US v. Travelers Ins. Co., 2:89cv271 (AVC).

• Decision Date: 24 November 1992
• Docket Number: No. 2:89cv271 (AVC).,2:89cv271 (AVC).
• Citation: 815 F. Supp. 521
• Parties: UNITED STATES of America v. The TRAVELERS INSURANCE COMPANY.
• Court: U.S. District Court — District of Connecticut

815 F. Supp. 521

UNITED STATES of America v. The TRAVELERS INSURANCE COMPANY.

No. 2:89cv271 (AVC).

United States District Court, D. Connecticut.

November 24, 1992.

Carl J. Schuman, U.S. Attorney's Office, Hartford, CT, Shereen J. Charlick and Genevieve Holm, U.S. Dept. of Justice, Civ. Div., Commercial Litigation, Washington, DC, for plaintiff.

Janet C. Hall, Frank F. Coulom, Jr., Robinson & Cole, Hartford, CT, Grace A. Bateman and W. Bruce Shirk, Seyfarth, Shaw, Fairweather & Geraldson, Washington, DC, for defendant.

RULING ON CROSS MOTIONS FOR SUMMARY JUDGMENT AS TO LIABILITY

COVELLO, District Judge.

I. INTRODUCTION

This is an action by the United States (Government) against The Travelers Insurance Company (The Travelers) seeking reimbursement of payments made under the Medicare Act, 42 U.S.C. § 1395y(b) et seq. for which The Travelers is allegedly liable pursuant to 42 U.S.C. § 1395y(b).¹ The issues presented are: (1) whether the Government has an independent cause of action against The Travelers pursuant to 42 U.S.C. § 1395y(b) et seq., the so-called Medicare secondary payer (MSP) provisions, which is separate and distinct from the Government's statutory right of subrogation set forth in the same statutes; and (2) whether The Travelers, when acting as an administrator of an employer health plan, must reimburse the Government for claims paid by Medicare that should have been paid by a primary payer.

The court concludes that the Government has a direct right of recovery against The Travelers pursuant to 42 U.S.C. § 1395y(b) that is separate and distinct from its right of subrogation and, therefore, with respect to this issue, grants the Government's motion for summary judgment (document # 126) and denies The Travelers' cross motion for summary judgment (document # 133).

The court further concludes that the Government does not have a claim against The Travelers when the insurer acts in the capacity of an administrator of an employer group health plan and, therefore, with respect to this issue, the court denies the Government's motion for summary judgment and grants The Travelers' cross motion for summary judgment.

II. STANDARD AND FINDING OF APPLICABILITY

Rule 56(c) of the Federal Rules of Civil Procedure provides that summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." See Celotex Corp v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). In the present instance, the court concludes that the controversy is one of law and that material facts are not in dispute. The matter is therefore determinable under the summary judgment procedure.

III. BACKGROUND AND FACTS

The United States administers the Medicare program through the Health Care Financing Administration, an agency of the Department of Health and Human Services. The Health Care Financing Administration administers Medicare through "fiscal agents" that act as "intermediaries" and "carriers" between hospitals and physicians and the Health Care Financing Administration. The Travelers is a Medicare intermediary and carrier as well as a private insurer and third party administrator of group health plans.

"From its inception until 1980, Medicare was the primary source of payment for the medical expenses for nearly all of its beneficiaries. Typically, ... Medicare was the `primary' payer of health care benefits and employer group health plans (EGHP's) were `secondary' payers, liable only for the costs that remained after Medicare made its payments. Accordingly, most insurance companies' contracts with EGHP's only covered `secondary' costs.

"In 1981, Congress enacted the Medicare Secondary Payer Statute ("MSP statute") in an effort to reduce federal spending and to protect the financial well being of the Medicare program. See 42 U.S.C. § 1395y.... The MSP statutory scheme applies to Medicare beneficiaries who have alternative sources of payment for health care services, such as insurance or an EGHP, and requires those alternate sources to pay health costs `primary' to Medicare. The intent of this statute was to cut the costs of the Medicare program by requiring that Medicare pay `secondary' to alternate sources." Blue Cross and Blue Shield Ass'n. v. Sullivan, 794 F.Supp. 1166, 1168-69, (D.D.C. 1992). Any Medicare payment is "conditioned on reimbursement" to Medicare "when notice or other information is received that payment ... has been or could be made under a group health plan." 42 U.S.C. § 1395y(b)(2).² The construction of the statutes creating the mechanism by which the Government can recover conditional Medicare payments is the focal point of this litigation.

The statutes at issue are codified at 42 U.S.C. § 1395y(b)(2)-(4). Each of these statutes contains similar provisions setting forth legal remedies available to the Government in instances where another entity had been primarily responsible for the medical service provided. Each statute provided:³

In order to recover payment made under this title for an item or service, the United States may bring an action against any entity which would be responsible for payment with respect to such item or service (or any portion thereof) under such a law, policy, plan, or insurance, or against any entity (including any physician or provider) which has been paid with respect to such item or service under such law, policy, plan, or insurance, and may join or intervene in any action related to the events that gave rise to the need for such item or service. The United States shall be subrogated (to the extent of payment made under this title for an item or service) to any right of an individual or any other entity to payment with respect to such item or service under such a law, policy, plan, or insurance.

42 U.S.C. § 1395y(b)(2)-(4) (emphasis added).

IV. CROSS MOTIONS ON DIRECT RIGHT OF RECOVERY

The Government argues that the Medicare secondary payer provision, 42 U.S.C. § 1395y(b), grants it an independent right of action against The Travelers to recover conditional Medicare payments separate from the Government's right of subrogation contained in the same statute. The Travelers contends that the Government is limited to a right of subrogation that arises only when The Travelers assumes financial responsibility for funding plan benefits.

The court agrees with the Government's contention that the Medicare secondary payment provisions grant the Government an independent right of recovery against The Travelers separate from its right of subrogation. 42 U.S.C. § 1395y(b)(2) describes two separate and distinct recovery rights. The first is the direct right of recovery found in the language that states: "The United States may bring an action against any entity which would be responsible for payment...." 42 U.S.C. § 1395y(b)(2). This right is different from the right of subrogation described in the language that states: "The United States shall be subrogated (to the extent of payment made under this title for an item or service) to any right of an individual or any other entity to payment with respect to such item or service under such a law, policy, plan, or insurance." 42 U.S.C. § 1395y(b)(2). The court declines to interpret the statute so as to render the direct right of recovery mere surplusage. It is an "elementary canon of construction that a statute should be interpreted so as not to render one part inoperative." Mountain States Tel. & Tel. Co. v. Pueblo of Santa Ana, 472 U.S. 237, 249, 105 S.Ct. 2587, 2594, 86 L.Ed.2d 168 (1985). Here, "to read the statute as solely providing the Government with a right of subrogation would give effect only to the sentence dealing with the right of subrogation." Provident Life & Accident Ins. Co. v. United States, 740 F.Supp. 492, 501 (E.D.Tenn.1990). See United States v. Blue Cross and Blue Shield of Michigan, 726 F.Supp. 1517, 1522 (E.D.Mich.1989).

V. CROSS MOTIONS ON LIABILITY OF INSURER AS ADMINISTRATOR

Self-insured employers pay for their own medical costs and therefore do not buy insurance from a carrier in such instances. Instead, they contract with an administrator to process, administer, and pay claims on behalf of the employer from the employer's funds. The Medicare secondary payer statute, 42 U.S.C. § 1395y(b)(2), states that the "United States may bring an action against any entity which would be responsible for payment" under the employer group health plan.

The Travelers contends that the Government cannot seek recovery for Medicare payments from it under circumstances in which it acts as the administrator of an employer group health plan because it is the employer and not the administrator that bears the ultimate responsibility for payment. The Travelers further argues that the claims in issue were never presented to it for payment and that it cannot be held liable for improperly filed claims when it had no obligation under § 1395y to advise customers or their employees of proper claim...