Does the MSP Act Preempt State Law?

Recently, this question was addressed by the Maryland Court of Special Appeals in Netro v. Greater Balt. Med. Ctr., Inc., No. 1990, 2018 Md. App. LEXIS 679 (App. July 5, 2018). In Netro, the Fourth Circuit added to the budding list of jurisdictions addressing who is able to sue under the private cause of action provision of the Medicare Secondary Payer Act (MSPA). The Court held that a personal representative of a Medicare beneficiary’s estate had standing to file suit under the MSPA. However, the Court also held that the Defendant did not fail to reimburse Medicare for its conditional payments.

Background

The crux of the question before the Maryland Court is a Maryland state law. The law provides that a plaintiff bringing a negligence action can enter into evidence the bill submitted by the healthcare provider but the defendant is then prohibited from informing the jury that a portion of the bill has been written-off. Nevertheless, under Maryland Code, Courts and Judicial Proceedings Article §3-2A-09 (“the Maryland Act”), a defendant against whom a verdict for past medical expenses has been entered may file a post-trial motion to reduce the judgment by the amount of the write-offs.

Originally, Netro was brought as a medical malpractice suit in a Maryland state court by the Medicare beneficiary’s estate personal representative against the Greater Baltimore Medical Center (“GBMC”). The jury returned a verdict for damages, including compensation for conditional payments made by Medicare for the decedent’s treatment. GBMC then filed a motion to reduce the judgment under the Maryland Act provision allowing the decrease in the amount of the write-offs. In response, Plaintiff/Appellant filed an opposition asserting that the Maryland Act should not be applied because the MPSA preempts it. Additionally, Plaintiff/Appellant argued that Medicare would receive more repayment of conditional payments if the Maryland Act provision did not exist. Furthermore, Plaintiff/Appellant contended that the Maryland Act conflicts with the main purpose of the MSPA, which is that the Medicare program be reimbursed for its conditional payments to the “maximum extent possible.” Fundamentally, Plaintiff/Appellant asserted that the application of the Maryland Act would entitle Medicare to less repayment.

Court Analysis

In determining whether Maryland law is preempted by the MSPA, the Court opined that the congressional purpose and intent of the MSPA was to ensure Medicare as the secondary payer of medical bills to the greatest extent possible, and that Medicare claims take a priority in right of recovery.

Additionally, the Court noted that the circumstances when federal law preempts state law are:

  1. the state law “sharply” interferes with, or is directly contrary to a federal law; or
  2. when compliance with both federal and state law is physically impossible.

The Maryland Court of Special Appeals applied the above prongs to the present matter as follows:

  • Does the Maryland Act “sharply interfere” with, or is it directly contrary to the MSPA?
    • The MSPA breaks down the amount for which Medicare is entitled to recover. Specifically, “[a] primary plan and entity (such as appellant) must reimburse Medicare “for any payment made” by Medicare “with respect to an item or service if it is demonstrated that such primary plan has or had a responsibility to make payment with respect to such item or service.” Id. At 28-29. Here, Medicare’s right to recovery was superior to any other claim because there were no other claims between GBMC and any other insurer. Therefore, the Maryland Act did not “sharply interfere” with the MSPA and Medicare’s claim remained superior even after the Maryland Act’s implementation.
  • Is compliance with both MSPA and Maryland Act a physical impossibility?
    • No, compliance with both Acts is not a physical impossibility. The MSPA requires full reimbursement of all conditional payments made. These payments made by Medicare in Netro totaled $157,730.75. Therefore, Defendant’s obligation to repay Medicare was also $157,730.75. The Maryland Act could be implemented without effecting Medicare’s amount of recovery. Additionally, the Maryland Act is not “directly contrary” to the MSPA, nor Medicare’s priority right of full recovery. Therefore, the Court held that compliance with both Acts is not physically impossible.

Takeaway and Commentary

Finally, the Court held that the MSPA does not preempt any part of the Maryland act primarily because the state law does not interfere with the purpose—Medicare as the secondary payer—of the federal law. Because of that, the Maryland Act’s reduction in the judgment was applicable and allowed Defendant to reimburse Medicare for paid amount rather than billed amount.

Generally, the standards of compensability are dictated by state law, which means that reimbursement obligations ultimately are controlled by state law. However, because a state law cannot directly contradict a federal law, in cases that involve MSPA considerations, any state law that purposely interferes with the MSPA will likely not survive. This recent case reinforces the MSPA’s position with respect to federal preemption. In MSPA considerations, state law can survive if it does not stand in the way of the MSPA—and the MSPA does not preempt state law if certain conditions are met.

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