Opinion ID: 613077
Heading Depth: 3
Heading Rank: 1

Heading: The Private Cause of Action and the Statutory Framework

Text: The private cause of action in the Medicare Secondary Payer Act states in full: [t]here is established a private cause of action for damages (which shall be in an amount double the amount otherwise provided) in the case of a primary plan which fails to provide for primary payment (or appropriate reimbursement) in accordance with paragraphs (1) and (2)(A). 42 U.S.C. § 1395y(b)(3)(A). The reason why this provision is attractive to Bio-Medical is immediately obvious. Unlike the ERISA cause of action, which is essentially a contract claim and thus permits only single damages, this provision permits Bio-Medical to recover double damages. But a private party can recover under this provision only if a primary plan has failed to provide primary payment or appropriate reimbursement in accordance with paragraphs (1) and (2)(A). When does that occur? To answer this question fully, it is first necessary to understand the Act's basic structure. The Act is comprised of eight sections, or paragraphs, [9] but only the first three are relevant here. Paragraph (1), entitled [r]equirements of group health plans, essentially lays out a system of rules instructing when group health plans must pay for medical items and services. See id. § 1395y(b)(1). The first three subparagraphs of paragraph (1) prevent group health plans from taking into account that a planholder is entitled to Medicare benefits due to being (a) at least sixty-five years old, (b) disabled, or (c) diagnosed with end-stage renal disease. (The third subparagraph, of course, is the subject of Part II above.) Paragraph (2), entitled Medicare secondary payer, instructs when Medicare may or may not pay for medical items and services. It has two main subparagraphs. Subparagraph (2)(A) provides that Medicare may not pay when a primary plan is reasonably expected to pay under paragraph (1), except as provided in subparagraph [2](B). Subparagraph (2)(B), in turn, provides that when the Act requires a primary plan to pay for items or services but the primary plan cannot reasonably be expected to pay promptly, then Medicare may make conditional payments for those items or services. Subparagraph (2)(B) expressly provides that these payments are conditional, that the primary plan shall reimburse Medicare, and that Medicare can sue a delinquent primary plan for reimbursement. See id. § 1395y(b)(2)(B). Finally, paragraph (3), entitled [e]nforcement, contains the private cause of action. See id. § 1395y(b)(3)(A); see generally Shalala, 23 F.3d at 414-15 (discussing the Act's structure). When does a primary plan fail to make payment in accordance with paragraphs (1) and (2)(A)? Determining when a primary plan violates paragraph (1) is easy. A primary plan fails to pay under paragraph (1) by, among other things, tak[ing] into account that a planholder is entitled to Medicare benefits after being diagnosed with end-stage renal disease. See 42 U.S.C. § 1395y(b)(1)(C)(i). As discussed in Part II above, Central States did precisely that by terminating the patient's coverage because of her entitlement to Medicare benefits. But the private cause of action uses the conjunctive: it requires that the primary plan fail to make payment in accordance with paragraphs (1) and (2)(A). Id. § 1395y(b)(3)(A) (emphasis added). The private cause of action, therefore, also apparently requires us to determine when a primary plan fails to pay in accordance with subparagraph (2)(A). The challenge with making this determination is that subparagraph (2)(A) only addresses Medicare  not primary plans  as its subject. As mentioned, the general thrust of paragraph (2) is to instruct when Medicare may or may not pay for medical items and services; the responsibilities of primary plans are detailed in paragraph (1). Specifically, subparagraph (2)(A) provides, in relevant part: [p]ayment under this subchapter may not be made, except as provided in subparagraph [2](B), with respect to any item or service to the extent that ... payment has been made, or can reasonably be expected to be made, with respect to the item or service as required under paragraph (1). Id. § 1395y(b)(2)(A). Although this provision contains two instances of passive voice, we can easily glean both implied subjects from the statutory context. [10] Rephrased in active voice for clarity, subparagraph (2)(A) states: Medicare may not pay for any item or service, except as provided in subparagraph (2)(B), to the extent that the Act requires a primary plan to pay. And subparagraph (2)(B) permits Medicare to pay conditionally for an item or service only if a primary plan that should pay cannot reasonably be expected to pay promptly. Substituting that provision back into subparagraph (2)(A), we arrive at this freestanding formulation of subparagraph (2)(A): Medicare may not pay for any item or service to the extent that the Act requires a primary plan to pay, except that Medicare may conditionally pay for the item or service if the primary plan cannot reasonably be expected to pay promptly. In other words, when a primary plan must pay but will not do so promptly, Medicare may make a conditional payment. How can a primary plan fail to make a payment in accordance with subparagraph (2)(A), if that subparagraph only instructs when Medicare, and not primary plans, may or may not make payments? The answer, of course, is that it cannot: it is impossible for one to violate an order addressed only to someone else. A primary plan can no more violate an order addressed only to Medicare than a soldier can violate an order addressed only to the members of a different platoon. But if a primary plan can never fail to pay in accordance with subparagraph (2)(A), and if a primary plan's violation of subparagraph (2)(A) is necessary for a party to prevail on the private cause of action, then the private cause of action is rendered inoperative. We must avoid such a construction of the Act if at all possible. See United States v. Atl. Research Corp., 551 U.S. 128, 137, 127 S.Ct. 2331, 168 L.Ed.2d 28 (2007) (stating that statutes should not be interpreted so as to render [an] entire provision a nullity). The solution is to consider paragraphs (1) and (2)(A) collectively, rather than individually. Paragraph (1) prevents primary plans from limiting a planholder's benefits or coverage simply because the planholder is entitled to Medicare benefits, and subparagraph (2)(A) instructs that when a primary plan violates that prohibition and accordingly fails to pay for treatment, Medicare may make a conditional payment for the treatment. Thus, a primary plan fails to pay in accordance with paragraphs (1) and (2)(A) when it terminates a planholder's coverage and thereby induces Medicare to make a conditional payment on its behalf  that is, when the primary plan violates the statutory system that these two paragraphs set into motion. Put differently, a primary plan is liable under the private cause of action when it discriminates against planholders on the basis of their Medicare eligibility and therefore causes Medicare to step in and (temporarily) foot the bill. Our interpretation, in addition to rendering operative all relevant statutory provisions, is eminently reasonable: it permits lawsuits against the primary plans that performed the precise actions that the Act condemns. Applying our interpretation of the Act's text to this case, Central States is liable to Bio-Medical under the private cause of action. By terminating the patient's coverage due to her Medicare entitlement (in violation of the Act) and inducing Medicare to make a conditional payment to Bio-Medical, Central States fail[ed] to provide for primary payment ... in accordance with paragraphs (1) and (2)(A). Although we believe that the Act's text alone compels this conclusion, we acknowledge that the convoluted nature of the statute permits a counterargument that is at least facially appealing: that in order to be liable under the Act's private cause of action, a primary plan's responsibility to pay must have already been demonstrated prior to the lawsuit. An opinion from the Eleventh Circuit first adopted this argument, which has now been repeated by several federal district courts. Indeed, relying on this authority, the district court below dismissed Bio-Medical's claim under the Act's private cause of action. We will now address the error of this argument.