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On April 16, 2018, the United States Sixth Circuit Court of Appeals published its opinion on Gucwa and Marusza v. Lawley, Ager, Baker, Rubin and Accident Fund Insurance Company, finding that because Gucwa and Marusza did not allege personal financial loss in the original complaint or the two amended complaints, they have not established standing to bring an MSP private cause of action for double damages.


Mark Marusza and Nancy Gucwa’s complaint alleged four causes of action in this matter: (1) Accident Fund and the defendant physicians defrauded Marusza, Gucwa, and others of benefits, in violation of the Racketeer Influenced and Corrupt Organizations Act; (2) Marusza is entitled to double damages under the Medicare Secondary Payer Act; (3) the defendant doctors tortiously interfered with Marusza’s contractual relationship and/or business expectancy by inducing Accident Fund to deny his benefits; and (4) Accident Fund falsely imprisoned Marusza by requiring him to attend an examination with a neuropsychologist. The analysis below focuses only on the MSP private cause of action for double damages.


Facts of the Case


A sport-utility vehicle struck Mark Marusza on October 18, 2011, while Marusza was in the course and scope of his employment. Marusza sustained injuries to his brain, shoulders, cervical spine, and ribs. Following his release from the hospital, Nancy Gucwa provided attendant care services for his brain and spinal injuries.


Marusza’s workers’ compensation carrier—Accident Fund Insurance Company— initially paid Marusza’s claims for Gucwa’s care but terminated payment in July 2012. Accident Fund retained the four defendant physicians—Dr. Jeffrey Lawley, Dr. Harvey Ager, Dr. W. John Baker, and Dr. Barry Rubin—to examine Marusza’s disability. Following the doctors’ reports, Accident Fund refused to pay for certain treatments, including drugs to control injury-induced aggression, psychiatric hospitalization, pain medication, attendant care, physical therapy, doctors’ visits, nurse case management, and surgeries for his neck, back, and shoulders.


As a result of Accident Fund’s refusal to pay for such care, Medicare paid $15,665.00 for such treatment. It is important to note that the opinion does not indicate or provide a breakdown of such payments. In other words, we do not know whether the payments made by Medicare were for drugs to control the injury-induced aggression, for the psychiatric hospitalization, for pain medication, for attendant care, for physical therapy, for doctors’ visits, for nurse case management, or for surgeries for his neck, back, and shoulders.


After Accident Fund’s denial of benefits, Marusza filed a workers compensation claim seeking payment of indemnity benefits and medical care associated with the injuries related to the accident with the Michigan Workers’ Compensation Agency. In May 2016, Workers’ Compensation Board Magistrate Beatrice B. Logan issued her opinion that Marusza required treatment for a mild traumatic brain injury, vision problems, and injuries to his neck, shoulders, and lower back caused by the 2011 accident. Because Marusza lost all wage earning capacity in the accident, Magistrate Logan ordered Accident Fund to pay Marusza workers’ compensation benefits owed from October 19, 2011, onward at the rate of $592.88 per week and for reasonable and necessary medical treatment of Marusza’s employment-related conditions. Based on this decision, on August 12, 2016, Accident Fund paid Marusza $74,382.00.


Prior to the Board’s decision and Accident Fund’s payment to Marusza, on March 5, 2015, Plaintiffs filed a complaint in the U.S. District Court for the Eastern District of Michigan naming Accident Fund and the four doctors as defendants. Plaintiffs filed their First Amended Complaint the next day. Each defendant moved to dismiss for failure to state a claim upon which relief can be granted in spring 2015.


Following the Board’s decision, Plaintiffs filed a Second Amended Complaint. In January 2017, the district court granted the defendants’ motions to dismiss each claim, denied Dr. Rubin’s and Plaintiffs’ motions for sanctions against each other, and denied Plaintiffs’ motion for leave to amend their Second Amended Complaint. Marusza and Gucwa, the plaintiffs, now appeal.


The Medicare Secondary Payer Act


Congress enacted the Medicare Secondary Payer Act in 1980 to reduce federal healthcare expenses. The Act makes Medicare a secondary payer for a beneficiary’s medical services when payment is available from a different primary payer, such as a workers’ compensation plan. 42 U.S.C. § 1395y(b)(2)(ii). If that primary payer neglects its obligation to pay for a particular medical service, Medicare can cover the cost conditionally and seek reimbursement from the primary payer. 42 U.S.C. § 1395y(b)(2)(B)).


The Act also creates a private right of action with double recovery against primary payers who fail to provide the appropriate payment or reimbursement. 42 U.S.C. § 1395y(b)(3)(A). Marusza alleges that Accident Fund defrauded Medicare by forcing them to pay $15,665.00 in medical bills for which Accident Fund was responsible. Marusza seeks double damages under the Act.


As the party invoking federal subject matter jurisdiction, Plaintiffs bear the burden of establishing “the `irreducible constitutional minimum’ of standing”: that the plaintiff “(1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision.”  The district court dismissed Marusza’s claim under the Act because he had not alleged financial harm. The court here affirms that decision. Because the Medicare Secondary Payer Act is not a qui tam statute, the financial injury suffered by the government does not confer standing upon other parties. In other words, this court holds private plaintiffs seeking MSP private cause of action double damages must suffer their own individual harm.


Marusza argues that this circuit held in Stalley v. Methodist Healthcare, 517 F.3rd 911,919 (USCA 6th Cir. 2008) that a plaintiff has standing under the Act as long as they are a Medicare beneficiary denied coverage by a primary payer. The court concludes this misrepresents Stalley. The court instead indicates that Stalley stands for the proposition that a particular plaintiff seeking relief under the Act as a “self-appointed bounty hunter,” lacks standing under the statute if “he was not a Medicare beneficiary, Medicare eligible, or denied coverage by a primary payer.”


Establishing Standing


This court rules that a plaintiff does not satisfy the elements of standing simply by showing that the insurer failed to make payments “on his behalf”; the plaintiff must show that he “himself suffered an injury because a primary plan has failed” to pay. In other words, this court finds that Marusza must allege that he was injured by Accident Fund’s failure to pay. Because Marusza’s complaint alleged merely that Medicare suffered a financial injury when Accident Fund failed to pay, the complaint failed to establish that Marusza himself had standing.


After the district court’s decision, Marusza alleged for the first time in his February 6 motion for rehearing and reconsideration that he had suffered financial loss. The court concludes the district court correctly denied the motion because “a motion for reconsideration may not be used to raise issues that could have been raised in the previous motion.” Marusza had multiple prior opportunities to address the standing issue. Furthermore, the conclusory allegations in the affidavit stated simply that Marusza had to “pay co-pays because Medicare does not pay the entire bill,” but failed to provide any receipts, billing statements, or other information about the amount, recipient, or date of the co-pays.


Marusza argued that the district court should have granted him leave to amend his affidavit a third time to address the lack of standing. However, Marusza made no request for leave to address the lack of personal financial harm until the motion for reconsideration. On appeal, this court refuses to consider Plaintiffs’ affidavits from the motion for reconsideration because “arguments raised for the first time in a motion for reconsideration are untimely and forfeited on appeal.”




Because Marusza did not allege personal financial loss in the original complaint or the two amended complaints, he has not established standing. Thus, the court affirms the district court. “The case law of this Circuit and the state of Michigan forecloses Plaintiffs’ RICO, Medicare Secondary Payer Act, tortious interference, and false imprisonment claims. For the foregoing reasons, the district court’s order is affirmed.”


This case continues a trend I have been writing and speaking about for some time, that Medicare beneficiaries are fast becoming and will continue to seek to become plaintiffs in MSP private cause of action for double damages. It is surprising to note that the decision does not mention the marquee cases in the 6th Circuit that gave way to such claims, including the July 16, 2014, United States Court of Appeals for the Sixth Circuit opinion on Michigan Spine and Brain Surgeons, LLC v. State Farm Mutual Automobile Insurance Company (allowing Michigan Spine to pursue its claim under the Medicare Secondary Payer Act against State Farm without showing of any financial loss), the September 2, 2014, United States District Court for the Western District of Kentucky opinion on Estate of Clinton McDonald v. Indemnity Insurance Company of North America (concluding that based on USCA 6th Circuit decision on Michigan Spine Clinic v. State Farm, as the Estate’s filing of the law suit prompted payment in the amount of $184,514. 24, the Estate was entitled to double damages per the MSP Private Cause of Action provision without showing personal financial loss), or the February 17, 2016, State of Michigan Circuit Court for the County of Oakland opinion on Hull v. Home Depot (finding that although Home Depot had already paid $42,233.16 to Medicare and Blue Cross Blue Shield Medicare Advantage Plan, because Mr. Hull’s filing of the MSP private cause of action prompted Home Depot’s payment of same, Mr. Hull was entitled to double damages without showing personal financial loss).


I do not anticipate this case will stop Medicare beneficiaries from becoming plaintiffs in MSP private cause of action for double damages. I do however anticipate such plaintiffs spending a considerable amount of time elaborating and enumerating the various ways in which they may have sustained personal financial loss as a result of the primary payer’s failure to reimburse Medicare for any accident related medical expenses that should have been the primary payer’s responsibility. Unfortunately, this may further complicate matters for primary payers, as it may allow such plaintiffs to file state causes of action permitted under specific state laws to prevent such financial losses to plaintiffs. Stay tuned as I continue to keep you updated on such trends and case law.


About Rafael Gonzalez

Rafael Gonzalez, Esq. is President of Flagship Services Group. He has over 30 years of experience in the auto, liability, no-fault, and work comp industries. He is one of the country’s top experts on Medicare and Medicaid compliance, serving insurers, self-insureds, and third party administrators. He speaks and writes on mandatory insurer reporting, conditional payment resolution, set aside allocations, and professional administration, as well as the interplay and effect of these processes and systems and the Affordable Care Act throughout the country. Rafael blogs on these topics at Medicare Compliance for P&C Insurers at www.flagshipservicesgroup.com/blog. He is very active on LinkedInTwitter, Instagram, and Facebook.


Rafael Gonzalez, Esq


About Medicare Conditional Payments

42 CFR Section 411.21 indicates that Medicare conditional payments are payments made by Medicare for medical treatment where a primary payer (insurer or self-insurer) has or may have an obligation to make such payment. Primary payers must reimburse Medicare for conditional payments it has made. 42 USC Section 1395y indicates that primary payers include group health providers, workers’ compensationliability and no-fault insurers and self-insured entities, as well as physicians, attorneys, hospitals, or clinics that receive payment from a primary payer must make reimbursement.

42 USC Section 1395y also indicates responsibility as a primary payer arises even if liability for the medical expense is contested. Such a responsibility can be demonstrated by entry of a judgment or by payment conditioned on a release or waiver of payment, even if liability is denied. 42 CFR Section 411.24 indicates Medicare has a direct right of action against all primary payers responsible for making payment. And, Medicare has a direct right of action against any person or entity that received a primary payment, including the Medicare beneficiary, medical provider, physician, attorney, state agency or private insurer.


About Medicare Advantage and Prescription Drug Plans Reimbursement

42 CFR Section 422.108(f) provides MAPs with the same rights of recovery that the Secretary of HHS has under the MSP regulations in subparts B through D of part 411 of 42 CFR. Additionally, the same MSP regulations at 42 CFR Section 422.108 are extended to PDPs at 42 CFR Section 423.462. Therefore, PDPs have the same MSP recovery rights as MAPs, which have the same recovery rights as HHS. This includes, as recent federal appellate and district court decisions have indicated, the ability to pursue double damages through MSP private cause of action pursuant to 42 USC Section 1395y(b)(3) should the primary payer deny the MAP or PDP reimbursement of any due conditional payments.


About Medicaid Third Party Liability Liens

42 USC Section 1396a mandates that all reasonable measures to ascertain legal liability for Medicaid payments and reimbursement of same be taken. The state or agency administering a Medicaid plan must take all reasonable measures to ascertain the legal liability of third parties to pay for care and services paid by Medicaid. Federal law also provides that in any case where such a legal liability is found to exist after medical assistance has been made available on behalf of the individual, the state or local agency must seek reimbursement for such assistance to the extent of such legal liability. 42 U.S.C. Section 1396a(a)(25).


About Flagship Services Group

Flagship Services Group is the premier Medicare and Medicaid compliance services provider to the property & casualty insurance industry. Our focus and expertise has been the Medicare and Medicaid compliance needs of P&C self-insureds, insurance companies, and third party administrators. We specialize in P&C mandatory reporting, conditional payment resolution, and set aside allocations. Whether auto, liability, no-fault, or work comp claims, we have assembled the expertise, experience and resources to deliver unparalleled MSP compliance and cost savings results to the P&C industry. To find out more about Flagship, our folks, and our customized solutions, please visit us at www.flagshipservicesgroup.com. To speak with us about any of our P&C MSP compliance products and services, you may also contact us at 888.444.4125 or info@flagshipsgi.com.




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