MSP statute: 42 U.S.C. § 1395y(b)(2) & the Zinman Court
Congress enacted Medicare in 1965, “a federally funded program of health insurance for the aged, disabled and persons suffering from end-stage renal disease.” (Ds’ MSJ at 4.) The Secretary of the Department of Health and Human Services is charged with broad authority to “prescribe such regulations as may be necessary to carry out the administration of the insurance programs under this subchapter.” Id. (citing 42 U.S.C. § 1395hh(a)(1)). She acts through the Administrator of the CMS program.
In 1980, Congress enacted the MSP provisions at issue in this case in an effort to “stem the skyrocketing costs of the Medicare program.” Id. (citation omitted). The MSP provisions “– require liability and no-fault insurance to be the primary payers for services rendered to Medicare beneficiaries, leaving the Medicare program to provide benefits only as a ‘secondary’ payer.” Id. (citation omitted). Two mechanisms protect Medicare funds and ensure that Medicare is the secondary payer.
In 1995, HHS served in place of CMS as the program for administering reimbursement under MSP provisions. Some Medicare beneficiaries in the past have argued that subsection iii, now iv, subrogated the United States to the rights of individuals or other entities, putting HHS in the position of the beneficiary in order to recover from third-party primary payers who are legally responsible to the beneficiary for a loss. The right of subrogation is equitable in nature and generally requires application of the equitable principle of apportionment. The court rejected the argument. The court found that the MSP legislation did not confine the right to reimbursement to subrogation, but also provided “an independent right of recovery against any entity that is responsible for payment of or that has received payment for Medicare-related items or services, including the beneficiary herself.” Id. at 844-45 (citing 42 U.S.C. § 1395y(b)(B)(2)(ii)). Relying on United States v. Travelers Insur. Co., 815 F. Supp. 521, 523 (Conn. 1992); Provident Life & Accident Insur. Co. v. United States, 740 F. Supp. 492, 501 (Tenn. 1990), the court found this independent right of recovery to be separate and distinct from the right of subrogation, and not limited by the equitable principle of apportionment. Id. at 845. “Moreover, to define Medicare’s right to recover its conditional payments solely by reference to its right of subrogation would render superfluous the alternative remedy of the independent right of recovery contained in section 1395y(b)(2)(B)(ii).” Id., but see In re Dow Corning Corp., 250 B.R. 298, 342 (Mich. 2000) (explaining purpose of direct action MSP provision is to circumvent common law rule barring direct tort actions against liability insurers prior to a judgment being entered against the insured tortfeasor).
The Zinman court also considered statutory provisions requiring the coordination of benefits, which are not at issue in this case. Concluding that the statute did not address the issue of apportioned recovery either by its language or structure, the court turned to the second step outlined by the Supreme Court in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842 (1984): whether HHS’s construction of the MSP statute was a permissible one. Zinman, 67 F.3d at 843.
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