The United States District Court for the District of Oregon, Portland Division recently published its opinion in the case of Oregon State Bar Professional Liability Fund v. United States Department of Health and Human Services and Kathleen Sebelius on March 29, 2012. At issue was whether the Oregon State Bar Professional Liability Fund (PLF), the insurer covering legal malpractice actions against Oregon attorneys, was an “applicable plan” required to report under Section 111 on the Medicare, Medicaid and SCHIP Extension Act as a Responsible Reporting Entity (RRE).
In July of 2010, the PLF wrote a letter to the Department of Health and Human Services requesting a formal opinion that the Reporting Act did not apply to the it. Secretary Sebelius responded by advising PLF that it was a “liability insurer” within the meaning of the Extension Act. The PLF then filed suit requesting a declaratory judgment that PLF was not an applicable plan, that the Secretary acted outside her authority in determining that PLF was an RRE, that the Secretary violated the Administrative Procedure Act in that determination, and that the District Court could review the Secretary’s decision concerning the PLF.
The Secretary moved for summary judgment arguing that the Medicare statutory scheme left no issue of material fact for the trial court. In short, the United States took the position that the Medicare Secondary Payer Act and the federal regulations empowering it were clear that the PLF, as a liability insurer, was subject to Mandatory Insurer Reporting.
In denying the government’s motion, Judge Marco A. Hernandez analyzed the role of professional liability insurance and made what appear to be several leaps of logic regarding its applicability to Medicare Secondary Payer issues and the reporting obligation. The court determined that PLF was, in fact, a liability insurer within the meaning of 42 USC 1395y(b)(2). However, the judge reasoned that because the insurance plan covers claims against attorneys who cause economic damage relating to the provision of legal services and does not cover claims of tortious conduct that result in bodily or emotional injuries the PLF does not become an RRE. Because PLF would “never have primary responsibility” for medical items claimed by a beneficiary, they are excused from the reporting obligation.
Interestingly, the judge acknowledged that a malpractice case “could” involve medical expenses paid conditionally by Medicare. However, he assumed that those injuries occurred as the result of the underlying accident or case being handled by the alleged negligent attorney. The judge failed to recognize that the nature of the malpractice alone could give rise to emotional or personal injuries. He further stated that the PLF does not cover bodily or emotional injuries. A close review of Medicare statutes and policy guidance indicates that insurance coverage is not what Medicare requires to be reported in a settlement involving a Medicare beneficiary but, rather, what is claimed and released in the process. Thus, if bodily or emotional injuries are claimed and released, the reporting obligation is triggered. Based upon a somewhat limited analysis of an automobile accident case, Judge Hernandez determined that the PLF was not the type of plan that Congress intended to saddle with the reporting obligation.
Based on the foregoing, the court determined that the alleged violation of the Administrative Procedure Act and whether the Secretary acted outside her authority were moot.
As of this writing, an appeal has not been filed by the United States. However, I fully expect that the decision will be appealed as the ruling seems to both misconstrue the arguments put forth by the United States and the legislative intent of the MMSEA. Judge Hernandez seems to assume that because he cannot envision a scenario in which Medicare’s interests would be raised by inadequate legal representation that they do not exist. A closer look at the intent underlying the MMSEA and the Medicare statutory scheme suggests differently.
About the Author: Russell S. Whittle, Esq., is the Vice President of MSP Compliance for Gould & Lamb, LLC. In his twenty plus years of practice prior to joining Gould & Lamb, LLC, Mr. Whittle practiced primarily in the area of insurance defense, representing the interests of large insurers and employers in both workers’ compensation and general automobile liability matters.