Michigan Spine & Brain Surgeons, PLLC v. State Farm Mutual Automobile Insurance , 758 F.3d 787 ( 2014 )

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit I.O.P. 32.1(b)
File Name: 14a0154p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
MICHIGAN SPINE AND BRAIN SURGEONS, PLLC, ┐
Plaintiff-Appellant, │
│
│ No. 13-2430
v. │
>
│
STATE FARM MUTUAL AUTOMOBILE INSURANCE │
COMPANY, │
Defendant-Appellee. │
┘
Appeal from the United States District Court
for the Eastern District of Michigan at Detroit.
No. 2:12-cv-11329—Sean F. Cox, District Judge.
Argued: June 17, 2014
Decided and Filed: July 16, 2014
Before: KEITH, CLAY, and McKEAGUE, Circuit Judges.
_________________
COUNSEL
ARGUED: Bryan L. Schefman, Bloomfield Hills, Michigan, for Appellant. James F. Hewson,
HEWSON & VAN HELLEMONT, P.C., Oak Park, Michigan, for Appellee. ON BRIEF:
Bryan L. Schefman, Bloomfield Hills, Michigan, for Appellant. James F. Hewson, Stacey L.
Heinonen, HEWSON & VAN HELLEMONT, P.C., Oak Park, Michigan, for Appellee. April N.
Ross, CROWELL & MORING LLP, Washington, D.C., for Amicus Curiae.
_________________
OPINION
_________________
McKEAGUE, Circuit Judge. This case presents the question of whether a health care
provider can bring the Medicare Secondary Payer Act’s private cause of action against a non-
1
No. 13-2430 Mich. Spine v. State Farm Page 2
group health plan that denies coverage for a reason besides Medicare eligibility. We hold that it
can.
I.
This action arises out of an October 26, 2010 automobile accident in which State Farm’s
insured, Jean Warner,1 allegedly sustained injuries. Following the accident, Michigan Spine
provided approximately $26,000 of neurological treatment to Warner. Michigan Spine
submitted the claim to State Farm, but State Farm denied coverage, stating that Warner’s medical
condition was the result of a preexisting condition. Thereafter, Michigan Spine submitted the
claim to Medicare, which approved a conditional payment of approximately $5,000 pursuant to
the Medicare Secondary Payer Act.
Michigan Spine brought suit against State Farm in state court, asserting a claim for direct
payment of benefits under Michigan’s No-Fault Act as well as a claim for damages under the
Medicare Secondary Payer Act, which permits private causes of action against primary plans that
fail to pay medical expenses for which they are responsible. State Farm removed the action to
federal court and filed a motion to dismiss and/or motion for partial summary judgment on the
Medicare Secondary Payer Act claim. The district court granted State Farm’s motion,2 holding
that Michigan Spine’s claim was foreclosed by Bio-Medical Applications of Tennessee, Inc. v.
Central States Southeast & Southwest Areas Health & Welfare Fund, 656 F.3d 277, 285 (6th Cir.
2011), which stated that a private party can recover under the Medicare Secondary Payer Act
only if a “primary plan” has failed to provide appropriate reimbursement “in accordance with
paragraphs (1) and (2)(A).” Because the Bio-Medical court stated that “[p]aragraph (1) prevents
primary plans from limiting a planholder’s benefits or coverage simply because the planholder is
entitled to Medicare benefits,” and State Farm did not deny coverage because of Warner’s
entitlement to Medicare benefits, the district court reasoned that Michigan Spine could not
pursue a private cause of action against State Farm. Id. at 286. The district court then declined
1
Warner is 53 years old, but became eligible for Medicare in 2000, when she was involved in an unrelated
accident.
2
The district court originally denied the motion, but later granted it on State Farm’s motion for
reconsideration.
No. 13-2430 Mich. Spine v. State Farm Page 3
to exercise supplemental jurisdiction over the state law claim and remanded the action to state
court. This appeal followed.
II.
Michigan Spine appeals the district court’s grant of State Farm’s motion to dismiss
and/or motion for partial summary judgment on its Medicare Secondary Payer Act claim. This
court reviews de novo a district court’s grant of a motion to dismiss as well as a motion for
summary judgment. See, e.g., Wurzelbacher v. Jones-Kelley, 675 F.3d 580, 583 (6th Cir. 2012);
Bruederle v. Louisville Metro Gov’t, 687 F.3d 771, 776 (6th Cir. 2012). Dismissing a motion on
the pleadings is appropriate when, even after taking all allegations of the non-moving party as
true, “the moving party is nonetheless clearly entitled to judgment.” Wurzelbacher, 675 F.3d at
583 (quoting Tucker v. Middleburg-Legacy Place, LLC, 539 F.3d 545, 549 (6th Cir. 2008)).
Summary judgment is appropriate “if the movant shows that there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a matter of law.” Bruederle, 687 F.3d at
776 (quoting Fed. R. Civ. P. 56(a)). Determining whether Michigan Spine’s claim against State
Farm may proceed requires statutory interpretation of the Medicare Secondary Payer Act, which
involves questions of law also subject to de novo review. See Ajan v. United States, 731 F.3d
629, 631 (6th Cir. 2013) (internal quotation marks omitted).
III.
“Medicare is a federal health insurance program that provides health insurance benefits to
people 65 years of age or older, disabled people, and people with end-stage renal disease.”
Stalley v. Methodist Healthcare, 517 F.3d 911, 915 (6th Cir. 2008). Medicare served as the
primary payer of health care costs for eligible individuals until 1980, when Congress, in an effort
to counteract escalating healthcare costs, enacted the Medicare Secondary Payer Act. Under the
Medicare Secondary Payer Act, in most situations where an individual is covered by both
Medicare and another payer, Medicare serves as the secondary payer rather than the primary
payer. Put differently, when payment is available from a primary plan, the primary plan and not
Medicare is responsible for paying the costs of the individual’s medical treatment. See id. When
“a primary plan . . . has not made or cannot reasonably be expected to make payment with
respect to such item or service promptly[,]” Medicare may conditionally pay for the cost of the
No. 13-2430 Mich. Spine v. State Farm Page 4
treatment. 42 U.S.C. § 1395y(b)(2)(B)(i); see also Stalley, 517 F.3d at 915. In such cases,
recouping the conditional payment, and ensuring that the responsible primary plan pays the
provider of medical care, becomes necessary.
Providers of medical care can sue primary plans who fail to pay under the Medicare
Secondary Payer Act’s private cause of action provision—provided that the primary plan’s
failure to pay satisfies certain criteria outlined elsewhere in the Act. When the private cause of
action was added in 1986, the provision stated that a private cause of action was available when a
primary payer failed to reimburse in accordance with “paragraph (1), (2), (3), or (4),
respectively.” Pub. L. No. 99-509, § 9319(b), 100 Stat. 1874 (emphasis added). In 1989, the
provision was reorganized into its current form, and now reads as follows:
(3) Enforcement
(A) Private cause of action
There is established a private cause of action for damages (which shall be
in an amount double the amount otherwise provided) in the case of a
primary plan which fails to provide for primary payment (or appropriate
reimbursement) in accordance with paragraphs (1) and (2)(A).
42 U.S.C. § 1395y(b)(3)(A) (emphasis added). Despite the change in conjunctive from “and” to
“or” and the paragraphs being consolidated, the requirements regarding when conditional
payment may be made have remained very similar. See Bio-Medical, 656 F.3d at 298 (White, J.,
concurring).
Determining what is required so as to trigger the availability of the private cause of
action—despite the Act’s convoluted and “torturous” text, see id. at 279 (majority opinion)—is
at the heart of this case. State Farm’s entire argument depends on Congress’s use of the
conjunctive “and,” as State Farm insists that both paragraphs have to be met in all cases.
Michigan Spine counters that the use of the conjunctive “and” is not instructive, and represents
“simply the current, short-handed iteration of the original provision.” Id. at 298 (White, J.,
concurring). Michigan Spine alleges that State Farm’s interpretation is nonsensical because one
of those paragraphs applies only to group health plans, a subset of primary plans, and so adopting
State Farm’s interpretation would render the private cause of action unenforceable against all
No. 13-2430 Mich. Spine v. State Farm Page 5
primary plans besides that subset—a result that does violence to the rest of the statutory scheme
and runs afoul of congressional intent.
An analysis of these two paragraphs is in order. For this, the Bio-Medical court’s
discussion of the Act is instructive. Paragraph (1), “Requirements of group health plans,”
essentially lays out a system of rules instructing when group health plans must pay for medical
items and services. See 42 U.S.C. § 1395y(b)(1). “The term ‘group health plan’ means a plan
(including a self-insured plan) of, or contributed to by, an employer (including a self-employed
person) or employee organization to provide health care (directly or otherwise) to the employees,
former employees, the employer, others associated or formerly associated with the employer in a
business relationship, or their families.” 26 U.S.C.A. § 5000(b)(1). Group health plans are one
subset of primary plans to which Medicare is a secondary payer under the Act. See 42 U.S.C.
§ 1395y(b)(2)(A) (noting that the term “primary plan” means group health plans, workmen’s
compensation plans, other insurance policies, and no-fault insurance). The first three
subparagraphs of paragraph (1) prevent group health plans from “taking into account” that an
individual is entitled to Medicare benefits due to “being (a) at least sixty-five years old,
(b) disabled, or (c) diagnosed with end-stage renal disease.” Bio-Medical, 656 F.3d at 285.
Therefore, it is at least clear that a group health plan fails to reimburse in accordance with
paragraph (1) when it takes into account an individual’s entitlement to Medicare benefits,
meaning that coverage is denied on the basis of Medicare eligibility. See id. at 285–86.
Paragraph (2), “Medicare secondary payer,” instructs when Medicare may pay for
medical items and services. As this court noted in Bio-Medical, it is odd that the Act conditions
the private cause of action on a primary plan’s failure to reimburse in accordance with
subparagraph (2)(A) because “subparagraph [2](A) only addresses Medicare—not primary
plans—as its subject.” Id. at 285. Despite subparagraph (2)(A)’s only addressing Medicare, the
Bio-Medical court construed the Act “collectively” so as not to render the private cause of action
inoperative. Id. at 286; see also United States v. Atl. Research Corp., 551 U.S. 128 (2007)
(noting that statutes should not be interpreted so as to nullify entire provisions). Subparagraph
(2)(A) provides that Medicare may not pay when a primary plan is expected to pay, “except as
provided in subparagraph [2] (B),” which in turn provides that when the primary plan “cannot
No. 13-2430 Mich. Spine v. State Farm Page 6
reasonably be expected” to pay “promptly,” Medicare may make conditional payments for those
items or services—which is what happened here. See 42 U.S.C. § 1395y(b)(2)(B). Notably, in
specifying when Medicare pays, subparagraph (2)(A) distinguishes between group health plans
and non-group health plans, indicating that the requirements of paragraph (1) apply to group
health plans but not to non-group health plans.3 Therefore, pursuant to Bio-Medical, a primary
plan fails to reimburse in accordance with subparagraph (2)(A) when it “causes Medicare to step
in and (temporarily) foot the bill.” Bio-Medical, 656 F.3d at 286. The Bio-Medical court
summed up liability under the private cause of action as follows: “a primary plan is liable under
the private cause of action when it [1] discriminates against planholders on the basis of their
Medicare eligibility and [2] therefore causes Medicare to step in and (temporarily) foot the bill.”
Id. (emphasis added).
The parties disagree whether Bio-Medical is controlling. State Farm relies heavily on
Bio-Medical’s language specifying when a “primary plan” is liable. See id. State Farm observes
that it is a primary plan, as was Central States in Bio-Medical. State Farm reasons that because
Central States denied coverage on the basis of Medicare eligibility and was found liable, State
Farm is not liable because it denied coverage on the basis of a preexisting condition. Therefore,
even though the actions of both Central States and State Farm caused Medicare to “step in” and
make a conditional payment—i.e., meeting the requirement of subparagraph (2)(A)— State Farm
cannot be liable here because it does not meet the Medicare-eligibility requirement of paragraph
3
The statute reads in relevant part as follows:
(2) Medicare secondary payer
(A) In general
Payment under this subchapter may not be made, except as provided in subparagraph
(B), with respect to any item or service to the extent thatC
(i) payment has been made, or can reasonably be expected to be made, with
respect to the item or service as required under paragraph (1)[, “Requirements of
group health plans,”] or
(ii) payment has been made or can reasonably be expected to be made under
[non-group health plans such as] a workmen’s compensation law or plan of the
United States or a State or under an automobile or liability insurance policy or
plan (including a self-insured plan) or under no fault insurance.
In this subsection, the term “primary plan” means a group health plan or large group health plan, to the
extent that clause (i) applies, and [a non-group health plans such as] a workmen’s compensation law or
plan, an automobile or liability insurance policy or plan (including a self-insured plan) or no fault
insurance, to the extent that clause (ii) applies.
42 U.S.C. § 1395y(b)(2)(A) (emphasis added).
No. 13-2430 Mich. Spine v. State Farm Page 7
(1). As a result, State Farm argues, Bio-Medical compels dismissal of Michigan Spine’s claim.
Michigan Spine counters that, while Central States and State Farm are both primary plans, unlike
Central States in Bio-Medical, State Farm, a no-fault insurer, is not a group health plan.
Michigan Spine asserts that Bio-Medical’s holding as far as non-group health plans like State
Farm are concerned is dicta and therefore not controlling.
The holding of a decision, which has precedential effect, is to be contrasted with dicta,
which does not have precedential effect. “Obiter dictum,” “something said in passing” in Latin,
is a “judicial comment while delivering a judicial opinion, but one that is unnecessary to the
decision before the court and therefore not precedential.” Black’s Law Dictionary (9th ed.
2009). With this definition, the issue of whether Bio-Medical applies to non-group health plans
comes into focus. While it is true that Bio-Medical stated that primary plans rather than group
health plans must meet the requirements of paragraphs (1) and (2)(A), this does not provide a
basis to conclude that Bio-Medical was addressing the non-group health plan issue faced here.
As a result, we find Bio-Medical distinguishable. See generally Rinard v. Luoma, 440 F.3d 361,
363 (6th Cir. 2006) (observing that “questions which merely lurk in the record, neither brought
to the attention of the court nor ruled upon, are not to be considered as having been so decided as
to constitute precedents”).
We therefore turn to the task of reconciling the provisions. On the one hand, paragraph
(1), “Requirements of group health plans,” notes that group health plans may not take Medicare
eligibility into account, and subparagraph (2)(A) indicates that only primary plans that are group
health plans need abide by the group health plan requirements in paragraph (1). On the other
hand, subparagraph (3)(A), the private cause of action, seems to require that all primary plans—
group and non-group health plans alike—abide by the group health plan requirements listed in
paragraph (1). In light of the inconsistency among the provisions, we do not find that the
statutory text provides a clear answer as to whether paragraph (1), “Requirements of group
health plans,” and thus the Medicare-eligibility requirement, applies to non-group health plans.
When statutory text is unclear, courts afford deference to and seek guidance from agency
regulations. See Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 842–45
(1984). Michigan Spine cites numerous regulations promulgated by the Centers for Medicare
No. 13-2430 Mich. Spine v. State Farm Page 8
and Medicaid Services in support of its argument that the Act supports a private cause of action
against non-group health plans. Most instructive are the regulations on what constitutes “taking
into account” Medicare eligibility, the portion of paragraph (1) that Michigan Spine argues does
not apply to non-group health plans. See 42 C.F.R. § 411.108. We observe that all eleven
examples of what constitutes taking Medicare into account, as well as the examples of what does
not constitute taking Medicare into account, are examples of action taken by group health plans.
See id. § 411.108(a). Not one example indicates how a non-group health plan such as State Farm
could satisfy the paragraph (1) requirement. See id. We believe the regulations lead to the
conclusion that paragraph (1)’s requirement of taking Medicare eligibility into account concerns
only group health plans and not non-group health plans, which means that Michigan Spine’s
claim against State Farm may proceed irrespective of the fact that State Farm denied coverage on
a basis other than Medicare eligibility.
Our conclusion is further supported by considering congressional intent. See Chevron,
467 U.S. at 842–44. It is well-established that in passing the Medicare Secondary Payer Act and
in providing for a private cause of action, Congress intended to “curb skyrocketing health costs
and preserve the fiscal integrity of the Medicare system.” In re Avandia Mktg., Sales Practices
& Products Liab. Litig., 685 F.3d 353, 363 (3d Cir. 2012); see also Stalley, 517 F.3d at 915
(“Congress enacted the [Act] to counteract escalating health-care costs.”). Adopting State
Farm’s interpretation of the Medicare Secondary Payer Act would eviscerate the private cause of
action as it relates to non-group health plans. We decline to reconcile the Act’s provisions in
such a manner, and in so doing note that other federal circuits have allowed claims under the
Medicare Secondary Payer Act to proceed against non-group health plans without evidence that
Medicare eligibility was involved in the benefit decision. See Avandia, 685 F.3d at 363;
Manning v. Utilities Mutual Insurance, 254 F.3d 387 (2d Cir. 2001). We therefore hold that the
Medicare-eligibility requirement in paragraph (1), “Requirements of group health plans,” applies
only to group health plans.
IV.
Although the text of the Medicare Secondary Payer Act is unclear as to whether a private
cause of action may proceed against a non-group health plan that denies coverage on a basis
No. 13-2430 Mich. Spine v. State Farm Page 9
other than Medicare eligibility, the accompanying regulations as well as congressional intent
indicate that this requirement applies only to group health plans and not to non-group health
plans. Therefore, Michigan Spine may pursue its claim under the Medicare Secondary Payer Act
against State Farm. Accordingly, we REVERSE the judgment of the district court and
REMAND for proceedings consistent with this opinion.