Zaleppa v. Seiwell (2010 PA Super 208 November 17, 2010) is a case out of Pennsylvania that recently held:

"After careful consideration, we conclude that there is no legal basis under either federal or Pennsylvania law to assert the interests of the United States government as to the reimbursement of Medicare liens."



Car wreck resulting in $15,000 jury verdict against Seiwell’s insurance company to compensate Phyllis Zaleppa. Seiwell alleges that the trial court erred in denying her post-trial motion, which requested that the court enter an order directing her to pay the verdict either (1) by naming Medicare, along with Zaleppa and her attorneys, as payees on the draft satisfying the verdict or (2) by paying the verdict into court pending notification from Medicare that all outstanding Medicare liens have been satisfied.

Both of Seiwell’s issues address the same legal question, whether the MSPA either requires or allows a private entity to assert the rights of the United States government regarding a potential claim for reimbursement of a Medicare lien.  Seiwell argues that under 42 U.S.C.A. § 1395y(b)(2)(B)(ii) of the MSPA, she and her liability insurer are considered the “primary plan” responsible for reimbursing Medicare for conditional payments made to Zaleppa.

As such, in the event that a private insurer is legally required to pay for the treatment for which
Medicare has already paid, the MSPA provides that Medicare must be reimbursed for the expense. 42 U.S.C.A. § 1395y(b)(2)(B)(i) (stating that “[a]ny such payment […] shall be conditioned on reimbursement to the appropriate Trust Fund”). An entity which receives payment from a primary
plan must reimburse Medicare within 60 days. See 42 C.F.R. § 411.24(h).

The MSPA specifically delineates the obligations of both the recipient and primary insurance plan as follows.
(ii) Primary plans
A primary plan, and an entity that receives payment from a primary plan, shall reimburse the appropriate Trust Fund for any payment made by the Secretary under this subchapter with respect to an item or service if it is demonstrated that such primary plan has or had a responsibility to make payment with respect to such item or service. A primary plan’s responsibility for such payment may be demonstrated 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.

As the express language indicates, the MSPA imposes a duty upon a “primary plan” and “an entity that receives payment from a primary plan” to reimburse Medicare if the primary plan is responsible to pay for the medical treatment provided. Id. Thus, if an outstanding Medicare lien existed, we recognize that the MSPA requires that either Zaleppa, as the “entity that receive[d] payment from [the] primary plan[,]” or Seiwell and her insurer, as the primary plan, must reimburse Medicare. Id. Importantly for our review, the regulations under the MSPA indicate that only a recovery demand letter, which is issued by Medicare and directed specifically to the primary plan, triggers the primary plan’s duty to reimburse the Medicare trust fund. 42 C.F.R. § 411.22(c) (specifying that a primary payer must make payment to either “an entity designed to receive repayments,” such as a plaintiff receiving a judgment in her favor, or “[a]s directed in a recovery demand letter” from Medicare).

"Seiwell, however, contends that the existence of this statutory obligation requires and enables her and her insurer, as a primary plan, to seek post-trial relief which affirmatively asserts the United States government’s interest in reimbursement. We disagree."  

Nothing in § 1395y(b)(2)(B)(ii), or any other provision of the MSPA, expressly authorizes a primary plan to assert Medicare’s right to reimbursement as a preemptive means of guarding against its own risk of liability. The MSPA sets forth only one method for the United States government to recover the funds which it dispersed through conditional Medicare payments. Under the MSPA, only the Unites States government is authorized to pursue its own right to reimbursement. 42 U.S.C.A § 1395y(b)(2)(B)(iii).

As such, we discern from the regulations that the government may only seek recovery
directly from a primary plan after it has issued a recovery demand letter to that primary plan. See 42 C.F.R § 411.22(c).

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