Case Update: The Medicare Secondary Payer Statute and State Workers' Compensation Laws


This decision, which stems from an appeal from the US District Court for the Southern District of Texas, involved the interplay between the Medicare Secondary Payer Statute (MSP), federal law, and Texas workers' compensation law. The U.S. Court of Appeals for the 5th Circuit held that the MSP does not preempt a state law requiring a workers' compensation claimant to obtain preauthorization from the insurance carrier before incurring certain medical expenses.

The underlying facts of this case involve a claimant who suffered a back injury in 1995. Claimant received workers' compensation benefits under Texas law and eventually applied for and received Medicare benefits before ultimately undergoing several back surgeries in 2005/2006 without obtaining preauthorization for either surgery from the Insurer. Medicare paid for both of these procedures and Claimant then filed a claim with the Insurer, arguing that Insurer was responsible for payment. Insurer argued they were not obligated to pay for the procedures because Claimant did not get preauthorization as required by Texas workers' compensation law. Claimant then filed the declaratory judgment action giving rise to this decision, for a determination as to whether the MSP preempted the Insurer's defense regarding preauthorization.

Pursuant to 42 U.S.C. Section 1395(b)(3)(A), a Medicare beneficiary may recover from his/her workers' compensation carrier twice the amount that Medicare paid on his/her behalf IF the carrier qualifies as a primary plan such that it "can reasonably be expected" to cover such expenses pursuant to some workers' compensation plan in effect. In this instance, Claimant must illustrate that the Insurer could "reasonably be expected" to pay for the procedures under Texas workers' compensation law. However, since he failed to obtain preauthorization, Claimant unsuccessfully argued that MSP preempted any state law impeding the intent of recovering money from primary payers, such as Insurer. However, the court held the MSP and its regulations do not go so far as to remove all state limitations on payments by insurance carriers. Rather, the court held that the language of the MSP is indicative of the fact that numerous MSP regulations presume that state workers' compensation laws will apply, and that Congress intended for the MSP to complement (not replace) state workers' compensation laws, including the preauthorization requirement.

The court also rejected Claimant's argument Medicare's conditional payment for both surgeries (which required a determination that the procedures were medically necessary) rendered the Texas preauthorization requirement moot. This argument suggested that Medicare's conclusion that Claimant's surgeries were medically necessary preempted any further consideration by the Insurer. Accordingly, the court noted that the MSP was not intended to override a primary payer's ability to impose medical necessity requirements in accordance with state law.

Caldera v. Insurance Co. of the State of PA, No. 12-40192 (U.S. Ct. of App. 5th Cir, 2013).