Guadalupe Caldera v. Ins Co. of the State of PA , 716 F.3d 861 ( 2013 )

Case: 12-40192 Document: 00512241519 Page: 1 Date Filed: 05/14/2013
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
May 14, 2013
No. 12-40192 Lyle W. Cayce
Clerk
GUADALUPE CALDERA,
Plaintiff-Appellant,
v.
THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA,
Defendant-Appellee.
Appeals from the United States District Court
for the Southern District of Texas
Before STEWART, Chief Judge, GARZA, and ELROD, Circuit Judges.
JENNIFER WALKER ELROD, Circuit Judge:
This case involves the interplay between the Medicare Secondary Payer
Statute (“MSP”), 42 U.S.C. § 1395y(b), and Texas workers’ compensation law.1
We must decide whether the MSP preempts a state law that requires a workers’
compensation claimant to obtain preauthorization from the relevant carrier
before incurring certain medical expenses. See Tex. Lab. Code Ann. § 413.014(c),
(d); 28 Tex. Admin. Code § 134.600. Because we hold that it does not, we
AFFIRM the district court’s judgment.
1
Texas statutes use the term “workers’ compensation”, whereas the MSP refers to
“workmen’s compensation.” Compare, e.g., Tex. Lab. Code Ann. § 408.001 with 42 U.S.C. §
1395y(b)(2)(A). Unless quoting the MSP, we refer to this body of law in accordance with the
Texas terminology.
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I. FACTUAL AND PROCEDURAL BACKGROUND
Plaintiff-Appellant Guadalupe Caldera injured his back at work in 1995.
Workers’ compensation carrier Insurance Company of the State of Pennsylvania
(“ICSP”) initially paid Caldera workers’ compensation benefits pursuant to
Texas state law. Still suffering from the injury, Caldera applied for and obtained
Medicare benefits in 1998.2
Caldera’s back injury ultimately resulted in two surgeries: one in 2005 and
another in 2006. Medicare paid for both procedures, with costs totaling
$42,637.41. Although Caldera did not seek preauthorization for either surgery
from ICSP (a prerequisite for payment under Texas workers’ compensation
law3), he filed a claim with ICSP for these expenses, arguing that ICSP—not
Medicare—was responsible for payment.
Caldera and ICSP engaged in an “extent-of-injury” dispute regarding the
surgeries. ICSP initially denied Caldera’s request for benefits on the ground
that the conditions that gave rise to the surgeries were not causally related to
Caldera’s workplace injury. Caldera appealed ICSP’s decision in accordance
with the administrative process that governs extent-of-injury disputes under
Texas workers’ compensation law and lost in a series of proceedings before the
Texas Department of Insurance, Division of Workers’ Compensation (the
“DWC”). Having exhausted his administrative remedies with respect to the
extent-of-injury dispute, Caldera sought judicial review in state court. The
parties settled the question in Caldera’s favor with an Agreed Judgment. The
2
ICSP later terminated Caldera’s lifetime medical benefits on the ground that the
covered injury was resolved and any new medical issues were unrelated. Caldera did not
appeal ICSP’s determination and continued to receive Medicare benefits.
3
A workers’ compensation carrier is “not liable” for services and treatments that
require preauthorization “unless preauthorization is sought by the claimant . . . and either
obtained from the insurance carrier or ordered by the commissioner.” Tex. Lab. Code Ann.
§ 413.014(d); see also Tex. Lab. Code Ann. § 413.014(c); 28 Tex. Admin. Code § 134.600
(requiring preauthorization for spinal surgeries).
2
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Agreed Judgment established that Caldera’s 1995 injury was the producing
cause of the conditions that gave rise to his surgeries, but it did not liquidate any
damages or require any payment.
Caldera also filed an MSP reimbursement claim against ICSP in the state-
court action, seeking double-damages.4 ICSP answered that Caldera could not
recover under the MSP because—regardless of the extent-of-injury issue—ICSP
had no obligation to pay for surgeries that were not preauthorized in accordance
with Texas workers’ compensation law.5 Caldera filed this declaratory judgment
action to determine whether the MSP preempts ICSP’s state-law defense.
ICSP moved to dismiss Caldera’s declaratory judgment suit pursuant to
Federal Rule of Civil Procedure 12(b)(1) for want of subject-matter jurisdiction,
Rule 12(b)(6) for failure to state a claim, and Rule 12(b)(7) for failure to join a
necessary party. Addressing only ICSP’s motion under Rule 12(b)(1), the district
court dismissed Caldera’s claim for failure to exhaust administrative remedies.
Caldera filed a motion for new trial, which the district court dismissed in a one-
page order. Caldera timely appealed.
II. ANALYSIS
A federal cost-saving statute, the MSP makes the government a secondary
payer when a Medicare recipient has another source of primary insurance
coverage. See 42 U.S.C. § 1395y(b); Thompson v. Goetzmann, 337 F.3d 489, 495
(5th Cir. 2003) (en banc) (citing Blue Cross & Blue Shield of Tex. v. Shalala, 995
F.2d 70, 73 (5th Cir. 1993); In re Silicone Gel Breast Implants Prods. Liab. Litig.,
174 F. Supp. 2d 1242, 1250 (N.D. Ala. 2001)). In other words, “Medicare serves
4
On the record before us, it appears that Caldera has suffered no out-of-pocket loss for
the costs at issue. And as far as we can tell, Medicare has taken no steps to recover these
funds from ICSP or Caldera.
5
The parties agreed to sever Caldera’s extent-of-injury appeal and his MSP claim. The
MSP claim is pending before the 105th Judicial District Court of Nueces County, Texas, but is
abated pending the outcome of this declaratory judgment.
3
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as a back-up insurance plan to cover that which is not paid for by a primary
insurance plan.” Goetzmann, 337 F.3d at 496. To support that function, the
MSP contains a private right of action to incentivize citizens to aid the
government in recovering funds erroneously paid by Medicare. See 42 U.S.C.
§ 1395y(b)(3)(A). A Medicare beneficiary may recover from his workers’
compensation carrier twice the amount that Medicare paid on his behalf if,
among other things, the carrier qualifies as a “primary plan”—that is, if it “can
reasonably be expected” to cover the expense “under a workmen’s compensation
law or plan.” Id. § 1395y(b)(2)(A). To succeed, then, Caldera must state a
plausible claim that ICSP “can reasonably be expected” to pay for his surgeries
under Texas workers’ compensation law.
Caldera admits that he failed to obtain preauthorization for his surgeries,
a state-law prerequisite for the receipt of workers’ compensation benefits from
ICSP. Nevertheless, Caldera argues that ICSP qualifies as a “primary plan”
that “can reasonably be expected” to pay because the MSP preempts the Texas
preauthorization requirement. Caldera asserts two preemption arguments, one
broad and one narrow, both unavailing. We address them in turn.
A.
First, Caldera broadly argues that the MSP preempts any state laws that
“impede the intent of recouping monies from primary payers” like ICSP. Caldera
relies extensively on a federal implementing regulation, which provides that
“Medicare benefits are secondary to benefits payable by a primary payer even if
State law or the primary payer states that its benefits are secondary to Medicare
benefits or otherwise limits its payments to Medicare beneficiaries.” 42 C.F.R.
§ 411.32(a)(1) (emphasis added).
Caldera is right that Congress explicitly prohibited workers’ compensation
and other insurers from subordinating their payment obligations to those of
Medicare. As we explained:
4
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Before 1980, if a Medicare beneficiary had an alternate
source of payment, such as private insurance or an
employee group health plan, Medicare was the primary
payer, and the health plan was the secondary payer,
liable only for the costs that remained after Medicare
made its payments. Private insurers even wrote this
practice into their health insurance contracts.
Congress enacted the MSP statute to reverse the order
of payment in cases where Medicare beneficiaries have
an alternate source of payment for health care.
Blue Cross & Blue Shield, 995 F.2d at 73 (internal citations omitted). Thus,
under the MSP neither state law nor a private insurance contract may, for
example, reduce an insured’s payments by the amount of his eligibility for
Medicare benefits.6
The MSP and its implementing regulations do not, however, extend so far
as to eviscerate all state-law limitations on payment, as Caldera suggests. To
the contrary, the plain language of the MSP illustrates its harmonious
relationship with state workers’ compensation law: a workers’ compensation
carrier is “primary” only if “payment has been made or can reasonably be
expected to be made under a workmen’s compensation law or plan of the United
States or a State.” 42 U.S.C. § 1395y(b)(2)(A)(ii) (emphasis added). Indeed,
numerous MSP regulations (indeed, an entire subchapter) presuppose the
application of state workers’ compensation laws. 42 C.F.R. § 411.40–.47. For
6
Courts across the country have reached this conclusion. See, e.g., Varacalli v. State
Farm Mut. Auto. Ins. Co., 763 F. Supp. 205, 207 (E.D. Mich. 1990) (holding that the MSP
preempted a state law that required insurers to offer “coordination of benefits at reduced
premiums” when the insured had other health and accident coverage, making Medicare the
primary payer in direct conflict with the MSP); Abrams v. Heckler, 582 F. Supp. 1155, 1165
(S.D.N.Y. 1984) (holding that Congress intended to override a state statute that expressly
prohibited the payment of no-fault benefits for Medicare-covered services); see also Bio-Med.
Applications of Tenn., Inc. v. Cent. States Se. & Sw. Areas Health & Welfare Fund, 656 F.3d
277, 279, 286 (6th Cir. 2011), cert. dismissed, 132 S. Ct. 1087 (2012) (concluding that “a
primary plan is liable under the private cause of action when it discriminates against
planholders on the basis of their Medicare eligibility and therefore causes Medicare to step in
and (temporarily) foot the bill” (emphasis added)).
5
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example, ICSP cites 42 C.F.R. § 411.43(a), which makes a beneficiary responsible
“for taking whatever action is necessary to obtain any payment that can
reasonably be expected under workers’ compensation.” To that end, Medicare
generally “does not pay until the beneficiary has exhausted his or her remedies
under workers’ compensation.” Id. § 411.43(b). Similarly:
If Medicare makes a conditional payment with respect
to services for which the beneficiary or provider or
supplier has not filed a proper claim with a primary
payer, and Medicare is unable to recover from the
primary payer, Medicare may recover from the
beneficiary or provider or supplier that was responsible
for the failure to file a proper claim.
Id. § 411.24(l). A “proper claim” is “a claim that is filed timely and meets all
other claim filing requirements specified by the plan, program, or insurer.” Id.
§ 411.21. Far from preempting the state-law workers’ compensation regime,
then, the regulations accept that Medicare may be unable to recover from a
carrier because a beneficiary failed to file a proper claim under state law.
Our decisions in Waters and Blue Cross and Blue Shield reinforce this
conclusion. Cf. Waters v. Farmers Tex. Cnty. Mut. Ins. Co., 9 F.3d 397, 398–401
(5th Cir. 1993) (holding that when state law or the terms of a primary plan limit
an individual’s right to payment, the government’s reimbursement is “equally
limited”: “No matter what theory is pursued—statutory right or
subrogation—the government stands exactly in [the Medicare beneficiary’s]
shoes when recovering from the available insurance funds.” (emphasis added));
Blue Cross & Blue Shield, 995 F.2d at 73 (summarizing the context surrounding
the enactment of the MSP: “the MSP statute has never created or extended
coverage; it has only dictated the order of payment when Medicare beneficiaries
already have alternate sources of payment for health care.”). Moreover, other
courts across the country have similarly held that an MSP claimant may not
recover amounts from a purported “primary plan” in excess of a carrier’s
6
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responsibility under state law or the relevant contract. See, e.g., Bradley v.
Sebelius, 621 F.3d 1330, 1337 (11th Cir. 2010); Estate of Foster v. Shalala, 926
F. Supp. 850, 864–65 (N.D. Ia. 1996).
In sum, we conclude that Congress intended the MSP to complement, not
supplant, state workers’ compensation rules. This includes the preauthorization
requirement that Caldera failed to meet before he filed suit. For that reason,
Caldera’s first argument fails.
B.
Second, Caldera makes the narrower argument that Medicare’s
conditional payment for his surgeries—which equates to a determination that
his surgeries were medically necessary7—renders the state-law preauthorization
requirement “moot” because preauthorization likewise depends on a showing of
medical necessity8. In Caldera’s view, Medicare’s conclusion that Caldera’s
surgeries were medically necessary preempts any independent consideration of
medical necessity by ICSP or, on administrative appeal, the DWC. Because he
has fulfilled the other state-law requirements for recovery (i.e., he has obtained
an Agreed Judgment regarding compensability), Caldera says ICSP must pay.9
7
See 42 U.S.C. § 1395y(a)(1)(A) (proscribing payment under Medicare Part A or Part
B unless items or services are “reasonable and necessary”).
8
25 Tex. Reg. § 2101 (2000) (“Preauthorization decisions are to be made entirely based
upon medical necessity of the treatment of the condition proposed to be treated.”); see In re
Tex. Mut. Ins. Co., 321 S.W.3d 655, 662 (Tex. App.—Houston [14th Dist.] 2010, orig.
proceeding) (citing Zenith Ins. Co. v. Ayala, 325 S.W.3d 176, 178 (Tex. 2010)).
9
Caldera also argues that the state court Agreed Judgment demonstrates ICSP’s
liability pursuant to section 1395y(b)(2)(B)(ii) of the MSP, regardless of whether he obtained
preauthorization. That provision states that a “primary plan’s responsibility for such
payment may be demonstrated by a judgment . . . or by other means. . . .” Id.
§ 1395y(b)(2)(B)(ii). But the Agreed Judgment does not establish ICSP’s responsibility to pay.
It relates only to the extent of Caldera’s injury. As the district court noted: “While ICSP has
agreed that Caldera’s injury is compensable, it has not agreed to pay any damages (medical
or otherwise) as a result. . . . Its liability for payment of medical expenses (specified or
generalized) has not been conceded in settlement but must be determined by workers
compensation law and the terms of coverage, which include the preauthorization requirement
7
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In support of this argument, Caldera poses a hypothetical: if he had
requested preauthorization pursuant to Texas workers’ compensation law, then
ICSP could have decided that the surgeries were not medically necessary, while
Medicare reached the opposite conclusion. According to Caldera, “federal
preemption would break that tie in favor of Medicare’s determination that the
[surgeries were] necessary to assist an eligible beneficiary.” Caldera warns that
to allow Medicare and the DWC to reach inconsistent conclusions “invites chaos”
and “would lead to a diverse and inconsistent application of the MSP where
Medicare has made conditional payments.”
This purported “conflict,” however, does not arise out of the text of the
relevant federal and state statutes or regulations. Rather, it is a function of two
entities engaging in a similar individualized analysis at the same time—a
common reality in a world of overlapping state, federal, and private action.
Similar as it may be, Medicare’s medical necessity determination is subject to
statutory provisions, regulatory standards, internal guidance, and precedent
distinct from that which governs a preauthorization analysis under Texas
workers’ compensation law. As a general matter, the MSP leaves those
distinctions intact. See 42 C.F.R. § 411.40–.47. To impose Medicare’s
individualized medical necessity determination on a state workers’ compensation
plan is to unravel this delicate balance.
Moreover, the “conflict” Caldera urges does not exist in this case. The
DWC and Medicare did not—indeed could not—reach opposite conclusions
regarding the medical necessity of Caldera’s surgeries. Because Caldera opted
not to seek preauthorization, the DWC never had the chance to evaluate the
and the timely submission of medical bills.”
8
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medical necessity of his procedures.10 We decline to reach a preemption
conclusion on the basis of a hypothetical conflict.
III. CONCLUSION
Congress enacted the MSP to reduce Medicare costs by making Medicare
a secondary payer of insurance benefits. It did not, however, intend to override
a primary payer’s ability to impose medical necessity requirements in
accordance with state law. Texas has gone to great lengths to craft a statutory
structure that “carefully constructs rights, remedies, and procedures” to provide
adequate coverage for injured workers. Tex. Mut. Ins. Co. v. Ruttiger, 381
S.W.3d 430, 440–41 (Tex. 2012) (citing City of Waco v. Lopez, 259 S.W.3d 147,
155-56 (Tex. 2008). That structure “contains detailed procedures and penalties
for failures of the various interested parties to comply with statutory and
regulatory requirements.” Id. at 440. We will not upset this well-oiled machine
absent a clear directive from Congress.
Under the MSP, if a claimant fails to file a proper claim in accordance
with state-law requirements and, therefore, cannot recover benefits from the
primary payer, so be it. Medicare can refuse to make a conditional payment, or
it can seek reimbursement from the claimant himself. In any event, the
10
As the Supreme Court has unanimously agreed, “[i]n most cases, [an] issue not
presented to an administrative decisionmaker cannot be argued for the first time in federal
court.” Sims v. Apfel, 530 U.S. 103, 112 (2000) (O’Connor, J., concurring in part and
concurring in the judgment) (“On this underlying principle of administrative law, the Court
is unanimous.”) (citing the majority and the dissent); see United States v. L.A. Tucker Truck
Lines, Inc., 344 U.S. 33, 36–37 (1952) (“[C]ourts should not topple over administrative
decisions unless the administrative body not only has erred but has erred against objection
made at the time appropriate under its practice.”).
9
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claimant cannot succeed under the MSP. Because that is Caldera’s situation
here, he fails to state a claim under Rule 12(b)(6).11 We AFFIRM.
11
We note that the district court dismissed Caldera’s claim for lack of subject-matter
jurisdiction under Rule 12(b)(1) based on Caldera’s failure to exhaust state-law remedies. But
an exhaustion requirement is jurisdictional in nature only if Congress “statutorily mandates
that a claimant exhaust administrative remedies.” Taylor v. United States Treasury Dep’t, 127
F.3d 470, 475 (5th Cir. 1997) (citations omitted); see Premiere Network Servs., Inc. v. SBC
Commc’ns, Inc., 440 F.3d 683, 686 n.5 (5th Cir. 2006). Congress has not done so here. The
MSP is silent with respect to state-law exhaustion requirements. See 42 U.S.C. § 1395y(b).
Considering the Supreme Court’s recent reminders that courts be precise in their use
of the term jurisdiction, we hold that dismissal under 12(b)(1) was not appropriate in this case.
See, e.g., Union Pac. R. Co. v. Bd. of Locomotive Engineers & Trainmen Gen. Comm. of
Adjustment, Cent. Region, 130 S. Ct. 584, 596 (2009) (quoting Steel Co. v. Citizens for Better
Environment, 523 U.S. 83, 90 (1998)) (“Recognizing that the word ‘jurisdiction’ has been used
by courts, including this Court, to convey ‘many, too many, meanings,’ we have cautioned, in
recent decisions, against profligate use of the term.” (internal citation omitted)). Nevertheless,
we may affirm under 12(b)(6) if Caldera’s failure to comply with a state-law exhaustion
requirement results in a failure to state a claim. See, e.g., Premiere, 440 F.3d at 686 n.5
(affirming the district court’s Rule 12(b)(1) dismissal of the plaintiff’s federal claims even
though “it would have been more accurate for the [district] court to have framed its dismissal
in terms of Premiere’s failure to state a claim, and not in terms of the court lacking
jurisdiction”); see also Dawson Farms, LLC v. Farm Serv. Agency, 504 F.3d 592, 594–95 (5th
Cir. 2007); Taylor, 127 F.3d at 476. Because Caldera fails to state a claim under the well-
established standard governing Rule 12(b)(6) for the reasons stated supra, we affirm.
10