Government Loses in MSPA Claim - US v. Stricker
United States v. Stricker
In this case, the Government alleged that 907 recipients of the Abernathy settlement (a “global settlement” of $300 million) received Medicare payments for medical expenses for injuries related to PCB contamination. In its lawsuit filed on December 1, 2009, the Government sought to recover reimbursement for its Medicare payments from the corporate defendants, their insurance carriers, and certain attorneys who represented Abernathy plaintiffs and allegedly received settlement funds.
On September 30, 2010, the Government’s case was dismissed due to the statute for limitations for the MSPA reimbursement claim had expired.
The Medicare Secondary Payer Act (“MSPA”) was enacted in 1980. The act allowed Medicare to seek reimbursement for money an insurance company or self insured paid on behalf of a Medicare beneficiary. MSPA covers all carriers, self-insureds, no fault insurance, and workers’ compensation insurance. MSPA regulations also clarify that the Government can use direct action to recover from the primary payers (insurance providers) and from parties that receive primary payments, such as beneficiaries, physicians, or attorneys. MSPA also specifically lists a judgment, settlement, or award as an example which may demonstrate “responsibility for payment” by a primary payer, triggering the obligation of Medicare reimbursement.
The Court separated the defendants into two groups, the corporate defendants and the attorney defendants. The separation into these groups is extremely important for future cases because the actions against these groups carried different statutes of limitations.
Generally, to recover from a defendant in a case which stems from a tort carries a statute of limitations of three years. Actions to recover from a defendant in a case which stems from a contract dispute carries a statute of limitations of six years.
As the Government’s action against the corporate defendant was founded in tort law, the complaint against them must have been filed by the government within three years after the right of action first accrued. The Court ruled that the Government’s first opportunity, or right of action, was on September 10, 2003, the day the court approved the settlement. Therefore, the action against the corporate defendants, filed December 1, 2009, was time-barred.
As for the attorney defendants, their obligation to reimburse Medicare from their clients settlement funds arose from the contractual relationship between the attorney and the client. Since this action was based in contract law, the statute of limitations was six years from the date of accrual. The attorney defendants received payment from the primary payer (the corporate defendants) on October 29, 2003, the date the court governing the Abernathy litigation ordered the transfer of $275 million in settlement monies from the court registry to the attorneys’ escrow account. Therefore, the government’s suit against the attorney defendants was also time-barred.
My two cents:
There are a few important lessons to be learned from Stricker. First, the government took a very aggressive stance, asking for double the amount owed as damages. Second, the distinction the court makes between the attorney defendants and the corporate defendants is substantial. Under the Court’s analysis, if the lawsuit had been filed in the four to six year window after the settlement, the action against the attorney defendants would have been allowed, while the action against the corporate defendants would have been dismissed.