Case Title: Cooper Hospital University Medical Center v. Selective Insurance Company of America

Citation: 

Docket Number: 

State: new-jersey

Court: New Jersey Supreme Court

Date: 2021-12-22T00:00:00Z

Document:
SYLLABUS

This syllabus is not part of the Court’s opinion. It has been prepared by the Office of the
Clerk for the convenience of the reader. It has been neither reviewed nor approved by the
Court. In the interest of brevity, portions of an opinion may not have been summarized.

   Cooper Hospital University Medical Center v. Selective Insurance Company of
                           America (A-46-20) (085211)

Argued September 13, 2021 -- Decided December 22, 2021

ALBIN, J., writing for a unanimous Court.

       In this appeal, the Court considers who bears the primary responsibility for the
payment of Dale Mecouch’s medical bills arising from an automobile accident that took
place before December 5, 1980 -- the issuer of an automobile insurance policy or
Medicare.

       In 2016, Mecouch was hospitalized for approximately two months at Cooper
Hospital University Medical Center (Cooper) due to complications arising from a 1977
automobile accident that left him paralyzed from the waist down. At the time of his
accident, Mecouch had a no-fault automobile insurance policy with Selective Insurance
Company of America (Selective), which provided Mecouch with unlimited personal-
injury-protection (PIP) benefits.

       Sometime after 1979 but before 2016, Mecouch was enrolled in Medicare.
Selective continued to pay Mecouch’s medical expenses related to the 1977 accident until
December 11, 2015, when it notified Mecouch by letter that, going forward, “Medicare is
the appropriate primary payer for any treatment related to” the 1977 accident.

        After Mecouch’s 2016 hospital stay, Cooper forwarded to Selective a bill in the
amount of over $850,000 for medical services rendered to Mecouch. Instead of paying
that bill, Selective directed Cooper to seek reimbursement from Medicare. Cooper was a
participating Medicare provider, and, at that time, Mecouch was a Medicare enrollee.
Cooper then billed Medicare, which issued a payment of under $85,000. Selective
eventually agreed to reimburse Cooper for Mecouch’s co-payments and deductibles.

       Cooper filed a complaint against Selective, seeking the total cost of Mecouch’s
care. The trial court granted summary judgment in favor of Cooper, awarding Cooper the
cost of Mecouch’s care minus the amount covered by Medicare. The Appellate Division
reversed, concluding Medicare is the “primary payer” of medical bills for healthcare
costs incurred by Mecouch at Cooper. The Court granted certification.  245 N.J. 470
(2021).
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HELD: Because Mecouch was a Medicare enrollee in 2016, Cooper -- a Medicare
provider -- was required to bill and accept payment from Medicare, which promptly
covered Mecouch’s medical expenses in accordance with its fee schedule. Cooper could
not seek payment from Selective other than for reimbursement of the Medicare co-
payments and deductibles.

1. Whether Selective or Medicare has primary responsibility for the payment of
Mecouch’s hospital bills turns on the interpretation of two statutory schemes: the New
Jersey Automobile Reparation Reform Act (the No Fault Act) and Title XVIII of the
Social Security Act (Medicare). In 1972, the Legislature passed the No Fault Act. Two
of the principal aims of the Act were providing prompt care to automobile accident
victims, regardless of fault, and constraining the spiraling cost of automobile insurance.
The No Fault Act required car owners to have automobile insurance and, in return,
required automobile insurers to provide PIP coverage for reasonable medical expenses
incurred as a result of personal injury sustained in an automobile accident. To ensure the
financial soundness of the no-fault system and to make automobile insurance premiums
affordable, the Legislature also adopted a provision to shift the costs of medical care
arising from automobile accidents to collateral sources, such as workers’ compensation
insurance and Medicare. Benefits collectible from a collateral source are typically
deducted from benefits collected under PIP under  N.J.S.A. 39:6A-6, “the collateral
source rule.” Under that rule, workers’ compensation insurance and Medicare are the
primary payers and the PIP carrier the secondary payer. And because, in the case of a
work-related automobile accident, a workers’ compensation insurance carrier is the
primary payer, the Court recognized that a PIP carrier that pays benefits under a no-fault
policy could “seek reimbursement from the workers’ compensation provider.” N.J. Mfrs.
Ins. Co. v. Hardy,  178 N.J. 327, 339 (2004). (pp. 2-3, 17-21)

2. The primacy of Medicare, however, presents a scenario distinct from the workers’
compensation setting in Hardy because of the statutory and regulatory requirements of
federal law. Congress enacted Medicare to provide healthcare benefits to persons over
the age of sixty-five, and expanded benefits in 1972 to persons under the age of sixty-five
who suffer from severe disabilities. In the Medicare system, healthcare providers, such
as Cooper, may contract with the Department of Health and Human Services (DHHS) to
receive compensation for treating Medicare enrollees. Hospitals that contract with
DHHS -- known as participating Medicare providers -- agree to accept reimbursement of
medical expenses incurred by Medicare enrollees according to a schedule set by the
Centers for Medicare and Medicaid Services (CMS), a division of DHHS. In contracting
with DHHS, Cooper and other healthcare providers agree “not to charge . . . any
individual or any other person” -- which includes corporations, like Selective, under
federal law -- “for items or services for which such individual is entitled to have payment
made under” Medicare. 42 U.S.C. § 1395cc(a)(1)(A) (emphasis added). Healthcare
providers, however, may collect a patient’s co-payments and deductibles, as determined
by CMS, among other select costs. 42 U.S.C. § 1395cc(a)(2)(A). (pp. 21-24)
                                            2
3. In 1980, to ensure the financial viability of Medicare, Congress passed the Medicare
Secondary Payer Act to expand the collateral sources that would have primary
responsibility for paying the medical expenses of a Medicare enrollee. Before December
5, 1980, Medicare was willingly the primary payer, even when automobile insurance was
available to pay for an enrollee’s medical expenses. In the Secondary Payer Act,
Congress prohibited Medicare from paying an enrollee’s medical expenses “to the extent
that payment has been made, or can reasonably be expected to be made” under a policy
of workers’ compensation insurance, “automobile or liability insurance . . . or . . . no fault
insurance.” See 42 U.S.C. § 1395y(b) (1976 & Supp. IV 1980). Requiring that no-fault
automobile insurance carriers pay their insureds’ medical expenses spared Medicare from
shouldering those costs. Congress granted DHHS authority to craft regulations to
implement Medicare, and DHHS promulgated a regulation stating that the Secondary
Payer Act does “not apply to any services required because of accidents that occurred
before December 5, 1980.” The Secondary Payer Act, in effect, preempted the No Fault
Act’s collateral source rule as it pertained to Medicare. (pp. 24-27)

4. In this pre-December 5, 1980, automobile injury case, the objectives of the No Fault
Act and Medicare are aligned. The No Fault Act shifted to Medicare the primary
responsibility for the payment of medical expenses arising from an automobile accident
to reduce the financial costs borne by the automobile insurance system -- costs eventually
passed on to the consumer. Medicare, in turn, was a program designed to provide
affordable medical insurance for the aged and disabled, and federal law prohibited
healthcare providers from seeking additional compensation from Medicare enrollees or
other insurers -- except to recoup such costs as co-payments and deductibles. Thus, at the
time of Mecouch’s automobile accident in 1977, the No Fault Act designated Medicare as
having primary responsibility for the payment of the medical costs of Medicare enrollees,
and Medicare willingly accepted primary responsibility for the healthcare of its enrollees.
Congress later expanded Medicare’s collateral source doctrine to include automobile
insurance carriers and no-fault insurance in the Secondary Payer Act. Under current
federal law, the automobile insurance carrier has primary responsibility for the costs of a
person’s medical care for injuries suffered in automobile accidents arising after
December 5, 1980. (pp. 27-30)

5. Mecouch, however, falls in a limited class of approximately 150 current New Jersey
Medicare enrollees who were injured in automobile accidents before December 5, 1980,
and whose medical care continues to be covered by Medicare as the primary payer. The
No Fault Act designated Medicare as the primary payer for Mecouch’s medical expenses,
and Medicare authorized the payment of those expenses. The No Fault Act shifts the
financial burden of an insured’s medical expenses onto Medicare if that insured is a
Medicare enrollee. See  N.J.S.A. 39:6A-6 (1977). In line with its broad remedial
purpose, Medicare will directly pay for an enrollee’s medical expenses related to a pre-
December 5, 1980 automobile accident. Because the enrollee is entitled to have medical
expenses covered by Medicare, the healthcare provider is barred from seeking
                                              3
reimbursement from the enrollee or the enrollee’s PIP carrier, except for the co-payment
and deductible amounts. Healthcare providers that contract with Medicare -- such as
Cooper -- know that they are barred from seeking further satisfaction “for items or
services for which such individual is entitled to have payment made” by Medicare.
42 U.S.C. § 1395cc(a)(1)(A). If a healthcare provider seeks satisfaction from a PIP
carrier instead of Medicare when treating a Medicare-enrolled patient, the healthcare
provider must refund the money to the carrier after receiving reimbursement from
Medicare. See 42 U.S.C. § 1395cc(a)(1)(C). (pp. 30-31)

6. The Court notes that here, Cooper has no reason to bill Selective first and should
instead directly bill Medicare. In cases when a healthcare provider is not certain whether
an insured is enrolled in Medicare, however, billing the PIP carrier first would further a
core purpose of the No Fault Act, which is to provide automobile accident victims with
the funds necessary for prompt medical care. If the insured in fact is a Medicare enrollee,
then the healthcare provider must refund the monies received upon payment from
Medicare. See 42 U.S.C. § 1395cc(a)(1)(C). (pp. 31-32)

7. This case is about legislative policies that set the order for the utilization of resources.
Today, in accordance with the Secondary Payer Act, if Mecouch suffered serious injuries
in an automobile accident and were treated in a Medicare participating hospital, such as
Cooper, then his automobile insurance carrier would be responsible for payment of the
hospital’s bill. The hospital would receive a much higher billing return for its medical
services because payment is coming from the carrier. But Congress’s Medicare policy
today is different from the policy in effect in 1977. Federal law in 1977 did not preempt
the No Fault Act’s designation of Medicare as a collateral source, and the Court must
give effect to the federal and state statutory schemes that apply to Mecouch’s 2016
hospital treatment and care arising from injuries that he suffered in a 1977 automobile
accident. Applying those schemes, Cooper -- upon notice from Selective -- was required
to bill Medicare for the hospital care rendered to Mecouch, a Medicare enrollee, and
Selective is responsible for the co-payments and deductibles owed by Mecouch to
Cooper. (pp. 32-34)

       AFFIRMED. REMANDED to the trial court.

CHIEF JUSTICE RABNER and JUSTICES LaVECCHIA, PATTERSON,
SOLOMON, and PIERRE-LOUIS join in JUSTICE ALBIN’s opinion. JUSTICE
FERNANDEZ-VINA did not participate.

                                               4
       SUPREME COURT OF NEW JERSEY
             A-
46 September Term 2020
                       085211

     Cooper Hospital University Medical Center
         on assignment by Dale Mecouch,

                 Plaintiff-Appellant,

                          v.

      Selective Insurance Company of America,

               Defendant-Respondent.

        On certification to the Superior Court,
                  Appellate Division.

      Argued                       Decided
 September 13, 2021            December 22, 2021

Stanley G. Wojculewski argued the cause for appellant
(Costello Law Firm, attorneys; Stanley G. Wojculewski,
on the brief).

Laura A. Brady argued the cause for respondent
(Coughlin Midlige & Garland, attorneys; Laura A. Brady,
of counsel and on the brief, and Christa P. McLeod, on
the brief).

Robert B. Hille argued the cause for amicus curiae New
Jersey Hospital Association (Greenbaum, Rowe, Smith &
Davis, attorneys; Robert B. Hille, of counsel and on the
brief, and John W. Kaveney and Neil Sullivan, on the
brief).

                          1
               Susan Stryker argued the cause for amicus curiae
               Insurance Council of New Jersey (Bressler, Amery &
               Ross, attorneys; Susan Stryker, of counsel and on the
               brief).

               JUSTICE ALBIN delivered the opinion of the Court.

         In 2016, Dale Mecouch was hospitalized for approximately two months

at Cooper Hospital University Medical Center (Cooper or Cooper Hospital)

due to complications arising from a 1977 automobile accident that left him

paralyzed from the waist down. By the time of his 2016 hospitalization,

Mecouch had become enrolled in Medicare. 1 We must determine who bears

the primary responsibility for the payment of the medical bills arising from his

hospital treatment and care -- Selective Insurance Company of America

(Selective), which issued the no-fault automobile insurance policy that

provided Mecouch with unlimited personal-injury-protection (PIP) benefits, or

Medicare. The parties agree that Mecouch has no responsibility to pay those

bills.

         Whether Selective or Medicare has primary responsibility for the

payment of Mecouch’s hospital bills turns on the interpretation of two

statutory schemes: the New Jersey Automobile Reparation Reform Act (the

1
    He was not eligible for Medicare at the time of his accident.
                                          2
No Fault Act),  N.J.S.A. 39:6A-1 to -18 (1977); and Title XVIII of the Social

Security Act (Medicare), 42 U.S.C. §§ 1395 to 1395lll.

      In 1977, the No Fault Act mandated that every automobile insurance

policy contain a provision requiring the insurer to pay “all reasonable medical

expenses” -- PIP benefits -- to the insured and insured’s family in the event

they were injured in an automobile accident, regardless of who was at fault in

causing the accident.  N.J.S.A. 39:6A-4(a) (1977). The Act imposed on the

automobile insurance carrier the responsibility of paying PIP benefits “as loss

accrues,” but provided that medical expenses payable from collateral sources,

such as workers’ compensation insurance and Medicare, were to be deducted

from the PIP benefits.  N.J.S.A. 39:6A-6 (1977) (the collateral source rule).

Under the collateral source rule, the automobile carrier typically was expected

to make prompt PIP payments first, but ultimately the collateral source had

primary responsibility for the payment of the medical bills. N.J. Mfrs. Ins. Co.

v. Hardy,  178 N.J. 327, 339 (2004).

      In 1972, Congress expanded Medicare to provide healthcare benefits not

only to the aged, but also to persons of any age who suffer from severe

disabilities. Social Security Amendments of 1972, Pub. L. No. 92-603,

§ 201(a)(2),  86 Stat. 1329, 1371. At that time, Medicare was authorized to

provide coverage for payment of an enrollee’s medical expenses -- except for

                                        3
those expenses covered by workers’ compensation insurance. See 42 U.S.C.

§ 1395y(b) (1976); Fanning v. United States,