Opinion ID: 4029645
Heading Depth: 2
Heading Rank: 2

Heading: Demonstrated Responsibility

Text: The primary issue in these consolidated cases is the operation of the demonstrated responsibility provision of the MSP Act. The text of the MSP Act, however, is remarkably abstruse. Therefore, we begin our discussion of the merits with a comprehensive review of the structure of the private cause of action before analyzing the application of that particular provision.
The text of the private cause of action provided for by the MSP Act is challenging to parse. It reads: There 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). 14 Case: 15-14353 Date Filed: 08/30/2016 Page: 15 of 25 42 U.S.C. § 1395y(b)(3)(A). One difficulty in understanding the text stems from the fact that a primary plan is only liable when it fails to pay “in accordance with” paragraphs (1) and (2)(A). The ambiguity arises because the demonstrated responsibility requirement at the heart of this case is contained in neither of the paragraphs referenced in the private cause of action provision. That is, the demonstrated responsibility requirement is not contained in either paragraph (1) or in paragraph (2)(A). Rather, the demonstrated responsibility requirement is contained in paragraph (2)(B). However, this lack of clarity in the statute need not detain us in this case. Our Glover decision has already held that the demonstrated responsibility requirement is incorporated as a prerequisite to pursuit of the private cause of action. See Glover, 459 F.3d at 1308–09 (holding that a plaintiff pursuing the private cause of action must satisfy the demonstrated responsibility requirement). The Glover court explained that the demonstrated responsibility requirement was incorporated as a prerequisite because the private cause of action language references paragraph (2)(A), which in turn references paragraph (2)(B). See also Humana, __ F.3d __, 2016 WL 4169120, at  (“Although paragraph (2)(A) does not expressly obligate primary plans to make payments, the defined term ‘primary plan’ presupposes an existing obligation (whether by statute or contract) to pay for covered items or services. Therefore, a primary plan ‘fails to 15 Case: 15-14353 Date Filed: 08/30/2016 Page: 16 of 25 provide for primary payment (or appropriate reimbursement) in accordance with paragraph[] . . . (2)(A),’ when it fails to honor the underlying statutory or contractual obligation.”) (internal citation omitted). We turn, then, to answer the question: Have Plaintiffs adequately demonstrated Defendants’ responsibility for payment by alleging an obligation pursuant to the insurance contracts, or must Plaintiffs first obtain a judgment against Defendants by suing for enforcement of those contracts prior to bringing suit under the MSP Act? 2. Application of the Demonstrated Responsibility Provision The MSP Act permits demonstration of a primary plan’s responsibility to pay “by a judgment, a payment conditioned upon the recipient’s compromise, waiver, or release (whether or not there is a determination or admission of liability) of payment for items or services included in a claim against the primary plan or the primary plan’s insured, or by other means.” 42 U.S.C. § 1395y(b)(2)(B)(ii). The question before us is whether the phrase “by other means” permits demonstration of responsibility by a contractual obligation. Defendants argue that it does not; they urge us to hold that Glover’s demand for a “separate adjudication or agreement” applies when the defendant’s responsibility derives from contract as well as from tort. Plaintiffs argue that a contractual obligation is among the “other means” by 16 Case: 15-14353 Date Filed: 08/30/2016 Page: 17 of 25 which the statute permits demonstration of responsibility, and that no separate adjudication or agreement (in addition to the contract) is necessary. This issue has been addressed in regulations issued by the Centers for Medicare and Medicaid Services (“CMS”) interpreting the MSP Act. The implementing regulations specify that a primary payer must reimburse Medicare “for any payment if it is demonstrated that the primary payer has or had a responsibility to make payment.” 42 C.F.R. § 411.22(a). The regulations explicitly list the means by which responsibility for payment may be demonstrated, including a judgment or “other means, including but not limited to a settlement, award, or contractual obligation.” Id. § 411.22(b).5 The regulations thus specifically permit demonstration of responsibility by means of a contractual obligation. “Generally, considerable weight should be accorded to an executive department’s construction of a statutory scheme it is entrusted to administer . . . .” 5 That subsection of the regulations reads, in its entirety: (b) A primary payer's responsibility for payment may be demonstrated by—
(2) A payment conditioned upon the beneficiary’s compromise, waiver, or release (whether or not there is a determination or admission of liability) of payment for items or services included in a claim against the primary payer or the primary payer's insured; or (3) By other means, including but not limited to a settlement, award, or contractual obligation. 42 C.F.R. § 411.22(b). 17 Case: 15-14353 Date Filed: 08/30/2016 Page: 18 of 25 Chevron U.S.A. Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 844, 104 S. Ct. 2778, 2782, 81 L. Ed. 2d 694 (1984). If a statute is silent or ambiguous with respect to a certain issue, we proceed to ask whether the executive’s construction of the statute is permissible. Gulfcoast Med. Supply, Inc. v. Sec’y, Dep’t of Health & Human Servs., 468 F.3d 1347, 1351 (11th Cir. 2006) (citing Chevron, 467 U.S. at 842–44, 104 S. Ct. at 2781–82). Here, the statutory phrase “other means” is ambiguous: it is not apparent from the text of the statute alone which “other means” Congress intended to allow. And a contractual obligation seems to us to be an eminently reasonable method of demonstrating responsibility. Defendants do not claim that the interpretation of the statute provided in the regulations is unreasonable. Instead, they fall back on their primary argument: that the existence of a contract does not necessarily demonstrate responsibility. They point out that PIP insurance contracts do not promise payment or reimbursement for all medical expenses, and they argue that it is possible that Plaintiffs seek to recover for injuries not covered under their policies. In other words, Defendants argue that a contract can demonstrate responsibility, but only once it is reduced to a judgment or settlement. We disagree, and our disagreement underscores an important difference between tort liability and contractual obligations. It is a fundamental principle of 18 Case: 15-14353 Date Filed: 08/30/2016 Page: 19 of 25 contract law that a contract imposes enforceable rights and obligations: “The heart of ‘contract’ is thus found both in its promissory nature and in its enforceability. . . . [O]nce a contract is entered, the parties’ rights and obligations are binding under the law . . . .” 1 Williston on Contracts § 1:1 (4th ed.). A contract imposes obligations on the parties immediately, without any involvement of the courts. While a lawsuit may be necessary to enforce a contract in the event of a breach, the obligations created by the contract exist as soon as it is executed. By contrast, an alleged tortfeasor has no obligations until he is adjudged liable. In a similar vein, demonstrating responsibility by means of a “judgment” necessarily presupposes a separate proceeding in which that judgment was obtained. On the other hand, the term “contractual obligation” in the CMS regulations presupposes only the existence of a contract. Moreover, adopting Defendants’ interpretation would render meaningless the statutory phrase “by other means,” as well as the specific reference to contractual obligations in the regulation. Defendants’ reading of the law “is thus at odds with one of the most basic interpretive canons, that a statute should be construed so that effect is given to all its provisions, so that no part will be inoperative or superfluous, void or insignificant.” Corley v. United States, 556 U.S. 303, 314, 129 S. Ct. 1558, 1566, 173 L. Ed. 2d 443 (2009) (internal quotation 19 Case: 15-14353 Date Filed: 08/30/2016 Page: 20 of 25 marks and brackets omitted). If Defendants are correct that a judgment or settlement agreement is always a prerequisite to suit under the MSP Act, then there are no “other means” that may demonstrate responsibility, and that part of the statute is superfluous. Additionally, Defendants’ preferred interpretation renders the reference in the regulations to contractual obligations entirely inoperative. If Defendants are correct that a contract must always be reduced to a judgment, then a “contractual obligation” can never demonstrate responsibility; only a judgment can. The regulations envision demonstrating responsibility with a judgment or settlement from a separate proceeding. If a contractual obligation, absent such a judgment or settlement, cannot demonstrate responsibility to pay, then the reference to judgments and settlements would be sufficient. There is no purpose at all for listing a contractual obligation as a means of demonstrating responsibility. Requiring that such a contractual obligation be reduced to a judgment renders superfluous the phrase “by other means.” This line of reasoning is entirely consistent with Glover. In Glover, we concluded that responsibility must be demonstrated by “a separate adjudication or agreement.” 459 F.3d at 1309. An insurance contract is, of course, a separate agreement, and permitting demonstration of responsibility via a contractual obligation is therefore consistent with our holding in Glover. Glover was decided 20 Case: 15-14353 Date Filed: 08/30/2016 Page: 21 of 25 in the tort context, and the “agreement” the Glover panel likely had in mind was a settlement agreement. But a settlement agreement is just a type of contract. So if Defendants are correct that a contractual obligation alone cannot demonstrate responsibility, then, presumably, even the beneficiary of a settlement agreement has not demonstrated responsibility until he has sued for breach of the settlement agreement, prevailed, and obtained a judgment. Given the explicit references in the text of the law to settlements and waivers as means of demonstrating responsibility, Congress clearly did not intend the result Defendants request. The plain language of the MSP Act indicates that at least some contractual obligations—namely, settlement agreements—are sufficient to demonstrate responsibility. We see no reason that other types of agreements—such as insurance contracts—should be treated differently. We hold that a contractual obligation may serve as sufficient demonstration of responsibility for payment to satisfy the condition precedent to suit under the MSP Act. This does not relieve Plaintiffs of their burden to allege in their complaints, and then subsequently prove with evidence, that Defendants’ valid insurance contracts actually render Defendants responsible for primary payment of the expenses Plaintiffs seek to recover. And Defendants may still assert any valid contract defense in arguing against their liability. We hold only that a contractual 21 Case: 15-14353 Date Filed: 08/30/2016 Page: 22 of 25 obligation may satisfy the demonstrated responsibility requirement, not that the existence of a contractual obligation conclusively demonstrates liability under the MSP Act’s private cause of action. 3. Policy Maximums Defendants IDS and Infinity Auto Insurance Company (“Infinity”) argue in the alternative that, even if Plaintiffs’ insurance contracts are sufficient to demonstrate Defendants’ responsibility to pay, Plaintiffs’ claims still fail because their complaints show that Defendants no longer have a responsibility to pay. Defendants’ argument is grounded in the fact that Plaintiffs’ insurance policies provided for a maximum of $10,000 in benefits. Defendants claim that any responsibility they had to pay was exhausted once the policy maximums were reached, which may have occurred in some of these cases. Plaintiffs respond that the statute requires repayment whenever a primary plan “has or had a responsibility to make payment,” 42 U.S.C. § 1395y(b)(2)(B)(ii) (emphasis added), and that Defendants are therefore liable if they ever had a responsibility to make a payment, even if they subsequently paid out the maximum benefits available under the policies.6 6 In their brief, Plaintiffs do concede that they cannot recover more than twice the policy limits. 22 Case: 15-14353 Date Filed: 08/30/2016 Page: 23 of 25 The district courts to which these arguments were presented did not reach them, instead dismissing the cases solely on the grounds that Glover barred liability. On remand, we leave it to the district courts to decide this issue in the first instance. 7