BMA of Kingsport individually and as Assignee of Patient,¹ Plaintiff, v. CENTRAL STATES, SOUTHEAST AND SOUTHWEST AREAS HEALTH AND WELFARE FUND, Defendant.

No. 2:08-CV-228.

United States District Court, E.D. Tennessee, at Greeneville.

August 13, 2009.

Douglas T. Gibson, The Gibson Firm LLC, Marietta, GA, for Plaintiff.

Edward H. Bogle, Central States Funds Law Department, Rosemont, IL, R. Jan Jennings, Branstetter, Stranch & Jennings, PLLC, Nashville, TN, for Defendant.

MEMORANDUM OPINION

LEON JORDAN, District Judge.

Now before the court are: "Defendant's Motion for Judgment on the Administrative Record" [doc. 42]; defendant's "Motion for Summary Judgment on the Counterclaim" [doc. 44]; and plaintiff's "Motion for Summary Judgment" [doc. 47]. The motions have been fully briefed and are ripe for the court's consideration. For the reasons that follow, plaintiff's motion will be granted and defendant's motions will be denied.

I. Background

Plaintiff operates a kidney dialysis center and is the assignee of the retiree health care benefits of a now-deceased patient ("the Patient") insured by defendant's group health plan ("the Plan"). The Patient, who was a covered spouse under the Plan, received dialysis treatment from plaintiff for her end stage renal disease ("ESRD") from August 2005 until her May 2006 death.

Plaintiff billed and was reimbursed by defendant for the dialysis until early 2006 when defendant became aware that the Patient had become eligible for Medicare as of November 1, 2005, due to her ESRD. Defendant then terminated coverage retroactive to the date of Medicare eligibility and recouped most of the payments it had made to plaintiff. Defendant based its decision on section 3.07(b) of the Plan, which terminates coverage no later than the date on which a dependent covered participant becomes entitled to Medicare.

Plaintiff appealed the decision by telephone and then to defendant's Benefits Claims Appeals Committee and its Health and Welfare Trustee Appellate Review Committee. The parties' positions were consistent throughout. Plaintiff argues that defendant is in violation of section (1)(C) of the Medicare Secondary Payer Act ("MSP"), 42 U.S.C. § 1395y(b), which prohibits "taking into account" a person's eligibility for Medicare on the basis of ESRD. Defendant, in reliance on Blue Cross & Blue Shield of Texas v. Shalala, 995 F.2d 70 (5th Cir.1993) ("Blue Cross Texas"), maintains that the MSP addresses only changes in benefits provided to ESRD Medicare patients but does not prohibit discontinuation of those persons' coverage altogether.

Defendant denied plaintiff's appeal at every level, and the instant suit followed. Count one of the present complaint seeks to recover the unpaid benefits due under the Plan pursuant to section 1132(a)(1)(B) of the Employee Retirement Income Security Act ("ERISA"). Count two alleges a private cause of action for doubled damages under the MSP. By a prior memorandum and order, count two was dismissed. See Bio-Medical Applications of Tenn. v. Cent. States, Se. & Sw. Areas Health & Welfare Fund, No. 2:08-CV228, 2008 WL 5110800 (E.D.Tenn. Dec. 1, 2008). Defendant's counterclaim seeks recovery of $4,036.62 in benefits paid to, but not recouped from, plaintiff.

II. Medicare Secondary Payer Act

The MSP is designed to reduce Medicare spending by making Medicare "the secondary payer for medical services provided to Medicare beneficiaries whenever payment is available from another primary payer." Stalley v. Methodist Healthcare, 517 F.3d 911, 915 (6th Cir.2008) (citation omitted). The statute addresses group health plan treatment of persons who are Medicare eligible, specifically addressing the "working aged," "disabled individuals," and ESRD patients.

Captioned "Individuals with end stage renal disease," section 1(C) of the MSP states in relevant part,

A group health plan ...

(i) may not take into account that an individual is entitled to or eligible for benefits under this subchapter under section 426-1 of this title during the [30]-month period which begins with the first month in which the individual becomes entitled to benefits under part A under section 426-1 of this title ...; and

(ii) may not differentiate in the benefits it provides between individuals having end stage renal disease and other individuals covered by such plan on the basis of the existence of end stage renal disease, the need for renal dialysis, or in any other manner;

except that clause (ii) shall not prohibit a plan from paying benefits secondary to this subchapter when an individual is entitled to or eligible for benefits under this subchapter under section 426-1 of this title after the end of the [30]month period described in clause (i).

42 U.S.C. § 1395y(b)(1)(C).² At issue in this case are the extent to which a plan may "take into account" ESRD Medicare eligibility under § 1395y(b)(1)(C)(i), and the meaning of § 1395y(b)(1)(C)(ii)'s "differentiation" provision.

A. "Benefits" v. "Coverage"

In 1993, the Fifth Circuit Court of Appeals in Blue Cross Texas was presented with an MSP dispute involving group health plan denial of coverage to ESRD Medicare patients. On its specific facts, Blue Cross Texas is readily distinguishable from the present case. The Fifth Circuit case "raise[d] a single issue of statutory interpretation: whether the 1989 amendment to the Medicare as Secondary Payer (MSP) statute ... requires group health care plans to offer continuation coverage to individuals who are eligible for Medicare because they have End Stage Renal Disease...." Blue Cross Texas, 995 F.2d at 71 (emphasis added). The Fifth Circuit excused a continuation insurer's noncompliance with the MSP based on a contrary provision found in the Consolidated Omnibus Budget Reconciliation Act ("COBRA"). By contrast, COBRA is not an issue in the case at bar. Instead, the instant Patient already had coverage, and that coverage was terminated because of her ESRD Medicare eligibility.

Factual and procedural distinctions notwithstanding, defendant has for years relied upon Blue Cross Texas's broader conclusion that § 1395y(b)(1)(C)(i)'s "`take into account' language does not apply to a health plan's decision to terminate continuation coverage. Rather, it applies to a plan's payments of benefits to an individual already covered by the plan." Id. at 73 (emphasis added). In reaching that conclusion, the Fifth Circuit compared COBRA's frequent use of the word "coverage" with the MSP's primary use of the term "benefits." Id. at 73-74.

Defendant has long argued that taking away some of a participant's benefits is prohibited by the MSP, but that eliminating all of that same participant's benefits is fine. For two reasons, this court finds defendant's long-term reliance on the Blue Cross Texas "benefits"/"coverage" distinction to be misplaced. First, the "single issue" in Blue Cross Texas was a conflict between specific provisions of the MSP and COBRA pertaining to continuation coverage. COBRA expressly allows for termination of coverage upon Medicare eligibility. See id. at 72; 29 U.S.C. § 1162(2)(D)(ii). COBRA is a statute pertaining to "coverage," thus the importance of the benefits/coverage dichotomy in the Fifth Circuit case. See Blue Cross Texas, 995 F.2d at 72-74.

Second, and of greater relevance to the case at bar, Blue Cross Texas was decided in 1993. Two years later, the Centers for Medicare and Medicaid Services ("CMS"), Department of Health and Human Services ("DHS"), issued several new regulations. Those regulations provide "[e]xamples of actions that constitute `taking into account'" [under § 1395y(b)(1)(C)(i)] "... that an individual is entitled to Medicare on the basis of ESRD...." 42 C.F.R. § 411.108(a). Among the examples is "[t]erminating coverage because the individual has become entitled to Medicare, except as permitted under COBRA continuation coverage provisions...." 42 C.F.R. § 411.108(a)(3); see also 42 C.F.R. § 411.161(a)(3) ("This rule [against `taking into account'] does not prohibit the termination of GHP coverage under title X of COBRA....").

Therefore, in light of Blue Cross Texas's distinct facts and the subsequent DHS regulations, the court finds defendant's "benefits"/"coverage" argument to be hollow. The insurance at issue in this case is not continuation coverage, and there is no relevant contrary statute at issue in this case—such as COBRA—containing a specific provision that overrides the MSP. By terminating the Patient's existing coverage, defendant terminated all of her benefits. Section 1395y(b)(1)(C)(i) simply does not contain the loophole suggested by defendant. See 42 C.F.R. § 411.108(a)(3).

B. "Differentiation"

The parties do not dispute that a group health plan can terminate coverage for reasons not prohibited by law. Defendant thus argues that § 1395y(b)(1)(C)(i) cannot be read as prohibiting termination of coverage for Medicare-eligible ESRD patients because such a reading would place the Plan in violation of § 1395y(b)(1)(C)(ii)'s "differentiation" provision. As noted above, § 1395y(b)(1)(C)(ii) states that a plan "may not differentiate in the benefits it provides between individuals having end stage renal disease and other individuals covered by such plan on the basis of the existence of end stage renal disease, the need for renal dialysis, or in any other manner[.]" According to defendant, the meaning of § 1395y(b)(1)(C)(ii) is that a plan can neither treat ESRD patients less favorably nor more favorably than non-ESRD patients.

Intuitively, defendant's reading appears implausible. It is difficult to envision Congressional concern over insurers treating costly ESRD patients more favorably than those not suffering from that expensive condition. Nonetheless, the language employed by Congress in § 1395y(b)(1)(C)(ii) is what it is, and on its face the statute prohibits only "differentiat[ing]" in...